BUY Price at COB 31 Aug p 52-week range 11-29p. Hummingbird Resources Plc Yanfolila could deliver. Mining

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1 Mining 1 September 2016 UK Initiation Hummingbird Resources Plc Yanfolila could deliver Hummingbird Resources Plc is an AIM listed gold development company targeting first production in The Company has 6.4Moz gold in the ground and mine construction is now under way at the 2.2Moz Yanfolila Gold Project, Mali, following the completion of a US$71m fund raise. Hummingbird also has the 4.2Moz Dugbe Gold Project, Liberia, over which it was granted a 25 year Mineral Development Agreement. BUY Price at COB 31 Aug p 52-week range 11-29p Ticker: HUM.L Share Price Performance Yanfolila construction has started with some earthworks and the company reported that long lead time items are on order. Detailed engineering underway and SENET (Pty) Ltd has been appointed as project manager, a South African company already involved in the project when it was still owned by Gold Fields Ltd. The balance of the funding required for construction ($88m) and to repay the outstanding bridge facility ($15m) with Taurus Mining Finance Fund LP is expected to be obtained from an appropriate debt facility. In addition, certain potential contractors have expressed an interest in providing vendor financing to the Yanfolila Project. The Company is in discussions with potential debt providers and contractors as it seeks to optimise the overall funding arrangements. Upside potential with Phase 2 and Gonka integration. Phase 2 is not based on Reserves and so additional risks apply but the company is planning further work and scheduling to upgrade these indicated resources. High Grade fast payback with over $60m cash from ops in the first full year and with attractive economics supported by grade. Dugbe is given no value at present as its low grade and needs sustainable higher gold prices but there could be a corporate angle to try and take it forward. Exploration exposure through Kola and its holding in Taoudeni. Valuation We have valued Hummingbird at $162.8m or 36p/share and this can be further derisked as the company confirms its debt position and as construction moves forwards. Risks include the conversion of Resources to Reserves, Financing Risk, Mining Risk, and Country Risk. All somewhat offset with diversification into a second project with higher grade so higher margin and significant cash position. Source: SNL Performance 1m 3m 12m Absolute (%) Stock Data Market cap 81.9m Shares outstanding (m) 343 Activities Hummingbird Resources is a West African gold explorer and developer listed on AIM with construction started on its Yanfolila Project in Mali. Directors Russell King Daniel Betts William Cook Thomas Hill David Pelham Stephen Betts Matthew Idiens Non-Exec Chairman Managing Director Operations Director Finance Director Non-Exec Non-Exec Non-Exec Significant Shareholders % Capital Group 9.5 Lindine Inc 9.4 Gold Fields Ltd 6.4 Odey Asset Management 6.0 Pala Investments 4.7 Sloane Robinson 3.9 Exploration Capital Partners 3.7 Dan Betts 1.4 Forecasts and Ratios Year to Dec A 2015A 2016E 2017E 2018E Sales $m Operating Costs $m EBITDA $m PAT $m EPS $ Source: Company Data, Cenkos Securities estimates Contacts Will Dymott - Analyst +44 (0) wdymott@cenkos.com For the purposes of UK regulation, Cenkos produces non-independent research which is a marketing communication under the FCA Handbook Conduct of Business ( COBS ) rules. Accordingly, this document has not been prepared in accordance with the legal requirements to promote independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Under the Markets in Financial Instruments Directive and the Financial Conduct Authority s Conduct of Business rules this document is a Marketing Communication. Cenkos Securities plc is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Registered office: Tokenhouse Yard, London EC2R 7AS Registered in England and Wales No

2 Contents Summary 3 Company Description 3 Strategy 3 Risks 3 Resource Reserve 3 Valuation 4 News flow 4 Assets 5 Yanfolila 5 Resource Reserve 7 Mining 8 Processing 9 Tailings Storage Facility 10 Infrastructure 10 Project Economics 11 Capex and Opex 11 Development Timeline 12 Gonka Expansion Potential 13 Dugbe 16 Resource Reserve 17 Exploration Upside 17 Hydroelectric collaboration agreement 17 Other Assets 18 Valuation 19 Sensitivities 20 In Ground Valuation 20 Capex/Annual Production oz 21 Cash flow 22 Gonka upside 22 Debt history 23 Financials 24 Directors & Senior Management 25 Directors 25 Senior Management 26 Risks

3 Summary Company Description Founded in late 2005, Hummingbird Resources is a West African gold explorer and developer (AIM:HUM), which listed on AIM in December 2010 with the Dugbe gold project in Liberia which has a resource of 4.2Moz. In July 2014 the Company acquired all of Gold Fields gold assets in Mali, including the 2.2Moz Yanfolila Project which is currently under construction and due to produce 130,000oz gold in its first full year of operations. Hummingbird is now a nearterm producer with 6.4Moz of gold and regional exploration exposure through its MOU with Kola and its interest in Taoudeni. Strategy Hummingbird s strategy is to create a gold company that has a portfolio of assets from exploration, development and to production. The key focus is on moving the Yanfolila project into production. While its operations in Liberia are low grade and require a sustainable higher gold price environment they still represent some possible value in the future, while the recent exploration deal with Kola maintains Hummingbird s regional exploration exposure. Risks Beyond this the usual operating, financing and exchange rate risks apply. At this point the biggest risk is funding to fill the requirement to production and repay the Taurus $15m bridge facility. Beyond that as the Company progresses construction and moves into production the associated risks are significant with possible delays cost over runs and then performance in terms of mining and recovery. Operating in West Africa, while not unusual, does present a risk. As seen with its assets in Liberia there is always the unexpected as shown by Ebola and while Mali may be a strong gold producing country it hasn t been immune to its own troubles from coups and extremists. Resource Reserve The Company has 6.4Moz gold in the including 2.2Moz at the Yanfolila Gold Project, Mali, and 4.2Moz at its Dugbe Gold Project, Liberia, over which it was recently granted a 25 year Mineral Development Agreement. Yanfolila has a Probable Ore Reserve of 3.14g/t containing 709.8koz. Table 1: Yanfolila Ounces Tonnes Ounces Grade (g/t) CSA JORC 18,645,000 1,587, Gold Fields 2012 SAMREC 3,520, , Gold Fields 2013 internal De-Risking Study 6,324, , Total 28,489,200 2,202, Total Project reserves and mineral inventory, Hummingbird interest is 85%. Gold Fields 2013 internal De-Risking Study is Non-JORC and Non-SAMREC 3

