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Hummingbird Res. (HUM)

Hummingbird Res.

Earn-in agreement with ARX on Dugbe Gold Project
RNS Number : 9000O
Hummingbird Resources PLC
04 June 2020
 

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

 

Hummingbird Resources plc

("Hummingbird" or the "Company")

 

Earn-in agreement with ARX on the Dugbe Gold Project

 

Hummingbird Resources plc ("Hummingbird" or the "Company") (AIM:HUM) is pleased to announce that it has entered into a conditional earn-in agreement with ARX Resources Limited ("ARX") in respect of the Company's Dugbe Gold Project ("Dugbe" or the "Project"), located in Liberia, which requires ARX completing a Definitive Feasibility Study, carrying out a significant exploration programme and covering all Project costs over the 2 year earn-in period (the "Earn-in").  The Earn-in entitles ARX to earn up to a 49% interest in the Project, and is subject to various conditions, including the payment by ARX to Hummingbird of a non-refundable deposit of US$2m. 

 

In addition, the Company has secured the right to acquire an exploration licence which is surrounded on all sides by the Company's existing Mineral Development Agreement (the "Central Licence"). 

 

Dugbe Gold Project - Earn in Agreement

The key terms of the Earn in Agreement with ARX are:

1.  The payment of a non-refundable US$2 million deposit (the "Initial Deposit") by ARX to Hummingbird within four weeks of signing the Earn in Agreement for a three month extendable exclusivity period, conditional, amongst other things, on the Company receiving a waiver from the Government of Liberia on its pre-emptive right over equity investment into the Company's subsidiary, Hummingbird Resources (Liberia) Inc., which holds the Project, and consent from the Anglo Pacific Group Plc (which holds a royalty interest over part of the Dugbe Gold Project, as set out in the announcement of 18 December 2012), both of which are expected to be forthcoming shortly.

2.  Subject to ARX demonstrating initial funding of at least US$10m (including the US$2m Initial Deposit) within the exclusivity period, ARX has the right to operate the Project under the oversight of a joint management committee and to earn into a 49 per cent economic interest in the Project (net of any interests of the Government of Liberia and Anglo Pacific Group Plc) over a two year period through:

a.  Completing a Definitive Feasibility Study, under joint management committee oversight, on the Project with the objective of being able to attract funding for the development of the Project;

b.  Undertaking a mutually agreed exploration programme of circa US$10m with the objective of materially increasing the known resource base of the Project; and

c.  Covering the overhead and operating costs associated with the Project during the 2 year earn in period.

(together the "Earn in Conditions")

3.  ARX has the right to extend the earn in period (of two years) by up to 12 months for payment of US$1m per month.

4.  Subject to meeting the Earn in Conditions, ARX has the right to be granted the 49 per cent economic interest in the Project.

5.  On being granted the 49 per cent economic interest in the Project, the parties undertake to enter into a customary joint venture agreement, as well as both having the right, subject to certain protections, to convert the Company's 51 per cent controlling interest in the Project into a 51 per cent controlling interest in ARX or any then listed parent company.

6.  On ARX commencing the 2 year earn in period as Operator, it is intended that Mr Daniel Betts and Mr Ernest Nutter will join the board of ARX as non executive directors.

 

Whilst the Company has confidence in the ability of ARX to meet the funding conditions referred to above, there is no guarantee it will be able to, and therefore no guarantee that the Earn-in Agreement will proceed as intended.

 

Central Licence option agreement

 

Additionally, the Company has secured the opportunity to acquire the Central Licence (see map attached - http://www.rns-pdf.londonstockexchange.com/rns/9000O_1-2020-6-3.pdf ) from MES Mining Corporation (a company incorporated in Liberia) (the "Option Agreement").  The key terms of the Option Agreement are:

1.  The payment, within four weeks, of an option fee of US$0.6 million to secure a three month extendable exclusivity period for technical due diligence on the Central Licence.

