Hummingbird Regulatory News (HUM)

Hummingbird Resources plc / Ticker: HUM / Index: AIM / Sector: Mining

06 June 2023

Hummingbird Resources plc

("Hummingbird" or the "Group")

2022 Audited Annual Results

Hummingbird Resources plc ("Hummingbird" or the "Group") (AIM: HUM), is pleased to announce its audited financial results for the year ended 31 December 2022.

Financial results

· Sales of US$143.3 million (2021: US$156.6 million) were generated from 80,445 ounces ("oz") of gold sold in 2022 at an average price of US$1,782/oz (2021: 87,553 oz sold at an average price of $1,788/oz), with additional US$7.0 million (2021: US$6.2 million) revenue generated from sale of Single Mine Origin ("SMO") gold.

· EBITDA of US$3.7 million (2021: US$28.2 million).

· Adjusted EBITDA1 of negative US$7.0 million (2021: positive US$18.6 million).

· Diluted loss per share of US$ 8.71 cents (2021: loss per share of US$ 3.22 cents (restated)).

· Total bank debt US$115.7 million (2021: US$61.8 million).

· Net debt of US$109.8 million2 (2021: $21.0 million2).

o  1 Adjusted EBITDA Earnings before interest, tax, depreciation and amortisation, effect of impairment charges, foreign currency translation gains/losses and other non-recurring expense adjustments but including IFRS 16 lease payments.

o  2 Net debt/cash including the value of gold inventory.

Operational results

· 80,653 oz of gold poured in 2022 (2021: 87,558 oz).

· All in Sustaining Cost ("AISC") of US$1,782 per oz in 2022 (2021: US$1,536 per oz)

· Group Reserves materially increased to 4.13 million ounces ("Moz") (2021: 1.12Moz) following the extensive drilling campaigns completed at Yanfolila and Kouroussa in 2021 being converted into Reserves, and the completion of a Definitive Feasibility Study ("DFS") in June 2022 on Dugbe, in Liberia.

· Group Resources increased to 7.28Moz (2021: 7.12Moz).

· DFS completed at Dugbe in Liberia by joint venture partners Pasofino Gold Ltd ("Pasofino"), of which the Group retains a majority 51% interest in Dugbe, showcasing: a high DFS pre-tax NPV of US$690 million (US$530 million post tax); significant 2.76Moz Reserve base; long life of mine ("LOM") of 14 years, with upside given the material exploration potential available; and a low AISC profile of US$1,005 per oz to underpin a gold mine of material value.

· Achieved full compliance of the World Gold Council ("WGC") and Responsible Gold Mining Principles ("RGMPs") in November 2022.

Dan Betts, Interim Chairman and CEO of Hummingbird, commented:

"The past year we achieved several key milestones we set ourselves to fulfil for the year, while facing challenges at our Yanfolila mine in Mali, especially the earlier part of 2022. Commencing construction at our Kouroussa Gold Mine in Guinea with a target of achieving first gold pour by the end of Q2 2023, to fulfil our strategic objective of becoming a multi-asset, multi-jurisdiction gold producer remains well on target with Kouroussa commissioning progressing well towards first gold pour within this quarter. We also set ourselves the goal to materially increase the Group's Reserves base to showcase LOM increase at all our assets. This was achieved with the release of our updated Group Reserves and Resources statement in June 2022 highlighting a material increase in Group Reserves to 4.1Moz. Further, another key focus area was to deliver a robust and valuable DFS at Dugbe via our joint venture partners Pasofino. As per the highlights above this was achieved in June 2022, with a strategic review underway with Pasofino on the best options to create value for all stakeholders at the asset. As well documented, we faced operational challenges at our Yanfolila mine in Mali during 2022, impacting the achievements as noted above. Pleasingly, post operational changes made mid-way through the year, we saw material improvements in the production, AISC profile and cash flow generation of the mine as seen in our Q4-2022 and Q1-2023 results.