4 Table 2: Liberia Resources Deposit Classification Tonnes Ounces Grade (g/t) Tuzon Indicated 41,800,000 2,031, Inferred 10,201, , Total 52,001,000 2,466, Dugbe F Inferred 43,010,000 1,764, Total 95,011,000 4,230, Valuation In March 2016 the optimisation study on Yanfolila using a $1250 gold price reported an NPV 8% of $162m. We have modelled the project using similar inputs and this results in an NPV of $135m on a 100% basis. Since the release of the optimisation study the gold price has increased and so we have modelled using a long term price of $1,350. We feel that given the associated risks at this stage of the project it is prudent to use a 12% discount rate rather than a lower discount rate and a multiple. Assuming the company finances the project with $35m debt, this result in a valuation of $131.5m post tax or $112m post tax on an 85% ownership basis. We have assigned a $5m valuation for any Gonka upside and $10m for the company s Liberian assets. Table 3: Valuation Asset NAV $m p/shr Yanfolila 111,800, Gonka 5,000, Liberia 10,000, Total 126,800, less Capital shortfall (Incl. debt) 35,000, plus Cash 71,000, Total Value 162,800, Source: Cenkos Securities estimate We have valued Hummingbird at $162.8m or 36p/share and this can be further derisked as the company confirms its debt position and as construction moves forwards. News flow The next key news will be its funding solution for the shortfall to bring Yanfolila into production which has a requirement of over $30m and to repay the $15m bridge loan to Taurus. Beyond this we expect updates on Development and then commissioning of Yanfolila and news on the contract miner. 4

5 Assets Yanfolila On 2 July 2014 Hummingbird acquired all of the mining and exploration interests, mainly the Yanfolila Project, from Gold Fields for $20m. This was settled by 21,258,503 shares in Hummingbird at The Yanfolila Project is hosted in Birimian Volcano-Sedimentary rocks of the Greater Siguiri Basin, approximately 285km from Bamako (byroad) in southern Mali on the Guinea border. Hummingbird has an 85% interest in the Project with a Malian partner holding a 5% interest and the Government of Mali entitled to a 10% free carried interest. The Government of Mali also has the right to purchase a further 10% interest. Yanfolila is fully permitted with a 30 year Mining Licence and Environmental Permit granted. Figure 1: Yanfolila Location Hummingbird released a DFS in January 2015 and optimised based on a new reserve estimate and revised mining schedule in February The DFS LoM Plan involves mining five open pits, starting initially with Komana East and Komana West, and then progressing to Guirin West, Sanioumale East and Sanioumale West. 5

6 Figure 2: Yanfolila Mining Permit The Yanfolila Project Phase 1 consists of two open cut mines, Komana East (KE) and Komana West (KW). The ore is non-refractory and the simple process plant design utilises gravity and Carbon-In-leach (CIL) capable of treating 1.24 Mtpa of ore and producing up to 120,000oz Au per annum. Initial mine life is planned to be approximately seven years. Associated infrastructure will include mine dewatering, access roads, airstrip, an accommodation village, offices and a Tailings Storage Facility. A power station and fuel supply depot will be supplied under third party contract. The mining will be carried out by a mining contractor under Hummingbird s supervision. 6

7 Phase 2 incorporates production from preliminary mine plans for Guirin West, and Sanioumale East and West deposits. In addition to Phase 1 and 2, a desktop study on the nearby Gonka deposit demonstrates an attractive incremental ore source for plant expansion. There is also a scoping study level report, outside of the mine plan, on a sixth deposit, Gonka, which has both open pit and underground mining potential. The Project also has over 1Moz of gold outside of the current mine plan, but within the mining permit area. Resource Reserve The Yanfolila Project is made up of seven main deposits, five of which have been subjected to resource definition drilling, modelling and grade estimation and reported as containing mineral resources compliant to JORC Code (2012 edition). Table 4: Ore Resource Reserve Estimate Deposit Insitu Resource within Pit designs Ore Reserves within Pit designs Nom. Cut-off, Incl. Mine Recovery & Mine Dilution Classification Kt Au (g/t) koz Classification Kt Au (g/t) koz Komana East Measured Proved Indicated 6, Probable 4, g/t Au Total M&I 6, Total 4, Inferred Komana East Measured Indicated g/t Au Total M&I Inferred Komana West Measured Proved Indicated 5, Probable 2, Total M&I 5, Total 2, Inferred Komana Measured - Proved Total Indicated 12, ,117 Probable 7, Total M&I 12, ,117 Total 7, Guirin West Measured Indicated Inferred 1, Sanioumale Measured West Indicated 1, Inferred Sanioumale Measured East Indicated Inferred Total M&I 16, ,421 Reserve updated 29 February 2016 Resources 15 December 2015 MRE for KE includes oxide, transitional and fresh material, reported at a 0.7 g/t Au cut-off to a depth of 240 vertical metres to reflect what may be considered a conceptual base of open-pit mining (to the 142RL), and at a cut-off of 1.20 g/t Au below this depth to reflect underground mining potential, which may conceptually be undertaken concurrently with open pit mining, a scenario which is informed by preliminary conceptual appraisal only. Grade control orientation drilling has been completed and results showed a consistent increase in grade from a section of the first year mining pit at Komana East. An Ore Reserve of 3.14g/t containing 709.8koz has been estimated and classified as Probable, reported in accordance with the JORC Code (2012 Edition). 7

