HUMMINGBIRD Resources may have to throw itself at the feet of its lenders again, principally Coris Bank following a dispute with its main mining contractor on the Kouroussa mine in Guinea.
The UK-listed miner said in an announcement on Monday that the dispute with the contractor resulted in lower planned volumes at Kouroussa. This would negatively affect cash flows. Shares in Hummingbird Resources fell nearly 30% to 7.75 pence a share by midday in London.
Hummingbird agreed a $55m loan with Coris Bank in September in which it pledged to cut $122.8m in debt over three years starting with a $77m debt repayment by the end of this year. But this turns on meeting production guidance of between 165,000 to 200,000 oz (downgraded from 200,000 oz in 2023) which in turn anticipates the $120m Kouroussa mine being at full steam of around 120,000 oz/year. The balance of Hummingbird’s production would be from the 75,000 to 80,000 oz/year Yanfolila gold mine in Mali.
In December, Hummingbird raised $30m mostly through a share placement at an average price of 11.26 pence per share with shareholders including 45% shareholder CIG, an investment bank.
Hummingbird also agreed to hedge 30,000 oz of gold, about 15% of total production. This comes at a time when the gold price peaked at a new all-time record of $2,195.15/oz on March 8. The gold price is currently about 4.5% higher year-to-date.
The gold miner said in its announcement that its principal contract miner Corica Mining Services “temporarily suspended” mining on March 17 owing to “various contractual disputes” in “a clear breach of the mining contract”.
Hummingbird said previously Corica had failed to meet mining contract volumes owing to delays in mining equipment mobilisation, commissioning and “overall operating performance”. Kouroussa was well placed to capitalise on resumed mining volumes as its processing plant was at full capacity and it expected to encounter high grades at its next blast, said Hummingbird.
While Hummingbird management sought to resolve the dispute, Kouroussa was being supplied with freshly mined ore by a “supporting” mining contract supplemented with the processing of low grade stockpiles.
However, Hummingbird warned that while the processing plant was expected to continue to run in the near term “reaching commercial production will not be possible, with production and cash flows increasingly impacted”.
Hummingbird had given Corica until tomorrow (March 19) to resume mining at Kouroussa failing which it could resume mining itself or work with alternative mining contractors and equipment suppliers to reach full mining.
“The company is in discussion with its primary lender, Coris Bank International regarding the potential implications of the situation on forecast production and the cash flows for the group,” said Hummingbird, adding that the bank had been supportive in the past.
Getting the Kouroussa mine up to speed has been difficult for Hummingbird. In addition to its rolling problems with Corica, Kouroussa last year ran into rain interruptions and delays related to skills development.
