UK-LISTED gold development firm, Hummingbird Resources, has raised $67m in a share placement for Yanfolila, a gold project in Mali it bought from South Africa’s Gold Fields in 2014 for $20m.
However, Gold Fields – which was Hummingbird’s largest shareholder with a 19.9% stake – is not participating in the offer taking its investment in the firm post-placement to 6.7%.
“We are now in a position to commence full-scale construction in order to bring Yanfolila, one of the highest margin undeveloped gold projects in Africa, to production,” said Dan Betts, MD of Hummingbird Resources in a press statement.
Hummingbird is to issue 103.7 million shares at 22 pence/share, a 13% discount to its closing share price on June 1. Just over 38% of shareholders, including directors holding 7.5%, are to support the offer that will be put to general vote on June 20.
A further $10m could be raised through the issue of another 31 million shares in the company in the event of a standard over allotment of the initial share placement.
Investors that have taken up shares in the company include Capital Group, which holds $1.9 trillion in assets under management. It will hold 10% of Hummingbird post the placement (but excluding the over-allotment option). Odey Asset Management, another major institution, will hold 6.3% of the firm.
The balance of Yanfolila’s estimated $80m capital cost will be financed through debt. “This equity placement enables Hummingbird to move immediately into detailed engineering with a clear timeline to production,” said Betts.
“The company will now have a strong balance sheet and is positioned to negotiate the best possible debt terms for our shareholders,” he added. Betts will subscribe for 315,000 shares in terms of the proposed placement.
The placement provides further evidence of growing investment interest in the prospectivity of west African gold which has seen support for the takeover of Amara Mining by Perseus Mining, and the rapid development of some 500,000 oz/year of gold production by Endeavour Mining.
Both Sibanye Gold and Harmony Gold have expressed an interest in sub-Saharan (non-South African) gold mines whilst Randgold Resources has parked ideas for growth by acquisition in the sector in favour of exploring and finding new gold targets again.
Yanfolila will produce 132,000 oz of gold in its first full year of production and a life of mine average of about 107,000 oz/year based on the results of a definitive feasibility study.
The study estimated all in sustaining costs of $695/oz which is comparable to some of the costs recorded by Randgold Resources, although Hummingbird’s investment returns planning is at a gold price of $1,250/oz. The gold price is currently trading at $1,211/oz.
Construction of the project will take about 12 months after completion of a detailed engineering study. The proceeds of the placement will be used to order long-lead items and begin construction.
Hummingbird added that there was some one million oz of “gold inventory” outside Yanfolila’s current mine plan but within the mining permit. In addition, there was high grade potential identified at the Gonka deposit, five kilometres from the Yanfolila plant.
“The company will now make a number of key hires to strengthen the team,” said Betts. Yanfolila will produce over $70m of free cash flow in its first full year of steady state production,” he added.
Some the capital raised will be used to settle a bridging loan with Taurus Mining Finance Fund from which it raised $15m after issuing stock for 33p/share. Hummingbird has a total debt facility of $75m with Taurus.