Hummingbird Resources – stronger production but higher debt, however shares do have attractions
Hummingbird Resources (LON:HUM) is a leading multi-asset, multi-jurisdiction gold producing company, whose vision is to continue to grow its asset base, producing profitable ounces.
It has two core gold projects, the operational Yanfolila Gold Mine in Mali, and the Kouroussa Gold Mine in Guinea, which are expected to more than double current gold production once at commercial production.
The company also has a 51% controlling interest in the Dugbe Gold Project in Liberia, which is being developed by its joint venture partners, Pasofino Gold.
The final feasibility results on Dugbe demonstrate 2.76Moz in reserves and strong economics such as a 3.5-year capex payback period once in production, and a 14-year life of mine at a low all-in sustaining cost (AISC) profile.
Mixed Results at Second Quarter Stage
This morning’s set of results from the group have reported strong production figures whilst its net debt has increased at more than its brokers were estimating.
However, the group’s outlook is very positive.
At Yanfolila the Q2 gold production was nearly 24k oz, with almost 25k oz gold sold for 2Q. Both throughput and grade beat broker 2Q expectations, while recoveries were in line and steady at 94%. 2Q AISC was $1234 per oz, while realised price was $1981 per oz.
Following a strong H1-2023, it is well positioned to meet its FY-2023 production guidance of 80,000 - 90,000 oz at an AISC of under US$1,500 per oz.
At Kouroussa the company is guiding to 30k oz of production in 2023 which is below broker expectations, but still on track.
The group should be giving an updated 2023 production outlook at the 3Q stage.
CEO Dan Betts stated that:
“As we look forward, our key focus for the coming months and the second half of the year is to fully ramp up production safely at Kouroussa to reach steady state production and to continue to demonstrate stable quarterly production at Yanfolila, generating solid free cashflows from both assets that strengthen our balance sheet.
Further, a core focus for the second half of 2023 is to begin to implement our detailed exploration plans to extend the life of mine at both Yanfolila and Kouroussa, coupled with a positive solution on Dugbe in Liberia to benefit key stakeholders at that asset."
Analyst Opinion – shares are a Buy
Tim Huff and Alex Bedwany at Canaccord Genuity Capital Markets rate the group’s shares as a Buy, with an unchanged Target Price of 22p a share.
Their estimates for EBITDA to end December 2023 show out at $66.6m (loss of $15.2m), lifting earnings up to 2.19c (loss 8.95c) per share.
For next year they see $146.8m EBITDA and 10.25c earnings.
Conclusion – an attractive purchase
The £84.7m capitalised group sees its shares off 6% this morning at 14.2p on heavier dealing volumes.
Just four months ago they were half this current price, however, if they drift back to the 10p-12p range then they look to be an attractive ‘penny stock’ purchase.