Hummingbird Resources Plc is a ‘first mover’ in eastern Liberia, committed to discovering and developing world-class gold deposits. in this report O v e r v i e w 2 Overview 4 The year in review 6 Our presence 8 Chairman’s statement 10 Business and Operational review 12 Chief Executive Officer’s statement 16 Technical summary 16 Detailed feasibility study 18 Preliminary economic assessment 32 Exploration 32 Dugbe Shear Zone 36 Juazohn Shear Zone 36 Dube Shear Zone 37 Cestos Shear Zone 38 Iron Ore 39 Corporate Social Responsibility 46 Board of directors 48 Financial statements 50 Directors’ report 55 Directors’ responsibilities statement 56 Independent auditor’s report 57 Consolidated income statement 57 Consolidated statement of comprehensive income 58 Consolidated balance sheet 59 Consolidated statement of cash flows 60 Consolidated statement of changes in equity 61 Notes to the consolidated financial statements 81 Company balance sheet 82 Company statement of cash flows 83 Company statement of changes in equity 84 Notes to the company financial statements Discover more on our website: www.hummingbirdresources.co.uk www.hummingbirdresources.co.uk Annual report 2013 1 Hummingbird has around 7,000km2 of highly prospective exploration ground along three shear zones in the south-east of Liberia. Over the last eight years Hummingbird has carried out a systematic exploration programme from grass roots work through to the definition of an NI 43-101 compliant 3.8Moz gold Resource discovered at its Dugbe 1 Project. A DFS is currently being carried out on the Dugbe 1 Project due for completion in Q3 2014. 2 Annual report 2013 Hummingbird Resources Plc Overview O v e r v i e w 4 The year in review 6 Our presence 8 Chairman’s statement “ A year passes quickly and in next year’s annual report i hope to write that we are putting the finishing touches to a positive DFS for the Dugbe 1 Project and construction of the Dugbe 1 mine is shortly due to commence.” Daniel Betts CeO www.hummingbirdresources.co.uk Annual report 2013 3 the year in review A year of focused exploration Hummingbird resources offers investors a unique opportunity to participate in the discovery and development of world-class mineral deposits in previously unexplored regions of Liberia. BuiLDing A wOrLD-CLASS DeveLOPment teAm: Appointment of Detailed Feasibility Study (“DFS”) consultants includes: ADDitiOnS tO A HigHLy exPerienCeD “OwnerS’ teAm”: Formation of the Technical Advisory Committee (“TAC”) made up of: DeveLOPment: Hummingbird Resources Plc (“Hummingbird”) delivered a robust Preliminary Economic Assessment (“PEA”) on its Dugbe 1 Project in 2013. The highlights of the PEA (based on 3.5Mtpa and US$1,500 gold price) include: ► NPV of US$337m ► IRR of 43% ► 125,000oz gold/year production for 20 year Life of Mine (“LOM”) ► 20 years’ free cash of US$954m ► 2.41 strip ratio and US$759/oz Opex for first five years of LOM ► MDM Engineering Group (“MDM”) to lead the DFS ► SRK Consulting (UK) Limited (“SRK”) as resource, reserve and mining consultants ► Coffey Mining Pty Limited (“Coffey Mining”) for geotechnical studies ► AMEC Plc (“AMEC”) for Environmental and Social Impact Assessment (“ESIA”) ► Mark Calderwood: Formerly CEO of Perseus Mining Limited with over 200,000oz/year production in Ghana ► Mike Skead: Formerly CEO of Ryan Gold Corp. and Head of Exploration at Banro Corp. Currently VP Project Evaluation at Dundee Resources Limited ► David Pelham: Five years as Technical Director of Hummingbird Resources and led the discovery of 3.8Moz gold at the Dugbe 1 Project ► Nigel Walls appointed as Head of Project Development: Formerly a Director of Wardell Armstrong International Limited and COO then CEO at Ncondezi Coal Company Limited irr of 43% nPv of uS$337m 4 Annual report 2013 Hummingbird Resources Plc O v e r v i e w Creating growth. By supporting sustainable growth, our actions will have long-term benefits for Liberia. Read more about our commitment to corporate responsibility from page 39 FuLLy FunDeD DeveLOPment PrOgrAmme: ► US$5m placement from the IFC in December 2012. IFC, part of the World Bank Group, made its first mining sector investment in Liberia in Hummingbird and has highlighted Liberia as one of its top three priority countries ► US$15m royalty agreement signed with Anglo Pacific Group Plc in December 2012 for a 2% royalty on production over the Dugbe 1 Project Area ► US$14m cash at 31 May 2013 with the final US$5m royalty tranche pending DFS unDerwAy: ► MDM appointed to lead the DFS ► SRK appointed as resource, reserve and mining consultants eSiA: ► AMEC appointed to complete the work ► AMEC has extensive experience across West Africa ► 15,802m of infill drilling ► All environmental and completed in 2013 to date on the Tuzon 2.05Moz NI 43-101 Inferred Resource ► Coffey Mining oversaw geotechnical drilling in July and August 2013 ► DFS due for completion in Q3 2014 with first gold pour targeted for Q2 2016 social studies underway exPLOrAtiOn: ► Comprehensive 17,000 line kilometre airborne geophysical survey flown over entire 2,000km2 Dugbe Shear Zone licence area HummingBirD reSOurCeS in FigureS Land in Liberia employees gold discovered 7,000 km2 3.8 moz 183 www.hummingbirdresources.co.uk Annual report 2013 5 Our presence Our opportunities in eastern Liberia Liberia lies on the coast of west Africa, sharing borders with Côte d’ivoire, guinea and Sierra Leone. the country has extensive history in natural resources. Key FACtS: ► Three operating deep water ports, new roads and railways currently being built ► Since 2006, foreign direct investment (“FDI”) of greater than US$17bn has flowed into the country ► In September 2011, ArcelorMittal began extracting and processing iron ore from the Nimba project ► Significant offshore oil discovery with Chevron and African Petroleum currently undertaking further exploration work ► Servestal, one of the world’s largest steel companies, acquired 100% of the Putu Iron Ore Project and plans to start producing in 2017 ► The IMF predicts real GDP to increase by 8.8% in 2013 BACKgrOunD With the exception of the capital city Monrovia, it is a sparsely populated country with a total population of over 4 million on a land area of over 100,000km2. Liberia was founded in 1847 by emancipated slaves from the United States and is one of only two African countries not to have roots in European colonisation. The country enjoyed more than 100 years of peace before 14 years of intermittent civil war at the end of the 20th century. Since then there has been considerable political and economic transformation. A new Liberia is now attracting impressive international private-sector investment – estimates suggest upwards of US$17bn since 2006. Since 1926 Firestone has owned and operated the world’s largest rubber plantation, and before the civil war Liberia was the world’s third largest producer of iron ore. Today, the country is focusing its efforts on reforming the economic system and rebuilding vital infrastructure to support growth. We have a huge opportunity with our “first mover” advantage to be working in Liberia and to help develop industries far beyond their pre-war levels. LAnD HOLDingS reLAtive tO weSt AFriCAn PeerS Hummingbird Avocet Keegan Ampella Amlib Aureus 6 Annual report 2013 Hummingbird Resources Plc O v e r v i e w C ÔTE D’ IV OI RE SIERRA LEONE GUI NEA Monrovia L I B E R I A Greenville Development status Our projects are at various stages of exploration and discovery as we continue to seek to break new ground. Dugbe 1 project p16 Dugbe Shear Zone p32 Juazohn Shear Zone p36 Dube Shear Zone p36 Cestos Shear Zone p37 (iron ore) mount ginka p38 www.hummingbirdresources.co.uk Annual report 2013 7 Chairman’s statement Ian Cockerill, Non-Executive Chairman “ we will keep an open mind to opportunities to create meaningful shareholder value from licences.” ian Cockerill non-executive Chairman Highlights ► Publication of PEA in April 2013 • IRR of 43%* • NPV of US$337m* • Capex of US$212m ► Formation of TAC including • Mark Calderwood • Mike Skead * Using a gold price of US$1,500 and based on 3.5Mtpa It has certainly been a very turbulent 2013. The gold price started the year at satisfactory levels and was then pummelled down several hundred Dollars in a day. Whatever the causes behind this unprecedented drop, it only serves to remind us that we still live in “interesting times” and our response to this volatility has to be the delivery of a project, fit for purpose, yet designed to withstand any foreseeable gold price scenario. I said last year that the underlying conditions for a higher yet sustainable gold price were in place and, whilst this year the first real signs of global economic green shoots are emerging, and with it a possible secular move out of the gold sector, I still feel the doomsayers talking gold back to below $800 per oz are deeply mistaken. The underlying problems in the global economy are still with us and will remain so until such time as the authorities face up to the need for some serious fiscal medicine, and as such gold deserves a place in any well managed investment portfolio. However, notwithstanding the current, well publicised sell off in the junior mining sector, over the past twelve months Hummingbird has continued to make excellent progress on all fronts, as we 8 Annual report 2013 Hummingbird Resources Plc O v e r v i e w “ we are encouraged by several technical studies to determine the most cost effective way to mine, process and deliver a highly profitable project.” gold exploration and production company, in a completely new part of the West African Shield. I would like to thank my fellow Board members for their diligence this past twelve months, to Dan, Will, Tom, Dave and all of our staff for their hard work and dedication as well. Whilst this year has been challenging, the year ahead is unlikely to be any easier but we are extremely fortunate to have in place the team we do. I am confident the fruits of their hard work will soon be realised and we will hopefully be reporting back next year with a positive outlook for the DFS. ian Cockerill Chairman 14 August 2013 move towards our stated near-term aim of bringing our Dugbe 1 Project into production in 2016. In the last year we successfully raised US$20m with two exceptional partners, which has guaranteed the necessary funding to complete our Detailed Feasibility Study. These important deals, at minimal dilution to existing equity holders, with the IFC and Anglo Pacific, ensure that we are funded through the current comprehensive work programme to drive the Dugbe 1 Project forward to the completion of a DFS anticipated for Q3 2014, without the need to raise additional funds. This has insulated us from the market through these challenging times and sets us apart from many of the other juniors currently suffering significant funding shortfalls. Both deals show that these important partners share our positive view of the Dugbe 1 Project, and with the IFC we have an excellent partner to progress through the necessary studies. We look forward to their valuable support, in particular ensuring that Hummingbird adheres to the IFC’s rigorous performance standards that promote sustainability together with social and environmental responsibility across all of our business operations. Our comprehensive Preliminary Economic Assessment published in April 2013 confirmed that the Dugbe 1 Project is both achievable and economically viable, even if the current lower gold price trend continues into 2016 when we foresee the Company moving into production. Additionally Hummingbird has strengthened its operational team to reflect the changing focus as we move into the development phase so that we possess all of the technical skills internally to drive the project forward and to work constructively with our globally-renowned team of DFS consultants. Together with our consultants and the internal Technical Advisory Committee, I am certain we have the right team in place to achieve the best results for all our stakeholders. Hummingbird is unique. We are proud of our track record of achieving what we said we would do when we listed on AIM in 2010, being able to add to our highly-skilled team as we have progressed from exploration into the development phase and evolving our strategy as appropriate but always remaining true to our ultimate objective of creating long-term shareholder value through becoming a significant www.hummingbirdresources.co.uk Annual report 2013 9 “ Hummingbird Resources has really helped me a lot. I have gained some experience in logistics and geology and would love to be a geologist.” Samuel W Gbiangbei, Jnr Geological Logistician and Database Assistant I was born into the Mano tribe in Yekepa, Nimba County in 1986. In 1991, I started my primary education in Yekepa and later moved to Guinea in the same year due to the civil war. I spent 15 years in exile and graduated from the Laine Refugee School in the Laine refugee camp in Guinea. In Guinea, I worked for the Médecins Sans Frontières Swiss logistics and medical department. I returned to Liberia in 2006 following the end of the civil war and settled in Saclepea, Nimba County. In Saclepea, I worked for the Médecins Sans Frontières Swiss logistics department and also attended the Jesuit Refugee Service vocational school where I studied basic computer science, management and French. In 2009, I moved to Monrovia primarily to study, but unfortunately I was unable to. In 2010 I left Monrovia and moved to Sinoe County in search of a job. In April 2010 I joined the Hummingbird Resources team as a labourer where I have been trained to perform a number of roles from a rig technician to a data entry clerk. In October 2010, I was offered a role in the Liberia head office in Monrovia to serve as the Geological Logistician from which I was promoted to Database Assistant. Within my role I track all the samples from the project sites to the lab here in Monrovia and in OMAC in Ireland. I also liaise with the Government of Liberia through the Ministry of Lands, Mines and Energy to organise the export permits for the samples. Hummingbird Resources has really helped me a lot. I have gained some experience in logistics and geology and would love to be a geologist. I look forward to seeing Hummingbird build gold mines so that many Liberians can have the opportunity to work. 10 Annual report 2013 Hummingbird Resources Plc Business and operational review 12 Chief Executive Officer’s statement 16 Technical summary 16 Detailed feasibility study 18 Preliminary economic assessment 32 Exploration 32 Dugbe Shear Zone 36 Juazohn Shear Zone 36 Dube Shear Zone 37 Cestos Shear Zone 38 Iron Ore 39 Corporate Social Responsibility 46 Board of directors B u S I n e S S A n D O p e R A t I O n A L R e v I e W “ I have greatly benefited from the new work environment and personal relationships including the Hummingbird team and local people. At present, I am looking forward to participating in the continuing transition process from exploration to the gold mining stage.” Marcellin Rakotondraibe Geologist www.hummingbirdresources.co.uk Annual report 2013 11 Chief Executive Officer’s statement Daniel Betts, Chief Executive Officer “ The highlight of this last year has been the release of an extremely positive PEA on our Dugbe 1 Project.” Daniel Betts Chief Executive Officer Highlights ► NPV of US$337m with an IRR of 43% assuming a 10% discount factor and US$1,500 gold ► Over the first five years 1.4 g/t ore mined at US$759/oz cost ► Capex of US$212m for 3.5Mtpa plant producing 125,000oz gold ► Free cash of US$954m over 20 year LOM A year passes quickly, and in next year’s Annual Report I hope to write that we are putting the finishing touches to a positive DFS for the Dugbe 1 Project and construction of the Dugbe 1 mine is shortly due to commence. The following year I hope to write that Hummingbird is on the verge of its first gold pour and becoming a producer. We are progressing rapidly. The highlight of this last year has been the release of an extremely positive PEA on our Dugbe 1 Project which shows the potential for a robust and profitable gold mine with an NPV of US$337m, IRR of 43% and free cash of almost US$50m per annum over the 20 year life of mine producing 125,000oz/year. Whilst the future of the Company is promising, we cannot ignore the adversity the gold sector is facing today. Writing this statement is not the easiest task I have ever had to tackle. On the face of it the obvious facts are disappointing. Mirroring the fall in the price of gold, and in line with many of our peers, our share price has lost nearly 80% of its value over the twelve month period. As a significant shareholder myself I am acutely 12 Annual report 2013 Hummingbird Resources Plc “ Many of Hummingbird’s directors and employees have bought shares in the Company demonstrating their commitment and belief in what we are achieving.” B u S I n e S S A n D O p e R A t I O n A L R e v I e W aware of what is being felt, not just by us but by our shareholders and by the whole sector. Many of Hummingbird’s directors and employees have bought shares in the Company demonstrating their commitment and belief in what we are achieving. Despite the current market conditions we remain very much on track to achieve our stated goals and ambitions. Gold may be out of favour at the moment, but given the continued uncertainty in the world and gold’s enduring nature as a long-term store of value it is likely to remain an important part of any person’s or country’s balanced investment portfolio. Likewise gold stocks may be out of favour, but gold is still around US$1,300 an ounce, a price at which the IRR of the Dugbe 1 Project is an attractive 30%. This remains an exciting project and it is important to remember that the current project economics are based merely on the gold we have identified to date. Excluding the potential for further gold discoveries, it is a compelling investment proposition for a company with a current market capitalisation of around £20m. In terms of timing we now find ourselves in a strong position: ► We were the first gold company to enter South East Liberia. ► We raised the money for our DFS through non-conventional methods prior to completing a PEA, with minimal shareholder dilution showing our commitment to preserving equity value however possible. ► We are now undertaking a DFS when few others are in a position, financially, to do so. This means that we have access to the best advisors and consultants. Contracts and timeframes are more competitive than at any time in recent memory, which means that there has not been a better opportunity to move forward with development projects for a long time. While the sector is going through a period of retrenchment and introspection, we will have taken the business forward and continued to build value for shareholders, which I believe will set us apart from the crowd when the tide and sentiment turns. Whilst the current market is undoubtedly extremely challenging for all concerned, it actually presents what may be looked back upon as the greatest buying opportunity of a generation and hopefully in the course of this report we will convince our shareholders, both old and new, that Hummingbird is one of the best placed companies to ride out the storm and capitalise on that opportunity. Financing During the year under review Hummingbird successfully arranged US$20m of funding via a US$5m strategic investment from the IFC, part of the World Bank, and through a US$15m royalty agreement with Anglo Pacific Group plc. These agreements mean that the Company is fully funded through to the end of the DFS and importantly, were achieved with minimal dilution to shareholders. Given the current situation many junior exploration and development companies find themselves in with a chronic lack of funds in a unsupportive market, we believe the funding achieved this year not only sets us apart from many of our peers but also provides significant endorsement for Hummingbird’s Dugbe 1 Project. www.hummingbirdresources.co.uk Annual report 2013 13 Chief Executive Officer’s statement continued Daniel Betts, Chief Executive Officer “ The publication of the PEA formally marked the transition of Hummingbird from an exploration company to an exploration and development company.” Financing continued These funding streams provide significant benefits to Hummingbird above and beyond the capital. In the case of the IFC this investment marked its first in the Liberian mining sector. The IFC is respected globally by governments and investors alike: its support provides reassurance to our investors and the host country that Hummingbird’s activities will be conducted at the very cutting edge of social and environmental best practices, and it acts as a security blanket that the Company has the support of a major global financial institution working with ourselves and the Liberian government to bring this project to fruition. preliminary economic Assessment In Q3 2012 we commenced our PEA which was completed and released to the market in April 2013. The PEA was conducted by Wardell Armstrong International Limited (“WAI”) with assistance from a number of other internationally recognised consulting firms. The purpose of the PEA was to assess the potential economic viability of the gold we have already discovered in the Dugbe 1 Project. Because we wanted to be as thorough as possible in our understanding of the potential for the Dugbe 1 Project, the level of work was extremely comprehensive for this stage of project. The Dugbe 1 Project The publication of the PEA formally marked the transition of Hummingbird from an exploration company to an exploration and development company. The PEA showed, as seen above, that the Dugbe 1 Project is based on a robust resource producing solid financial returns. Capitalising on the successful PEA and the fact that we have funding in place, we have been able to commence progression towards a DFS resulting in the following key appointments: ► MDM appointed as lead consultant on the DFS; ► SRK appointed to carry out resource and reserve estimations together with mining optimisations; ► Coffey Mining appointed for the geotechnical studies; ► AMEC appointed to carry out the Environmental & Social Impact Assessment; ► Hummingbird has built an ‘owners’ team’ headed by Nigel Walls, a former director of WAI and COO, then CEO, of Ncondezi Coal; and ► Technical Advisory Committee was formed with Mike Skead, current VP Project Evaluation at Dundee Resources, Mark Calderwood, former CEO of Perseus Mining and David Pelham, Non-Executive Director of Hummingbird. I would like to take this opportunity to thank David Pelham for his immense contribution to the Company over the last five years as he moves from Technical Director to Non-Executive Director. David first worked for Hummingbird as a consultant before spending the last five years as the Company’s Technical Director. David has led the geological team from grass roots exploration to where we stand today with a 3.8Moz gold Resource, a positive PEA and DFS well under way. It goes without saying that Hummingbird has benefited immensely from David’s experience during his time as Technical Director and we look forward to continuing to benefit from it as he transitions to Non-Executive Director. 