2019 Audited Final Results and Exploration Update

RNS Number : 8019O

Hummingbird Resources PLC

03 June 2020

 

Hummingbird Resources plc / Ticker: HUM / Index: AIM / Sector: Mining

Hummingbird Resources plc

("Hummingbird" or the "Company")

2019 Audited Final Results and Exploration Update

Hummingbird Resources plc (AIM:HUM), is pleased to announce its final audited results for the period ended 31 December 2019 (the "Period"). Additionally, the Company gives an update on its current exploration programme at Yanfolila.

Financial Highlights

-  Total Group Sales of US$156.9m (2018 US$ 116.5m)

-  Pre-Tax Profit of US$9.4m (2018 Pre-Tax Loss of US$11.7m)

-  EBITDA of US$54.5m (2018 US$12.7m)

-  Adjusted EBITDA¹ of US$46.3m (2018 US$14.7m)

-  Net Debt US$31m² (2018 US$39.4m)

Operational Highlights

-  Production increase, and associated cost decrease throughout the year

-  115,649 ozs of gold poured in 2019 (91,620 ozs in 2018)

-  US$986/oz AISC in 2019 (US$1,087/oz AISC in 2018)

-  Average grade of 2.88 g/t in 2019 (2.83 g/t in 2018)

-  112,686 ozs of gold sold in 2019 at an average price of US$1,377/oz

-  Published five-year rolling mine plan with 574,000 ozs forecast to be produced with an average production of over 120,000 ozs per annum over the next three years

Post-Period Drilling Highlights

To date, during 2020, we have had some significant near mine exploration success, with drill intersections including:

Komana East Underground Deposit

-  4.3m @ 6.51 g/t from 300.7m depth (KEUGDD001)

-  2.55m @ 6.16 g/t from 254.9m depth (KEUGDD003)

-  3.13m @ 4.21 g/t from 285m depth (KEUGDD003)

-  4.82m @ 10.56 g/t from 289m depth (KEUGDD004)

Bolobi Coura Deposit

-  4m @ 5.81 g/t from 16m depth (KBCRC0003)

-  4m @ 16.90 g/t from 57m depth (KBCRC0003)

Please see the following link for a map indicating the location of the Company's greenfield exploration targets for 2020.

http://www.rns-pdf.londonstockexchange.com/rns/8019O_1-2020-6-3.pdf

Dan Betts, CEO of Hummingbird, commented:

" 2019 is the first profitable year for Hummingbird Resources which is a milestone in the development of any Company. When you start in grass root explorations it's a long time coming in mining so this is a significant moment in our journey.

"Strong cash flows, rapid de-leveraging and maintaining our trajectory to be net debt free in the 2020 calendar year puts us in an excellent position to support our development plans for the future.

"Of particular note is the outstanding drill results coming in from our 2020 exploration drill programme. These holes are intended to prove up underground resources at Komana East and also target new greenfield anomalies. No new targets have been drilled at Yanfolila since 2012 and so it is particularly gratifying to see the intersections at the Bolobi Coura target, prioritised due to their proximity to the plant, looking so strong. Whilst one sparrow doesn't make a summer this is a great start to the 2020 exploration programme and we look forward to providing further updates as they arrive."

2020 Production, AISC and deleveraging outlook

Following the production of 30,282 ozs in Q1 we are pleased to maintain full year production guidance of 110,000-125,000 ozs and confirm that we remain on track to move from net debt to net cash position prior to the end of 2020.

We continue to experience cost pressures related to COVID-19; particularly employment costs and logistics costs coupled with, potential, extra material movement later in the year as we look to take advantage of higher gold prices and re-sequence our mine plan to ensure the long term profitability of the mine.  These factors may contribute to as much as an additional US$100 per ounce in our 2020 ASIC and we will provide further guidance on this as matters clarify.

2020 Exploration Plan

The Company has recommenced field exploration activities, initiating drilling operations on the 5^th March.  As previously announced for 2020, the Company has adopted a three-fold exploration strategy targeting both open pit and underground Resources and Reserves, in addition to testing new near mine targets to feed the exploration pipeline. 

