Hummingbird Resources Share Discussion Threads

[lowtrawler] 09/2/2021 10:17

Johnhemming. I'm a chartered accountant and EBITDA being a proxy for cash flow is a popular misconception. Simple example - Start up company with no sales, operating costs of £100k, interest payment on £10m loan of £500k, Depreciation £1m and zero tax. EBITDA would say £(100)k, Actual cash outflow would be £600k (if the loan wasn't taken in the year), or a cash inflow of £9.4m if taken in the year. In neither case is EBITDA close to the actual cashflow.

The argument is that EBITDA is the cash generated by the day-to-day operations to help pay for financing and tax but even then there can be a lot of non-cash items outside depreciation and amortisation which do not get adjusted for. In any case, tax is part and parcel of operating and so why should tax be excluded?

[johnhemming] 09/2/2021 10:00

lowtrawler - not everyone would agree with you


"It can be seen as a proxy for cash flow from the entire company’s operations."

[wassapper] 09/2/2021 09:56

Talk here so negative it has to be a buy signal, and who was it that said above "ignoring the other assets"? You can't. Stalker is aiming for 5m oz at Dugbe. HUM will own half. At a valuation for a developed mine of $50 per oz in the ground that's $125m to HUM. I randomly chose that number, but you can't ignore it and whatever you believe, the HUM management can't f*uck it up.

[lowtrawler] 09/2/2021 09:54

johnhemming. EBITDA is not a cash profit - tax and interest are both cash items. EBITDA is not a recognised measure by professional accounting standards and really only became popular during the dotcom boom in the late 90's. For companies that have high capital costs, resulting in high interest and high depreciation, it gives an impression of profitability and cash generation that is removed from reality.

[johnhemming] 09/2/2021 09:52

LLB - are there figures reported on the monthly grading?

[plat hunter] 09/2/2021 09:34

Acgually LLB 20 million a year debt repayments on 100k ounces is 20 dollars an ounce, so included or not, it's a moot point really in terms of what the actual real costs are I guess.Grade is probably biggest culprit in reality, the more you process the more you spend. So if you're processing more but getting less out, no??

[avsome1968] 09/2/2021 09:30

25p not held could test 23p now.

[johnhemming] 09/2/2021 09:28

Debt generally is about systems of finance. Paying debt off does not itself affect profit whatit does do is to reduce future interest payments. Hence I would have been surprised if debt is considered to be part of costs.

EBITDA is basically a cash profit.

If you borrow money to build a processing plant then the payments for the building of the processing plant are a cost (moreso of a capital nature).

[laurence llewelyn binliner] 09/2/2021 09:07

#PH... incorrect, debt repayments have been pretty flat for over a year, and dropped from USD7M to 6M for the most recent Q4-2020, whereas the AISC has risen from Q3-2019 at 849, and Q4-2019 of 839, and now 1500..

Exploration costs have doubled from USD 50 per ounce produced to 100/oz for 2021

It was disappointing to see management chose to conceal the real AISC per ounce produced is over 1500, and used ounces sold instead to keep the number below 1500 which is a change of reporting metric..

It was also disappointing to see managements lack of transparency on the 02.12.2020 RNS where there was a material risk of missing guidance of 110-125koz, with 93,000 ounces poured and 7,000 in October/November and 4 weeks to go for FY it was a known fact that we were going to miss guidance, not a risk, we were also told the grade had improved for December, and it did not, and yet management chose not to be transparent with their expectations and downgrade guidance then..

The company does have a bright future, some great projects work in progress, but they need to grow up with their reporting..

[plat hunter] 09/2/2021 08:55

If you don't include debt, interest or write downs then your accounting method is EBITDA.Essentially it's all costs incurred as part of production. So the real question is not if it includes debt, but what was the debt booked against?For example, if the debt was incurred to build a processing plant, then it's obviously a direct cost to production and would be included.

[johnhemming] 09/2/2021 08:55

I have agreed to sign up with the investor group and support the proposal of a meeting with private investors. The platform Investor meet Company is one good way to do that which other companies have done.

