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Gold & gold stocks across the board being smashed right now. Ironically, HUM's standard up relatively well atm given bullishness in broader equity. Esp' after todays US job report
Can see a lot of people pulling out and edging into equities, creating further downside over the next couple of weeks. However, personally remain bullish for Gold for any view more than a few weeks out. Q2 GDP numbers are known to be bad. There'll likely be a rise pre-news, but it's the long term trend which matters most. QE & inflation are golds friend
The drop is because gold has fallen 1.5% (or 2% in £s) on back of more positive US job numbers. The whole gold sector is off c.5% - nothing to do with Dugbe.
Perhaps ARX will issue a few bogus invoices on HUM for security / medical services to fund the DFS!!!
Increased costs due to COVID-19 in West Africa ? You have to having a laugh and suggest that you look at an ASX listed company that I am invested in operating in Cote D'Ivoire and with a prospect south of Dugbe not yet looked at. (ASX:TIE) 4 company owned rigs going hammer and tongs at Abujar , hitting record metres drilled last month at lowest costs and all under control re Covid 19.
SHG and GGP also down, which are indicators I look at.
Monkey - The volume traded has hardly changed. If volume had tripled and we were selling at these prices then I'd be worried. Price of Gold's come off so how much of that drop is that? You're really trying to make some massive sell pitch here when the evidence doesn't back you up. Cora is 6% down right now. Did Dan cause that also?
I don't mind as I've just topped up again. To get back to where we were (30.5p) is 15% up from here. Easy money.
The SP nearly always drops on good news here. Been here long enough to know that. I've asked for no more good news in past posts because of it, so it must be good news
Now we have had 2 days of price action post RNS - its clear what the market thought of the structure of this deal.
Some great debate and opinion on both sides of argument. But what ever you view unfortunately for all SH the damage is done - perception of management yet again has been crystallised into the SP, the chart looks terrible. Will not be an easy road back and I cant see Dan changing his ways anytime soon - thats the real disappointment despite excellent fundamentals on Mali.
Rickylfc5 - You can only imagine the increased costs involved due to covid in West Africa. The costs for my event company in the UK has increased significantly (along with risk). You have to expect the same for HUM in this situation.
One aspect that I think is all important is cost of security during this period. I'd hope HUM has significantly increased the security at Yan especially when they've announced to the world that they're sitting on $11million of gold in the court yard. You've seen the looting in America. There's no reason why we could not be in the same situation. Security needs to be doubled/ tripled during this period.
That's only one aspect of the costs that I'd guess would go up. I'm just glad that we have been able to mine uninterrupted during this period. The majority of mines around the world have not had this luxury.
I really don't believe the market is reacting that badly to this news. The seller who has been around for the last month is still around. There's not been a huge revolt to this news. The usual seller is just happy to accept a lower price/ profit. Most people sell on news because of the volume of interest in the share and this is happening here.
This changes instantly once HUM announce the future plans/ strategy of the company. An announcement on a divi changes this instantly! Combine this with being net cash positive and an average/good Q2 and this flies.
It’s all in the update - staff & logistic issues. FairPlay to Dan he is doing to proactively manage and putting in an airstrip, of course the cost would rise.
As for trucking of ore, he is spreading the profitability of the mine at a time of higher prices to smooth rather than just maximising profit in short term. Again great management.
If they had done a Cora with Dugbe and reatained the 51% it would have sat better with Hum shareholders. Its the DB (and Co) taking a chunk that riles many SH. On a side note, they are anticipating a rise in costs at Yanofilla at a time when oil has taken a big plunge in price - seems a little strange!!
If the market was correct, then there would be no opportunity.
The best example I can cite is SLP, languishing at 6/8p a few years ago, with nearly its market cap in cash on the balance sheet and Miton, a large shareholder, a forced seller.
This is a dead ringer, the HUM cash cow now intact and with the risk ring fenced and the reward retained. For me, Dugbe was always a risk: potentially a vanity project for DB, but he has been mature and worked on a first class deal (it's not the financing, but the new management skills).
Nothing more to be said other than sheep will always be followers.
Wonder why the market is not reading the same positive view and reflecting this smart move in the sp?
CD
You are missing the whole point here.
The new team want DB & co to put their money where their mouth is: that is common practice, somewhat akin to any bank demanding personal guarantees.
Instead of mindlessly bashing this commitment try and look at this in the round, in the context of greed AND fear. The greed aspect of this has been done to death, but what about now looking at the high risk? Dugbe is not an easy project and this is very much the start of the new chapter.
What we do not yet know is how the rest of the funding will be raised. It is perfectly possible that this will be another Cora, listed on AIM and there for all of us to risk our hard earned. Being honest, I am unlikely to invest, as it does not suit my level of risk taking: for that reason, I am glad that I have not been "involuntarily enrolled" in such a high risk "early days" opportunity and having a 51% share of a project that has been sorted out and "build ready" suits me far more.
The strategy now seems quite clear to me. Escalate the already built Yanfolila, our cash cow, by organic growth and add super value by keeping or obtaining stakes in other projects during the risky exploration phase, letting someone else do the "heavy lifting" and thus having a valuable share of a proven asset to build or sell. Ultimately, that is quite a smart business model.
