Hummingbird Resources Share Discussion Threads

[borderterrier1] 03/8/2021 16:33

cj91 Heard it all before from others many, many times. You can spout facts, figures, issue glowing 72 page reports about this etc. as much as you like. The FACT is this share price is going backwards and it continues to do so. Who would you blame that on?

[cj91] 03/8/2021 16:15

Correction to state that HUM contributes to $20-25m (through internal cash flows) with Coris Bank providing $60mil.

[cj91] 03/8/2021 16:13

TBTT - Let me simplify this for you in terms of how I believe the financing will pan out for Karoussa.

Total Capex - $100m (includes $10m of contingency)
Current Machinery/Equipment Replacement Value - $20m
Revised required Capex - $80m
Assuming an additional contingent expense of $5m for any other measures provides a final full requirement of c$85m.

HUM's cash position as at 30th June, 2021 - $12.4mil. We understand that there is no debt on the books. Assuming a $1350 AISC for H2 (should be better but lets assume this cost) and a production of c55koz at a gold price of $1800, provides further cash pile of c$24.75m. My forecast is that HUM has c$35mil in cash by Dec 2021.

I expect HUM to contribute $20mil (which will be available by end of Q3 - i.e. Sep 30th) with Coris providing the remaining $60mil. Incidentally $60mil is also the amount Coris provided for the Yanfolila asset. That was on the following terms a)9% interest rate b) No hedging or royalty requirements c) 12 month capital repayment deferral. Now all this was when the gold price was much lower, at a time when HUM was still an explorer and had no prior experience to show they could repay the loan etc.

My estimates would be that Coris would provide very similar terms of 8 - 9% interest rate, no requirement to hedge or royalties and although we wouldn't need a capital repayment deferral, we would probably get that too.

I also suspect that the senior debt facility will be drawn down in phases with $30m drawn down first and HUM's cash contribution of $10mil making it a first stage Capex total of $40mil and 4-6 months down the line, a further $30mil draw down and cash contribution of $10mil internally.

Overall I'm extremely confident that once the Capex estimates are out, and the financing is arranged there will be a significant uplift to HUM's underlying value.

I believe it is a 12 month build so assuming a Q1 2023 Karoussa first pour, HUM will be a 200koz+ producer with combined AISC of c$1100/oz and if as I expect gold to be around $2000+, there are some significant cash flows to be had!

[borderterrier1] 03/8/2021 15:43

Plat Hunter No, we are not the same person. We are two separate long term speculators that understand (unlike the new investors) the historic hype surrounding this. Nothing would please me more than to see this finally head N but I suspect it won't. I don't believe TBTT is still invested here but unfortunately, I am. I sincerely hope I am proved wrong but I'm afraid that after 7 years this will once again fizzle out like a damp squib.
cj91 Yes, you are correct, I spout the same old nonsense about Dan Betts, Hum management and past failings. Please don't forget that it isn't my credibility that is on the line here. After this length of time the abysmal share price proves that theirs is.

[cj91] 03/8/2021 15:38

Wishful thinking? Well, that's more a reflection of your posts. You might have experience in raising money but I have experience in financial services and advisory too. I know how exactly these deals work. Whilst your arguments on the risk appetite works for a lender, you cannot assume all lenders work on the same metric. My point was around the fact that HUM has enough cash generation to satisfy and equity contribution than requiring to come to the markets to raise capital. Coris will fund the rest and that has been made abundantly clear by management. Yet the likes of you keep chirping like a broken record about hypothesis that is factually incorrect!!

As for your point on shareholder returns, that is how every company works. You argue HUM is cheap so by that metric you see value here at current levels. We'll see in due course if that value materialises but until then lets stick to facts and see what happens. Sprouting hypothesis without even reading RNSs, listing to interviews or directly speaking to the company is just simply wrong and shows the motive behind such posts.