The bulk of the drilling will be to target resources at the existing deposits containing Indicated and Inferred Resources not yet in the mine plan i.e. Komana East underground, Sanioumale East, Kabaya South, etc.  These deposits have been shallowly, drilled tested in the past which demonstrated further upside potential, adding further economic resources to the current life of mine plan.  These new resources create further optionality, robustness and mine life to the existing LOM schedule.

Exploring and testing the newly identified greenfield targets near the mine present another opportunity to grow the resource base.  The initial targets to be drill tested have been selected on the basis of five key criteria -  the strength of the gold in the soil anomaly, underlying controlling structure, proximity to the process plant, location within the mining license, and future resource growth potential. 

Diamond drilling operations have commenced at Komana East targeting the underground resource development.  This drilling will build up the ounce profile to support and expand the planned Komana East trial underground mine.  Drilling to date has intersected and confirmed the presence and continuity of mineralisation that extends beyond the previous limit of the resource model and/or improves the resource confidence.  Samples from the initial holes drilled have been sent off for assaying with results received for the first four holes of the 14- hole programme. See drill results table below.

Latest drill results Komana East Underground -2m Trigger value 0.3g/t

Hole ID	Depth From	Depth To	Element	Interval Width (m)	Grade (g/t)	Intercept Description	Gram*Metre	Cut off grade
KEUGDD001	183	188	Au_ppm	5	2.53	5m @ 2.53 g/t	12.7	0.3
KEUGDD001	203	205	Au_ppm	2	0.7	2m @ 0.70 g/t	1.4	0.3
KEUGDD001	256.7	259.5	Au_ppm	2.8	0.44	2.8m @ 0.44 g/t	1.2	0.3
KEUGDD001	262.9	265.3	Au_ppm	2.4	2.13	2.4m @ 2.13 g/t	5.1	0.3
KEUGDD001	300.7	305	Au_ppm	4.3	6.51	4.3m @ 6.51 g/t	28.0	0.3
KEUGDD002	214	220	Au_ppm	6	2.36	6m @ 2.36 g/t	14.2	0.3
KEUGDD003	254.9	257.45	Au_ppm	2.55	6.16	2.55m @ 6.16 g/t	15.7	0.3
KEUGDD003	285	288.13	Au_ppm	3.13	4.21	3.13m @ 4.21 g/t	13.2	0.3
KEUGDD004	289	293.82	Au_ppm	4.82	10.56	4.82m @ 10.56 g/t	50.9	0.3

Reverse Circulation resource growth and definition drilling will commence in early June at Sanioumale West and East.  Both deposits contain only oxide resources due to previous Mineral Resource Estimate modelling parameters but remain open along strike and at depth, into the fresh rock.  Additionally intersections such as 10.5m at 5.4 g/t gold from hole SNDD0029 at Sanioumale East, which still require follow up work, further demonstrate the future resource growth potential at the deposits.

Since acquiring Yanfolila from Gold Fields Ltd in mid 2014, no new greenfield targets have been drill tested which could add new mineral resources to the existing resource base.  Reconnaissance drilling on high priority targets both within the mining license and the adjacent Diaban exploration license are being targeted.  The reconnaissance drill programme at the first of these greenfield targets, named BBC (800m to the NorthWest of Komana East pit) has just been completed with the drill results received for the first six holes. See drill results table below.

