Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Confidence about a prospective gold mine in Mali got a significant boost, after the company behind the project raised US$67 million to go toward construction.
AIM-listed Hummingbird Resources (LSE:HUM) placed 103,698,254 shares at 22 pence per share and a subcription offer for another 105 million shares at the same price.
The GBP45.8 million will be plowed into construction of the Yanfolia Gold Project, a mine located 200 kilometres south of Malian capital Bamako.
The Telegraph reports the mine having an eight-year lifespan with around 6 million ounces of gold underground. First production is slated for 2017 with an initial output of 132,000 ounces. The remainder of the mine’s GBP55 million cost will be financed through debt.
“We are now in a position to commence full-scale construction in order to bring Yanfolila, one of the highest margin undeveloped gold projects in Africa, to production,” said Managing Director Dan Betts, in a statement. “This equity placement enables Hummingbird to move immediately into detailed engineering with a clear timeline to production. The Company will now have a strong balance sheet and is positioned to negotiate the best possible debt terms for our shareholders.
“The Company will now make a number of key hires to strengthen the team. We look forward to making further announcements as we start delivering significant milestones at Yanfolila. Yanfolila will produce over US$70m of free cash flow in its first full year of steady state production.”
Shares in Hummingbird Resources fell initially on the announcement, dropping by 4 percent Thursday, but rose again on Friday to close at an even 24 pence/share.
Click here for the full press release and project highlights
Mining in Mali suffered a crisis of confidence last November with a terrorist attack at a hotel that left 14 dead.
Two executives from Vancouver-based B2Gold Corp (TSX:BTO, NYSE:BTG) were staying at the Radisson Blu hotel in the Mali capital of Bamako when gunmen stormed the premises. The men were rescued and brought to safety by Malian special forces who entered the hotel and began kicking down doors looking for guests.
About 170 hostages were taken by the militants and 19 were killed in a mass shooting; jihadist group Al-Mourabitoun has claimed responsibility in co-operation with al-Qaida.
However according to risk consultancy Verisk Maplecroft, despite the increased risk, mining in Mali is becoming ever more attractive following a series of positive developments for the sector:
Last month, Mali upgraded its estimated reserves by a third to around 800 tonnes, which should ensure continued production for at least the next 15 years. Moreover, only a handful of Mali’s 133 potentially gold-rich sites have been mapped out, and the rising gold price generates new possibilities for exploration in a country with huge untapped potential.
Expansion work is already underway at several locations, and financing is in place for the development of the Fekola mine in Kayes – believed to be the largest orogenic gold deposit in West Africa. Production at the 215-tonne deposit is set to begin in early 2017. All of this is happening as terrorist groups extend their reach south of the Sahel and as prolonged political instability continues to cripple northern Mali.
