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Hummingbird Res. (HUM)

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Monday 08 April, 2013

Hummingbird Res.

Publication of Scoping Study

RNS Number : 7493B
Hummingbird Resources PLC
08 April 2013
 



Monday 8 April 2013

 

 

Hummingbird Resources plc

("Hummingbird Resources" or the "Company") (AIM: HUM)

 

Robust Economics Confirmed by Preliminary Economic Assessment

 

"The current project is robust from a technical and economic perspective and WAI can see no reason why this project should not proceed to a Definitive Feasibility Study."  WAI PEA Report April 2013.

 

Hummingbird Resources, the Liberian gold explorer with a 3.8 Moz gold Resource, announces results of the Preliminary Economic Assessment ("PEA") on its Dugbe 1 Project in Liberia, West Africa.  The PEA was conducted by Wardell Armstrong International ("WAI") a leading independent mining consultancy, with input from a number of other internationally recognised firms.

 

Highlights:

 

·     Post-tax NPV (10%) of $337m for a 3.5Mtpa owner-operated mine giving an IRR of 43% (assuming a US$1,500/oz gold price)

·     Capital cost to build a 3.5Mtpa tank leach operation of US$212m with a payback period of 3 years

·     Contract mining may significantly reduce initial capex to US$143m and increase IRR to 55%

·     20 year LOM produces free cash of  $954 million

·     Average annual gold production of 125,000oz per annum

·     A low strip ratio of 3:1 at Tuzon and potential gold recovery of up to 90%

·     PEA publication meets requirements for payment of second $5m tranche under the Anglo-Pacific Group royalty agreement

·     Significant potential for further optimisation

 

WAI has completed a number of different financial scenarios for the Dugbe 1 Project, assuming variable mining rates and using both tank and heap leach technologies. The 3.5mtpa plant tank leach process has been identified by the Company as possessing the best balance of shareholder return, deliverability and achievable capital requirements.

 

On an owner managed basis, such a mine will produce an average of 125,000oz of gold annually and require initial capital of US$212 million which will be paid back after only three years of production. For the first five years of life, the mine will have a low stripping ratio of 2.4:1 and an operating cash cost of US$759/oz which increases to 4.3:1 and US$904/oz over the life of mine and these figures includes total royalty and G&A.  A financial model over the 20 year life of mine produces a post-tax NPV (using a discount rate of 10%) of US$337 million and an IRR of 43.4%.

 

Hummingbird's comprehensive metallurgical testwork programmes, including 600 5m composite samples taken across the extent of both ore bodies, has indicated recovery rates of 88-90% from a CIL ("conventional tank Carbon in Leach") operation, with an average stripping ratio of 3:1 at Tuzon and 6:1 at Dugbe. 

 

It is estimated that first production could be achieved within 18 months from the commencement of construction of a 3.5Mtpa plant.

 

In the Dugbe 1 Project, which is situated only 40 miles by road from the deep-water port of Greenville in southeastern Liberia, gold mineralisation has been defined in the Dugbe and Tuzon deposits, with a combined NI43-101 compliant Inferred Resource of 94.15Mt at an average grade of 1.27g/t Au. The Dugbe 1 3.8Moz resource converts to a potentially mineable resource of 67.94Mt at an average grade of 1.31g/t, for 2.87Moz Au fully diluted.

 

Financial model based on owner operated tank leach scenario with a three year trailing gold price of US$1500/oz:

 

LOM Totals (owner operated)

