HUMMIN Hummingbirdâ€™s Dugbe Camp, Liberia
NGBIRD RESOURCES From Explorer to Producer Overnight
An Exclusive Interview with CEO Daniel Betts
oming from a family history in the mining sector, Hummingbird Resources CEO Dan Betts knows better than most how to uncover value. Having discovered Africaâ€™s largest gold find in 2012, the West African focused gold explorer
has expanded its operations beyond Liberia with their first acquisition. In this exclusive with the Aspire Africa, Dan discusses the companyâ€™s acquisition of Gold Fields interests in Mali, what this means for shareholders, and the transition from a gold explorer to producer.
By: J. Landry
CEO, Hummingbird Resources J. Landry: Dan, you come from strong family history in resources - can you tell us about some of the industry insights and lessons learned while growing ? Dan Betts: It’s difficult to summarise all of the lessons learnt over the generations but I think the key insight is that you need to plan longterm and not be knocked off course by short term gold price volatility. Long-term, the price trend is going to be upwards. 4
Hummingbird Resources · Mali - Liberia
JL: How was the decision made to look into Liberia in 2005? DB: It was an opportunity that the Liberians brought to us. They had an area that they thought could be prospective but absolutely no commercial gold mining activity had occurred in the country. They knew us from trading gold in the 1980’s and offered us the chance to come and pick up exploration ground there in 2005. Initially we looked to
Resource of 1.8Moz at Yanfolila Project in Mali
partner with established miners but ultimately took the decision to branch out vertically and develop our own gold company. This obviously culminated in an AIM listing and the discovery of just under 1Moz in 2010, before growing the resource to over 4Moz. JL: Can you talk about the conditions in Liberia, its stability and working with government? DB: Logistically it is good, especially by West African standards. We are only 40 miles from a deep water port, and there is a good road linking us. The pro-mining government was democratically re-elected in 2011 and the mining code is based on Australian mining regulation code. The fiscal terms are set to encourage investment with an expected Royalty of 3% and a 25% basic tax rate. JL: You also had Africa’s largest gold find in 2012 didn’t you? DB: Yes. We announced our maiden resource of 812Koz in 2010 and had increased that to 1.8Moz by the end of that year, and to 3.8Moz in 2012. An infill drilling campaign was completed in March 2014 which resulted in a further increase to 4.2Moz, including 2Moz at Tuzon with a grade of 1.5g/t. This resource is built on 2 deposits but we have already identified a further 3 deposits and 140 targets that require further exploration and have only really just started to scratch the surface of our 3,000 km squared Liberian licence acreage. JL: You recently acquired the Yanfolila Project from Gold Fields in Mali. Can you tell us about this? DB: We have agreed to acquire all of Gold Fields interests in Mali which comprises of over 3,000 square kilometres of highly prospective belt scale exploration operation in two groups of licences. Yanfolila being one, and Kangare being the other.
