Produce Develop Explore Annual Report & Accounts 2016 A N N U A L R E P O R T 2 0 1 6 H U M M I N G B I R D R E S O U R C E S P L C Contents Overview 01 Snapshot 02 Company Highlights 04 Chairman’s Statement Strategic Review 06 CEO’s Statement 10 Yanfolila Gold Project 14 Dugbe Gold Project 16 Exploration 18 Sustainability Governance 20 Board of Directors 22 Directors’ Report 25 Strategic Report 27 Directors’ Responsibilities Statement Financial Statements 28 Independent Auditor’s Report 29 Consolidated Income Statement 29 Consolidated Statement of Comprehensive Income 30 Consolidated Balance Sheet 31 Consolidated Statement of Cash Flows 32 Consolidated Statement of Changes in Equity 33 Notes to the Consolidated Financial Statements 54 Company Balance Sheet 55 Company Statement of Cash Flows 56 Company Statement of Changes in Equity 57 Notes to the Company Financial Statements Produce, Develop, Explore “ The work completed during 2016 has laid the foundations for an exceptional 2017; where the bird flies the nest and becomes a standalone cash generative entity” l e r o p x E | p o l e v e D | e c u d o r P 6 1 0 2 s t n u o c c A & t r o p e R l a u n n A | s e c r u o s e R d r i b g n m m u H i Basil De Tent “The person who is not hungry says the coconut has a hard shell” Snapshot Yanfolila Gold Project, Mali Dugbe Gold Project, Liberia First gold pour targeted by end of 2017 132,000oz in year 1 production at US$620/oz cash cost 60% IRR and US$162m NPV US$186m NPV 29% IRR 20 year LoM 125,000 oz Avg production per year At DFS stage Corporate Proven Management US$76m equity raised in 2016 Snapshot corporate Largest mining fund raise on AIM in 4 years Shareholders include Gold Fields, Sprott, Capital, RCF & Odey Fidelity and Majedie Strong team with proven track record bringing mining projects into production Founded by Dan Betts in 2005 Experience in Africa Quality Assets Two large-scale gold assets 6.4 MOZ gold inventory 2.2 MOZ Au Yanfolila project in Mali 4.2 MOZ Au Dugbe project in Liberia - 22 Overview Company Highlights US$60m Debt Facility with Coris Bank International US$76m Raised in equity in 2016 US$54m Cash in the bank at year end l e r o p x E | p o l e v e D | e c u d o r P 6 1 0 2 s t n u o c c A & t r o p e R l a u n n A | s e c r u o s e R d r i b g n m m u H i Cumulative Projects NPV Chart NPV (US$M) 186 162 US$372m Total 24 Yanfolila Gonka2 Dugbe2 1. Yanfolila and Gonka NPV is based on a US$1,250 gold price assumption and Dugbe is based on a US$1,300 gold price assumption. 2. Gonka and Dugbe are at Scoping Study level and there are no Reserves on either Project. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore Production Development Bringing the fully funded Yanfolila Gold Project to low- cost production is the immediate priority Dugbe and Yanfolila offer significant development upside Exposure Exploration Assess strategic opportunities ahead of the next rising gold market Maximise on new discovery opportunities across large land holding 4 Overview Chairman’s Statement I am pleased to report that Hummingbird Resources Plc (“Hummingbird” or “the Company”) has followed the strong progress of 2015 with another year of significant and positive development in 2016. Whilst the macro-economic and geo- political environment have become no clearer since I last wrote to you, at Hummingbird, the team has focused on delivery against the factors it has within its control – namely, ensuring that the project economics are robust, progressing the physical development of the Yanfolila Gold Project (“Yanfolila” or “Yanfolila Project”) in Mali, ensuring that we have the financing available as and when required and ensuring that we have a suitably experienced and capable team to deliver our stated aim of “first gold” by end of 2017. We completed our Definitive Feasibility Study (“DFS”) in January 2016 and the Optimised Mine Plan in February 2016, which reinforced the promising economics of the project – an average 107,000 oz/ year of gold production, an internal rate of return (“IRR”) of 60% (at US$1250 oz gold price), and an all in sustaining cost (“AISC”) of under US$700 per oz. All of which were significant improvements on our previous expectations. With the improvements in project economics and planning we set out to fully fund the project and this was achieved through new equity funding of US$76m completed in 2016, followed by mandating Taurus to provide a US$45m debt facility, plus an un-drawn US$10m cost overrun facility in December 2016. Post the year end the Company replaced the Taurus Facility with Coris Bank International (“Coris”). We commenced building the project team in 2015 and the process continued in 2016 with the appointment of a construction team with a wealth of experience in both gold and Africa. Following this bolstering of the team, a crucial milestone during the period was the start of construction on site. Shareholders can follow its progress via the photos and videos on our website and I would encourage you all to have a look – seeing is believing! I am also pleased to report that we have managed construction on time and budget through the year and this has continued into 2017. In January we hosted the first visit to site for financial analysts and I was pleased to read their positive conclusions from their interactions with the team during the visit. Our Sustainability (Corporate Social Responsibility (“CSR”)) programme continued to make good progress during the year. We support local communities in both healthcare and education, with the aim of developing new skills that will create long term prosperity and employment. We greatly value our close relationship with the Government of Mali (“GoM”) and were delighted to conclude our shareholder agreement with them in February 2017. We are pleased to have the GoM and the local communities as partners with us at Yanfolila and we are determined to make a positive contribution to the economic and social development of our host country. In Liberia, where we have our Dugbe Gold Project, we completed and announced the positive results of a hydro power pre- feasibility study. The baseline monitoring continues on the project and the Company continues to evaluate the best ways to develop the asset into a mine. With a resource of 4.2Moz gold and a large exploration land package, it is a very exciting asset that will be a mine of the future. Of course, shareholders will recognise that building a new mine is never a straightforward nor easy process. What defines a successful mining company is their alertness to emerging issues and the rapidity and effectiveness of their reaction. During my time as Chairman, I have been very impressed by the way in which the Hummingbird team work together to overcome the inevitable issues and problems as and when they arise. Whilst we make excellent progress on all fronts, it is good to see that the team is anything but complacent. As you will recognise, it is far too early to declare ‘victory’ in our plans for Yanfolila but I have every confidence in the people to whom we have entrusted successful completion. I would like to take this opportunity to thank all at Hummingbird and its partners for their work in 2016 and their commitment to “first gold” by end of 2017. Russell King Non-executive Chairman Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore Yanfolila Economics US$162m NPV 60% IRR An outstanding year for the development of Yanfolila US$695/oz 709k oz AISC @3.14g/t probable ore reserve 6 Strategic Review CEO’s Statement 2016 was a seminal year in the development of Hummingbird. The year started with the release of the DFS on our Yanfolila Gold Project in Mali, and within nine short months construction began on site. The robust fundamentals demonstrated in the DFS marked the project out as a low-cost producer and these numbers have been well publicised. At a gold price of US$1,250, the project shows an IRR of 60% and importantly shows free cash flow of approximately US$70m in the first full year of production. Importantly, the project also shows excellent