Hummingbird Resources Pushes Rapidly On Towards A Two Million Ounce Gold Resource In Liberia
Published in Alastair Ford, Minesite on 25 Oct, 2011
“We were happy with the IPO”, says Dan Betts, chief executive of Hummingbird Resources. Mirabaud definitely didn’t think we’d get it away at that price. But it was fairly valued on a comparable basis - fully valued, but not overvalued. And we were twice over-subscribed, by proper people.” In many ways, it was a dream start. Serious institutions like Blackrock, JP Morgan, Fidelity and Dundee all bought into the Hummingbird story that the Liberian portion of the Birimian craton offers some of the most prospective gold exploration in the world. What’s more, they were prepared to put up US$40 million of new money at 167p per share to help the company prove it.
That was back in December 2010, and the markets weren’t exactly bullish. But the listing got away with an ease that resulted in one or two catty comments from brokers who envied the fees, and companies that envied the money. Political risk loomed large in the standard critique of Hummingbird then, and still does. But the other criticism - that the company didn’t have much gold, and had little chance of finding any more, has now been put to bed, and in some style.
“Our first challenge”, says Dan, “was to prove that we weren’t just some company struggling to get to a million ounces”. At the time of the listing, Hummingbird was able to bring 812,000 ounces of gold at 1.2 grams per tonne to the table, 500,000 ounces of which was indicated, and all of which is located at the company’s Dugbe F project on the Dugbe shear zone. But as of 26th September that resource has now more than doubled, to 1.8 million ounces, including 1.4 million ounces in the indicated category, and the promise of more to come looks increasingly credible.
“We’re a growth exploration story”, says Dan. “We’re still expecting a further significant resource upgrade. We’re still drilling.” As of early October the company had completed 25,000 metres of drilling since the listing, in addition to 32,000 stream, soil and trench samples. A 48 hole drill programme commenced on a second target on the Dugbe ground, Tuzon, in August, and Dan is optimistic that this prospect could eventually deliver on an even bigger scale. “It’s probably our most exciting prospect to date”, he says. “Although there are no guarantees it looks like the geology’s the same, and it’s an order of magnitude wider.”
Early results from the Tuzon drilling certainly seem to augur well. The first three holes have delivered what the literature called Hummingbird’s “best gold intersections to date”. And at an aggregated 56 metres at 1.4 grams per tonne from the first hole it does seem that Dan’s confidence is well placed. So it’ll be interesting to watch as the rest of the results start to come out from Tuzon, and to see what sort of an impact they have on the company’s share price.
At the current 136p, the shares haven’t exactly soared away since the listing last year. But then the markets haven’t exactly been kind to anyone over the past 12 months. Even so, the valuation of Hummingbird’s indicated ounces in the ground currently stands at around US$67.5, significantly less than ounces booked by Shanta, Nyota, Azumah, Ampella and Aureus. Across the border in Burkina Faso, Volta’s ounces at Kiaka are valued at even less, but that’s another market anomaly that will probably be corrected before too much longer.
In any case, with US$25 million in the bank, Hummingbird can afford to crack on in the hope that the shares will eventually catch up with the newsflow. First, there’ll be the additional results from Tuzon. Then, the company will have to consider which of the other drill-ready targets on Dugbe it also wants to get the rigs turning on. In the meantime, Dan and his team will also have to sit down and work out what kind of a mining operation it wants to create.
Two options present themselves. The company could switch the focus from exploration to development, and start moving towards production on a relatively small scale. That option has the merits of providing earlier cashflow, and enabling the company to mount a more robust defence, should any hostile interest arise on the market. London likes production, and given that Dan is firmly wedded to London, it’d probably be worth taking the preferences of the locals into consideration.
And there’s no doubt that predators are interested, although at the moment it may only be a sniff rather than a kill that they have in mind. The likes of Randgold, Goldfields and Newmont are all well aware, according to Dan, of the resource base that Hummingbird is capable of building across its 7,000 square kilometres of ground. “To get a lockdown like this in Ghana”, he says, “you’d have to go back 100 years”. And he would very much like not to have the company whisked away from under his nose and bought on the cheap.
But welcome to the markets. The second option relies in part on the long-term buy-and-hold investment strategies of the company’s major shareholders. The question that’s likely to come under consideration as early as January, is, in its baldest form, according to Dan: “Do you go gangbusters to get five million ounces?” And that strategy may well appeal to the likes of JP Morgan and Blackrock, who are in any case well used to frying bigger fish. Plenty will depend on how the markets treat Hummingbird over the next few months. But a lot is riding too on the company’s ability to continue delivering significant resource upgrades from future drilling. It’ll be interesting to watch.
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