8 The Company has not re-evaluated all of Gold Fields Mineral Resources from December 2012, which includes Gonka and Kabaya South. This is made up of the 1.46Moz of SAMREC 2009 compliant Resources shown in table 5 below. Table 5: Gold Fields 2012 SAMREC Resources Deposit Classification Kt Au (g/t) Au (ozs) Gonka Indicated Inferred 1, Kabaya South Indicated 1, Inferred Total Indicated 1, Inferred 2, The above Gold Fields reported Mineral Resources are effective December 31, 2012 and signed off by GF's competent persons as being in accordance with the SAMREC 2009 code. These Mineral Resources are constrained by open pit mining envelopes (based on a gold price of $1,650oz) optimized using scoping study-level modifying factors. Gold Fields did not estimate a Mineral Reserve for these resources. No economic cut-off grade was stated by Gold Fields nor the material types i.e. oxide, transitional or fresh. The figures above were reported as rounded numbers by Gold Fields. Table 6: Gold Fields De-Risking Study 2013 Non Code Compliant Mineral Inventory Deposit Cut-Off Classification Kt Au (g/t) Au (kozs) Guirin West (fresh only) 0.9 g/t Inferred Sanioumale West (fresh only) 0.9 g/t Inferred 1, Gonka (ex-pit) 0.9 g/t Inferred 1, Kabaya South (ex-pit) 0.9 g/t Inferred Badogo Malikila 0.5 g/t Inferred 2, Total 6, None of the tonnes and grade listed above were modelled or estimated by CSA, nor Hummingbird. The above tonnes and grade were all reported by Hummingbird as part of the 1.8Mozs in June 2014 upon purchase of the project from GF. The stated tonnes and grade above have not been reported or published in accordance with any mineral resource code i.e. JORC 2012 or SAMREC The above tonnes and grades were derived from block models estimated by GF as part of their November 2013 Yanfolila De-Risking Study of the Yanfolila Project. A full description of the GF 2013 DRS resources will be included in the Hummingbird DFS study, Section 5 - Mineral Resources. These tonnes and grades are not included in any mine plan and are for the purpose of developing strategic long term planning scenarios for the Yanfolila operation by Hummingbird. The tonnes and grades are not considered as current resources. The numbers have been rounded to reflect that this is an estimate. Numbers may not total due to rounding. The GK and KS tonnes and grade have been depleted by the reported in-pit tonnes and grades, 1,500,000t at 2.9 g/t and 2,020,000t at 1.31 g/t respectively (2009 SAMREC figures reported above). Materially nothing has changed i.e. lithology or weathering surfaces, at these deposits since these tonnes and grade were estimated. It is not known if the above tonnes are diluted or un-diluted. Mining The Yanfolila Project consists of two main clusters of ore deposits: located in the south are the deposits of Komana East, Komana West, Guirin West and Gonka, and located in the north are Sanioumale West and Sanioumale East. Phase 1 The proposed mine plan will see mining operations commence and be carried out at the KE and KW deposits Phase 1. Mining operations will be carried out by mining contractor, using conventional drill and blast and load and haul mining methods. The mine life is currently planned for a period of seven years at approx. 1.2Mtpa. 8

9 The pit dewatering program will utilise a total of 27 de-watering wells which are designed to reduce the pore pressure in the surrounding rocks, thus allowing steeper pit walls, and also to reduce the inflow to the in-pit sumps. After an initial pre-production period of five months, where ore will be stockpiled and waste material will be used for building up the RoM pad and TSF wall, the main mining schedule will be mined during a period of 72 months. Thereafter the feeding and processing of ore will continue for another three months from RoM stockpiles. This could be extended by Phase 2 and Gonka. Phase 2 Hummingbird has also generated optimised pitshells and a preliminary mine schedule from the Guirin West and Sanioumale East and West deposits. The mine schedule is comprised of oxide only Indicated Resources. This extends Phase 1 mine life to over seven years and total gold production to 770koz. We have based our valuation on Phase 1 and 2. Phase 2 is not based on Reserves and so additional risks apply but the company is planning further work and scheduling to upgrade these indicated resources. Figure 3:: Production Timeline by Pit Processing The ore is non-refractory and the simple process plant design utilises gravity and Carbon-Inleach (CIL). The plant will have a throughput capacity of 1.24Mtpa, producing up to 121,000Auoz per annum. LoM recovery of the gold averages 92.5%. The plant design incorporates industry standard unit process operations, consisting of primary and secondary crushing, closed-circuit ball milling with gravity concentration, intensive leach of the gravity concentrate, carbon-in-leach of the gravity tailings, elution, electro-winning, and smelting to produce gold doré. 9

