Hummingbird Resources

Full traceable gold supply from drill bit to jeweler

 


 

In its first year of full-scale production at the Yanfolila gold mine in Mali, Hummingbird Resources came through a challenging period to perform well within its 2019 gold output guidance range. The addition of a second ball mill allowed the AIM-listed miner to circumnavigate issues such as an unstable pit wall and damaged local infrastructure resulting from heavy rains. After successfully executing a remediation plan for the operation in 2019, it was no surprise that RGN found Hummingbird’s managing director Dan Betts in high spirits during an interview in Cape Town at the start of February. Joining in the conversation was Dan’s brother Charles, managing director of family refining and manufacturing business The Betts Group, who recently launched Single Mine Origin (SMO) – an initiative that provides a fully traceable chain of custody for gold production, starting with the gold produced at Yanfolila.

 

Jacob Ambrose Willson: Dan, how pleasing was Hummingbird’s operational performance in 2019, especially given the challenges faced at the beginning of the year?

 

Dan Betts: We’ve started this year in a lot better place than a year ago. At the beginning of 2019, our guidance was 110-125,000 ounces, and we produced a total of 115,649 ounces over the course of the year. Considering the operational challenges we faced at the start of the year, hitting the middle of our guidance was a remarkable achievement and our strong progress was shown by Q4, which was the fourth consecutive quarter of rising producing and reduced costs.

 

JAW: How significant was the addition of a second ball mill at Yanfolila in terms of improving throughput and lowering costs?

 

DB: When we commissioned the second ball mill, it was a calculated risk as we had invested a significant sum of money and we were also experiencing operational issues at the time, so to maintain that plan was a big commitment.

 

The new ball mill gives us that extra throughput, around 13% more, and provides us with more risk mitigation in terms of the grade profile and the different types of ores, blends and flexibility on weather. Without the new ball mill, it would’ve made a difficult period even more challenging.

 

As with the plant, it was delivered on time and on budget, and it ramped up perfectly. The ball mill is performing to full capacity and we are doing 200 tonnes an hour, day in day out. Technically it’s been a great success which is reflected in our strong operational progress of late.

 

JAW: Efficiency seems to be a hallmark of Hummingbird. How does the company implement such efficient procedures where items are consistently delivered on time and on budget?

 

DB: It sounds like a cliché but it’s all about people. It’s taken us 14 years to build a team, and we’ve been through a lot of people in this time and kept the good ones. We work with a lot of contractors and consultants as well, whether its Capital Drilling, Redis, or Imagri in-country in Mali. You have to have internal discipline but you’ve also got to have good external people.

 

Our senior VP for project delivery, Shaun Bunn, has led both these areas and been invaluable to us in that regard. He came on board when we were finalising the feasibility study for Yanfolila and then led that project and the ball mill project.

 

We have a general manager on-site and then we have a development team which is led by Shaun, who look at ways to improve Yanfolila and future developments. They also look at other potential projects, undertake due diligence and provide the checks and balances so that the plant is optimised and everybody knows what’s going on.

 

JAW: The introduction of SMO was another key development last year. Charlie, how long has this been in the pipeline and what inspired you to set up this kind of programme for ethical gold certification?

 

Charlie Betts: It’s been in the pipeline for several years, but it’s only been since Hummingbird was in production that we could move SMO forward. The inspiration is simply being exposed to the jewellery trade as a family business, we see massively increasing demand for provenance and it’s just not available.

 

There are a couple of options with Fairmined and Fairtrade Gold but there’s a huge premium associated with those. There’s also an element of mining corporates all being tarnished with the same brush in the mind of jewelers. I’ve seen how beneficial a responsibly run mine can be to the local area where it’s operating.

 

The idea is to try and create something which has mass market capability. You can make that provenance claim because we are tracking gold all the way from mine to the finished project which gets sent to the jewelers. I think it’s an exciting opportunity.

 

DB: I also think our ability to control every stage of the supply chain from drill bit to high end jeweler is unique. Charlie is looking at it from the end user market, but from the other end of the market, the mining industry is so defensive and beaten up by its critics.

 

The mining industry should be on the front foot, saying we are industry leaders in all these environmental, social, community and health initiatives. We go to places where there is no progressive sustainable development and we provide it. What other industry does that?

 

If you were to go and build a billion dollar infrastructure development in Cape Town, are you also going to build a school and create an environmental offset initiative? No other industry does it. We pay all our taxes and we reinvest with massive commitments in the local communities.

 

If we can use something like SMO to highlight and showcase all the good that responsibly run mining companies do, then the end user can be proud of it and it becomes a virtuous circle. This process educates the industry and the end users and you are both putting pressure on each other to do the right thing. I’m really excited about it. It adds a different paradigm to just trying to build a mine, it’s about doing it the right way. This idea could have some really strong momentum behind it in time.

 

JAW: How big are your ambitions for SMO? It’s currently only served by the Yanfolila mine, but do you intend to broaden it to other gold mines in the region?

 

CB: The opportunity for SMO is massive. In terms of the supply side, our ambitions are very big and not limited to West Africa. It’s still a work in progress but the provenance claim is watertight, it’s quite easy to lock that down in terms of segregation because of the access we have.