Latest drill results BBC - 2m cut-off grade 0.3g/t

Hole ID	Depth From	Depth To	Element	Interval Width (m)	Grade (g/t)	Intercept Description	Gram*Metre	Cut off grade
KBCRC0001	31	33	Au_ppm	2	1.59	2m @ 1.59 g/t	3.2	0.3
KBCRC0002	28	31	Au_ppm	3	0.46	3m @ 0.46 g/t	1.4	0.3
KBCRC0002	43	48	Au_ppm	5	0.39	5m @ 0.39 g/t	2.0	0.3
KBCRC0003	16	20	Au_ppm	4	5.81	4m @ 5.81 g/t	23.2	0.3
KBCRC0003	22	26	Au_ppm	4	0.4	4m @ 0.40 g/t	1.6	0.3
KBCRC0003	57	61	Au_ppm	4	16.9	4m @ 16.90 g/t	67.6	0.3
KBCRC0003	63	65	Au_ppm	2	0.97	2m @ 0.97 g/t	1.9	0.3
KBCRC0003	69	72	Au_ppm	3	0.62	3m @ 0.62 g/t	1.9	0.3
KBCRC0004	9	11	Au_ppm	2	0.38	2m @ 0.38 g/t	0.8	0.3

The results are very encouraging at this early stage and drilling has moved onto the second greenfield target, Haul Road Hill, which is located along the main haul road between Komana East and the process plant.

Further exploration target generation work is being carried out simultaneously to the above drill programmes as the Company looks to pursue new opportunities to add to the pipeline of resource growth targets.

¹ _{Adjusted EBITDA Earnings before interest, tax, depreciation and amortisation, effect of impairment charges, foreign currency translation gains/losses and other non-recurring expense adjustments but including IFRS 16 lease payments.}

² _{2019 Net debt excludes US$12.6m IFRS 16 lease liabilities. See note 5 below for reconciliation.}

**ENDS**

For further information, included an updated Corporate presentation, please visit www.hummingbirdresources.co.uk or contact:

Daniel Betts, CEO Thomas Hill, FD Douglas Ross, IR	Hummingbird Resources plc	Tel: [phone]
James Spinney Ritchie Balmer James Bellman	Strand Hanson Limited Nominated Adviser	Tel: [phone]
James Asensio Ed Montgomery	Canaccord Genuity Limited Broker	Tel: [phone]
Tim Blythe Megan Ray Rachael Brooks	Blytheweigh Financial PR/IR	Tel:  [phone]

Notes to Editors:

Hummingbird Resources (AIM: HUM) is a leading gold production, development and exploration company.  The Company has two core gold projects, the Yanfolila Gold Mine in Mali and the Dugbe Gold Project in Liberia.  Yanfolila produced its first gold pour on time and budget in December 2017.  At 31 October 2019 Yanfolila has a 7.9Mt of Reserve ore @ 2.66 g/t for 676,000ozs gold.  At 31 March 2019 Yanfolila had a total Resource base (inclusive of Reserves) of 28Mt of Ore @ 2.23 g/t for 2,005,300ozs gold.  The Dugbe Gold Project has Resources currently totalling 4.2Moz of gold and a completed NI 43-101 compliant PEA on the project showing a 43% IRR and US$337m NPV at a US$1,500 gold price.

In addition to Hummingbird's production and development assets, the Company also has an exploration footprint of ~4,000km2 and a significant shareholder in AIM listed Cora Gold, which is advancing a portfolio of prospects in Mali and Senegal

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

Chairman's Statement

Hummingbird's year was characterised by the significant improvement in the Company's operational performance after overcoming significant challenges at the start of 2019. We successfully posted four consecutive quarters of increased production and decreased costs at our Yanfolila gold mine in Mali and signed our Dugbe Mineral Development Agreement ("MDA") with the Government of Liberia. This has enabled the Company to start 2020 in a strong operational and financial position and has given Hummingbird a bright future.  The dedication and perseverance of our team has allowed the Company to look forward to further growth as we aim to progress both Yanfolila and Dugbe in the coming year.

In line with many businesses operating internationally, the global COVID-19 pandemic has created material uncertainty for the Company. We have taken decisive action in order to protect our operating environment, especially the safety and wellbeing of our staff, contractors, service providers and suppliers as an absolute priority. This pandemic shows no respect for the perimeter fence and we showed a duty of care for our surrounding communities including through strengthening healthcare provision, washing materials, the provision of an isolation facility and socio-economic support. We continue to successfully manage the situation with 2020 production on track to meet full year guidance but acknowledge the dynamic risks COVID-19 presents with many aspects beyond the control of the Company. 

