Hummingbird Resources LON:HUM, the AIM-listed, London-based gold miner operating in Mali and Guinea with interests in Liberia, is going through a period of significant change.
The mining company’s shares have been limping along for the best part of a decade after a bright and optimistic start for the 17-year-old company. Opening the week (7th October) at 6.86p which was trending downwards in the morning’s trade, Hummingbird’s shares are down about 3% over one-year, and down 35% year-to-date, with the shares quite volatile, ranging between 4.06p and 14p.
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Over five-years, shareholders in Hummingbird will have seen their shares lose value by 73% and down 84% over a decade. The company, in its last results (to end-June 2024) was in a loss-making position. It reported a pre-tax loss of USD29.6m (GBP22.6m), an 820% reverse from a pre-tax profit of USD4.1m in 1H23. This came despite selling 30,687 ounces of gold from its flagship Yanfolila Project in Mali and the gold price being up 6.3% year-on-year to USD2,048/oz, near an all-time high (USD2,685.49/oz achieved last month). Yanfolila’s production was down year-on-year from 51,149oz.
Operational problems beset Hummingbird
As previously reported across the group Hummingbird has been having operational problems. In April, as reported, at its Kouroussa Gold Mine in Guinea, the contractors, Corica Mining Services walked off the job. The mine then had a fire at its main fuel dump. The group was forced to take direct operational control and lost two-months’ production. Corica came back on-site in May, which was an important win for Hummingbird, as Kouroussa is a key part of Hummingbird’s portfolio, with the mine expected to double the firm’s gold output. However, the mine isn’t expected to get into commercial production until later this year. It has been affected by issues of lower-than-forecast mining volumes, delayed pit staging and problems with processing plant optimisation.
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The operational issues were contagious, and Yanfolila Gold Mine with the operation facing short-term mining challenges due to poor fleet availability and changes in mining sequencing, leading to increased waste stripping and reduced production. The gold produced at Yanfolila was also done expensively, at USD2,598/oz. The company also saw its debt rise from USD150m to USD153m by the end of June.
Strategic change
The company realised that things were starting to unravel a bit, and implemented an operational and financial review. It hoped this would stabilise the ship and lead to sustainable growth and value creation. Hummingbird engaged an independent consultant to analyse the company’s management and operational performance. One of the big changes was in leadership. Dan Betts, the founder and CEO was invited to step aside as chief executive and take up the role as chairman (a position he’d been doubling-up on as interim chairman since 2022 when the previous chairman, Russell King retired), reducing his operational involvement with the miner. The company is now seeking a new CEO.
Hummingbird also successfully refinanced USD25m of its debt with primary lender, Coris Bank International. The package agreed covered the miner’s existing obligations and was repayable over two years with a one-year payment and interest deferral. Management said this gives it greater financial flexibility as it focuses on getting Kouroussa into commercial production.
Pasofino takeover talk
The company was operating at arm’s length in Liberia through subsidiary, Pasofino Gold Limited [TSX:VEIN], of which Hummingbird owns 53%. Pasofino, according to Hummingbird’s management, has made considerable exploration progress with the 27-million-ounce Dugbe Gold Project. Hummingbird became involved with TSX-listed Pasofino in 2020 through an earn-in to Dugbe. This left Hummingbird owning 49% of Dugbe. At the end of last year Hummingbird switched its 49% claim on Dugbe into a 51% shareholding in Pasofino, which it increased to the current 53% through a USD2m investment in January.
This morning (7th October) Pasofino announced it was intending to raise USD2.5m in a private placement to continue Dugbe operations. Hummingbird, with its own financial commitments, didn’t participate in the placing and will see its shareholding in the Canadian explorer fall to around 50.4%. This might pay out, or not, as about three weeks’ ago Pasofino also announced that it had received a USD75m cash offer to buy it out from an unnamed third party. The Canadian company has, like many explorers, found financing conditions tough and has until 7th November to accept or decline the takeover offer. The offer is at CAD0.66/share, a 20% premium on the share price at the time of offer. Today the company’s shares are trading ay CAD0.71, well ahead of the CAD0.34 it was trading at one year ago.
Without doubt Hummingbird has had a tough year. That said, should it get Kouroussa into commercial production by the year’s end, and get Yanfolila back on track – given the state of play with the gold price and the world’s current geopolitical uncertainty – it has two valuable assets on its hands ready to pour gold into a hungry market. Moreover, should Pasofino decide to take the offer on the table, its investment into the Canadian-Liberian venture might be seen as canny; and even if the offer doesn’t go through Dugbe is a solid asset. With new blood expected in the boardroom, the idiom ‘a new broom sweeps clean’ comes at a strategic time for the AIM-listed miner
Shareholders might be feeling a bit bruised and battered. But in a year or two this share could – and it’s a big could – be a valuable part of anyone’s portfolio, so we still see Hummingbird as ‘One to Watch’.