HUM analysis - credit John Cornford30 Aug 2023 22:36
They seem to go on and on (as they do). Small explorers especially are drifting, submerged along with commodities and, until now, gold – still 5% off its US$ peaks against all the rumours of a new BRIC gold-backed currency – which the market obviously doesn’t believe.
I did say ‘don’t sell’ in my June update. But I didn’t see those doldrums continuing which is the only reason I can think that caused HUM’s shares to sink back 30% to just over 10p after publication of its operational update three weeks ago for the quarter to June.
The pessimists were able to walk the shares down at first despite there being no just cause that I can see. They latched on to the lack (yet) of any paydown of the debt built up over the last few years as a result of the poor results at the existing Yanfolila mine last year and the start of building its second producing mine at Koroussa this.
But I wouldn’t have expected any paydown yet. Kourossa only achieved (on time) its first gold pour a few weeks ago, while capital spending hasn’t quite stopped and, as I said in my June update “projecting this year’s results in any detail in such turn-around cases is impossible, because in addition to Yanfolila swinging back into a decent profit but at an unpredictable rate, will be Kouroussa’s contribution (swinging from consuming cash to build, to building cash – also at an unpredictable rate)”
So the optimists have pushed the shares somewhat back up, only to encounter rumours of war between Niger, and the West African States where Hum operates – although well away from the borders where conflict might arise.
HUM itself is optimistic, expecting debt payback from Kourousa to start in this second half, although it also expects costs to rise temporarily at Yanfolila while it switches from mining one pit to another. Maybe that, and the uncertainty, still, of what Kourousa’s ramp-up costs will be is another plank for the pessimists, but I would have thought the scope for initial revenues from Kourossa is now so large, that it will outweigh any further – probably minor – problems elsewhere. Hummingbird is expecting Kouroussa to ramp up from zero to having produced 30,000 gold ounces by the year end, compared with 51,150 ounces from Yanfolila in this year’s first half. The company isn’t yet guiding for Kouroussa’s costs, but will do so in its October operational update. Meanwhile, I suggest don’t sell even though the shares might drift for a bit.
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