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One of the characteristics of the present state of the small cap market is that the divergence between companies who are well funded, and in the case of mining companies, those who are in production. Indeed, even for close followers of the space, to come up with more than a handful of companies who are actually in production is quite a challenge. This is even more so if you wish to narrow it down to those just production token amounts.

The big inflection point for Hummingbird Resources was in Q2, not only in terms of the share price which effectively tripled between March to May, but also with regard to the first pour at Kouroussa confirmed in June. The shares have since backed off, a nod to the cliché of it being better to travel than arrive on the stock market. Part of the reason for the massive spring rally was sentiment towards Hummingbird has been abnormally low, with many detractors casting doubt on the company’s assets, its management and its milestones.

Ramp Up

But now some three months after first pour, Hummingbird’s credibility is growing, and it can be regarded as being in the sweet spot phase of ramping up of production. This is likely to attract a new type of investor, not the blue sky / hole in the ground brigade. These will be longer term, sticky holders.

July Update

A taste of what is to come was delivered by Hummingbird’s late July update. This boasted in the Q2-2023 operational and trading update H1-2023 production of >51 Koz of gold at Yanfolila in Mali, and Kouroussa producing first gold, with the Company looking to reach steady state production at that asset in Q4-2023. The change in Group adjusted EBITDA of c.US$15.5 million for Q2-2023 and c.US$33.1 million for H1-2023 was material.

Multi-asset / Multi-Jurisdiction

This puts the company in the box seat, being able to describe itself as a multi-asset, multi-jurisdiction production gold company, de-risking itself in the process. Of course, as well as the innate benefit of being a producer, there will be the progressive benefit of being able to pay down debt,and absorb the cost of expansion via production from cash flows from two mines.

The Company has stated they expect to reach steady state production at Kouroussa in Q4-2023, with an expected full year of production for FY-2024 to take to the Group to being a +200koz per annum gold producer. Further, this is backed by the contribution to be made from the Yanfolila mine, and 2023 guidance here of 80,000 to 90,000 oz of gold, which could prove conservative given 51 Koz produced H1-2023, compared to 80,635 in 2022. In addition, the Company recently released their 2023 Company Reserves and Resources statements, showcasing 4.03 Moz in Reserves and 9.96 Moz in Resources, which highlights for the size of this Company, and material amount of gold to be developed for future mining.

A Conservative 20p Year End Price Target

While typical broker price targets are typically derived from fundamentals and read across peer group comparisons, as mentioned above, there are only a few companies in the small cap space to compare Hummingbird with, especially in the sub £100m market cap area. With the shares currently around 12p, a conservative target, given the summer’s news flow would be to retest 20p 2023 highs by the end of the year.