 

I think the responsibility claim can now be developed further following the publication of the Responsible Gold Mining Principles (RGMPs). If we bring in another project, which is the intention, utilising the RGMPs will clarify the assessment of such a project as a responsible source.

 

DB: The vision, for want of a grander word, is to create an accreditation standard that every responsible miner in the world wants to be a part of, and every responsible jeweler in the world wants to be a part of. It’s limitless in its potential.

 

Only a tiny percentage of gold utilised in the jewellery or investment sectors has a traceable source of origin and having the reassurance of detailed provenance not only attracts a substantial price premium but also gives consumers the peace of mind that it has been responsibly sourced and is doing good. We feel this is a trend that is only going in one direction.

 

JAW: Having attended the World Gold Council’s session on its RGMPs here in Cape Town, will Hummingbird be complying with these principles?

 

DB: Absolutely. I think the development of the SMO piece is very strategic and central to Hummingbird. I think that ESG investing across the world, from the retail buyer in jewellery to the investor in BlackRock, is a tidal wave that is not going away. Whilst this may be a box ticking exercise for some, we have an opportunity to make it real and to be the next generation mining company that is at the forefront of this. We want to put all our effort into it.

 

CB: From the SMO side, there is a proliferation of different standards that companies can hold themselves up to. The RGMPs look effective in bringing all the existing standards together and the self-certification for SMO was based on their principles.

 

At the session we begun to learn about the assurance process and the implementation of that, and that is something that Hummingbird will have to look at. We want to avoid adding massive cost into the supply chain, because we want to make it available to the mass market without having to charge a large premium.

 

JAW: Staying with the ESG theme, what new programmes and initiatives have commenced during the last year in the communities surrounding the Yanfolila mine?

 

DB: In the last 12 months, despite being focused on operational issues, the two main priorities in this area have been community health, where there has been a lot of work on child malnutrition and malaria education, and market gardens.

 

We’ve built six market gardens where we have provided water, seedstock and land for artisanal miners that have been displaced. We’ve educated them on how to farm and then we buy the produce. The next step will be to look at putting in solar powered cold storage units, so they can store the vegetables and sell them on the open market. We also built a chicken farm and buy the meat from them.

 

The idea is that after the mine is gone, we will have built a lasting legacy and they will have a sustainable industry. I visited the market gardens recently and saw first-hand the hundreds of mostly women who have taken up gardening roles. Some of the women told me the market gardening is fantastic and they never want to return to artisanal mining. It’s really rewarding to see an initiative like this work. The pride they have in what they are doing is amazing. We’ve got market gardens, and we have also built a hospital and a school.

 

JAW: Looking forward, what is Hummingbird’s strategy for extending the life of the Yanfolila mine?

 

DB: We’ve just announced that we are recommencing exploration activities at Yanfolila, which is a three-staged strategy. We are looking at underground studies at Komana East, we’re looking at converting resources to reserves, and we’re looking at greenfield exploration, which we haven’t done since we bought the project. It’s exciting to be able to recommit funds to encourage organic growth.

 

We have significant Indicated Resources which we are looking to convert to ore Reserves to further augment our 5-year rolling mine plan. There are also potential M&A opportunities in the region and lots of companies that we could look to JV with and add mine life. We’ve got five years of reserves as the base case and we are looking to then add to and improve it.

 

JAW: What is the current development plan for the company’s Dugbe Gold Project in Liberia?

 

DB: We’ve signed a non-binding term sheet with ARX Resources Limited, where if they deliver $30 million to invest in the project, we will evaluate an earn-in agreement with them. They can earn up to 50% of the project if they commit to exploration and complete a definitive feasibility study (DFS).

 

Whilst it’s non-binding, the idea is that Hummingbird will be undiluted until the delivery of a DFS. We have a massive project here and we need a partner to develop it. We want to breathe life back into this project which the market currently places no value on, particularly following our focus on building and ramping up Yanfolila in Mali.

 

Just to put some basic numbers around the Dugbe project, at a $1,600 gold price, if you took $200 an ounce out of the ASIC (which we believe is possible with newly available lower cost power options) and if you increase the resource by a couple million ounces, you’ve got an NPV of almost $1 billion, and that’s worth zero in Hummingbird’s share price.

 

We haven’t sold this project. We are just trying to unlock the significant value we see there and want to do that with a partner who also sees the considerable exploration potential to grow the resource and take it to DFS. On completion we can then decide whether to sell or build it ourselves, depending on what is the best way to take it forward.

 

JAW: Outline what the main company targets are in 2020 from a corporate and operational perspective?

 

DB: We aim to continue improving operational performance, to build the Hummingbird team and make sure everything is working seamlessly. We want to increase the mine life at Yanfolila, organically or inorganically.

 

We also want to look at the wider picture and how to grow Hummingbird through potential M&A transactions. At a minimum we aim to be debt free by 2021, at which point we will evaluate how we return value to shareholders.

 

Leveraging the decade plus of experience we have of building a team with the skills to explore, build and operate a mine affords us a unique opportunity to create a bigger future for Hummingbird and build a multi-asset producing gold company.