REG - Hummingbird Res. - Corporate strategy update, equity placement & TVR

Hummingbird ResourcesAnnouncement

07/12/2023 07:00

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RNS Number : 0128W  Hummingbird Resources PLC  07 December 2023

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

 

7 December 2023

Hummingbird Resources plc

("Hummingbird", the "Group" or the "Company")

Corporate strategy update, equity placement & TVR

Hummingbird (AIM: HUM) is pleased to announce a corporate strategy update and
an underwritten equity placement, part of which is subject to, inter alia,
shareholder approval.

Highlights

·      Hummingbird is undertaking an equity placement of up to US$30
million (the "Placement") at a price of 11.2625 pence per Subscription Share
(the "Placement Price"), underwritten by a partially conditional US$25 million
investment by the Company's largest shareholder and strategic investor CIG SA
("CIG"), to accelerate its growth strategy, increase exploration, and
strengthen its balance sheet to provide capital support for the Group's
operations.

·      In addition to the Placement, the Company will offer shareholders
the opportunity to subscribe for shares at the same price as the Placement
through an open offer to be launched in due course (the "Open Offer").

·      Hummingbird is in the process of converting its 51% interest in
the Dugbe Gold Project, Liberia (the "Project"), into a 51% controlling
shareholding interest in TSX-V listed Pasofino Gold Limited ("Pasofino"). The
conversion simplifies the ownership structure of the Project, providing clear
visibility and control to facilitate more efficient decision-making and
project advancement.

·      The Group intends to enter into a near term revenue protection
strategy through a gold price cost collar over a portion of the Company's
production for the first three quarters of FY-2024 in the order of c.60,000
ounces ("oz"), as the Company materially deleverages its balance sheet.

·      Yanfolila remains on track to meet its FY-2023 production
guidance of 80,000 - 90,000 oz with AISC under US$1,500 per oz and the ramp-up
at Kouroussa continues to progress towards full scale commercial production in
early FY-2024.

·      The Company is on track to produce c.200,000 oz in FY-2024.
Formal FY-2024 Group production and AISC guidance will be provided at the
Q4-2023 operational and trading update, expected at the end of January
FY-2024.

Dan Betts, CEO of Hummingbird, commented:

"Today's announcement of an equity placement, corner-stoned by CIG
demonstrates the ongoing support for Hummingbird to implement our growth
strategy. The Placement strengthens our balance sheet, increases our
exploration activities, and advances the Dugbe Gold Project, through the soon
to be controlling interest we have now established in Pasofino. The revenue
protection strategy also locks a portion of our FY-2024 gold production as we
move to materially deleverage and strengthen our balance sheet.

With the ramp-up of Kouroussa progressing, we are set to reach full commercial
production in early FY-2024, and remain on track to be a c.200,000 oz per year
gold producer next year."

Yacouba Sare, Managing Director of CIG SA, commented:

"Our strategic investment is an endorsement of Hummingbird's strategy for
growth to a be multi-asset, multi-jurisdictional gold producer. With a
strengthened balance sheet, accelerated exploration plans and the soon to be
controlling interest in Pasofino, we believe the Company is well on its way to
achieving its near and longer term growth ambitions."

Management interview and Webcasts

An interview with Dan Betts, CEO and Interim Chairman on this release is
available on the Company's website - Media - Hummingbird Resources Plc
(https://www.hummingbirdresources.co.uk/media/#corporate-interviews) .

Additionally, the Company plans to hold a webcast via the Investor Meet
Company platform following the release of the Circular. The Company invites
attendees to pre-send questions to the Company via
IR@hummingbirdresources.co.uk (mailto:IR@hummingbirdresources.co.uk) .

