Hummingbird Regulatory News (HUM)

Hummingbird Resources plc / Ticker: HUM / Index: AIM / Sector: Mining

24 June 2021

Hummingbird Resources plc

('Hummingbird' or the 'Company') 

Pasofino Gold releases updated Preliminary Economic Assessment for the Dugbe Gold Project, Liberia

Hummingbird Resources plc (AIM:HUM) is pleased to announce that Pasofino Gold Ltd ('Pasofino') (TSXV:VEIN) has released its independent Preliminary Economic Assessment ('PEA') for the Dugbe Gold Project ('Dugbe' or the 'Project'). The PEA has been prepared in accordance with NI 43-101 by DRA Projects (Pty) Ltd a wholly owned subsidiary of DRA Global Ltd ("DRA") as lead consultant and assisted by SRK Consulting Ltd (UK) and Epoch Resources (Pty) Ltd. For the full Pasofino release details and graphics, please follow the link here

Pasofino has an earn-in agreement for a 49% stake in the Project, with Hummingbird maintaining a controlling interest of 51%. For further details on the option and earn-in agreement with Pasofino, please refer to the Company's RNS dated 4 June 2020.

Highlights

· Significant Production Potential - Establishing a foundation for a New Gold District

o Five million tonnes per annum ('Mtpa') operation producing approximately 2.5 million ounces ('Moz') of gold over a 14 year Life-of-Mine ('LOM')

o Steady state average annual gold production of approximately 188,000 ounces ('oz'), with peak production of approximately 226,000 oz in year eight of operation  

· Strong Financial Metrics

o Pre-tax NPV5% of US$825 million (US$627 million post-tax), 34% IRR (31% post-tax) at a gold price of US$1,600/oz

o Pre-tax NPV5% of US$1,153 million (US$874 million post-tax), at a gold price of US$1,800/oz

o Fast capital payback of c.2.9 years from start of production

o LOM Cash flow of US$627 million*

o LOM AISC of US$893/oz and US$821/oz cash cost

· Simple Project with Economies of Scale

o LOM strip ratio of 4.5:1 highlighted by a low strip ratio of 2.8:1 in the first four years

o Low power costs of US$0.18/kwh, with opportunities for long term savings with alternative sources

o Significant community support built over 10+ year history of the Project

· Development Capital

o Pre-production capital requirement of approximately US$391 million

· Exploration and Study Upside

o Much of the 2,599 km2 land package is prospective. Pasofino has new drill targets in the pipeline following intensive surface exploration work undertaken over the last six months

o Ongoing positive drilling results at Dugbe F and Tuzon will be included into the updated Mineral Resource Estimates ('MRE') planned for July and August 2021

o Current test work underway at ALS Perth, Australia looking to improve metallurgical recoveries

Key Aspects Which Enhance The Quality Of The Project Include:

• 74 km by road from the port of Greenville to the Dugbe Project

• Tuzon and Dugbe F deposits 4 km apart serviced by a central processing plant

• US$0.18/kWh estimated mine life power costs

• Constructive relationship with the Government of Liberia

* Cash costs per payable ounce and AISC per payable ounce are non-GAAP financial measures. Please see "Cautionary Note Regarding Non-GAAP Measures". AISC per payable ounce includes all mining costs, processing costs, mine level G&A, royalties, sustaining capital and closure costs. Cash costs per payable ounce includes all mining costs, processing costs, mine level G&A, and royalties

The PEA was prepared in accordance with Canadian Securities Administrators' National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). The reader is advised that the PEA summarized in this news release is intended to provide only a high-level review of the project potential and design options. The PEA mine plan and economic model include numerous assumptions and the use of inferred mineral resources. The PEA is preliminary in nature, includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Dan Betts, CEO of Hummingbird Resources, commented: "We have always believed in the fundamental value of the Dugbe Project and the huge, district scale exploration potential. The recently released, positive drilling results at the Dugbe F and Tuzon deposits highlight the ongoing exploration potential, as well as Pasofino's robust PEA, with a +US$800 million NPV (over $1 Billion at US$1,800oz gold price) and upside potential as exploration drilling takes place. This PEA highlights the material value and potential of the Project and its ability to not only be the mine we have long envisaged but also to become the next gold district in West Africa/Liberia. The PEA provides a strong foundation on which Pasofino will complete a Feasibility Study whilst they continue to satisfy the earn in conditions of our JV and once completed this will be another major milestone for the Project. We look forward to keeping you updated on developments at Dugbe."

Ian Stalker, CEO of Pasofino, commented: "We are extremely pleased with the set of outcomes from this PEA exercise. It underscores the potential of the Project to deliver significant value to all stakeholders going forward. Our consulting engineers and management team have set the basis for a high quality Feasibility Study which is in progress, and which will incorporate the positive recent infill and step out exploration results recently announced. We look forward to completion of the Feasibility Study which should provide a solid foundation for the start of the build phase expected to occur in 2023.