For 2023, the year has started well, and the Group is at a pivotal junction for growth, with Yanfolila performing better and Kouroussa commissioning underway towards first gold pour and then to name plate production for H2-2023. Further, with a strategic partner in place with CIG, endorsing the Group's strategy for growth, we are confident and excited about the Group's prospects for the remainder of 2023 and beyond."

Interim Chairman and CEO's Statement

During the past year our key priorities were to: commence construction at our Kouroussa Gold Mine in Guinea with a target of achieving first gold pour by the end of Q2 2023; to fulfil our strategic objective of becoming a multi-asset, multi-jurisdiction gold producer; analyse, understand and increase the Group's Resources and Reserves profile on the back of the 2021 exploration drilling campaign; to assist our joint venture partners Pasofino, to deliver a robust and valuable definitive feasibility study ("DFS") at Dugbe; to continue to improve on our Environmental, Social and Governance ("ESG") initiatives, including SMO; to achieve full compliance of the year 3 WGC RGMPs; and to achieve better overall performance at Yanfolila in Mali.

With Yanfolila ending the year in a significantly better state than at the beginning and with Kouroussa on track to pour gold imminently, I am pleased to be able to report that we have achieved all of those objectives.

In early January 2022, the Group formally commenced construction at Kouroussa following the mobilisation of equipment and personnel in December 2021, by the Project's construction and engineering firm WACOM, in line with the Project schedule and targeted first gold pour by the end of Q2 2023. Throughout the year construction advanced from first breaking ground and clearance works, towards the major civil work construction phase. By Q4 2022, an increasing focus turned to 'operational readiness' programmes, with James Francis joining the Group as General Manager for Kouroussa to lead the business forward. 

Despite the well documented macro global inflationary challenges (which persist), and despite the regional backdrop of ECOWAS sanctions and restricted movements of people and goods in the region I am pleased to be able to report that the Kouroussa project remained on track and on budget throughout the period. Furthermore, as this Annual report goes to print, we are within days of "first gold" at Kouroussa with the project currently going through its commissioning phase and so I am confident that it will be delivered ahead of schedule and on budget. This will be the second mine that the Hummingbird team have designed, financed, and built on time and on budget; and given the challenging environment it is an extremely commendable achievement by the team.

In 2021 we embarked on a targeted c.44,000-meter exploration drilling campaign at Kouroussa and Yanfolila, with a focus to increase our overall Group Reserves profile and provide meaningful LOM extensions at our assets. This cumulated in the release of our updated Group Resources and Reserves statement in June 2022, which showcased a material uplift to Kouroussa's Reserves profile to 647 kilo ounces ("Koz") at a high grade of 4.15 grammes a tonne ("g/t") and added Reserves net of depletions at Yanfolila totalling 719 Koz, including extending the underground Reserves profile at Yanfolila to 278 koz at 3.94 g/t. Further, at Dugbe via our joint venture partner, Pasofino, final DFS results were announced on 13 June 2022, establishing a material maiden Reserves profile at Dugbe of 2.76 million ounces ("Moz") in which the Group retains a controlling 51% interest. The material uplift in the Group's Reserves profile was a significant achievement for the Group during 2022. This work has led the Group to two significant conclusions that will shape our focus going forward. Firstly, the exploration potential at Kouroussa is significant and we will be looking to ramp up our regional exploration efforts to extend the mine life as soon as possible. Secondly, the exploration potential at Yanfolila would seem to lie mainly in the underground potential which could go on for many years, and as time goes by will shape our focus towards making Yanfolila a smaller underground operation focussed on cost and profitable ounces.

On Dugbe, as noted above, our joint venture partner Pasofino released a detailed and robust DFS with key highlights being: strong financial metrics, with a pre-tax NPV 5% of US$690 million, 26.35% IRR (23.6% post-tax); fast capital payback of approximately 3.5 years from start of production; a large mineral Reserve with potential for expansion of 2.27 Moz of gold, with a long 14-year LOM; and a detailed Environmental and Social Impact Assessment ("ESIA") study also completed.