Equity Placement

The Company is undertaking an equity placement of up to US$30 million, subject
to, inter alia, shareholder approval, comprised of a partially conditional
US$25 million investment by CIG (the "CIG Investment") and up to US$5 million
from other investors. The Placement involves the issue of up to 210,491,795
new ordinary shares of £0.01 of the Company ("Ordinary Shares") (the
"Subscription Shares") split across two tranches:

·      A firm first tranche of US$5.5 million, which involves the
issue of 38,576,805 Subscription Shares (the "First Tranche Shares"),
including the issue of 35,057,991 Subscription Shares to CIG, which will
result in a CIG holding of 29.9% in the Company, and;

·      A conditional second tranche, subject to, inter alia, shareholder
approval, of up to US$24.5 million, which involves the issue of up to
approximately 171,914,990 Subscription Shares (the "Second Tranche Shares"),
which, before the effect of the below mentioned Open Offer, is expected to see
CIG establish a holding of up to c.43% in the Company.

The placement price is 11.2625 pence per Subscription Share (the "Subscription
Price").

In addition, the Company will offer shareholders the opportunity to subscribe
for new Ordinary Shares at the Subscription Price through an open offer to be
launched in due course (the "Open Offer"). Further details, including how
qualifying shareholders can participate in the Open Offer, will be provided in
the coming weeks with the publication of a shareholder circular containing
full details of the Placement (the "Circular").

CIG is conditionally subscribing for up to 142,522,475 of the Second Tranche
Shares subject to, inter alia, the granting of a Rule 9 waiver by The Panel on
Takeovers and Mergers (the "Panel"), to be approved by shareholders
independent of CIG, of the obligations that would otherwise fall upon CIG
pursuant to Rule 9 of The City Code on Takeovers and Mergers to make an offer
for the entire issued share capital of the Company as a result of the
potential issue of the Second Tranche Shares to CIG, which will lead to its
interest in the Company increasing to over 30 per cent, and potentially up to
approximately 43 per cent. dependent on the level of acceptances for the Open
Offer. Further details on the Rule 9 waiver will be set out in the Circular.

The First Tranche Shares are expected to be admitted to trading on AIM on 12
December 2023. Conditional upon, inter alia, shareholder approval being
granted at the General Meeting for the issue of the Second Tranche Shares, the
Second Tranche Shares will be admitted to trading on AIM as soon as
practicable following the General Meeting.

The Company intends to publish the Circular shortly, which will include a
notice of General Meeting, and a further announcement will be made as and when
appropriate.

Use of proceeds

The Company will allocate the net proceeds to strengthen the balance sheet of
the business and advance multiple growth initiatives as part of the Company's
growth strategy. These initiatives encompass exploration activities at both
the Yanfolila and Kouroussa Gold Mines, as well as maximising the value of the
Dugbe Gold Project.

Hummingbird intends to utilise the proceeds of the Placement as follows:

·      Exploration Activities: c.US$5 million of the funds will be
directed towards increased exploration activities at the Yanfolila and
Kouroussa Gold Mines.

o  Hummingbird's exploration team has developed a comprehensive exploration
plan from FY-2024 onwards, focused on high-probability targets aimed at
increasing Resources to Reserves for the Group, thereby extending the Life of
Mine ("LOM") at both operating assets.

·      Dugbe Gold Project Advancement: c.US$2 million of the proceeds
will be dedicated to progressing the Dugbe Gold Project in Liberia, bringing
this highly valuable asset closer to production.

o  The funds will be used to optimise the 2022 Definitive Feasibility Study
("DFS") through FY-2024 and further progress the Project. Hummingbird and
Pasofino have identified several opportunities to maximise the value of Dugbe
and reduce the overall project capex profile, including the optimisation of
power usage, improvements to the metallurgical recovery rates and additional
exploration activities.

·      Balance Sheet Strengthening: The remainder of the proceeds will
be used to strengthen the Company's balance sheet through deleveraging and
operational initiatives.

o  The funds will be allocated to provide additional capital support for the
Group as it completes operational initiatives at Yanfolila including, the
Komana East Underground operation, and the ramp up of Kouroussa to commercial
production in early FY-2024, as well as supporting the deleveraging of the
balance sheet.