10 Figure 4: Yanfolila Process Flow Tailings Storage Facility The design of the TSF for the Yanfolila Gold Project was originally undertaken by Gold Fields in 2013 which looked at several locations with respect to the mineral deposits for the Project. In late 2014 Hummingbird engaged Ausenco to develop the TSF for the Project. The outcome of the study identified that a rockfill-centerline raise was the preferred option, although it had a slightly higher sustaining capital cost than the upstream-rockfill raise, it is more robust from both a construction and water management perspective. The use of a combination of an HDPE membrane for the embankment wall with a natural clay liner for the facility basin ensures compliance with IFC performance standards, but also results in lower initial capital costs and subsequent sustaining costs for each of the annual embankment raises that will be necessary. Infrastructure Access to the site is via an existing road connecting the town of Yanfolila and the Kona Bridge. Allowance has been made to upgrade this road. Bridges on the road have been assessed as adequate for the transport of plant equipment to site. Additional roads will be built to maintain access to local villages. The Project is located adjacent to the Sankarani River in the Malian Sudano-Guinean area, which on average has a seven month dry season (October to April), and a five month rainy season (May to September). The Yanfolila mine will require a continuous water supply of up to 1.35m 3 /tonne of ore, of which more than 80% will be consumed within the mill and CIL circuit. Process water 10

11 requirements will be met from two principal sources. Reclaim from the TSF will be used to the greatest extent possible to both minimize the demand for abstraction of water from environmental sources and to control the volume in storage within the TSF impoundment. Clean water, plus any make-up required over and above that which can be reclaimed from the TSF, will be sourced from the Raw Water Pond and Process Water Pond. Water will also be available from the dewatering of pits. Additionally a river abstraction system will also be installed. The mine is to be supplied power 'across the fence' from an Independent Power Provider. Construction and camp power during the construction period will be using generators. Power from the IPP is scheduled to commence at the start of cold commissioning and will be on a rental diesel generator basis supplied by the power contractor. Over the LoM a maximum of 8MW of installed power is required with the base load calculated to be an average of approx 4MW. For the LoM Study a power cost of 20.4c/kWh was calculated based on the commercial power tender offered to the Company. A split fuel facility will be constructed by the selected fuel supplier, one serving the process plant and the other serving the mining and vehicle fleet. Fuel will be provided on a full turnkey 'over-the-fence' basis and the all in cost of diesel fuel delivered to the Project is $0.614/litre for this LoM Study. The price of diesel is set by the government of Mali based on the world oil price which has been steadily rising since the release of the optimisation study. This has a significant impact on the process operating costs and mining costs which both have a high proportion of fuel cost within their total cost. Project Economics Table 7: Comparison of Phase 1 (Reserves from KE and KW pits only) results from the DFS released in January 2016 to the New Mine Schedule February Phase 2 includes Gurin West, Sanioumale West/East DFS Jan 2016 Phase 1 US$1,100 Optimisation Feb 2016 Phase 1 US$1,100 DFS Jan 2016 Phase 1 US$1,250 Optimisation Feb 2016 Phase 1 US$1,250 DFS Jan 2016 Phase 1 & 2 US$1250 Optimisation Feb 2016 Phase 1 & 2 US$1250 Gold Price LoM Ore Mined Mt Strip Ratio waste:ore 13.2:1 12.9:1 13.2:1 12.9:1 12.1:1 11.9:1 LoM Grade g/t LoM Contained Gold Koz Recovery % LoM Recovered Gold koz Production Year 1 Koz LoM Production/year Koz LoM Cash Costs $/oz LoM AISC $/oz Project Capex $m NPV (8% discount) $m IRR % Capex and Opex Yanfolila is towards the lower end of capital intensity for West African Gold projects with a capital cost of $79m including contingency. Hummingbird has net cash of over 85% of the total Capital requirement. The Company has already spent over $2m on earthworks and some infrastructure but does also have a working capital requirement of approximately $9m. 11

12 Table 8: Capital Cost Summary Description Cost ($m) General Infrastructure 7.6 Mining 8.6 Owners Direct 5.9 Owners Indirect 2.8 Process Plant 46.7 Process Plant Infrastructure 1.7 Sub Total 73.3 Contingency 6.1 Total 79.4 DFS January 2016 The Yanfolila optimisation study has a cash cost of $620/oz and an AISC of $695/oz as shown in the table below. Mining costs account for over half the total costs and were based on Hummingbird estimates. Of this Load Haul Drill Blast make up most of the costs so are sensitive to the Diesel price (set by the Malian Govt based on world prices that have since risen), pit depth and haul distance. Hummingbird has received tenders for the mining contract at competitive rates and based on the current mining schedule the all in LoM cost for mining is $2.52/t. Table 9: Operating Costs Operating Cost Units Cost Mining Cost $/t 2.5 Processing Cost $/t Ore 15.4 G&A Cost $/t Ore 7.3 Total Opex $/t Ore 58.5 Cash Cost $/oz 620 AISC $/oz 695 Optimisation February 2016 Development Timeline Hummingbird commenced earthworks for the plant in June 2015 and these were completed in September 2015 in preparation for civil contractors to place structural concrete equipment foundations and slabs. Hummingbird reported in April 2015 that it had ordered long lead items ahead of production including ball mill, mineral sizer, tower crane and carbon-in-leach tanks. Hummingbird has started detailed engineering for the full-scale construction with SENET (Pty) Ltd as project manager, a South African company already involved in the project when it was still owned by Gold Fields Ltd. Under the direction of Wayne Galea, SENET on 1 July 2016 commenced its engineering, procurement and construction mandate of the 1.24 Mtpa operation. Full scale mine construction will start on completion of financing. 12