downside protection with a robust IRR of 42% at a US$1,100 spot gold price. As we went to press with last year’s annual report, the critical objectives for Hummingbird were to fund the US$88m capex and attract a high calibre team to develop the mine. I am pleased to be able to report that both of these objectives have been achieved. Furthermore, the development of the mine is still performing in line with both the aggressive budgets and timelines we set for ourselves. Set out below is a summary of the key achievements and developments of the last 12 months. Financing In 2016, the Company successfully raised US$76m of new equity which represented the largest placing for a junior gold company on the AIM market in four years. I would like to both welcome new shareholders and thank existing shareholders for their support through this process. The placing re-capitalised the Company allowing us to commit to an ambitious schedule targeting an initial gold pour within 14 months from pouring concrete. We ordered the construction of the ball mill within days of completing the fundraising, which enabled us to steal a march on the critical path for the project and importantly it enabled us to re-negotiate the terms of our debt financing. The new equity vastly reduced the equity to debt ratio in the project to in the region of 60:40 and made for a far more desirable funding proposition for debt providers. Subsequently we agreed to re-mandate Taurus Funds Management Pty Limited from Australia with a reduced facility of US$45m and a US$10m over run facility with an extension of the bridge loan to US$25m to maintain momentum. As the market recently learnt, in a post balance sheet event we were excited to be able to have replaced the Taurus facility with a senior loan from an African Bank called Coris Bank International. Coris is a major player in the African market-place and has not only offered better rates with no royalty, but will also be an influential partner capable of helping Hummingbird grow and providing invaluable African support. Government Shareholder Agreement On the subject of African support, we were delighted to complete the Shareholder Agreement for La Société des Mines de Komana (the company which holds the Yanfolila mining licence) with the GoM. As the first company in Mali to have completed this negotiation in the last three years, we look forward to working with the Government as our partners as we continue to develop and support the mining industry in Mali. In line with this Shareholder Agreement, the Government of Mali will hold, as anticipated, an overall 20% interest in Yanfolila, following its agreement to pay US$11m to exercise their right to acquire an additional 10% of equity on top of their 10% free carry. I believe this exemplifies the Government of Mali’s commitment and support of Yanfolila, and its confidence in the economic potential of our mine. Team building With the possible exception of the financing of the project, by far the most important development of the year has been assembling the team to build the mine. We have attracted what I believe is a world class team and this sets us up to do great things going forward. The core management team is illustrated on the following page, and in addition to these senior roles I am also delighted to have been able to welcome David Lunt to the Company’s Technical Advisory Committee (“TAC”). David, in his senior management positions with MINPROC, has overseen the design and development of dozens of process plants for companies including BHP Billiton, Vale and Rio and he is an invaluable resource for our development team to use for support. Yanfolila Project Development: Budget The DFS delivered a project budget, including working capital to a point of positive cash flow, of US$88m. This was an ambitious and aggressive target and I am pleased to say that we are currently 63% committed on the capital items and we are still tracking under this budget. In addition to this budget, the Company also has to finance corporate overheads, Liberian expenditure, exploration costs, financing costs and the repayment of the outstanding US$15m Taurus bridge facility that was used for the DFS. The re-capitalisation of the Company through US$76m of equity has Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore ORGANISATIONAL CHART SHEC Committee William Cook David Hebditch Kate Harcourt Russell King Chairman Daniel Be(cid:23)s CEO Technical Advisory Commi ee Ian Cockerill David Lunt Mark Calderwood Robert Monro Head of Business Development Shaun Bunn Senior VP Project Delivery Thomas Hill Finance Director David Hebditch VP SHEC William Cook VP Opera‡ons Wayne Galea VP EPCM Murray Paterson VP Geology Timothy Huskinson VP Finance John Meneghini VP Mining ensured that the Company is fully funded for all corporate expenditure and obligations above and beyond the project budget. This is an important differential between Hummingbird and many other development companies. Despite being in the enviable position of being fully funded and with all development to date being on budget and on schedule, we are not complacent. As the project continues to progress from the drawing offices of Johannesburg to construction in the field, we are aware that we still have significant construction challenges to overcome throughout the rainy season in Mali and that with nearly 450 people on site even small delays can cause significant cost over runs. That said, we believe that we are well prepared for this phase of work and that we have effectively now removed the risk of capital item blow outs from the project being so committed. The challenge is now delivery and as I write this I can assure you that each and every person involved in the project is engaged, enthused and committed to bringing Yanfolila into production as scheduled. Critical Path By definition, something is always on the critical path. Traditionally in projects of this nature, the ball mill, being the longest lead item, drives the critical path. I am pleased to say that construction of our ball mill is complete and that as I write it has recently arrived into the port of Abidjan for transporting to site. As a result, various other elements of the project hit the critical path; be it the front-end crushing circuit construction; the development of the tailings storage facility; the supply of reagents or simply the erecting and electrification of the plant. The team maintains a laser focus on this critical path and is constantly challenging it. As a result, I am equally pleased to say that the project is still tracking on schedule for first gold by the year end. Engineering & Design Together with our Engineering, Procurement, Construction Management (“EPCM”) contractor, SENET, we have now completed all the detailed design drawings for the project, and under the guidance and leadership of Wayne Galea, our VP of EPCM, I am pleased that we have been able to make savings and efficiencies in this area by cutting out unnecessary steel and complications in the design which were present in the original DFS design. Construction Over recent months the project has moved from the drawing office into the field. The preparatory earthworks were completed early in 2016 with the concrete foundations then being poured. The carbon in leach tanks are now over 70% complete and the steelwork for the gold room and reagent area is being erected. The front-end crushing circuit has been fabricated and is in transit for assembly on site, and the conveyors and construction therefore is all on schedule. Once constructed, the plant will need to be electrified and we have recently signed a power contract with Aggreko to provide ‘over the fence’ power from a bank of diesel generators. Finally, we will move into the commissioning stages of the plant in Q4 2017 ahead of our targeted first gold pour by the end of the year. Mining During the year, we awarded a mining contract to African Mining Services (‘AMS’) which itself is a subsidiary of Ausdrill, a major provider of mining services listed in Australia. The