After the severe operational challenges towards the latter end of 2018 we started the year with the drive and ambition to return to full production capacity and put Hummingbird back on the same course as when it started its life as a producing gold company. We can safely say that we achieved this with production up 42% and cash costs reduced by 33% from the first to fourth quarter of the year. Further to this, the Group successfully completed construction of its second ball mill at Yanfolila, which increased throughput to 1.4Mtpa. Through exploration efforts and technical studies we have also increased reserves at Yanfolila with a five-year rolling mine plan showing that we have many years of cash generation from the mine to come.

As has always been the case, Environmental, Social and Governance ("ESG") was at the heart of our business in 2019, and we maintained an impressive safety record. Our engagement with local stakeholders happened at all levels, from national government through to local communities and meant that significantly fewer grievances were recorded compared to the previous period. Some extremely successful initiatives that Hummingbird has been mindful in championing are our livelihood restoration projects. 2019 saw continued investment in four new market gardens for 350 women,  renovation and upgrade work to four market gardens previously supported, construction of a building for a local soap factory, donation of rice mills to two communities and the construction and opening of a new micro-finance office. It was also very pleasing to see that the chicken projects previously invested in produced US$30,000 of income for the community in the period, showing that these initiatives give lasting and crucial livelihoods for communities.

Hummingbird has always held the community work and investment it does as a key focus and 2019 saw us provide three new water supply systems including a borehole, pump, solar system, water storage and delivery system throughout the villages of Bougoudale, Kona and Kabaya. In terms of continued support  for education and health in the communities where we operate, I was pleased to see us provide traineeship programmes in vocational skills and sponsor teachers' salaries as well as making significant donations of medical equipment and training to healthcare workers.

Closely linked to our community work is the environmental management plan that we applied across the Company's operations including air quality sampling, water quality sampling, monthly noise monitoring, continuous particulate monitoring and management of all waste. We are always striving for ways in which to minimise our impacts on the environment in which we operate and are committed to being transparent in terms of our environmental impacts, including quantifying our carbon emissions.

I would like to thank all our shareholders who have been there through our evolution from gold explorer to gold producer and remained committed through the challenging times. I hope that you are able to recognise the strides the Company has made in the period and the bright future Hummingbird has.

Russell King

Non- Executive Chairman

CEO's Statement

2019 was about building on the strong platform we worked hard to establish and achieving production growth at Yanfolila. We have focussed on driving forward our clear path to sustainable growth and that we have made strong headway in this respect. We have continued to build on our financial strength as we move forward as a consistent gold producer, exemplified by Yanfolila reporting four consecutive quarters of increased production and reduced costs per ounce and ending the year within our forecasted production guidance. As pleased as we are with last year's performance, we continue to look forward and are focussed on maintaining this momentum and on operating responsibly for the benefit of all our stakeholders.

Our aim at the start of the year was to get production and plant throughput back on track following the well-flagged operational challenges in 2018. Our progress as a producing gold company was soon demonstrated with the completion of Yanfolila's second ball mill, which was achieved ahead of time and within our budget. This was a testament to the hard work and operational excellence of our staff whose work has helped to increase plant throughput capacity by around 24% and brought valuable economies of scale to our business.

Ultimately, this contributed to us achieving our production guidance for the year delivering over 115,000 ounces of gold as well as reduced costs per ounce.

Our evolution as an established mining company has also been demonstrated in our improving financial strength. During the year we continued to deleverage aggressively, strengthening our balance sheet. We ended the year strongly and we are on track to be debt free in the first half of 2021.

We also continued to build on our Reserves at Yanfolila during the year and were pleased to add a further 165,000 ounces to pre-production Reserves, an increase of 32% to the previous Reserve base. This was particularly pleasing given it included maiden Reserves at Gonka and Sanioumale West which will form part of our plan to ensure the mine's long-term future. We have also, post period end, re-commenced exploration drilling in 2020 with the aim to further extend resources and confidence in the underground potential at Komana East. 