2.  Should the Company exercise the option, the consideration payable is:

a.  Initial consideration of US$0.5 million payable on exercise.

b.  Deferred consideration of US$0.9 million payable within 12 months.

c.  Contingent consideration in the form of a sliding scale royalty of up to 1 per cent of commercial production (capped at 3m ounces of production) from the Central Licence area (in the event it is brought into production).

Under the Earn in Agreement ARX will have the right to direct the Company to exercise the option to acquire the Central Licence by meeting the costs of exercise and subsequent overhead and operating costs associate with the Central Licence which shall then be included within the Project which ARX are earning into.

 

Related Party Transaction

Whilst a number of parties have expressed interest in the Dugbe Project and carried out varying levels of due diligence, ARX's proposal was both a significant improvement on the non binding potential transaction with ARX as announced on 14 January 2020 and by far the most compelling proposal due to a combination of factors.  In particular ARX's team has a strong track record in funding and advancing projects, has moved quickly to close this transaction to invest significantly in order to unlock the material potential of the project, whilst allowing Hummingbird to retain a controlling 51 per cent interest in the project.  Additionally the earn in is in line with the Company's previously stated strategy of seeking to unlock the latent value of the Project including through partnerships and allowing the Company to develop other prospective strategic opportunities to capitalise on the platform we have built through the exploration of potential M&A opportunities.     

Three directors of the Company (Daniel Betts, Ernie Nutter and Thomas Hill) have invested into ARX in support of ARX's strategy to develop Dugbe, as well as to demonstrate their personal commitment and long term belief in the potential of the Dugbe Gold Project.  The three directors have an aggregate holding of 39%in ARX as at today's date, which is likely to be diluted in the normal course as a result of ARX's upcoming fundraising activities in order to satisfy the conditions of the Earn in Agreement.  Each of their investments was on the same terms as third parties investing at the time, and the Company's interaction with ARX was handled by an independent  committee of the Hummingbird Board, chaired by the Chairman, and comprising the three other directors (in addition to the Chairman) (the "Independent Committee").

The Company entering into the Earn-in Agreement with ARX constitutes a related party transaction pursuant to AIM Rule 13.  Accordingly, the Independent Committee consider, having consulted the Company's Nominated Adviser, Strand Hanson Limited, that the terms of the Earn in Agreement are fair and reasonable insofar as Hummingbird's shareholders are concerned.

 

 

Dan Betts, CEO of Hummingbird, commented:  

"As anybody who has been involved with, or observed, Hummingbird since 2007 will know, the origin of the Company is in exploration in Liberia and particularly the Dugbe Gold Project.  Hummingbird was the first mover into eastern Liberia, pioneering exploration in a region that had never been mapped and the geology was not known at all.  It is to the immense pride of all who have been involved in that journey that we were able to discover not only the significant mineral resource at the Project but what we believe to be a district scale gold province of potentially global significance.

"Equal to that pride has been our frustration.  Ultimately the Project was seen by many as too large, and ultimately too big for a junior to develop.  I am proud of the fact we were nimble enough to change direction and acquire the Yanfolila project in Mali.  Subsequently we have developed, financed, built and operated Yanfolila - and in the process we have learned a great deal about what our strengths and weaknesses are.

"Whilst we continue to believe completely in the potential of the Dugbe Gold Project we also realise that it is a very different project to what we are focused on at Yanfolila.  In order to unlock its value, it needs a large investment of capital and management time in both the DFS and to further showcase its exploration potential which was demonstrated when the first 164 holes we drilled all intersected mineralisation.

"We are delighted that ARX has committed to invest significantly in the project to help us to finally start to unlock the value at Dugbe, while keeping the project under our control.  We are confident in a highly effective collaborative partnership.  This confidence is evidenced by making our own individual investments in ARX and that Ernie and myself will join the ARX board once the deal is consummated.  ARX is not only committing significant risk capital up front but comes with a proven management team with significant west African experience.  Our partnership with ARX will provide fresh eyes, fresh energy and fresh thinking to a project we have been looking to unlock for some time and we are truly excited about how the project will progress.

"Additionally we have secured the opportunity to consolidate the land package with the option to acquire the Central licence.  This licence has always been of potentially significant importance in our goal to fully explore the mineralisation of the region and we are excited to see how this may enhance the Project. 