"There are many key attributes of this Project demonstrated by the results of the PEA. However, from a practical construction and mining perspective, the following are worth highlighting:

· The proximity of the Project to the deep-water port of Greenville (74 km away)

· The high productivity opportunity that both deposits on the Project offer provides added value to the development of Project

· The constructive relationship enjoyed with the Government of Liberia" 

Trade Off and Updates

DRA was appointed as lead consultant to prepare the PEA in accordance with NI 43-101, and was assisted by SRK Consulting Ltd (UK) and Epoch Resources (Pty) Ltd.

A number of trade-offs were completed by DRA and Pasofino during the PEA work, including the evaluation of processing capacities from 4 Mtpa to 7 Mpta and a trade-off on a full range of power options. The 5 Mtpa option was identified as the most suitable capacity for the current Project, based on the life of the Project, estimated capital and shareholder return.

For an owner mining scenario, the PEA CAPEX estimate is US$391 million. Operating costs are expected to be in the order of US$826/oz during the initial years, and an average of US$893/oz over the LOM. During the first four years, operating costs are kept low by mining the shallow mineralised material in both pits (Dugbe F and Tuzon) at a targeted strip ratio of less than 2.8, increasing thereafter to an average of 6.8 over the balance of the LOM.

In terms of contained ounces, the PEA relies on 65% Indicated Resources and 35% Inferred Resources, from the Dugbe F and Tuzon deposits which are 4 km apart. An updated MRE on the Dugbe and Tuzon deposit are anticipated to be released in July and August 2021. With the PEA now complete, this sets the foundation for the completion of the Feasibility Study ('FS') in order to then fully demonstrate the financial viability for the Project which is ongoing.

Other key considerations for the PEA included:

• Mining and processing scenarios that were considered ranging from 4 Mtpa to 7 Mtpa

• Recent West African benchmarks were used to determine the capital and operating costs

• Work to date has included the potential for power generation from hydro power and thermal co-generation with photovoltaics ('PVs'). This may effectively reduce the Project operating cost and carbon footprint

• Various tailings storage facilities ('TSF') options have been initially evaluated in accordance with the stringent new Global Industry Standard on Tailings Management classification

Project Description and Location

The Project is located in south-eastern Liberia, approximately 60 km east of Greenville and 240 km south-east of the capital Monrovia. The combined Project covers an area of 2,559 km² and is defined within a single Mineral Development Agreement ('MDA'), issued to Hummingbird in January 2019, valid for 25 years. The centre of the Project has an approximate latitude of 5.093º and longitude of -8.502º. The Tuzon and Dugbe F deposits are approximately 4 km apart.

The Sackor Prospect is located 2.5 km south west of Dugbe F. The Project area comprises a number of licence areas that were amalgamated, the most recent of these being the Central Licence area.

Mineral Resource Estimate

SRK originally produced an MRE for Tuzon in March 2014. Without any material further exploration work, SRK updated the Tuzon MRE with an effective date initially reported as 30 July 2020, later revised to 19 August 2020 to align both deposit estimates, using SRK's 2014 model but applying updated economic parameters.

CSA produced an updated MRE for the Dugbe F deposit with an effective date of 15 July 2020. SRK reviewed the CSA MRE for Dugbe F and takes responsibility for it for the purposes of this announcement and the associated Technical Report; the effective date was revised to 19 August 2020 to align both deposit estimates.

The table below provides the updated MRE for the Dugbe Gold Project which has been prepared in accordance with the terminology, definitions and guidelines given in the Canadian Institute of Mining, Metallurgy and Petroleum ('CIM') Definition Standards for Mineral Resources and Mineral Reserves (May 2014) and has been reported in accordance with National Instrument ('NI') 43-101 Standards of Disclosure for Mineral Projects. The Qualified Person for both estimates is Martin Pittuck (CEng, FGS, MIMMM). Martin Pittuck is an independent Qualified Person as defined by the Canadian National Instrument NI 43-101. No mining other than very minor artisanal workings has taken place at the deposits and therefore no depletion of the estimates was required. For both deposits, the Mineral Resource is restricted to a conceptual pit shell, as is required to establish reasonable prospects for eventual economic extraction ('RPEEE'). Both estimates are reported at a 0.5 grammes tonne ('g/t') gold cut-off.

Mineral Resource Estimate for the Dugbe Gold Project using a 0.5 g/t Au cut-off grade

1. The effective date of the Mineral Resource is 19 August 2020.

2. The Mineral Resource assumes open pit mining at a cut-off grade of 0.5g/t Au and within a USD1700/oz gold conceptual pit shell.

