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Hummingbird inks deal with ARX to expand Dugbe project

4th June 2020

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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Aim-listed gold miner Hummingbird Resources has entered into a conditional earn-in agreement with Canadian oil and gas producer ARX Resources over its Dugbe gold project, in Liberia.

The agreement requires ARX to complete a definitive feasibility study (DFS), carry out a significant exploration programme and cover all Dugbe project costs over the two-year earn-in period. 

In return, the earn-in entitles ARX to earn up to a 49% interest in the Dugbe project, and is subject to various conditions, including the payment by ARX to Hummingbird of a nonrefundable deposit of $2-million within four weeks of signing the earn-in agreement for a three-month extendable exclusivity period.

The deal also enables Hummingbird to secure the right to acquire an exploration licence which is surrounded on all sides of its existing mineral development agreement, the central licence. 
 
Other key terms of the earn-in agreement with ARX include Hummingbird receiving a waiver from the government of Liberia on its pre-emptive right over equity investment into its subsidiary, Hummingbird Resources Liberia, which holds the Dugbe project, and consent from the Anglo Pacific Group, which holds a royalty interest over part of the Dugbe project, both of which are expected to be forthcoming shortly.

Subject to ARX demonstrating initial funding of at least $10-million, including the $2-million initial deposit, within the exclusivity period, it has the right to operate the Dugbe project under the oversight of a joint management committee and to earn into a 49% economic interest in the project.

In addition, ARX is also required to undertake a mutually agreed exploration programme of about $10-million with the objective of materially increasing the known resource base of the Dugbe project, as well as covering the overhead and operating costs associated with the project during the two-year earn-in period.

Together with the earn-in conditions, ARX has the right to extend the earn-in period by up to 12 months for payment of $1-million a month.

ARX’s Ian Stalker says that, with Dugbe’s established four-million-ounce resource base, and with a highly experienced West African mining team, ARX is ready to get going on taking the Dugbe project through a DFS and beyond. “In this current gold market the project is well placed to be advanced rapidly.”

CENTRAL LICENCE OPTION

As part of the agreement, Hummingbird has secured the opportunity to acquire the central licence of the Dugbe project from MES Mining Corporation.

Hummingbird CEO Dan Betts says this licence has always been of potentially significant importance in Hummingbird’s goal to fully explore the mineralisation of the region. “We are excited to see how this may enhance the project.”

The key terms of this option agreement are the payment, within four weeks, of an option fee of $600 000 to secure a three-month extendable exclusivity period for technical due diligence on the central licence.

Should Hummingbird exercise the option it would require an initial consideration of $500 000 (payable on exercise), with a deferred consideration of $900 000 payable within 12 months.

It would also be subject to a 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 is brought into production.

Under the earn-in agreement ARX will have the right to direct Hummingbird to exercise the option to acquire the central licence by meeting the costs of exercise and subsequent overhead and operating costs associated with it, which shall then be included within the Dugbe project.

He notes that Hummingbird was the first mover into eastern Liberia, “pioneering exploration in a region that had never been mapped”, with the geology being completely unknown. However, equal to this pride has been the company’s frustration, as Betts says the Dugbe 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.”

Further, while Betts says Hummingbird continues to believe completely in the potential of the Dugbe project, the company also realises that it is a very different project to what it is 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.”

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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