competitive tender process resulted in a price that is better than the number used in our DFS and due to the ‘fixed and variable’ nature of the contract we are hopeful of further additional savings that we can make. The AMS team has mobilised to site in April 2017 and their first task is to help with the construction of the tailings storage facility. They will then move into pre-production pre-stripping and mining of the ore body in August to ensure we have ore on the ROM pad prior to commissioning. Over the life of the mine, this contract has a nominal value of over US$200m and is the most significant contract we will sign during the Yanfolila mine development. I am thankful to both Darren Gibcus and John Meneghini (VP Mining) for their assistance in drafting and negotiating this complex and material agreement. Camp Services and Infrastructure With a current project head count of 450, rising to nearly 800 at the peak during pre- production mining and then stabilising at around 750 during steady state production, the ancillary services in order to support this operation have been significant. The camp is being fully upgraded with catering facilities, ablutions, laundry, access road upgrades, air strip evaluations, security, communications, mechanical maintenance and recreational facilities having all been built under the guidance of Will Cook, VP Operations. Without this platform there is no way the development team would have been able to deliver the project so effectively to date. The camp is also serviced by an expert medical group called Critical Care International (“CCI”) whose first-class doctors have not only kept our staff and our contractors safe, but have proved invaluable in the roll out of our community development and medical training programmes. Social, Health, Environment and Community (“SHEC”) Before any mine is built, the focus of considerable attention is the risks associated with the impact and effects on local populations. Typical concerns include 8 Strategic Review CEO’s Statement continued gold market for miners in recent years has understandably meant that the spotlight has to be on the near-term cash flows, higher grade reserves and compelling cash margins demonstrated at Yanfolila; but the Dugbe Gold Project is a sleeping giant which we are very excited to continue progressing. Conclusion I would like to echo Russell’s comments and thank all of our hard-working employees and consultants who have made many personal sacrifices during the last year to get Hummingbird to where it is. Without their efforts our projects would not have been able to develop at the same pace or to the same quality as they have and, I would like to single out Shaun Bunn as our overall project lead for his relentless energy and drive across all areas of the development of Yanfolila. The work completed during 2016 has laid the foundations for an exceptional 2017; where the bird flies the nest and becomes a standalone cash generative entity. It is the financial community that incubate the eggs of discovery and nurture them through the exhaustive stages of evaluation and development and so I also want to thank all of our shareholders (old and new) for their commitment, trust and patience. At Hummingbird we are excited to be on the verge of this new chapter. We not only have the skills, but we also have the energy to transform Yanfolila into a highly profitable new mine, and also maximise value from our other assets and to build a best in class gold mining company. Dan Betts Chief Executive Officer 1. Bloomberg data; April 2017 2. Cantor Fitzgerald research; June 2016 potential problems with land acquisitions and relocations, artisanal miners being removed and levels of local workforce employment. These are all valid questions and concerns, and far too often in the mining industry they are only paid lip service. They are, however, absolutely instrumental to the success of the operation. There is no doubt in my mind that working with the local populations and making them a part of the business and the journey is the only way for a mine to be truly successful and leave a positive legacy. As such, I am delighted that we acquired this project from Gold Fields, a company which had invested heavily in the areas of education, health awareness and alternative livelihoods. I am even more delighted that under the expert guidance of David Hebditch, our VP SHEC, we have significantly enhanced these initiatives; from market gardens, local clinics, schools, training programmes to alternative skills and livelihood training. Furthermore, our current local employment on site is 90%. During the year, we have also successfully completed all land acquisition without dispute and we have seen the departure of all artisanal miners from Komana East pit (with Komana West scheduled for later this year). Furthermore, to date, construction has proceeded with zero lost time injuries which is indicative of the fantastic safety culture David is developing under the guidance of Shaun Bunn. Geology Our geology department, led by Murray Paterson, VP Geology, has been largely focused on reducing risk during mining. They have concentrated on mine planning in different scenarios and infill drilling ahead of mining. Yanfolila is a multi-pit mining operation with multiple ore types in each pit. The plant has been built to provide for maximum flexibility, with an ability to process all ore types and blends of material. The successful mining operation however will depend on a water tight communication between the mining department and the processing team so that the plant is operating at maximum efficiency for the ore that is being presented to the mill. The glue in this equation is the geology department and under Murray we have been building a comprehensive understanding of the different ore types and potential different operating scenarios (for example bad weather) to ensure that our flexible approach will keep the plant full and recoveries at the best possible levels. Exploration has taken a back seat over the past year, for the reasons stated above. However, as we approach the commencement of production, we are starting to now evaluate exploration targets (both brown and green fields) to extend the mine life at Yanfolila. We are in an enviable position because we already have the resources to extend the mine life. It is simply a question of prioritising the best ounces to convert to reserves and bringing these reserves into the mine plan first to improve the economics. We are excited about our various expansion and exploration initiatives and I look forward to updating the market about these programmes in due course. Contractors Above all else, building a mine is a team game. With so many different partners and contractors on site we have adopted a very open and collegiate approach to working with our partners and we believe this is paying dividends in terms of delivery. SENET is our lead EPCM contractor, with Imagri providing the main construction and civil work on site. Aggreko is providing the long-term power contract with Zen Petroleum providing the fuel. I would like to take this opportunity to thank all of our operators for working so tirelessly to help deliver this ambitious plan for Hummingbird and its shareholders. Trading Performance, Share Price & Value During the period Hummingbird’s share price rose from 12.5p to 18p, and post period end achieved highs of up to 27p. We issued 236,288,781 new shares in return for US$76m. Based on this capital structure and looking forward to our first year of full scale production, this marks Hummingbird out as the standout gold developer trading in the public markets. It is trading on 1.26 times projected free cash flow for the first full year of production against an industry average which can range anywhere from 15–25 times1. In the first full year of production cash flow per share will be 20p. This assessment of Hummingbird’s exceptional position in the market does not take our 4.2Moz Dugbe Gold Project in Liberia into account. Broker Cantor Fitzgerald has suggested