In fact whereas in the past I very rarely attended AGMs I now attend quite a few presentations and events through remote services.

I was not, however, "shocked" by the 2020 results. They were in line with my calculations of a couple of weeks beforehand.

I also don't share the criticisms of management. I think the company is in quite a good position. Obviously the gold price matters, but so does the USD exchange rate etc etc.

I am also perhaps in a minority in that I quite like their approach on ESG and supporting the community in Mali.

[ukgeorge] 09/2/2021 08:50

Prat Hunter are you Diane Abbott?

[roguetreader] 09/2/2021 08:50

Page 15 gives a decent breakdown of the AISC components

[plat hunter] 09/2/2021 08:44

John...AISC explained...Https://www.investopedia.com/terms/a/allincost.asp

[ukgeorge] 09/2/2021 08:33

John AISC do not include debt repayments.Prat Hunter literally lies at every opportunity.

[plat hunter] 09/2/2021 08:26

Debt relayments are indeed included John as it's a cost.'ALL IN SUSTAINING COSTS" ;-P

[plat hunter] 09/2/2021 08:24

"Had gold stated at 1500 then they'd be juggling"Not necessarily, as Gold rises in value so does the cost to produce it. The AISC is only indicative of costs, net margin is the only thing that matters in reality.

[johnhemming] 09/2/2021 08:17

I am relatively new to the details of mining finance, but I would hazard a guess that paying debt is not part of AISC.

[lowtrawler] 08/2/2021 23:08

Having done a little more research, I believe there are some valid concerns over management capability. Some of the mine modelling has been worryingly inaccurate and they seem a little incident prone. Communication failures tend to be a feature of AIM but there are plenty of exceptions. If gold had stayed under 1500, they would currently be struggling.

On the plus side, they are producing 100k/oz a year, effectively debt free and self funding a lot of promising prospects. In my view, Gold is likely to rise in price which will positively impact HUM more than most junior miners.

On balance, I am going to dip my toe in to ride what I hope will be significant Gold price improvement. I reckon 2300 Gold could double the price and as some of the prospective mines come on stream, there should be further price growth. I'm not going to go mad, I can see some valid concerns and so will maintain only a modest investment.

Thanks for the comments all.

[plat hunter] 08/2/2021 21:34

"There are uncertainties in the RNS that would be best being certainties."Not sure there is... It looks pretty simple to me.. Capex has doubled from from 5 mill to 10 million and the debt of 11 million is to be paid off in the first half too.16 million being spent right there, get passed June, the AISC falls and the cash accrual will really start motoring.

[johnhemming] 08/2/2021 21:17

>So the basic premise is that the management are not held in high regard. They have >messed up in various ways, got lucky and are pretty poor at communication.
So if we separate those things.

a) The management are not held in high regard
That may be true, but is not necessarily correct.

b) The management are poor at communication.

There are uncertainties in the RNS that would be best being certainties.

[plat hunter] 08/2/2021 21:10

Well todays gold movement added 2.5 million to the earnings.Let's see what happens tomorrow. ;-P

[lowtrawler] 08/2/2021 21:07

So the basic premise is that the management are not held in high regard. They have messed up in various ways, got lucky and are pretty poor at communication.So long as gold stays above 1700, they can fund their capital projects and emerge stronger.Due to their high AISC, they are massively geared to the gold price. A $100 movement in gold will change profitability by around 20%?Thus, if I believe gold will increase in price, they will be a great investment. Volatility will be of the scale though.

[borderterrier1] 08/2/2021 21:07

Plat Hunter Wake up. Do yourself a favor and read the recent post by Anon3 on the LSE bb entitled "What a Mutt" and then perhaps you will realize that what I have been saying on here for a long time is right? What concerns me most with this abysmal share price is exactly what he says, how can the co. get it back up?

As I have often said at one time I held 400,000 shares here, today only 120,000. Fortunately, I can afford the loss but there are many who come on here that probably can't.......and that disturbs me. Perhaps the move by others to remove DB will not be successful but I hope it is. BTW I have not had a reply to my e mail from the company. It's a poor job all round IMO.