Berenberg nudges up target price on Hummingbird Resources following Dugbe study

Berenberg stated that based on a gold price $1,400 per ounce and a 10% discount rate, the study generated a net asset value of $198.0m for the project as a whole, leading the analysts to value Hummmingbird's interest at $39.0m, assuming production commences in 2025.

However, the analysts also applied a 50% risk weighting as Dugbe was still "at an early stage".

The German bank said with both Dugbe and the Kouroussa project in Guinea, Hummingbird has a pipeline that could ultimately raise attributable group production to almost 300,000 ounces per year or more if the life of the Yanfolila mine in Mali can be extended beyond 2024.

Berenberg did also cation that the timeline for the Kouroussa project, scheduled to enter production in 2023 with a build decision and financing due in the second half, appeared to be "very tight", especially given Covid-19 restrictions, and believes that it could potentially be delayed beyond this.

"We assume 51,000 oz is produced from the mine in 2023; we do not believe that the 205,000 oz group target for that year is achievable. Dugbe is materially larger in throughput and lower in grade than the company’s other assets, with capex that is a multiple of the JV partner’s aggregate market capitalisation and could be challenging to fund, especially if debt is also taken on to fund Kouroussa," said Berenberg, which also reiterated its 'hold' rating on the stock.