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Hummingbird Resources hovers above support – waiting for a gold price reversal? (HUM)

The share price of gold producer Hummingbird Resources (LSE:HUM) dipped 2% to 26.2p on the release of its interim results today. The company reported a pre-tax profit of US$3.5m for the first half of the year, and production from its Yanfolila Gold Mine was in line with guidance at 51,304 ounces.

Gold was sold at US$1,312/oz and all in sustaining costs (AISC) were US$884/oz during the period.  The general macro climate for precious metals is undoubtedly weighing on Hummingbird’s share price and H2 revenues will likely face the headwind of lower gold prices. That said, there’s plenty of reasons to be optimistic that the gold spot price will recover somewhat by year-end.

It’s also worth noting that costs in Q1 included investment to ramp-up to commercial production. Q2 saw AISC on gold sold of US$790/oz, which will go some way to offsetting a lower average gold price in H2. In any case, the results see the company profitable compared with losses in 2017 H1 & H2 of US$2.61m and US$5.34m respectively.

As you would expect Hummingbird’s stock chart has mirrored golds price decline since early 2018 and a reversal will likely only take hold once gold finds its footing. The stock is around the horizontal support level of 25/26p which also coincides with the bottom of the current upward trend channel. Should this fail – and this might well be the case if gold hits new lows – decent support should be found at 18/19p. The Relative Strength Index (RSI) also reflects the steady downtrend, moving in a narrow channel since March.

There are however some hints that the stock is approaching a decisive move, with the price action coiling into a wedge. These patterns are followed, more often than not with a bullish reversal to the upside.

Author: Stuart Langelaan

The author does not own shares in the company mentioned in this article

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