14 Annual report 2013 Hummingbird Resources Plc “ Hummingbird is a rare breed – a gold explorer, a project developer, a company which is funded through to DFS, with an ambitious management team and a highly experienced advisory committee and board.” B u S I n e S S A n D O p e R A t I O n A L R e v I e W exploration As well as transitioning to a developer during the year we have also made inroads on the exploration front. Arguably the most significant of these programmes was a 17,000 line km airborne magnetic and radiometric survey that was flown over the 2,000km2 Dugbe Shear Zone licence area. This is the largest of its kind ever in Liberia and we believe it will lead us to many new targets once the full interpretation has been received. The results, which are due imminently, should greatly enhance our understanding of the regional geology across the shear zone and will hopefully help us identify a large number of potential targets which we will be able to actively explore. We will also be able to re-rank the prospectivity of all of our exploration targets by incorporating this new magnetic and radiometric geophysical data into our existing data which will be a significant step forward. Outlook During the rest of 2013 and as we move forward into 2014, Hummingbird is fully focused on executing its strategy of further advancing the Dugbe 1 Project and progressing it closer to production. The Company is fully funded for the next important stage of its growth and it has the team in place to take the project to the conclusion of a DFS, at which stage the implementation of the first mine in south-east Liberia can commence. Hummingbird is a rare breed – a gold explorer, a project developer, a company which is funded through to DFS, with an ambitious management team and a highly experienced advisory committee and board. Since its formation, the Company has a track record of delivery and of finding an alternative to the equity markets when and if necessary to preserve long-term equity value for shareholders. The darkest hour comes just before dawn, and I think that we have a great deal to look forward to. I would like to especially thank the whole Hummingbird team for their loyalty and dedication through this time and I look forward to an exciting year ahead. Daniel Betts Chief Executive Officer 14 August 2013 Dugbe Shear Zone The DSZ is a 2,000km2 group of four licences in the south-east of Liberia. Within the DSZ is Hummingbird’s 3.8Moz Dugbe 1 Project and a number of other highly prospective gold targets. A 17,000 line km airborne geophysical survey was flown over the entire shear zone in 2013 to further our target generation to find the next Dugbe 1 Project. www.hummingbirdresources.co.uk Annual report 2013 15 technical summary Detailed feasibility study The Company has formed an owners’ team with a wealth of experience and expertise to take the DFS and ESIA forward. Key facts ► DFS underway and all consultants appointed ► MDM lead DFS consultant supported by: – SRK on Resource estimation; – Coffey Mining on Geotechnical Studies; and – AMEC on hydrological studies. DFS Hummingbird completed its PEA in April 2013 and subsequently has decided to move directly into a DFS. The primary rationale is that sufficient work has been completed over the last two years and it is now appropriate to take the project forward towards mine construction commencing with a DFS and an ESIA. A comprehensive tender process for the DFS consultant was conducted from May to the end of June, commencing with a total of 17 expressions of interest and culminating with a short list of four tenderers who made presentations to our team during two days of interviews. At the end of this it was decided to award the contract to the AIM listed, Johannesburg-based company MDM Engineering Group Limited. It has been decided to conduct the front end engineering and design (“FEED”) concurrently with the DFS in order to be able to proceed directly to an engineering, procurement and construction (“EPC”) contract at the end of the DFS and therefore reduce the overall timeframe to mine construction. It is expected that the DFS and FEED will be completed by the end of Q3 2014. MDM is the successor company to MDM Ferroman (Pty) Ltd (“MDM Ferroman”). Since purchasing MDM Ferroman’s 18 years of intellectual capital and employing all of their key staff in 2006, MDM has been implementing a new management style and processes. MDM has over 24 years of operational experience and specialises in metallurgical and process engineering. Over 40 gold DFSs have been completed by the team (such as Agbaou in the Côte d’Ivoire for Etruscan Resources Inc., 2008), 90% of which went on to achieve third party funding, and MDM has designed and built over 30 gold plants across Africa, such as the Tarkwa expansion for Gold Fields Limited in 2011. The overall scope of work for the DFS consultant is summarised as follows: ► process engineering; ► civil engineering; ► structural engineering; ► mechanical engineering; ► electrical engineering; ► control and instrumentation engineering; ► front end engineering and design; ► infrastructure; ► project risk analysis; ► project implementation plan; and ► capital and operating cost estimates +/- 10%. 16 Annual report 2013 Hummingbird Resources Plc MDM started work on the DFS in July 2013, with an initial site visit in August. Concurrent with this, additional metallurgical test work is underway at laboratories in South Africa to fine-tune the process flow sheet. This test work will be integrated into an initial Options Study, as part of the DFS, to fully evaluate the economic impact of different processing scenarios in order to produce the most economically robust and financeable project. Resource estimation SRK has been appointed as the consultant for the resource estimation work, following a competitive tender process. A site visit to Dugbe to review our data, drill core and methodologies was completed during June and SRK is now advising Hummingbird on the resource categorisation and geological modelling. To date 15,802m of infill drilling has been completed in 2013. Reserve and mining SRK has been appointed to conduct the reserve and mining element of the DFS following a competitive tender process. Geotechnical Coffey Mining in Perth has been appointed to run the geotechnical studies for the DFS, including the design of the tailings management facility. The Coffey Mining team already knows the project from its previous work on the geotechnical section for the PEA. Hydrology AMEC will be conducting all the hydrology and hydrogeology studies for the DFS and ESIA. A programme of ESIA water monitoring holes and holes for hydrogeology and associated packer testing was drilled over July and August for this part of the studies. timelines The DFS started in July 2013 and should be completed by the end of Q3 2014. Similarly, the ESIA started in April 2013 and should be completed by the end of June 2014. Hummingbird owners’ team The Company has formed an owners’ team with a wealth of experience and expertise to take the DFS and ESIA forwards. The Project Manager is Nigel Walls and he is responsible for overall co-ordination of the DFS. The engineering, cost control and engineering management will be managed by Howard Rowland based in Johannesburg. He has been responsible for the tender process and will co-ordinate the day to day interaction with the DFS contractor, monitoring their progress, costs and suppliers. Mark Fleming, our Chief Geologist, will oversee all the geological work, such as the Resource estimation. Kobus de Wet, also based in Johannesburg, will manage and advise on the metallurgy and process test work and provide guidance on the process flow sheet. The ESIA work will be advised by John Eyre and Kim-Marie Clothier of North Coast Consulting. They will be responsible for maintaining oversight of all aspects of the ESIA and will co-ordinate the programme with our SHEC manager. B u S I n e S S A n D O p e R A t I O n A L R e v I e W SpOtLIGHt On LIBeRIA: environment We aim to leave a positive legacy which survives beyond the life of mine, economically, environmentally and socially. Read more in our Corporate Social Responsibility report from page 39 www.hummingbirdresources.co.uk Annual report 2013 17 technical summary continued Preliminary economic assessment The PEA, released in April 2013, highlighted the project to be robust from both a technical and economic perspective, and WAI saw no impediment to proceed directly to a DFS. Dugbe 1 Project Wardell Armstrong International Limited was commissioned by Hummingbird in Q3 2012 to prepare a PEA on its Dugbe 1 Project in Liberia, West Africa. This PEA documents the geological mineral resource, the geological block modelling, the mineable resource, mineral processing, environmental and social issues and a financial assessment of the mining operations from project commencement to the end of mine life. WAI was the principal author of the PEA document, with input from a number of other internationally recognised companies. The PEA, released in April 2013, highlighted the project to be robust from both a technical and economic perspective, and WAI saw no impediment to proceed directly to a DFS. Summary At the Dugbe 1 Project, a NI43-101 compliant Inferred mineral Resource of 94.1Mt at an average of 1.27g/t Au has been confirmed. The resources are contained in both the Dugbe F and Tuzon deposits. The 3.83Moz resource converts to a potentially mineable resource, by applying dilution and mining recovery, of 67.9Mt at an average grade of 1.31g/t Au for 2.87Moz. A mineral processing recovery of 90% has been applied to the potentially mineable resource based on a significant number of Au recovery tests. A number of financial scenarios for the project were completed by applying different mining rates and processing technologies. Following a review, Hummingbird considers the 3.5Mtpa owner-operated Tank Leach operation possesses the best balance of shareholder return, deliverability and achievable capital requirements. The gold price for the financial analysis was set to the three year trailing gold price, which at the time of reporting was US$1,500/oz. The Project is situated 75km by road from the deep-water port of Greenville in south-eastern Liberia. In terms of the size and average gold grade of the project, the Dugbe 1 Project is considered to represent an attractive financial opportunity with a robust payback period. It is estimated that first production could be achieved within 18 months from the commencement of construction of a 3.5Mtpa plant. Key project facts ► post-tax NPV (10%) of US$337m giving an IRR of 43%; ► Capex of US$212m with a payback period of three years; ► 20 year LOM produces free cash of US$954m; ► contract mining may significantly reduce initial Capex to US$143m and increase IRR to 55%; ► average annual gold production of 125,000oz; ► a low strip ratio of 3:1 at Tuzon and potential gold recovery of up to 90%; and ► significant potential exists for extending the current resources and to make new discoveries in the Project area. 18 Annual report 2013 Hummingbird Resources Plc Introduction The PEA is based on the results from 28 trenches and 279 diamond drill holes at the Dugbe F deposit and 7 trenches and 78 diamond drill holes at the Tuzon deposit. The PEA has been prepared by WAI on behalf of Hummingbird. The information, conclusions, opinions, and estimates contained in it are based on: ► information available to WAI at the time of preparing the PEA, including previous Technical Reports prepared on the Dugbe 1 Project and associated licences in close proximity to the Project; ► assumptions, conditions, and qualifications as set forth in the PEA; ► data, reports, and other information supplied by Hummingbird and other third party sources; ► the capital expenditure (“Capex”) estimates for the mineral processing, infrastructure and tailings aspects of the project were estimated by GBM Minerals Engineering Consultants Limited (“GBM”) in 2011. The mining Capex aspects of the project were estimated by WAI, as well as the operating costs for mineral processing and mining. Cost estimates were generated using cost information extracted from industry standard databases and cost models; WAI and GBM cost models and databases; data released by public companies such as studies, operational reviews and due diligence report; and PEA, PFS, FS and BFS studies completed by WAI; and ► the mining operating cost estimates have been based upon the results of the pit optimisation and subsequent mining fleet analysis and therefore may differ slightly from the estimates used for the actual pit optimisations. All cost estimates were to an accuracy of +/-40%. Geology and mineralisation The majority of Liberia and Sierra Leone is underlain by the Man Shield, an Archaean unit that comprises extensive granitic gneisses and granitoid rocks, which is in part overlain by the Proterozoic Birimian greenstones (Figure 1). The Birimian sequence surrounds the Man Shield along its northern and eastern edges, and consists of a series of volcano- sedimentary rocks, gneisses and granites which have been subjected to various grades of metamorphism. ► quartz-feldspar-biotite- orthopyroxene-garnet gneiss; and ► granitic intrusives of variable grainsize. Tropical weathering has produced a superficial weathering profile which includes lateritic soils to a depth of 5–10m that cover most of the Dugbe 1 Project area. Outcrops of fresh bedrock are generally restricted to watercourses and occasional road cuttings. Figure 1: Geology and gold deposits of West Africa In the south-eastern part of Liberia, the correlative of the Birimian sequence is the Eburnean Metamorphic Province which is a largely gneissic terrain. In the Dugbe area, these Birimian-age rocks form an extensive belt of quartz-feldspar-biotite gneisses, extending from Greenville to Dugbe. The Dugbe 1 Project area is traversed by the Dugbe Shear Zone which strikes east-northeast, a structure that is well defined using aeromagnetic and radiometric data (Figure 2). In the Dugbe 1 Project area, there are five main lithological units namely: ► quartz-feldspar-biotite gneiss; ► quartz-feldspar-biotite-garnet gneiss; ► quartz-feldspar-biotite-orthopyroxene gneiss; Figure 2: Recent figure from airborne radiometric and geophysical survey; focus on Dugbe MDA area only Using a cut-off grade of 0.5g/t Au to define a mineralised zone, the Dugbe F deposit comprises a single tabular zone of mineralisation that is 8-10m thick. The mineralisation extends over a north-northeast strike distance of 2,800m and dips at 20–25° to the southeast. Similarly at Tuzon, the deposit appears to be comprised of a number of stacked mineralised zones striking northeast-southwest for 2,000m and dips at an average of 40° towards the south-east. At both deposits the gold occurs as very fine, free grains within micro- fractures, along grain boundaries and in quartz-sulphide stringer veins (Figure 3). The mineralisation is ubiquitous with elevated sulphide occurrence and is conspicuous by its lack of associated alteration and structure. Rare visible gold has been observed in drill core. B u S I n e S S A n D O p e R A t I O n A L R e v I e W www.hummingbirdresources.co.uk Annual report 2013 19 technical summary continued Preliminary economic assessment Dugbe 1 Project continued estimated mineral resources As part of the PEA, WAI confirmed that the deposit evaluation activities being carried out by Hummingbird at the Dugbe 1 Project are to a high industry standard. WAI completed an independent audit of the identified mineral resources previously prepared by ACA Howe International Limited (“ACA Howe”). ACA Howe undertook the following: ► For both deposits mineralised envelopes were generated using a 0.5g/t Au cut-off grade on cross-sections, using both surface trenching and diamond core data. These envelopes were then wireframed to arrive at the current tonnage and grade estimations. ► The Dugbe F deposit was modelled using a columnar model prototype which was unfolded along with the sample data. The sample data was then composited to the full intercept width. No top cut was applied. The grade estimation was carried out using the Inverse Distance Weighting Squared (“IDW2”) approach on a metal accumulation (grade x true thickness). ► At Tuzon, the sample data was composited to 1m. A top cut of 7g/t Au was applied to the composited data. A block model was created within the wireframe based on a parent cell size of 10m x 20m x 10m (X,Y,Z). The Tuzon model and sample data was unfolded and the estimation also carried out using IDW2. Figure 4: Hummingbird drill campaigns at the Dugbe 1 Project Table 1.1: Dugbe F and Tuzon Resource estimates (WAI, 1 March 2013) (in accordance with the guidelines of NI43-101) Dugbe F Inferred Tonnage Au Metal tuzon Inferred Tonnage Au Metal total Inferred Tonnage Au Metal Unit Mt g/t Kg Koz Mt g/t Kg Koz Mt g/t Kg Koz Cut-off grade (g/tAu) 0.5 43.0 1.28 1.0 30.0 1.47 2.0 3.49 2.48 54,900 44,200 8,640 1,760 1,420 51.1 1.26 31.4 1.57 278 4.90 2.45 64,400 49,300 11,900 2,070 1,590 94.1 1.27 61.4 1.52 382 8.39 2.46 119,000 93,500 20,500 3,830 3,010 660 Figure 3: Fine free gold (Au) along grain boundaries at Dugbe F (qz-quartz, bi-biotite, pl-plagioclase, ap-apatite, po-pyrrhotite, as-arsenopyrite) At Dugbe F, 199 mainly NQ diamond core holes totalling 26,201.3m have been drilled, with 20,177 samples assayed, on a spacing of 160m x 160m with some 80m spaced infill in areas considered to be more complex (Figure 4). 28 trenches have also been dug spaced along the deposit totalling 2,521.8m for 1,334 samples. At Tuzon, 65 NQ diamond core holes totalling 16,094.3m have been drilled, with 7,897 samples assayed, on a spacing of 160m x 160m (Figure 4), with some additional infill at 80m spacing. Seven trenches have also been dug, spaced along the deposit, totalling 1,682.0m for 666 samples. This data forms the basis for the identified mineral resource estimate reported. The database was verified by WAI and was considered to be of generally good working order and suitable for use in an identified mineral resource estimate. 20 Annual report 2013 Hummingbird Resources Plc B u S I n e S S A n D O p e R A t I O n A L R e v I e W Figure 5: Grade-tonnage curve of the in-situ Mineral Resource for Dugbe F Figure 6: Grade-tonnage curve of the in-situ Mineral Resource for Tuzon t / g u A e d a g e g a e v a r r l e d o m k c o B l 3.00 2.50 2.00 1.50 1.00 0.50 0.00 50 45 40 35 30 25 20 15 10 5 0 l B o c k m o d e l t o n n a g e ( M t ) t / g u A e d a g e g a e v a r r l e d o m k c o B l 4.00 3.50 3.00 2.50 2.00 1.50 1.00 70 60 50 40 30 20 10 0 l B o c k m o d e l t o n n a g e ( M t ) 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.50 0.40 0.20 none 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 Block model cut-off value Au g/t Grade Au g/t Tonnage Block model cut-off value Au g/t Grade Au g/t Tonnage A summary of the evaluation of in-situ Mineral Resources is shown in Table 1.1 below and the grade-tonnage curves for the Dugbe F and Tuzon deposits are given in Figures 5 and 6 respectively. Mineral processing A significant number of tests for this level of study assessing gold recovery, on samples distributed throughout both deposits, have been undertaken at a number of different internationally respected laboratories. This test work has demonstrated that the mineralised rocks at Dugbe F and Tuzon are amenable to cyanidation leaching. a Heap Leach (based on what is typical for Heap Leach operations). Two principal process routes have been considered using sodium cyanide with subsequent gold recovery: ► Tank Leach (conventional tank Carbon-in-Leach (“CIL”)); and A conceptual flow sheet for Tank Leach comprises: single stage crushing, open circuit Semi-Autogenous Grinding (“SAG”), closed circuit ball milling, carbon-in-leach, carbon stripping, electrowinning and bullion smelting. ► Heap Leach. Gold recoveries of up to 90% are anticipated with a Tank Leach (based on test work completed) and 60% with SpOtLIGHt On LIBeRIA: Access and infrastructure Hummingbird Resources invests directly in the people of Liberia. Hummingbird’s activities will have positive multiplier effects to the wider population. Read more in our Corporate Social Responsibility report from page 39 www.hummingbirdresources.co.uk Annual report 2013 21 technical summary continued Preliminary economic assessment Dugbe 1 Project continued Mineral processing continued The design criteria is given below for a conceptual plant based on the extraction of 3.5Mtpa ore: ► Stage 1 Ore Receiving Section – ore will be delivered to a static grizzly (-600mm material), then moved to a jaw crusher (-150mm material), and next to an ore stockpile. This circuit will treat approximately 750t/hour. ► Stage 2 Grinding – ore will be fed into an 8.5m x 4.35m SAG mill fitted with a 6,000kW motor at a rate of 440tph. Ore will be ground to 80% passing (P80) through 850µm and pass into hydro-cyclone classification. Underflow from the cyclone will pass into a closed circuit Ball mill to be ground to a P80 of 75 µm. Overflow will return to the SAG mill. ► Stage 3 CIL Circuit – product from the grinding will be pumped from the pre-leach sump to six 3,300m3 tanks operating in series. ► Stage 4 Doré Production – this will comprise an elution circuit of AARL type design. ► Stage 5 Carbon Regeneration – this stage will comprise a diesel fired rotary kiln and reactivated carbon will be returned to the CIL circuit. ► Stage 6 Cyanide Detoxification – the final stage of the process will include cyanide detoxification prior to disposal of wastes into a tailings management facility. A conceptual flow sheet for a similarly sized Heap Leach process comprises pregnant solution from the heap sent to a desorption circuit, followed by electrowinning and production of gold cathode. Due to uncertainties surrounding the operation of a Heap Leach process in the relatively high rainfall tropical environment the Tank Leach option would appear to provide a more stable and robust process option. Table 1.2: WAI Estimate – Potential Mineable Resource for a Tank Leach process route (February 2013) Classification Dugbe F Ore tuzon total Waste Strip ratio Ore Waste Strip ratio In-situ ore Waste Strip ratio total tonnes Mt Grade Au (g/t) Contained gold g oz 29.6 182 6.15 38.4 115 3.00 67.9 297 4.37 1.32 38,900,000 1,250,000 — — — — — — 1.31 50,300,000 1,620,000 — — — — — — 1.31 89,200,000 2,870,000 — — — — — — Table 1.3: WAI Estimate – Potential Mineable Resource for a Heap Leach process route (February 2013) Classification Dugbe F Ore tuzon total Waste Strip ratio Ore Waste Strip ratio In-situ ore Waste Strip ratio total tonnes Mt Grade Au (g/t) Contained gold g oz 26.8 134 5.00 40.6 121 2.99 67.4 255 3.79 1.29 34,600,000 1,110,000 — — — — — — 1.27 51,700,000 1,660,000 — — — — — — 1.28 86,400,000 2,780,000 — — — — — — Mineable resources WAI performed a series of open pit optimisations on the Inferred Resource, after applying 5% dilution and a mining recovery of 95%, in order to assess the potential geometries of the final economic pits and the mineable resources for the Dugbe F and Tuzon deposits. Pit slopes of 55° and 52° were applied to Dugbe F and Tuzon respectively. The results indicate that for the Tank Leach process route, the Dugbe 1 Project has a total potentially mineable resource of 67.9Mt at a diluted average grade of 1.31g/t for 2.87Moz of contained metal (Table 1.2). For the Heap Leach process, the optimisation results generated a potentially mineable resource of 67.4Mt at diluted grade 1.28g/t for 2.78Moz of gold (Table 1.3). The pit optimisations were undertaken using the most recent block models generated by ACA Howe and audited 22 Annual report 2013 Hummingbird Resources Plc by WAI. Inferred Resources have been included within the pit optimisation to derive an estimate of the mineable resource. For the purposes of the PEA, and in order to distinguish the material identified as potentially mineable from a Reserve as defined under the terms of NI 43-101, this material is referred to as a “potentially mineable resource”. Mining Mining at Dugbe F and Tuzon will be a conventional open pit operation with ore and waste extracted via drill, blast, load and haul. The mining equipment fleet is likely to consist of Atlas Copco FlexiROC D60 track-mounted drills for blast hole drilling, and Liebherr 8m3 and 15m3 shovels for ore and waste excavation respectively. Upon loading, ore will be hauled from Dugbe F and Tuzon pits in plant such as Caterpillar (“CAT”) 777G 90t haul trucks to a centralised Run-of-Mine (“ROM”) pad, from where it will be fed into a primary crusher, its entry into the processing plant. Waste from Dugbe F and Tuzon will be hauled in 90t trucks to waste dumps located on the footwall side of each pit. Mining operations at the Dugbe 1 Project will have a strip ratio of approximately 3:1 at Tuzon and 6:1 at Dugbe F. The resultant open pit footprint at Tuzon is approximately 1.75km along strike by 0.75km across strike and some 200m deep, with a resultant total rock tonnage of approximately 115Mt. WAI generated a series of production schedules for each process route scenario (Tank Leach and Heap Leach) at production rates of 2Mtpa, 3.5Mtpa, 5Mtpa and 8Mtpa, presented in Table 1.4 and Table 1.5 on the following pages. Project infrastructure Abundant water is available within the site location, with annual rainfall in the area typically averaging at 4,000mm. Large raw water and process water tanks are proposed to be established. Decanter water from the tailings management facility will be returned to the plant in preference to raw water from environmental sources. It is estimated that for a 3.5Mtpa plant, the power supply required will be 17.5MW. For the PEA, power estimations have been worked out using US$0.28/kWh, which is based on using Light Fuel Oil (“LFO”) leased generators. It is believed that a significant optimisation of power supply can occur that will reduce the cost, e.g. the option of using heavy fuel oil generators has the potential to produce power for around US$0.17/kWh. Also, the opportunity for hydroelectric power at a number of regional sites could be suitable for run-of-river hydro-schemes sufficient to produce up to 30MW of power at a cost of US$0.18/kWh. Potential may also exist to use crude palm oil from nearby plantations that could be mixed direct with LFO to make biodiesel. WAI has provided a provisional mine layout (Figure 7) and identified a potentially suitable naturally occurring valley some 2.5km to the north of the Tuzon deposit that could support a tailings management facility. Figure 7: Dugbe 1 Project Access will include the upgrade of the 75km road from Greenville, where a deep water port is located, to a two-lane laterite road suitable for heavy mining equipment. B u S I n e S S A n D O p e R A t I O n A L R e v I e W Global compliance standards Since Hummingbird