HUMMINGBIRD Resources said it will double production following agreement with Cassidy Gold Corporation to swap shares for control of the Canadian firm’s Kouroussa gold project in Guinea.
The terms of a heads of agreement signed between the parties is that Hummingbird will offer about 35.2 million shares at 28.4 pence per share, or some £10m – equal to 9.1% of the firm’s enlarged share capital. The Hummingbird shares are being offered at a slight premium to its current price of 26.5p – a modest 1.5% higher in London today.
As part of the deal, Hummingbird has also agreed to a deferred payment of £10 for every ounce of gold reserve published (proved economic) above 400,000 oz up to a maximum of one million oz. A 2% net smelter royalty agreement on all gold sales over and above the first 200,000 oz in production and sales is also part of the package, up to a maximum of 2.2 million oz.
Cassidy Gold Corporation has agreed to a one-year lock-in of Hummingbird shares and an orderly sell down of shares for a year if shareholders elect to exit the register.
For its shares, Hummingbird takes on Kouroussa which, if developed as planned, will produce 100,000 oz for an initial five-years at an all-in sustaining cost of $800/oz, and take Hummingbird’s total annual gold output to more than 200,000 oz.
Hummingbird said in February that it intended to produce an average 120,000 oz/year for three years from its Yanfolila gold mine in Mali.
Developing Kouroussa will cost about $90m, roughly the value of Hummingbird’s market capitalisation, but in a market considered supportive of dollar gold prices. Initial support for $100m in credit had been received from its West African banker, Coris Bank International.
The company last week announced it had farmed out the exploration of its Dugbe project in Liberia removing a potential major capital cost item from its balance sheet.
“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,” said Daniel Betts, CEO of Hummingbird in a statement.
Hummingbird said Kouroussa was located in the “prolific Siguiri Basin, and had a high grade mineral resource of 1.18 million ounces grading at above 3g/t. There was also the chance of organic growth at depth.
“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,” said Betts. “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.”
The company would detail engineering and project design over the next six months “… whilst initiating construction and ordering long lead items”. It said the project timetable would be “aggressive”, targeting the first gold pour in two years.