13 Figure 5: Development Timeline Figure 6: Production Profile Cenkos Securities estimates Gonka Expansion Potential Mining of the Gonka deposit is not currently included in the Company's DFS on the Yanfolila Project. The Gonka deposit is a geological extension along strike southwards of the Komana East deposit. The Gonka deposit is 4.5km south of the Komana East deposit and within the same sequence of massive basalt, polymictic conglomerate and lithic greywacke. The deposit is open at depth and has considerable opportunity to increase the scale of the mine when this is fully evaluated from further drilling and other studies. 13

14 The Yanfolila plant has been designed for potential modular expansion from 1.25Mtpa to 1.5Mtpa. Hummingbird completed a desktop study incorporating Gonka into a consolidated Yanfolila mine schedule by increasing throughput at the Yanfolila processing plant and where the first year of mining from Gonka is aligned to that of the rest of the Project. This analysis incorporated DRA's mining schedule and operating costs into the existing DFS financial model, along with additional capital estimate of $5m to expand the plant capacity to 1.5Mtpa. The main adjustments related to additional leaching tanks and enhancements to the comminution circuit. The results from this analysis of incorporating Gonka increased the project NPV 8% by $24m can be achieved relative to the DFS, Using $1,100/oz, the value uplift is $13m. On a standalone basis but trucking 5km to the Yanfolila plant the schedule generated by DRA mines averages of 2.98g/t for 28kozpa over a combined six year mine life. It is anticipated that Gonka would initially be mined as an open pit 2.3g/t) and will be mined using conventional drill and blast methods over 4.15 years with an average strip ratio of 8.4:1 (w:o). Mining operations will then transition to an underground long hole stoping mine in year four and extend the mine life to a total of six years 4.5g/t), commencing from the bottom of the open pit. Figure 7: Gonka Mine plan This is based on a combination of the SAMREC compliant Inferred Mineral Resources of 2.9g/t (corresponding to the open pit) and additionally Goldfields internal estimate of 4.03g/t (corresponding to the underground). 14

15 Figure 8: Gonka Location relative to Yanfolila proposed Plant Given the proximity to the plant if successfully drilled out it is highly likely that the mining schedule overall could change with the inclusion of Gonka. 15

16 Dugbe In 2013 Hummingbird completed a PEA on the 4.2Moz Dugbe Gold Project in Liberia using a $1,300/oz gold price and the project had a post tax IRR of 29% and NPV 10% of $186m. Given the low grade of the deposit and gold price environment optimisation work is underway to try and make it work but this is limited as the Company s focus is on Yanfolila. Liberia now has its first almost commercially operating gold mine which wasn t a smooth ride but with the post Ebola environment things are looking up. Dugbe could be a project for the future and once carried a significant valuation. Hummingbird signed a 25-year mineral development agreement with the government of Liberia in July The agreement provides the framework for the project to be developed and operated, including stabilisation of taxes and duties. Under the agreement, gold production from the project will have a 3% royalty rate, a 25% income tax rate and a reduction of fuel duty by at least 50%. The government will receive a 10% free carried interest in the project. Hummingbird will also establish a community development fund. Further work is needed on the draft DFS to improve the overall Project economics. At the appropriate time the Company plans to implement further work on the Dugbe Gold Project to enhance the resource, mine plan, process flow sheet, recovery and operating costs that have been achieved. It is also looking at Dugbe from a corporate perspective and so a JV or Earn in is also a possibility in order to advance the project. The PEA was conducted by Wardell Armstrong International and modelled a 3.5Mtpa plant tank leach process with 88-90% recovery for a 20-year LoM. This was based on owner operated open pit mining with an average stripping ratio of 3:1 at Tuzon and 6:1 at Dugbe. LoM operating costs were reported as $904/oz with production on average of 125,000oz pa and initial capital of US$212m on an owner operated basis. At present there is limited expenditure on site as the Company is focused on Yanfolila but at some point it will carry out: Further conversion of Inferred to Indicated Resources at Tuzon through a short drilling programme; Confirming extensions at depth of the most significant part of the Tuzon orebody through a short drilling programme; Carrying out further work at the highly prospective Sackor deposit, close to Dugbe F, to develop an Indicated Resource on the back of a recent extensive re-logging exercise of core; Review the Dugbe F Inferred Resource (1.8Moz), and look to upgrade its classification to Indicated Resources; Review mine scheduling and waste dump philosophies to improve operating economics; and Optimise the process flow sheet through a short programme of further metallurgical testwork. 16

