Hummingbird signs earn-in deal over its Dugbe Gold Project
Hummingbird
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Hummingbird Resources has entered into a conditional earn-in agreement with ARX Resources over its Dugbe Gold Project in Liberia, it announced on Thursday.
The AIM-traded firm said the agreement would require ARX to complete a definitive feasibility study, carry out a “significant” exploration programme, and cover all project costs over the two-year period.
It said the earn-in would entitle ARX to earn up to a 49% interest in the project, and was subject to various conditions, including the payment by ARX to Hummingbird of a non-refundable deposit of $2m (£1.6m).
ARX also had the right to extend the earn-in period of two years by up to 12 months, for payment of $1m per month.
In addition, Hummingbird said it had secured the right to acquire the ‘Central’ exploration licence, which was surrounded on all sides by its existing mineral development agreement, from MES Mining Corporation.
It said the terms of that option agreement included the payment, within four weeks, of an option fee of $0.6m to secure a three-month extendable exclusivity period for technical due diligence.
Should the firm exercise the option, the consideration payable was initial consideration of $0.5m payable on exercise, deferred consideration of $0.9m payable within 12 months, and contingent consideration in the form of a sliding scale royalty of up to 1% of commercial production, capped at three million ounces of production, from the Central Licence area in the event it was brought into production.
Under the earn-in agreement, Hummingbird said ARX would 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 associated with the licence, which would then be included within the project which ARX was earning into.
“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,” said chief executive officer Dan Betts.
“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.”
Betts said that ultimately, the project was seen by many as too large, and too big for a junior to develop, adding that he was “proud” of the fact the company was 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 definitive feasibility study and to further showcase its exploration potential which was demonstrated when the first 164 holes we drilled all intersected mineralisation.”
Betts noted that in addition to the earn-out, it 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.”
At 0940 BST, shares in Hummingbird Resources were down 3.06% at 27.38p.