Unit

Tank Leach

2Mtpa

3.5Mtpa

5Mtpa

8Mtpa

Total Ore Treated

kt

67,937

67,936

67,936

67,936

Total Gold Produced Moz

Moz

2.5

2.5

2.5

2.5

Total Revenue

$M

3,796

3,796

3,796

3,796

Total  Operating Cash Cost $/oz years  1-5

$/oz

814

759

768

782

Total Operating Cash Cost $/oz LOM

$/oz

1,006

904

878

835

Initial Capital Expenditure

$M

156

212

281

357

Sustaining Capital Expenditure

$M

52

44

35

33

Total Royalty, G&A

$M

389

389

389

389

Taxes

$M

277

298

266

227

Operating Free Cash Flow

$M

764

954

990

1,065

NPV 10%

$M

170

337

378

504

IRR

%

30.4

43.4

38.6

47.0

Payback

Years

3

3

3

3

Strip yrs 1-5

years

1.8

2.4

2.6

3.0

Grade yrs 1-5

g/t

1.42

1.41

1.35

1.31

 

NB: Models based on a gold price of US$1,300/oz and $1,700/oz are included in the appendix.

In order to produce post tax cash flows, an initial tax-free period of three years has been estimated to account for capital redemption, followed by a tax rate of 30% in addition to a 5% royalty calculated on revenue. Cash cost includes Total Royalty, G&A.

 

The PEA supports the Company's decision to rapidly progress the Dugbe 1 Project towards a Definitive Feasibility Study.  To achieve this objective, Hummingbird Resources intends to:

 

Complete the programme of infill drilling  currently underway, so that the first ten years of production falls within the Measured & Indicated category as a basis for the conversion to reserves;

Finalise the appointment an EPC/EPCM contractor to lead the Definitive Feasibility Study ("DFS");

Optimise revenue during the initial five years of production by improving the definition of higher grade resource blocks;

Consider cost saving options through alternative means of power generation;

Optimise the process route and refine capital costs;

Further investigate the benefits of contract mining;

Conduct an Environmental and Social Impact Assessment to international standards; and

Search for additional gold resources within reach of a central processing plant. The basis for this exploration is the 13,000 line km airborne geophysical survey currently being flown over the Dugbe Shear Zone.

 

During 2013, Hummingbird will commence a DFS and concentrate on infill drilling and trenching at Dugbe 1, as well as undertaking wider regional exploration.

 

A drilling programme is currently underway at Dugbe 1 with over 9,000m of drilling already completed this year (initial drill results were released on 28 March 2013). This drilling is ongoing with two diamond core drill rigs at site, drilling over 4,000m a month.  The initial aim of this work is to provide additional data on a closer sample spacing to define the spatial grade correlation and enable the Mineral Resource classifications to be upgraded.  Efforts will focus on targeting higher grade ore for the initial stage of mine production as well as refining the operating and capital costs of the project.

 

With the IFC investment and the Anglo Pacific royalty agreement, the Company is fully funded for its 2013 work programme.

 

Dan Betts, CEO of Hummingbird, said:

 

"The completion of the Company's PEA is a significant milestone for Hummingbird Resources and shows that the Tuzon and Dugbe F ore bodies make a compelling case for a stand-alone mine with an attractive financial return. The economics can only be strengthened when our nearby Sackor discovery and the potential to discover additional gold resources on our extensive acreage are also taken into account.

 

As Arthur Schopenhauer noted; "all truth passes through three stages: First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident." The PEA goes a long way to proving that the project already has robust economics and that a mine should be built.

  

Being fully financed through our 2013 work programme, we have already commenced the work which takes us towards a Definitive Feasibility Study. During the course of the next 12 months the Company will look to enhance the results of the PEA which already displays a number of positive attributes. These include the low strip ratio, high tank leach recoveries, the proximity to a port and a pro-mining jurisdiction. Our future efforts will focus on targeting higher grade ore for the initial stage of mine production, as well as refining the operating and capital costs of the project. 

 

I would like to take this opportunity to thank the staff at Hummingbird and all the consultants. They have all worked so diligently to not only discover from nothing Liberia's biggest gold deposit but to complete this extensive piece of work which outlines the country's largest and potentially most profitable gold mine. It is a remarkable achievement. " 

 

WAI PEA Report April 2013

 

"In terms of the size and average gold grade of the project, Dugbe 1 is considered to represent an attractive financial opportunity with a robust pay-back period."