Resources began operations in Liberia, we have been compliant with the Liberia Extractive Industries Transparency Initiative (“LEITI”), a scheme designed to ensure financial transparency and accountability to an internationally recognised standard. Liberia was the first African country to be compliant with the global EITI, and we are proud to support this initiative. Read more in our Corporate Social Responsibility report from page 39 www.hummingbirdresources.co.uk Annual report 2013 23 technical summary continued Preliminary economic assessment Dugbe 1 Project continued Project infrastructure continued Table 1.4: LOM mining production schedules, Tank Leach scenario Year 2Mtpa mining schedule Ore Waste Strip ratio Au grade 3.5Mtpa mining schedule Ore Waste Strip ratio Au grade 5Mtpa mining schedule Ore Waste Strip ratio Au grade 8Mtpa mining schedule Ore Waste Strip ratio Au grade Year 2Mtpa mining schedule Ore Waste Strip ratio Au grade 3.5Mtpa mining schedule Ore Waste Strip ratio Au grade 5Mtpa mining schedule Ore Waste Strip ratio Au grade 8Mtpa mining schedule Ore Waste Strip ratio Au grade Unit Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Unit Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t total 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 67.9 297 4.37 1.31 67.9 297 4.37 1.31 67.9 297 4.37 1.31 67.9 297 4.37 1.31 2.00 2.80 1.40 1.51 3.49 7.00 2.00 1.47 4.99 8.93 1.79 1.44 7.98 15.3 1.91 1.41 1.99 4.50 2.26 1.38 3.49 7.37 2.11 1.37 4.99 9.26 1.86 1.40 7.98 17.3 2.17 1.44 1.99 4.07 2.04 1.42 3.49 5.45 1.56 1.44 4.99 16.8 3.37 1.44 7.98 28.0 3.50 1.23 2.00 3.91 1.96 1.31 3.49 10.2 2.92 1.46 4.99 16.9 3.39 1.30 7.98 27.7 3.47 1.20 2.00 2.92 1.46 1.48 3.50 11.8 3.38 1.32 4.99 12.7 2.55 1.17 6.45 26.7 4.15 1.27 2.00 2.95 1.48 1.56 3.49 11.8 3.38 1.24 4.99 17.5 3.50 1.16 7.98 50.2 6.29 1.22 18 19 20 21 22 23 24 25 26 27 2.00 7.61 3.81 1.30 3.49 20.9 5.97 1.02 — — — — — — — — 1.99 13.4 6.71 1.22 3.49 22.6 6.46 1.49 — — — — — — — — 2.00 12.7 6.37 1.23 1.63 3.61 2.21 1.73 — — — — — — — — 1.99 13.5 6.77 1.22 2.00 13.5 6.78 1.14 2.00 14.1 7.08 1.30 2.00 13.5 6.77 1.19 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1.99 2.76 1.39 1.42 3.49 10.5 3.00 1.16 4.99 12.3 2.47 1.30 7.98 44.4 5.57 1.30 2.00 11.8 5.91 1.30 — — — — — — — — — — — — 1.99 3.54 1.78 1.28 3.49 11.9 3.41 1.14 3.46 20.6 5.96 1.24 7.98 50.0 6.27 1.28 1.99 12.4 6.23 1.21 — — — — — — — — — — — — 2.00 13.9 6.98 1.22 3.49 12.0 3.42 1.31 4.99 37.1 7.43 1.21 5.62 37.3 6.62 1.53 2.00 12.3 6.15 1.31 — — — — — — — — — — — — 1.99 9.23 4.63 1.27 3.49 6.60 1.89 1.27 4.99 31.9 6.39 1.28 — — — — 28 — — — — — — — — — — — — 1.99 5.52 2.77 1.28 3.46 20.5 5.93 1.23 4.99 30.0 6.01 1.38 — — — — 29 — — — — — — — — — — — — 2.00 3.09 1.55 1.23 3.49 24.1 6.90 1.21 4.99 31.2 6.26 1.36 — — — — 30 — — — — — — — — — — — — 1.99 2.34 1.18 1.20 3.49 23.6 6.76 1.17 4.99 31.3 6.28 1.44 — — — — 31 — — — — — — — — — — — — 2.00 7.58 3.80 1.05 3.49 22.4 6.42 1.27 4.62 20.4 4.41 1.22 — — — — 32 — — — — — — — — — — — — 1.99 13.0 6.53 1.16 3.49 20.6 5.92 1.29 2.00 7.05 3.53 1.37 3.49 21.8 6.25 1.31 1.99 4.32 2.17 1.23 3.49 22.2 6.37 1.58 — — — — — — — — 33 — — — — — — — — — — — — — — — — — — — — 34 — — — — — — — — — — — — — — — — — — — — 35 — — — — — — — — — — — — 2.00 12.6 6.31 1.37 1.99 12.7 6.38 1.54 1.99 13.0 6.50 1.31 2.00 12.7 6.39 1.07 2.00 12.7 6.37 1.30 1.99 10.2 5.12 1.58 1.63 4.06 2.49 1.74 0.47 0.51 1.08 1.23 24 Annual report 2013 Hummingbird Resources Plc Dugbe 1 Project continued Project infrastructure continued Table 1.4: LOM mining production schedules, Tank Leach scenario 2Mtpa mining schedule 3.5Mtpa mining schedule 5Mtpa mining schedule 8Mtpa mining schedule 2Mtpa mining schedule 3.5Mtpa mining schedule 5Mtpa mining schedule 8Mtpa mining schedule Year Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Year Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Unit Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Unit Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t 67.9 297 4.37 1.31 67.9 297 4.37 1.31 67.9 297 4.37 1.31 67.9 297 4.37 1.31 2.00 7.61 3.81 1.30 3.49 20.9 5.97 1.02 — — — — — — — — 2.00 2.80 1.40 1.51 3.49 7.00 2.00 1.47 4.99 8.93 1.79 1.44 7.98 15.3 1.91 1.41 1.99 13.4 6.71 1.22 3.49 22.6 6.46 1.49 — — — — — — — — 1.99 4.50 2.26 1.38 3.49 7.37 2.11 1.37 4.99 9.26 1.86 1.40 7.98 17.3 2.17 1.44 2.00 12.7 6.37 1.23 1.63 3.61 2.21 1.73 — — — — — — — — 1.99 4.07 2.04 1.42 3.49 5.45 1.56 1.44 4.99 16.8 3.37 1.44 7.98 28.0 3.50 1.23 1.99 13.5 6.77 1.22 — — — — — — — — — — — — 2.00 3.91 1.96 1.31 3.49 10.2 2.92 1.46 4.99 16.9 3.39 1.30 7.98 27.7 3.47 1.20 2.00 13.5 6.78 1.14 — — — — — — — — — — — — 2.00 2.92 1.46 1.48 3.50 11.8 3.38 1.32 4.99 12.7 2.55 1.17 6.45 26.7 4.15 1.27 2.00 14.1 7.08 1.30 — — — — — — — — — — — — 2.00 2.95 1.48 1.56 3.49 11.8 3.38 1.24 4.99 17.5 3.50 1.16 7.98 50.2 6.29 1.22 2.00 13.5 6.77 1.19 — — — — — — — — — — — — total 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 1.99 2.76 1.39 1.42 3.49 10.5 3.00 1.16 4.99 12.3 2.47 1.30 7.98 44.4 5.57 1.30 1.99 3.54 1.78 1.28 3.49 11.9 3.41 1.14 3.46 20.6 5.96 1.24 7.98 50.0 6.27 1.28 2.00 13.9 6.98 1.22 3.49 12.0 3.42 1.31 4.99 37.1 7.43 1.21 5.62 37.3 6.62 1.53 18 19 20 21 22 23 24 25 26 27 2.00 11.8 5.91 1.30 1.99 12.4 6.23 1.21 2.00 12.3 6.15 1.31 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — B u S I n e S S A n D O p e R A t I O n A L R e v I e W 1.99 9.23 4.63 1.27 3.49 6.60 1.89 1.27 4.99 31.9 6.39 1.28 — — — — 28 2.00 12.6 6.31 1.37 — — — — — — — — — — — — 1.99 5.52 2.77 1.28 3.46 20.5 5.93 1.23 4.99 30.0 6.01 1.38 — — — — 29 1.99 12.7 6.38 1.54 — — — — — — — — — — — — 2.00 3.09 1.55 1.23 3.49 24.1 6.90 1.21 4.99 31.2 6.26 1.36 — — — — 30 1.99 13.0 6.50 1.31 — — — — — — — — — — — — 1.99 2.34 1.18 1.20 3.49 23.6 6.76 1.17 4.99 31.3 6.28 1.44 — — — — 31 2.00 12.7 6.39 1.07 — — — — — — — — — — — — 2.00 7.58 3.80 1.05 3.49 22.4 6.42 1.27 4.62 20.4 4.41 1.22 — — — — 32 2.00 12.7 6.37 1.30 — — — — — — — — — — — — 1.99 13.0 6.53 1.16 3.49 20.6 5.92 1.29 — — — — — — — — 33 1.99 10.2 5.12 1.58 — — — — — — — — — — — — 2.00 7.05 3.53 1.37 3.49 21.8 6.25 1.31 — — — — — — — — 34 1.63 4.06 2.49 1.74 — — — — — — — — — — — — 1.99 4.32 2.17 1.23 3.49 22.2 6.37 1.58 — — — — — — — — 35 0.47 0.51 1.08 1.23 — — — — — — — — — — — — www.hummingbirdresources.co.uk Annual report 2013 25 technical summary continued Preliminary economic assessment Dugbe 1 Project continued Project infrastructure continued Table 1.5: LOM mining production schedules, Heap Leach scenario Year 2Mtpa mining schedule Ore Waste Strip ratio Au grade 3.5Mtpa mining schedule Ore Waste Strip ratio Au grade 5Mtpa mining schedule Ore Waste Strip ratio Au grade 8Mtpa mining schedule Ore Waste Strip ratio Au grade Year 2Mtpa mining schedule Ore Waste Strip ratio Au grade 3.5Mtpa mining schedule Ore Waste Strip ratio Au grade 5Mtpa mining schedule Ore Waste Strip ratio Au grade 8Mtpa mining schedule Ore Waste Strip ratio Au grade Unit Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Unit Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t total 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 67.9 297 4.37 1.31 67.9 297 4.37 1.31 67.9 297 4.37 1.31 67.9 297 4.37 1.31 2.00 5.38 2.69 1.37 3.49 9.39 2.69 1.34 4.99 15.2 3.05 1.30 7.98 23.2 2.91 1.33 1.99 6.20 3.11 1.31 3.49 10.5 2.99 1.26 4.98 14.7 2.94 1.29 7.98 24.2 3.03 1.35 1.99 5.87 2.94 1.26 3.49 10.4 2.96 1.35 4.99 15.1 3.04 1.46 7.98 24.2 3.03 1.34 2.00 6.25 3.13 1.22 3.49 10.2 2.91 1.32 4.99 15.2 3.04 1.33 7.98 24.4 3.06 1.18 2.00 5.91 2.96 1.30 3.49 10.6 3.05 1.40 4.99 15.1 3.02 1.29 7.98 24.5 3.07 1.17 1.99 6.45 3.24 1.29 3.49 10.6 3.04 1.41 4.99 15.1 3.02 1.20 7.98 49.9 6.25 1.26 18 19 20 21 22 23 24 25 26 27 1.99 5.60 2.81 1.28 3.49 19.8 5.68 1.26 — — — — — — — — 2.00 6.34 3.18 1.24 3.49 20.1 5.74 1.07 — — — — — — — — 1.99 5.69 2.85 1.00 2.32 2.11 0.91 1.29 — — — — — — — — 2.00 13.4 6.72 1.21 2.00 11.9 5.95 1.18 2.00 11.9 5.98 1.17 1.99 12.8 6.43 1.23 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 2.00 5.98 3.00 1.47 3.49 10.5 3.01 1.29 4.99 15.5 3.10 1.21 7.98 30.1 3.78 1.36 2.00 5.01 2.51 1.34 — — — — — — — — — — — — 1.99 5.94 2.98 1.49 3.49 10.7 3.06 1.20 4.99 14.8 2.96 1.13 7.98 45.8 5.73 1.30 1.99 7.70 3.86 1.46 — — — — — — — — — — — — 1.99 5.92 2.97 1.34 3.49 10.1 2.89 1.18 4.99 28.9 5.80 1.19 3.51 9.04 2.57 1.21 1.99 11.5 5.75 1.33 — — — — — — — — — — — — 2.00 6.31 3.16 1.38 3.49 9.77 2.80 1.21 4.99 23.6 4.72 1.33 — — — — 28 — — — — — — — — — — — — 1.99 6.44 3.23 1.35 3.49 10.0 2.87 1.21 4.99 26.1 5.23 1.35 — — — — 29 — — — — — — — — — — — — 2.00 6.06 3.04 1.30 2.19 8.73 3.99 1.04 4.99 24.2 4.84 1.47 — — — — 30 — — — — — — — — — — — — 1.99 6.17 3.10 1.15 3.49 22.9 6.55 1.20 4.99 29.0 5.82 1.14 — — — — 31 — — — — — — — — — — — — 2.00 6.45 3.23 1.22 3.49 20.6 5.91 1.22 2.52 3.05 1.21 1.28 — — — — 32 — — — — — — — — — — — — 1.99 5.98 3.00 1.21 3.49 10.2 2.92 1.39 2.00 6.04 3.02 1.14 3.49 17.8 5.11 1.44 2.00 5.52 2.77 1.21 3.49 20.4 5.83 1.48 — — — — — — — — 33 — — — — — — — — — — — — — — — — — — — — 34 — — — — — — — — — — — — — — — — — — — — 35 — — — — — — — — — — — — — — — — 2.00 12.1 6.04 1.40 1.99 7.83 3.92 1.85 1.99 12.1 6.07 1.15 2.00 10.9 5.45 1.11 1.99 12.2 6.09 1.07 2.00 4.26 2.13 1.30 1.52 1.34 0.88 1.27 26 Annual report 2013 Hummingbird Resources Plc Dugbe 1 Project continued Project infrastructure continued Table 1.5: LOM mining production schedules, Heap Leach scenario 2Mtpa mining schedule 3.5Mtpa mining schedule 5Mtpa mining schedule 8Mtpa mining schedule 2Mtpa mining schedule 3.5Mtpa mining schedule 5Mtpa mining schedule 8Mtpa mining schedule Year Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Year Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Ore Waste Strip ratio Au grade Unit Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Unit Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t Mt Mt W:O g/t 67.9 297 4.37 1.31 67.9 297 4.37 1.31 67.9 297 4.37 1.31 67.9 297 4.37 1.31 1.99 5.60 2.81 1.28 3.49 19.8 5.68 1.26 — — — — — — — — 2.00 5.38 2.69 1.37 3.49 9.39 2.69 1.34 4.99 15.2 3.05 1.30 7.98 23.2 2.91 1.33 2.00 6.34 3.18 1.24 3.49 20.1 5.74 1.07 — — — — — — — — 1.99 6.20 3.11 1.31 3.49 10.5 2.99 1.26 4.98 14.7 2.94 1.29 7.98 24.2 3.03 1.35 1.99 5.69 2.85 1.00 2.32 2.11 0.91 1.29 — — — — — — — — 1.99 5.87 2.94 1.26 3.49 10.4 2.96 1.35 4.99 15.1 3.04 1.46 7.98 24.2 3.03 1.34 2.00 13.4 6.72 1.21 — — — — — — — — — — — — 2.00 6.25 3.13 1.22 3.49 10.2 2.91 1.32 4.99 15.2 3.04 1.33 7.98 24.4 3.06 1.18 2.00 11.9 5.95 1.18 — — — — — — — — — — — — 2.00 5.91 2.96 1.30 3.49 10.6 3.05 1.40 4.99 15.1 3.02 1.29 7.98 24.5 3.07 1.17 2.00 11.9 5.98 1.17 — — — — — — — — — — — — 1.99 6.45 3.24 1.29 3.49 10.6 3.04 1.41 4.99 15.1 3.02 1.20 7.98 49.9 6.25 1.26 1.99 12.8 6.43 1.23 — — — — — — — — — — — — total 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 2.00 5.98 3.00 1.47 3.49 10.5 3.01 1.29 4.99 15.5 3.10 1.21 7.98 30.1 3.78 1.36 1.99 5.94 2.98 1.49 3.49 10.7 3.06 1.20 4.99 14.8 2.96 1.13 7.98 45.8 5.73 1.30 1.99 5.92 2.97 1.34 3.49 10.1 2.89 1.18 4.99 28.9 5.80 1.19 3.51 9.04 2.57 1.21 18 19 20 21 22 23 24 25 26 27 2.00 5.01 2.51 1.34 1.99 7.70 3.86 1.46 1.99 11.5 5.75 1.33 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — B u S I n e S S A n D O p e R A t I O n A L R e v I e W 2.00 6.31 3.16 1.38 3.49 9.77 2.80 1.21 4.99 23.6 4.72 1.33 — — — — 28 2.00 12.1 6.04 1.40 — — — — — — — — — — — — 1.99 6.44 3.23 1.35 3.49 10.0 2.87 1.21 4.99 26.1 5.23 1.35 — — — — 29 1.99 7.83 3.92 1.85 — — — — — — — — — — — — 2.00 6.06 3.04 1.30 2.19 8.73 3.99 1.04 4.99 24.2 4.84 1.47 — — — — 30 1.99 12.1 6.07 1.15 — — — — — — — — — — — — 1.99 6.17 3.10 1.15 3.49 22.9 6.55 1.20 4.99 29.0 5.82 1.14 — — — — 31 2.00 10.9 5.45 1.11 — — — — — — — — — — — — 2.00 6.45 3.23 1.22 3.49 20.6 5.91 1.22 2.52 3.05 1.21 1.28 — — — — 32 1.99 12.2 6.09 1.07 — — — — — — — — — — — — 1.99 5.98 3.00 1.21 3.49 10.2 2.92 1.39 — — — — — — — — 33 2.00 6.04 3.02 1.14 3.49 17.8 5.11 1.44 — — — — — — — — 34 2.00 4.26 2.13 1.30 1.52 1.34 0.88 1.27 — — — — — — — — — — — — — — — — — — — — — — — — 2.00 5.52 2.77 1.21 3.49 20.4 5.83 1.48 — — — — — — — — 35 — — — — — — — — — — — — — — — — www.hummingbirdresources.co.uk Annual report 2013 27 technical summary continued Preliminary economic assessment Dugbe 1 Project continued environmental studies The Government of Liberia, via the Environmental Protection Agency (“EPA”), has indicated that it requires Hummingbird to complete an ESIA for the Dugbe 1 Project to comply with international standards. environmental and social issues have been identified which are likely to require careful consideration and allocation of resources for management: ► pollution of surface water and changes to surface water flows; ► pollution of groundwater and Environmental and socio-economic receptors have been identified, including: surface water resource, groundwater, biodiversity, local communities and artisanal mining. Based on the high sensitivity of the receptors, the following potential localised changes to groundwater flows and levels; ► loss of, or changes to, significant biodiversity, including internationally threatened and endangered species; ► unplanned increases in the human population leading to resource issues and complex relocation related impacts; ► presence of a well-established artisanal mining industry; and ► cumulative impacts on the forest ecosystem. No unmanageable impacts have been identified at this early stage of the project’s development. Table 1.6: Summary of initial capital expenditure for the Dugbe 1 Project Direct costs 2Mtpa 3.5Mtpa 5Mtpa 8Mtpa 2Mtpa 3.5Mtpa 5Mtpa 8Mtpa tank Leach Heap Leach Direct costs (US$m) Mining Process – single stage crushing Process – milling Process – leaching Process – carbon circuit Process – gold room Process – tailings detoxification Process – reagents Process – others Total process Infrastructure Power Total infrastructure and power Tailings management facility Total direct (US$m) EPCM Temporary facilities Freight Communications and vendors Spares Working capital Contingency Total indirect (US$m) total initial capital expenditure 53.5 4.99 16.8 6.66 3.89 0.80 1.77 1.44 1.84 38.2 13.5 0.66 14.2 6.90 113 10.1 1.78 1.78 0.89 2.97 13.6 11.9 43.0 156 68.7 6.98 23.5 9.31 5.45 1.13 2.47 2.02 2.58 53.4 18.9 0.92 19.9 9.70 152 14.1 2.49 2.49 1.24 4.15 19.1 16.6 60.2 212 103 8.64 29.1 11.5 6.75 1.39 3.06 3.02 3.19 66.7 23.5 1.14 24.6 12.0 207 17.6 3.10 3.10 1.55 5.16 23.8 20.7 74.9 282 134 11.5 38.5 15.3 8.94 1.85 4.06 3.32 4.23 87.7 24.3 1.52 25.8 16.0 263 22.0 3.88 3.88 1.94 6.47 29.8 25.9 93.8 357 53.5 — — — — — — — — 18.3 — — 13.9 — 85.7 — — — — — — — 68.7 — — — — — — — — 25.5 — — 19.5 — 114 — — — — — — — 103 — — — — — — — — 31.6 — — 24.2 — 159 — — — — — — — 134 — — — — — — — — 41.9 — — 32.0 — 208 — — — — — — — 22.4 108 31.3 145 38.8 198 51.4 259 28 Annual report 2013 Hummingbird Resources Plc Capital expenditure For the 2Mtpa base case, the initial capital expenditure was estimated at US$156m for a Tank Leach process route and US$108m for a Heap Leach process route. The maximum initial capital expenditure required to develop the project for the 8Mtpa case has been estimated at US$357m for a Tank Leach operation and US$259m for a Heap Leach operation. The initial capital expenditure estimates are summarised in Table 1.6. The mining component of the estimates equates to approximately 35% of the total capital cost, with the processing capital expenditure (including indirect costs) at 50% and the remaining 15% consisting of infrastructure and tailings items. Sustaining capital expenditure throughout the LOM is summarised in Table 1.7 below. Operating costs Utilising the mining production schedules, a fleet and haulage analysis was used to estimate the mining operating cost over the LOM. This includes estimates for drill, blast, load, haul, grade control and mine maintenance operations. Table 1.7: Estimated LOM sustaining capital expenditure Category Unit 2Mtpa 3.5Mtpa 5Mtpa 8Mtpa Tank Leach operations US$m Heap Leach operations US$m 52 31 44 26 35 22 33 20 Table 1.8: WAI operating cost estimate process route Tank Leach Heap Leach Mining G&A Rehabilitation Unit 2Mtpa 3.5Mtpa US$/t ore US$/t ore US$/t rock US$/t rock US$/t ore 20.30 18.00 8.40 2.20 0.50 0.25 7.31 2.07 0.50 0.25 5Mtpa 17.10 6.87 1.68 0.50 0.25 8Mtpa 16.30 6.49 1.60 0.50 0.25 The mining operating costs range from US$2.20/t rock to US$1.60/t rock for the 2Mtpa to 8Mtpa operations respectively, with the operating cost decreasing as production rate increases and economies of scale are achieved. Mineral processing operating costs, made up of estimates for reagents, power, labour and maintenance, range from US$20.30/t ore to US$16.30/t ore for Tank Leach and US$8.40/t ore to US$6.49/t ore for Heap Leach. These operating costs assume power generation using a light fuel oil plant at a cost of US$0.28/kWh (Table 1.8). B u S I n e S S A n D O p e R A t I O n A L R e v I e W SpOtLIGHt On LIBeRIA: pygmy Hippo Foundation In July 2011 we founded the Pygmy Hippo Foundation, a UK registered charity, dedicated to improving conservation in Liberia. Read more in our Corporate Social Responsibility report from page 39 www.hummingbirdresources.co.uk Annual report 2013 29 technical summary continued Preliminary economic assessment Dugbe 1 Project continued Life of Mine plan WAI completed a series of post-tax discounted cash flow analyses of the Dugbe 1 Project, applying variable mining rates and assessing both the Tank Leach and Heap Leach options, to assess the project’s potential from a financial perspective (Table 1.9). The resultant models assumed a tax holiday for the first three years of production during capital redemption, followed by a standard 30% tax on revenue as from year four. For a Tank Leach, contractor mining scenario, the Dugbe 1 Project generates a positive NPV, discounted at 10%, ranging between US$118m and US$418m depending on the production rate, with robust IRRs of 38% to 56% respectively. Using a three year trailing gold price of US$1,500/oz, the payback period is 2–3 years depending on the production rate. For a Heap Leach operating scenario, the NPV (10%) ranges between US$59m and US$212m, with IRRs ranging from 30% to 52% respectively. The payback period is 3–4 years, depending on the level of production. For a Tank Leach, owner-operated mining scenario (Table 1.10), the Dugbe 1 Project generates a positive NPV (10%) ranging between US$170m and US$504m depending on the production rate, with robust IRRs of 30% to 47% respectively. Using a three year trailing gold price of US$1,500/oz, the payback period is 2–3 years depending on the production rate. For a Heap Leach, owner-operated scenario, the NPV (10%) ranges between US$112m and US$357m, with IRRs ranging from 25% to 47% respectively. The payback period is 3–4 years, depending on the level of production. Table 1.9: Financial analysis of the Dugbe 1 Project – Contractor mining Summary of Results LOM totals Total ore treated Total gold produced Total revenue Total operating cost Unit kt Moz US$m US$m 2.5 3,800 2,740 Total operating cost cash years 1–5 US$/oz 952 Total operating cost cash US$/oz 1,240 Initial capital expenditure US$m 102 Sustaining capital expenditure Total royalty, G&A Taxes US$m US$m US$m Operating free cash flow US$m npv 10% IRR payback LOM strip Strip years 1–5 US$m % Years Ratio Ratio 67 389 (119) 384 118 38.2 3.0 4.37 1.82 tank Leach Heap Leach 2Mtpa 3.5Mtpa 5Mtpa 8Mtpa 2Mtpa 3.5Mtpa 5Mtpa 8Mtpa 67,900 67,900 67,900 67,900 67,400 67,400 67,400 67,400 2.5 3,800 2,400 893 1,100 143 48 389 2.5 3,800 2,340 906 1,080 178 41 389 2.5 3,800 2,190 930 1,020 223 42 389 1.6 2,480 1,780 1,130 1,250 56 42 288 1.6 2,480 1,600 1,020 1,140 78 35 285 1.6 2,480 1,530 939 1,100 95 31 285 (173) (153) (138) (79) (108) (103) 641 257 55.3 2.0 4.37 2.39 699 299 46.2 3.0 4.37 2.59 818 418 56.4 2.0 4.37 3.00 224 59.1 29.9 3.0 3.79 2.97 334 127 48.1 2.0 3.79 2.92 358 144 39.9 3.0 3.79 3.02 1.6 2,480 1,410 935 1,030 125 28 285 (92) 427 212 52.0 2.0 3.79 3.02 30 Annual report 2013 Hummingbird Resources Plc B u S I n e S S A n D O p e R A t I O n A L R e v I e W Conclusions In the conclusion of the PEA WAI believed that the Dugbe 1 Project represents an attractive opportunity with significant potential as the project continues to be refined from scoping through to feasibility study level. In terms of the size and average gold grade of the project, it is considered to represent an attractive financial opportunity with a short payback period. The financial analysis indicates that a Tank Leach, contractor operated scenario generates the most attractive economic return, although this requires greater initial capital expenditure than the Heap Leach scenario. Table 1.10: Financial analysis of the Dugbe 1 Project – Owner operated Summary of Results LOM totals Total ore treated Total gold produced Total revenue Total operating cost Total operating cost cash years 1–5 Unit kt Moz US$m US$m US$/oz Total operating cost cash US$/oz Initial capital expenditure US$m Sustaining capital expenditure Total royalty, G&A Taxes US$m US$m US$m Operating free cash flow US$m npv 10% IRR payback LOM strip Strip years 1–5 US$m % Years Ratio Ratio tank Leach Heap Leach 2Mtpa 3.5Mtpa 5Mtpa 8Mtpa 2Mtpa 3.5Mtpa 5Mtpa 8Mtpa 67,900 67,900 67,900 67,900 67,400 67,400 67,400 67,400 2.5 3,800 2,160 814 1010 156 52 389 2.5 3,800 1,900 2.5 3,800 1,830 2.5 3,800 1,730 1.6 2,480 1,270 1.6 2,480 1,140 1.6 2,480 1,070 1.6 2,480 995 759 904 212 44 389 768 878 281 35 389 782 835 357 33 389 882 943 109 30 288 793 861 146 25 285 719 824 198 22 285 716 776 259 20 285 (277) (298) (266) (227) (217) (223) (200) (164) 764 170 30.4 3.0 4.37 1.82 954 337 43.4 3.0 4.37 2.39 990 378 38.6 3.0 4.37 2.59 1,070 504 47.0 3.0 4.37 3.00 563 112 25.4 4.0 3.79 2.97 659 223 38.0 3.0 3.79 2.92 696 266 38.0 4.0 3.79 3.02 751 357 46.9 3.0 3.79 3.02 www.hummingbirdresources.co.uk Annual report 2013 31 exploration exploration has progressed on the Dugbe, Joe village, nemo Creek and tiehnpo licences over the past year. Dugbe Shear Zone (“DSZ”) Key facts ► A prominent northeast–southwest trending crustal fault structure ► 70km strike length within our licence area ► 2,051km2 of licence area ► 3.8Moz of Resources in Dugbe 1 Project area, currently comprising Dugbe F and Tuzon deposits ► 75km by road to Greenville port – operational deep water port that underwent an upgrade during spring 2013 An extensive geophysical and radiometric airborne survey was flown over 17,000 line km in H1 2013 over the entire 2,000km2 Dugbe Shear Zone licence area. This is the largest ever airborne survey flown in Liberia. While final images are still pending from the work, early indications are that geology south of the Dugbe Shear Zone is markedly different from the more established understanding of geology around the Dugbe 1 Project, north of the DSZ. When the complete and interpreted images are submitted to Hummingbird from the airborne survey, this should greatly enhanced our understanding of the regional geology across the shear zone and will hopefully identify a large number of potential targets we will be able to actively explore. We will also be able to re-rank the prospectivity of all of our exploration targets by incorporating this new data into our existing data which will be a significant step forward. The Dugbe 1 Project area is a theoretical 10km radius around the maiden Dugbe F Resource and overlaps both the Dugbe F and Joe Village licences. During the last financial year infill drilling has commenced in the Dugbe 1 Project, mostly on an 80m x 80m grid at Tuzon deposit. Tuzon Resource definition has become increasingly well-defined, as the geological team has re-logged the historic and new 2013 drill core to create a new more accurate geologic model of the deposit, based on an improved understanding of the critical features of the mineralisation. Following the re-logging of Tuzon drill core, a similar review of Dugbe F diamond drill core is now underway. 