Hummingbird buys Guinea Kouroussa mine project; gold M&A continuing

London — London-listed gold miner Hummingbird Resources has formally assumed ownership of the Kouroussa gold project in Guinea from Cassidy Gold, as a wave of merger and acquisition activity continues to sweep the gold sector amid high spot metal prices, Hummingbird said Sept. 1.

Plans for the acquisition were announced June 8.

Hummingbird is awaiting award of a project mining license from the Guinea government, it said in a statement. It will work in partnership with the government to develop the project, it added.

Once the license is awarded, the company will pay an initial consideration for the project of £10 million ($13.45 million), raised via the issue of 35,248,441 new ordinary shares in the company at a price of 28.4 pence, representing 9% of the company's enlarged share capital, it said.

Hummingbird plans to start construction at Kouroussa in early 2021 and first gold from the site is expected in two years' time.

"Our dedicated project management team have started development plans and the permitting process as we highlighted in our recent 1H2020 interim results," said Hummingbird CEO Dan Betts. "Completion of the acquisition gives us further confidence to advance with these initiatives to bring Kouroussa into production and transform Hummingbird into a multi-asset producing resources company."

Analysts from S&P Global Market Intelligence, part of the S&P Global group alongside S&P Global Platts, said in a mid-August webinar that gold had accounted for around 75% of the total value of merger and acquisitions in the mining sector so far this year. "Commodity buyers are targeting gold and silver globally in multiple small deals," with Africa and Brazil deposits high on the list of targets, an MI analyst said.

Gold spot prices last month rose to record highs of over $2,000/oz on safe-haven appeal amid macroeconomic concerns caused by the COVID-19 pandemic, before slipping back slightly.

High-grade resource

Kouroussa is a near-term development asset in the Siguiri Basin, near Kouroussa town in northeastern Guinea. It has a high grade mineral resource of 1.18 million z of gold at over three grams per mt, and an internal rate of return of 51.2% (at a $1,350/oz gold price), Hummingbird said.

Synergies between Kouroussa and Hummingbird's existing Yanfolila mine in Mali enable the company to use similar metallurgical flow sheet and process plant design to facilitate construction, Hummingbird said. It plans to fast track the Guinea mine to produce around 100,000 oz/year at all-in sustaining costs of around US$800/oz over an initial five year mine life, it said.

During an initial six-month period the company will analyze a funding structure for the project, consistent with a letter of intent received from its west African banking partners, Coris Bank, it said. The financing is expected to support the project with up to $100 million and will take into account the fact that the company expects to be generating significant cash flows from its Yanfolila mine, which is due to become debt free in Q2 2021.

Hummingbird said in April it expects to hit an annual target of 110,000-125,000 oz of gold output from its Yanfolila mine after it increased first-quarter production by 27% year on year to 30,282 oz.