HUMMINGBIRD Resources was “ambitious to diversify” through merger and acquisition activity and would explore opportunities in its 2019 financial year, said Daniel Betts, CEO of the UK-listed gold junior.
He added, however, that growth through acquisition was fraught with risks: the company would step carefully in assessing options.
Betts was commenting following publication of the firm’s 2018 year-end results – its first full year as an operating company – where production from its Mali-based Yanfolila mine at some 91,620 ounces was below expectations. The mine was scoped to produce 107,000 oz a year in a definitive feasibility study.
The company has guided to 2019 production of between 110,000 and 125,000 oz which it would expand to an average of between 130,000 to 145,000 oz in the three years of its 2020 to 2022 financial years – an improvement based on commissioning of a second ball mill at its Yanfolila processing facilities.
Beyond this, the task lay in turning resources to reserves as mine production fell to 80,000 oz from 2023. Consequently, the company was working on proving up reserves at its Gonka prospect, and Komana East. Based on current resources, some one million ounces of gold sat outside reserves.
Hummingbird had also learned as an operating company, said Betts. The company saw heavy rains in Mali destabilise the pit wall at the Komana East section of Yanfolila. The rain also washed away a bridge at the single road supplying the mine. An incident involving the Mali military and protesting artisanal miners also resulted in the death of three people at the company’s mining permit (previously reported).
In was in the context of these disturbances, that Betts commented on M&A saying in his CEO year-end commentary that whilst “… M&A remains a regular question for Hummingbird in the context of delivering shareholder value … [I]t must be noted that such considerations will only be explored in a strict and disciplined manner”.
He added: “We recognise the risk inherent in a single mine operation and are ambitious to diversify that risk; however, only if we believe such a change would be value-accretive on a per-share basis”. Betts said later in his commentary that unlocking shareholder value meant “… developing prospective strategic opportunities to capitalise on the platform we have built through the exploration of potential M&A opportunities”.
The development of the firm’s Dugbe prospect in Liberia, the development of which is now captured in a Mineral Development Agreement with the Liberian government – its first for a new discovery in about 15 years – was also a priority for the group.
Betts acknowledged that debt was higher than anticipated at some $61m owing to the effect of the flooding incident at Komana East. Cash was $21m as of the year-end however.
