Hummingbird Resources plc [HUM-AIM] has signed a binding heads of terms agreement for the acquisition of the Kouroussa Gold Project located in Guinea, West Africa, from Cassidy Gold Corp. [private], subject to standard conditions precedent including Government approval.
The Kouroussa Gold Project is a near term development asset in the prolific Siguiri Basin, which has a high-grade mineral resource of 1.18 million oz of gold at >3 g/t. The acquisition turns Hummingbird into a near term multi-asset producer with jurisdictional diversification in line with the company’s strategy.
First gold production is targeted within two years, with production of about 100,000 oz per annum and AISC of circa US$800/oz over an initial five-year Life-of-Mine. Similar metallurgical flow sheet and process plant design to Hummingbird’s Yanfolila mine in Mali allows the company to leverage construction and operational expertise gained to date.
Estimated capital development cost of approximately US$90 million for plant construction, mine development and all associated infrastructure. At a gold price of US$1,750/oz, IRR would be 98%, NPV would be US$251 million with a cumulative free cash of US$344 million (inclusive of a 2% royalty retained by the vendors.
Significant exploration potential is known to exist at depth beneath the Koekoe deposit with another six high priority targets identified from intersections which require follow up work or surface bulk sampling results. A Letter of Intent from Hummingbird’s West African Bankers, Coris Bank International, to provide up to US$100 million for the development of Kouroussa as deemed necessary and according to the company’s funding strategy, subject to due diligence and credit committee approval. The project is in a well-established and stable mining jurisdiction with a number of world class bauxite and gold mines owned and operated by major international companies.
Key terms of acquisition
Initial consideration of £10m satisfied through the issue of 35,248,441 Hummingbird new Ordinary Shares at 28.4p, currently representing 9.1% of the enlarged share capital:
• Equivalent to approximately US$10 per resource ounce.
• All significant beneficial owners of Cassidy 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 1,000,000 ounces).
• § Additionally, Cassidy shall retain a 2% net smelter royalty on all gold sales by or on behalf of the Company over and above the first 200,000 ounces of its production and sales up to a maximum of 2.2m ounces of production and sales
Dan Betts, CEO of Hummingbird, commented: “The intended acquisition of Cassidy Guinea and the Kouroussa Gold Project marks a transformational step in the development of Hummingbird and the execution of our strategy to become a multi asset gold producer in the near term.
“Kouroussa is a high-grade, high margin project with a number of similarities and synergies with Yanfolila which we are confident we can harness to our advantage. Over the last few years we have looked at a vast number of projects and Kouroussa ticks every box in terms of a next mine for Hummingbird. It is of the scale, geology, process circuit design and grade that are all perfect for our team’s experience to be put to immediate use, and it is in line with our strategy to focus on high margin projects.
“I am delighted to welcome the shareholders of Cassidy Gold to the Hummingbird share register and I am pleased that our West African Banking partner, Coris, have indicated their keen support for the financing of the project as may be required. Our plan is to spend the next six months refining the detailed engineering and design of the project whilst initiating construction and ordering long lead items, with an aggressive timetable to try to accelerate the build and pour gold within two years of the acquisition.”