3. A geological loss of 5% has been applied to the mineralised volumes at Dugbe F due to barren late-stage intrusive pegmatites.

4. Figures have been rounded to the appropriate level of precision for the reporting of Mineral Resources.

5. The Mineral Resources are stated as in situ dry tonnes. All figures are in metric tonnes.

6. The Mineral Resource has been classified under the guidelines of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council (2014), and procedures for classifying the reported Mineral Resources were undertaken within the context of the Canadian Securities Administrators' National Instrument 43-101 (NI 43-101).

7. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.

Mining Methods

Both the Tuzon and Dugbe F deposits are shallow and so amenable to open pit mining operations. The planned open pits will be mined utilising conventional truck and shovel method to supply mill feed to the run of mine ('RoM') tip (near Tuzon) and waste to the respective pits waste stockpile facilities.

The primary aim of the PEA work was to test and evaluate various mining and processing options in order to re-scope the more detailed study work to follow. Most of the testing and evaluation was carried out through mine optimisation models that included technical and financial data from all aspects of the planned operation. As Pasofino is completing drilling work with the intention of converting Inferred Resources into Indicated Resources, the PEA work included Inferred Resource material, in order to obtain a more accurate processing capacity for the probable mine life.

Three rounds of optimisation were completed as the results and inputs were refined. The technical results will be used to guide the further FS work. The results of one of the selected scenarios were also used to support the financial model in this report to determine the financial potential of that scenario.

Geological and production schedule data was used to determine a suitable mining approach and fleet, which in turn informed the optimisation work. A fleet option was selected and further detailed for the selected scenario.

Mineral Processing and Metallurgical Testing

A number of historical test work programmes have been undertaken on samples originating from the Dugbe F and Tuzon deposits over the period 2009 to 2014. DRA reviewed the historical test work, with a primary focus on the Mintek work, to derive a conceptual level flowsheet, recovery and operating cost estimate for the updated PEA.

The Dugbe Gold Project 5 Mtpa gold processing plant design has been based on a typical semi-autogenous grinding ('SAG') and ball milling circuit followed by a carbon-in-leach ('CIL') gold recovery circuit. This process flowsheet is well known in industry and has historically been proven as a successful processing route for oxide and fresh gold ores.

Based on Hummingbird's previously reported similarities between the Dugbe F and Tuzon ore deposits in terms of mineralisation style, host lithology type and geometry, DRA interprets the metallurgical response for Dugbe F would be similar to Tuzon. The gold recoveries for Dugbe F and Tuzon oxide and fresh ore will be validated in the 2021 test work programme undertaken at ALS laboratories.

From the historical test work, gold recoveries are expected to range from 87.1% to 89.5%, averaging 88.4% over the LOM. The recovery assessment is based on a feed blend containing 71% Tuzon fresh material and 26% Dugbe F fresh material with the remaining 3% comprised of oxides.

Project Infrastructure

Access

The primary access is a 74 km road from the port of Greenville to the mine site utilising the existing public road infrastructure. The main requirement is to upgrade the existing access roads and tracks to accommodate the anticipated traffic volumes during mining operations, as well as providing public access to the local villages. The road is split into two defined sections: the 30 km road from Greenville Port to Plazon Junction and the 44 km track from Plazon Junction to the mine site. Access along the 30 km from Greenville to Plazon Junction consists of gravel roads that are mostly in fair condition. The balance of the primary access road, between Plazon Junction and the mine site, consists of existing gravel roads and tracks. This section will require extensive upgrades to meet the required standards.

Water

It is anticipated that the Project will be water positive, and as such, care will be taken to ensure that all water discharged to the environment meets the necessary quality requirements as per local legislation and international best practice.

The main water systems will be the TSF and the process plant. Tailings slurry will be delivered to the TSF and the solids will settle out. The TSF will collect rain and runoff water. Water will be returned to the process plant for reuse, and excess water will be discharged in a controlled manner to the environment.

Other water-related considerations are runoff from the waste storage facility ('WSF') and process plant areas. Waste ore will be tested for any geochemical contamination before a decision is made regarding appropriate designs for the WSF. All runoff from the process plant will be directed to pollution control dams.

Power

An electric load list was developed, based on a preliminary mechanical equipment list (carbon-in-leach recovery flow sheet). The load demand of the process plant and associated infrastructure is anticipated to be 25 MW (28 MVA), whilst annual energy consumption is expected to be approximately 205 GWh.

As there is no electrical utility infrastructure in the vicinity of the mine site, energy demands must be met through local generation. Power provision will be the largest single operating cost for the operation. Consequently, various power supply options were evaluated to find the most cost-effective solution. Power generation can also be a material source of greenhouse gases and environmental impact, so low carbon emission options were also considered.