 

Conference call information

 

Hummingbird Resources will host an analyst conference call today, 8th April 2013, at 9.30am BST, to present and discuss the results of the Scoping Study. To join the conference call, please dial:

 

                UK toll free: 0808 2370038

                UK number: 0203 4262845

 

A live webcast of the presentation will be available at: https://arkadin-event.webex.com/arkadin-event/onstage/g.php?t=a&d=702942350 and the password is: 638210

 

 

The webcast will be available on the Company's website from approximately 1.00pm BST.

 

Enquiries:

Hummingbird Resources plc      

Daniel Betts, Chief Executive Officer

Thomas Hill, Finance Director

Robert Monro, Head of Business Development

+44 (0) 203 416 3560

Liberum Capital Limited

Nominated Adviser and Joint Broker

Tom Fyson / Christopher Kololian

+44 (0) 203 100 2222

FTI Consulting LLP

Financial PR

Ben Brewerton / Oliver Winters / Victoria Huxster

+44 (0) 207 831 3113

 

 

Appendices

 

1:            WAI Mineable Resource Estimation

 

WAI Estimate: Potential Mineable Resource for a Tank Leach Process Route February 2013 (using 0.5g/t lower cut off)

Classification

Total Tonnes

Grade

Contained Gold

Mt

Au g/t

g

oz

Tuzon

Ore**

38.37

1.31

50,256,491

1,615,784

Waste

115.03

-

-

-

Strip Ratio

3.00

-

-

-

Dugbe F

Ore**

29.56

1.32

38,915,457

1,251,161

Waste

181.89

-

-

-

Strip Ratio

6.15

-

-

-

Total

In Situ Ore**

67.94

1.31

89,171,948

2,866,944

Waste

296.91

-

-

-

Strip Ratio

4.37

-

-

-

 



 

2:            Detailed Capital Costs:

 

 Initial Capital Expenditure (owner operated)

Tank Leach

Direct Costs $m

2Mtpa

3.5Mtpa

5Mtpa

8Mtpa

Mining

53.50

68.70

103.30

134.02

Total Process

38.17

53.41

66.67

87.70

Total Infrastructure and Inf Power

14.19

19.85

24.59

25.77

Tailings Management Facility

6.94

9.71

12.03

15.95

Total Direct

112.80

151.67

206.58

263.43

Total Indirect

43.00

60.15

74.88

93.82

Total Initial Capital Expenditure

155.80

[211.82]

281.46

357.26

 

 

3:            Headline mining numbers, both owner operated and contract mining, assuming a gold price of $1,500/oz:













LOM Totals (owner operated)

Unit

Tank Leach

2Mtpa

3.5Mtpa

5Mtpa

8Mtpa

Total Ore Treated

kt

67,937

67,936

67,936

67,936

Total Gold Produced Moz

Moz

2.5

2.5

2.5

2.5

Total Revenue

$M

3,796

3,796

3,796

3,796

Total  Operating Cash Cost $/oz years  1-5

$/oz

814

759

768

782

Total Operating Cash Cost $/oz LOM

$/oz

1,006

904

878

835

Initial Capital Expenditure

$M

156

212

281

357

Sustaining Capital Expenditure

$M

52

44

35

33

Total Royalty, G&A

$M

389

389

389

389

Taxes

$M

277

298

266

227

Operating Free Cash Flow

$M

764

954

990

1,065

NPV 10%

$M

170

337

378

504

IRR

%

30.4

43.4

38.6

47.0

Payback

Years

3

3

3

3

Strip yrs 1-5

years

1.8

2.4

2.6

3.0

Grade yrs 1-5

g/t

1.42

1.41

1.35

1.31

 













LOM Totals (contract mining)

Unit

Tank Leach

2Mtpa

3.5Mtpa

5Mtpa

8Mtpa

Total Ore Treated

kt

67,937

67,936

67,936

67,936

Total Gold Produced Moz

Moz

2.5

2.5

2.5

2.5

Total Revenue

$M

3,796

3,796

3,796

3,796

Total  Operating Cash Cost $/oz years  1-5

$/oz

952

893

906

930

Total Operating Cash Cost $/oz LOM

$/oz

1,235

1,103

1,077

1,017

Initial Capital Expenditure

$M

102

143

178

223

Sustaining Capital Expenditure

$M

67

48

41

42

Total Royalty, G&A

$M

389

389

389

389

Taxes

$M

119

173

153

138

Operating Free Cash Flow

$M

384

641

699

818

NPV 10%

$M

118

257

299

418

IRR

%

38.2

55.3

46.2

56.4

Payback

Years

3

2

3

2

Strip yrs 1-5

years

1.8

2.4

2.6

3.0

Grade yrs 1-5

g/t

1.42

1.41

1.35

1.31

 

4:            Flexing the gold price to $1,300/oz and $1,700/oz

LOM Totals (owner operated)

Unit

Tank Leach - 3.5Mtpa

$1300

$1500

$1700

Total Ore Treated

kt

67,936

67,936

67,936

Total Gold Produced Moz

Moz

2.5

2.5

2.5

Total Revenue

$M

3,290

3,796

4,303

Total  Operating Cash Cost $/oz years  1-5

$/oz

749

759

769

Total Operating Cash Cost $/oz LOM

$/oz

894

904

914

Initial Capital Expenditure

$M

212

212

212

Sustaining Capital Expenditure

$M

44

44

44

Total Royalty, G&A

$M

364

389

415

Taxes

$M

178

298

419

Operating Free Cash Flow

$M

594

954

1,315

NPV 10%

$M

186

337

489

IRR

%

29.4

43.4

57.0

Payback

Years

3

3

2

Strip yrs 1-5

years

2.4

2.4

2.4

Grade yrs 1-5

g/t

1.41

1.41

1.41

 

 

 










LOM Totals (contract mining)

Unit

Tank Leach - 3.5Mtpa

$1300

$1500

$1700

Total Ore Treated

kt

67,936

67,936

67,936

Total Gold Produced Moz

Moz

2.5

2.5

2.5

Total Revenue

$M

3,290

3,796

4,303

Total  Operating Cash Cost $/oz years  1-5

$/oz

883

893

903

Total Operating Cash Cost $/oz LOM

$/oz

1,093

1,103

1,113

Initial Capital Expenditure

$M

143

143

143

Sustaining Capital Expenditure

$M

48

48

48

Total Royalty, G&A

$M

364

389

415

Taxes

$M

52

173

293

Operating Free Cash Flow

$M

281

641

1,002

NPV 10%

$M

106

257

409

IRR

%

32.7

55.3

76.2

Payback

Years

3

2

2

Strip yrs 1-5

years

2.4

2.4

2.4

Grade yrs 1-5

g/t

1.41

1.41

1.41

 

5:            Outline Mine Plan

 

5.1:         Mining Operation

 

Mining at the Dugbe 1 Project will be a conventional open pit operation with ore and waste extracted via drill, blast, load and haul.  The mining equipment fleet is likely to consist of equipment similar to Atlas Copco FlexiROC D60 track-mounted drills for blast hole drilling, and Liebherr 8m3 and 15m3 shovels for ore and waste excavation.  Upon loading, ore will be hauled from Dugbe F and Tuzon in plant such as CAT 777G 90t haul trucks to a centralised ROM pad, from where it will be crushed in a primary crusher before being fed to the processing plant. Waste from Dugbe F and Tuzon will be hauled in 90t trucks to waste dumps located on the footwall side of each pit.

Mining operations at the Dugbe 1 Project will have a life of mine average strip ratio of approximately 3:1 at Tuzon and 6:1 at Dugbe F.  The average strip ratio for the first 10 years of mine life on a 3.5Mtpa plant is 2.8:1.  The resultant open pit footprint at Tuzon is approximately 1,750m along strike by 730m and some 200m deep with a resultant total rock tonnage of approximately 115Mt.  The Dugbe F footprint is approximately 2,750m in strike with a maximum width of 1,000m and a total rock tonnage of approximately 181Mt.

 

5.2:         Processing

 

Mineral Processing test work has been undertaken at a number of different internationally respected laboratories.  This test work has demonstrated that the mineralised rocks at Dugbe F and Tuzon are amenable to cyanidation.

 

Two principal process routes have been considered: conventional tank carbon in leach (CIL) and heap leach using sodium cyanide with subsequent gold recovery.  Gold recoveries of up to 90% are anticipated with tank leach and 60% with heap leaching. 

 

A conceptual flow sheet for a 3.5mtpa CIL operation comprises the following key stages and components:

 

Stage 1 - Ore receiving section: ore will be delivered to a static grizzly (600mm material), then move to a jaw crusher (150mm material), and next to an ore stockpile for a maximum of 12 hours. This circuit will treat approximately 750t/hour.

 

Stage 2 - Grinding: ore will be fed into an 8.5m x 4.35m semi-autonomous (SAG) mill fitted with a 6,000kW motor at a rate of 440tph. Ore will be ground to 80% passing through 850µm. From hydrocyclone classification underflow material will pass through a closed circuit Ball mill, before returning to the SAG mill.

 

Stage 3 - CIL circuit: Product from the grinding circuit will be pumped from the pre-leach sump to six 3,300m3 tanks operating in series.

 

Stage 4 - Doré production: this will comprise an elution circuit of AARL type design.

 

Stage 5 - Carbon regeneration: this stage will comprise a diesel fired rotary kiln and regenerated carbon will be returned to the CIL circuit.

 

Stage 6 - Cyanide detoxification: the final stage of the process will include cyanide detoxification) prior to disposal of wastes in a Tailings Management Facility ("TMF"). A nominal cost for cyanide detoxification has been included in the CAPEX but the precise nature and extent of any cyanide treatment will be determined during the ESIA to be undertaken as part of the Definitive Feasibility Study.

 

5.3:         Tailings Management Facility and Mine Layout

 

The Environmental and Social Scoping Report (WAI, April 2013) has provided a provisional mine layout and identified a potentially suitable naturally occurring valley some 2.5km to the north of the Tuzon deposit that could support a TMF. The cost of the TMF has been estimated at US$9.71m.

 

5.4:         Infrastructure

 

It is assessed that the infrastructure cost for the project will be under US$20m and this will include the upgrade of the road from Greenville to a two-lane laterite road suitable for heavy mining equipment.

 

6:            Power

 

It is estimated that a 3.5Mtpa plant will require 17.5MW of installed power. For the PEA, power estimations have been worked out using US28cents/kWh, which is based on using Light Fuel Oil (LFO) leased generators.  On this basis it is believed there is significant optimisation that can occur to reduce opex on the project and all possibilities will be evaluated during the DFS and we anticipate significant cost saving in this area. For example, the option of using HFO generators will be investigated and indicative figures so far from a leading power generation company has suggested a ten year generator rental agreement including HFO could produce power in the order of US17c/kWh.

 

Furthermore, a desktop scoping study conducted by Knight Piesold in 2012 into the opportunity for hydroelectric power concluded that there were a number of regional sites that could be suitable for a run-of-river hydro scheme sufficient to produce up to 30MW of power at a cost of US18c/kWh. Lastly, a study will also be conducted into the opportunity to use crude palm oil (CPO) from nearby oil palm plantations that could be mixed direct with LFO to make biodiesel.

 

7:            Capital Expenditure

Summary of the initial capital expenditure required for each production rate 

 

Summary of Initial Capital Expenditure for the Dugbe 1 Project


Tank Leach

Direct Costs $m

2Mtpa

3.5Mtpa

5Mtpa

8Mtpa

Mining

53.50

68.70

103.30

134.02

Total Process

38.17

53.41

66.67

87.70

Total Infrastructure and Inf Power

14.19

19.85

24.59

25.77

Tailings Management Facility

6.94

9.71

12.03

15.95

Total Direct

112.80

151.67

206.58

263.43

EPCM

10.08

14.10

17.56

22.00

Contingency

11.86

16.59

20.66

25.88

Freight

1.78

2.49

3.10

3.88

Comms and Vendors

0.89

1.24

1.55

1.94

Spares

2.97

4.15

5.16

6.47

Temporary Facilities

1.78

2.49

3.10

3.88

Working Capital

13.64

19.08

23.76

29.76

Total Indirect

43.00

60.15

74.88

93.82

Total Initial Capital Expenditure

155.80

211.82

281.46

357.26

 

8:            Mineral Processing and Infrastructure Initial Capital Expenditure

In order to generate an initial capital estimate for each production rate, a base case capital expenditure for each process route was estimated and scaled using an industry standard method. The estimates have been made on the basis of a rented diesel generated power scenario.

 

 


Tank Leach

Direct Costs $m

2Mtpa

3.5Mtpa

5Mtpa

8Mtpa

Mining

53.5

68.7

103.3

134.02

Single Stage Crushing

4.99

6.98

8.64

11.46

Milling

16.78

23.47

29.07

38.54

Leaching

6.66

9.31

11.54

15.29

Carbon Circuit

3.89

5.45

6.75

8.94

Gold Room

0.80

1.13

1.39

1.85

Tailings Detoxification

1.77

2.47

3.06

4.06

Reagents

1.44

2.02

3.02

3.32

Others

1.84

2.58

3.19

4.23

Total Process

38.17

53.41

66.67

87.70

Infrastructure

13.53

18.93

23.45

24.25

Inf Power

0.66

0.92

1.14

1.52

Total Infrastructure and Inf Power

14.19

19.85

24.59

25.77

Tailings Management Facility

6.94

9.71

12.03

15.95

Total Direct

112.80

151.67

206.58

263.43

 

 

Notes to Editors:

 

Hummingbird Resources plc is an AIM quoted mineral exploration company incorporated in England and Wales and headquartered in London.  Since its establishment in November 2005, the Company and its subsidiaries (the "Group") has been active in Liberia, West Africa, and is currently the holder of the largest area of mineral exploration ground in the highly prospective Birimian geological region of eastern Liberia.  The Group's total Inferred Resource is 3,835,000 ounces of gold.  The Group has published a PEA on its project showing on a 3.5Mtpa tank leach operations and NPV of US$337m on a Capex of US$212m for an IRR of 43.4%.  This gives a payback period of 3 years and is based on a 10% discount rate and US$1,500 gold price (three year average gold price at time of release).

 

The Group has published a NI43-101 compliant Inferred Resource on its Dugbe F deposit of 43.01 million tonnes at 1.28 g/t Au to give 1,764,000 ounces of gold using a lower cut-off grade of 0.5 g/t Au and no upper cut-off grade.  In addition, the Group has declared an Inferred Resource on its Tuzon project of 51.1 million tonnes at 1.26 g/t Au to give 2,071,000 ounces gold using a lower cut-off grade of 0.5 g/t Au and an upper cut-off grade of 7.0 g/t Au.  Tuzon lies 2.6km to the east of the Dugbe F deposit.  Exploration is being carried out to best industry practices.

 

In 2013 the Group is moving the Dugbe 1 Project towards feasibility and is currently infill drilling its existing Resources as well as continued regional exploration work.

 

The Group currently holds exploration licences covering approximately 7,000 square kilometres in total, which constitutes a significant proportion of eastern Liberia containing the Birimian sequence.

 

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


This information is provided by RNS
The company news service from the London Stock Exchange
 
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