Hummingbird may start to sing after it snaps up Mali mine
THE Betts family has been in the gold industry for 250 years. Based in Birmingham, they smelt gold, refine it and produce bars, coins, jewellery, and even alloys for dental crowns. Just over ten years ago, Dan Betts, then aged 31, decided to go back to the source, when he founded Hummingbird
Resources, a gold explorer with a huge mine in Liberia.
Hummingbird listed on AIM in 2010 at 167p and Midas recommended the stock in March 2011, by which time the shares had fallen to 147½p. Today, the price is just 22½p.
The company has been hit by factors both general and specific. Between 2011 and January this year, the gold price plunged from more than $1,800 (£1,365) to just over $1,000 an ounce.
That provoked a widespread backlash against small miners, particularly those that were still at the exploration stage.
Bank or equity funding was almost impossible to obtain and many share prices – including Hummingbird’s – tanked.
The firm also suffered because its site in Liberia, while vast, is in the middle of the jungle and the cost of mining its gold is estimated at $900 to $950 an ounce. As the price of gold tumbled, Betts’ Liberian assets became increasingly unappealing.
Nonetheless, the group has survived and, share price notwithstanding, it is in better shape than ever. On flotation, it had the Liberia site, which was expected to produce around 500,000 ounces of gold at a rate of 1.2 grams per ton of ore.
Since then, it has hugely expanded its Liberian operations and bought a site in Mali from leading South African miner Gold Fields.
Today, Hummingbird’s estimated resources have soared to more than six million ounces at a rate of 3.5 grams per ton of ore. The Liberian site is still at the exploration stage but the Mali project, home to 2.2million ounces of gold, is expected to start production late next year.
Hummingbird managed to raise more than £50million this summer by issuing shares at 22p each. The fundraising was the largest from an AI-Mlisted gold miner in four years and included support from top institutional gold investors as well as Gold Fields.
The money will be used to build the Mali mine, expected to produce 132,000 ounces of gold in 2018. Some investors were unsettled by Betts’ decision to buy the Mali site, suggesting it implied he had lost interest in Liberia.
But the deal has proved fortuitous, taking Hummingbird from an exploration company to one on the cusp of commercial production. The cost of production is relatively low in Mali, too, at about $675 an ounce.
As sales get under way, Hummingbird will be better able to fund the Liberian project and develop the Mali site still further.
The group should also benefit from growing enthusiasm for gold. The price is now more than $1,300 an ounce and investors are increasingly optimistic about its prospects in a low interest rate, volatile world.
Midas verdict: Hummingbird has had a rough ride and investors have suffered. But Betts has proved himself a resourceful leader. Gold stocks are notoriously unpredictable, but this one seems seriously undervalued. Longsuffering shareholders should hang on. New investors could also snap up a few.