The share price of Hummingbird Resources (LSE:HUM) fell 17pc to 16.75p on Tuesday after the company released production figures for the first quarter of 2019. Gold poured from the Yanfolila mine in the quarter totaled, 23,807 ounces, an increase on the previous two quarters, while ore mined was slightly under the quarterly average over the past 12 months. What appears to have upset the market is the large increase in costs. Problems in both the Komana East and West pits required remediation work and restricted access. The additional expenditure required ramped up the All-In Sustaining Costs (AISC) to $1,297 per ounce of gold extracted. This is the second successive quarter whereby the AISC has been higher than the average price received for gold sold. However, the costs were markedly lower in Q1 2019 than the previous quarter when the AISC peaked at $1,677 per ounce.
Another factor weighing on the share price is that the artisanal mining depletion in the Komana West pit is deeper and more extensive than Hummingbird previously estimated in the reserve model. However, in Tuesday’s update, the firm stated that as they progress deeper into the pits ‘the impact of this is expected to reduce significantly in the near term’.
Despite these issues, Hummingbird says it maintains its production guidance of 110,000 to 125,000 ounces of gold for 2019. The company goes on to warn that the AISC for the year may exceed the previous estimates of $800 to $850 per ounce.
On a more positive front, the construction of a second ball mill at Yanfolila is progressing to plan, with the installation team due to arrive on site during April. Once operational, the second ball mill will increase throughput capacity from 1Mtpa to 1.24Mtpa.
Dan Betts, CEO of Hummingbird, commented:
"The period under review has seen the Company resume mining to plan, following a period of remediation work on the pit wall, with a quarter on quarter increase in production of 33%. In the period, production was impacted by ore depletion from the Komana West pit from historical artisanal workings, which was greater than forecast in the reserve model. We are taking immediate steps to reverse the impact of this dilution through working closely with the mine contractor and as we progress deeper in the pits the impact of this is expected to reduce significantly in the near term as we access areas of expected higher-grade ore."
"We look forward to receiving the updated reserve/resources report in Q2, which will allow us to publish a new Life of Mine plan for Yanfolila. It is also pleasing to note the strong progress we have made on the second ball mill project and we look forward to the positive impact that will bring to our process plant capacity once completed."
Author: Stuart Langelaan
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