10 minute read
Hummingbird Resources
HUMMINGBIRD RESOURCES
Advertisement
Regular readers of RGN will be very familiar with AIM-listed gold explorer and producer Hummingbird Resources by now. This publication has been following the company’s West African story since 2016, when it had only then completed a definitive feasibility study (DFS) for the Yanfolila gold project in Mali, having pivoted away from its original exploration asset in Liberia. Over the last four years, Hummingbird has delivered the Yanfolila mine on-time and on-budget, transforming itself from an explorer to a producer in the process. After reaching nameplate capacity in early 2018, the highly flexible team skilfully navigated operational challenges at the mine in 2019 and boosted throughput through the addition of a second ball mill, all while maintaining a prominent position in the local Sikasso region through a series of generous community development programmes. 2020 has been another year of significant news flow for Hummingbird, despite the worrying emergence of a global pandemic that has posed a challenge not just to the company’s finances but more importantly to its stakeholders.
“There’s no doubt it’s been very challenging,” says managing director Dan Betts. “We operate a remote mine in a remote jurisdiction and Mali’s borders have been closed for some time, which has given us a lot of supply chain and logistics issues.
“We’ve had to increase our inventory of spares, fuel and supplies so we can sustain unforeseen events, but when things do go wrong it’s hard to get parts to site and this has a cost implication for the company.”
However, Betts believes that by far the biggest challenge posed by COVID-19 has been maintaining morale and managing fatigue on-site at Yanfolila. The pandemic has dictated a stricter focus on employee health and safety, which has meant changing shift patterns from normal with time off to an intense 15-week spell on-site for many staff.
“It’s amazing they’ve kept going so well, but it’s been a tough ask for our team. Another challenge has been not knowing. You can’t really plan in this time, so it’s been a case of reactive planning depending on what rules governments have thrown at us.”
Going into Guinea
Despite these significant impediments to Hummingbird’s regular operational and corporate rhythms, the company has remained active in the market and announced the acquisition
of the Kouroussa Gold Project in Guinea from junior explorer Cassidy Gold Corp in June, moving into a third West African jurisdiction in the process.
The deal for this near-term development asset in Guinea’s prolific Siguiri Basin perfectly
aligns with Hummingbird’s strategy of building a high grade, high margin gold producer in West Africa and it complements the Yanfolila mine in more ways than one.
“We were aiming for a project with a production profile of around 100-150,000 ounces (oz)
per year. This bracket sounds great on a spreadsheet but it’s actually very hard to find this type of project which is slightly sub-scale for the majors and the mid-tiers, but big enough to be a substantial employer and revenue generator for us. The Kouroussa project was a little gem in that respect.”
Kouroussa has a mineral resource of 1.18 million oz of gold, which Hummingbird has applied significant dilution to, but is still returning head grades at over 3 g/t gold according to Betts. “There
HUMMINGBIRD RESOURCES
AT A GLANCE
STOCK TICKER
AIM:HUM
MARKET CAPITALISATION
£101.5 million (as of June 24, 2020) a j
were some absolutely knock out drill holes there and I think the exploration potential is huge as well,” he says. First gold is expected in under two years, when the mine will produce around 100,000 oz per annum.
In addition, there exist several similarities between Kouroussa and Yanfolila, in terms of the scale of both projects, the metallurgical flowsheets and process plant design and even service providers as they are in the same broad geographic region in West Africa.
“We can take a lot of synergy from everything we have done at Yanfolila and transport it across to Kouroussa, which should help us build the mine very effectively. We have kept the same project team together from Yanfolila and after the second ball mill, this is the
third build that project team will work on.”
A mature mining sector
While not as mature as Mali’s gold sector, Guinea is by no means a fledgling mining jurisdiction. Thanks to its world class bauxite and bulk commodities industries, the country has established infrastructure, a strong understanding of mining and
it hosts plenty of major mining companies as a result. For Hummingbird, Guinea represents a new political environment – which always takes time to acclimatise to. However, Betts believes this adaption comes with no significant risk. In fact, working in Guinea may actually be smoother as the country has its own port and there is no need to cross land
borders to get on-site. “In terms of physical security, Guinea is slightly more stable than Burkina and Mali at the moment. I think it’s a good time to enter, certainly in terms of gold exploration around the Siguiri gold belt. There have been some amazing drill holes come out recently from the Australian juniors and I think there is
DAN BETTS, HUMMINGBIRD RESOURCES MANAGING DIRECTOR
going to be a lot of activity in this part of Guinea over the next 10 years.”
Hummingbird is already busying itself at the Kouroussa project crossing Ts and dotting Is in terms of permitting and government approval for the change of hands. The company is in dialogue with the government and is pleased to have received early support from the authorities.
