Hummingbird Resources (LON:HUM), the Liberia-focused gold firm, has revealed further promising drilling results from its flagship Dugbe prospect. With its interests across the vast unexplored gold territory that is Eastern Liberia stretching over 14 exploration licenses, analysts are becoming excited about the company’s potential to deliver.
In its update for Dugbe today Hummingbird revealed positive assay results for 19 holes. All intersected gold with highlights standing at 3.1m at 6.8grammes/tonne(g/t), 1m at 3.3g/t, 9m at 2.1g/t, 7.3m at 2.3g/t and 6.6m at 2.4g/t.
The positive results effectively extends gold mineralisation at the prospect, with assays from a further 34 holes still pending.
The current resource at Dugbe stands at 812koz at 1.2g/t, based on 97 drill holes drilled in 2010.The latest data has pleased Hummingbird’s chief executive Daniel Betts who said they strengthen the case for a “significant resource upgrade” for the prospect in the third quarter.
Dominic O'Kane, analyst at Liberium Capital, was no less cheered by the latest Dugbe numbers. He too believes there is “reasonable scope” now for a resource upgrade for Dugbe.
O’Kane added: “Exploration at Dugbe is still at an early stage and there is a long way to go to prove an economic project at Dugbe, but given the continuity of this near surface orebody….and potential for higher grades, we are starting to ruminate on the mineability of a low-medium grade deposit.”
“The exceptional continuity of mineralisation identified to date with strong gold intersections is extremely positive and given that the deposit is open to the east, south and north, we reiterate the massive potential of the deposit and the region as a whole.”
He has previously speculated that a resource increase to 1.5Moz in the third quarter, which would amount to a doubling on the current 812,000 ounces estimate ((grading 1.2 g/tonne), is “credible”. Following today’s update he is maintaining this view.
O’Kane also believes that there is now “real potential” for the existing Dugbe resource to grow beyond 2 million ounces within the next 18 months, adding it is turning out to be a “highly predictable ore body” capable of lending itself to future positive news flow.
At its current market cap of US$120m, Liberium estimates Hummingbird is currently being valued at US$99/oz of resource, a 2% discount to his estimate for the African explorer peers’ average. With Dugbe now looking so promising he expects, in the first instance, that Hummingbird’s equity value will grow in line with new ounces being added for the project.
O’Kane estimate that if the Dugbe resource reached 1.5Moz, and if it is valued at the peer group average of around US$100/oz, the implication is a 29% upside to the shareprice of 168p per share.
But, as important as Dugbe is to Hummingbird, O’Kane is keen to highlight the company’s broader interests in Liberia, noting these too hold upside potential and currently comevirtually free within the scope of its market value. The company owns 14 exploration licenses in Eastern Liberia, covering around 7,000km2, “an enormous land holding in what is unexplored gold territory”.
While these other assets are less obvious and less tangible they do suggest Hummingbird’s enormous regional potential, says O’Kane, adding: “Given the proven high prospectivity of West Africa’s Birimian gold belts, we believe Hummingbird has the potential to discover and dominate an entire new gold region.
We believe this is an option worth paying for and this reason we think the slight premium to other spatially constrained explorers is fully justified.”
Liberium Capital rates Hummingbird a ‘buy’. Earlier this morning its shares stood at 140.5p, up 1.5p, valuing the company at £75m.