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Hummingbird flies on stellar initial gold recovery (HUM)

Shares in gold producer and developer Hummingbird Resources (LSE:HUM) flew higher today after the firm announced better than expected gold recovery at its newly-opened Yanfolila Gold Mine in Mali.

Yanfolila saw its share rise 5.8pc, or 2p, to 35.2p after announcing that the plant has been consistently achieving higher than design specification gold recoveries of around 96pc since gold production began in December. Total gold recovered to date is 10,737oz, of which 5,483oz has already shipped to refiners.

Over the past ten days, the plant has been operating at an average of around 90pc of design throughput capacity and continues to move towards full production in line with Hummingbird’s planned schedule.

In the first period of Yanfolila’s operations, Hummingbird has been processing ore from lower-grade stockpiles to ensure plant performance, and gold extraction has been satisfactory in advance of increasing the head grade. Now that the mine is expected to hit name-plate capacity by the end of Q1 and recoveries are ahead of schedule, the higher-grade ore is increasingly being introduced to the plant.

Hummingbird added that it plans to spend between $8-$10m on exploration this year to extend Yanfolila’s life. However, this figure will not exceed 15pc of operating cash flows from the mine. In particular, it has commenced efforts to convert over 1 Moz of resource outside the Yanfolila mine plan into reserves.

Chief executive Dan Betts said:

‘I am pleased that activity on site is steadily progressing as per the ramp-up schedule and we are on track to achieve nameplate capacity from the plant by the end of Q1 2018.’

‘I am particularly happy to report on the technical performance of the plant, with recoveries over 95% already and a solid performance of the milling circuit. This stands us in good stead as we continue to ramp up the performance of the operation.’

Good Value

We pointed out Hummingbird’s potential ahead of Yanfolila’s first gold pour, in an article on this site in December.

We argued at the time that the business’s ability to deliver a gold project on time and within budget throughout a variety of different gold price conditions and a challenging operating environment was a rarity.

Especially when rivals like Avocet Mining (LSE:AVM) and Acacia Mining (LSE:ACA) remain at the behest of strike action and political instability in their respective domestic operating environments.

The firm’s market cap has dipped from around £133.5m when we wrote our original article, to £115m at present.

Make what you will of the risk associated with operating in Western Africa, but the firm appeared cheap at £133.5m. Now with significant progress being made at Yanfolila, the discounted valuation could provide an even more attractive entry point.

Author: Daniel Flynn

Disclosure:

The author of this piece does not hold shares in the company mentioned.

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