that this project could offer significant further upside and add a further 14p in value2. It is with this in mind that I firmly believe that Hummingbird is due a re-rating in the market as it evolves into a profitable mining company and delivers the significant free cash flow highlighted in our DFS. Liberia In 2013 we completed a PEA which showed, at a US$1,300/oz gold price, a post-tax IRR of 29% and NPV10 of US$186m for the Dugbe Gold Project in Liberia. Since this study, we have been looking at ways to optimise this project based on the volatile gold price environment. In Liberia, over 30% of our operating costs relate to the cost of generating our own power and we have been conducting extensive studies in this area of the business. In August 2016, we delivered a hydro-electric power pre-feasibility study in partnership with Knight Piésold and funded by IFC InfraVentures (“IFC”). The study showed that hydro was a viable potential solution to power the Dugbe Gold mine and ongoing baseline monitoring is continuing to allow the study to be taken to the next stage. Renewed confidence in gold makes Dugbe a very exciting prospect with almost unlimited exploration upside. The tightening in the Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore We not only have the skills, but we also have the energy to transform Yanfolila into a highly profitable new mine, and also maximise value from our other assets and to build a best in class gold mining company. 10 Strategic Review Yanfolila Gold Project Mali The Yanfolila Gold Project is currently under construction. Construction commenced in October 2016 and is due to be completed in Q4 2017 in advance of first gold pour in December 2017. In April 2017 the construction is nearly 60% complete and remains on budget and schedule. Construction Update At the time of writing (April 2017) construction remained on plan and on budget with forecast first gold pour still due for December 2017. Pre-production mining is due to commence in Q3 2017 before commissioning of the processing plant in Q4 2017. The progress of the various sections of the project at the time of the writing is as follows: Technical Studies Yanfolila Project Production Year 1 LoM Production/year LoM Grade Annual Throughput CAPEX Recovery All in Sustaining Costs (US$/oz) Progress completed LoM NPV (8%) After tax IRR Construction Update Area Process Design Detailed Engineering Procurement and Delivery Construction Committed Capex Commissioning Overall 91% 99% 61% 36% 63% 0% 59% The development of Yanfolila is constantly evolving and for updated progress Shareholders should go to our website www.hummingbirdresources.co.uk. for recent press releases, photographs and videos. Technical Studies On 29 February 2016, the Company announced the results of an updated Reserve statement and mine schedule for Yanfolila. The positive implications of this are highlighted in the following table. Life of Mine DFS, January 2016 The DFS has been compiled by DRA Projects (“DRA”) for the Yanfolila Gold Project. CSA Global (“CSA”) were responsible for the Mineral Resource and Ore Reserves reports. SENET, a highly credentialed EPCM provider with significant West African gold experience, completed the metallurgical testwork, process design and engineering, and capital and operating cost estimates for the processing plant and the associated plant infrastructure. Other key contributors were Schlumberger Water Services (“SWS”), who carried out detailed hydrology and hydrogeological studies, and Ausenco Engineering Canada (“Ausenco”), who completed the design and cost estimates for the Tailings Storage Facility (“TSF”). • • • • • • • • • Structural, Mechanical, Plate work and Piping (“SMPP”) contract commenced in January 2017 with IMAGRI SARL under the supervision of SENET Ball Mill completed and due to arrive at Yanfolila in May 2017 Fuel supply contract signed with Zen Petroleum Mali SA (“Zen”), a well- established West African fuel company Process plant foundations largely complete Carbon-in Leach (“CIL”) tanks construction due for completion in May 2017 Tailings Storage Facility (“TSF”) construction commenced with Inter Mining Services (“IMS”), a Malian civil contractor AMS mobilising to site to assist with TSF construction ahead of pre-production mining Completion of initial phase of pre- production grade control drilling Exploration plan to increase mine life is being developed US$1,100 US$1,250 US$1,400 132,000oz 132,000oz 132,000oz 107,000oz 107,000oz 107,000oz 2.95g/t 1.24Mtpa US$88m 92.8% US$686 2.95g/t 1.24Mtpa US$88m 92.8% US$695 2.95g/t 1.24Mtpa US$88m 92.8% US$701 US$109m US$162m US$216m 42% 60% 77% The DFS LoM Plan will progressively mine five open pits, starting initially with Komana East (“KE”) and Komana West (“KW”), and then progressing to Guirin West (“GW”), Sanioumale East (“SE”) and Sanioumale West (“SW”). The Company is also considering developing the high grade Gonka Resource, initially as an open pit, then moving to an underground mine. The plant will have a throughput capacity of 1.24Mtpa. The ore is non-refractory and the simple process plant design utilises gravity and CIL for the processing and recovery of the gold. The plant design incorporates industry standard unit process operations, consisting of primary and secondary crushing, closed-circuit ball milling with gravity concentration, intensive leach of the gravity concentrate, carbon-in- leach of the gravity tailings, elution, electro-winning, and smelting to produce gold doré. Mining will be carried out by AMS who have significant West African experience. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore 2.2MOZ (@ 2.4 g/t) in Mali Yanfolila Gold Project is fully permitted with a 30 year mining licence and environmental permit granted 12 Strategic Review Yanfolila Gold Project Mali continued Resources and Reserves Probable Reserves* Pits Komana East Komana West Total Total Mineral Inventory CSA JORC GF 2012 SAMREC GF 2013 DRS – internal de-risking study(1) Total Tonnes Contained Ounces (Au) Grade (g/t) 4,606,000 2,433,000 7,039,000 470,600 239,200 709,800 3.18 3.06 3.14 Tonnes Ounces Grade (g/t) 18,645,000 1,587,600 3,520,000 6,324,200 224,400 390,700 28,629,596 2,195,748 2.64 1.98 1.92 2.39 * Total project Reserves and mineral inventory, Hummingbird interest is 75% (1) Non-JORC and non-SAMREC resources compliant to JORC Code (2012 Edition). Geology The Yanfolila Gold Project is situated within one of several sub-basins along the eastern margin of the Greater Siguiri Basin (“GSB”). The GSB straddles the Mali-Guinea border and forms the western margin of the Birimian Volcano- Sedimentary Basin (“BVSB”). Combined with the Archaean Kenema-Man Domain (“west of the GSB”) and the pan-African Benin-Nigeria Shield (“east of the BVSB”) these form the West African Craton, one of the major gold producing regions and well-endowed gold rich provinces in the world. The Yanfolila Belt, which hosts the Project, is orientated north-south and is located on the eastern margin of the GSB. The belt contains several sub-basins including the Komana Mafic Sub-Basin (“KMSB”) and the Kabaya Sub-Basin (“KSB”). The KMSB has an abundance of mafic rock units, basalt and dolerite that have proven to be the preferred host to mineralisation and correspond to a broad gravity high. The KMSB hosts the majority of the Yanfolila gold targets and deposits that have been currently defined. It has a stratigraphic sequence of basalt, polymictic conglomerate, feldspathic sandstone, silt-shale and a lithic- dominated greywacke. Porphyry, granodiorite and diorite intrusions crosscut the stratigraphy of the KMSB. For a detailed breakdown of the Yanfolila Gold Project Reserves and Resources please see the London Stock Exchange announcement made by the Company on 15 December 2015. A copy of the announcement can be found on the Company’s website www. hummingbirdresources.co.uk Mining Geotechnical There are two distinct regimes at the Yanfolila Gold Project deposits: regolith soils and bedrock. The nature of the saprolites and saprocks of the regolith