In Liberia, we were delighted to sign a 25-year MDA with the Government of Liberia which covers Hummingbird's 4.2Moz Dugbe Gold Project. This agreement provides the necessary long-term stability and framework for work to progress at Dugbe including further exploration, feasibility studies, mine development, production and ultimately mine closure. The strong gold price during the year only made this large project more attractive, adding opportunity and optionality to Hummingbird's portfolio; and it will be a core strategic goal of the company in 2020 to find ways to unlock the huge potential value of this project.

ESG is central to all levels of decision making at Hummingbird. We understand our responsibility as a gold company and continue to seize the opportunity to make a difference. Our ESG Committee helped drive tangible progress across all areas in 2019, for example through a focus on our risk management framework, reducing the usage of fresh water at our mine site, progressing a project which will provide alternative ASM opportunities and working with local communities to gain feedback and ensure we are operating to the benefit of everyone. Our aim to build a lasting positive legacy in local communities was progressed further with the construction of 22 latrines, providing training for medical workers, equipping medical centres and sponsoring teachers' salaries being just a few of our initiatives during the year.  We are looking to continue our work as a responsible company by working towards conformance with the World Gold Council Responsible Mining Principles by 2022.

Providing a safe working environment for all our employees remains at the heart of our operations. We are proud of our improving safety record in 2019 with a 20% reduction in Total Recordable Injury Frequency Rate ("TRIFR") but we will not stop until this number is zero. In this vein, we continued to improve safety across all aspects of our operations, delivering over 11,000 hours of safety training in the year.

As always, I would like to thank our incredible employees for their tireless work during the year. We could not operate without you and our strong company ethos of transparency, responsibility, excellence, respect and being one team will ensure we continue to work well together for years to come.

I am extremely pleased with our performance and proud of our people, but we are not done. Our vision of building a sustainable mining company that benefits all of our stakeholders will continue into the years ahead. This has already started with the release of our five-year rolling mine plan which is focused on converting further resources to reserves and extending the Life of Mine through exploration and underground development. Cash generation and shareholder value will continue to be key areas of focus going forward and we are forecast to produce 110 - 125,000 ounces of gold in 2020. I am excited by our progress already this year and look forward to delivering for our various stakeholders over the years to come.

As a postscript, as this goes to print, we are all working from relative isolation in the strange new world caused by the novel Coronavirus. It strikes me that the paragraph above has never been more true - those staff who have been retained at site keeping the operation going, unable to leave and see their families have worked tirelessly to keep the mine going. The situation is unprecedented and presents a dynamic set of challenges from supply chain to security and from morale and fatigue to safety and contractor management. We are mindful too of the fragile health systems in West Africa and have been working with authorities and local community representatives to strengthen the community's resilience should the pandemic arrive in our local villages. We are now several weeks into this situation, and I am confident we will be able to maintain operations through this period thanks to the commitment and dedication of the team. Thank you.

Dan Betts

Chief Executive Office

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2019

 

		2019 $'000	2018 $'000
Continuing operations
Revenue		156,874	116,539
Production costs		(86,298)	(88,157)
Amortisation and depreciation		(38,783)	(19,881)
Royalties and taxes		(5,726)	(3,942)
Cost of sales		(130,807)	(111,980)
Gross profit		26,067	4,559
Share based payments		(753)	338
Other administrative expenses		(12,056)	(9,834)
Operating profit/(loss)		13,258	(4,937)
Finance income		2,241	4,797
Finance expense		(8,278)	(9,119)
Share of associate loss		(62)	(235)
Share of joint venture loss		(4)	(2)
Reversal of impairment/ (impairment of associate)		-	(2,044)
Reversals in impairment of financial assets		23	88
Gains/(losses)on financial assets measured at fair value		2,218	(198)
Profit/(loss) before tax		9,396	(11,650)
Tax		(1,551)	(1,163)
Profit/(loss) for the year		7,845	(12,813)