With a robust Dugbe DFS completed, an increasing focus then turned towards working on a strategic review with our joint venture partner Pasofino on determining the best options to generate maximum value of Dugbe for all stakeholders. The strategic review remains ongoing, and we are confident of highlighting in 2023, a pathway towards unlocking the material value of that asset to our shareholders.

In relation to ESG, November 2022 saw a key milestone for the Group as it achieved Year 3 full compliance of the WGC RGMPs. Hummingbird is committed to operating responsibly with strict ESG protocols and practices. Adopting the WGC RGMPs is a key part of Hummingbird's strategy for building a long term, responsible mining company. Meeting and where possible exceeding these requirements demonstrate our continued commitment to adhering to international best practice ESG standards. Ever since the Company was founded, ESG concepts have been more than just a word to us. We want to be at the forefront of developing the art of responsible mining in the industry leaving a lasting positive legacy in the regions and communities in which we operate. For this reason, we established the Pygmy Hippo foundation ("PHF") in 2011 to work to preserve the regional environment around our projects. In addition, we have worked very closely to establish community health benefit initiatives with our partner Critical Care International ("CCI") whilst seeking to increase transparency and exposure through our support of Single Mine Origin Gold ("SMO") creating a universe of environmental, social, healthcare and transparency impacts against which we can be measured. 

SMO continues to gain increased industry recognition in 2022, with multiple jewellery brands using and endorsing SMO gold in their products, including British jewellers Boodles. As I noted in last year's annual report, the SMO initiative gives us the opportunity to showcase mining as the force for good that we at Hummingbird fundamentally believe can and should be. It also gives us the opportunity to be a part of a larger movement that future proofs mining in a world of increased scrutiny and showcases responsible mines for all the valuable work that they do. I believe this initiative has the scope to transcend our Group and be a driver of change for the positive impact the mining industry delivers more broadly.

Regrettably, the achievements as highlighted above were significantly hampered by the operational underperformance at Yanfolila in Mali during 2022, particularly for the first three quarters of the year. A key driver of this was the continual underperformance of our mining contractor's fleet, materially hindering the ability to follow the scheduled mine plans. The Group, in turn, took decisive and necessary actions to stabilise ongoing production challenges and return Yanfolila to a cashflow positive position by addressing the poor mining performance of the Yanfolila mine both in the immediate and longer term. The Group stepped in to support our mining contractor by providing additional fleet such as extra excavators, reinforcing the contract miner's maintenance teams to improve the overall mining fleet performance coupled with several other work stream initiatives; ultimately (post year-end) our relationship with our contract miner has come to an end and mining activities are now being carried out by a new contractor with much more internal support.

Pleasingly, by the end of 2022, the decisive initiatives the Group took as noted above, coupled with on site management changes, saw Yanfolila' s operational performance materially improve, which has continued into 2023. Hummingbird's Q4 2022 production and AISC profile were amongst some of the best recorded for several years. Gold production was 28,264 oz at an AISC profile of US$1,248 per oz, leading to a materially improved Group EBITDA of c.US$11 million for the Q4 2022 quarter. This was a hugely positive outcome at the end of what was a challenging year at Yanfolila.

2023 Outlook:

In March 2023, the Group secured a key, regionally influential strategic partner and strengthened the balance sheet with a c.US$17 million placement led by CIG group. The placement has helped ensure Kouroussa gets into production as scheduled for first gold pour by the end of Q2 2023 and provides the ability to help fast-track further exploration at the asset. This investment by new and existing shareholders endorses the Group's growth strategy in the West African region and beyond.

With this support, we will achieve our strategic goal this year of being a multi-asset, multi-jurisdiction gold producer.

At Yanfolila, a key focus is to maintain the improved operational performance, as exhibited by our Q4 2022 and Q1 2023 operational results and to bring online Yanfolila' s underground mine by year end for a full year of production in 2024. Further, at Dugbe, with a strategic review underway, our goal for 2023 is to show a pathway to unlocking the material value of that asset for all stakeholders.

