The Hummingbird Resources (LSE:HUM) share price remained flat today as it disclosed it had hit the top end of its revised production guidance with 91,620 ounces (oz) of gold poured in 2018. Guidance had been reduced from between 105k and 115k oz to between 87k and 92k oz after the company endured a number of setbacks at its Yanfolila gold mine in the last quarter of 2018.
In October, the company announced that stability issues at the western wall of Yanfolila’s Komana East pit had required work to be suspended in several areas. Compounding the disruption, the firm also said an unusually heavy wet season had damaged a bridge on the only access road to the mining, leading to the introduction of a weight limit that restricted much of its equipment – in particular, heavy equipment that would be aid the repair of the pit wall could not pass.
In today’s update, Hummingbird reassured investors that remedial work is progressing well at the Komana East pit wall and completion is expecting in the coming weeks. The company reports it has “resumed full capacity production in Q1 2019”. To overcome the weight limit issue regarding the public bridge, Hummingbird mobilised a military barge to transport heavy equipment and other large loads across the river. A new bridge is currently being built a Government contractor and is due to be completed at the end of Q2 2019.
The combination of these problems and the significantly reduced guidance caused the share price to capitulate, hitting a low of 15p. As the time of writing the stock has recovered to 24.6p, a decent move from the lows, which perhaps explains the lack of movement this morning. maybe much of today’s positive news on rectifying the issues has been assumed already in the price, or the stock could be taking a breather after a surging 75% increase from lows. Either way, with Hummingbird upping guidance for 2019 to between 110k and 125k oz and a rising gold price, the company could well continue its flight to recovery.
After all, the stock is still substantially lower than the 40p highs it struck in late 2017 when gold was similarly priced at around $1300 per oz. With all-in sustaining costs (AISC) forecast to be $800-$850 per oz in 2019 - which include the remaining costs of the remediation work – Hummingbird already has a significant margin to the current spot price. Should the gold price go on to conquer the resistance around $1360 that held it back for much of 2018, gold stocks are going to be very rewarding indeed.
In support of its 2019 guidance range, the firm states it is on track to produce 10k oz of gold in the month of January, a great start to the New Year.
Dan Betts, CEO of Hummingbird, commented: "The Group has been through an operationally challenging quarter, but I am pleased to report that we have made significant headway on the ground in resolving the issues we faced. January's production figures are in line with 2019's production guidance and mine plan and we are making positive progress with the construction of a second ball mill, which is due for completion in Q3 2019. This will increase throughput and, along with our exploration campaign, the long-term value of Yanfolila.
Over the course of Q1 we look forward to receiving the remaining drilling results from the 2018 exploration campaign and working with the team to understand how to release the expected potential of these results in our Life of Mine planning."
Author: Stuart Langelaan
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