32 Annual report 2013 Hummingbird Resources Plc Sampling protocols and data collection have been reviewed on all levels, in concert with a transfer of the Company database from Microsoft Access to Datashed. Validation of historical data has been conducted, and all current practices updated to reflect the new arrangement of Hummingbird’s database. The success of this refined approach and increase in detailed knowledge of the mineralised zone has led to better targeting of gold horizons at Tuzon. The reviewed and validated data and geologic model will be fed into the DFS currently underway, giving the best possible information from which to base the studies. The 15,802m of infill drilling completed to date in 2013 was designed to increase the confidence and categorisation of the resource at Tuzon and has also been logged to continue the ongoing building and development of the detailed geological model. A series of environmental holes have been drilled initially to monitor water level and water quality in the area, using the Geebo River as the baseline level. AMEC has been awarded the Environmental and Social Impact Assessment portion of the DFS, and also more recently the hydrogeological component of the study. Geotechnical holes are currently being drilled in HQ diamond core by the same rig. These holes will be situated in Tuzon area for current feasibility work, with monitoring and assessment by Coffey. Dugbe licence (Blocks A, B, D, F) Following on momentum from last year and the success of exploration at the Dugbe 1 Project, work through Q3 2012 to Q2 2013 has largely focused on development studies to prove the economics of the Dugbe F and Tuzon deposits. Various studies and metallurgical sampling have been conducted, in concert with consulting parties to complete a PEA in early 2013 and push forward a DFS which is currently underway. In June 2012 two specific drill programmes were drawn up, a “statistical cross” at Dugbe F, and a grid pattern for Tuzon. These brief programmes were needed to inform the short range lateral information (along strike and across strike), used to derive variograms, determine infill drill spacing and thereby design effective infill drilling programmes for the deposits. Fourteen holes were completed at Dugbe F and five holes at Tuzon. While the Tuzon programme was cut short, enough information was acquired to allow infill drilling to progress in January 2013. Drilling and trenching were started in early 2013. As the drilling contractor was setting up over Tuzon deposit, a trench programme of 23 additional trenches was planned to confirm and extend the known surficial outcropping of mineralised zone. Once underway a second CS1400 diamond drill rig was brought in to assist, and both rigs remained productive and active through to programme completion at end of May. Results returned from this programme were very encouraging, both adding confidence to the gold grade distribution between existing drill holes and continuing to define the geological model and structural controls on the resource. B u S I n e S S A n D O p e R A t I O n A L R e v I e W SpOtLIGHt On LIBeRIA: Community relations We live and work with the communities that surround our operations, and explore responsibly in light of these. Read more in our Corporate Social Responsibility report from page 39 www.hummingbirdresources.co.uk Annual report 2013 33 exploration continued Working out from the Dugbe 1 Project area, our exploration teams identified some highly prospective targets in the Joe Village licence, around 15km north-west of Dugbe F. Dugbe Shear Zone (“DSZ”) continued Dugbe licence (Blocks A, B, D, F) continued The two rigs each averaged 2,000m drilling per month, completing the infill programme within four months. In full 62 new diamond drill holes were completed, for a grand total of 15,802m. All core was oriented on each run, and after training with Reflex staff the ACTII down-hole orientation tool was used full time to increase precision and reliability of down-hole surveys. A total of 10,447 half core samples were sent for assay, with final results pending in the next few weeks. to revisit and assay additional sections of the historic drill core as we look to properly define the resource and move forward through the DFS. Joe village licence Working out from the Dugbe 1 Project area, our exploration teams identified some highly prospective targets in the Joe Village licence, around 15km north-west of Dugbe F. This target area is known as NW Joe Village. The targets comprise stream sediment sample anomalies in an area close to drainage watersheds and near to artisanal workings (these latter points indicate that the source to the artisanal gold must be close by). Accordingly we undertook an extensive series of soil sample surveys over four large grids and a total of 2,400 samples were taken to investigate these targets. During Q1 2013 the trench programme was also extended at Tuzon, from the initial 13 to a total of 36 new trenches. 3,530m planned work produced 1,515 samples. As these results have come in, Hummingbird has seen the steady expansion of the mineralised zone at surface. All new data is being incorporated into our existing framework and the geologic model. Further trench work was planned and commenced for Dugbe F deposit in Q1 2013. Thirteen trenches were dug to completion producing 894 samples. These trenches were planned similarly to the programme at Tuzon, to confirm the extent of mineralised outcrop at surface. After work was completed to sample and process the new core from 2013 drilling, work has continued back into old drill core where selective sampling previously left certain intervals un-assayed. With a fresh look at Tuzon deposit geology this year and an increasingly clear view of the controls on mineralisation, it is now important These soil grids showed four distinct gold-in-soil anomalies within an east-west trend, over a strike length of 8km. The largest of these is in Grid 6, extending for about 2km in strike length. These anomalies appear to extend from the west where the same anomalous zones appear to have been identified on the ground of Tawana Resources further to the west. From these targets identified within NW Joe Village, trenching continued in relation to positive results from stream sediment and soil samples, and in proximity to local gold workings. Over 2,300 channel samples were taken from 24 trenches in the area, totalling 5,350m of work. Results were disappointing in the area but not barren and thin zones of anomalous gold were noted from samples. This area is low-lying and marshy with a deeper weathering profile, making it harder to reach bedrock and take truly representative samples. For this reason and to test the deeper, non-leached saprolite below, an auger drill was acquired recently to further study such areas. The Sackor drill programme was completed in Q3 2012, a 20 hole diamond drill programme of 3,727m. From this 3,478 samples were sent for assay and returned with favourable results. The mineralised zones appear to be stacked similar to Tuzon, and though of smaller scale are still open to the north after first phase drilling. Best results include: ► 13.0m @ 1.33 g/t Au in SKDC007; ► 7.0m @ 1.63 g/t Au in SHDC008; and ► 6.0m @ 3.36 g/t Au in SKDC001. Sackor is 3km South-West of Dugbe F deposit, and represents Hummingbird’s third gold discovery within the Dugbe 1 Project. West from Dugbe 1 Project the geology team set up a trench programme over the Sackor 2 gold-in-soil anomaly. Six trenches were surveyed and finished for 1,616m and 728 channel samples taken. At Grid 5 in Joe Village a similar size programme was initiated in the second half of 2012. Five trenches were completed for 1,700m, producing 702 samples. These areas produced similar results to NW Joe Village, where a deeper weathered profile was encountered compared to the Dugbe 1 anomalies. Low-grade gold results on both programmes provide target sites for further work. 34 Annual report 2013 Hummingbird Resources Plc nemo Creek licence The Nemo Creek licence is a large licence area of 690km2 in the south of our DSZ licence package. It lies to the south of the Dugbe 1 Project area. Stream sediment sampling identified numerous gold anomalies. Accordingly, a total of twelve soil sampling grids were designed to investigate these anomalies further. These grids amount to 20,000 soil samples at 200m x 40m spacing, of which nearly 6,500 were completed through Q3 2012. Teams worked from west to east systematically to complete grids as access via logging roads opened in this direction. Four grids were sampled to completion, including grids 1, 4, 11, and 12. Assay results returned through Q4 2012 have repeatedly shown bands of east-northeast trending gold-in-soil anomalies, extending in strike length along low ridges between soil lines. Further exploration has been proposed to investigate these anomalies, with the ultimate aim of extending the Hummingbird resource base south of the DSZ. Nemo Creek represents a vast area of interest with strike-parallel anomalies emerging in relation to local artisanal gold mining activity. tiehnpo licence The 665 km2 Tiehnpo licence lies on the east end of Hummingbird’s 2,051km2 ground held along the Dugbe Shear Zone, approximately 50km east of the Dugbe 1 Project. The north part of the Tiehnpo licence area has long been known to host extensive artisanal workings in alluvial settings. Establishing the hard rock source of gold in these alluvial workings has been a target for the Hummingbird exploration team. At Sardiaken in the Tiehnpo licence, 2,800m of trenches were completed through to the end of 2012. The steep topography in the area allowed work to reach good quality saprolite and bedrock on most trench lines, and structures measured within the workings confirmed southerly dipping strata as mapped previously. Over 1,400 trench samples were collected during the programme from 15 separate trenches. Assays returned during Q4 2012 and Q1 2013 were not as significant as hoped, but do show continuity from trench to trench. The anomalous values can be traced along strike with respect to topography and dip of bedrock. The appearance of the gold horizon is of a long lateral zone which dips to the south and is comparable to Dugbe F mineralisation in its geometry. Exploration in Sardiaken area is still too early stage to fully determine the significance of trenching results to date. B u S I n e S S A n D O p e R A t I O n A L R e v I e W eMpLOYee pROFILe: Brotris nG Donkeh Geological Technician “ With the responsibilities to sample and log, I am so happy to work with Hummingbird because it’s a life improvement.” www.hummingbirdresources.co.uk Annual report 2013 35 exploration continued Hummingbird is targeting BIF hosted gold deposits across the Zia licence. A large amount of exploration, including stream sediment sampling, soil sampling, trenching and auger drilling, has occurred across this licence. Juazohn Shear Zone (“JSZ”) The JSZ separates younger Proterozoic metasediments and metavolcanics on the west from Archaean gneisses on the east. of the North-East trending BIF ridge, along which numerous artisanal gold workings and stream sediment anomalies are located. Zia licence This licence covers 443km2 and was awarded to Deveton Mining Company (“Deveton”) in November 2005. Hummingbird owns 80% of Deveton. Hummingbird is targeting BIF hosted gold deposits across the Zia licence. A large amount of exploration, including stream sediment sampling, soil sampling, trenching and auger drilling, has occurred across this licence during the time Hummingbird has owned it. In addition 1,950m of scout core drilling were completed at the end of 2010. While the results did not show intersections of obvious economic grades, a large number of pyritic mineralised zones were intersected, with gold values up to 1.7 g/t. In fact, the mineralised zones are characterised by strong silver and bismuth haloes, and further scout drilling is proposed, once the status of the licences is finalised (Zia and the adjacent licences are the subject of an MDA application). Kana Hills licence This licence covers 257km2 and was awarded to Geotess International Corporation in 2004, which was then transferred to Afro Minerals Inc. (“Afro”) in 2007. Hummingbird owns 80% of Afro. The licence adjoins the Zia licence in the JSZ and covers the continuation Jababli licence The licence covers 400km2 and was awarded to Deveton in October 2009. Hummingbird owns 80% of Deveton. Earlier stream sediment sampling work established exciting gold targets associated with amphibolite ridges of likely Archaean age. Follow-up soil sampling defined coincident gold/ arsenic anomalies along a 9km ridge with abundant artisanal workings in streams draining off it. A trenching programme amount of 1,300m in length was completed along the Peace Camp ridge. This was focused on gold-in-soil and stream sediment anomalies on the Peace Camp ridge, a 9km ridge of amphibolite and other metamorphosed rocks of likely Archaean age. Trench results were disappointing, indicating narrow structures containing gold mineralisation. However, there are two other prospects within the Jababli licence where further work is justified: ► Sloh Meh – A major artisanal working near a watershed, where previous soil sampling was unsuccessful due to the depth and inhomogeneous nature of the soil horizon; and ► Peace Camp East – A major artisanal working situated to the east of Peace Camp ridge, and yet to be investigated. Zwedru licence This licence covers 1,000km2 and was awarded to Hummingbird in April 2010. Hummingbird owns 100% of this licence. A stream sediment sampling programme, totalling over 1,140 samples on the Zwedru licence revealed a number of anomalous gold areas, mostly focused around the east and southeast of the 1,000km2 licence. Follow-up stream sediment samples have been taken, confirming the extent of these anomalies. Dube Shear Zone tawake licence This licence covers 665km2 and was awarded to Hummingbird in April 2010. The licence is 100% Hummingbird owned. The licence is geologically well-situated, lying on the junction of the regional scale Dugbe and Dube Shear Zones, with evidence of abundant intrusive igneous activity. As a point of comparison, the gold mineralisation in the Dugbe Shear Zone appears to be spatially associated with acid intrusive activity. Over 600 stream sediment samples collected on the licence indicate broad prospectivity and support the idea that the adjoining shear zones have acted to increase complexity and raised the potential for gold mineralisation in the area. 36 Annual report 2013 Hummingbird Resources Plc Follow-up soil grids with prospect-scale geological and regolith mapping have been proposed for 2013. The outcome of these programmes would determine an advance to trenching and possible scout drilling. Gekehn licence This licence covers 795km2 and was awarded to Hummingbird in April 2010. The licence is 100% Hummingbird owned. 570 completed stream sediment samples showed greater prospectivity for gold in the northern half of the licence. A general phased plan to enhance stream sediment anomalies with further sampling is in place for 2013. Once these are complete, soil grids will be proposed over areas of interest, notably in the east where the Dube Shear passes through the licence, and in the north-west where several encouraging stream sediment samples are located. plibo licence This licence covers 375km2 and was awarded to Hummingbird in April 2010. The licence is 100% Hummingbird owned. A total of 470 stream sediment samples have been collected on the licence. A proposal for over 2,500 soil samples was submitted in the last fiscal year to define an isoclinal antiform delineated by the US Geological Survey (“USGS”). These fall into three grids which contain a significant proportion of the anomalous stream sediment results, and lie in a northeast-southwest (“NE-SW”) orientation over the top of the structure. A more detailed exploration plan has now been proposed, including closer-spaced follow-up stream sediment sampling and then soil sampling on a 120m x 40m grid. These steps will progressively define potential targets and justify each new phase in turn, with trenching and reconnaissance drilling to follow if early work is successful. Cestos Shear Zone Ba licence This licence covers 625km2 and was renewed by Deveton in October 2011. Hummingbird owns 80% of Deveton. The Ba licence lies in Archaean rocks immediately west of the Cestos Shear Zone, and is also immediately north of Amlib United Minerals Inc’s Cestos project, with its multiple gold targets. In Q3 2012 results were returned for 1,088 soil samples over three grids within Ba licence. Results in the north-east for Grid 3 are encouraging, showing a possible bedrock gold source on an arcuate ridge above significant artisanal workings. B u S I n e S S A n D O p e R A t I O n A L R e v I e W eMpLOYee pROFILe: Darius paygar Storeman “ I have worked for Hummingbird for over three years. Initially I worked in Dugbe Camp and now I am head storeman for the Company based in Monrovia and in charge of making sure all our field operations are correctly supplied. It is an excellent job and I am very proud to work for Hummingbird.” www.hummingbirdresources.co.uk Annual report 2013 37 exploration continued the Dtt work showed that it is possible to obtain concentrate samples with a Fe grade averaging 60% to 68% Fe in concentrates across the 90 samples. Iron ore Mt Ginka licence This licence covers 155km2 and is held in a 50:50 joint venture with Petmin Ltd. In previous years a number of exploration activities were conducted at the Mt Ginka iron ore prospect. These included compilation of historical work, followed by an airborne geophysical survey with geophysical interpretation and reviews using highly experienced external consultants, together with geological mapping and an initial trenching programme. This previous work had identified the existence of magnetic iron formation (“IF”) units over the 30km long east-west trending ridge. In order to further investigate the thickness and character of the Mt Ginka iron formation along strike, as well as to obtain fresh magnetite samples for preliminary test work a scout drilling and further trenching programme was undertaken in the year. Six diamond drill holes were completed for a total of 1,058m, and eight trenches completed for a total of 848m. The programme was successful in intersecting the main Mt Ginka iron formation a number of times, with true thicknesses of up to 41m thick in trenches on the west side of the 30km long ridge, and generally thinner on the east. The geological team recommended further drilling and trenching work, with a focus on the west side of the ridge, to further define the extent and thickness of the iron formation. silica grains. It should be noted that these DTT samples were ground to 75 micron size, and it is normal for magnetite ores to be ground finer than that to properly separate the silica and magnetite grains. Overall, the DTT work is at a successful stage in establishing the possibility of upgrading the Ginka magnetite ore to a saleable product. Mt Ginka drill programme A total of 90 samples from holes GKDH-001 and GKDH-002 were submitted for Davis Tube Tests (“DTT”). The purpose of DTT is to determine whether a magnetic iron ore (in this case magnetite) is amenable to magnetic upgrading, in order to yield a saleable magnetite concentrate. The DTT work showed that it is possible to obtain concentrate samples with a Fe grade averaging 60% to 68% Fe in concentrates across the 90 samples. However, Si02 grades remained higher than desirable for a magnetite concentrate (4.8% to 13% range) in many samples. As a result finer grind may be necessary to liberate magnetite grains from the adjacent 38 Annual report 2013 Hummingbird Resources Plc Corporate social responsibility at Hummingbird we believe that it is our duty to work across all of our operations in the most socially and environmentally responsible way possible. From Board level through to our in-country team, every Hummingbird employee recognises the importance of working safely and respectfully to protect the environment and the communities in a country we are privileged to work in. Hummingbird Resources: ► provides a safe working environment and invests in the skills of our workforce; ► engages and consults with local communities and other key stakeholders, working towards development together; and ► respects and protects the natural environment. Hummingbird invests directly in the people of Liberia. We believe that this is the greatest lasting contribution that can be made. Our education and training programmes are central to our CSR strategy, allowing us to operate safely and sustainably. By developing skills in our workforce, Hummingbird’s activities will have positive multiplier effects to the wider population. Hummingbird takes an industry best practice approach to environmental and social risk management. By identifying and assessing risks early in the project cycle, the Company can first look at alternative options that avoid negative risks altogether, such as through changing the location or employment of specific technologies. Where avoidance is not possible, the Company will mitigate these risks through specific operating procedures, training and management plans. For risks that remain after such mitigation measures, the Company is committed to offsetting or compensating where necessary. Although Liberia’s developmental and socio-economic challenges continue, our actions as a responsible company have a long-term impact by supporting sustainable growth, especially within the rural areas where we operate. Living and working in Liberia is a great privilege and we understand the responsibility we have to the citizens of Liberia. We aim to leave a positive legacy which survives beyond the life of mine, economically, environmentally and socially. Throughout the past year, the Company has taken great strides to further improve its environmental and social management and performance. Below are details of some of the major achievements to date, as well as a timeline for the path ahead in the continuing development. B u s i n e s s a n d O p e r a t i O n a l r e v i e w emplOyee prOfile: Benjamin volawuo Junior Geologist “ My experience with Hummingbird has been an exciting one. I have enjoyed working with my colleagues from all around the world. Unlike other companies in Liberia, Hummingbird has the largest land acquisition making it a major force to be reckoned with in the emerging mineral industry in Liberia, enabling us young geologists to work in various areas of exploration.” www.hummingbirdresources.co.uk Annual report 2013 39 Corporate social responsibility continued Hummingbird resources invests directly in the people of liberia. we believe that this is the greatest lasting contribution that can be made while we are here. positive development impacts from Hummingbird operations employment and training Hummingbird continues to be a major employer in Liberia and over 90% of the Company’s workforce are Liberian nationals. In a country of high unemployment, this represents a significant development impact. As the Company progresses towards mine development, generating local employment opportunities will continue to be a priority focus area. Investing directly into people through training and sponsorship is key to our corporate strategy. This past year the Company has partnered with Education Development Centre (“EDC”) in a USAID funded education and training programme. To date it has seen over 20 Hummingbird employees through an eight month course at two different levels. In addition, Hummingbird continually trains staff across its operations. This includes first aid training for field staff, geological training courses, environmental and social work, computer skills training sessions and vocational skill training such as carpentry and masonry. access and infrastructure Hummingbird has continued to invest significant financial and logistical resources into the upgrade of the rural road network that supports its main operational site at the Dugbe 1 Project. Infrastructure development remains a priority area for Government investment, especially in rural counties such as Sinoe, not least since improved access can bring wide benefits to local communities that have for so long been cut off from access to basic public services. During the early part of 2013 we undertook a major road rehabilitation project of 40km of road from Plazon bridge (located 35km east of Greenville) to Dugbe Camp, using a variety of road building machines. For the first time in many years, ambulances are now able to travel from the county capital of Greenville to the communities surrounding the Dugbe 1 Project site, all in less than two hours. Early in 2013, Hummingbird worked with a major GSM mobile network provider in Liberia, to provide network coverage around the Dugbe 1 Project area with the erection of a GSM tower on the hill adjacent to Dugbe Camp, powered by the Company’s electricity. This alone has significantly transformed the ability of the local population, including employees in-camp, to communicate and will in turn provide impetus for their own development. Community-level projects The Company’s work on specific community development projects continues. However, in order to maximise the impact of the social investment projects and to adopt a targeted and proactive approach, Hummingbird initiated a process of needs assessment across key local communities and other local stakeholders, conducting development planning consultation meetings with local communities, government ministries and various potential partner organisations. Following these rounds of consultation, a budget has been approved by the Hummingbird Safety, Health, Environmental and Community (“SHEC”) committee for the implementation of a number of projects throughout 2013. As a result, during the past year we have upgraded smaller access roads into communities, rebuilt over ten bridges, and built the first hand pump in Joplokpo (one of the major traditional host communities). Furthermore, the focus of this ongoing work will be on the provision of safe drinking water and improved sanitation. This work will be conducted by a local implementing