Hummingbird Resources PLC Q4 2019 Production Results and Operational Update (6692Z)

TIDMHUM

RNS Number : 6692Z

Hummingbird Resources PLC

14 January 2020

Hummingbird Resources plc / Ticker: HUM / Index: AIM / Sector: Mining

Hummingbird Resources plc

("Hummingbird" or the "Company")

Q4 2019 Production Results and Operational Update

Hummingbird (AIM:HUM) is pleased to announce preliminary production results for the fourth quarter ("Q4") and twelve months ended 31 December 2019 at its Yanfolila Gold Mine in Mali.

Hummingbird is pleased to announce that it has achieved its 2019 full-year production guidance of 110-125,000 ozs, having produced 115,649 ozs in the year.

Yanfolila Operational Highlights

   --    Production increase, and associated cost decrease, for the fourth consecutive quarter 
   --    33,892 ozs of gold poured in Q4 2019 (30,484 ozs in Q3 2019) 
   --    US$839/oz AISC in Q4 2019 (US$849/oz AISC in Q3 2019) 
   --    Average grade of 2.91 g/t in Q4 2019 (3.23 g/t in Q3 2019) 
   --    31,278 ozs of gold sold in Q4 2019 at an average price of US$1,452/oz 

Corporate highlights at 31 December 2019

   --    Cash of US$9m (US$16m at end of Q3 2019) 
   --    2,900 ozs of gold inventory on hand worth approx. US$5m at current prices 

-- Bank debt of US$40m at the end of the FY 2019, with US$5m repaid in the quarter (US$45m at end of Q3 2019) in line with deleveraging plan

Outlook

-- 2020 guidance is to be set later this month alongside the release of the updated rolling mine plan incorporating the new open pit reserves

   --    Targeting net cash position in H2 2020 
   --    Debt free by the end H1 2021 

Dan Betts, CEO of Hummingbird, commented:

"I am pleased to report another quarter of improved operational performance with both production increasing and AISC decreasing for the fourth consecutive quarter, resulting in the Company achieving mid guidance for full-year production. After the well documented challenges earlier in the year this is a considerable achievement and I am extremely proud of the team for the way they have delivered on the production plan, ending the year on a high.

We continue to focus on financial discipline to further improve cash flow generation and strengthen the balance sheet. We will continue to deleverage aggressively, paying down our outstanding debt and target a position of net cash in H2 2020, as we continue our focus on increasing shareholder value.

We are positive in our outlook for 2020 and look forward to releasing our 2020 guidance with an updated rolling mine plan incorporating the new open pit reserves. We will also add further detail on our plan to develop the considerable opportunities within the Yanfolila licenses via targeted exploration and developing underground studies."

Yanfolila Gold Mine

 
                            Q4 2019              Q3 2019              Q2 2019              Q1 2019              FY 2019                FY 2018 
 Gold poured 
  (Ounces)                  33,892               30,484               27,466               23,807               115,649                91,620 
                -------------------  -------------------  -------------------  -------------------  ---------------------  --------------------- 
 Ore mined 
  (Tonnes)                  680,178              400,823              390,552              262,317              1,733,870              1,130,990 
                -------------------  -------------------  -------------------  -------------------  ---------------------  --------------------- 
 Ore processed 
  (Tonnes)                  367,788              308,269              296,264              281,337              1,253,658              1,092,485 
                -------------------  -------------------  -------------------  -------------------  ---------------------  --------------------- 
 Avg. grade 
  mill feed 
  (g/t)                     2.91                 3.23                 2.86                 2.46                 2.88                   2.77 
                -------------------  -------------------  -------------------  -------------------  ---------------------  --------------------- 
 Recovery (%)               93.10                93.48                94.23                93.88                93.67                  95.48 
                -------------------  -------------------  -------------------  -------------------  ---------------------  --------------------- 
 Gold sales 
  (Ounces)                  31,278               30,373               27,701               23,333               112,686                91,546 
                -------------------  -------------------  -------------------  -------------------  ---------------------  --------------------- 
 AISC (US$/oz)              839                  849                  998                  1,297                976                    1,087 
                -------------------  -------------------  -------------------  -------------------  ---------------------  --------------------- 
 Average gold 
  sale price 
  (US$/oz)                  1,452                1,422                1,311                1,296                1,376                  1,271 
                -------------------  -------------------  -------------------  -------------------  ---------------------  --------------------- 
 

The Company met full-year guidance with 115,649 ounces poured. The Company delivered its strongest operational quarter to date, enabling both production to increase and associated costs to decrease for the fourth consecutive quarter.

Debt repayment and financial discipline

The Company had US$40m debt outstanding to Coris Bank at the end of Q4 2019, reduced from US$45m at end of Q3 2019. The debt is being repaid on a 'straight line' basis delivering a swift deleveraging for the Company. All bank debt is due to be fully repaid by the end of H1 2021. In addition, the Company has continued to strengthen its balance sheet including reducing trade and other payables.

Safety

Providing a safe working environment for all our employees, consultants and contractors remains at the heart of our operations. Having improved our safety records throughout 2019 we now strive to continue this trend.

 
 Measure            Q1 2019   Q2 2019  Q3 2019  Q4 2019 
 3-month average 
  LTIFR             2.52      1.24     0        1.25 
                   --------  --------  -------  ------- 
 Project average 
  LTIFR             2.60      2.43     1.23     1.25 
                   --------  --------  -------  ------- 
 

All safety frequency rates are reported per 1,000,000 hours

Community Development

Hummingbird continues to support a wide range of community development projects, and notable developments in the quarter include:

   --    Construction of 22 latrines in the communities as part of our sanitation projects. 