Mining Within the Yanfolila package is the Yanfolila Project which is a well defined, fully permitted project. It consists of 1.8Moz of gold grading 2.6g/t, and it has significant upside in both near pit and further afield resources. The reason for Hummingbird acquiring this project is it’s a perfect fit with our large world-class project in Liberia and it will give us the ability to get into early cash flow and production very quickly. The project Gold Fields were trying to build was a 2Mt/y plant and we believe the opportunity is in building an oxide only plant that will process around 850,000 tonnes of ore/year, for an average gold production of 5560,000 ounces per year and the capital cost will be in the region of $50M and we believe we’ll be in production next year. We’re extremely excited, we think it’s a transitional and transformational deal for Hummingbird and it’s a perfect opportunity to exploit the current gold market where there is tremendous value out there. To put this in perspective, Gold Fields themselves have spent in the region of $105M on the Yanfolila Project and there was significant money spent before they took control of it. So it really is one of the best defined, ready to go, fully permitted projects I’ve seen and we’ve looked at a lot of projects. We’re very happy to be at this point. JL: What was the rationale behind the Yanfolila acquisition? DB: That’s a good question. There are a couple of reasons for the strategy and the acquisition. In Hummingbird, we had a single project in Liberia. The project is a large-scale open pit gold mining project. We’re completing our DFS studies on the Dugbe 1 Project at the moment. The Dugbe 1 Project which has a 4.2Moz Aspire Africa · July/Aug 2015
We’re extremely excited, we think it’s a transitional and transformational deal for Hummingbird .” Dan Betts
resource and will get significantly bigger over time. It has no option to really start with a small scale, small capex project. I think in this current gold pricing market, challenges for accessing capital are going to be significant. What we don’t want to do is find a world-class gold project and be in a position like many other juniors where we can’t fund it. Over the last two years we’ve been looking to either find a way to bring Dugbe 1 into production for a small capex or to find another strategy to do that, and this Yanfolila Project fits the bill perfectly because we can bring the whole project into production for about $50M of capex. The second reason for the purchase - it is our belief at Hummingbird that the current gold market presents almost a once in a generation opportunity to access quality projects for very cheaply. Over the last two years we’ve looked at dozens and dozens of projects, and for various reasons we haven’t liked them. There’s been problems with the resource or the permitting or the politics, but the Yanfolila Project is as complete as any project I’ve seen. The work done by Gold Fields is worldclass. They’ve drilled almost 500,000 metres of drilling and the project is fully permitted with a thirty year mining permit and all the tax and fiscal regime in place. It’s a perfect fit for Hummingbird to build a gold company off of the back of it. JL: How close is Yanfolila to production? DB: The simple answer is we believe we’ll be in production in 2015. This is a very short time frame. The project Gold Fields envisaged was a 2M t/y plant and the project is fully permitted. There’s no licencing issues or anything. It’s ready to go; it’s ready to start. Now before we start building the project we’re going to right-size it. What we mean by this 6
Hummingbird Resources · Mali - Liberia
Work on primary access is we’re looking to build an oxide only plant and build a smaller scale plant as phase one of the development. We image a 4-6 month optimisation period at the start of the project, and a twelve month build. So by the end of next year we’ll be in production. JL: Hummingbird Resources transitioned from a gold explorer to producer almost overnight. What does this acquisition mean for the Dugbe 1 Project in Liberia? DB: It’s outstanding news for the Dugbe 1 Project in Liberia because it de-risks it significantly. I’ve said previously, one risk in this market is that we bring out a DFS on-time and on budget and it shows a very robust project at Dugbe 1, but you have a large capital challenge to raise the finance to build the mine. With the Yanfolila Project coming onstream with a more manageable capital cost, it totally de-risks the development pipeline to bring Dugbe 1 on stream. We can use the cash flows from the Yanfolila Project to help assist with the development of Dugbe 1.
Infill Drilling December 2013
With the Yanfolila Project some of the key members of the Gold Fields team are coming across, so it’s not like Hummingbird will be understaffed or under resourced to manage both projects. We fully anticipate motoring ahead with the DFS on the Dugbe 1 Project and not delaying it at all. JL: Did you always envision Hummingbird Resources to be a multi-faceted operator with a West African focus? DB: The answer to that question is that I’ve always envisioned building the best possible gold company that we could. It seems that at the moment we have a West African position, but I wouldn’t rule out looking at the right asset in any jurisdiction. I think that this market is unique and that 8
Hummingbird Resources · Mali - Liberia
there are opportunities everywhere, but yes, I always envisioned building the best possible company that we could and creating shareholder value through either buying or discovering assets that could make a significant economic return. JL: Why have you chosen this time for your first acquisition? DB: A lot of these acquisitions happen when they happen, you can’t choose everything. Gold Fields have their own strategy looking to divest of certain assets in Africa and the opportunity arose now. So I think the key is being ready to react to the market and to opportunities as they arise. As I’ve said, we’ve had a strategy of looking for a suitable project for about two years now, but the worst thing you can do, is do a deal for
3,200km2 of exploration potential in Liberia
the sake of it. We’re infinitely patient, we have a world-class project in Liberia and we didn’t need to do anything. But this opportunity arose and its clearly a fantastically robust project. It’s got an RRR of 54% at the current gold price. It was really too perfect for Hummingbird not to do the deal. So in answer to that question, we’ve been ready but we didn’t specifically choose now. The time almost chose itself.
