The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
If you can read financials, it is reasonably clear.
Both Mali and Guinea are increasingly stable, now that their corrupt regimes have been overthrown and both countries are in the hands of young men of energy and vision. Whether that stability comes at the price of democracy is a different consideration and that is yet to be known.
POG is, of course, critical and we do need to see the promised improvement in H2 (which comes from grade and it is said to improve at depth in the current deposit). What would really make the difference would be blending some of the higher grade oxides from near surface such as S/E: the sooner we have a mine plan incorporating these, rather than underground mining, the better.
Broadly speaking, H1 was a difficult period in which the company balanced the books by an increase of current creditors to pay off the loan.
The company did generate substantial cash flow from its operation, but it also made equally substantial investment in plant and machinery (probably the tailings dam) and exploration, both of which will move the company forward.
What should change in H2 is that there is no further loan or interest to pay, there should be slightly less exploration, given the annual budget of $10 million and that $5.6 has already been spent, the tailings has now been done and H2 operations are expected to be an improvement on H1.
The creditor facility could be from any one of the exploration, tailings or new contractor outfits and is a cheap source of finance.
The key thing about the results is the consistency of the big intervals of gold bearing ore and the depths.
Murray Patterson described it as more like seams of coal and so, whilst it may not be high grade (and that might mean heap leaching) the strip ratio is much lower and that makes the mining component much cheaper, particularly if it starts near surface.
Project Highlights
-- Hummingbird to acquire the Kouroussa Gold Project, a near term development asset in the prolific Siguiri Basin, which has a high grade mineral resource of 1.18Moz of gold at >3g/t
-- The acquisition of the Project turns Hummingbird into a near term multi-asset producer with jurisdictional diversification in line with the Company's strategy
-- First gold production targeted within 2 years, with production of circa 100,000oz per annum and AISC of circa US$800 over an initial 5 year Life of Mine ("LoM")
-- Similar metallurgical flow sheet and process plant design to Yanfolila allows Hummingbird to leverage construction and operational expertise gained to date
-- Estimated capital development cost of circa US$90m for plant construction, mine development and all associated infrastructure
-- Illustrative pre-tax project IRR, NPV and free cash at range of gold prices(1) :
Gold Price US$/oz IRR NPV(10) Cumulative
US$m Free Cash
US$m
1,350 51% 110 167
---- -------- -----------
1,500 69% 162 233
---- -------- -----------
1,750 98% 251 344
---- -------- -----------
2,000 97% 338 454
---- -------- -----------
(1) Internally generated by the Company based on information acquired from Cassidy and inclusive of the 2% royalty retained by the vendors
-- Significant exploration potential is known to exist at depth beneath the Koekoe deposit with another 6 high priority targets identified from intersections which require follow up work or surface bulk sampling results
-- Letter of Intent from the Company's West African Bankers, Coris Bank International, to provide up to US$100m for the development of Kouroussa as deemed necessary and according to the company's funding strategy, subject to due diligence and credit committee approval
-- Well established and stable mining jurisdiction with a number of world class bauxite and gold mines owned and operated by major international companies
The POG is indeed key to HUM performance, since management have not hedged any production and with the current high AISC the company is extremely sensitive to POG.
Whilst HUM is not a producer in Kouroussa, it would have been helpful to issue an RNS saying that operations were not affected and that assurances are being given that business agreements will be honored and that the new regime recognized the importance of the mining industry to its ongoing financial stability.
We do also need more clarity on Kouroussa generally. HUM have had 15 months to get their act together and should have capex figures by now. With the MLA finalized in May establishing key figures, the financial position should be complete. All of this was promised to be expedited in the original announcements (including provisions finance): it now needs to be delivered.
The interim update was more encouraging on promises than figures, but at least Q2 was a marked improvement on Q1. If Q3 lives up to the promises of higher production from better grades (hence lower AISC), then the SP should respond accordingly.
So no derampers and minimal effect on the SP.
Conde should not have cheated on the constitution in grabbing a third term and it looks as if he is making way for a young man with belief in a better future for the Guinean population.
Some of the social commentary is relevant to HUM as it focuses on the increasing wealth being generated in the country from the mining industry (iron ore and bauxite as well as gold) with the problem being that this wealth is not being used for the good of the overall population. The expectation has to be that the foreign investment in mining will be encouraged and the revenue from a stable mining industry more fairly distributed.
No doubt, Colonel Goita will be a close ally, given the parallel situations and this may be the opportunity for both countries to move forward to peace and prosperity.
It does not have to be at the highest rate.
It has to be at a rate that the margin is sufficient to cover all overheads, plus exploration and a contribution to Kouroussa funding (even if it is just getting a working capital buffer sorted out or available for the initial ground works to be done by next May). At $1900 and with an AISC of $1300, there should be at least $200 per oz over and above all "unallocated " expenditure and that underpins Kouroussa financing.
Hoping that POG will go to the moon is not a strategy for a growing company: once it has got to the 200000 oz pa then it is a different matter, particularly if much of that is at a lower AISC.
It may well go tits up eventually, but in the intervening period we want certainty to ensure that we get Kouroussa underway.
Once Kouroussa is producing at the much lower AISC, then (realistic) fluctuations in POG present no risk and full exposure to POG is preferable.
Just a thought: had we hedged last year, the interims would have shown a profit and our cash balance would have been significantly more. It might be prudent to take advantage of the current spike: it could be setting a lower limit rather than forward selling at a set price. In our current situation, for the next 12 months we want certainty, not risk.