Conversion of the Ownership of the Dugbe Gold Project

Following the exercise of Pasofino Gold Limited's ("Pasofino" - TSXV: VEIN)
option, Hummingbird will, upon approval of its Personal Information Form by
the TSX Venture Exchange ("TSXV"), convert its 51% interest in the Dugbe Gold
Project into a 51% controlling shareholding interest in Pasofino. The
conversion simplifies the ownership structure of the Project, providing clear
visibility and control over one of West Africa's largest undeveloped gold
projects and facilitating more efficient decision-making and project
advancement.

With a pre-tax and post-tax NPV5% (at US$1,700/oz gold price) of US$690
million and USD524 million respectively (Pre-tax NPV5% at US$1,850/oz of
US$920 million), 4.0 million oz in Resources and 2.8 million oz in Reserves,
and a production profile of 200,000 oz for the first 5 years of the fourteen
years LOM, Dugbe is a strategic asset with significant value upside for
Hummingbird's shareholders. For the next 12 months, the Company plans to
optimise the Dugbe Definitive Feasibility Study ("DFS") completed by Pasofino
to maximise value and progress the Project towards construction. (Full details
of the DFS can be found - www.pasofinogold.com
(https://www.pasofinogold.com/home/default.aspx) ),

The conversion is being undertaken pursuant to Pasofino's exercise of its
right under an Option Agreement entered in 2020 to acquire Hummingbird's 51%
interest in the issued and outstanding shares of Hummingbird Resources
(Liberia) Inc. ("HBL"), which holds the interest in Dugbe, and all shareholder
loans made by Hummingbird to HBL (the "Dugbe Interest"). This transaction will
result in Pasofino becoming the sole owner of the Dugbe Gold Project, subject
to the 10% carried interest of the Government of Liberia, and be classified as
a subsidiary of Hummingbird.

In consideration for the ownership conversion, Pasofino will issue 54,027,783
new common shares to Hummingbird, granting the Company a 51% shareholding
interest in Pasofino, and consequently establishing Hummingbird as a "control
person" under the TSXV policies. Pasofino's shareholders approved Hummingbird
control person status at the annual general and special meeting held on August
23, 2023. Closing remains subject to the TSXV approving Hummingbird's personal
information form, which approval is expected in the near-term.

In order to affect the ownership conversion, Hummingbird, Pasofino, and its
wholly-owned subsidiary, ARX Resources Limited, are entering into a share
exchange agreement ("Share Exchange Agreement"), effective upon the Personal
Information Form filed by Hummingbird being approved by the TSXV The Share
Exchange Agreement mandates that Pasofino and Hummingbird enter into an
investor rights agreement ("Investor Rights Agreement"), pursuant to which the
Company is entitled to appoint three members to the board of Pasofino, of
which two members have been appointed and the third member will be appointed
in due course.

In this regard, in liaison with the Company, Pasofino will appoint Dan Betts
(Non-executive Chairman), Stephen Dattels (Non-executive Deputy Chairman), and
Thomas Hill (Non-executive Director) to the Board, effective as of the
closing, in addition to two of the existing directors - Savaş Sahin and
Robert Metcalfe, who will continue as directors of the Board. These directors
will serve on the Board until they seek re-election at the next annual meeting
of Pasofino's shareholders.

Further details can be found in the announcement by Pasofino via the following
link: www.pasofinogold.com/news (https://pasofinogold.com/news/default.aspx)

CIG Investment Details

CIG will be issued 35,057,991 First Tranche Shares and up to a further
142,522,475 Second Tranche Shares, subject to, inter alia, shareholder
approval. In total, it is expected that CIG will be issued up to 177,580,466
Subscription Shares and will have a holding of up to approximately 43% per
cent in the Company's share capital as enlarged by the issuance of the
Subscription Shares, and prior to the effect of the Open Offer.