 

"I look forward to updating the market on our progress in partnership with ARX at Dugbe with the objective of progressing the Project towards a significant mine which will benefit all stakeholders."

 

Ian Stalker of ARX said

"We are delighted to have to opportunity to work with Hummingbird on the Liberian Dugbe Gold Project.  With Dugbe's established 4 million Oz Resource base and with a highly experienced West African Mining Team (including mine-builders), we are ready to get going on taking the Project through a DFS and beyond!  In this current gold market the Project is well placed to be advanced rapidly."

 

About ARX

ARX Resources Limited is a private BVI incorporated company.  The Company was founded by Stephen Dattels, former Executive Vice President and a Director of Barrick Gold Corporation, and Michael Beck, a former partner of N. M. Rothschild & Sons, who formed a partnership in the mid 1990's to jointly fund and develop resource projects in developing countries involving the full suite of mineral resources and oil & gas. Since that time they have been involved in financings and project development involving billions of dollars on several continents in a myriad of resources including: gold, nickel, chromite, coal, iron ore, copper, uranium, lithium, cobalt, potash, titanium, industrial minerals and oil & gas.

In structuring its Option Agreement and Joint Venture with ARX, it necessitated bringing on board a successful mine finance group in addition to a world class operating team which would operate hand in hand with Hummingbird but would be independently run ensuring, minimal strain on Hummingbird's human resources and no strain on its financial resources. The team that has joined ARX consists of Ian Stalker and members of his technical team.  Ian has been responsible for developing multiple mines over several decades. He has been involved in bringing into production multiple successful African gold mines and operating same including: the Obuasi expansion for Ashanti Goldfields in Ghana, the Siguri Mine in Guinea, the Bibiani Gold Mine in Ghana and the Geita Gold Mine in Tanzania.

 

Ian Stalker, who is expected to be appointed as CEO of ARX, has worked with Mr. Dattels and Mr. Beck on many of their mining ventures as a director often in the position of CEO.  Mr. Stalker is an international mining executive with over forty plus years of "hands on" experience in mine development and operations in Europe, Africa and Australia.  Mr. Stalker was a Vice President of Gold Fields Ltd., which at one point was the world's fourth largest gold producer.  He has successfully overseen the development of several mineral projects in Africa from defined resources through feasibility study into operational mines and thereafter continued to manage ongoing operations and expansions.

 

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

 

**ENDS**

 

For further information, included an updated Corporate presentation, please visit www.hummingbirdresources.co.uk or contact:

Daniel Betts, CEO

Thomas Hill, FD

Douglas Ross, IR

Hummingbird Resources plc

Tel: +44 (0) 20 7409 6660

 

 

 

James Spinney

Ritchie Balmer

 

Strand Hanson Limited

Nominated Adviser

Tel: +44 (0) 20 7409 3494

 

 

 

James Asensio

Ed Montgomery

 

Canaccord Genuity Limited

Broker

Tel: +44 (0) 20 7523 8000

 

 

 

Tim Blythe

Megan Ray

Rachael Brooks

Blytheweigh

 

Financial PR/IR

Tel:  +44 (0) 20 7138 3204

 

Notes to Editors:

Hummingbird Resources (AIM: HUM) is a leading gold production, development and exploration company.  The Company has two core gold projects, the Yanfolila Gold Mine in Mali and the Dugbe Gold Project in Liberia.  Yanfolila produced its first gold pour on time and budget in December 2017.  At 31 October 2019 Yanfolila has a 7.9Mt of Reserve ore @ 2.66 g/t for 676,000ozs gold.  At 31 March 2019 Yanfolila had a total Resource base (inclusive of Reserves) of 28Mt of Ore @ 2.23 g/t for 2,005,300ozs gold.  The Dugbe Gold Project has Resources currently totalling 4.2Moz of gold and a completed NI 43-101 compliant PEA on the project showing a 43% IRR and US$337m NPV10 at a US$1,500 gold price.

In addition to Hummingbird's production and development assets, the Company also has an exploration footprint of ~4,000km2.

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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