Well, you must have a different definition of 12 months, Swampmonster.
Feb 2021 announcing Q4 was a production low point and followed by a poor Q1 (made worse by the promise that they were already mining high grades). That translated to not great interims.
Q2 did show improvement, but it takes more than 1 quarter to rebuild trust and so Q3 is vital. The have promised that H2 will be better, with improved production and reduced AISC and if they deliver on that, then we will have had 6 months of good news!
The exploration on SE at Yanfolila has been encouraging, but that will only add value when it is finalised into the mine plan and hopefully used for blending as soon as possible. Grade affects AISC and reduction of that is what will make HUM profitable.
Kouroussa should have been good news, but management utterly screwed up the various announcements and it took value off the SP.
Personally, I would like to see the company hedge gold so that there is lease uncertainty going forward.
Cheerful
Hum still own the Liberian company (until the earn in is complete).
For this period, Pasofino is funding the exploration etc and so what you are seeing is the two sides of the entry, Pasofino putting all the money in to our subsidiary and the money coming out of the subsidiary again as expenses. Over time, it should net to zero.
So, no surprises
Not good by comparison with 2020, but it has to be remembered that was wholly due to the stellar first Q and production of the 30K oz in the Q.
The million dollar question is whether they will meet guidance, particularly in respect of AISC, which implies a much reduced figure to meet the higher end overall average for the year. They need to get to the higher grade and the consequent increased oz. automatically translates to the better AISC because of the fixed cost component.
Looking at the whole table of Cora results, rather than headline grabber, are they really so good?
By comparison, it is the sheer consistency of the thick "seams" at Dugbe which make mining economic: it completely alters the strip rate and hence the mining cost (as well as being near surface).
As far as these "one swallow" drill results are concerned, we have them at S/E and they are RNSed with a complete lack of imagination.
There are plenty here who can make HUM sound a fabulous prospect, as does Bert Munroe for Cora, but management at HUM have blundered through communications of every sort (bad and good) in the last 12 months and that is reflected in the SP.
It is a decent update, not least because it is in line with the expectations created and released within a reasonable time frame, all part of good corporate governance.
The increased gap between AISC and POG reduces risk (and makes full exposure to POG more acceptable).
With this update, the company can very easily meet the annual guidance..
Really important to build up the cash war chest as we go into financing Kouroussa and showing profitability will strengthen the company's negotiating hand.
Condolences to the family of the fatality.
Over 150p 2011/2012
It hit 57p in 2014
39p ish peak when Yafolila first produced early 2017
42//40p last August and subsequently retested that.
Investors need to have the confidence that Yanfolila will have an extended LOM and reduced AISC (which is largely down to grade): today's SE exploration results should assist with both and is therefore key in going forward.
Finally, some good news, which like the proverbially buses, has all come together.
The Pasofino drilling was good: lower strip rates more than compensate for the grades and 100 meter depth is open pit, particularly when the deposit is in "seams" with continuity.
SE drilling results really excellent news. Extending the LOM at Yanfolila should be the greatest catalyst for the SP as it provides ongoing income from existing major capital spend.
The flack on Kouroussa seems to have hit home finally and the promise of annual updates on reserves/resouces is better corporate governance.
What we now need is a Q2 released on time and showing some improvement on Q1 to restore some positive sentiment.
Racehorses are thoroughbreds (with a minority sport in Arab racing and pony racing for fun eg annual Shetland "Grand National" at Olympia, where many a future jockey cuts their teeth).
Paso finos are entirely different, a pleasure riding horse, with the power required for suspension rather than speed: more akin to the warmblood/dressage high performance horses and trained to give a smooth ride: just what we all want with Dugbe in the capable hands of Stalker.
The company does have reasonable prospects, but needs an "Ian Stalker" type of CEO who combines technical expertise with a good straight forward communication (probably because he is a master of his subject and perhaps because he has some respect for investors trusting him with their hard earned cash ).
Instead of being an exciting prospect, Kouroussa is turning into another "albatross" round the neck of the company and that is down to the way it has been handled recently.
When the MLA was announced, the terms looked onerous, but were in fact similar to those used by Cassidy in studies and therefore should have been used by HUM when announcing the financial metrics last summer. There is still no hard investment case information on the website in respect of Kouroussa. By failing to reiterate that the bottom line is still excellent, management have turned the deal into a negative on the SP.
The Cassidy information blackout is completely unacceptable. Regardless of whether or not litigation is involved, shareholders have a right to know what is at stake. As it is potentially 50% of the future income, a case could be made for suspending the share, particularly as Cassidy, our largest shareholder (maybe) does actually know the true state of affairs.
The Yanfolila experience shows the importance of absolute clarity at the start: objectively asses the project and don't fool yourself or anyone else about grades or financials impacting on the bottom line.
Of course, the shareholders are absolutely entitled to have proper information at all times and management repeatedly fail to inform shareholders: last year there were multiple occasions when guidance should have been revised and the market was misled. For that reason, the market can have no confidence in Betts.
Colonel Goita is no fool.
His message is that he is doing this to keep the transitional arrangements going forward ie he is the good guy.
Should this really even be described as a coup when it is a struggle between factions in government: Goita, after all, is the vice president.
The market has hardly reacted on any of the Mali based companies and it looks more as if it is the Kouroussa deal which is the real negative drag on the SP.
All so frustrating, as POG climbs.