Attributable to:
Equity holders of the parent		5,422	(10,250)
Non-controlling interests		2,423	(2,563)
Profit/(loss) for the year		7,845	(12,813)

Earnings per share (attributable to equity holders of the parent)
Basic ($ cents)		1.53	(2.93)
Diluted ($ cents)		1.50	(2.93)

Consolidated Statement of Financial Position

As at 31 December 2019

 

		2019 $'000	2018  $'000
Assets
Non-current assets
Intangible exploration and evaluation assets		73,859	69,171
Intangible assets software		284	118
Property, plant and equipment		129,732	140,723
Right of use assets		12,940	-
Investments in associates and joint ventures		99	1,528
Financial assets at fair value through profit or loss		6,103	-
		223,017	211,540
Current assets
Inventory		18,082	13,807
Trade and other receivables		11,557	13,316
Unrestricted cash and cash equivalents		4,398	17,320
Restricted cash and cash equivalents		4,131	4,210
		38,168	48,653
Total assets		261,185	260,193
Liabilities
Non-current liabilities
Borrowings		10,148	40,819
Lease liabilities		3,661	-
Provisions		14,879	13,541
		28,688	54,360
Current liabilities
Trade and other payables		39,809	39,787
Lease liabilities		8,933	-
Other financial liabilities		15,000	15,319
Borrowings		29,852	20,112
		93,594	75,218
Total liabilities		122,282	129,578
Net assets		138,903	130,615
Equity
Share capital		5,301	5,271
Retained earnings		129,952	124,117
Equity attributable to equity holders of the parent		135,253	129,388
Non-controlling interest		3,650	1,227
Total equity		138,903	130,615

Consolidated Statement of Cash Flows

For the year ended 31 December 2019

 

		2019 $'000	2018 $'000
Net cash inflow from operating activities		44,724	18,134
Investing activities
Purchases of intangible exploration and evaluation assets		(3,836)	(5,922)
Purchases of property, plant and equipment		(15,471)	(20,070)
Purchase of shares in other companies		(402)	(105)
Loans provided net of issue costs		-	(2,000)
Interest received		65	181
Net cash used in investing activities		(19,644)	(27,916)
Financing activities
Exercise of share options		30	36
Lease payments		(11,871)	-
Loan interest paid		(4,280)	(5,871)
Loans repaid		(20,809)	(10,911)
Commissions and other fees paid		(844)	-
Loans received net of issue costs		-	9,168
Net cash used in financing activities		(37,774)	(7,578)
Net decrease in cash and cash equivalents		(12,694)	(17,360)
Effect of foreign exchange rate changes		(307)	(1,730)
Cash and cash equivalents at beginning of year		21,530	40,620
Cash and cash equivalents at end of year		8,529	21,530

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2019

	Share capital $'000	Share premium $'000	Other reserves $'000	Retained earnings $'000	Total equity attributable to the parent $'000	Non-controlling interest $'000	Total $'000
As at 31 December 2017	5,176	148,930	2,000	(15,500)	140,606	4,171	144,777
Aggregate adjustments on adoption of IFRS 9	-	-	-	(1,522)	(1,522)	(381)	(1,903)
Balance at 1 January 2018 as restated	5,176	148,930	2,000	(17,022)	139,084	3,790	142,874
Comprehensive loss for the year:
Loss for the year	-	-	-	(10,250)	(10,250)	(2,563)	(12,813)
Total comprehensive loss for the year	-	-	-	(10,250)	(10,250)	(2,563)	(12,813)
Transactions with owners in their capacity as owners:
Acquisition of minority interests	84	1,916	(2,000)	-	-	-	-
Exercise of warrants	11	25	-	-	36	-	36
Total transactions with owners in their capacity as owners	95	1,941	(2,000)	-	36	-	36
Share based payments	-	-	-	518	518	-	518
Cancellation of share premium 1	-	(150,871)	-	150,871	-	-	-
As at 31 December 2018	5,271	-	-	124,117	129,388	1,227	130,615
Comprehensive loss for the year:
Loss for the year	-	-	-	5,422	5,422	2,423	7,845
Total comprehensive loss for the year	-	-	-	5,422	5,422	2,423	7,845
Share based payments	30	-	-	422	452	-	452
Other	-	-	-	(9)	(9)	-	(9)
As at 31 December 2019	5,301	-	-	129,952	135,253	3,650	138,903

¹ - On 25 September 2018 the Company received court approval for the cancellation of the Company's share premium. The cancellation had the effect of creating distributable reserves.