NGO partner with oversight provided by a committee comprised of representatives from both the Company and the local communities. Performance measurement and evaluation of these projects will drive greater social impact and enable sustainable community involvement and ownership of such development projects. The work both completed to date, and planned for the rest of 2013, combined with ongoing stakeholder engagement work will form the basis of the Community Development Plan that is currently being developed in partnership with AMEC who is conducting our Environmental and Social Impact Assessment. internal capacity building and management systems review Central to the ability of any company to implement sustainability programmes on the ground is to ensure that the necessary human resource requirements are in place. To that end, the Company has taken a number of steps to bolster the environmental and social department and put in place clear roles and responsibilities. In February 2013, Hummingbird contracted independent SHEC consultants, North Coast Consulting, to help advise the Company through the forthcoming ESIA process and provide independent oversight of 40 Annual report 2013 Hummingbird Resources Plc Our education and training programmes are central to our Csr strategy, allowing us to operate safely and sustainably. standards and policies commenced in March 2013 and are expected to be complete by the end of the calendar year. Of particular note is the newly revised community-level Grievance Mechanism that provides a fair and transparent manner for stakeholders to raise concerns with the Company. These are handled according to a specific procedure (developed in consultation with local communities) with set deadlines for provision of an initial response and follow-up investigation. Statistics on the GM are complied and reported on monthly to the SHEC committee. internal management system review. In March 2013 the Company hired a full time SHEC Manager, David Hebditch, to oversee and manage all SHEC related matters in the country. In the field, the Company has also taken on two Community Liaison Officers with a good blend of youth and experience. These two positions are key to help improve community engagement and ensure there is a permanent line of communication with local stakeholders. Since last year, Hummingbird has worked on reviewing all internal policies and procedures. This has resulted in a heavily updated and more comprehensive set of operating standards and policies and management plans. These have all been developed in line with the IFC Performance Standards and informed by industry best practice for exploration as seen in the PDAC e3 plus guidelines. The roll out and implementation of these B u s i n e s s a n d O p e r a t i O n a l r e v i e w emplOyee prOfile: marcellin rakotondraibe Geologist “ I have greatly benefited from the Hummingbird team and local people.” www.hummingbirdresources.co.uk Annual report 2013 41 Corporate social responsibility continued maintaining strong community relations with the host communities in which the Company works remains a key pillar of the company’s Csr strategy. ifC investment In December 2012, the Company saw the IFC become a major shareholder. Adherence to the IFC’s Performance Standards enables companies to meet international best practice by managing environmental and social risks and impacts so that development opportunities are enhanced. Hummingbird is bound to compliance with these standards and, as the only mining company currently financed by the IFC in Liberia, this is a significant endorsement of the environmental and social credentials of the Company. In summary, the IFC standards are: ► PS1: Assessment and Management of Environmental and Social Risks and Impacts; ► PS2: Labour and Working Conditions; ► PS3: Resource Efficiency and Pollution Prevention; ► PS4: Community Health, Safety and Security; ► PS5: Land Acquisition and Involuntary Resettlement; ► PS6: Biodiversity Conservation and Sustainable Management of Living Resources; ► PS7: Indigenous Peoples; and ► PS8: Cultural Heritage. The IFC Performance Standards cover a whole host of environmental and social risks, and full details of the current version (July 2012) are available through the IFC website. sustainability monitoring and transparency Increasingly companies and other organisations are turning to measuring their sustainability performance. This moves the sustainability agenda from generic statements towards measurable outcomes. To that end, Hummingbird Resources has instigated a number of environmental and social monitoring programmes that will form the basis for the development of key performance indicators (“KPIs”) as the Company develops. A monthly report is prepared by the SHEC Manager and submitted to the SHEC committee containing details of these statistics. From May this year, the Board has committed to working towards reporting to the internationally recognised sustainability reporting scheme, the Global Reporting Initiative (“GRI”). This provides a standardised format for companies and organisations to report on their sustainability performance. At first, the Company will report to the Level C standard, before moving towards Level B and A reporting as operations commence and the Company grows. Lastly, Hummingbird Resources continues to support transparency in the extractives industry through its annual submissions of all Government payments to the Liberia Extractive Industries Transparency Initiative (“EITI”), the national programme aligned to the international EITI scheme. Community relations Maintaining strong community relations with the host communities in which the Company works remains a key pillar of the company’s CSR strategy. Hummingbird has clear principles and procedures for stakeholder engagement that look to engage with communities before, during and after all operations. Importantly, these look to include vulnerable groups such as women and youth, as well as take account of special economic groups such as Artisanal and Smallscale Miners (“ASM”) that surround many of the Company’s operations. The Company holds regular monthly meetings with all key affected communities, which are formalised in the IFC compliant Stakeholder Engagement Strategy, as well as more informal quarterly meetings with all communities. All of these meetings are documented and minuted. Alongside the ESIA, a Stakeholder Engagement Plan is currently being developed that will identify, analyse and structure all engagement with a diverse and inclusive range of stakeholders. The Company has now employed a community liaison team headed by an experienced Liberian national. Within each community the Company has encouraged and helped instigate the formation of committees with representatives from each group within the community, such as youth, women, elders and artisanal miners. These are designed to help facilitate ease of communication and decision making within the community. environmental management Hummingbird Resources operates in areas of considerable environmental importance. The Dugbe 1 Project is located within the Upper Guinean Rainforest that constitutes a global biodiversity hotspot, and is 15km from Sapo National Park, Liberia’s foremost protected area. As such it is vital that Hummingbird’s operations are conscious 42 Annual report 2013 Hummingbird Resources Plc A first draft of the ESIA is planned to be submitted to the epa of liberia in december 2013, with the full twelve month baseline studies and submission of the final report for EPA approval due at the end of June 2014. of the environmental impact they may have and that necessary procedures and risk mitigation plans are in place. To that end, the Company has taken considerable steps to review and update all relevant standard operating instructions. Examples include clear procedures on minimising unnecessary clearance of vegetation during geological operations, as well as site rehabilitation practices that ensure local ecosystems remain in the conditions that allow for natural re-vegetation to pre-operation levels. The Company has a clear bushmeat policy that bans all staff and contractors from hunting and purchasing bushmeat as well as transporting any form of bushmeat in Hummingbird vehicles. This is underpinned by regular toolbox talks and education sessions on the importance of ecological management. In February of 2013, Hummingbird commissioned The Biodiversity Consultancy, a leading biodiversity specialist group, to conduct a Rapid Biodiversity Assessment (“RBA”) and preliminary Critical Habitat Assessment across Hummingbird licence areas. This work has proved invaluable in identifying potential species and critical habitats where Hummingbird operates and will in turn inform the baseline studies that will be conducted as part of the ESIA. Alongside the RBA and internal management system review, the ESIA baseline studies will help to inform the development of an Ecological Management Plan for the exploration, construction, operation and closure phases of the Company’s operations. This will be based on international best practice, and involve contributions from various stakeholders including international experts, national policy makers and various national and international conservation groups. environmental and social impact assessment In April 2013, following a competitive tendering process involving a number of international consultancy groups, Hummingbird commissioned AMEC to conduct the ESIA for Hummingbird’s flagship Dugbe 1 Project. AMEC, in partnership with the Liberian national consultancy Earth Environmental Consultancy (“EEC”), is tasked with developing a robust, IFC and Liberian EPA compliant, ESIA. AMEC and EEC have assembled a strong multi- disciplinary team with extensive West African and Liberian experience. B u s i n e s s a n d O p e r a t i O n a l r e v i e w emplOyee prOfile: martin t mapika Land Surveyor “ I feel at home with Hummingbird and want to see the project getting to the mining stage.” www.hummingbirdresources.co.uk Annual report 2013 43 Corporate social responsibility continued it is vital that Hummingbird’s operations are conscious of the environmental impact they may have and that necessary procedures and risk mitigation are in place. environmental and social impact assessment continued Baseline studies commenced in May 2013 with various consultants having already conducted a number of site visits. As part of the formal ESIA process, AMEC and EEC conducted a round of Scoping Study Stakeholder consultation meetings in late May to help inform the development of the ESIA Terms of Reference as well as fulfil national requirements and introduce the projects to a number of key stakeholders. These included all national ministries and Governmental departments in Monrovia and Sinoe, international and national non-Governmental organisations, as well as of course local communities and community leaders around the project site. A first draft of the ESIA is planned to be submitted to the EPA of Liberia in December 2013, with the full twelve month baseline studies and submission of the final report for EPA approval due at the end of June 2014. The ESIA will be conducted to international standards and industry best practice with significant input from key Hummingbird stakeholders, such as the IFC, helping to ensure that the studies are robust and thorough. As the most advanced and complete environmental and social studies to be completed so far by Hummingbird, this is an exciting project that will lay the basis for ensuring that Hummingbird’s operations continue to be undertaken in the most environmentally and socially responsible manner possible. Quick facts – sapo national park ► Liberia’s first and only protected area ► Located in Sinoe County, South-Eastern Liberia ► 1,804km2 ► Home to the majority of the world’s remaining pygmy hippos ► Part of the Upper Guinean Rainforest – a biodiversity hotspot of global significance spOtligHt On liBeria: leadership for Conservation in africa (“lCa”) ►The LCA was established by South African ►The LCA’s vision is “to harness the collective National Parks, with support from Gold Fields Ltd and the International Union for Conservation of Nature (“IUCN”). It held its inaugural meeting in August 2006, and works to establish links between business and conservation. will and capacity of business and conservation leaders for sustainable conservation-led socio-economic development in Africa”. By the year 2020, the LCA plans to save 20 million hectares of African rainforest and currently has membership from 16 African countries. Read more at www.lcafrica.org 44 Annual report 2013 Hummingbird Resources Plc in attendance, the gala featured special remarks by Madame Anyaa Vohiri, Executive Director of Liberia’s Environmental Protection Agency. The ball was a huge success, raising over £80,000 for the PHF. In May 2013, Hummingbird’s CEO Daniel Betts and Head of Business Development Bert Monro cycled the famous Lands End to John O’Groats challenge, 1,000 miles, to raise funds for the PHF. Over ten days, the pair were joined by many friends and supporters, and were able to raise over £12,000 for the Pygmy Hippo Foundation, notably from corporate sponsors such as Casimir Capital to international extractive companies also working in Liberia such as Putu Iron Ore Mining Inc. and Aureus Mining Inc. If cycling across the UK wasn’t enough of a physical trial, Bert completed the Liberian Marathon on 25 August 2013 to raise further funds for the Pygmy Hippo Foundation. Currently, in addition to raising funds to launch a feasibility study of the organisation’s PPP plan, the PHF is in discussions with the Forestry Development Authority on how best to deploy resources to effectively improve anti-poaching patrols and otherwise equip the staff at Sapo National Park. B u s i n e s s a n d O p e r a t i O n a l r e v i e w Pygmy Hippo Foundation management, especially across Africa. Currently, WCS is assisting the PHF and LCA in developing a PPP model that would be most effective for Sapo National Park, which will be determined by a comprehensive feasibility study, which is planned to commence in August 2013. The IFC has expressed its interest in supporting the PHF’s efforts to reinvigorate Sapo, and the PHF is currently in discussion with all relevant stakeholders to design a PPP model that would involve private-sector support for a better-resourced, better-protected national park management for Sapo. The PHF hopes to prove the success of this PPP scheme at Sapo and, in the future, help to introduce this concept to protect pygmy hippo habitat elsewhere, as well as other critical ecosystems in Liberia. fundraising events The PHF formally launched in October 2012, with a ball at the Natural History Museum in London. With over 400 guests vision In October 2012, Hummingbird Resources launched the Pygmy Hippo Foundation, a UK registered charity, as a catalyst for greater conservation in Liberia. The Pygmy Hippo Foundation (“PHF”) aims to promote the conservation, preservation and protection of pygmy hippos’ natural habitat in the forests of eastern Liberia. There are estimated to be fewer than 3,000 pygmy hippos surviving in the remaining patches of Upper Guinean tropical forest, a critical ecosystem recognised as having one of the world’s greatest densities of biodiversity. The largest intact stretch is located in south-eastern Liberia, around Sapo National Park. Focusing on the pygmy hippo as a flagship for this unique rainforest, the Pygmy Hippo Foundation is seeking to undertake a partnership with the Government of Liberia to enhance the protection and management of Sapo National Park through a public-private partnership (“PPP”). towards a conservation partnership In November 2012, the Pygmy Hippo Foundation, along with Leadership for Conservation in Africa (“LCA”), a South African-based conservation organisation, signed a Memorandum of Understanding with the Forestry Development Authority of the Republic of Liberia (“FDA”), to explore possibilities for re-developing Sapo National Park through using a PPP model. In April 2013, PHF and the LCA approached the New York-based Wildlife Conservation Society (“WCS”), known worldwide for its experience in different models of national park www.hummingbirdresources.co.uk Annual report 2013 45 Board of directors ian david Cockerill non-executive Chairman Ian has nearly 40 years of experience in the mining industry, having been responsible for business development at AngloGold, and CEO of both Gold Fields Ltd and AngloCoal, between 1997 and 2009. He is currently Executive Chairman of Petmin Ltd, an AIM and JSE mining company concentrating on bulk commodities, a Non-Executive Director of Orica Ltd in Australia, the Senior Lead Independent Director of Ivanplats Ltd, Vice-chairman of African Minerals Ltd, and an advisor to several other companies associated with the natural resources sector. In addition, Ian is Chairman of the Leadership for Conservation in Africa (“LCA”) a not for profit organisation promoting sustainable employment opportunities, linked to conservation projects, across the African continent. daniel edward Betts managing director Daniel founded Hummingbird in November 2005. After graduating from Nottingham University he worked for Accenture Management Consultants until he joined the Betts family business in 2000. 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 2005. 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 2012. 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 2001. 46 Annual report 2013 Hummingbird Resources Plc stephen alexander Betts non-executive director Stephen co-founded the Company in November 2005. 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 19 years’ experience in natural resource companies. He is a founder and Director of AIM quoted VANE Minerals plc and also founder and Director of Seamwell International Ltd, a private company developing underground coal gasification projects in China. From 1995 to 2001 he worked as an associate director at Laing and Cruickshank Investment Management, part of the Credit Lyonnais Group. david almgren pelham non-executive director David is a mineral geologist with 30 years’ global exploration experience. He has worked with a number of mining and exploration companies such as Placer Dome Inc, Outkumpu Mining and AMAX Exploration. David has broad experience in the exploration and assessment of gold deposits, including all major gold deposit types, as well as in the exploration and assessment of deposits of gemstones, major base metals and energy minerals, with a major focus on Africa. He is credited with the discovery of the Chirano 5–6m ounce gold mine in Ghana. Key tO COmmittee memBersHip audit committee remuneration committee safety, health and environmental committee Committee Chairman B u s i n e s s a n d O p e r a t i O n a l r e v i e w www.hummingbirdresources.co.uk Annual report 2013 47 48 Annual report 2013 Hummingbird Resources Plc financial statements 50 Directors’ report 55 Directors’ responsibilities statement 56 Independent auditor’s report 57 Consolidated income statement 57 Consolidated statement of comprehensive income 58 Consolidated balance sheet 59 Consolidated statement of cash flows 60 Consolidated statement of changes in equity 61 Notes to the consolidated financial statements 81 Company balance sheet 82 Company statement of cash flows 83 Company statement of changes in equity 84 Notes to the company financial statements f i n a n C a l i s t a t e m e n t s www.hummingbirdresources.co.uk Annual report 2013 49 Directors’ report The Directors present their report on the affairs of the Group, together with the financial statements and Auditor’s Report for the year ended 31 May 2013. Principal activities The Group’s principal activity is the exploration, evaluation and development of mineral exploration targets, principally gold, focused exclusively in Liberia. The subsidiary and associated undertakings principally affecting the losses or net assets of the Group in the year are listed in note 15 to the financial statements. Business review and future developments The purpose of this review is to show how the Group assesses and manages risk and uncertainty and adopts appropriate policies and targets. Further details of the Group’s business and expected future developments are also set out in the Chairman’s Statement and in the Business and Operational Review. Principal risks and uncertainties The Group and Company are subject to various risks relating to political, social, industry, business and financial conditions. The following risk factors, which are not exhaustive, are particularly relevant to the Company and the Group’s business activities: Exploration risk There is no assurance that the Group’s exploration activities will be successful, and statistically few properties that are explored are ultimately developed into producing mines. Political risk All of the Group’s operational activities are located in Liberia and the Group is therefore dependent on the political and economic situation in Liberia and the wider African region. After 14 years of civil war, hostilities ceased in 2003, and Liberia has since experienced a wave of new investment, improved infrastructure, and has become one of the fastest growing economies in West Africa. However there can be no assurance that political stability will continue. Licensing and title risk The Group’s exploration activities are dependent upon the grant of appropriate licences, concessions, leases, permits and regulatory consents which may be withdrawn or made subject to limitations. Such licences and permits are as a practical matter subject to the discretion of the applicable Government or Government office. The Group must comply with known standards, existing laws and regulations that may entail greater or lesser costs and delays depending on the nature of the activity to be permitted. The interpretations, amendments to existing laws and regulations, or more stringent enforcement of existing laws and regulations could have a material adverse impact on the Group’s results of operations and financial condition. Whilst the Group continually seeks to do everything within its control to ensure that the terms of each licence are met and adhered to, third parties may seek to exploit any technical breaches in licence terms for their own benefit. Additionally whilst the Group has diligently investigated title to all its licences and, to the best of its knowledge, title to all is in good standing, this should not be construed as a guarantee of title. If a title defect does exist it is possible that the Group may lose all or part of its interest in the relevant properties. Licence renewal and Mineral Development Agreement risk There is a risk that negotiations with the Government in relation to the renewal or extension of a licence, or the grant of a Mineral Development Agreement (“MDA”), may not result in the renewal, extension or grant taking effect prior to the expiry of the previous licence period, and there can be no assurance of the terms of any extension, renewal or grant. 50 Annual report 2013 Hummingbird Resources Plc Principal risks and uncertainties continued Financing risk The development of the Group’s properties will depend on the Group’s ability to obtain financing through the raising of equity capital, joint venture of projects, debt financing, farm outs or other means. There is no assurance that the Group will be successful in obtaining the required financing. If the Group is unable to obtain additional financing as needed, some interests may be relinquished and/or the scope of the operations reduced. Details about the use of financial instruments by the Company and its subsidiaries as well as exposure to financial risks are given in note 24 to the financial statements. Key performance indicators Given the stage of development of the Group’s operations, the key performance indicators used by management for monitoring progress and strategic objectives for the business are set out below. These are discussed within the CEO’s Statement and in the Technical Review below: Resources – indicated and inferred (ounces Au) Metres drilled (cumulative) Samples collected (cumulative) Exploration expenditure (cumulative) Cash balance Share price 31 May 2013 31 May 2012 3,835,000 3,817,000 69,036 109,780 $46.6m $13.7m £0.415 53,316 76,192 $32.5m $15.5m £1.115 corporate governance The Company is subject to the corporate governance regime of the United Kingdom. The Directors acknowledge the importance of the guidelines set out in the Corporate Governance Code and the QCA Guidelines and therefore intend to comply with these so far as is appropriate having regard to the size and nature of the Company. Board The Board currently comprises seven members, three of whom are executive. The Board meets regularly and is responsible for strategy, performance, approval of major capital projects and the framework of internal controls. To enable the Board to discharge its duties, all Directors receive appropriate and timely information. Briefing papers are distributed to all Directors in advance of Board meetings, and all Directors have access to the advice and service of the Company Secretary. The Articles of Association provide that Directors will be subject to re-election at the first opportunity after their appointment and they will voluntarily submit to re-election at intervals of three years. Audit committee The audit committee comprises Matthew Idiens (Chairman) and Stephen Betts. The audit committee is responsible for reviewing a wide range of financial matters including the annual and interim reports, the Company’s internal control and risk management system. The audit committee’s responsibilities include meeting with the Company’s auditor and agreeing the scope of their audit. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 51 Directors’ report continued corporate governance continued Remuneration committee The remuneration committee comprises Ian Cockerill (Chairman), Matthew Idiens and Stephen Betts. The remuneration committee is responsible for reviewing the performance of the executive directors, setting their remuneration levels and determining the design and setting the targets for any incentive schemes operated by the Company for the Directors. It is also responsible for determining at which point the Company should adopt any form of share option plan, and considering the grant of options under any such plan. The Board itself determines the remuneration of the non-executive directors. safety, health and environmental committee (“sHEc”) The SHEC comprises Ian Cockerill (Chairman), Daniel Betts and William Cook. SHEC is responsible for formulating and reviewing the safety, health and environmental policies of the Group. It is also responsible for ensuring that all Directors are kept informed of their health and safety obligations. Post balance sheet events Events after the reporting date have been disclosed in note 26 to the financial statements. Results and dividends The results of the Group for the year ended 31 May 2013 are set out in the Consolidated Income Statement. The Directors do not recommend payment of a dividend for the year (2012: $nil). Directors and Directors’ interests The Directors of the Company during the year and their beneficial interests in the ordinary shares of the Company for the year were as follows: ID Cockerill1 SA Betts2,4 MC Idiens RJH Smith DE Betts3,4 WBT Cook DA Pelham TR Hill5 number of shares at 31 May 2013 531,083 673,500 3,219,607 — 4,611,048 287,150 2,325 92,617 Number of shares at 31 May 2012* 531,083 539,100 3,219,607 41,130 4,476,648 287,150 2,325 92,617 1 – ID Cockerill’s interests are held by family trusts in which he has a beneficial interest. 2 – SA Betts’s interests consist of 109,000 shares held by SA Betts, 92,500 shares held by Caroline Betts, 292,0004 shares held by Stephen Betts & Sons Limited, and 180,0004 shares held by the Stephen Betts & Sons Limited (Self Administered) Pension Scheme. 3 – DE Betts’s interest consists of 4,139,048 shares held by DE Betts, 292,0004 shares held by Stephen Betts & Sons Limited, and 180,0004 shares held by the Stephen Betts & Sons Limited (Self Administered) Pension Scheme. 4 – The 292,000 shares held by Stephen Betts & Sons Limited and 180,000 shares held by Stephen Betts & Sons Limited (Self Administered) Pension Scheme are included in both SA Betts and DE Betts. 5 – This interest includes contracts for difference over 5,000 ordinary shares, 18,684 ordinary shares which are held in his pension, and 23,933 ordinary shares which are owned by his wife. * Or on appointment if later. On 18 July 2012 Thomas Hill was appointed as Finance Director of the Company. On 2 November 2012 Roderick Smith resigned as a Non-Executive Director of the Company. On 28 June 2013 David Pelham moved from being an Executive Director to a Non-Executive Director. 52 Annual report 2013 Hummingbird Resources Plc Directors and Directors’ interests continued The Directors’ interests in the share options of the Company at 31 May 2013 were as follows: Options at 1 June 2012* Options granted during the year Options lapsed during the year 20,000 20,000 — — 337,500 16,500 16,500 — — 450,000 16,500 16,500 — — 270,000 16,500 16,500 — — 1,125,000 42,000 42,000 — — 675,000 38,500 38,500 — — 225,000 32,500 32,500 — — 67,500 35,500 35,500 — — — — 25,000 25,000 — — — 16,500 16,500 — — — 16,500 16,500 — — — 16,500 16,500 — — — 125,000 125,000 — — — 65,000 65,000 — — — 32,500 32,500 — — — 65,000 65,000 — — — — — — — — — — — — — — (270,000) — (16,500) (16,500) (16,500) — — — — — — — — — — — — — — — — — — — — Options at 31 May 2013 20,000 20,000 25,000 25,000 337,500 16,500 16,500 16,500 16,500 450,000 16,500 16,500 16,500 16,500 — 16,500 — — — 1,125,000 42,000 42,000 125,000 125,000 675,000 38,500 38,500 65,000 65,000 225,000 32,500 32,500 32,500 32,500 67,500 35,500 35,500 65,000 65,000 Exercise price £1.25 £1.25 £1.12 £1.12 £0.486 £1.25 £1.25 £1.12 £1.12 £0.486 £1.25 £1.25 £1.12 £1.12 £0.486 £1.25 £1.25 £1.12 £1.12 £0.486 £1.25 £1.25 £1.12 £1.12 £0.486 £1.25 £1.25 £1.12 £1.12 £0.486 £1.25 £1.25 £1.12 £1.12 £0.486 £1.25 £1.25 £1.12 £1.12 Date of grant First date of exercise Final date of exercise 27/06/2011 27/06/2011 11/07/2012 11/07/2012 27/06/2012 27/06/2013 11/07/2013 11/07/2014 27/06/2021 27/06/2021 11/07/2022 11/07/2022 26/10/2010 27/06/2011 27/06/2011 11/07/2012 11/07/2012 26/10/2010 27/06/2011 27/06/2011 11/07/2012 11/07/2012 26/10/2010 27/06/2011 27/06/2011 11/07/2012 11/07/2012 26/10/2010 27/06/2011 27/06/2011 11/07/2012 11/07/2012 26/10/2010 27/06/2011 27/06/2011 11/07/2012 11/07/2012 26/10/2010 27/06/2011 27/06/2011 11/07/2012 11/07/2012 26/10/2010 27/06/2011 27/06/2011 11/07/2012 11/07/2012 24/12/2011 27/06/2012 27/06/2013 11/07/2013 11/07/2014 24/12/2011 27/06/2012 27/06/2013 11/07/2013 11/07/2014 24/12/2011 27/06/2012 27/06/2013 11/07/2013 11/07/2014 24/12/2011 27/06/2012 27/06/2013 11/07/2013 11/07/2014 24/12/2011 27/06/2012 27/06/2013 11/07/2013 11/07/2014 24/12/2011 27/06/2012 27/06/2013 11/07/2013 11/07/2014 24/12/2011 27/06/2012 27/06/2013 11/07/2013 11/07/2014 26/10/2020 27/06/2021 27/06/2021 11/07/2022 11/07/2022 26/10/2020 27/06/2021 27/06/2021 11/07/2022 11/07/2022 26/10/2020 27/06/2021 27/06/2021 11/07/2022 11/07/2022 26/10/2020 27/06/2021 27/06/2021 11/07/2022 11/07/2022 26/10/2020 27/06/2021 27/06/2021 11/07/2022 11/07/2022 26/10/2020 27/06/2021 27/06/2021 11/07/2022 11/07/2022 26/10/2020 27/06/2021 27/06/2021 11/07/2022 11/07/2022 3,586,000 724,000 (319,500) 3,990,500 ID Cockerill ID Cockerill ID Cockerill ID Cockerill SA Betts SA Betts SA Betts SA Betts SA Betts MC Idiens MC Idiens MC Idiens MC Idiens MC Idiens RJH Smith RJH Smith RJH Smith RJH Smith RJH Smith DE Betts DE Betts DE Betts DE Betts DE Betts WBT Cook WBT Cook WBT Cook WBT Cook WBT Cook DA Pelham DA Pelham DA Pelham DA Pelham DA Pelham TR Hill TR Hill TR Hill TR Hill TR Hill Total * Or on appointment if later. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 53 Directors’ report continued Directors’ remuneration ID Cockerill SA Betts MC Idiens RJH Smith DE Betts WBT Cook DA Pelham TR Hill Total Directors’ remuneration Directors emoluments for the year ended 31 May 2013 $’000 Directors emoluments for the year ended 31 May 2012 $’000 63 52 54 22 261 222 176 226 1,076 64 51 54 52 218 202 169 — 810 The remuneration committee is in the process of determining the design and setting the targets of a performance based incentive scheme for the executive Directors. Additionally DA Pelham is entitled to a discovery bonus based on $0.10 per proved/probable reserve ounce. Directors’ indemnities The Company has obtained third party indemnity provisions for the benefit of its Directors and Officers. supplier payment policy It is the Group’s policy to make payments, where possible, to suppliers in accordance with agreed terms provided that the supplier has performed in accordance with the relevant terms and conditions. Trade payables of the Group at 31 May 2013 were equivalent to 51 (2012: 35) days’ purchases, based on the average daily amount invoiced by suppliers during the year. Trade payables of the Company at 31 May 2013 were equivalent to 28 (2012: 22) days’ purchases, based on the average daily amount invoiced by suppliers during the year. charitable and political donations The Company has made charitable donations of $180,000 (2012: $118,000) during the year. The Company has not made any payments to political parties during the year (2012: $nil). statement as to disclosure of information to the auditor Each of the persons who is a Director at the date of approval of this Annual Report confirms that: ► so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and ► the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006. Baker Tilly UK Audit LLP has expressed its willingness to continue in office as auditor and a resolution to re-appoint them will be proposed at the forthcoming Annual General Meeting. This Directors’ Report has been approved by the Board and signed on its behalf by: DE Betts Director 14 August 2013 Registered Office: 49–63 Spencer Street, Hockley, Birmingham B18 6DE Company registered in England and Wales 05467327 54 Annual report 2013 Hummingbird Resources Plc Directors’ responsibilities statement The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and have elected under company law to prepare the Company financial statements in accordance with IFRS as adopted by the EU. The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and the Company and the financial performance of the Group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing the Group and Company financial statements, the Directors are required to: ► select suitable accounting policies and then apply them consistently; ► make judgements and accounting estimates that are reasonable and prudent; ► state whether they have been prepared in accordance with IFRSs adopted by the EU; and ► prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Hummingbird Resources plc website. Legislation in the United Kingdom governing the preparation and dissemination of financial statement may differ from legislation in other jurisdictions. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 55 independent auditor’s report scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at http://www.frc.org.uk/Our- Work/Codes-Standards/Audit-and- assurance/Standards-and-guidance/ Standards-and-guidance-for-auditors/ Scope-of-audit/UK-Private-Sector- Entity-(issued-1-December-2010).aspx. Opinion on financial statements In our opinion: ► the financial statements give a true and fair view of the state of the Group’s and the parent Company’s affairs as at 31 May 2013 and of the Group’s loss for the year then ended; ► the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; ► the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2006; and ► the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the companies Act 2006 In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. We have audited the Group and parent Company financial statements (“the financial statements”) which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Statements of Cash Flows, the Consolidated and Company Statements of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and, as regards the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As more fully explained in the Directors’ Responsibilities Statement the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (“APB’s”) Ethical Standards for Auditors. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: ► adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or ► the parent Company financial statements are not in agreement with the accounting records and returns; or ► certain disclosures of Directors’ remuneration specified by law are not made; or ► we have not received all the information and explanations we require for our audit. Andrew Allchin (senior statutory Auditor) For and on behalf of BAKER tiLLY UK AUDit LLP, statutory Auditor chartered Accountants 2 Whitehall Quay Leeds Ls1 4HG 14 August 2013 56 Annual report 2013 Hummingbird Resources Plc consolidated income statement for the year ended 31 May 2013 continuing operations Revenue Profit on deemed disposal Share based payments Other administrative expenses Administrative expenses Finance income Finance expense Share of joint venture loss Loss before tax Tax Loss for the year attributable to equity holders of the parent Loss per ordinary share Basic and diluted ($ cents) Notes 12 22 5 8 9 12 10 11 2013 $’000 — — (679) (2,786) (3,465) 463 (145) (225) (3,372) — (3,372) 2012 $’000 — 588 (1,139) (3,147) (3,698) 263 (674) (46) (4,155) — (4,155) (6.13) (7.78) consolidated statement of comprehensive income for the year ended 31 May 2013 Loss for the year Other comprehensive income Exchange translation differences on foreign operations total comprehensive loss for the year attributable to equity holders of the parent 2013 $’000 (3,372) — 2012 $’000 (4,155) — (3,372) (4,155) F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 57 consolidated balance sheet as at 31 May 2013 Assets non-current assets Intangible exploration and evaluation assets Property, plant and equipment Investment in joint venture current assets Trade and other receivables Amounts due from joint venture Cash and cash equivalents total assets Liabilities current liabilities Trade and other payables Other financial liabilities Amounts due to joint venture total liabilities net assets Equity Share capital Share premium Retained earnings Equity attributable to equity holders of the parent Notes 13 14 12 16 12, 16 16 18 19 12 21 2013 $’000 2012 $’000 46,589 607 711 47,907 753 — 13,692 14,445 62,352 2,564 10,049 382 12,995 49,357 908 46,355 2,094 49,357 32,522 1,363 936 34,821 851 35 15,503 16,389 51,210 2,602 — 1,139 3,741 47,469 855 41,922 4,692 47,469 The financial statements of Hummingbird Resources Plc were approved by the Board of Directors and authorised for issue on 14 August 2013. They were signed on its behalf by: DE Betts Director company number 05467327 The notes to the consolidated financial statements form part of these financial statements. 58 Annual report 2013 Hummingbird Resources Plc Consolidated statement of cash flows for the year ended 31 May 2013 Net cash outflow from operating activities investing activities Purchases of intangible exploration and evaluation assets Purchases of property, plant and equipment Interest received net cash used in investing activities Financing activities Net proceeds from issue of shares Proceeds from warrants issued Financial liabilities issued net of issue costs Net cash from financing activities net decrease in cash and cash equivalents Effect of foreign exchange rate changes cash and cash equivalents at beginning of year cash and cash equivalents at end of year Notes 23 2013 $’000 (3,822) (12,458) (85) 150 (12,393) 4,486 355 9,708 14,549 (1,666) (145) 15,503 13,692 2012 $’000 (2,201) (13,391) (593) 208 (13,776) 42 — — 42 (15,935) (674) 32,112 15,503 F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 59 consolidated statement of changes in equity for the year ended 31 May 2013 As at 1 June 2011 Comprehensive loss for the year: Loss for the year total comprehensive loss for the year Transactions with owners in their capacity as owners: Issue of shares total transactions with owners in their capacity as owners Share based payments As at 1 June 2012 Comprehensive loss for the year: Loss for the year total comprehensive loss for the year Transactions with owners in their capacity as owners: Issue of shares total transactions with owners in their capacity as owners Share based payments As at 31 May 2013 Share capital $’000 854 — — 1 1 — 855 — — 53 53 — 908 Share premium $’000 41,881 — — 41 41 — 41,922 — — 4,433 4,433 — 46,355 Retained earnings $’000 7,490 (4,155) (4,155) — — 1,357 4,692 (3,372) (3,372) — — 774 2,094 Total $’000 50,225 (4,155) (4,155) 42 42 1,357 47,469 (3,372) (3,372) 4,486 4,486 774 49,357 60 Annual report 2013 Hummingbird Resources Plc notes to the consolidated financial statements for the year ended 31 May 2013 1 General information Hummingbird Resources Plc is incorporated in England and Wales under the Companies Act. The address of the registered office is 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 and development of mineral exploration targets, principally gold, focused exclusively in Liberia. 2 Adoption of new and revised standards The financial statements have been drawn up on the basis of accounting policies consistent with those applied in the financial statements for the year to 31 May 2012. In the current year, the following new and revised Standards have been adopted. The adoption of these standards, interpretations and amendments did not materially impact the Group. international Financial Reporting interpretations (“iFRic”) ► IFRIC 19 ► IFRIC 14 Extinguishing Financial Liability with Equity Instruments Limit on a Defined Benefit Asset, Minimum Funding Requirement and Their Interaction The following Standards and Interpretations which have not been applied in the financial statements were in issue but not yet effective (and in some cases had not yet been endorsed by the EU). The Directors do not expect that the adoption of these Standards or Interpretations in future periods will have a material impact on the financial statements of the Company or the Group. ► IFRS 1 (amended) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters ► IFRS 1 (amended) Government Loans ► IFRS 7 (amended) Disclosures – Transfers of Financial Assets ► IFRS 7 (amended) Offsetting Financial Assets and Financial Liabilities ► IFRS 9 ► IFRS 10 ► IFRS 11 ► IFRS 12 ► IFRS 13 Financial Instruments Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement ► IAS 1 (amended) Presentation of Items of Other Comprehensive Income ► IAS 12 (amended) Deferred Tax: Recovery of Underlying Assets ► IAS 19 (amended) Employee Benefits ► IAS 27 ► IAS 28 Separate Financial Statements Investments in Associates and Joint Ventures ► IAS 32 (amended) Presentation – Offsetting Financial Assets and Financial Liabilities ► IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 3 Significant accounting policies Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) 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 the 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 $1.5164 (2012: $1.5576). www.hummingbirdresources.co.uk Annual report 2013 61 F i n A n c A L i s t A t E M E n t s notes to the consolidated financial statements continued for the year ended 31 May 2013 3 Significant accounting policies continued Going concern The Directors have reviewed forecasts and budgets based on current expected levels of expenditure and have concluded that the Group has sufficient funds available to meet its commitments for at least the next twelve months from the date of the approval of financial statements. The Directors regularly review the funding position of the Group and its cash flow forecasts. As a significant proportion of costs are discretionary, the Directors are able to take action to reduce expenditures should this be necessary. The development of the Group’s properties through to production and revenue generation will depend on the Group’s ability to obtain financing through the raising of equity capital, joint venture of projects, debt financing, farm outs or other means. There is no assurance that the Group will be successful in obtaining the required financing. If the Group is unable to obtain additional financing as needed, some interests may be relinquished and/or the scope of the operations reduced. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 May each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of subsidiaries acquired of or disposed of during the year are included in the Consolidated Income Statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interest’s share of changes in equity since the date of the combination. Losses applicable to the non-controlling interest in excess of the non-controlling parties’ interests in the subsidiaries equity are allocated against the interest of the Group except to the extent that the non-controlling interest has a binding obligation and is able to make an additional investment to cover the losses. Joint ventures Where the Group holds an interest in a jointly controlled entity, it accounts for its interest using the equity method. Under the equity method, the investment in the jointly controlled entity is recognised at cost and the carrying amount is increased or decreased to recognise the Group’s share of the profit or loss of the joint venture after the date of recognition. Where the Group contributes or sells assets to a joint venture in exchange for an equity interest in the jointly controlled entity, the Group recognises in profit and loss for the period the proportion of the gain or loss attributable to the equity interests of the other ventures. Leasing Rentals payable by the Group under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Foreign currencies For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in United States Dollars (“$”), which is the functional currency of all of the entities in the Group, and the presentation currency for the consolidated financial statements. Exchange differences are recognised in the profit or loss in the period in which they arise. 62 Annual report 2013 Hummingbird Resources Plc 3 Significant accounting policies continued taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Property, plant and equipment Property, plant and equipment (“PP&E”) are carried at cost less accumulated depreciation and any recognised impairment loss. Depreciation and amortisation is charged so as to write off the cost or valuation of assets, other than land, over their estimated useful lives, using the straight-line method, on the following bases: Development assets – vehicles Development assets – other 33.3% 33.3% Other 33.3% The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. impairment of property, plant and equipment At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 63 notes to the consolidated financial statements continued for the year ended 31 May 2013 3 Significant accounting policies continued impairment of property, plant and equipment continued If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. intangible exploration and evaluation assets The Group applies the full cost method of accounting for exploration and evaluation (“E&E”) costs, having regard to the requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources. Under the full cost method of accounting, costs of exploring for and evaluating mineral resources are accumulated by reference to appropriate cost centres being the appropriate licence area, but are tested for impairment on a cost pool basis as described below. E&E assets comprise costs of (i) E&E activities that are ongoing at the balance sheet date, pending determination of whether or not commercial reserves exist and (ii) E&E that, whilst representing part of the E&E activities associated with adding to the commercial reserves of an established cost pool, did not result in the discovery of commercial reserves. Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income statement as they are incurred. Exploration and evaluation costs All costs of E&E are initially capitalised as E&E assets. Payments to acquire the legal right to explore, costs of technical services and studies, seismic acquisition, exploratory drilling and testing are capitalised as intangible E&E assets. Such costs include directly attributable overheads, including the depreciation of property, plant and equipment utilised in E&E activities, together with the cost of other materials consumed during the E&E phases. treatment of E&E assets at conclusion of appraisal activities Intangible E&E assets related to each exploration licence/prospect are carried forward, until the existence (or otherwise) of commercial reserves has been determined. If commercial reserves have been discovered, the related E&E assets are assessed for impairment on a cost pool basis as set out below and any impairment loss is recognised in the income statement. The carrying value, after any impairment loss, of the relevant E&E assets is then reclassified as development and production assets. impairment of E&E assets E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. Such indicators include, but are not limited to, those situations outlined in paragraph 20 of IFRS 6 Exploration for and Evaluation of Mineral Resources and include the point at which a determination is made as to whether or not commercial reserves exist. Where there are indications of impairment, the E&E assets concerned are tested for impairment. Where the E&E assets concerned fall within the scope of an established full cost pool, the E&E assets are tested for impairment together with all development and production assets associated with that cost pool, as a single cash-generating unit. The aggregate carrying value is compared against the expected recoverable amount of the pool, generally by reference to the present value of the future net cash flows expected to be derived from production of commercial reserves. Where the E&E assets to be tested fall outside the scope of any established cost pool, there will generally be no commercial reserves and the E&E assets concerned will generally be written off in full. Any impairment loss is recognised in the income statement as additional depreciation and amortisation, and separately disclosed. The Group considers the whole of Liberia to be one cost pool and therefore aggregates all Liberian assets for the purposes of determining whether impairment of E&E assets has occurred. 