A high-level trade-off study was completed to determine the most cost-effective power generation technologies available to the Project; where the levelised cost of energy was compared between thermal generation (diesel and HFO), hydroelectric power generation and solar photovoltaic ('PV') power generation. The base case power generation costs considered in this report are based on HFO fueled thermal generation plant, as this technology is readily available to the Project. "Hybrid" power generation solutions, involving a portion of PV generation and battery storage, should result in a reduction in energy cost and will be assessed during the execution of the FS. Other 'green' generation technologies show a reduction in the levelised cost of energy but require an investment by third parties, which is being actively pursued by Pasofino.

Based on HFO fueled power generation, operating costs are expected at US$0.18 per kWh, with US$52.1 million capital investment required (the capital portion is assumed to be spread over a 12-year period, based on the application of a build-own-operate-transfer ('BOOT') type contract agreement). The operating cost is primarily comprised of fuel cost, which is subject to fluctuation with the crude oil price (dated January 2021).

Several fuel suppliers have been approached, and several proposals have been received regarding the delivery of 2,935 kl HFO fuel to site per month. The volume of fuel required supports the landing of new fuel storage and handling infrastructure at Greenville Port, with delivery to site taking place via road tanker. The costs for the required supply chain infrastructure have been included in the budgetary cost per litre provided.

Capital Cost Estimate

The project capital has been derived from four previous projects of a similar nature executed in West Africa and is summarised in the table below. Capital is within the accuracy of a Class 4 Association of the Advancement of Cost Engineering ('AACE') estimate of (+50%/-30%).

Project capital cost overview - base case

*includes bulk infrastructure and re-settlement costs

Operating Cost Estimate

The operating costs over life of Project include mine operations, process plant, TSF and general and administrative ('G&A') costs. Total LOM average operational costs are estimated to be approximately US$134 million per annum equivalent to a unit rate of US$28 per tonne RoM. An overview of operational costs is presented in the table below.

Operating expenditure

Economic Outcomes

The potential viability of the Project has been determined through developing an economic model founded on the results derived from the PEA. The financial model has been prepared on a 100% equity project basis and does not consider alternative financing scenarios. A discount rate of 5% has been applied in the analysis. A static metal price of US$1,600 per oz has been applied. All-in sustaining costs have been reported as per the World Gold Council ('WGC') guideline dated November 2018 and are exclusive of project capital, depreciation and amortisation costs. Capital payback is referenced to the timeline from initial production up to the point of realising a net zero cumulative cashflow. The key economic outcomes are presented in the table below on a pre-tax and post-tax basis.

The impact of initial capital costs has a limited elasticity in impacting overall project value due to the capital phasing profile and relatively low expenditure in comparison to revenue and operating costs over the prescribed LOM.

Economic outcomes summary

NPV Sensitivity to Gold Price

The impact of flexing gold price and discount rate on NPV (pre-and post-tax) has been assessed and presented in the data tables below.

Metal price and discount rate data tables

Opportunities

A number of potential opportunities exist to improve the economics of the Dugbe project:

• Reduce capital through contract mining

• Increase mine life or throughput when recent drilling at Dugbe F, Tuzon and Sackor is included in the MRE

• Increase in recoveries based on further metallurgical testing

• Additional ounces discovered along strike from Tuzon toward Sackor

• Reduction in power costs with the potential for hydroelectric and solar power

Current Work

Current work that is in progress includes:

• Further geological, geotechnical and hydrogeological drilling

• Metallurgical test work from existing and new drill core

• Environmental and social field work

Qualified Persons Statement

Scientific or technical information in this disclosure that relates to exploration results and Mineral Resources was reviewed, on behalf of Hummingbird, by Mr Martin Pittuck a full time employee of SRK UK. Mr Pittuck is a member in good standing with the Institute of Materials, Minerals and Mining, a Fellow of the Geological Society of London and is a Chartered Engineer; he has 25 years' relevant experience.

Scientific or technical information in this disclosure that relates to mining, processing and related infrastructure results was reviewed, on behalf of Hummingbird by Mr Robin Welsh, a full-time employee of DRA Global Ltd. Mr Welsh is a Professional Engineer in good standing with the Engineering Council of South Africa with 30 years' relevant experience.

**ENDS**

 For further information please visit www.hummingbirdresources.co.uk or contact:

Notes to Editors:

Hummingbird Resources (AIM: HUM) is a leading multi-asset, multi-jurisdiction gold production, development and exploration company and member of the World Gold Council ('WGC'). Hummingbird's vision is to continue to grow its asset base, producing profitable ounces, while continuing to focus on its Environmental, Social & Governance ('ESG') policies and practices. The Company currently has two core gold projects, the producing Yanfolila Gold Mine in Mali, and the Kouroussa gold development project in Guinea. Further, the Company has a controlling interest in the Dugbe Gold Project in Liberia that is being developed by Pasofino Gold Limited through an earn-in agreement.