I think dugbe is a great deal, fully funded now until potential mine build. Would have been a huge cash drain. If an oil company had done this people would be going happy. partner is taking responsibility under HUM control and this lets management focus on spending our cash for LOM expansion & Small value enhancing Mine acquisitions Such as Coras. I keep buying on all the dips :)
My take on it:
I've long regarded Dugbe as nearly worthless. 4.2m ounces of gold sounds like a lot, but the grades are low, the geological and logistical difficulties immense, and the jurisdiction nightmarish. $70m may have been spent on exploring it a decade ago, but (IMO) it was mostly money wasted.
I would have been very happy if HUM had sold Dugbe outright for even $10m in cash - to get paid something is always better than nothing. I am happy that HUM are not putting any new money into a project that (IMO) is unlikely to ever come to fruition.
So far, so good.
However, I do not like the related party transaction part of the ARX deal. It says nothing good about Dan Betts and HUM's other directors. It worries me that Dan Betts has not learnt from his previous mistakes - my guess now is that he can't be taught.
It wouldn't surprise me if a predator announces a hostile bid for Hummingbird in the near future. This deal feels like the kind of questionable stunt that company directors pull when they know their time in charge is almost up. I hope that's right, and at this point I'd support almost any vaguely reasonable offer, just go get rid of the current BoD.
Until then, I'd expect Hummingbird to continue to trade at a discount to other comparable junior gold producers. That's the true cost of having Dan Betts as CEO. But (IMO) 27p is still TOO cheap, considering the likely cash flows from Yanfolila and the exploration upside.
Hi CD, thank you for your thoughts. Your point about cash from HUM into the $2m investment is well made. I agree that it does have an unhelpful symmetry with the Bunker Hill ‘investment’ in terms of quantum. Nevertheless, I see them as two separate deals, BH was buying into a new project to expand the portfolio (it’s another matter as to whether we agree it was bad deal, yet to be determined but it doesn’t feel good) and another was to diversify risk from an existing investment. On the latter, $10m needs to be invested - a good round number for broadly half of the project, which feels investable. A lower investment may not be as attractive and putting more money into Dugbe was not viable for HUM. Whether the deal was run by shareholders or not, I have no doubt that institutions have been clear that they do not expect Yanfolila cash to be reinvested into Dugbe, so what choice did the board have? Ultimately they need to raise $10m from outside HUM while still keeping HUM in control - which is what they have achieved and can ultimately take control of ARX through conversion of project ownership into the company. That the management team have invested alongside the ARX guys, should make the deal look more attractive to new investors - clear sign of confidence. Whether you like that or not Is in my mind a separate question from the terms of the funding. I don’t think HUM has been ripped off given the work, expense and risk involved. On reflection I would prefer that Dan and team bought more HUM shares and keep their exposure through that, but at this stage I don’t smell a rat.
If DB did run it past the IIs and they where ok with it, then it's probably a good deal.
I wonder if DB ran his plan past institutional investors (in Hum) prior to the announcement? If not he runs the risk of losing their support
As far as I am concerned you have summarised the situation perfectly Juxtapose.
Well, today was an opportunity and it will be interesting to see how the market eventually digests these last pieces of news: in some way, it has been a total overload of information, with no real chance to digest.
In the light of today's announcement, the WGC seems less important, but might deliver good contacts down the road.
The accounts were all we could have hoped for: a maiden profit and superb EBIDTA, better than most predicted.
The exploration results were mixed, but the near surface grades on the new greenfields exploration were really good and that has tremendous implications for high grade near term mill feed at a low cost and overall LOM.
Today potentially is the start of unlocking an elephant asset and the focus on exploration is interesting. They could be expecting to materially increase the resource by better grades as well as the expanded area.
The figures are a lot better than some are saying.
HUM invested $50 million net, since part of it ($15 million) was funded with the repayment deferred out of profits. The new outfit are looking at far more than just the $10 million for exploration: they also are funding the DFS, which is costly: I have rarely seen one at less than $5 million, plus funding all the overheads and costs associated with the project over a two year period. The package is probably closer to the original figure of $30 million and is therefore a reasonable apportionment for a junior share. Given the caliber of the new management, it does seem like an excellent deal.
It has been an extraordinary week: when will the market wake up?
If HUM had announced today that they were embarking on a $10m exploration and development initiative of Dugbe you would find the same names complaining about the update. Dugbe is certainly not worth $60-70m in the current climate. If the directors are acting in concert to take on the risk at a substantial discount then good for them! We have a 120koz producing mine operating at near record gold prices. That is what will drive interest and return for shareholders here, not some low grade exploration asset that will require a couple hundred million to get to production.
I would also add, raising equity has the massive disadvantage that the HUM share price remains depressed relative to value. So say you raise equity, you would issue at a discount, and give up short-term Yanfolila value for speculative Dugbe value. I don’t think the existing investors would thank management for that. Perhaps if the share price gets to a sensible valuation then maybe HUM can part fund some of the future Dugbe construction cost and keep a larger share of the project from there.
RetiredBanker, I understand your frustrations. I just hope for a takeover at 35-40p. It would sail through, I think.