Mining It diversifies your political risk to two countries; it utilises our skillset operationally in West Africa. I think that the project itself is so robust at the current gold price and the capital required to bring it into production is manageable, particularly with Hummingbird’s extremely supportive existing shareholder register.
JL: What does this mean for Hummingbird shareholders?
I think it will not only deliver value in itself, but it will unlock the value in Dugbe 1, because it’s my opinion that Hummingbird is significantly undervalued compared to its peer group, and the stage of development its at.
DB: As a significant shareholder myself I hope its good news, otherwise I wouldn’t have supported the deal! I sincerely believe it derisks Hummingbird in terms of its ability to deliver, and the ability to become autonomous and self-generating with cash flows.
A lot of the reason for that underrating is that the market perceives a potential capital challenge to build a project. This acquisition eliminates that capital challenge and shows a clear pipeline to production for both projects. It’s a great deal for Hummingbird shareholders.
Aspire Africa · July/Aug 2015
Bridge to camp JL: What is the structure of the deal? DB: The deal we’ve agreed with Gold Fields is that we will acquire the Yanfolila package. Glencar Mining is the company we’re acquiring off Gold Fields with their Mali interests. We’re paying $20M of Hummingbird paper – it’s an all share deal at 56 pence/share. It means Gold Fields will become Hummingbird’s largest shareholder.
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10 Hummingbird Resources · Mali - Liberia
That has obvious strategic benefits for us having a world-class gold major on our share register. It also means we don’t have to find the cash to acquire the asset and we can use cash to develop it. The deal’s structure is real straight forward. Hopefully extremely value accretive to shareholders, as we unlock the value and prove the economics of the oxide only plant, and how quickly it will come in to production. You will see a lot of value coming through off the back of that deal.
Mining For $20M of Hummingbird paper, we’re acquiring an asset that has had $100M spent on it. Over 500,000 metres of drilling, and we get a $65M tax credit against future profits for the work done to date. And with a 54% RRR at the current gold price, it’s a very attractive deal for us. JL: What is Hummingbird’s current cash position and what are your deliverables over the next six months? DB: Hummingbird currently has nearly $8M of cash in the bank and we’ve also got a number of other facilities and options available to us for further funding should we require it. But we have enough money in the budget to conclude an optimisation study on Yanfolila and continue with the Dugbe 1 feasibility studies. During the next six months our objective is to complete the optimisation studies at Yanfolila. Everything has been fully permitted and fully done on the Yanfolila Project for the scale of project Gold Fields envisaged. All we need to do is make amendments. There’s no permitting or licencing issues at all. It’s purely internal workings, and we’ve already started that. Through the due diligence period we’ve already started optimising the resources for the project we imagine. We’re looking at a project with a cash cost of just about $500/ oz of production. The main purpose now is to prove it’s real and get into construction as quickly as possible. JL: Can you talk about Hummingbird’s responsibility to the local community and the activities you’ve undertaken? DB: Working with the communities is key and will become more so as we go into production. We run a comprehensive range of community
Community Engagement projects with initiatives in areas such as healthcare, education, and infrastructure. We are proud to have a good working relationship with our host communities. JL: Lastly, can you explain what the Pygmy Hippo Foundation is? DB: The Zoological Society of London estimates that there are less than 2,000 pygmy hippos remaining in the wild. The majority of these are believed to be located in southeast Liberia’s Sapo National Park. In July 2011 we founded the Pygmy Hippo Foundation, a UK registered charity, dedicated to improving conservation in Liberia. Through the re-development of the Sapo National Park, enabling broader conservation initiatives in the surrounding forest areas and facilitating education programmes, the Pygmy Hippo Foundation aims to promote the conservation, preservation and protection of endangered species such as the pygmy hippo in their natural environment. ASPIRE Aspire Africa · July/Aug 2015 11
www.hummingbirdresources.co.uk 22 Mount Row, London W1K 3SF, UK Tel: +44 (0) 20 3416 3560