are substantially similar to many sites in the region. The recommended slopes in regolith materials are an average of 44 degrees from surface to a depth of 40m and 40 degrees below 40m. The slope design angles recommended for the regolith assumes depressurisation of the pit walls in advance of mining by installing an array of dewatering wells around the pits. In the fresh rocks below the regolith, the ground conditions appear reasonably competent with no major rock defects identified. The rocks are strong and the structures appear to be a conventional footwall / hanging wall relationship. The slope angle limitation on the hanging walls is largely dependent on practical and/or operational factors. The recommended designs for each of the two wall types for all the fresh rock sections of the pits is between 50–52 degrees. The Yanfolila Gold Project is made up of seven main deposits, five of which have been subjected to resource definition drilling, modelling and grade estimation and reported as containing mineral The designs for both the regolith and the bedrock slopes have case history support from operations in the region and are adopting similar slope angles, provided dewatering of the regolith is carried out prior to mining and good wall control is maintained. Mining Method The Yanfolila Gold Project consists of two main clusters of ore deposits: located in the south are the deposits of KE, KW, GW and Gonka (“GK”), and located in the north are SE and SW. Mining operations will be carried out using conventional drill and blast and load and haul mining methods. Plant production during the mine life is currently planned for a period of seven years, mining some 8.8Mt of ore and 106.7Mt of waste. Waste rock will be re-located to designated waste rock facilities at each pit and will be progressively rehabilitated. Process Design In developing the process flowsheet, trade-off studies were conducted to optimise unit process selection. Consultants were engaged to assist with the flowsheet development in the areas of their expertise. The trade- Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore off studies and simulations conducted included the following; comminution circuit design options, live stockpile versus bin for crushed ore storage, number of stages for CIL, elution circuit evaluation, detoxification mixer and sparger configuration and the introduction of a tailings thickener. Based on the metallurgical test work results, trade-off studies and simulations from consultants, the design criteria of the Yanfolila process plant was developed, assuming treatment of up to 1.24 Mtpa on a blend of oxides and fresh, and up to 1.0 Mtpa when treating mainly fresh ore. The Yanfolila process plant design utilises a CIL process for the processing and recovery of gold from oxide and a blend of oxide and fresh ore. The plant design incorporates industry standard unit process operations, consisting of primary and secondary crushing, closed-circuit ball milling with gravity concentration, intensive leach of the gravity concentrate, carbon-in-leach of the gravity tailings, elution, electrowinning and gold sludge smelting to produce doré. A two stage crushing facility is installed to treat all ore types. In order to maintain mill throughput, a tertiary crushing facility will be added when the proportion of hard fresh ore increases. A 12 hour live stockpile ensures continuous and consistent feed to the mill. Recovery of gold will be through a combination of gravimetric means and direct cyanidation. Gravity concentrate is treated through an intensive cyanidation process with the pregnant solution pumped to an independent gravity electrowinning circuit. The CIL circuit consists of seven tanks in series: one pre-leach tank and six CIL tanks. Permits Yanfolila Gold Project is fully permitted with a 30 year Mining Licence and Environmental Permit granted. 14 Strategic Review The Dugbe Gold Project Liberia The Dugbe Gold Project is a 4.2Moz gold Resource with a completed Preliminary Economic Assessment (“PEA”) showing a 20 year LoM of 125,000oz gold produced/year. This is Liberia’s largest gold deposit and the Company strongly believes there is significant potential to grow these Resources further. A Collaboration Agreement was signed on 7 April 2015 between Hummingbird, IFC and Aldwych International (“Aldwych”). In this agreement the IFC funded a c.US$265,000 hydro- electric power (“HEP”) pre-feasibility study (“PFS”) which was conducted by Knight Piésold. The PFS evaluated the opportunity to build and run a 20-30MW HEP which would have the potential to make significant improvements to the operating costs of the Dugbe Gold Project. The study was positive and showed that HEP could offer a potentially cheaper and sustainable power solution. To read more about this study please refer to the News page of the Company website, www.hummingbirdresources.co.uk. Future Proposed Work Programme: The work completed in producing the draft DFS has uncovered areas where further optimisation and development can be targeted to further improve the overall Dugbe economics. At the appropriate time the Company plans to implement further work on the Dugbe Gold Project to enhance the resource, mine plan, process flow sheet, recovery and operating costs that have been achieved. This work may include: • Further conversion of Inferred to Indicated Resources at Tuzon through a short drilling programme; • Confirming extensions at depth of the most significant part of the Tuzon ore-body through a short drilling programme; • Carrying out further work at the highly prospective Sackor deposit, close to Dugbe F, to develop an Indicated Resource on the back of a recent extensive re-logging exercise of core; • Review the Dugbe F Inferred Resource (1.8Moz), and look to upgrade its classification to Indicated Resources; • Review mine scheduling and waste dump philosophies to improve operating economics; and • Optimise the process flow sheet through a short programme of further metallurgical test-work. The Dugbe Gold Project PEA shows a 20 year mine life and we believe there are significant opportunities to increase the resource inventory to extend it even further. The Directors believe that the Dugbe Gold Project remains a significant asset. MDA signed with the Government of Liberia for a 25 year term mining agreement Hydro-electric power pre- feasibility study completed Potential to significantly reduce Project opex through reduced power costs Large exploration upside Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore 4.2MOZ (@ 1.4 g/t) in Liberia The Dugbe Gold Project PEA shows a 20 year mine life and we believe there are significant opportunities to increase the resource inventory to extend it even further. 16 Strategic Review Exploration There is a large amount of under explored exploration ground and many exciting opportunities to be reviewed now that Hummingbird is active in Mali. Mali Mali has significant potential for the discovery and development of economic gold deposits, as is underlined by its position as Africa’s third largest gold producer. Gold Fields invested significant amounts of money in exploration and there are a number of drilled discoveries, as well as drill ready exploration targets. There is a large amount of under explored exploration ground and many exciting opportunities to be reviewed now that Hummingbird is active in the Country. We are looking forward to both further exploring our existing licence packages, and keeping an open view to augment existing ground where synergies exist. The Company has reviewed all of its exploration potential on its mining permit and has created an outline plan to exploit that potential. Once Yanfolila is in production the Company is looking forward to entering into a more active exploration programme with the specific focus on achieving a 10+ year Reserve mine life in the short term. Currently our Resources have been converting to Reserves at around a 50% rate so the Company looks forward to doing further work on the 1+Moz of Resources not currently in Reserves