Yanfolila DFS Significantly Increases NPV & IRR

RNS Number : 1091M

Hummingbird Resources PLC

18 January 2016

 

Hummingbird Resources plc / Ticker: HUM / Index: AIM / Sector: Mining

18 January 2016

Hummingbird Resources plc ('Hummingbird' or 'the Company')

Yanfolila Definitive Feasibility Study Significantly Increases NPV and IRR 

 

Hummingbird Resources plc (AIM: HUM), is pleased to the announce its Definitive Feasibility Study ("DFS") for the Yanfolila Gold Project ("Yanfolila" or the "Project") in Republic of Mali which demonstrates significant enhancement to its economics as an open-pit, low-cost gold mining operation.

Yanfolila DFS Highlights:

	DFS January  2016            (US$1,250)	DFS January 2016      (US$1,100)	Optimisation Study March 2015        (US$1,250)
NPV (US$m, 8% discount rate)	142	88	72
IRR (%)	55	37	35
LoM Ore Mined (Mt)1	8.8	8.8	6.4
Strip Ratio (waste:ore)	12.1:1	12.1:1	10.6:1
LoM Grade (g/t)	2.77	2.77	2.64
LoM Contained Gold (koz)	787	787	547
Recovery (%)	92.5	92.5	94
LoM Recovered Gold (koz)	727	727	513
Production Year 1 (koz)	121	121	100
LoM Production/year (koz)	102	102	79
LoM Cash Costs (US$/oz)	645	645	641
LoM AISC (US$/oz)2	720	713	733
Project CAPEX (US$m)3	79	79	72
1.        The life-of-mine ("LoM") plan comprises the Komana East ("KE") and Komana West ("KW") deposits for which Ore Reserves have been reported (as announced on 15 December 2015), as well as ore from the Guirin West ("GW"), Sanioumale East ("SE") and Sanioumale West ("SW") deposits based on pit designs and mining schedules applied to the Indicated Mineral Resources for these deposits.  Study results based on stated Ore Reserves alone are reported in Appendix 1. 2.        Difference in all-in sustaining costs (AISC) for the DFS cases reflect the royalty levels at different gold prices.    3.        Of the total Project CAPEX, US$2m has already been spent on plant earthworks.

·    Yanfolila Net Present Value ("NPV") of US$142m using US$1,250 gold price, approximately double that from the March 2015 Optimisation Study.

·    Significant increase in Internal Rate of Return ("IRR") to 55% based on a gold price of US$1,250/oz.

·    Project remains robust at current gold prices with an attractive IRR of 37% at a gold price of $US$1,100/oz.

·    Low-cost operation with all-in sustaining costs of approximately US$720/oz.

Dan Betts, CEO of Hummingbird Resources, said: 

"We are delighted to see such an impressive improvement in Yanfolila's economics.  The NPV of the Project since the Optimisation Study in March 2015 has almost doubled to US$142 million at a gold price of US$1,250/oz with the Project generating robust returns at current gold prices.  This is a major achievement for Hummingbird and I would like to take this opportunity to thank the team who have helped complete this study."

Life of Mine DFS

The DFS has been compiled by DRA Projects ("DRA") for the Yanfolila Gold Project.  CSA Global ("CSA") were responsible for the Mineral Resource and Ore Reserves reports.  SENET, a highly credentialed EPCM provider with significant West African gold experience, completed the metallurgical testwork, process design and engineering, and capital and operating cost estimates for the processing plant and the associated plant infrastructure.  Other key contributors were Schlumberger Water Services ("SWS"), who carried out detailed hydrology and hydrogeological studies, and Ausenco Engineering Canada ("Ausenco"), who completed the design and cost estimates for the Tailings Storage Facility ("TSF").

Summary

The DFS LoM Plan will progressively mine five open pits, starting initially with Komana East and Komana West, and then progressing to Guirin West, Sanioumale East and Sanioumale West.  The Company is also considering developing the high grade Gonka Resource, initially as an open pit, then moving to an underground mine.  The plant will have a throughput capacity of 1.24Mtpa, producing up to 121,000 Au oz per annum.  The ore is non-refractory and the simple process plant design utilises gravity and Carbon-In-leach (CIL) for the processing and recovery of the gold which averages 92.5% over LoM.  The plant design incorporates industry standard unit process operations, consisting of primary and secondary crushing, closed-circuit ball milling with gravity concentration, intensive leach of the gravity concentrate, carbon-in-leach of the gravity tailings, elution, electro-winning, and smelting to produce gold doré.  Mining will be carried out by a mining contractor with significant West African experience.