Share capital The share capital comprises the issued ordinary shares of the Company at par value. Share premium The share premium comprises the excess value recognised from the issue of ordinary shares for consideration above par value. Other Reserves Other reserves comprise of shares that are awaiting to be issued in connection with the purchase of minority interest.

Retained earnings Retained earnings comprise distributable reserves. Non-controlling interest The non-controlling interest relates to the 20% stake the Government of Mali has in Société Des Mines De Komana SA ("SMK") which owns and operates the Yanfolila Mine.

Notes to the Consolidated Financial Statements

1.  General information

Hummingbird Resources PLC is a public limited company with securities traded on the AIM market of the London Stock Exchange. It is incorporated and domiciled in the United Kingdom and has a registered office at 49-63 Spencer Street, Hockley, Birmingham, West Midlands, B18 6DE.

The nature of the Group's operations and its principal activities are the exploration, evaluation, development, and operating of mineral projects, principally gold, focused currently in West Africa.

2.  Basis of preparation

The preliminary announcement does not constitute full financial statements.

The financial information for the year ended 31 December 2019 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 2 June 2020 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales. The report of the auditor on the 31 December 2019 financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006, but did include a matter to which the auditors drew attention by way of emphasis without qualifying their report relating to the basis of preparation which is reproduced below:

"Material uncertainty related to going concern

We draw attention to notes 3 and 30 in the financial statements, which indicates that the group and company will need additional funding should the Covid-19 pandemic have a significant impact on gold production, resulting from an extended period of partial or full shut-down. As stated in these notes, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the group and company's ability to continue as a going concern. Our opinion is not modified in respect of this matter. "

The 2019 annual report is expected to be posted to shareholders and included within the investor relations section of our website on 03 June 2020 and will be considered at the Annual General Meeting. The financial statements for the year ended 31 December 2019 have not yet been delivered to the Registrar of Companies.

The financial information for the year ended 31 December 2018 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 22 May 2019 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales. The report of the auditor on the 31 December 2018 financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006, but did include a matter to which the auditors drew attention by way of emphasis without qualifying their report relating to the basis of preparation which is reproduced below:

"Material uncertainty related to going concern

We draw attention to the accounting policy on going concern in note 3 of the financial statements, which indicates that there is a risk that further funding will be required should anticipated levels of gold production not be achieved. As stated in the accounting policy on going concern, these events or conditions, along with the other matters set forth in note 3, indicate that a material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern. Our opinion is not modified in respect of this matter."

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as adopted by the EU and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The principal accounting policies adopted are set out below.

The functional currency of all companies in the Group is United States Dollar ("$"). The financial statements are presented in thousands of United States dollars ("$'000").  For reference the year-end exchange rate from Sterling to $ was $1.3185 (2018: $1.2690).

3.  Going Concern

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are set out in the Finance Review on pages 20 to 26. At 31 December 2019, the Group had cash and cash equivalents of $8.5 million and total borrowings of $40 million.

The Group has prepared cash flow forecasts based on estimates of key variables including production, gold price, operating costs, capital expenditure through to December 2021 that supports the conclusion of the Directors that they expect sufficient funding to be available to meet the Group's anticipated cash flow requirements to this date.

These cashflow forecasts are subject to a number of risks and uncertainties, in particular the ability of the Group to achieve the planned levels of production. The Board reviewed and challenged the key assumptions used by management in its going concern assessment, as well as the scenarios applied and risks considered, including the risks associated with COVID -19. Various scenarios were considered for COVID - 19 including where there is partial closure or full closure of the Yanfolila Mine for a short period.