as well as other discoveries at a pre Resource stage. There is a recently published Exploration Presentation which can be found on the Mali Exploration page of our website; www.hummingbirdresources.co.uk. The Company entered into an agreement with Kola Gold, a private gold exploration company, on the 29th June 2016 to amalgamate certain exploration assets into a new company called Cora Gold. The aim of the amalgamation was to create a larger exploration focussed company with a dedicated team aiming to discover and grow new deposits. Further to the proposed amalgamation on the 6th February 2017 it was announced that Cora Gold intended to complete a reverse take-over (“RTO”) of Glenwick Plc, an AIM listed company. For further information on this transaction please go the website, www. hummingbirdresources.co.uk. Liberia Hummingbird has around 2,000km² of exploration ground in southeast Liberia. This offers a huge upside potential for future gold discoveries in a still largely unexplored, yet highly prospective, region of the Birimian gold province. At the end of 2013 we published the results of the interpretation of the 17,000 line km airborne magnetics and radiometrics data collected earlier that year. The interpretation, conducted by Southern Geoscience in Australia, resulted in over 140 targets to be followed up with systematic exploration. A further, more detailed review of the interpreted anomalies and historic Hummingbird data has enabled us to define a plan for future exploration programmes, prioritising targets and activities based on two principal aims: • identifying new resources as quickly as possible near to the existing Dugbe Gold Project with work starting proximal to the current deposits and progressing outwards; and • the discovery of a new deposit. Targets occurring in the closest proximity to the Dugbe Gold Project are structural, either on or parallel to the North-East striking Tuzon deposit, on structures intersecting the Dugbe Shear Zone from the West, or on the Dugbe Shear Zone itself. Prospect-scale mapping over the target areas, complete soil coverage and re-evaluation of all gold-in-soil data with follow-up trenching will identify drill targets. Regional targets defined by the geophysics are either folds interacting with faults, intrusives or other folds, intersecting faults or interpreted dilation zones. Few are associated with artisanal activity. Follow-up exploration, particularly to those areas with the stream sediment anomalies, is to be conducted with reconnaissance mapping and soil geochemistry. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore 18 Strategic Review Sustainability Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore Local employment Expat Malian other Local communities 36% 10% 54% Overview 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 has a duty to working safely and respectfully to protect the environment and the communities in the countries we are privileged to work in. Health and Safety All accidents are preventable, and we aim to achieve Zero Harm with every employee, contractor and visitor returning home safely every day. Since the Yanfolila Gold Project entered the construction phase there have been no fatalities or Lost Time Injuries (LTI) with nearly 300,000 hours worked by the Company and its contractors. Induction and training programmes are developed by the Company and its contractors to address specific workplace risks and hazards. All employees are required to undertake these programmes and regular refresher courses are being provided. Community Development Hummingbird has developed and implemented a community development plan (“CDP”) at each project site in partnership with local communities, government agencies and non- governmental partner organisations. In Mali, the Project has continued to sponsor 18 teachers and nurses across the Yanfolila Gold Project area, facilitating access to important social services in one of Mali’s poorest rural communes. The clinic on site has started an outreach programme working with health facilities and providers in the commune to improve standards of training, hygiene and service provision. Weekly training sessions held at the clinic serve to not only reinforce existing skills, but bring new knowledge and practices to these providers from CCI’s UK registered Doctors. To date over 300 teaching hours have been given to local nurses and healthcare providers, and this programme will continue to grow in line with Project development. Livelihood development continues to be a major pillar for the CDP. Work to expand the successful market garden projects has started, with three new two hectare gardens in development for three communities. Each of these gardens seeks to target 50 women beneficiaries, and monitoring data from existing gardens shows that these can be successful cash generating projects. Local procurement has improved during 2016 with links to local producers of fruit and vegetables, as well as meat and poultry products. In addition over US$50,000 of local construction materials has been purchased in support of the civils work completed. Investment in safe drinking water resources remains a key focus for many in Mali. The project is currently undertaking feasibility studies for a tapped water project to serve over 5,000 people. This project will use solar power to pump and distribute water to approximately 15 access points across the communities, as well as provide clean water to key areas such as existing schools and clinics. This initiative has the potential to deliver concrete returns to local communities and we look forward to implementing this in 2017. Local employment Local employment presents a genuine opportunity for socio-economic development within our host communities, as well as helping to secure our ‘social licence to operate’. The Company signed a “Protocole d’accord” with the local authorities formalising our commitment to maximise local employment. Current performance during the construction phase shows that we are performing well above commitments with a total of 450 employees and contractors working on the project of which 90% are Malian and 129 of them are from the local communities. Working within a rural commune, the sourcing of skilled labour is difficult. However, through effective training and apprenticeship programmes local employees can learn transferable skills that will benefit them long after the project closes. To that end, training programmes will be a major focus for the project and its contractors as we move towards production later in 2017. Stakeholder Engagement Maintaining strong community relations with the host communities in which the Company works remains a key pillar of the Company’s Sustainability Strategy. Stakeholder engagement plans, and associated grievance mechanisms have been developed and implemented in both Liberia and Mali. The experienced community relations teams conduct regular planned meetings with key stakeholders and consultation committees at both project sites in Mali and Liberia. The key focus areas for engagement include local employment, community investment activities, artisanal and small-scale mining activities, land access and compensation and general project updates. At both project sites there are strong levels of local support for Company activities based on mutual understanding and trust. Land acquisition In Mali, a Land Acquisition and Compensation Plan has been completed by experienced national consultants ESDCO working closely with the Company’s SHEC team and Group Environment and Social “E&S” advisor. Based on current project description there is no physical resettlement of houses required, although agricultural and forest land will be acquired for development activities. The process started in April 2015 and first phase payments were completed in October 2016. Two subsequent phases of compensation are planned in line with agricultural seasons and international best practice. A total of 50 Project Affected Persons (“PAPs”) were identified as farming around 130ha of land set to be impacted by phase 1 of Project development activities. The land acquisition and compensation plan was formally approved by Malian authorities and individual agreements between the Project and each PAP have been signed and notarised. In line with international best practice requirements and in addition to compensation, the Company and ESDCO have worked to identify replacement land and implement measures to improve productivity of farmers. A monitoring and evaluation program has also been included to monitor effectiveness and inclusiveness. 