Hummingbird Resources

Coming full circle at Yanfolila in Mali



For Dan Betts, managing director of Hummingbird Resources, trying to describe the company’s achievements in the first quarter of 2018 without using superlatives is a difficult proposition. The West Africa-focused miner achieved first production from the Yanfolila Gold Mine in Mali back in December 2017, before earmarking the first three months of 2018 as a key ramp-up period for its flagship project. Low and behold, in a Q1 production update Hummingbird announced that the mine had reached nameplate capacity, thus completing the company’s journey from construction of the mine to full commercial production. Hummingbird’s MD talks to RGN about 2018 production targets at Yanfolila, along with further exploration plans and development opportunities.


Over the last three months, Hummingbird has rapidly progressed from a developer under pressure to deliver on time and on budget, to a cash generative gold producer.


“It’s a complete change in the time and our situation in the business as we’ve got the cash flow. Its totally transformational and a huge milestone,” remarks Betts.


While it has undoubtedly been an exciting period for the company, this transition has presented a whole new set of challenges to the team, who have had to ensure that every single small component is taken care of for the operation to run smoothly.


“To do that in three months, which is a pretty short amount of time in the mining industry, I think is amazing and hats off to the team, overall they’ve done a fantastic job.”


The next challenge for Hummingbird at Yanfolila is to maintain current production levels for the rest of the year and meet the overall production guidance for the mine that was set at between 105,000 ounces (oz) and 115,000 oz of gold.


While Betts wishes not to belittle the difficulty of achieving this target – remember sustained gold production is dependent on a number of circumstances and Hummingbird is relatively new to the game –  he feels that overcoming challenges is nothing new for the company.


“I think we have to be diligent. We have built a fantastic operating team, the new manager is extremely experienced and has brought a lot of steady leadership and organisation to the operating team, making sure our maintenance schedule is proactive and not reactive.”


Beyond the 2018 production guidance for Yanfolila, Hummingbird has also devised a detailed exploration plan for the surrounding area which should further cement the future of the operation beyond its current seven-year mine life.


The project is located within the highly prospective Yanfolila Greenstone Belt, which has been subject to lots of previous mining activity down the years, most notably by Yanfolila’s former owner Gold Fields.


Low hanging fruit


In fact, Hummingbird actually inherited a significant gold resource outside of the current mine plan, and it is for this reason that the company has identified an exploration strategy for 2018 that focuses on ‘low hanging fruit’.


However, the word exploration is somewhat misleading according to Betts, as the gold has already been discovered by Hummingbird’s predecessor, and so the MD prefers to use the term ‘Resource conversion’.


“What we need to do is go to those Resources that we inherited from Goldfields – we have over 1 million ounces of gold in Resource outside of the mine plan – and we need to put more drill holes into it, understand it better and convert those Resources into Reserves to extend the mine life and extend the profitability of the business – that is the low hanging fruit.”


This year, Hummingbird will proceed with this Resource conversion by setting up its own data base and inventory of Resources, before converting them into Reserves. “I think it’s the most intelligent way to add value to the business, but we will only do it in a disciplined way,” reveals Betts.


“We want to show the market and any potential investors that we are not just going to – having become a cash generative business – get dizzy with cash flow and go off doing different things.”


Clearly for Betts and Hummingbird, the name of the game is discipline and as such the company has pledged to spend no more than 15% of free cash flow on its exploration programme at Yanfolila each year. This should amount to around at least US$8 million, enough to add significant value to the business while conforming to the well-regimented mantra.


Nonetheless, Hummingbird is not solely predicated on Yanfolila and the associated Resource conversion in the surrounding area. It has a significant asset in Liberia called the Dugbe Gold Project and also a material stake in fellow West African explorer, Cora Gold.


In fact, Cora Gold was created when Hummingbird teamed up with a private company and agreed to hand over some of its West African exploration assets to the consequent business, in return for a 50% share in Cora, diluted to 34% post the IPO fund raise.


Arms’-length exploration


Betts has previously commented on the attractiveness of this ‘arms’-length exploration incubator’ model Hummingbird has with Cora and it seems like the relationship is about to bear fruits, judging by the stellar results of a maiden drilling campaign in Southern Mali.


Cora’s Tekeledougou drilling programme identified two gold zones: Woyoni, with 56 metres at 2.2 g/t Au, including 22 metres at 4.86 g/t Au and Kouroudian, with 17 metres at 6.8 g/t Au including 1 metre at 102 g/t Au.


“If there is any continuity there and they can build a resource base, it’s only 8 km from our plant so it could be a monumental win-win for both of us. They can effectively save themselves the huge CAPEX of building a mine and can be fast-tracked into cash flow by running through our mill.


“We know them well, we trust the management team, and we have great faith in Jon Forster and his skills as an exploration geologist. Overall, we are totally supportive; Hummingbird’s representatives sit on the board and we are totally behind them, so good luck to them.”


All things considered, Hummingbird has significant growth plans for Mali over the coming years and fortunately has been blessed with a pro-mining government that is also highly cooperative and considerate towards foreign investors.


Working with a wholeheartedly supportive regime has become even more coveted when considering the recent plight of foreign mining companies in countries such as Tanzania and the Democratic Republic of Congo, where outfits have been subject to hasty unilateral action during the last 12 months.


While Mali is in the process of resolving a $100 million VAT dispute with Randgold Resources, the government has reassured Hummingbird and its fellow miners that there will be no knee jerk reaction and it remains fully supportive of mining developments in the country, according to Betts.


Hummingbird has also been very conscious the role it plays within the communities that it operates in right from the beginning of its time in West Africa and has tried to commit in a meaningful way to improving living standards and quality of life.


“We are a guest in their communities and the only way to succeed is if everyone works together and the only way that works is if communities believe in what you are doing.


“This is reflected in the tangible actions you take in their villages and communities, and we’ve made a significant positive contribution, which we will continue to do.  Where we’ve made the greatest impact is within local healthcare, having run successful projects regarding malnutrition-awareness, health and hygiene education, and premature birthing issues, to name but a few.


“In particular, our relationship with Critical Care International, who have been managing our health care response, has been exceptional. The tangible evidence is that they’ve been saving dozens and dozens of lives so I’m really proud of that,” beams Betts.


Brave new world


To conclude, Hummingbird has taken its first steps into the challenging sphere of running a full-scale commercial gold mine, after progressing from explorer and mine developer to producer at Yanfolila in rapid time.


Therefore, in acknowledgement of the challenges faced by a typical African gold company in the first three to six months of production, Betts reveals that the main priority for Hummingbird over the next 12 months is consolidation.


“We are also looking to explore and extend the mine life, but we are really focusing on making the operation absolutely hum, if you’ll pardon the pun.


“That’s the first and foremost priority this year. If you get that right you have unbelievably strong cash flows, and we are clearly under-valued based on those cash flows, and you have optionality in terms of exploration internally and M&A.”