Broker tips: Hummingbird Resources, Hurricane Energy

Analysts at Berenberg reiterated their 'buy' rating on precious metals outfit Hummingbird Resources on Thursday, stating the firm's acquisition of the Kouroussa gold project in Guinea brought further diversification.

Berenberg said the move was a "key development" in the company’s strategy to become a multi-asset gold producer as Kouroussa was a high-grade, high margin project with a number of similarities to, and synergies with, its Yanfolila gold mine in southern Mali, which enables it to leverage construction and operational expertise.

Furthermore, the German bank highlighted that Hummingbird has received a letter of intent from Coris Bank to provide up to $100m for the development of Kouroussa, which more than covers capex requirements.

"This acquisition fits well within the company's strategy, which remains focused on extending the life of mine at Yanfolila through exploration, along with diversifying cash flows through high-margin projects," said Berenberg.

"As a result, Kouroussa bolsters the portfolio, with Hummingbird set to become a multi-asset gold producer in the mid-term with expected production of circa 200,000 ounces per annum at an all-in sustaining cost of circa $815/oz."

Berenberg adjusted its model to reflect Hummingbird's 2019 final results, cost pressures at Yanfolila and the acquisition of Kouroussa.

Analysts at Canaccord Genuity slightly lowered their target price on oil exploration company Hurricane Energy from 16.0p to 14.0p on Thursday following the firm's recent change in leadership.

Canaccord said the departure of chief executive Robert Trice paved the way for a fresh look at the technical understanding of the company's basement play, with a focus on getting the best out of its current Lancaster development.

The Canadian broker said Hurricane was "a long way" from its halcyon days of July 2019, when the early data indicated that Lancaster was performing "extremely well" as the news since then has been variable, but "mostly gloomy".

Canaccord also stated the looming issue remained the company's $230m of convertible bonds, which mature in July 2022.

"We anticipate that Hurricane will not be in a position to repay fully this debt," said Canaccord. "While a refinancing of the convertible looks required, it is clear that balance sheet risk could increase significantly."

The analysts said the focus now was on "the tricky process" of maximising cash flow after financial flexibility has been diminished through production that has effectively halved.

While Canaccord acknowledged that costs were "essentially unchanged", it said Hurricane has also been impacted as oil prices have been hit of late.