[tigerbythetail] 03/8/2021 15:31

You're quite wrong, and your post is full of "faction" and deluded wishful thinking.
I clearly have a lot more experience of raising large amounts of money from banks than you. I've described any bank's standard modus operandi when looking at a project like this. Nothing special to Hummingbird, just usual rules of engagement.
For some reason PIs always think banks are willing to take the same risks as equity investors but then are satisfied with only a few % return. But banks make their money by forcing the risk onto others as much as possible. Banks are not interested in "future cashflows" which are dependent on actual achieved production (risk 1), successful management of country risk (risk 2) and the gold price (risk 3). They want to see that the project is fully funded in hard available cash before they disburse their share of the funds (which is very rarely more than 70%). That's how it is. Like it or lump it.
And it is to be noted that this approach has worked very well for Coris Bank so far - they have made their return on their loan to Hummingbird to build Yanfolila. Shareholders of HUM have received nothing from the transaction - no dividends, no capital appreciation.
So it's 1:0 here when it comes to banks vs. shareholders!
I agree that HUM is very cheap, though, by all usual measures. Gold miners, in general, are cheap stocks. HUM is cheap even for a gold miner. But I just don't see this changing much.

[charlieeee] 03/8/2021 15:08

Polaris

My view of hedging would be for the period up to Kouroussa mine build completion and not beyond.

The reason is that margins at Kouroussa are said to be much better with an AISC of less than $1000 and so once that comes on stream, the POG becomes far less critical and there is less risk with full exposure to fluctuating gold prices.

It is the intervening period where the preservation of margin is important to keep the wheels turning on exploration etc. and build up a war chest for increased working capital. Obviously, the AISC at Yanfolila is a key element in any decision and the lower it is in H2 the less need there is for hedging.

[plat hunter] 03/8/2021 12:48

It's the same person.

[cj91] 03/8/2021 12:31

I've long been a shareholder of HUM and know very well the track record of management and the investment opportunity at present.

The commentary from the likes of border terrier in particular and now by TPTT is rather extraordinarily appalling and clearly biased - this is either based on their investment history here or a pure attempt to de-ramp to be able to buy in at cheaper prices.

Border Terrier -> You're delusional at best. For someone to constantly sprout the same old non sense time and again without any substance either fundamentally or technically just goes to show the kind of person you are. I note that people have tried to debate you but you contrive to just talk about Dan Betts, HUM Management and the past failings. Your credibility is clear for everyone to see, but I think you have issues of your own - so if it helps you to keep sprouting non-sense, go on - I don't think the genuine investors care much given your lack of coherent reasoning on why HUM is not a buy at current levels.

TPTT -> I cannot disagree more regarding your views on the funding for Karoussa. HUM have clearly stated in their RNS and recent podcast on their intentions to fund Karoussa. This would be a mix of cash generated internally and debt funding. There is absolutely no requirement to raise capital. Given my significant investment here, I have also reached out directly to management have had them confirm that they have absolutely no intention to raise equity. Your view on what Coris Bank is just that, your view. Whilst you personally may see a risk calling it a dangers of creating an 'echo chamber', if you truly are looking to be invested I'd suggest reaching out to management to clarify this.

To give you more colour on the Karoussa funding, the expected Capex in total for the fully production target of c100koz is c$100m which includes c$10m of contingency costs. RNS from earlier in the year states that Coris Bank have provided a letter of intent to fund up to $100m towards this project. It is worth highlighting that the project already has a replacement value worth of machinery/equipment worth $20m. In total I'd expect the final cost requirement to be c$80-90m given the replacement value and contingent costs. I expect Coris to fund a large portion of that capex estimate (i.e. $75m) with the remaining $15m funded through internal cash generation). There is also the option to have a staged approach in place to fund Karoussa should Coris decide not to provide the full debt, which I personally cannot see given how quickly and efficiently HUM have repaid the debt to Coris.

Overall the market has absolutely got it wrong here in my opinion. Whilst management rightfully received flack (and directly from me in the past) for performance, they have significantly stepped up their game through operational improvements as seen in the last quarter.

Currently trading at £75m mcap is simply too cheap when you consider the fundamental value here. Debt free with Yanfolila producing c100-110koz with expected margins of c30% at a gold price of $1800 this year. Karoussa to now come on board which will be fully debt funded and by 2023 adds a further 100koz/pa reducing the AISC down to c$1100/oz. Dugbe meanwhile progressing by VEIN and HUM retains half the value of the asset which is worth over a billion dollars! All this for £75m is simply irrational. Whilst the market can have its view, it will eventually meet fair value and that to me is lot higher than £75m.

I also note new institutions on the register so hopefully SC are done soon (if not already) and that should also see a return in sentiment. Finally I personally am a gold bull and see $1800 as the average base for the rest of the year with it progressing higher next year. All in all, HUM provides the best value from a gold producer/explorer perspective - so this constant de-ramp without factual accuracy and credible debates are quite tedious now.

