Since its shares were floated on the Alternative Investment Market in December 2010, Liberia-focused mining explorer Hummingbird Resources has more than doubled the size of its estimated gold resources to a useful 1.765m ounces. Now the rumour is that Hummingbird will announce a significant addition to resources before March.
- Big upgrade in resources imminent
- Large, unexplored licences
- Plenty of cash for development
- Gold's fundamentals remain strong
- Residual effects of civil war
- Project located in thick jungle
Liberia's civil war ended in 2003, but left the impoverished country's mineral resources undermapped and unexploited. By taking first-mover advantage, Hummingbird secured substantial exploration licences covering 7,000 square kilometres. The current area of focus is less than 20 miles from a deepwater port. That's round the corner by the standards of mining in Africa, although there is thick jungle in between.
Nevertheless, the company has been actively drilling to test its belief that the ore-rich Birimian geology, which elsewhere in West Africa hosts numerous major gold deposits, extends into eastern Liberia. The presence of many small-scale local miners provides further evidence that there is plenty of gold.
| HUMMINGBIRD RESOURCES (HUM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 151p | MARKET VALUE: | £81m | |
| TOUCH: | 148-151p | 12-MONTH HIGH: | 173p | LOW: 100p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 61p | NET CASH: | $32m | |
| Year to 31 May | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | nil | -1.29 | -4.60 | nil |
| 2011 | nil | -2.61 | -5.79 | nil |
| % change | – | – | – | – |
Normal market size: 3,000 Market makers: 7 £1=$1.544 | ||||
Drilling results to date have been encouraging. Based on analysis of the first 15,000 metres of a total 20,000 metres drilled at the core Dugbe F licence during 2011, Hummingbird more than doubled the gold resources it claimed at flotation to 1.765m ounces. The resource was determined using internationally recognised standards, which gives the estimate credibility and confirms the project as one of the fastest growing in West Africa. Equally encouraging is the shallow, gently dipping ore zone, which is easier to drill than one that dips steeply, and makes for easier extraction.
Shortly after the Dugbe F update, Hummingbird announced that drilling at the Tuzon prospect had returned the company's best-ever drill results in terms of the thickness and concentration of mineralisation intersected. This is particularly significant because Tuzon lies a mile or so east of Dugbe F, which means ore from the two projects could be processed at a single plant, greatly improving profitability.
A first estimate of Tuzon's resources is expected by the end of March and could confirm a very attractive project. Cash of $32m (£21m) is enough to keep the company drilling to the end of the year, by which time it could have demonstrated a substantial quantity of gold.
Hummingbird also has a 50 per cent interest in the Mount Ginka iron ore joint venture, also in Liberia. The $2m invested by its partner, Petmin, is being used to fund a programme of trenching, sampling and early drilling.