Project Costs

Capital Cost Summary
Description	Cost (US$000)
General Infrastructure	7,570
Mining	8,619
Owners' Direct	5,870
Owners' Indirect	2,784
Process Plant	46,738
Process Plant Infrastructure	1,710
Sub Total	73,291
Contingency	6,066
Total	79,357

Operating Cost	Units
Mining Cost (US$/t)	2.40
Processing Cost (US$/t ore)	14.5
G&A Cost (US$/t ore)	6.6
Total OPEX (US$/t ore)	53.2
Cash Cost (US$/oz)	645
AISC* (US$/oz)	720

*AISC = All-in Sustaining Cost

Geology

The Yanfolila Project is situated within one of several sub-basins along the eastern margin of the Greater Siguiri Basin ("GSB"). The GSB straddles the Mali-Guinea border and forms the western margin of the Birimian Volcano-Sedimentary Basin ("BVSB"). Combined with the Archaean Kenema-Man Domain ("west of the GSB") and the pan-African Benin-Nigeria Shield ("east of the BVSB") these form the West African Craton, one of the major gold producing regions and well-endowed gold rich provinces in the world.

The Yanfolila Belt, which hosts the Project, is orientated north-south and is located on the eastern margin of the GSB. The belt contains several sub-basins including the Komana Mafic Sub-Basin (KMSB) and the Kabaya Sub-Basin ("KSB").  The KMSB has an abundance of mafic rock units, basalt and dolerite that have proven to be the preferred host to mineralisation and correspond to a broad gravity high.

The KMSB hosts the majority of the Yanfolila gold targets and deposits that have been currently defined.  It has a stratigraphic sequence of basalt, polymictic conglomerate, feldspathic sandstone, silt-shale and a lithic-dominated greywacke. Porphyry, granodiorite and diorite intrusions crosscut the stratigraphy of the KMSB.

The Yanfolila Project is made up of seven main deposits, five of which have been subjected to resource definition drilling, modelling and grade estimation and reported as containing mineral resources compliant to JORC Code (2012 Edition).

For a detailed breakdown of the Yanfolila Project Reserves and Resources please see the London Stock Exchange announcement made by the Company on the 15^th December 2015.  A copy of the announcement can be found on the Company's website www.hummingbirdresources.co.uk.

Please click on the link to see a map of mine layout and deposit locations.

http://www.rns-pdf.londonstockexchange.com/rns/1091M_-2016-1-17.pdf

Mining

Geotechnical

There are two distinct regimes at the Yanfolila Project deposits: regolith soils and bedrock. The nature of the saprolites and saprocks of the regolith are substantially similar to many sites in the region. The recommended slopes in regolith materials are an average of 44 degrees from surface to a depth of 40m and 40 degrees below 40m. 

The slope design angles recommended for the regolith assumes depressurisation of the pit walls in advance of mining by installing an array of dewatering wells around the pits.

In the fresh rocks below the regolith, the ground conditions appear reasonably competent with no major rock defects identified. The rocks are strong and the structures appear to be a conventional footwall / hanging wall relationship. The slope angle limitation on the hanging walls is largely dependent on practical and/or operational factors. The recommended designs for each of the two wall types for all the fresh rock sections of the pits is between 50-52 degrees.

The designs for both the regolith and the bedrock slopes have case history support from operations in the region and are adopt similar slope angles, provided dewatering of the regolith is carried out prior to mining and good wall control is maintained.

Mine Recovery, Dilution and Cut-off Grades

The dilution for KE and KW deposits was conservatively set for the Whittle runs at 12%, which resulted in slightly conservative pit shells being generated. Dilution was applied at zero grade.  In similar operations within the region, with tabular, steep dipping, structurally controlled ore bodies mined by similar sized equipment, the ore loss value applied in Whittle optimisations is 5%.

