Hummingbird Resources plc (AIM: HUM ) 3Q20 financial and operation trading update for the three months to 30 September 2020, highlighting increased Gold production and sales with a strengthening balance sheet.

 

Financial Highlights

Production and Sales

3Q20 production increased to 24,722 oz of gold poured (2Q20: 24,054 oz) on an 3Q20 AISC of US$1,283 per oz (2Q20 US$983 per oz).

Gold Sales during the period were 23,794 oz at an average realised price of US$1,919 per oz (average price per oz in 1H20 was US$1,621/oz)

Deleveraging Balance Sheet

Strong cash generation during the period strengthened the balance sheet to a gross cash position of US$9m as at 30 September 2020 (2Q20: US$6m) post US$5m development expenditure during the period including exploration programmes, expansionary capex; and preliminary pre-development costs at the Kouroussa Gold Project in Guinea (“Kouroussa”). 

Total bank debt also reduced US$7m to US$19m, reducing the overall net debt position to US$10m for the Company as at the period end.

However, as of 30 September, the Company held 4,600 oz gold inventory on hand, valued at US$9 million, which technically reduces Net Debt to approximately US$1.0m.

Dan Betts, CEO of Hummingbird, commented:

"Despite a more difficult quarter impacted by some of the heaviest rains on record hitting site, compounding the already difficult logistical challenges imposed upon us through a combination of managing COVID-19 issues and the temporary closure of borders due to the military coup in Mali, we are now in the dry season, borders are back open and we are looking to have a strong finish to the year in terms of production.

 

Importantly we continue to rapidly deleverage the Company's balance sheet with net debt (including gold on hand) approaching zero at the time of writing. This is a major milestone and a significant achievement for the Company.”

Dan Betts, CEO of Hummingbird, commented:  Dan Betts, CEO of Hummingbird, commented:  ​​​​​"Despite a more difficult quarter impacted by some of the heaviest rains on record hitting site, compounding the already difficult logistical challenges imposed upon us through a combination of managing COVID-19 issues and the temporary closure of borders due to the military coup in Mali, we are now in the dry season, borders are back open and we are looking to have a strong finish to the year in terms of production.

Importantly we continue to rapidly deleverage the Company's balance sheet with net debt (including gold on hand) approaching zero at the time of writing. This is a major milestone and a significant achievement for the Company.

 

Operational Highlights

Exploration and drilling at Yonfolila

As outlined in the exploration and drilling release on 8th October, confidence of the world class gold resource and life of mine potential at Yanfolila continues to improve. 

Continued Development of Kouroussa

In line with the Company’s stated strategy to be a multi asset and multi jurisdiction producer, work continues at pace with pre-development work plans at Kouroussa ‘progressing well’.

Hummingbird is awaiting the award of the mining license to then begin development works, which are expected early 2021 

Further Progress at Dugbe Gold Project

JV partner, Pasofino Gold Limited (“Pasofino”) (TSX: VEIN), announced it had gained funding during the quarter and has now begun works to carry out its Definitive Feasibility Study (“DFS”) and exploration works to earn-in its 49% stake in the project once these agreed milestones have been met.

Management Changes

During the period, Edrich Welthagen was promoted to General Manager (“GM”) at the Yanfolila Mine from Mine Manager with Shaun Bunn, SVP of Projects Delivery, and John Meneghini, SVP Operations, now reporting directly to the Executive Committee on an interim basis to accelerate decision making on the ground.

Post Period End Highlights

Post the period end, exploration and drilling results continued to be ‘encouraging’ with new results from Sanioumale West and initial results from Sanioumale East reported as ‘very positive’:

 Sanioumale West “SW” Deposit:

  • 15m @ 3.72 g/t from 47m depth (SNWRC0450) 
  • 12m @ 2.54 g/t from 10m depth (SNWRC0451) 
  • 15m @ 3.45 g/t from 9m depth (SNWRC0461) 
  • 2m @ 44.39 g/t from 24m depth (SNWRC0469) 

Sanioumale East “SE” Deposit:

  • 16m @ 9.64 g/t from 47m depth (SNERC0317) 
  • 7m @ 3.72 g/t from 45m depth (SNERC0308) 
  • 9m @ 1.90 g/t from 36m depth (SNERC0315) 
  • 4m @ 4.09 g/t from 65m depth (SNERC0317) 
  • 5m @ 3.85 g/t from 101m depth (SNERC0329)

Dan commented; “Our 2020 exploration programme has led to some stellar intersections, particular at the Sonamale West and East deposits and we are excited to model these and see the impact on the life of mine at Yanfolila.”

  • Kouroussa:  Hummingbird’s pre-development plans are continuing with a key piece of work regarding the Front-End Engineering Design analysis (“FEED”) nearing completion by year end.
  • Bunker Hill Settlement: Hummingbird reached an agreement with Bunker Hill Mining Corporation (“Bunker Hill”) to settle it’s US$2.1 million outstanding convertible loan to the Company by converting the entire loan into common shares of Bunker Hill
  • Issued Share Capital: The Company is extending the exercise date on some 1,660,000 share options, exercisable at 22p, that would normally expire on the 26 October 2020 - due to close period restrictions.

Outlook

  • Deleveraging:  Debt reduction continues as originally planned and the Company remains on track for current bank loans to be fully repaid by 1H 2021
  • FY20 Guidance: 
  • Production: As the Company is now into the dry season, it is now better placed to guide FY20 expectations towards the lower end of the 110,000 - 125,000/oz production range.
  • AISC: Extreme rainfall, the ongoing Covid pandemic and the temporary closure of the Mali border, have caused the Company logistical issues, which have obviously had a negative impact on costs. Whilst the border has now re-opened, the Company expects there to be an impact on full year cost to US$995 oz.
  • 2021 budgeting analysis: Hummingbird’s 2021 corporate budget plans are now being developed including plans for: 
  • Exploration & drilling for both Yanfolila and Kouroussa
  • Mine development for Dugbe.

Dan commented; “Our 2020 exploration programme has led to some stellar drill intersections particular at the Sanioumale West and East deposits and we are excited to model these and see the potential impact on the life of mine at Yanfolila. We continue to make solid progress at Kouroussa ahead of commencing construction of our second mine, which, when built, will see the Company as a circa 220,000 oz producer.

Additionally, our important environmental and social governance initiatives continue to provide significant benefits for our local stakeholders."

 

Shares in HUM have hit 12-month highs recently on the back of strong trading, drilling results and corporate development as a multi-asset, multi-jurisdiction mining company. The shares opened down at 37.5p following the update.

3 Reasons to Follow HUM

1.    Strong underlying geological indications at Yonfolila, Kouroussa and Dugbe with more drilled expected to drive resources and production higher
2.    Hummingbird has put a strong management team in place since 2015 with expertise in mining commodity markets and in-region experience of West Africa who have a track record of delivering projects on time and on budget
3.    Significant growth potential of this multi-asset and multi jurisdiction mining company with appetite to expand the number of projects going