[borderterrier1] 02/8/2021 15:04

Cora gold going like an express train this morning I see? I wonder why that is? It couldn't be because the Ceo (ex. Hummingbird) knows what he is doing and there is no interference from others............could it? Hummmmmmmmmmm.......?

And BushyTailed. I guess from your comments about me on the LSE bb you don't agree with my observations here? So what exactly do you blame this abysmal share price on? Come on BT address me directly, don't make unfounded comments that you can't back up behind my back. Grow a pair and let's hear it.

[borderterrier1] 01/8/2021 20:52

TBTT What a thing to say! Distrust and dislike of Hum's management you say? Really? I wonder why? And (as I mentioned in my earlier post) I agree entirely with your opinion that this could be a bottom feeder for several years yet. It's not exactly the misleading "share holder value" B/S that the Ceo promised in 2015 by any stretch of the imagination.....is it?

[tigerbythetail] 01/8/2021 20:23

The consensus here that HUM won't need an equity raise to fund Kouroussa shows very neatly the dangers of creating an "echo chamber" on sites like these.
FWIW, I can almost guarantee that Coris will not fund 100% of the capital cost of Kouroussa. Nor will they place any trust in any future cashflows HUM may be able to make from Yanfolila. They will want to see a 30% to 40% fully-funded equity buffer in place before they disperse any loan money. That's just how banks work all over the world.
The good news is that HUM do now have better security to offer than before, so the interest rate should be reasonable (c. 8%?). Partial hedging of Yanfolila production may be advisable for HUM anyway, and I'm sure Coris Bank would like the extra stability that implies.
HUM remains spectacularly cheap considering how much gold it mines, etc. But the market seems to have settled into a state of permanent distrust and dislike of HUM's management. Given that we are still years away from dividends, I think it could bump along the bottom at roughly this price for some years.

[borderterrier1] 01/8/2021 16:09

Prat Punter More pearls of wisdom? Quote:- "Yanfolila is a totally different lending proposition than it was 4 years ago." If what you say is correct, why don't more of the BOD have skin in the game and why hasn't the share price responded accordingly?"

[plat hunter] 01/8/2021 11:15

I expect they'll be as much hedging as they'll be placings to fund Kourrousa.HUM is debt free and operates a circa 20% net operating margin with a track record of paying early. Not to mention the circa 150 million balance sheet which we also didn't have when arranging the finance for Yanfolila.It's a totally different lending proposition than it was 4 years ago and absolutely pointless comparing the requirement to fund yanfolila with kourroussa. Wait until we're funding Dugbe, they'll be some interesting possibilities there.

[temujiin] 01/8/2021 00:12

Hi Charlieeee,

yes fair comment regarding the very large equity funding to kick start the Yani mine build. Glad we agree on HUM's ability to fund Kouroussa by debt, thought you were questioning that.

On hedging, I have no issue with it and it may well be a prudent move to hedge a significant %, say up to 50-60% max if POG spikes significantly above $2000/oz.

[buywell3] 31/7/2021 23:29

POG has in the past gone up and down bigtime

Now it has to learn to live with stablecoins

It will move just the same as ever was --- buywell asks what would happen to POG if the yuan was devalued by 50% ?

[plat hunter] 31/7/2021 16:35

Gold just isn't as volatile as other metals and it's demand is one of economic need for the majority of the planet, rather than being subject to industrial demand. It's why gold has moved consistently northwards for the previous two millenia's. Today gold is a store of wealth for billions of people who's own currencies suffer worse rates of inflation than the US Dollar.Gold loves inflation and considering that a producer benefits from long term average prices then hedging is something I don't want to see here, especially given the crazy IRR at Kourroussa.Just my view but i'd also be prepared to accept it, if it came to it.

[polaris] 31/7/2021 15:59

@charlieeee - I hadn't gone that far back to see that the initial stages of Yanfolila funding had an equity component. By 2017, things had moved on quite a lot with the first construction project. HUM is a very different animal for this second build and can fund $40+ M itself during the expected build timeline. In that respect, it is more like the Coris 2017 debt deal than the original funding deal, in terms of amount of debt.