17 Figure 9: Dugbe Location Resource Reserve Table 10: Liberia Resources Deposit Classification Tonnes Ounces Grade (g/t) Tuzon Indicated 41,800,000 2,031, Inferred 10,201, , Total 52,001,000 2,466, Dugbe F Inferred 43,010,000 1,764, Total 95,011,000 4,230, Exploration Upside At the moment there is limited work onsite but the project has some exploration upside with 2,355km 2 of ground under Mineral Development Agreement for 25 years. Over 140 exploration targets discovered across the Dugbe Shear Zone following the airborne survey and positive exploration soil and trenching results around Dugbe Gold Project. Hydroelectric collaboration agreement Hummingbird has signed a collaboration agreement on the planning and development of a 20MW to 30MW hydroelectric power plant in southeast Liberia with IFC InfraVentures and Aldwych International Ltd. Preliminary assessment demonstrated a range of options for the development of a sustainable and low cost source of hydroelectric power for Dugbe and the southeast Liberian region. A pre-feasibility study and carried out by Knight Piésold, confirms the potential viability of a range of options for HEP plants. The PFS has assessed five alternative solutions from 10-30MW of hydro-electric power for Capex ranges from $ m dependent on size of option selected. This offers a hydro-electric power solution for the Dugbe Gold Project, with 17

18 potentially materially positive cost and environmental benefits. Dugbe Project operating costs which were 40% of costs in the DFS. The plant would be about 10km from the Dugbe 1 gold project. Other Assets Hummingbird entered into a MOU with Kola Gold Limited in June 2016 with a view to amalgamating certain of its non-core gold exploration permits in Mali together with a number of Kola's permits in Mali and Senegal into Cora Gold Inc. This is subject to Cora receiving commitments for $4m and the usual due diligence by the end of September. Hummingbird will hold 43% and Cora Gold will hold 57% prior to the minimum $4m raise. Figure 10: Regional map showing permit opportunities in the Kenieba Window and Yanfolila Gold Belt Cora will hold over 10 gold exploration properties in excess of 1,600km 2 located the Kenieba Window in Mali and Senegal and the Yanfolila Gold Belt in Mali. Hummingbird maintains Buy-back and royalty rights over the four permits closest to Yanfolila which could add upside. In June 2015 Hummingbird sold its Asheba gold-prospective license in Ghana to private Taoudeni Resources Ltd for 10% of Taoudeni and a discovery bonus of US$1 per ounce in 500,000 ounce increments on discovery at Asheba. Hummingbird also retains the right to buy back a 10% interest in the project for US$7m upon publication of a feasibility study by the buyer. 18

19 Valuation In March 2016 the optimisation study on Yanfolila using a $1250 gold price reported an NPV 8% of $162m. We have modelled the project using similar inputs and this results in an NPV of $135m. Since the release of the optimisation study the gold price has increased and so we have modelled using a long term price of $1,350. We feel that given the associated risks at this stage of the project we are using a 12% discount rate rather than a lower discount rate and a multiple. Assuming the company finances the project with $35m debt, this results in a valuation of $131.5m post tax or $112m post tax on an 85% ownership basis. In the last few months Hummingbird has completed a significant capital raise of over $70m. This was by placing 22m shares at 22p and then an additional 11m shares at 26p. With the last reported cash of $7.2m in December 2015 and post fees we estimate that Hummingbird has approximately $71m in cash. We estimate that Hummingbird will need approximately $107m made up of $78m in Capex, $13m in working capital on a corporate and project basis and the $15m bridge facility from Taurus. The Taurus bridge facility is due to be refinanced in September and so we assume this will be repaid from proceeds of the recent raise. This results in a $35m shortfall on the current requirement. The balance of the funding requirement for construction and to repay the outstanding bridge facility is expected to be obtained from an appropriate debt facility. In addition, certain potential contractors have expressed an interest in providing vendor financing to the Yanfolila Project. The Company is in discussions with potential debt providers and contractors as it seeks to optimise the overall funding arrangements. We have assumed that Hummingbird signs a $35m facility to cover this shortfall and have modelled the project on this basis. We have assigned a $5m valuation for any Gonka upside and $10m for the companies Liberian assets. Table 11: Valuation Asset NAV $m /shr Yanfolila 111,800, Gonka 5,000, Liberia 10,000, Total 126,800, less Capital shortfall (Incl. debt) 35,000, plus Cash 71,000, Total Value 162,800, Source: Cenkos Securities estimate As such we have valued Hummingbird at $162.8m or 36p/share and this can be further derisked as the company confirms its debt position and as construction moves forwards. 19

20 Sensitivities We ran sensitivities on our model to look at the effect of the gold Price, Capex, Opex, Strip Ratio and Discount Rate on the NPV. The sensitivity analysis showed that the project was most sensitive to the Gold price then opex and strip ratio with Capex and the discount rate used having a minimal effect. As expected changes in the Gold price grade and recovery had similar effects on NPV. The project was most sensitive to gold price with a 20% increase in our modelled long term price of $1350 to $1620 had a 56% increase in NPV. Opex was also fairly sensitive with a 20% increase reducing the NPV by 30%. The rest were inline. Figure 11: Sensitivities Figure 12: Grade vs Size Source: Cenkos Securities estimates Source: SNL Grade The project was sensitive to grade but this is where Yanfolila shows its strength as it is reasonably high grade in comparison to other projects of a similar or larger size. With a LoM grade of nearly 3g/t and a total inventor grade of nearly 2.5g/t Yanfolila has a fairly robust margin and so should be able to weather any issues if it can deliver the grade as modelled. Costs The all in cost of production for the life of the mine of US$695/oz is one of the lowest in West Africa. This makes Yanfolila one of the highest margin undeveloped gold projects in Africa today. In Ground Valuation Hummingbird is trading in line with its peers based on Yanfolila Phase 1 and 2 alone and given its financing situation and project stage but this is due a revaluation as the project derisks and moves along the path to production and then as shown in the chart below a meaningful uplift is due. This also shows the market gives no value for any future growth in Mali or even acknowledges Liberia, which in the past was ascribed so much value. 20