64 Annual report 2013 Hummingbird Resources Plc 3 Significant accounting policies continued Financial instruments Recognition of financial assets and financial liabilities Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. Derecognition of financial assets and financial liabilities The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for the amount it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or expired. trade and other receivables Trade and other receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost less any provision for impairment. cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash with three months or less remaining to maturity and are subject to an insignificant risk of changes in value. trade and other payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic resource will result and that outflow can be reliably measured. Rehabilitation Provisions are made for the estimated rehabilitation costs relating to areas disturbed during exploration activities up to reporting date but not yet rehabilitated. Changes in estimate are dealt with on a prospective basis as they arise. share based payments The Group has applied IFRS 2 Share based Payment for all grants of equity instruments. The Group has used shares and share options as consideration for goods and services received from suppliers and employees. Equity-settled share based payments to employees and others providing similar services are measured at fair value at the date of grant. The fair value determined at the grant date of such an equity-settled share based instrument is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually vest. The corresponding amount is credited to retained earnings. Equity-settled share based payment transactions with other parties are measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably or excess fair value of the identifiable goods or services received, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. The fair value determined at the grant date of such an equity-settled share based instrument is expensed since the shares vest immediately. Where the services are related to the issue of shares, the fair values of these services are offset against share premium. Fair value is measured using the Black-Scholes model. The expected life used in the model has been adjusted based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 65 notes to the consolidated financial statements continued for the year ended 31 May 2013 3 Significant accounting policies continued Warrants Due to the exercise price of the warrants being in a different currency to the functional currency to the Group, at each reporting date the warrants are valued at the fair value with changes of fair value recognised in the profit and loss as they arise. Fair value is measured using the Black-Scholes model. Accounting for royalty financing In order to determine the appropriate accounting treatment for the royalty financing which is described in note 19 requires an assessment of whether the substance of the arrangements constituted a financial liability. As prior to commercial production the Group can be required to deliver cash to the provider in certain circumstances which are not all within the Group’s control then this is considered by the Group to represent a financial liability. The Group has chosen not to designate this as “a fair value through profit or loss” financial liability and therefore it is recognised at amortised cost. On commencement of commercial production, once the Group is only obliged to pay a percentage of its revenue, then this is considered to have extinguished the financial liability, and this is recognised as a part disposal of the relevant asset. segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments and making strategic decision, has been identified as the Board of Directors. The Board of Directors consider there to be only one operating segment, the exploration and development of mineral resources, and only one geographical segment, being Liberia. Therefore, no additional segmental information is presented. 4 critical accounting judgements and key sources of estimation uncertainty In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both the current and future periods. The following are the critical judgements and estimations that the Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. Recoverability of exploration and evaluation assets Determining whether an E&E asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 Exploration for and Evaluation of Mineral Resources. As E&E assets are assessed for impairment on a cost pool basis the existence and quantum of any impairment is dependent on the choice of basis of cost pools. If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. This assessment involves judgement as to: (i) the likely future commerciality of each cost pool of assets; (ii) when such commerciality should be determined; and (iii) the potential future revenues and the value in use. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. share based payments In order to calculate the charge for share based compensation for the options granted on 26 October 2010, on 27 June 2011 and on 11 July 2012 as required by IFRS 2, the Group makes estimates principally relating to the assumptions used in its option-pricing model as set out in note 22. The critical judgements made in these estimates were for the share options granted on 26 October 2010: the share price on the date of grant which was estimated at £0.486 (adjusted for share consolidation) being the price of the most recent share issue at the date of grant; and the expected volatility of share price which was estimated based on other quoted exploration companies. The critical judgement for the share options granted on 27 June 2011 and 11 July 2012 was the expected volatility of the share price which was estimated based on the Company’s own historic volatility and those of other quoted exploration companies. 66 Annual report 2013 Hummingbird Resources Plc 5 Administrative expenses by nature Other income Depreciation of property, plant and equipment (note 14) Staff costs excluding share based payments Net foreign exchange losses/(gains) Audit fees (note 6) Non-audit fees payable to associates of the Company’s auditor (note 6) Communications and IT Insurance Marketing Charitable donations Office expenses Professional and consultancy Travel and accommodation Bank charges Share based payments Profit on deemed disposal (note 12) 2013 $’000 (160) 133 1,300 7 49 — 52 52 279 80 236 506 220 32 679 — 3,465 2012 $’000 — 112 1,563 (5) 44 7 62 51 284 118 187 452 237 35 1,139 (588) 3,698 6 Auditor’s remuneration Amounts payable to Baker Tilly UK Audit LLP and its associates in respect of both audit and non-audit services: Audit fees Fees payable to the Company’s auditor for the audit of the Company’s annual accounts total audit fees non-audit fees payable to associates of the company’s auditor Taxation services total non-audit fees 2013 $’000 2012 $’000 49 49 — — 44 44 7 7 F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 67 notes to the consolidated financial statements continued for the year ended 31 May 2013 7 staff costs The average monthly number of employees and Directors was: Directors Other employees Their aggregate remuneration comprised: Wages and salaries Social security costs Pension Share based payments 2013 number 2012 Number 7 188 195 2013 $’000 3,553 (13) 103 774 4,417 7 202 209 2012 $’000 3,133 334 51 1,321 4,839 Within wages and salaries, $992,000 (2012: $779,000) relates to amounts paid to Directors, and included within pension is an amount of $78,000 (2012: $29,000) relating to pension contributions in respect of Directors. Included within staff costs is $2,438,000 (2012: $2,137,000) capitalised to intangible exploration and evaluation assets. Included within social security costs is a release of a provision of $367,000 (2012: provision of $116,000) for the potential employer’s social security contributions in respect of the share options issued to employees and Directors. No amounts are payable until the relevant share options are exercised, and the amount actually payable will relate to the actual gain made on exercise. 8 Finance income Interest on bank deposits Revaluation of warrants (note 21) 9 Finance expense Foreign exchange loss The foreign exchange loss arose on non-functional currency bank deposits. 2013 $’000 157 306 463 2013 $’000 145 145 2012 $’000 263 — 263 2012 $’000 674 674 68 Annual report 2013 Hummingbird Resources Plc 10 tax The taxation charge for the year can be reconciled to the loss per the income statement as follows: Loss before tax Tax credit at the rate of tax 23% (2012: 26%) Tax effect of non-deductible expenses Items not subject to tax Deferred tax asset not recognised tax expense and effective tax rate for the year 2013 $’000 (3,372) (776) 2 (73) 847 — 11 Loss per ordinary share Basic loss per ordinary share is calculated by dividing the net 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 loss per share is based on the following data: Losses Loss for the purposes of basic loss per share being net loss attributable to equity holders of the parent number of shares Weighted average number of ordinary shares for the purposes of basic loss per share Loss per ordinary share Basic and diluted 2013 $’000 (3,372) 2013 number 55,000,447 53,367,031 2013 $ cents (6.13) 2012 $ cents (7.78) 2012 $’000 (4,155) (1,080) 3 (152) 1,229 — 2012 $’000 (4,155) 2012 Number At the balance sheet date there were 6,474,658 (2012: 4,369,255) potentially dilutive ordinary shares. Potentially dilutive ordinary shares include share options issued to employees and Directors, warrants issued to the IFC and the conditional acquisition of the 20% interest in the Joe Village licence, which it did not previously own as described in note 20. In 2013 the potential ordinary shares are anti-dilutive and therefore diluted loss per share has not been calculated. 12 Joint venture On 24 January 2011, the Company, together with its wholly owned subsidiary Iron Bird Resources Inc. (“Iron Bird”), entered into an agreement with Petmin Limited (“Petmin”) relating to the Group’s Mount Ginka licence for exploration of iron ore in northern Liberia. Petmin Limited has been listed on the JSE since 1986 and the London Stock Exchange’s AIM since 2006. Ian Cockerill is Executive Chairman of Petmin Limited. The key terms of this agreement were: ► the Mount Ginka licence would be transferred to Iron Bird; ► Iron Bird would issue new shares equivalent to 15% of its issued share capital to Petmin for a consideration of $500,000; and ► subject to meeting certain criteria, Petmin were obliged to invest a further $1,500,000 in Iron Bird, to increase its shareholding to 50%. Iron Bird was incorporated by the Company for the purpose of this transaction and the substance of this transaction was that the Group contributed the Mount Ginka licence in exchange for a share in the joint venture. As a result of this transaction Iron Bird ceased to be a subsidiary and became a joint venture. Therefore the disposal of a subsidiary and the recognition of a joint venture using the equity method have been reflected in the financial statements. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 69 notes to the consolidated financial statements continued for the year ended 31 May 2013 12 Joint venture continued On 27 June 2011 Petmin invested $1,500,000 in Iron Bird and as a result was issued new shares in Iron Bird equivalent to 35% of its issued share capital to increase its stake in Iron Bird to 50% of its issued share capital. The profit on the deemed disposal of Iron Bird was determined as follows: 24 January 2011 $’000 Group’s 100% interest pre transaction: Non-current assets Amounts due to Hummingbird Resources (Liberia) Inc. Net liabilities at the date of disposal Group’s 85% interest post transaction: Cost of investment Share of joint venture assets and liabilities Gain on deemed disposal Investment in joint venture: On the date of recognition of investment in joint venture Share of joint venture results for the period investment in joint venture as at 31 May 2011 Share of joint venture results for the period to 27 June 2011 investment in joint venture pre second phase investment on 27 June 2011 (85%) Share of joint venture assets and liabilities post transaction (50%) Gain on deemed disposal of 35% Share of joint venture assets post transaction Share of joint venture results for the period from 27 June 2011 to 31 May 2012 investment in joint venture as at 31 May 2012 Share of joint venture results for the period from 31 May 2012 to 31 May 2013 investment in joint venture as at 31 May 2013 The Group’s interest in the joint venture as at 31 May 2013 is set out below: Share of: Non-current assets Current assets Current liabilities net assets 110 (112) (2) — 423 425 $’000 423 (29) 394 (6) 388 976 588 976 (40) 936 (225) 711 $’000 567 207 (63) 711 As at 31 May 2013 $382,000 (2012: $1,139,000) was due from the Company and Group to the joint venture. As at 31 May 2013 $185 (2012: $35,000) was due from the joint venture to the Company and Group. The joint venture had no revenue in the period. Both Petmin and the Company have the option to contribute equally to future fundraisings. 70 Annual report 2013 Hummingbird Resources Plc 13 intangible exploration and evaluation assets cost At 1 June 2011 Additions At 1 June 2012 Additions At 31 May 2013 $’000 17,582 14,940 32,522 14,067 46,589 Additions to intangible exploration and evaluation assets during the year include $700,000 (2012: $748,000) of capitalised depreciation of property, plant and equipment used in exploration and evaluation activities. 14 Property, plant and equipment Development assets – vehicles $’000 Development assets – other $’000 cost At 1 June 2011 Additions Disposals At 1 June 2012 Additions Disposals At 31 May 2013 Accumulated depreciation At 1 June 2011 Charge for the year Disposals At 1 June 2012 Charge for the year At 31 May 2013 carrying amount At 31 May 2013 At 31 May 2012 1,486 92 (55) 1,523 — — 1,523 487 451 (23) 915 403 1,318 205 608 690 455 — 1,145 33 — 1,178 301 289 — 590 304 894 284 555 Other $’000 365 61 — 426 44 — 470 106 120 — 226 126 352 118 200 Of the property, plant and equipment depreciation charged in the year $700,000 (2012: $748,000) was capitalised into intangible exploration and evaluation assets, with the balance being charged to the income statement. Total $’000 2,541 608 (55) 3,094 77 — 3,171 894 860 (23) 1,731 833 2,564 607 1,363 F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 71 notes to the consolidated financial statements continued for the year ended 31 May 2013 15 subsidiaries The Company had investments in the following subsidiary undertakings as at 31 May 2013, which principally affected the losses and net assets of the Group: Name Directly held Hummingbird Resources (Liberia) Inc. Afro Minerals Inc. Golden Grebe Mining Limited indirectly held Deveton Mining Company Sinoe Exploration Limited Hummingbird Security Limited 16 current assets trade and other receivables Other receivables VAT recoverable Prepayments and accrued income Country of incorporation and operation Proportion of voting interest % Activity Liberia Liberia United Kingdom 100 80 Exploration Exploration 100 Holding company Liberia Liberia Liberia 80 90 100 2013 $’000 88 273 392 753 Exploration Exploration Security 2012 $’000 260 96 495 851 The Directors consider that the carrying amount of the other receivables approximates their fair value and none of which are past due. cash and cash equivalents Cash and cash equivalents as at 31 May 2013 of $13,692,000 (2012: $15,503,000) comprise cash held by the Group. The Directors consider that the carrying amount of these assets approximates their fair value. Amounts due from joint venture Amounts due from joint venture are disclosed in note 12. 17 Deferred tax Differences between IFRS and statutory tax rules give rise to temporary differences between the carrying values of certain assets and liabilities for financial reporting purposes and for income tax purposes. At 31 May 2013, the Group had unrecognised deferred tax assets of $2,300,000 (2012: $1,700,000) in respect of UK and Liberian tax losses. No deferred tax asset has been recognised in respect of these amounts as the recovery is dependent on the future profitability, the timing and the certainty of which cannot reasonably be foreseen. 72 Annual report 2013 Hummingbird Resources Plc 18 trade and other payables Trade payables Other taxes and social security Accruals Other payables 2013 $’000 1,862 111 576 15 2,564 2012 $’000 1,393 201 992 16 2,602 The average credit period taken for trade purchases is 51 days (2012: 35 days). Where possible the Group seeks to settle agreed payables within the contractual timeframe. The Directors consider that the carrying amount of trade and other payables approximates to their fair value. Operating lease commitments At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: Within one year In the second to fifth years inclusive After five years 2013 $’000 130 361 32 523 2012 $’000 118 121 48 287 Operating lease payments represent rentals payable by the Group for properties located in Liberia and the head office in the UK. 19 Other financial liabilities Royalty liability Warrant liability (see notes 8 and 21) Royalty liability 2013 $’000 10,000 49 10,049 On 17 December 2012 the Group entered into a royalty financing arrangement with APG AUS No 5 Pty Limited (a wholly owned subsidiary of Anglo Pacific Group Plc) (“APG”) in relation to the Dugbe 1 Project. Under the terms of the agreement APG agreed to advance US$15m in three equal tranches subject to the satisfaction of certain criteria. The first tranche of US$5m was received on 14 March 2013 and the second tranche of US$5m was received on 10 April 2013 giving a total of US$10m due at 31 May 2013. The third tranche is conditional (unless waived by APG) on a total of 25,000m of infill drilling being completed on the Dugbe 1 Project. The advances will be converted into 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 oz, additional quarterly payments will be required until such time as the cumulative royalty paid is US$15m (the maximum total payment in any such quarter is equivalent to the royalty that would have arisen on sales of 50,000 oz 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 oz, in which case it increases to 2.5% in respect of that quarter. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 73 notes to the consolidated financial statements continued for the year ended 31 May 2013 19 Other financial liabilities continued Royalty liability continued These advances do not bear interest and are only repayable in certain limited circumstances prior to the commencement of commercial production. Should the Group cease to use all reasonable commercial endeavours to be granted an MDA covering the Dugbe 1 Project, then the advances become repayable. Until the commencement of commercial production when the liability will be extinguished and treated as a part disposal of the Group’s economic interest in the Dugbe 1 Project a financial liability of the amount advanced exists. Issue costs of US$292,000 have been capitalised within intangible exploration and evaluation assets. The amounts advanced are secured by legal charges over the assets of Hummingbird Resources (Liberia) Inc. and Sinoe Exploration Limited, and a legal charge over the shares of Hummingbird Resources (Liberia) Inc., Sinoe Exploration Limited and Golden Grebe Mining Limited. Additionally the Company has provided a guarantee to APG regarding the obligations of its subsidiaries in respect of this arrangement. 20 share capital Authorised share capital As permitted by the Companies Act 2006, the Company does not have an authorised share capital. issued equity share capital 2013 2012 number $’000 Number issued and fully paid Ordinary shares of £0.01 each 56,726,371 908 53,410,565 The Company has one class of ordinary shares which carry no right to fixed income. At 1 June 2011 Share options exercised (a) At 1 June 2012 Share options exercised (b) Issue of shares (c) At 31 May 2013 (a) share options exercised $’000 855 Ordinary shares of £0.01 Number 53,355,565 55,000 53,410,565 90,000 3,225,806 56,726,371 ► 55,000 share options were exercised during the prior year raising gross proceeds of £27,000 ($42,000). (b) share options exercised ► 90,000 share options were exercised during the year raising gross proceeds of £43,750 ($70,000). (c) issue of shares ► On 12 December 2012 3,225,806 shares were issued at a strike price of £0.93 to the International Finance Corporation (“IFC”) in return for £3,000,000. In addition the Company has granted the IFC warrants to subscribe for a further 1,612,903 new ordinary shares. The warrants are at a strike price of £1.4415 over a five year term. Issue costs of $43,000 have been offset against the consideration received. On 29 February 2012 the Group entered into a conditional agreement to acquire the 20% interest in its Joe Village licence, which it did not previously own, for 103,255 ordinary shares in the Company. At 31 May 2013 the acquisition had not yet completed and the shares had not been issued. 74 Annual report 2013 Hummingbird Resources Plc 21 Warrants issued On 12 December 2012 the Company granted 1,612,903 warrants to the IFC: Total number of warrants granted Exercise price of the warrants Exercise date 1,612,903 £1.4415 12/12/2017 The fair value of the warrants granted was estimated as at the date of grant using the Black-Scholes model, taking into account the terms and conditions upon which the warrants were granted. The expected volatility was determined based on the volatility of the Company’s own historic volatility from listing on AIM. The table below lists the principal assumptions and inputs to the model used to fair value the warrants granted on the 12 December 2012 and to fair value the warrants at 31 May 2013: 31 May 2013 12 December 2012 Share price Expected dividend yield Expected volatility Expected life Risk free interest rate £0.4150 nil 41.16% 4.5 years 1.06% The gain arising on the change in value of the warrants between issue and 31 May 2013 is disclosed in note 8. 