On exploration, given limited drilling was undertaken in 2022, we are cognisant of the need to increase the Group's exploration activities to maintain and extend the Group's Reserves base. This is a priority for us going forward. We are completing a detailed review of exploration plans at Kouroussa and Yanfolila, with expectations in 2H 2023 and 2024 to have reinitiated exploration campaigns at those assets, particularly at Kouroussa.

We successfully achieved Year 3 WGC RGMP full compliance at both corporate and Yanfolila site levels, as part of our increasing focus to ensure these and other leading international ESG standards are embedded into the Group's and mine site's procedures and policies. Importantly we aim to continue to enhance sustainable community livelihood programmes and projects at our assets, whilst growing the SMO initiative across the broader gold market.

On a final note, I would like to thank our previous chairman, Russell King for his time and valuable guidance at the company. Since his retirement in June 2022, I have assumed the role of Interim Chairman in addition to being CEO. It is probably fair to say that the environment in the middle of last year for attracting a suitable Chair to help us drive forward with our next stage of growth was somewhat sub optimal; but we are in much better shape now as Kouroussa comes online, and it is indeed our intention to find such a candidate. Whilst we will not rush into a hasty decision, it remains a priority for the group going forward.

In conclusion, with Yanfolila's operational performance improving, and Kouroussa's birth imminent, the Group is at a pivotal juncture for exponential growth, a key focus for the executive team this year is to show improved cash flow generation and a stronger balance sheet for the Group to underpin our growth strategy and ultimately drive shareholder returns.

Dan Betts

Interim Chairman and Chief Executive Officer

Consolidated Statement of Comprehensive Income - For the year ended 31 December 2022

Consolidated Statement of Financial Position - For the year ended 31 December 2022

Consolidated Statement Cash Flows - For the year ended 31 December 2022

Consolidated Statement of Changes in Equity - For the year ended 31 December 2022

Notes to the Consolidated Financial Statements

1. General information

Hummingbird Resources PLC is a public limited company with securities traded on the AIM market of the London Stock Exchange. It is incorporated and domiciled in the United Kingdom and has a registered office at 49-63 Spencer Street, Hockley, Birmingham, West Midlands, B18 6DE.

The nature of the Group's operations and its principal activities are the exploration, evaluation, development, and operating of mineral projects, principally gold, focused currently in West Africa.

2. Basis of preparation

The preliminary announcement does not constitute statutory financial statements for the years ended 31 December 2022 and 31 December 2021.

The financial information for the year ended 31 December 2022 has been extracted from the Group's audited financial statements which were approved by the Board of Directors on 05 June 2023 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales. The report of the auditor on the 31 December 2022 financial statements was unqualified but contained a material uncertainty paragraph relating to going concern and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2021 have been delivered to the Registrar of Companies. The Auditor has reported on those accounts; their report was unqualified but contained a material uncertainty paragraph relating to going concern and did not contain a statement under Section 498 (2) or Section 498(3) of the Companies Act 2006.

3. Going concern

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are set out in the Financial Review. At 31 December 2022, the Group had net cash and cash equivalents of $2.2 million, (made up of $3.9 million of restricted cash in line with the Group's loan arrangements and $1.7 million of overdraft) and total borrowings of $115.7 million. Details on the Group's borrowings are set out in note 19 to the financial statements.

The Group has prepared cash flow forecasts based on estimates of key variables including production, gold price, operating costs, scheduled debt repayments in line with the Group's debt arrangements and capital expenditure through to December 2024 that supports the conclusion of the Directors that there is sufficient funding available to meet the Group's anticipated cash flow requirements to this date.

These cashflow forecasts are subject to a number of risks and uncertainties, in particular the ability of the Group to achieve the planned levels of production and the recent higher gold prices being sustained. The Board reviewed and challenged the key assumptions used by management in its going concern assessment, as well as the scenarios applied and risks considered, including the risks and potential disruptions associated with the recent changes in governments in Mali and Guinea.