“They [the government] seem very supportive of Hummingbird’s involvement and I don’t foresee any problems, so the team is now working on refining the detail and the scope of the plant.” Throughout the remainder of the year, the company plans to refine the Kouroussa feasibility study and enlarge the scope of the plant, making it more comparable to the Yanfolila operation.
“We’re imagining a circa 1-1.2 million tonnes per year plant,
two-stage crushing, CIL gravity circuit producing in the region of 100,000 oz per year,” Betts envisions. “Hopefully we will be ready to start construction at the beginning of next year.”
Sharing the workload in Liberia
Also in June, Hummingbird sealed an earn-in agreement with ARX Resources for the Dugbe project (its original West African asset). Liberia has been a tough nut to crack for the company over the past five years and the project itself presented problems due to its vast scale.
“It’s going to be a huge project. Remember the first 164 drill holes we did all hit mineralisation. There is so much gold there to be found, but we felt it needed someone with a longer-term mindset to do more exploration and expand the project. That’s what ARX is doing.”
Under the terms of the deal, ARX will spend US$10 million on further exploration and commit to completing a DFS while funding all other costs during the two-year period, earning a 49% interest in the project.
The agreement should also unlock a huge amount of value for Hummingbird’s investors, according to Betts. “When ARX lists in Canada it will be a separate entity with a direct look-through value for Hummingbird’s shareholders. And then at the end of it all, Hummingbird converts its 51% in the project into 51% of the company and maintains control of the asset. I think it’s a fantastic deal.”
In a third major piece of news flow in June, Hummingbird confirmed its membership with the World Gold Council – a point of real pride for the company’s managing director. “I see the Council as the highest body in the gold industry.
“It has many capable and respected people looking
to find ways to promote the industry and all the good work it does. That’s the bit of the relationship I am most looking forward to; looking at how we can promote and be proud of the gold mining industry.”
Betts is quick to highlight the admirable work that the gold sector does around the world in terms of R&D, environment, community and healthcare. “I think that is something to be immensely proud of and I’m looking forward to being a part of that with the World Gold Council.”
Assisting the COVID-19 effort
In a particularly fraught time for all of its people, Hummingbird has gone
above and beyond in its commitments to the local communities in Mali, bringing in additional public health education initiatives while continuing to support existing programmes, including the hugely successful market garden and water projects. “We have put a huge amount of effort into driving community health education, including bringing in an additional site doctor who has provided valuable assistance to our medical team in supporting Hummingbird’s COVID-19
response. “In addition, we have made donations to the Malian government and local health authorities, offering direct support to our local communities with initiatives such as soap manufacturing.
We have been buying soap from the community soap factories previously established by Hummingbird and supplying the local communities to help combat
COVID-19 with greater handwashing and hygiene.
“We also continue to supply medical equipment and are in the process of buying some testing equipment with the support of the government of
Mali.” At the start of the year, Hummingbird earmarked resource expansion at Yanfolila as one of its key annual targets. This has not changed even after the outbreak of COVID-19 and all of its implications on the ground.
In early June, the company announced some encouraging drill holes from underground drilling at Komana East, and there are hopes this could prove up the underground mining concept at Yanfolila and add long-term oz to the base load feed for the mine.
“We’re hitting mineralisation where we were expecting and are also targeting some new deposits. Nobody has done any greenfields exploration here for seven or eight years, and we’ve had a couple of good hits in the early drill holes. It’s a bit early to say but I’m optimistic we will come up with more good results,” Betts concludes.
Specialist Bank
Bringing security to frontier markets
INVESTEC INVESTEC From Pakistan to Thailand, Bangladesh and practically everywhere in between, it’s never been easier to trade in frontier market securities. Investec’s Corporate and Institutional Banking division has the research and ability to execute a wide range of local and international security transactions. Our skilled traders, advanced technology and strong, established relationships, can give your investment the edge in a brand new market.
Call us, and see what we can bring to your table.
Execution
Simon Reid simon.reid@investec.com +27 11 286 4885
Ryan Bell ryan.bell@investec.com +27 11 286 4732
Ziv Okun ziv.okun@investec.com +27 21 416 3337
Sales and Strategy
Andrew Schultz andrew.schultz@investec.com +21 24 416 3339 Research
Yeukai Gavaza yeukai.gavaza@investec.com +27 11 291 3044
Kuda Kadungure kudakwashe.kadungure@investec.com +27 11 291 3092
Anthony Geard anthony.geard@investec.co.za +27 21 416 1431
Chris Becker chris.becker@investec.com +27 11 286 9104
