REG - Hummingbird Res. - Optimised Mine Schedule Enhances Economics <Origin Href="QuoteRef">HUMR.L</Origin> - Part 3
29/02/2016 07:10
- Part 3: For the preceding part double click ID:nRSc3611Qb
elevated concentrations in groundwater in the KW area, and is shown to be mobilized from transitional and fresh rock. HUM believes that Field kinetic test results confirm
that the TSF and Waste Dump design is fit for purpose. · Water management for the site, including water balances through all seasons, potential interconnectivity
with the Sankarani River and the need for pit dewatering has been investigated and modelled by Schlumberger Water Services. Key conclusions include that there is unlikely
to be any significant hydraulic connectivity between the Sankarani River and the groundwater system in the KW pit area; dewatering of the saprock unit effectively
underdrains the saprolite; flood protection should be included for the lowest elevation points of the western pit rim; significant volumes of water will require discharge
to the environment, however much of this will only require basic conditioning to remove suspended solids in Environment control dams; detoxification of tailings will be
required; and HUM believes that the current TSF design capacity will not require secondary treatment prior to discharge as the water storage capacity removes this
requirement.
Infrastructure · The existence of appropriate infrastructure: availability of land for plant development, power, water, transportation (particularly for bulk commodities), labour, accommodation; or the ease with which the infrastructure can be provided, or accessed. · The project site is a greenfield site without existing infrastructure, except for the Komana exploration camp.· The site layout plan indicates adequate land
for project development.· Access to the site is via an existing road connecting the town of Yanfolila and the Kona Bridge. Allowance has been made to upgrade this
road. Bridges on the road have been assessed as adequate for the transport of plant equipment to site. Additional roads will be built to maintain access to local
villages.· Water supply will be from Sankarani river take-off, pit dewatering and return from the tailings storage facility. A potable water treatment facility,
sized for 5m3/h will be located in a high security area of the process plant.· Power will be supplied from an Independent Power Provider. Two vendors have provided
offers for this supply.· Labour is expected to include local and national personnel, with some expatriate senior management. Local hire is expected to be
approximately 47% of the operational workforce, and expatriates less than 5%.· Accommodation has been based on personnel living both in camp and locally. The Komana
camp is planned to consist of 2 to 5 person blocks, senior management villas and kitchen, restaurant, medical and recreational facilities. The construction workforce will
be housed in converted containers sleeping up to 4 persons.
Costs · The derivation of, or assumptions made, regarding projected capital costs in the study.· The methodology used to estimate operating costs. · Allowances made for the content of deleterious elements.· The derivation of assumptions made of metal or commodity price(s), for the principal minerals and co- products.· The source of exchange rates used in the study.· Derivation of transportation charges.· The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc.· The allowances made for royalties payable, both Government and private. · The capital cost estimate is categorized as 'Feasibility Type', with a combination of detailed and semi-detailed costs. It has been produced using Vendor firm and
budget quotations and in-house data. An overall project contingency has been included.· Mine operating costs have been based on tender data provided by mining
contractors during June and July 2015. Process plant costs have been based on estimates for operating and maintenance personnel, consumables and reagents, power,
maintenance supplies and assay costs, including vendor quotations.· General and Administration costs include estimates for Human Resources, camp operations and
catering, health and medical supplies, PPE, training, security, vehicles, insurance, transport, corporate services, environmental and social, external advisors, permits
and fees and fuel.· The accuracy of both capital and operating cost estimates is considered to be -10% to +15%. · Arsenic has been identified at the KW deposit.
Allowances for increased cyanide consumption have been included, based on metallurgical test work results. · Commodity prices have been based on current pricing and
long term projections for gold consistent with World Bank predictions issued in October 2015.· The capital cost estimate is presented in US dollars as at Q3, 2015.
Exchange rates for AUD, GBP, ZAR and EUR were as at that date. No allowances have been made for fluctuations in exchange rate.· Selling costs have been estimated for
gold, including royalties and refining. Refining costs have been based on proposals from three refineries.
Revenue factors · The derivation of, or assumptions made regarding revenue factors including head grade, metal or commodity price(s) exchange rates, transportation and treatment charges, penalties, net smelter returns, etc.· The derivation of assumptions made of metal or commodity price(s), for the principal metals, minerals and co-products. · See comments above.
Market assessment · The demand, supply and stock situation for the particular commodity, consumption trends and factors likely to affect supply and demand into the future.· A customer and competitor analysis along with the identification of likely market windows for the product.· Price and volume forecasts and the basis for these forecasts.· For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract. · The Gold Fields Mineral Services (GFMS) gold survey Q3 2015 indicated that physical gold demand increased by 7% year on year due to an increase in net official
sector buying and a high level of retail sales of bars and coins.· The annual 2014 GFMS review indicated demand for gold dropped by 18%, however CIS and Russian
Central banks increased their gold holdings. This trend is expected to continue over the medium term. It is also expected that the eastward shift in physical gold demand
will give the gold market stability in the near to medium term.· Global mine production increased by 2% in 2014 and scrap supplies declined by 13%. It is expected
that mine production will stabilize at current levels.· The World Bank Commodity Price Forecast, released October 20, 2015 indicates gold prices ranging from $1156/oz
in 2015, to $1084 in 2020 and at $1000/oz in 2025.
Economic · The inputs to the economic analysis to produce the net present value (NPV) in the study, the source and confidence of these economic inputs including estimated inflation, discount rate, etc.· NPV ranges and sensitivity to variations in the significant assumptions and inputs. · Capital cost estimates are based on a combination of detailed and semi-detailed costs, suitable for inclusion in a Feasibility study. They have been produced using
Vendor firm and budget quotations and in-house data. Operating costs are based on recent mining contractor quotations and processing costs developed in house and by
consultants and using vendor quotations for consumables.· Financial analysis based on financial modelling by Endeavour Financial on behalf of HUM indicate that the
project returns a positive Discounted Cash Flow ("DCF") of US$ 80.4M at a discount rate of 10% sufficient to justify the estimated capital expenditure over a production
life of 6 years. The payback period is estimated to be slightly less than 2 years. No allowance has been made for inflation.· Sensitivity analysis has indicated that
the project is robust in terms of capital costs, sensitive to operating costs with a 10% change in operating costs causing approximately 10% change in DCF and very
sensitive to changes in revenue factors, with a 10% change in gold price causing a 43% change in DCF.
Social · The status of agreements with key stakeholders and matters leading to social licence to operate.
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