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Cantor lifts price target on Hummingbird by 44% after Gold Fields deal

Published: 21:04 17 Jun 2014 AEST

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Broker Cantor has lifted its target price on Hummingbird Resources (LON:HUM) by 44% after the gold explorer revealed a "transformational” acquisition of gold assets in Mali last week.

The target moves to 115p from 80p previously and the rating is a repeated 'buy'.

"The deal looks very exciting in our view, with near-term production an achievable target, particularly with HUM reporting that expressions of interest in financing the project have already been received," noted analyst Asa Bridle, adding that Hummingbird reckons it can be brought into production by late 2015 for just over US$50mln.

The firm is buying the 1.8mln-ounce Yanfolila project from Gold Fields in an all-paper deal that values the property at £20mln. Gold Fields will become  the firm's second largest shareholder with 26.3%.

The economics of the mine look very attractive with sustaining costs put at US$700 an ounce, while the internal rate of return is 53% based on initial production of 80,000 ounces of the precious metal a year.

The acquistion covers a total land package of 3,200 sq km and a drill database of 420,000m

Bridle noted that to date,US$100 mln has been spent on the properties, so on top of the resources and geological database, the Yanfolila project also boasts good infrastructure and an established camp.

Most recently Gold Fields' work has been focused on the Komana East (122,000 ounce resource at 3.7g/t) and West (103,000 ounce at 3.15g/t) deposits, showing they could be developed as open pits, he added.

Hummingbird shares were unchanged at 59 pence each.

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