20 Governance Board of Directors Thomas Hill Finance Director & 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. Russell King Chairman Russell is currently the Senior Independent Non-Executive Director of Aggreko plc, the FTSE 100 temporary power generation company. Prior to this Russell served as Chief Strategy Officer at Anglo American where he had global responsibility for strategy, business development, government relations, safety and sustainable development. He was also a member of Anglo American’s plc executive committee for eight years. Between 2010 and 2013 he was a senior advisor to RBC Capital Markets on Metals and Mining. Russell is also Senior Independent Director of Spectris plc and Interserve plc. Matthew Charles Idiens Non-Executive Director Matthew founded Hummingbird in November 2005 and he has 20 years’ experience in natural resource companies. He is a founder and Director of AIM quoted Rose Petroleum plc and also founder and director of Seamwell International Ltd, a private company developing underground coal gasification (“UCG”) projects in China. From 1995 to 2001 he worked as an associate director at Laing and Cruickshank Investment Management, part of the Credit Lyonnais Group. Daniel Edward Betts Chief Executive Officer Daniel founded Hummingbird in November 2005 and has run the Company since its inception. 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 in 2005. Stephen Alexander Betts Non-Executive Director Stephen 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. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore Technical Advisory Committee David Almgren Pelham Non-Executive Director (and member of TAC) David is a mineral geologist with over 35 years global exploration experience. He has worked in over 40 countries in Africa, Europe, North and South America, the Middle East and Asia. He has been involved as Technical Director with new junior company start-ups and initiated numerous new exploration projects worldwide. He has worked in several West African countries, and oversaw the discovery and early evaluation of the +6 Moz Chirano Gold Mine in Ghana, as well as Hummingbird’s 4.2 Moz Dugbe gold deposit in Liberia. He has been closely involved with a number of major discoveries of gold, copper-cobalt, coal, iron ore, chrome and uranium. Converted into in-situ gold-equivalent terms, these new discoveries add up to over 100 Moz of gold. Ian Cockerill Technical Advisory Committee Ian is the former Non-executive chairman of Hummingbird. Ian was also formerly CEO of Gold Fields Limited and Anglo Coal Ltd. He is currently Non-executive director of Endeavour Mining, Chairman of Petmin Limited, Lead Independent director of Ivanhoe Mines, Chairman of the Leadership for Conservation in Africa and Non-executive director of Orica Limited. Mark Calderwood Technical Advisory Committee Mark was the CEO at Perseus Mining for over 10 years and successfully led the company from being an explorer into a 200,000oz/year gold producer in Ghana. Mark is a member of the Australian Institute of Mining and Metallurgy and has over 25 years of experience in the sector. David Lunt Technical Advisory Committee David is a metallurgist by training, formerly Technical Director with GRD Minproc and currently running Stirling Mineral Processing consulting group. David has spent his career focussing on the development and design of process plants and has extensive experience in African gold mines having worked on Tarkwa for Gold Fields amongst many others 22 Governance 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 December 2016. Principal activities The Group’s principal activity is the exploration, evaluation and development of mineral projects, principally gold, focused in West Africa. The subsidiary and associated undertakings principally affecting the losses or net assets of the Group in the year are listed in note 16 to the financial statements. Corporate Governance The Company acknowledges the policies set out by the corporate governance regime of the United Kingdom. The Directors acknowledge the importance of the guidelines set out in 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 six members, two 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. Post balance sheet events Events after the reporting date have been disclosed in note 30 to the financial statements. Results and dividends The results of the Group for the year ended 31 December 2016 are set out in the Consolidated Income Statement. The Directors do not recommend payment of a dividend for the year (2015: 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: RJ King SA Betts (Note 1 & 2) MC Idiens DA Pelham DE Betts (Note 2 & 3) TR Hill (Note 4) WBT Cook (Note 5) Number of shares at 31 December 2016 Number of shares at 31 December 2015 53,955 712,542 53,955 712,542 2,741,607 2,741,607 25,052 2,325 4,949,149 4,634,149 148,235 — 108,235 287,150 Note 1 –SA Betts’s interests consist of 148,042 shares held by SA Betts, 92,500 shares held by Caroline Betts, 292,000 shares held by Stephen Betts & Sons Limited, and 180,000 shares held by the Stephen Betts & Sons Limited (Self Administered) Pension Scheme. Note 2 – 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. Note 3 – DE Betts’s interest consists of 4,477,149 shares held by DE Betts, 292,000 shares held by Stephen Betts & Sons Limited, and 180,000 shares held by the Stephen Betts & Sons Limited (Self Administered) Pension Scheme. Note 4 – TR Hill’s interest includes contracts for difference over 5,000 ordinary shares, 58,684 ordinary shares which are held in his pension, and 23,933 ordinary shares which are owned by his wife. Note 5 – On 30 September 2016, WBT Cook resigned as a director to become VP Operations, and focus on the delivery of the Yanfolila Gold Project. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore The Directors’ interests in the share options of the Company at 31 December 2016 were as follows: Options granted during the year Options of directors resigned during the year Options lapsed during the year Options at 31 December 2016 Options at 1 January 2016 125,000 125,000 337,500 33,000 33,000 450,000 33,000 33,000 225,000 65,000 65,000 1,125,000 217,000 217,000 150,000 — — — — 67,500 100,500 100,500 100,000 — — — — 675,000 141,000 141,000 100,000 RJ King RJ King SA Betts SA Betts SA Betts MC Idiens MC Idiens MC Idiens DA Pelham DA Pelham DA Pelham DE Betts DE Betts DE Betts DE Betts DE Betts DE Betts DE Betts DE Betts TR Hill TR Hill TR Hill TR Hill TR Hill TR Hill TR Hill TR Hill WBT Cook WBT Cook WBT Cook WBT Cook — — — — — — — — — — — — — — — 426,136 426,136 426,136 426,137 — — — — 340,909 340,909 340,909 340,909 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — (675,000) (141,000) (141,000) (100,000) Exercise priceNote 2 Date of grant First date of exercise Final date of exercise £0.01 £0.01 £0.22 £0.22 £0.22 £0.22 £0.22 £0.22 £0.22 £0.22 £0.22 £0.22 £0.22 £0.22 £0.22 £0.01 £0.01 £0.01 £0.01 £0.22 £0.22 £0.22 £0.22 £0.01 £0.01 £0.01 £0.01 £0.22 £0.22 £0.22 £0.22 17/11/2014 17/11/2014 17/11/2015 17/11/2016 17/11/2024 17/11/2024 26/10/2010 05/12/2013 05/12/2013 26/10/2010 05/12/2013 05/12/2013 26/10/2010 05/12/2013 05/12/2013 26/10/2010 05/12/2013 05/12/2013 05/12/2013 30/09/2016 30/09/2016 30/09/2016 30/09/2016 26/10/2010 05/12/2013 05/12/2013 05/12/2013 30/09/2016 30/09/2016 30/09/2016 30/09/2016 26/10/2010 05/12/2013 05/12/2013 05/12/2013 24/12/2011 01/06/2014 01/06/2015 24/12/2011 01/06/2014 01/06/2015 24/12/2011 01/06/2014 01/06/2015 24/12/2011 