RE: Recommendation15 Apr 2020 06:35
Not a bad write up - HUM : We think gold operations here are running extremely well currently and expect a strong 1Q result in the coming days (last year on 16th April), most likely the company's strongest quarter yet, likely a positive catalyst. The balance sheet has historically been burdened by high levels of debt but this will turn to net cash around mid-year 2020 for the first time helping reduce investor risk significantly. After this, cash generation for shareholders ramps fast. Management recently reset 2020 guidance and put in place various targets, a 5-year plan, and incentive structure around these including bonuses. Alongside this there have also been recent new share purchases by management during the 1Q, a relatively rare event in recent times and we view this action as a positive signal for Q1 and 2020 as a whole. Annualising Q4 2019 production (it is somewhat seasonal so not necessarily a good extrapolation) of 33,892oz gives 135,568oz production for 2020 which is well ahead of 125,000oz 2020 guidance, giving some comfort it could be exceeded. For 2020 the exploration budget has been significantly expanded and there is a clear focus on wanting to extend the existing mine life which we think will be successful as the year progresses. This is our favorite of the 5 shares discussed here and hence we would make it the largest holding in a weighted basket. We think a doubling of the share price over a year is a realistic goal.