HUMMINGBIRD Resources on Thursday took steps to shore up its balance sheet announcing terms of a $30m share placement with institutions, led by investment bank CIG which becomes the gold miner’s 45% shareholder.
Hummingbird also said it would hedge 15% of its forecast gold production for 2024. Shares in the company fell 14% in the first hour of trade in London.
Hummingbird said $25m of the proceeds from the share placement were to secure the balance sheet while it built up production at Kouroussa, a newly commissioned gold mine in Guinea. A further $5m was to fund exploration, and $2m was to optimise a 2022 definitive feasibility study of Dugbe, a gold project in Liberia.
In an additional announcement, Hummingbird said it would flip up its 51% asset level stake in Dugbe to a 51% controlling stake in Pasofino Gold, its Toronto-listed joint venture partner which has been developing the project.
Hummingbird CEO Dan Betts said the equity placement, “cornerstoned” by CIG, demonstrated “ongoing support” in his firm’s development plans. The shares have been placed at 11.26 pence per share, a 10% discount to Hummingbird’s last close in London. CIG subscribed for $25m while other investors bought the balancing $5m.
Hummingbird also said shares would be offered on the same terms to the general market, details of which will be published in the coming days.
Shares in Hummingbird have increased 77% in the last 12 months as the company recovered from an operationally disappointing 2022 in which it missed production guidance at its 80,000 to 90,000 oz/year Yanfolila mine in Mali.
Hummingbird’s production guidance for 2024 of 200,000 oz anticipates that its $120m Kouroussa is at full steam. The cost of the project, however, has put strain on Hummingbird’s balance sheet. Hummingbird arranged a $55m loan with Coris Bank in September and pledged to cut $122.8m in debt over three years starting with a $77m debt repayment by the end of next year.
Details of Hummingbird’s hedge strategy were not disclosed but at 30,000 oz it will inevitably heap pressure on the successful ramp up of Kouroussa. The gold hedge was not connected or a condition to CIG’s investment in the firm.
Hummingbird said in its third quarter review it had encountered “challenges” to production at Kouroussa including rain interruptions and delays related to skills development – both of which Betts said had been anticipated by his firm.
“The ramp-up process of Kouroussa has been slower than anticipated, about a quarter behind schedule,” said a Hummingbird spokesperson. “The primary reason for the delay is the unavailability of the mining fleet,” he said. “However, mining fleets are now on-site, along with an additional support fleet, and the ramp-up process is picking up pace.”