Gold firm Hummingbird Resources (LSE:HUM) rose 2.8pc to 31.4p today after telling investors that it has launched a major exploration programme to extend the life of its flagship Yanfolila gold mine in Mali. Using four rigs, the company will drill over 50,000m across six deposits found near the site’s processing plant with the aim of converting a considerable bulk of its 2.2Moz gold resource to reserves.
Hummingbird expects the programme – which will cost between $8-10m – to extend Yanfolila’s mine life from its current seven years to beyond ten years. It is also expected to improve the grade of ore delivered to the processing plant to advance annual production levels and, in turn, projected yearly free cash flow.
The most significant targeted deposit is Gonka. Humminbird will put the bulk of this year’s drill budget towards converting as much of the area’s 300kozs of inferred resources into measured and indicated as possible. Gonka is located 5km away from Yanfolila’s processing plant and contains ore graded at 3.1g/t, a significantly higher grade than the mine’s current supply.
When we spoke to Hummingbird’s head of business development Robert Monro in May, he said Gonka had the potential to increase Yanfolila’s annual gold production from its currently projected c.115,000oz to 150,000oz.
Another critical deposit is Komana East, located on the same structure as Gonka, where a recently-completed underground study showed the potential for an economic underground mine with 113,000ozs of gold.
Due to a new geological interpretation, the firm also revealed today that it will carry out exploration drilling at a deposit called Komana West. Here, it will test for open pit, down-dip extensions of high-grade zones that have not been previously followed up.
Murray Paterson, VP Geology, said: ‘I am extremely pleased that, after thorough preparation, drill rigs are mobilised and the campaign is under way. The drilling is aiming primarily for the conversion of existing resources to reserves targeting an expected extension to Yanfolila’s mine life. We have a number of mineable deposits already proven up as Resources and this programme is about converting those ounces into the mine plan for Yanfolila.
‘The company has also significantly benefited from the arrival of Dr Colin Porter, a structural geologist with extensive experience in gold exploration in West Africa, as Exploration Manager on-site.’
As we wrote in May, Hummingbird undoubtedly proved a highly-disciplined approach in getting Yanfolila into production on time and budget last year, instilling faith in its plans going forward. Its considerable institutional backing emphasises this point, with large investors including Capital, Gold Fields and asset managers Odey and Majedie.
With shares still failing to make a proper break higher this year, it remains likely that a real inflexion point for Hummingbird will be the publication of its results for Q2 2018, its first full quarter of production at Yanfolila. However, the market’s reaction to today’s news is encouraging, especially given that it is likely the firm will continue to provide regular exploration updates going forward.