22 share based payments Share based payment charge for share options granted 11 July 2012 Share based payment charge for share options granted 27 June 2011 Share based payment charge for share options granted 26 October 2010 total share based payment charge 2013 $’000 598 176 — 774 Included within share based payments, is $95,000 (2012: $218,000) capitalised to intangible E&E assets. £0.7475 nil 39.74% 5 years 0.80% 2012 $’000 — 654 703 1,357 F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 75 notes to the consolidated financial statements continued for the year ended 31 May 2013 22 share based payments continued Equity-settled share based payments granted in the year to 31 May 2013 On 11 July 2012 the Company granted 989,000 share options to certain Directors and employees. Total number of share options granted Exercise price of the options Exercise period: Tranche 1 – 11 June 2012 and 11 June 2021 Tranche 2 – 11 June 2013 and 11 June 2021 Number of share options lapsed during the current period Number of share options outstanding as at 31 May 2013 989,000 $1.738 (£1.12) 494,500 494,500 53,000 936,000 The fair value of equity-settled share options granted was estimated as at the date of grant using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The expected volatility was determined based on the volatility of similar quoted companies as well as the Company’s own historic volatility from listing on AIM. The table below lists the principal assumptions and inputs to the model used for options granted on the 11 July 2012: Share price at the date of grant Expected dividend yield Expected volatility Expected life Risk free interest rate $1.714 (£1.105) nil 68% 5 years 0.61% Equity-settled share based payments granted in the year to 31 May 2012 On 27 June 2011 the Company granted 1,023,000 share options to certain Directors, employees and consultants. Total number of share options granted Exercise price of the options Exercise period: Tranche 1 – 27 June 2012 and 27 June 2021 Tranche 2 – 27 June 2013 and 27 June 2021 Number of share options lapsed during prior periods Number of share options lapsed during the current period Number of share options outstanding as at 31 May 2013 1,023,000 $1.994 (£1.25) 511,500 511,500 212,000 83,500 727,500 The fair value of equity-settled share options granted was estimated as at the date of grant using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The expected volatility was determined based on the volatility of similar quoted companies as well as the Company’s own historic volatility from listing on AIM. The table below lists the principal assumptions and inputs to the model used for options granted on the 27 June 2011: Share price at the date of grant Expected dividend yield Expected volatility Expected life Risk free interest rate $1.978 (£1.24) nil 70% 5 years 1.87% 76 Annual report 2013 Hummingbird Resources Plc 22 share based payments continued Equity-settled share based payments granted in the year to 31 May 2011 On 26 October 2010 the Company granted 78,000 share options with an exercise price of £21.875. On 23 November 2010 as a result of the bonus issue the Company adjusted the options granted, to increase the number of ordinary shares over which options were held by an additional 44 options for every one option held and to decrease the exercise price by a factor of 45 such that the option holders were in the same economic position as before the bonus issue. As a result there were 3,510,000 options outstanding as of 31 May 2011 with an exercise price of £0.48611 each. These share options are exercisable in the period between 24 December 2011 and 26 October 2020. These share options issued to employees and Directors normally lapse on cessation of employment or holding office. Total number of share options granted (post bonus issue) Exercise price of the options Exercise period – 24 December 2011 and 26 October 2020 Number of share options exercised in prior periods Number of share options exercised in the current period Number of share options lapsed during the current period Number of share options lapsed during the current period Number of share options outstanding as at 31 May 2013 3,510,000 £0.48611 3,510,000 55,000 90,000 — 270,000 3,095,000 The fair value of equity-settled share options granted was estimated as at the date of grant using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The expected volatility was determined based on the volatility of similar quoted companies as the Company was not quoted at the time. The table below lists the principal assumptions and inputs to the model used for options granted on 26 October 2010: Share price at the date of grant Expected dividend yield Expected volatility Expected life Risk free interest rate 23 Notes to the statement of cash flows Loss before tax Adjustments for: Depreciation of property, plant and equipment Share based payments Profit on deemed disposal Finance income Finance expense Share of joint venture loss Operating cash flows before movements in working capital Decrease/(increase) in receivables (Decrease)/increase in payables Decrease/(increase) in amounts due from joint venture (Decrease)/increase in amounts due to joint venture Net cash outflow from operating activities $0.778 (£0.486) nil 65% 5 years 3% 2013 $’000 (3,372) 133 679 — (463) 145 225 (2,653) 31 (478) 35 (757) (3,822) 2012 $’000 (4,155) 112 1,139 (588) (263) 674 46 (3,035) (196) 280 (35) 785 (2,201) F i n A n c A L i s t A t E M E n t s Cash and cash equivalents (which are presented as a single class of assets on the balance sheet) comprise cash in hand, cash at bank and short-term bank deposits with an original maturity of three months or less. The carrying value of these assets is approximately equal to their fair value. www.hummingbirdresources.co.uk Annual report 2013 77 notes to the consolidated financial statements continued for the year ended 31 May 2013 24 Financial instruments In common with all other businesses, the Group and Company are exposed to risks that arise from its use of financial instruments. This note describes the Group’s and Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. capital The Company and Group define capital as share capital, share premium and retained earnings. In managing its capital, the Group’s primary objective is to provide a return to its equity shareholders through capital growth. Going forward the Group will seek to maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through new share issues or the issue of debt, the Group considers not only its short-term position but also its long-term operational and strategic objectives. Externally imposed capital requirements The Group is not subject to externally imposed capital requirements. Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the consolidated financial statements. Principal financial instruments The principal financial instruments used by the Group from which financial risk arises are as follows: Financial assets Cash and cash equivalents Other receivables Amounts due to joint venture (see note 12) Financial liabilities Trade payables Other payables Royalty liability (see note 19) Warrant liability1 (see note 21) Amounts due to joint venture (see note 12) 2013 $’000 13,692 361 — 14,053 1,862 15 10,000 49 382 12,308 2012 $’000 15,503 356 35 15,894 1,393 16 — — 1,139 2,548 1 The fair value of the warrant liability (see note 21) has been determined using a valuation technique where at least one input (which could have a significant effect on the instrument’s valuation) is not based on observable market data and is therefore a level 3 financial instrument. Where inputs can be observed from market data without undue cost and effort, the observed input has been used. Otherwise, management determines a reasonable estimate for the input. General objectives, policies and processes The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. Whilst retaining ultimate responsibility for these, the Board has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Board receives regular reports from the Finance Director through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies set. The overall objective of the Board is to set policies that seek to reduce risk as far as practical without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below. 78 Annual report 2013 Hummingbird Resources Plc 24 Financial instruments continued General objectives, policies and processes continued credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises principally from the Group’s investment in cash deposits. The Group seeks to deposit funds with reputable financial institutions until such time as it is required. The Group does not have any significant credit risk exposure on trade and other receivables. The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk. Liquidity risk Liquidity risk arises from the Group and Company’s management of working capital and the amount of funding committed to its exploration programme. It is the risk that the Group or Company will encounter difficulty in meeting its financial obligations as they fall due. The Group and Company’s policy is to ensure that sufficient funds will be available to allow it to meet its liabilities as they fall due. To achieve this, the Board receives cash flow projections as well as information regarding available cash balances on a regular basis. The Board will not commit to material expenditures prior to being satisfied that sufficient funding is available. The Group’s financial liabilities are not significant and therefore no maturity analysis has been presented. All financial liabilities held by the Group are non-interest bearing. Foreign exchange risk and foreign currency risk management The Group is exposed to foreign exchange risk through certain of its costs being denominated in currencies other than the functional currency (in particular Sterling), and from holding Sterling cash balances. Although the Group has no formal policy in respect of foreign exchange risk, as the majority of the Group’s forecast expenditures are in United States Dollars and Sterling, the Group holds the majority of its funds in these two currencies. Currency exposures are monitored on a monthly basis. The carrying amounts of the Group’s and Company’s foreign currency denominated financial assets and monetary liabilities at the reporting date are as follows: Liabilities Assets Euros (“€”) Sterling (“GBP”) Canadian Dollars (“CAD”) South African Rand (“ZAR”) Australian Dollars (“AUD”) Foreign currency sensitivity analysis 2013 $’000 37 592 — 17 5 2012 $’000 67 392 — — — 2013 $’000 55 4,386 6 29 35 2012 $’000 41 8,177 8 30 — The Group is exposed primarily to movements in GBP against the $. Sensitivity analyses have been performed to indicate how the profit or loss would have been affected by changes in the exchange rate between the $ and GBP. The analysis is based on a weakening and strengthening of the $ by 10% against the GBP in which the Group has assets and liabilities at the end of each respective period. A movement of 10% reflects a reasonably possible sensitivity when compared to historical movements over a three to five year timeframe. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit where the $ strengthens 10% against the GBP. For a 10% weakening of the $ against the GBP, there would be an equal and opposite impact on the profit, and the balance below would be negative. The following table details the Group’s sensitivity to a 10% strengthening in the $ against the GBP. F i n A n c A L i s t A t E M E n t s Decrease in income statement and net assets www.hummingbirdresources.co.uk 2013 $’000 (380) 2012 $’000 (789) Annual report 2013 79 notes to the consolidated financial statements continued for the year ended 31 May 2013 25 Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. transactions with stephen Betts & sons Limited During the year the Company charged Stephen Betts & Sons Limited $38,000 (2012: $32,000) under a contract for the provision of office equipment and premises. Additionally during the year Stephen Betts & Sons Limited charged the Company $88,000 (2012: $85,000) under a contract for the provision of staff, office equipment and premises. There were no amounts outstanding between the parties as at 31 May 2013 (2012: $nil). Stephen Betts & Sons Limited is a related party of the Group because Stephen Betts and Daniel Betts are shareholders and Directors of that company. transactions with the Pygmy Hippo Foundation During the year the Company made charitable contributions to The Pygmy Hippo Foundation of $80,000 (2012: $118,000). At 31 May 2013 The Pygmy Hippo Foundation owed the Company $18,000 (2012: $nil). The Pygmy Hippo Foundation is a related party as Daniel Betts, Thomas Hill and William Cook are Directors of the Company and The Pygmy Hippo Foundation. Joint venture with Petmin Limited (iron Bird Resources inc) During the prior year, the Group entered into a transaction with Petmin Limited as described in note 12. Petmin Limited is a related part of the Group because Petmin Limited is a joint venture partner and Ian Cockerill is the Executive Chairman of that company. During the year the Group received management fees of $160,000 (2012: $60,000) from Iron Bird Resources Inc. Remuneration of key management personnel The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Short-term employee benefits Social security cost Pension Share based payment charge (Reduction)/provision for potential social security costs on share options 2013 $’000 998 126 78 584 (354) 1,432 2012 $’000 781 96 29 912 92 1,910 26 Events after the reporting date share options Since the year end 19,500 share options that were granted on 27 June 2011 and 12,500 share options that were granted on 11 July 2013 lapsed. 80 Annual report 2013 Hummingbird Resources Plc company balance sheet as at 31 May 2013 Assets non-current assets Investments Property, plant and equipment Receivables from subsidiaries current assets Trade and other receivables Cash and cash equivalents total assets Liabilities current liabilities Trade and other payables Other financial liabilities Amounts due to joint venture total liabilities net assets Equity Share capital Share premium Retained earnings total equity Notes 2013 $’000 2012 $’000 31 32 33 33 33 34 34 36 7,730 143 30,624 38,497 722 12,018 12,740 51,237 1,039 49 382 1,470 49,767 908 46,355 2,504 49,767 4,698 215 31,403 36,316 300 13,198 13,498 49,814 1,120 — 1,139 2,259 47,555 855 41,922 4,778 47,555 The financial statements were approved by the Board of Directors and authorised for issue on 14 August 2013. They were signed on its behalf by: DE Betts Director The notes to the Company financial statements form part of these financial statements. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 81 Company statement of cash flows for the year ended 31 May 2013 Net cash outflow from operating activities investing activities Purchases of property, plant and equipment Investment in subsidiaries Decrease/(increase) in amounts due from subsidiary companies Interest received Notes 37 net cash used in investing activities Financing activities Proceeds from issue of shares Proceeds from warrants issued Net cash from financing activities net decrease in cash and cash equivalents Effect of foreign exchange rate changes cash and cash equivalents at beginning of year cash and cash equivalents at end of year 2013 $’000 (4,027) (69) (2,604) 755 69 (1,849) 4,486 355 4,841 (1,035) (145) 13,198 12,018 2012 $’000 (2,024) (77) (2,389) (13,324) 173 (15,617) 42 — 42 (17,599) (674) 31,471 13,198 82 Annual report 2013 Hummingbird Resources Plc company statement of changes in equity for the year ended 31 May 2013 As at 1 June 2011 Comprehensive loss for the year: Loss for the year total comprehensive loss for the year Transactions with owners in their capacity as owners: Issue of shares total transactions with owners in their capacity as owners Share based payments As at 1 June 2012 Comprehensive loss for the year: Loss for the year total comprehensive loss for the year Transactions with owners in their capacity as owners: Issue of shares total transactions with owners in their capacity as owners Share based payments As at 31 May 2013 Share capital $’000 854 — — 1 1 — 855 — — 53 53 — 908 Share premium $’000 41,881 — — 41 41 — 41,922 — — 4,433 4,433 — 46,355 Retained earnings $’000 8,123 (4,702) (4,702) — — 1,357 4,778 (3,048) (3,048) — — 774 2,504 Total $’000 50,858 (4,702) (4,702) 42 42 1,357 47,555 (3,048) (3,048) 4,486 4,486 774 49,767 F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 83 Notes to the company financial statements for the year ended 31 May 2013 27 Significant accounting policies The separate financial statements of the Company are presented as required by the Companies Act 2006 (the “Act”). As permitted by the Act, the separate financial statements have been prepared in accordance with International Financial Reporting Standards. The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are the same as those set out in note 3 to the consolidated financial statements except as noted below. As permitted by section 408 of the Act, the Company has elected not to present its profit and loss account for the year. Hummingbird Resources Plc reported a loss for the financial year ended 31 May 2013 of $3,048,000 (2012: $4,702,000). investments Fixed asset investments, including investments in subsidiaries, are stated at cost and reviewed for impairment if there are any indications that the carrying value may not be recoverable. 28 critical accounting judgements and key sources of estimation uncertainty The Company’s financial statements, and in particular its investments in and receivables from subsidiaries, are affected by the critical accounting judgements and key sources of estimation uncertainty in respect of the recoverability of exploration and evaluation assets which are described in note 4 to the consolidated financial statements. Recoverability of investment in subsidiaries and amounts due from subsidiaries Where the majority of the assets of subsidiary undertakings are exploration and evaluation assets, determining whether an investment in and loan to a subsidiary is impaired requires an assessment of whether there are any indicators of impairment, of these underlying exploration and evaluation assets. If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. This assessment involves judgement as to: (i) the likely future commerciality of each cost pool of assets; (ii) when such commerciality should be determined; and (iii) the potential future revenues and value in use. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. As the market capitalisation of the Company was less than the carrying value of the Company’s net assets as at 31 May 2013, an impairment review was carried out in respect of the carrying values of the investment in subsidiaries and the amounts due from subsidiaries as stated in the Company Balance Sheet. As a result of the positive Preliminary Economic Assessment on the Dugbe 1 Project which was published during the year and the Group proceeding with the DFS in respect of the Dugbe 1 Project, the Directors consider that there was no impairment as at 31 May 2013. 29 Auditor’s remuneration The auditor’s remuneration for audit and other services is disclosed in note 6 to the consolidated financial statements. 30 staff costs The average monthly number of employees (including Directors) was: Directors Other employees Their aggregate remuneration comprised: Wages and salaries Social security costs Pension Share based payments 2013 number 2012 Number 7 5 12 7 5 12 $’000 $’000 1,482 (185) 101 679 2,077 1,312 281 51 1,321 2,965 84 Annual report 2013 Hummingbird Resources Plc 30 staff costs continued Within wages and salaries, $992,000 (2012: $779,000) relates to amounts paid to Directors for services rendered. Included within staff costs is $194,000 (2012: $299,000) recharged to subsidiaries as intangible exploration and evaluation assets. Included within social security costs is a release of a provision of $367,000 (2012: $116,000 provision) for the potential employers social security contributions in respect of the share options issued to employees and Directors. Key management remuneration is disclosed in note 25 to the consolidated financial statements. 31 investments cost At 1 June Additions At 31 May investment in subsidiaries 2013 $’000 Investment in subsidiaries 2012 $’000 4,698 3,032 7,730 2,172 2,526 4,698 The Company’s subsidiaries are disclosed in note 15 to the consolidated financial statements. The additions in the year relate to certain costs incurred by the Company on behalf of its subsidiaries that are not invoiced to subsidiaries, including share based payments. These costs are not repayable by the Company’s subsidiaries. 32 Property, plant and equipment cost At 1 June 2011 Additions At 1 June 2012 Additions At 31 May 2013 Accumulated depreciation At 1 June 2011 Charge for the year At 1 June 2012 Charge for the year At 31 May 2013 carrying amount At 31 May 2013 At 31 May 2012 Development assets – other $’000 38 31 69 16 85 6 21 27 27 54 31 42 Other $’000 233 61 294 45 339 30 91 121 106 227 112 173 Total $’000 271 92 363 61 424 36 112 148 133 281 143 215 F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 85 Notes to the company financial statements continued for the year ended 31 May 2013 33 current assets Receivables from subsidiaries At the balance sheet date amounts receivable from the fellow Group companies were $30,624,000 (2012: $31,403,000). These amounts are repayable on demand, however, these are not expected to be repaid within one year and no interest is currently charged. The carrying amount of these assets approximates their fair value. trade and other receivables Other receivables VAT recoverable Prepayments and accrued income There are no past due or impaired receivables. cash and cash equivalents 2013 $’000 38 273 411 722 2012 $’000 37 96 167 300 Cash and cash equivalents as at 31 May 2013 of $12,018,000 (2012: $13,198,000) comprise cash and short-term bank deposits with an original maturity of three months or less. The carrying value of these assets approximates their fair value. The Company’s principal financial assets are bank balances and cash and receivables from related parties, none of which are past due. The Directors consider that the carrying amount of receivables from related parties approximates their fair value. 34 current liabilities trade and other payables Trade payables Other taxes and social security Accruals Other payables 2013 $’000 689 61 274 15 1,039 The average credit period taken for trade purchases is 28 days (2012: 22 days). The Directors consider that the carrying amount of trade and other payables approximates to their fair value. Other financial liabilities The Company’s other financial liabilities are included within note 21 of the consolidated financial statements. Amounts due to joint venture Amounts due by the Company to the joint venture are disclosed in note 12. Operating lease commitments At the balance sheet date, the Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: Within one year In the second to fifth years inclusive After five years 2013 $’000 97 — — 97 2012 $’000 395 54 665 6 1,120 2012 $’000 87 — — 87 Operating lease payments represent rentals payable by the Company for the UK head office. 86 Annual report 2013 Hummingbird Resources Plc 35 share capital The movements on this item are disclosed in note 20 to the consolidated financial statements. 36 share based payments The Company’s share based payments information is disclosed in note 22 to the consolidated financial statements. 37 Notes to the statement of cash flows Loss before tax Adjustments for: Depreciation of property, plant and equipment Share based payments Finance income Finance expense Operating cash flows before movements in working capital Increase in receivables (Decrease)/increase in payables (Decrease)/increase in amounts due to joint venture Net cash outflow from operating activities 38 Financial instruments The Company’s strategy and financial risk management objectives are described in note 24. Principal financial instruments The principal financial instruments used by the Company from which risk arises are as follows: Financial assets Cash and cash equivalents Other receivables Financial liabilities Trade payables Other payables Warrant liabilities1 Amounts due to joint venture 2013 $’000 (3,048) 133 679 (361) 145 (2,452) (446) (372) (757) (4,027) 2013 $’000 12,018 30,935 42,953 689 15 49 382 1,135 2012 $’000 (4,702) 112 1,139 (195) 674 (2,972) (11) 174 785 (2,024) 2012 $’000 13,198 31,536 44,734 395 6 — 1,139 1,540 1 The fair value of the warrant liability (see note 21) has been determined using a valuation technique where at least one input (which could have a significant effect on the instrument’s valuation) is not based on observable market data and is therefore a level 3 financial instrument. Where inputs can be observed from market data without undue cost and effort, the observed input has been used. Otherwise, management determines a reasonable estimate for the input. F i n A n c A L i s t A t E M E n t s www.hummingbirdresources.co.uk Annual report 2013 87 Notes to the company financial statements continued for the year ended 31 May 2013 38 Financial instruments continued The risks that the Company is subject to in addition to the Group risks described in note 24 are set out below: credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. In addition to the risks described in note 24, which affect the Group, the Company is also subject to credit risk on the balances receivable from its subsidiaries (see note 33). Foreign currency exposure and sensitivity analysis The Company’s exposure to foreign currency exposure and sensitivity to exchange rates is the same as the Group’s (see note 24). 39 Related parties Amounts due from subsidiaries The Company has entered into a number of unsecured related party transactions with its subsidiary undertakings. The most significant transactions carried out between the Company and its subsidiary undertakings are mainly for short and long-term financing. Amounts owed from these entities are detailed below: Hummingbird Resources (Liberia) Inc. 2013 $’000 30,624 2012 $’000 31,403 These amounts are repayable on demand and no interest is currently charged. The Company’s transactions with other related parties and remuneration of key management personnel are disclosed in note 25 to the consolidated financial statements. 40 Events after the balance sheet date Events after the balance sheet date are disclosed in note 26 to the consolidated financial statements. 88 Annual report 2013 Hummingbird Resources Plc “ There is a tide in the affairs of men which, taken at the flood, leads on to fortune; omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat; and we must take the current when it serves, or lose our ventures” …Brutus “ Markets are but mere tides, Brutus, if waning on shores nearby then waxing on those yonder they surely are. Steer your boat by celestial star through such immediate torrents; see beyond the crushing current at your bow; and when the tide waxes once more upon those shores, your boat shall rise the fastest” …Basil de Tent Hummingbird Resources Plc 22 Mount Row London W1K 3SF Tel +44 (0)20 3416 3560 www.hummingbirdresources.co.uk