Hummingbird Resources on 'stable footing' after first half

Hummingbird Resources updated the market on its second quarter of operations on Wednesday, reporting 24,054 ounces of gold poured in the period, down from 27,466 ounces a year earlier.

The AIM-traded firm said its all-in sustaining cost for the three months ended 30 June was $983 per ounce, down slightly from $998 per ounce in the second quarter of 2019.

A total of 31,520 ounces of gold was sold in the second quarter, at an average price of $1,663 per ounce, as the company reported that the 2020 exploration programme was over 75% complete, with more than 12,000 metres of drilling completed.

Its total recordable injury frequency rate stood at 2.3 for the period, meeting its target of having a rate lower than 2.5.

On the corporate front, Hummingbird said its cash totalled $6m as at 30 June, down from $9m at the end of December, while its gold inventory on hand totaled 4,000 ounces at period end, up from 2,900 ounces on 31 December, with that worth about $8m.

Bank debt was $26m, down by $14m since the 2019 year-end, with the board also highlighting the signing of a sale and purchase agreement to acquire the Kouroussa Gold Project in Guinea.

An earn-in agreement was also struck with ARX Resources, to advance the Dugbe Gold Project.

Since the quarter ended, Hummingbird maintained its 2020 guidance of between 110,000 and 125,000 ounces at an all-in sustaining cost of up to $995 per ounce, as previously announced.

It said it was on track for a targeted net cash position in the second half, with the current bank loans to be fully repaid by the end of the first half of 2021.

Yanfolila was predicted to generate more than $60m of EBITDA in the second half of 2020, or $120m on an annualised basis, at current gold prices.

The company’s exploration programme, targeting an improved mine plan, was said to be “on track”, with approval for the change of control of the Kouroussa project received from the Government of Guinea.

A non-refundable deposit of $2m had been received from ARX for the Dugbe earn-in, with the necessary consents and waivers received from Anglo Pacific Group and the government of Liberia.

The board also noted that ARX had been acquired by Pasofino Gold, quoted on the TSX Venture Exchange, in a share-for-share exchange, with Pasofino’s pro-forma market cap standing at about $75m, representing a “substantial” indicative valuation for the Dugbe Project.

“The Covid-19 pandemic has presented us all with a very challenging and dynamic operating environment over the last few months, which previously caused us to advise that we anticipated cost pressure across the board whilst we moved towards a more stable operating situation,” said chief executive officer Dan Betts.

“While that proved to be the case in the second quarter, with logistical, mechanical and mining challenges all exacerbated by restricted movements and quarantine periods, I am pleased to say that the team has continued to perform well in these trying times and that we have established a stable footing enabling us have a robust outlook for the second half of the year.”

Dan Betts said looking beyond current operations at Yanfolila was “very exciting”, adding that the company was receiving some “extremely positive” results from its drill programmes, with the indications “promising” even though it would take some months to model all the data.

“Additionally, the acquisition of Kouroussa gathers momentum as we have now received the change of control approval from the government of Guinea and are preparing to commence works as soon as practical following the anticipated granting of the necessary exploitation licence.

“At Dugbe, our earn-in partners have been working quickly to develop infrastructure plans ahead of an aggressive exploration programme, planned to both increase resources and complete a DFS at the project.

“We look forward to providing updates as tangible progress is made and value is further demonstrated at the project.”

At 0933 BST, shares in Hummingbird Resources were up 0.37% at 40.85p.