Hummingbird Resources (HUM) “is pleased to announce the signing of a binding heads of terms agreement for the acquisition of the Kouroussa Gold Project located in Guinea”. The company notes the project “in the prolific Siguiri Basin… has a high grade mineral resource of 1.18Moz of gold at >3g/t… First gold production targeted within 2 years, with production of circa 100,000oz per annum and AISC of circa US$800 over an initial 5 year Life of Mine… Estimated capital development cost of circa US$90m”...
The agreement is for an initial £10 million in new Hummingbird shares at 28.4p each (subject to 12 month lock in and 12 month orderly market), deferred consideration of £10 for every ounce of gold reserve published in excess of 400,000 ounces (subject to a maximum of 1 million ounces) and a 2% net smelter royalty on gold sales above the first 200,000 ounces (subject to a maximum of 2.2 million ounces). It is also emphasised a “well established and stable mining jurisdiction with a number of world class bauxite and gold mines owned and operated by major international companies” and an NPV10 even at $1,350 gold of $110 million, at $1,750 gold more than $250 million. That is also with significant exploration potential and there a letter of intent from the company's West Africa bankers, Coris Bank International, to provide up to $100 million.
Even with the new shares, the market cap here is only around £110 million – currently approx. $140 million. That also with other recent asset progress and “net debt US$31m (2018 US$39.4m)… we remain on track to move from net debt to net cash position prior to the end of 2020” with production from the Yanfolila gold mine in Mali. The company notes “the acquisition of the project turns Hummingbird into a near term multi-asset producer with jurisdictional diversification” and that Kouroussa has “similar metallurgical flow sheet and process plant design to Yanfolila… we look forward to updating the market as the development of Kouroussa progresses”.
We look to this to further help the shares as those noted updates and production and exploration news is enhanced in a favourable gold environment. We continue to target a 40p+ share price and our stance remains buy.
Filed under: Hummingbird Resources, Zaza, Malcolm Graham Wood, Catenae, gold, Cora Gold
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