The Whittle runs were executed using the cash-flow model option. This results in Whittle calculating a revenue and cost for mining the block (and processing it, if an ore parcel is present).  Cut-off grades are calculated with an average reported for each bench.

The KW deposit reported a maximum average cut-off grade of 0.92g/t for the US$1,100 pit, and the KE deposits a maximum average cut-off grade of 0.75g/t.

These DFS results do not yet incorporate the current mine planning work which is building on the maiden Ore Reserve statement announced on 15 December 2015. Optimising the DFS for this analysis is expected to improve mining dilution rates, improving the average grade of Phase 1 to 3.03g/t, as per the Ore Reserve statement, from the DFS Phase 1 average of 2.9g/t.

Pit Selection and Design

For both KE and KW the US$1,100 pit was selected and there is a significant increase in ounces compared with the Optimisation Study, especially at KE.  This was primarily due to lower processing costs and increased slope angles that allowed deeper ore from the base of KE pit to be extracted.

The mine plan envisages the mining of the KE and KW deposits which contain currently defined reserves during years 1 - 6 ("Phase 1") followed by mining of the GW, SW and SE deposits over years 5 - 7 ("Phase 2"). Optimisation work to include the expected benefits of blending Phase 1 and Phase 2 ores will be assessed going forward.

Mining Method

The Yanfolila Gold Project consists of two main clusters of ore deposits: located in the south are the deposits of KE, KW, GW and Gonka ("GK"), and located in the north are SE and SW.

Mining operations will be carried out using conventional drill and blast and load and haul mining methods. Plant production during the mine life is currently planned for a period of seven years, mining some 8.8Mt of ore and 106.7Mt of waste. Waste rock will be re-located to designated waste rock facilities at each pit and will be progressively rehabilitated in accordance with IFC guidelines.   

During an initial mining pre-production period of approximately five months the selected mining contractor will mobilise and establish operations, ore will be stockpiled ready for plant commissioning and much of the waste material removed will be used for building up the RoM stockpile pad and TSF starter embankment.

During peak production (the first three years of mine life) the mining schedule calls for some 1 Mbcm to be mined per month. The mining contractor equipment fleet is sized on this basis.

Drill and blast activities will be required once the hardness of the material to be excavated becomes too difficult, or inefficient to free dig.  Once commenced, 10m blast holes will be drilled in a dense pattern for blasting.  

The pit dewatering program is an integration of ex-pit water wells (27 in total) and in-pit sumps designed to reduce pore pressure in the surrounding rocks and reduce inflow to the in-pit sumps.

The Company intends to engage an experienced mining contractor for the Project and notes that there are a number of well-established local and international mining contracting companies in West Africa, some of whom have been operating in the region for more than 20 years. 

Process Design

In developing the process flowsheet, trade-off studies were conducted to optimise unit process selection.  Consultants were engaged to assist with the flowsheet development in the areas of their expertise.  The trade-off studies and simulations conducted included the following; comminution circuit design options, live stockpile versus bin for crushed ore storage, number of stages for CIL, elution circuit evaluation, detoxification mixer and sparger configuration and the introduction of a tailings thickener. 

Based on the metallurgical testwork results, trade-off studies and simulations from consultants, the design criteria of the Yanfolila process plant was developed, assuming treatment of up to 1.24 Mtpa on a blend of oxides and fresh, and up to 1.0 Mtpa when treating mainly fresh ore. 

The Yanfolila process plant design utilises a CIL process for the processing and recovery of gold from oxide and a blend of oxide and fresh ore. The plant design incorporates industry standard unit process operations, consisting of primary and secondary crushing, closed-circuit ball milling with gravity concentration, intensive leach of the gravity concentrate, carbon-in-leach of the gravity tailings, elution, electrowinning and gold sludge smelting to produce doré.

A two stage crushing facility is installed to treat all ore types. In order to maintain mill throughput, a tertiary crushing facility will be added when the proportion of hard fresh ore increases.  A 12 hour live stockpile ensures continuous and consistent feed to the mill.