21 Figure 13: MCap vs Resource/Reserve Source: SNL Base on Yanfolila alone and only using the Phase 1 and 2 JORC Reserve and Resource indicated numbers the in ground valuation is similar to our NPV valuation. Table 12: In Ground value Ounces $ /share Yanfolila Reserve 585,395 97,500, Yanfolila Resource 1,207,505 73,300, Total 1,792, ,800, Source: Cenkos Securities estimates, SNL, Company Data Capex/Annual Production oz Yanfolila has one of the best ratios of Capex to production capacity for a range of similar African Gold projects. While this is helped by the use of a contract miner it also shows the advantage of resizing the project from the numbers indicated in the Gold Field days. Figure 14: Capital Expenditure vs. Annual Production Source: SNL 21

22 Cash flow Based on our models Yanfolila shows a fast payback with strong cash from ops of over $60m in the first full year for Hummingbird. Figure 15: Yanfolila Phase 1 & 2 cash flow waterfall Source: Cenkos Securities estimates Gonka upside We have given Gonka a valuation of $5m. as discussed above the results from this analysis of incorporating Gonka increased the project NPV 8% by $24m can be achieved relative to the DFS, Using $1,100/oz, the value uplift is $13m. On a standalone basis but trucking 5km to the Yanfolila plant the schedule generated by DRA mines averages of 2.98g/t for 28kozpa over a combined six year mine life. It is 22

23 anticipated that Gonka would initially be mined as an open pit 2.3g/t) and will be mined using conventional drill and blast methods over 4.15 years with an average strip ratio of 8.4:1 (w:o). Mining operations will then transition to an underground long hole stoping mine in year four and extend the mine life to a total of six years 4.5g/t), commencing from the bottom of the open pit. Our valuation is based on the mining inventory of 169koz at the average resource valuation of $61/oz and then a 50% discount to give a valuation of $5m or 1p per share. Debt history In August 2014 Hummingbird reached agreement with Taurus Mining Finance Fund for a two phase debt facility to fund the construction of the Yanfolila project. A $10m Bridge Facility (increased to $15m) and a $75m 5-year facility for the purpose of refinancing the Bridge Facility and financing the development costs for the Yanfolila gold project. First gold production was targeted at Yanfolila by the end of The key terms of the Bridge Facility Agreement are as follows: 18 month term funding of US$10m. Interest rate of 9% per annum paid semi-annually. Arrangement fee of 1% of facility amount. Early repayment at option of the borrower Mortgage over the shares of Glencar Mining. The bridge was extended to $15m in September 2015 and documentation for the $75m was being finalised for initial drawdown with fist gold expected in The $75m facility seems to have been withdrawn sometime toward the beginning of the year and Hummingbird has refinanced via a significant equity placing and is currently looking for approximately $35m in further debt. On 25 February 2016 Hummingbird announced it has secured a six-month extension for the US$15m bridge facility with Taurus Mining Finance Fund LP to 8 September. The extension was to allow both parties to work together towards a fully funded finance package for Yanfolila without the timing of the bridge affecting discussions; so expect either another extension or news on the remaining financing. In December 2012 Hummingbird agreed with Anglo Pacific for a US$15m financing for a 2% net smelter return royalty from any sales of product mined within a 20km radius of Dugbe F. After an initial grace period of six months following the commencement of commercial production, in the event that quarterly sales of gold produced are less than 50,000 ounces, additional quarterly payments will be required until such time as the cumulative royalty paid is US$15 million (the maximum total payment in any such quarter is equivalent to the royalty that would have arisen on sales of 50,000 ounces of gold). Following this period the royalty is 2% except where both the average gold price is above $1,800 and sales of gold are less than 50,000 ounces, in which case it increases to 2.5% in respect of that quarter. 23

24 Financials Table 13: Financials Year to Dec A 2015A 2016E 2017E 2018E Income Statement Sales $m Operating Costs $m EBITDA $m D&A $m Operating profit $m Interest Expense $m PBT $m Tax $m PAT $m EPS $ Cash Flow Cash yr start $m Operating Cash flow $m Financing Cash flow $m Capex $m Interest $m Debt repayed $m Free Cash Flow before tax $m Tax Payable $m Free Cash Flow after tax $m Cash Yr End $m Balance Sheet Cash $m Total current assets $m Non Current Assets $m Total Assets $m Debt $m Other Liabilities $m Total Liabilities $m Shareholder Equity $m Source: Company Data, Cenkos Securities estimates Figure 16: Share price Timeline Source: SNL/ Company Data 24

