Gold Fields takes $26m stake in Hummingbird

[miningmx.com] – GOLD Fields is to sell its Yanfolila gold mining project in Mali for $20m to the UK’s Hummingbird Resources in a transaction that reunites the junior firm’s chairman, Ian Cockerill, with the South African gold major he led for six years from 2002 to 2008.

In terms of the transaction, the $20m is payable in shares at 56p/share making Gold Fields a 26.3% shareholder in Hummingbird, the UK firm said in an announcement.

Shares in the company gained 6% in early UK trade giving it a market capitalisation of just over £31m (R560m).

The Yanfolila project contains some 1.8 million ounces of gold grading at 2.8 grams per tonne. The mine has an estimated six years life of mine producing at a rate of 850,000 tonnes of ore a year, equal to 81,000 ounces at a cash cost of $503/oz.

All in sustaining costs have been calculated at $700/oz with life of mine capital expenditure is an estimated $71m.

“This is an encouraging development for the company [Hummingbird] and will hopefully provide a low cost rapid route for the company to evolve from explorer to producer,” said Investec Securities in a morning note.

It added, however, that Hummingbird’s announcement was short of information regarding the production profile of Yanfolila.

According to Numis Securities, Yanfolila is expected to deliver first production at the end of 2015, producing 55,000 ounces a year over 6 years.

It added that: “Looks like a neat acquisition for Hummingbird that will diversify risk out of Liberia and provide a means to early cash flow against a wider large exploration portfolio”.

The sale of Yanfolila is part of Gold Fields’ strategy to focus on its larger assets and spend less on exploration and greenfields development.

Nick Holland, Gold Fields CEO, said on May 26, that the company was spending $51m at its existing Australian assets this financial year, just over double the $25m it spent last year. Gold Fields bought the Yilgarn South mines from Barrick last year, but acquisitions were not a priority, he said.

“For the right deal, we can find ways to finance it,’ said Holland in May. “We would look at bolt-ons, but not major transformational deals. We don’t want to waste good money on bad acquisitions; we would rather grow the cash,’ he said.

While at Gold Fields, Cockerill fended off a hostile takeover launched by Harmony Gold before leaving for Anglo American where he headed Anglo Coal for barely a year before falling out with former Anglo boss, Cynthia Carroll.

He took over as chairman of Hummingbird Resources, a exploration play founded by the UK’s Betts family, in 2010. He had previously been a chairman of Petmin, a Johannesburg listed mid-cap mining company but recently relinquished the post to become a non-executive director of the firm.