That said, the bank may still ask for other guarantees and either a royalty or hedging (or both) are possibilities to give some visibility to the HUM cash part of any raise. HUM do have a track record now with Coris and that will help. Banks just like to make a decent turn on something they know will have little actual risk. HUM is a much better proposition than their original agreement, IMO.

Hedging, pros and cons, as with any bet to give future earnings visibility. I was involved a long time ago in a company that was eventually destroyed by its hedge, Avocet Mining. I rode it all the way up and then sold, as it became apparent that the hedge was becoming a real drag on future potential. Get the timing right and it is a real boon, get it wrong and it can ruin a perfectly good company.

The effectiveness of a hedge depends on where you see gold going. Even at $1800, HUM is a pretty good cash generator. Where is the point at which cash generation for the Kouroussa build and timeline would be in jeopardy? That's the point at which you'd like to hedge, but ride the upside. That's the risk the bank and HUM take on and would determine any hedge component. It's another way for the bank to earn fees and to earmark future cash-flows. Usually, the hedge will have a requirement that principal debt is retired before the hedge can be bought out, so that the bank gets maximum return. There will also be the time component value of the hedge, or collar, arrangement with the bank.

At least we will not need to wait for that long to find out... probably...

[borderterrier1] 31/7/2021 13:03

IMO, some of the "investors" that post on the LSE bb have strange way of considering this as an "investment" opportunity. The acceptable time frame for their "investment" doesn't make any sense to me. This "on time and on budget" mine has been producing now since 2017 and the miserable performance of the share price is still only half of where it was as a mud field. "Decades" ??????? Are you serious?

[dickbush] 31/7/2021 09:45

July average gold price $1,806.

[laurence llewelyn binliner] 31/7/2021 09:10

#Charlieee, hedging does have its merits locking in profits, but clearly we would lose out on any upside over the hedging number, and that’s the risk..., given the FED outlook on rates, I think we have a 18-24 month window with potential headroom for POG as inflation digs in, but it will be an interesting decision the BOD make, and I am looking forward to seeing the RNS after they work out the Kouroussa funding package, on current earnings numbers we can just about self fund with an overdraft for operating costs but the debt component (if any) will be driven by how soon we start, and how soon the big ticket plant items need paying for..

1 good recent example of when hedging can go very wrong is IAG, they hedged and forward bought all their jet1 fuel at 2019 prices for 2020, Covid hit then prices tanked, demand tanked, but they were committed to spending Billions of USD and had to over pay for a years worth of fuel they didn’t need at a huge premium to market, that made for some ugly losses, and some harsh conversations amongst the strategy team for sure...

[lowtrawler] 31/7/2021 05:38

charlieee, I'm invested in HUM partly as a bet on the price of gold. If they hedge, I will find them less attractive.

[charlieeee] 30/7/2021 23:37

At the current POG, Yanfolila is generating profit and that was my specific question: should the company lock those profits in to decrease the risk associated with taking on debt again, this time for Kouroussa.

The ability to fund Kouroussa is not being questioned (and was done to death earlier this week!)but, Temujiin and Polaris, you should both be aware that significant equity funding was raised for Yanfolila and the Taurus/Coris debt financing was only part of the funding (as was to be expected for a first project).

[temujiin] 30/7/2021 20:04

There is no doubt imo that HUM can borrow $100m or 100% for Kouroussa Capex if they so wanted, after all they borrowed all the capex for Yani and had at the time, no way of paying off the debt.

With Kouroussa they now have cash in the bank and a highly profitable producing gold mine as back up. The indecision from DB's answer seemed to be how much of HUM's cash pile they wanted to use for Kouroussa, rather than how much they could borrow.

[charlieeee] 30/7/2021 18:28

I agree that hedging does not have to be 100% and that a guaranteed margin is the sensible way to proceed when the company has debt to pay (and a known relatively high AISC): failure to hedge last year at $2000 per Oz was inexplicable when we did have debt.

Going forward, hedging would provide more certainty re the level of the cash component for Kouroussa funding. Even if the company can borrow the $100 million capex, the terms would probably be better if the company contribution can be 20%(or more) plus the working capital/costs of ramping up to full production.

Really, the question is one of risk: should the company take the same/greater risk in its exposure to the POG as we might as individual shareholders?

HOC hedging at $27 per oz on silver at Pallacanta makes an interesting comparison, particularly the reasoning.