We covered Hummingbird Resources (LSE:HUM) in late October suggesting it may be a buy at 19/20p. The stock had suffered a strong selloff, dipping as low as 15p on the bid after it revealed stability issues at its Yanfolia mine were affecting production output. To add to the company’s woes, a public bridge around 35km away had weight restrictions imposed on it as a result of heavy flooding too. The issues affecting the mine added to existing dark clouds caused by a weak gold price and growing concerns about the resolve of the wider global markets. It did however appear that the market was overreacting and the drop had overshot the mark – although serious issues, the problems were resolvable and the gold price was looking increasingly poised for a recovery rally.
In January, the firm reassured investors that remedial work was progressing well at the Komana East pit wall and completion was expected over the following weeks. The company reported it has “resumed full capacity production in Q1 2019” and had overcome the weight limit issue regarding the public bridge. Hummingbird had managed to mobilise a military barge to transport heavy equipment and other large loads across the river. A new bridge is currently being built and is expected to be completed by the end of Q2 2019. It is little surprise that the stock has enjoyed a solid recovery since then, rising over 25% to hit 25.5p last month. Today’s share price of 24p may well offer further upside, particularly with the current bullish outlook for the gold price. Let us not forget Hummingbird was trading at over 35p per share at this time a year ago.
A look at the chart now shows that the recovery rally halted as it tested the bottom of the previous upward channel (dotted line). The stock may well consolidate with a retrace before likely having a second go at breaking back into that upward channel.
Today, the company released a ‘TR-1’ – the standard form for notification of major holdings required when a shareholder takes a position over 3pc of the total share capital – stating that Standard Life Aberdeen plc holds an aggregate shareholding across affiliated investment management entities of 5.05pc. It is naturally positive to see institutional organisations increasing their positions in a stock, and further underlines the possibility that Hummingbird has likely come out the other side of its recent operational hardship.