Recovery of gold will be through a combination of gravimetric means and direct cyanidation. Gravity concentrate is treated through an intensive cyanidation process with the pregnant solution pumped to an independent gravity electrowinning circuit. The CIL circuit consists of seven tanks in series: one pre-leach tank and six CIL tanks.

Please click on the link to see a diagram of the process flow sheet.

http://www.rns-pdf.londonstockexchange.com/rns/1091M_1-2016-1-17.pdf

Tailings Storage Facility

The design of the TSF for the Yanfolila Gold Project was originally undertaken by Gold Fields Limited ("Gold Fields") in 2013 which looked at several locations with respect to the mineral deposits for the Project.  In late 2014 Hummingbird engaged Ausenco to develop the TSF for the Project.  The outcome of the study identified that a rockfill-centerline raise was the preferred option, since although it had a slightly higher sustaining capital cost than the upstream-rockfill raise, it is more robust from both a construction and water management perspective. The use of a combination of an HDPE membrane for the embankment wall with a natural clay liner for the facility basin ensures compliance with IFC performance standards, but also results in lower initial capital costs and subsequent sustaining costs for each of the annual embankment raises that will be necessary.

Infrastructure and Services

General Infrastructure

The site access road is via an existing 29km road that connects the town of Yanfolila to the Kona Bridge close to the Project site. No major infrastructure work is required on the road, such as on bridges, and the majority of the work focuses on upgrading the exisiting road.

Prior to the development of the KE pit, a new 8 km plant access road will need to be constructed from the Kona Bridge turn off into the plant to allow access for local people and for traffic into the plant area.

 Additionally, a 1,300m laterite airstrip will be constructed prior to commissioning which will allow the mine to bring in light aircraft for the transport of personnel to and from the site, and also for the extraction of gold.

Plant Infrastructure

The main gate to the plant will enable control of vehicle and pedestrian access to the high security area of the plant via interlocked gates.

The proposed plant infrastructure includes:

·    An assay lab for the daily analyses of mining and process samples to be performed at the plant

·    A change house building which includes the security office, first-aid room.

·    A control room building for the entire plant is located on top of the CIL tanks.

·    Two reagents store buildings.

·    Water and sewage treatment plants, fire protection systems and drainage concepts have been included based on the requirements of the processing plant.

Power Supply and Distribution

The mine is to be supplied power 'across the fence' from an Independent Power Provider ("IPP").  Construction and camp power during the construction period will be using generators. Power from the IPP is scheduled to commence at the start of cold commissioning and will be on a rental diesel generator basis supplied by the power contractor with extensive experience in west Africa. Over the LoM a maximum of 8MW of installed power is required with the base load calculated to be an average of approx. 4 MW. For the LoM Study a power cost of 20.4c/kWh was calculated based on the commercial power tender offered to the Company.

A split fuel facility will be constructed by the selected fuel supplier, one serving the process plant and the other serving the mining and vehicle fleet. Fuel will be provided on a full turnkey 'over-the-fence' basis and due to the recent fall in the world oil price, on which the price of diesel in Mali is set by the Government of Mali, the all in cost of diesel fuel delivered to the Project is US$ 0.614/litre for this LoM Study. This has a significant positive impact on the process operating costs and mining costs which both have a high proportion of fuel cost within their total cost. Further reductions in the world oil price since the LoM Study was completed will produce further savings to the overall cost of fuel delivered to site and therefore also to the overall operating costs of the Project.

Komana Camp Expansion

The current camp that serves the Project was constructed in various stages over the last five years by Gold Fields.  The intent of the Company is to utilise the existing camp for the Project instead of constructing a new purpose built camp. The location of the current camp, combined with the space available and standard of the infrastructure currently available, means that this option is preferable and more cost effective.  The upgrade of the camp facilities will include an increase in capacity to 152 people, expansion of the food hall and clinic and installation of water and sewerage treatment plants.

Environmental & Social

A significant number of baseline and impact assessment studies have taken place during the life of the Project.

Active pit dewatering will occur throughout LoM and the management of this water can have significant environmental and social impacts to quantity and quality of water. Modelled impact of drawdown of groundwater levels suggests a very limited impact to community wells and hand pumps in the vicinity of open pit mining locations. Additionally, analysis and test work of the waste rock to be mined show that acid rock drainage will not be an issue for the Project.