25 Directors & Senior Management Directors Russell King - Non-Executive Chairman Russell is currently the Senior Independent Non-Executive Director of Aggreko plc, the FTSE 100 temporary power generation company. Prior to this Russell served as Chief Strategy Officer at Anglo American where he had global responsibility for strategy, business development, government relations, safety and sustainable development. He was also a member of Anglo American s plc executive committee for eight years. Between he was a senior advisor to RBC Capital Markets on Metals and Mining. Russell is also a Non- Executive Director of Interserve plc, Sepura plc and Spectris plc. Daniel Edward Betts - Managing Director Daniel founded Hummingbird in November After graduating from Nottingham University he worked for Accenture Management Consultants until he joined the Betts family business in Founded in 1760, the family business is the oldest privately owned gold bullion smelters and refiners in the country, and it has a long history of trading across the world and dealing in all areas of the precious metal industry. Whilst working for the Betts family business Daniel established a number of natural resource based businesses in Uganda, Namibia, Sierra Leone, Mauritania and Peru, before starting Hummingbird Resources in William Benjamin Thurston Cook - Operations Director William is a former officer of the British Army having served in the Light Infantry. Following his army service he worked in the security sector, for companies such as Control Risks, Rubicon and Salamanca Risk Management before joining Hummingbird Resources as Country Manager. William is experienced in the operational and logistical management of projects in challenging environments. In his capacity as Operations Director he has been responsible for the establishment and ongoing running and development of all of Hummingbird s operational capability in Liberia, as well as more recently for the general oversight of the DFS and ESIA. Thomas Hill - Finance Director and Company Secretary Thomas joined the Company as Chief Financial Officer in September 2010 and was appointed as Finance Director in July Prior to this Thomas was a senior manager within BDO LLP s natural resources department, where he worked extensively with quoted mining and exploration companies and was involved with numerous flotations and other corporate transactions. He has a metallurgy, economics and management degree from Trinity College, Oxford and qualified as a chartered accountant with BDO LLP in David Almgren Pelham - Non-Executive Director David is a mineral geologist with over 35 years global exploration experience. He has worked in over 40 countries in Africa, Europe, North and South America, the Middle East and Asia. He has been involved as Technical Director with new junior company start-ups and initiated numerous new exploration projects worldwide. He has worked in several West African countries, and oversaw the discovery and early evaluation of the +6Moz Chirano Gold Mine in Ghana, as well as Hummingbird s 4.2Moz Dugbe gold deposit in Liberia. He has been closely involved with a number of major discoveries of gold, copper-cobalt, coal, iron ore, chrome and uranium. Converted into in-situ gold-equivalent terms, these new discoveries add up to over 100Moz of gold. 25

26 Stephen Alexander Betts - Non-executive Director Stephen co-founded the Company in November He has over 40 years experience in trading with gold and related businesses in developing countries, having established several businesses in West Africa during his career. He is the Chairman of the Stephen Betts group of companies. The family business has over 250 years history in smelting, refining and bullion dealing. Matthew Charles Idiens - Non-executive Director Matthew co-founded Hummingbird in November 2005 and he has 20 years experience in natural resource companies. He is a founder and Chief Executive Officer of AIM quoted Rose Petroleum plc and also founder and director of Seamwell International Ltd, a private company developing underground coal gasification (UCG) projects in China. From he worked as an associate director at Laing and Cruickshank Investment Management, part of the Credit Lyonnais Group. Senior Management Robert Monro - Head of Business Development Bert joined Hummingbird in 2009 as Operations Manager in charge with overseeing the development of the Dugbe 1 Project as it progressed from greenfield exploration to maiden resources. Following 18 months in the field Bert spent six months in Monrovia as the acting Country Manager, overseeing all in-country activity, before returning to be based in London in April 2011 as Hummingbird s Head of Business Development. Shaun Bunn - Technical Director Shaun Bunn is a mining executive with over 30 years experience in exploration, mining, processing and project development. Shaun has a BSc and GDip (Metallurgy) from WA School of Mines, and an MBA from Deakin University. Shaun has managed mining projects through all stages of development, from grass roots exploration, feasibility studies, financing, construction, commissioning and operations. Wayne Galea - Project Manager (Yanfolila) Wayne Galea is a mining professional with 31 years experience in the mining industry specialising in gold. A process engineer by background, he has worked for a number of the world s leading engineering companies including AMEC, Bateman and Signet, where he has extensive experience of managing EPCM contracts. He has also worked directly for gold mining companies such KBK Gold where he was instrumental in their project execution. Wayne s career has led him to have experience of working in Africa, Asia and Australasia with a focus on process engineering, and he brings significant technical and project execution skills to the Hummingbird team. 26

27 Risks Company Risk Hummingbird is a pre-production Gold company so still dependant on external financing to move its projects forwards until it achieves commercial production. As such there is a risk that this is never achieved. Mining Risk As the company moves into production the projects still need to deliver as modelled and as such dependant on ore grades and production tonnages being achieved. The use of a contractor may remove some risks but the reliance on an external group to deliver as expected is important and results may not be as expected. Commodity Price Risk Hummingbird is moving toward gold production and so is at risk to changes in the commodity price. While the margin looks significant for Yanfolila it shows the highest sensitivity. Dugbe is a lower grade deposit and so is more sensitive and needs to have a higher gold price environment to really deliver. The international fuel price is also a risk as a significant proportion of the proposed costs are made up of fuel. Country Risk Yanfolila is located in the Republic of Mali, which has a favourable mining jurisdiction with a strong track record of supporting the development of mining and particularly gold projects. Mali is Africa s third largest producer of gold and a number of the pre-eminent gold mining companies operate mines in the country. Being located in the south of the country is also important in that it is away from the more fragile and insecure north, as well as closer to the key port of Abidjan which makes the logistics of transporting equipment and materials to the mine relatively simple. Dugbe is located in Liberia which poses a high operational risk according to Control Risks. Poor infrastructure particularly outside the capital Monrovia poses a challenge to business operations. Dugbe however, is located only 40 miles by road from the deepwater port of Greenville in south eastern Liberia so infrastructure is fairly good for the region. Exchange Rate Risk While Hummingbird is a UK listed company it reports in US dollars and has cost exposures to the West African CFA franc (pegged to the ) and Liberian dollar. 27