The primary quarter of 2019 was imagined to be step one in Hummingbird Assets’ (OTCPK:OTCPK:HUMRF) path to restoration after a dreadful 2018, during which the whole lot went improper. I’ve detailed the corporate’s misfortunes extensively on In search of Alpha, right here.
Nonetheless, Q1 2019 was one other dreadful quarter during which the one 23,807 ounces of gold have been produced and all-in sustaining prices (AISC) got here in at $1,297 per ounce. This has led Hummingbird to confess that its 2019 AISC might exceed the beforehand introduced of $800-$850 per ounce goal.
Supply: Hummingbird Assets
Causes for the underperformance
Throughout the interval, Hummingbird accomplished remediation work on a pit wall of the Komana East deposit of its Yanfolila gold venture in Mali. Nonetheless, manufacturing from the Komana West deposit was negatively impacted from higher than anticipated ore depletionfrom historic artisanal workings. In idea, the affect from this needs to be decreased over time as the corporate goes deeper into the pits.
Another excuse for the decrease than anticipated manufacturing and better prices was the low plant throughput. This was as a result of low plant availability and restricted quantities of the softer oxide ore to mix with the tougher contemporary ore. The corporate additionally admitted that it seems to have incurred pointless mining dilution and ore loss as a result of placing give attention to rehabilitation works.
The grades in the course of the interval weren’t nice and it is because Hummingbird nonetheless hasn’t accessed some areas of high-grade ore and oxide ore because of the low mining volumes.
The primary quarter of 2019 wasn’t all unhealthy information for Hummingbird although. The development of the brand new public bridge to the Ynafolila venture appears to be going properly and footage from March confirmed important progress:
Supply: Twitter of Robert Monro, Head of Enterprise Growth at Hummingbird
In 2018, heavy rains broken the outdated picket bridge resulting in Yanfolila, which hampered remediation works as Hummingbird couldn’t transfer some equipment as a result of launched weight restrictions.
The outdated picket bridge
Development of the $13 million second ball mill at Yanfolila is progressing to plan and is round 60% full. It ought to begin operations within the third quarter of 2019 and increase the plant throughput from 1Mtpa to 1.24Mtpa, when working with 100% contemporary materials.
Throughout the first quarter of 2019, Hummingbird obtained the remaining drill outcomes from its 2018 exploration marketing campaign and may improve Yanfolila’s reserves and sources within the second quarter of 2019. After that, the corporate will put together a brand new lifetime of mine plan for the mine, which can mirror the up to date reserves in addition to the affect of the second ball on the plant throughput.
Relating to the four.2Moz Dugbe gold venture in Liberia, Hummingbird re-signed its mineral development agreement in January 2019 and is now ready for it to be handed into legislation.
The 2019 manufacturing steerage stays unchanged at 110,000-125,000 ounces of gold and the affect from the upper prices in Q1 appears to be much less extreme than I anticipated, based on the press. In keeping with Miningmx, AISC for the total 12 months may enhance by as much as $50 per ounce.
Dangers in 2019
The wet season in Mali runs between June and October and the third quarter of 2018 noticed the heaviest wet season in Mali for the previous 20 years. I feel that it’s unlikely for the 2019 wet season to be as unhealthy as final 12 months’s, but it surely may nonetheless trigger some issues for Hummingbird, particularly if the brand new public bridge is unfinished when it begins. The corporate must stockpile sufficient ore forward of the wet season and ensure it’s ready in case of a repeat of the 2018 heavy rains.
Different dangers I see for the corporate embrace low gold costs and excessive oil costs in addition to operational points. I’m shedding religion in Hummingbird’s means to run Yanfolila easily, though I nonetheless consider the corporate has some very competent folks on board. For instance, technical advisory committee chair Attie Roux is a former COO of Endeavour Mining (OTCQX:EDVMF), which is an excellent intermediate gold producer with a market cap of greater than $1.5 billion.
The bar was set low for Hummingbird Assets in Q1 2019 and it simply wanted to finish remediation works and end interval with none new points to make shareholders blissful. As a substitute, the corporate bumped into a number of new issues and the pointless mining dilution and ore loss are its personal fault, which I feel ought to lead buyers to significantly query administration’s talents.
The issues, but once more, appear fixable however shareholder persistence is working out as mirrored within the slumping share value.
I nonetheless assume that the corporate is undervalued but it surely must run Yanfolila and not using a hitch over the 2019 wet season and ship a fantastic reserve replace to regain investor belief. Additionally, Hummingbird wants to complete the set up of the second ball mill on time and on funds and discover a associate for the event of the Dugbe venture. The corporate faces a mountain of challenges in 2019 and it wants to start out delivering on its plans to unlock the worth of Yanfolila and Dugbe. I am cautiously optimistic it might probably succeed.
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Disclosure: I’m/we’re lengthy HUMRF. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (apart from from In search of Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.
Further disclosure: I’m not a monetary adviser. All articles are my opinion – they aren’t solutions to purchase or promote any securities. Carry out your personal due diligence and seek the advice of a monetary skilled earlier than buying and selling.