Waste management for all Project activities will be undertaken by the Company.  A dedicated facility for the sorting and disposal of wastes will be centrally located.  Provision has been made for a centralised sorting area and storage shed, incinerator for hazardous and medical waste stream, non-hazardous landfill, and a small lined hazardous landfill cell.  Organic and biodegradable waste will be collected and composted in line with permit requirements.

Social Management

The Project does not require physical resettlement, however land acquisition and compensation for development activities is necessary.  This process started in April 2015 and is now nearly complete, with significant stakeholder engagement and the establishment of a multi-stakeholder Commission.

To date the Project has maintained excellent relationships with local stakeholders involved in artisanal and small-scale mining ("ASM")  and there is a common understanding of the mine development process and timeline. 

The Project provides considerable opportunity for improvement of socio-economic conditions in the local area.  Currently the local area and communities are underserved by social services and infrastructure and therefore the Project will look to enhance sustainable socio-economic development opportunities wherever possible. 

The Project is set to employ, directly and indirectly around 900 people during construction and around 800 people during operation. The Company will prioritise local employment seeking to employ unskilled labour from the Commune and promote a preference for local employment in equally qualified semi-skilled and skilled labour.

Appendix 1

Comparison of Phase 1 (Reserves from KE and KW pits) against Phase 1 and 2 (Reserves and in-pit Indicated ounces from GW, SW and SE pits)

	Phase 1            (US$1,100)	DFS Phase 1 & 2   (US$1,100)	Phase 1            (US$1,250)	DFS Phase 1 & 2   (US$1,250)
NPV (US$m, 8% discount)	69	88	118	142
IRR (%)	35	37	53	55
LoM Ore Mined (Mt)	7.1	8.8	7.1	8.8
Strip Ratio (waste:ore)	13.2:1	12.1:1	13.2:1	12.1:1
LoM Grade (g/t)	2.91	2.77	2.91	2.77
LoM Contained Gold (koz)	666	787	666	787
Recovery (%)	92.1	92.5	92.1	92.5
LoM Recovered Gold (koz)	614	727	614	727
Production Year 1 (koz)	121	121	121	121
LoM Production/year (koz)	101	102	101	102
LoM Cash Costs (US$/oz)	656	645	656	645
LoM AISC (US$/oz)	720	713	727	720
Project Capex (US$m)	79	79	79	79

DRA Projects has reviewed the information contained in this announcement and confirmed it is in accordance with the facts as they are aware and as provided to DRA by Hummingbird's specialist consultants.

**ENDS**

Enquiries:

Daniel Betts Thomas Hill Robert Monro	Hummingbird Resources plc	Tel: [phone]
Samantha Harrison	RFC Ambrian Ltd Nominated Adviser and Joint Broker	Tel: [phone]
Jon Belliss	Beaufort Securities Limited Joint Broker	Tel: [phone]
Lottie Brocklehurst Felicity Winkles Hugo de Salis	St Brides Partners Ltd Financial PR/IR	Tel: [phone]

About Hummingbird Resources Plc

Notes to Editors

Hummingbird Resources (AIM: HUM) is building a leading gold production, development and exploration company.  The Company has two core gold projects, the near-term production Yanfolila Gold Project in Mali and the Dugbe Gold Project in Liberia.  Its current focus is on bringing Yanfolila, which has a Probable Reserve of 665,600ozs @ 3.03g/t and total Resources of 1.8Moz of gold and an additional 390,700ozs of non-compliant exploration potential.  The high grade gold project has the potential to turn a profit in a varying gold price environment and will allow for quick returns with low operating costs.  A US$75 million debt facility has been agreed with Taurus Mining and initial plant earthworks have been completed.

The 4.2Moz Dugbe Gold Project in Liberia provides Hummingbird with excellent development upside.  An optimisation of the DFS is on-going whilst Yanfolila is brought to production in the near-term.  Additionally, the Company has 4,000km² highly prospective exploration ground in Mali and Liberia and is constantly evaluating new quality assets.

For more information, please visit www.hummingbirdresources.co.uk

 

END

 

 

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