-- Arranged for a micro-finance company (Nyessiguiso) to open in the community in order to promote savings and giving out small loans for the population in order to carry out small projects

-- Six water boreholes equipped with storage facilities in the villages of Bandiougoufara, Fougatie, Kona, Kabaya, and Soloba

   --    Four new market garden installations in Soloba, Bandiougoufara, Kona, and Fougatie. 
   --    Construction of soap production facilities in the village of Donsosso 

-- First honey harvested from 10 Kenyan hives installed earlier in the year, assisted by representatives of the Beekeepers' Association of Mali with whom a partnership has been established

   --    Poultry project increasing productivity with 4,000kg of chicken meat sold 

Gold sales and pricing strategy

The Company remains committed to operating as an unhedged gold producer. However, as a single asset producer with approximately US$30m of debt scheduled for repayment in the next 12 months, a significant fall in the gold price could materially impact the Group's ability to service debt and meet operating costs. Accordingly, the Group has sought to insure against this risk by investing in low cost put options at a strike price of US$1,350 per ounce over 60,000 ounces of gold in H1 2020, to effectively place a floor on the gold price without capping the exposure to the upside.

All the gold dore produced from the Yanfolila mine is sold by the Company's subsidiary Societe Des Mines De Komana SA ("SMK") on an arms-length basis to Auramet International (https://auramet.com/), who manage the gold sales process. Sales prices are typically confirmed in advance of each regular shipment to reduce the exposure to short term volatility in the gold price. The gold dore is sold at a discount to the refined gold price which approximates to the refining and transport costs that are borne by Auramet International.

As part of the SMO gold initiative (https://singlemineorigin.com/), a small proportion of the gold produced from the Yanfolila mine and sold to Auramet is purchased from Auramet, once refined at market prices by Hummingbird. This segregated SMO gold is then sold to Stephen Betts and Sons Limited either in the form of gold grain or investment coins at an additional premium releasing extra value for Hummingbird. From Stephen Betts and Sons Limited it is sold on to third party customers (for example the 1 oz Hummingbird gold coin is available at (https://bettsinvestments.co.uk/product/1oz-hummingbird/) and Boodles (https://www.boodles.com/corporate-responsibility/single-mine-origin-gold/).

Dugbe Gold Project

As previously announced, Hummingbird has continued to explore numerous avenues in order to progress the exploration and development potential of the Dugbe Gold Project in Liberia. We are pleased to announce that, as part of this process, Hummingbird has signed a non-binding memorandum of understanding with ARX Resources Limited ("ARX"), a BVI incorporated company, whereby, subject to certain conditions precedent, ARX will acquire the Dugbe project and commit at least US$30m for further exploration to increase the already substantial (4.2m oz, independently verified according to the CIM Code) gold inventory and complete a Feasibility Study on the Project. The 2013 PEA showed an NPV10 (post tax) of US$337 million at a US$1,500 gold price and a resource estimate that the management of ARX strongly believe they can materially improve upon.

The conditions precedent include but are not limited to the satisfaction of all legal, government and regulatory approvals; the approval of both Boards; the availability of at least US$30m of liquid finance; an approved management team with the requisite skills and experience to develop the project and satisfactory shareholder protections, including various anti-dilutionary rights for Hummingbird. As part of this deal, Hummingbird expects to become a significant shareholder in ARX, have Board representation and assist with the development and execution of all operating plans. Further updates will be forthcoming if the ARX deal progresses to a binding nature, of which there is no current certainty.

**ENDS**

For further information please visit www.hummingbirdresources.co.uk or contact:

 
 Daniel Betts,     Hummingbird Resources plc   Tel: [phone] 
  CEO                                           6660 
  Thomas Hill, 
  FD 
  Douglas Ross, 
  IR 
 
 James Spinney     Strand Hanson Limited       Tel: [phone] 
  Ritchie Balmer                                3494 
  James Bellman     Nominated Adviser 
                  --------------------------  ---------------------- 
 
 Ed Montgomery     Canaccord Genuity Limited   Tel: [phone] 
  James Asensio     Broker                      8000 
                  --------------------------  ---------------------- 
 
 Gordon Poole      Camarco                     Tel: [phone] 
  Owen Roberts                                  4980 
  Ollie Head        Financial PR/IR 
                  --------------------------  ---------------------- 
 

Notes to Editors:

Hummingbird Resources (AIM: HUM) is a leading gold production, development and exploration company. The Company has two core gold projects, the Yanfolila Gold Mine in Mali and the Dugbe Gold Project in Liberia. Yanfolila produced its first gold pour on time and budget in December 2017. At 31 October 2019 Yanfolila has a 7.9Mt of Reserve ore @ 2.66 g/t for 676,000ozs gold. At 31 March 2019 Yanfolila had a total Resource base (inclusive of Reserves) of 28Mt of Ore @ 2.23 g/t for 2,005,300ozs gold. The Dugbe Gold Project has Resources currently totaling 4.2Moz of gold and a completed NI 43-101 compliant PEA on the project showing a 43% IRR and US$337m NPV at a US$1,500 gold price.

In addition to Hummingbird's production and development assets, the Company also has an exploration footprint of 4,000km2 and a significant shareholder in AIM listed Cora Gold, which is advancing a portfolio of prospects in Mali and Senegal.

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January 14, 2020 02:00 ET (07:00 GMT)