The Board also considered sensitivities to those cash flow scenarios (including where production is lower than forecast due to COVID -19) which in some cases would require additional funding.  Should this situation arise, the Directors believe that they have a number of options available to them, such as deferring certain expenditures and/or obtaining additional funding, which would allow the Group to meet its cash flow requirements through this period, however there remains a risk that should the COVID -19 pandemic persists for a longer time and any additional funding required by the Group may not be able to obtain it in the necessary timeframe.

Based on its review, the Board has reasonable expectation that the Group has adequate resources to continue operational for the foreseeable future and hence the Board considers that the application of the going concern basis for the preparation of the Financial Statements was appropriate. However, the unknown potential future impact of COVID - 19, at date of signing of these financial statements, indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern.

Should the Group be unable to achieve the required levels of production and associated cashflows, defer expenditures or obtain additional funding such that the going concern basis of preparation were no longer appropriate, adjustment would be required including the reduction of balance sheet asset values to their recoverable amounts and to provide for future liabilities should they arise.

4.  Profit/(loss) per ordinary share

Basic profit/(loss) per ordinary share is calculated by dividing the net profit/(loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of Ordinary shares outstanding during the year.

The calculation of the basic and diluted profit/(loss) per share is based on the following data:

	2019 $'000	2018 $'000
Profit/(losses) Profit/(loss) for the purposes of basic profit/(loss) per share being net profit/(loss) attributable to equity holders of the parent	5,422	(10,250)
Number of shares	2019 Number		2018 Number
Weighted average number of ordinary shares for the purposes of basic profit/(loss) per share	353,815,287		349,510,437
Adjustments for share options and warrants	8,347,731		5,081,354
Weighted average number of ordinary shares for the purposes of diluted profit/(loss) per share	362,163,018		354,591,791
Profit/(loss) per ordinary share	2019 $ cents		2018 $ cents
Basic	1.53		(2.93)
Diluted	1.50		(2.93)

At the reporting date there were 15,549,307 ( 2018: 25,029,585) potentially dilutive ordinary shares. Potentially dilutive ordinary shares include share options issued to employees and directors, warrants issued and the conditional acquisition of the 20% interest in the Joe Village licence, which the Group did not previously own. For the year ended 31 December 2018, because there is a reduction in loss per share resulting from the assumption that the share options and warrants are exercised, the latter are anti-dilutive and are ignored in the computation of diluted loss earnings per share and therefore there is no difference between basic and diluted loss per share.

5.  Net debt reconciliation

		At 1 January  2019 $'000	Adoption of IFRS 16 $'000	Cash flow $'000	Foreign exchange movement $'000	Amortisation of issue costs/other $'000	At 31 December 2019 $'000
Unrestricted cash		17,320	-	(11,858)	(1,064)	-	4,398
Restricted cash		4,210	-	-	(79)	-	4,131
Total cash & cash equivalents		21,530	-	(11,858)	(1,143)	-	8,529
Borrowings		(60,931)	-	20,809	1,246	(1,124)	(40,000)
Lease liabilities		-	(24,959)	11,871	-	494	(12,594)
Net debt		(39,401)	(24,959)	20,822	103	(630)	(44,065)

		At 1 January  2018 $'000	Cash flow $'000	Foreign Exchange Movement $'000	Amortisation of issue costs $'000	At 31 December 2018 $'000
Unrestricted cash		36,210	(17,360)	(1,530)	-	17,320
Restricted cash		4,410	-	(200)	-	4,210
Total cash & cash equivalents		40,620	(17,360)	(1,730)	-	21,530
Borrowings		(64,650)	1,742	2,889	(912)	(60,931)
Net debt		(24,030)	(15,618)	1,159	(912)	(39,401)

6.  Availability of Accounts

The audited Annual Report and Financial Statements for the year ended 31 December 2019 and notice of AGM will shortly be sent to shareholders and published at:  www.hummingbirdresources.co.uk

 

END

 

 

MSCDXLBBBQLXBBQ