The terms of the CIG Investment are set out in an investment agreement entered
between CIG and the Company and include:

·      An undertaking by CIG that it will not (save in limited
circumstances) dispose of the Subscription Shares for a period of 12 months
from the date of admission of the First Tranche Shares (in the case of the
First Tranche Shares) or 12 months from the date of admission of the Second
Tranche Shares (in the case of the Second Tranche Shares); and

·      The granting to CIG of a pre-emption right in relation to further
equity issues by the Company while it holds 20% or more of the Ordinary
Shares.

As noted in the Company's 7 February 2023 announcement, CIG is party to a
relationship agreement with the Company and the Company's nominated
adviser, Strand Hanson Limited, which imposes certain obligations on CIG in
its position as a substantial shareholder (as defined under the AIM Rules) in
the Company to ensure that the Company will at all times be capable of
carrying on its business independently of CIG and the members of its group.
The relationship agreement remains in force for so long as CIG's holding
remains at 10% or above. Under the terms of the CIG Investment agreement, CIG
has also agreed not to make an offer for the Company without the
recommendation of the Company's board, for so long as its holding is at 15% or
more, subject to limited exceptions.

Related Party Transaction

CIG is classified as a Substantial Shareholder of the Company pursuant to the
AIM Rules for Companies (the "AIM Rules"). The Company entering into the CIG
Investment is accordingly classified as a related party transaction pursuant
to the AIM Rules. In this regard, the directors of the Company confirm, having
consulted with the Company's nominated adviser, Strand Hanson Limited, that
they consider that the terms of the CIG Investment to be fair and reasonable
insofar as its shareholders are concerned.

Admission and Total Voting Rights

Application has been made to the LSE for the admission of the 38,576,805
First Tranche Shares, which is expected to take effect on or around 12
December 2023. (''Admission'').

Following Admission (of the First Tranche Shares), the Company's issued share
capital will consist of 640,495,504 Ordinary Shares, all with voting rights.
The Company currently does not hold shares in treasury. The total number of
voting rights in the Company following Admission is therefore 640,495,504,
which may be used by shareholders as the denominator for the calculations by
which they will determine if they are required to notify their interest in, or
a change to their interest in the Company under the FCA's Disclosure
Guidance and Transparency Rules.

A further announcement will be made in respect of the admission of the Second
Tranche Shares.

 

((1)) CIG is controlled by the same principal as the Company's primary
lending bank.

**ENDS**

Notes to Editors:

Hummingbird Resources plc (AIM: HUM) is a leading multi-asset,
multi-jurisdiction gold producing Company, member of the World Gold
Council and founding member of Single Mine Origin (www.singlemineorigin.com
(http://www.singlemineorigin.com/) ). The Company currently has two core gold
projects, the operational Yanfolila Gold Mine in Mali, and the Kouroussa
Gold Mine in Guinea, which will more than double current gold production
once at commercial production. Further, the Company has a controlling interest
in the Dugbe Gold Project in Liberia that is being developed by joint
venture partners, Pasofino Gold Limited. The final feasibility results on
Dugbe showcase 2.76Moz in Reserves and strong economics such as a 3.5-year
capex payback period once in production, and a 14-year life of mine at a low
AISC profile. Our vision is to continue to grow our asset base, producing
profitable ounces, while central to all we do being our Environmental, Social
& Governance ("ESG") policies and practices.

 

For further information, please visit hummingbirdresources.co.uk
(https://www.hummingbirdresources.co.uk/)  or contact:

 

 

 Daniel Betts, CEO       Hummingbird Resources plc  Tel: +44 (0) 20 7409 6660

 Thomas Hill, FD

 Edward Montgomery, CD
 James Spinney           Strand Hanson Limited      Tel: +44 (0) 20 7409 3494

 Ritchie Balmer          Nominated Adviser
 James Asensio           Canaccord Genuity Limited  Tel: +44 (0) 20 7523 8000

                         Broker
 Bobby Morse             Buchanan                   Tel:  +44 (0) 20 7466 5000

 Oonagh Reidy            Financial PR/IR            Email: HUM@buchanan.uk.com (mailto:HUM@buchanan.uk.com)

 George Pope

 

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