UK-based firm Hummingbird Resources has signed a letter of intent (LoI) to acquire a 50% interest in the African Gold Group’s (AGG) Kobada gold project in Mali.

The agreement also comprises an initial investment of C$3.6m ($2.88m) to acquire around 9.9% in AGG, with a further right to increase its shareholding in the company to 19.2% for an additional payment of C$4.4m ($3.52m).

The proposed acquisition gives Hummingbird the opportunity to create a high-grade concentrate at Kobada to add an additional 50,000oz gold per annum to production from its Yanfolila mine.

Hummingbird CEO Dan Betts said: “Based on the due diligence we have completed to date we believe we will be able to truck a high-grade concentrate to the Yanfolila processing plant from Kobada.

“This high-grade concentrate would have a material increase to our annual production rates and could add up to an additional 50,000oz per annum to our existing average life of mine production of 107,000oz.

“This high-grade concentrate could add up to an additional 50,000oz per annum to our existing average life of mine production of 107,000oz.”

“The Yanfolila gold mine currently has a 7.5-year mine life based on reserves and we have over 1Moz gold in resources that we will look to convert to reserves and extend this mine life once in production.”

The mine is said to have measured, indicated and inferred gold resources of 2.2 million ounces.

Hummingbird noted that the deal will enable it to progress with the target of achieving 150,000oz production per annum within three years from now.

In addition, the acquisition is expected to improve the production profile of Yanfolila and its net present value (NPV).

Once detailed feasibility study (DFS) on Kobada is completed, the company has the right to acquire a 50% interest in the project through CAPEX funding.

If the DFS is favourable, the company is required to wholly fund the capital costs required to build the mine and processing plant as part of the project.

Following CAPEX funding, Hummingbird will have the right to manage and operate the project, as well as receive 70% of the net cash-flows until it has recovered the investment.