The biggest material uncertainty and risks remains ounces produced and whether the current mine plan can be achieved (including expected production from the Kouroussa mine which is currently being commissioned) and mining contractor equipment performance, and sanctions on Russia, which are also having a logistical impact on the Group. These production levels are also key in supporting the scheduled debt repayments over the period under review. Where additional funding may be required, the Group believes it has several options available to it, including but not limited to, use of the overdraft facility, cost reduction strategies, selling of non-core assets and raising additional funds from current investors and debt partners.

The Board also considered sensitivities to those cash flow scenarios (including where production is lower than forecast and gold prices lower than current levels) which would require additional funding. Should this situation arise, the Board believe that they have several options available to them as referenced above, which would allow the Group to meet its cash flow requirements through this period, however, there remains a risk that the Group may not be able to achieve these in the necessary timeframe.

Based on its review, the Board has a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future and hence the Board considers that the application of the going concern basis for the preparation of the Financial Statements is appropriate. However, the risk of lower-than-expected production levels, timing of VAT offsets and receipts, increased fuel costs and potential disruptions to supply chain and the ability to secure any potential required funding at the date of signing of these financial statements, indicates the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern.

Should the Group be unable to achieve the required levels of production and associated cashflows, defer expenditures, obtain additional funding or renegotiating the current financing arrangements such that the going concern basis of preparation was no longer appropriate, adjustment would be required including the reduction of balance sheet asset values to their recoverable amounts and to provide for future liabilities should they arise.

4. Loss per ordinary share

Basic loss per ordinary share is calculated by dividing the net loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The calculation of the basic and diluted loss per share is based on the following data:

At the reporting date there were 29,560,125 (2021: 19,984,137) potentially dilutive ordinary shares and warrants. For the year ended 31 December 2022, because there is a reduction in diluted loss per share due to the loss-making position, therefore there is no difference between basic and diluted loss per share.

5. Net debt reconciliation

1 Included within the other category on lease liabilities is $761,000 additions to liabilities, $475,000 forfeiture of liabilities as a result of the renewal of the leases for the corporate office and interest charge of $2,862,000. Included within the other category for borrowings is $1.8 million of issue costs amortisation.

6. Events after the reporting date

Issue of Shares and Strategic Investor

On 7 February 2023 the Company entered into a share subscription agreement for the investment of US$15 million into the Company by CIG SA ("CIG"), which was split into two tranches:

o  A firm first tranche of circa US$3.8 million, involved the issue of 39,360,800 new ordinary shares of £0.01 of the Company and;

o  A second tranche of circa US$11.2 million, which involved the issue of 117,724,008 new ordinary shares.

Following the CIG investments, the Group also received an additional subscription of a total of 23,070,797 shares in the Company, for circa £1.8 million excluding fees from certain existing institutional shareholders and through an open offer.

All the shares were issued at a subscription price of 7.79 pence, which represented a c.2% premium to the 30-day VWAP. As part of the share subscription CIG have the right to maintain their stake.

In aggregate, a total of 180,155,805 ordinary shares in the Company were issued to CIG and other investors, for a total of £14 million (circa $17 million) excluding fees, to help fund Kouroussa into production.

7. Availability of accounts

The audited Annual Report and Financial Statements for the year ended 31 December 2022 and notice of AGM will shortly be sent to shareholders and published at: www.hummingbirdresources.co.uk.

**ENDS**

Notes to Editors:

Hummingbird Resources plc (AIM: HUM) is a leading multi-asset, multi-jurisdiction gold producing Group, member of the World Gold Council and founding member of Single Mine Origin (www.singlemineorigin.com). The Group currently has two core gold projects, the operational Yanfolila Gold Mine in Mali, and the Kouroussa Gold Mine in Guinea, which will more than double current gold production when in production, scheduled for first gold pour within Q2 2023. Further, the Group has a controlling interest in the Dugbe Gold Project in Liberia that is being developed by joint venture partners, Pasofino Gold Limited. The final feasibility results on Dugbe showcase 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 AISC profile. Our vision is to continue to grow our asset base, producing profitable ounces, while central to all we do being our Environmental, Social & Governance ("ESG") policies and practices.

For further information, please visit hummingbirdresources.co.uk or contact: