Approval by shareholders at a meeting on 1 July to buy the Yanfolila gold asset in Mali will greatly improve prospects for Hummingbird Resources (HUM:AIM). The miner could become a producer within 18 months, generating cash to help fund existing interests in Liberia. At 56.5p, Cantor Fitzgerald reckons the share price will double in a year.
Gold price weakness left the market wondering if Hummingbird would develop its Dugbe asset in Liberia due to low metal grades, causing an 89% slump between February 2012 and August 2013 to 19p. The stock has since started to recover thanks to new financial support and higher grade and size at Dugbe. This re-rating should be fuelled by the addition of Yanfolila which has twice the grade of gold than Dubge per tonne of rock. There’s a two-year payback for the $52 million construction bill.
The build and operating costs are relatively low for Yanfolila but so too is the mine life at a mere six years, producing 329,000 ounces in total, far less than the 1.8 million ounce headline resource. The large layer of gold not included in production plans isn’t economical to extract at current metal prices. Yet Hummingbird reckons there could be more suitable material on the licence area to extend Yanfolila’s life.
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Yanfolila looks a good fit for Hummingbird despite the slight catch that only a portion is economically-viable to mine at present.