01/06/2014 01/06/2015 Note 1 Note 3 Note 3 Note 3 Note 3 24/12/2011 01/06/2014 01/06/2015 Note 1 Note 3 Note 3 Note 3 Note 3 24/12/2011 01/06/2014 01/06/2015 Note 1 26/10/2020 01/06/2024 01/06/2025 26/10/2020 01/06/2024 01/06/2025 26/10/2020 01/06/2024 01/06/2025 26/10/2020 01/06/2024 01/06/2025 Note 1 — — — — 26/10/2020 01/06/2024 01/06/2025 Note 1 — — — — 26/10/2020 01/06/2024 01/06/2025 Note 1 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 125,000 125,000 337,500 33,000 33,000 450,000 33,000 33,000 225,000 65,000 65,000 1,125,000 217,000 217,000 150,000 426,136 426,136 426,136 426,137 67,500 100,500 100,500 100,000 340,909 340,909 340,909 340,909 — — — — 6,670,181 Total 4,659,000 3,068,181 (1,057,000) Note 1 – the first date of exercise is at any time on or after the grant of a Mineral Development Agreement to any group company by the Government of Liberia. The final exercise date is 10 years after the grant of a Mineral Development Agreement. Note 2 – all share options (including the Long Term Incentive Plan) issued prior to 1 January 2016 (excluding share options issued to RJ King) were rebased to £0.22 (refer to note 25). Note 3 – the exercise dates are dependent on meeting certain vesting criteria (refer note 25). Directors’ Remuneration RJ King SA Betts MC Idiens DA Pelham (Note 1 & 2) DE Betts (Note 3) TR Hill WBT Cook (resigned as director 30 September 2016) Total Directors’ remuneration Directors emoluments 2016 $’000 Directors emoluments 2015 $’000 51 47 48 44 688 491 293 57 52 53 49 355 316 285 1,662 1,167 In addition to the amounts above, the Directors are accruing potential benefits under incentive schemes as set out in note 25. Note 1 – in addition DA Pelham received geological consultancy fees in 2015 (see related party disclosure note 28). Note 2 – DA Pelham is entitled to a discovery bonus based on $0.10 cents per proved/probable resource ounce in respect of the Group’s Dugbe Shear Zone licences in Liberia. Note 3 – DE Betts is entitled to a contingent deferred bonus as disclosed in note 25. 24 Governance Directors’ Report continued 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 December 2016 were equivalent to 91 (2015: 55) days’ purchases, based on the average daily amount invoiced by suppliers during the year. Trade payables of the Company at 31 December 2016 were equivalent to 118 (2015: 59) 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 $nil (2015: $1,000) during the year. The Company has not made any payments to political parties during the year (2015: $nil). FINANCIAL RISK MANAGEMENT The Group is exposed to a variety of financial risks including currency risk, credit risk and liquidity risk. Some of the objectives and policies applied by management to mitigate these risks are outlined in both the Strategic Report and note 27 to the Consolidated Financial Statements. 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 sections 418 of the Companies Act 2006. RSM UK Audit LLP have expressed their 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 23 May 2017 Registered Office: 49-63 Spencer Street, Hockley, Birmingham, B18 6DE Company registered in England and Wales 05467327 Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore Strategic Report The purpose of this report 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 Strategic 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: Construction risk The development of mining projects may be subject to unexpected problems and delays that could increase the development and operating costs of that project. There is no assurance that any mine can be developed within the expected budgets or timeframes, and statistically few projects in the industry are delivered on time or on budget. Should the Yanfolila Project be delayed or suffer cost increases this could require additional funding to be raised or render the project uneconomic. Gold price risk As a junior mining company developing its first gold mine partially through debt funding, the Group is significantly exposed to the gold price. Should the gold price fall significantly this will impact future reserves, profitability and could ultimately impact the ability to service the debt and meet operating costs. Exploration and development risk There is no assurance that the Group’s exploration and development activities will be successful, and statistically few properties that are explored are ultimately developed into profitable producing mines. Political risk All of the Group’s operational activities are located in Liberia and Mali and the Group is therefore dependent on the political and economic situation in Liberia, Mali and the wider African region. However, the Group aims to mitigate assessed risks by proactive and forward looking assessments and strategic planning and the development of contingency plans where higher risks are identified. Mali is engaged in political recovery and stabilisation after a military coup in March 2012 and a French-led military intervention against the separatist Tuareg rebels in the north of Mali in January 2013. In general the security risk in Mali remains high and The United Nations peacekeeping mission in Mali, established in April 2013 and consisting of over 11,000 military and police, has helped maintain the security situation throughout the remainder of the country but the situation in the north of the country remains fragile. Talks between the government and separatist rebels aimed at bringing about peaceful resolution ended inconclusively in March 2015 and there has been an increase in violence in the region including some isolated incidents in the south of the country during 2015. The most serious incidents have been the terrorist attack on a restaurant in Bamako in March 2015 in which seven people were killed, including six expatriates, and an attack on the Radisson Blu hotel in Bamako on 20 November 2015 in which 19 people were killed. The Group maintains strict security procedures in order to mitigate the possible security risks to the Group’s activities as far as is possible. Liberia has not been affected by any security incidents during the past year. Nonetheless, attention is now turning to the third democratic presidential elections since the end of the civil unrest which are due to take place in October 2017. The outbreak of the Ebola virus in Liberia during 2014 and 2015 had a large impact on the economy and the country in general. Many businesses were directly and indirectly affected by the epidemic but the country was formally free from Ebola on 14 January 2016. Mali has had two independent outbreaks of Ebola in October and November of 2014 and the government of Mali quickly conducted a successful tracing, quarantine and treatment program of all patients and possible contacts which resulted in the WHO declaring “all-clear” in January 2015. Nevertheless, the threat of Ebola re-emerging in the region remains possible but the Group maintains robust hygiene measures in order to mitigate and reduce any potential threat to the Group’s operations. Licensing and title risk The Group’s exploration and development 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. There is a risk that negotiations with a Government in relation to the grant, renewal or extension of a licence, or Mineral Development Agreement (“MDA”), may not result in the grant, renewal or extension 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. 26 Governance Strategic Report continued Additionally, whilst the Group has diligently investigated title to its licences and, to the best of its knowledge, title 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. 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 27 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 Strategic Review. The Group made a loss after tax of $8.4m compared to a loss of $4.6m for the previous financial year. The increase is largely due to foreign exchange losses of $3.2m (2015: $228,000) which are allocated between administrative and finance expenses in the Consolidated Income Statement. The basic loss per share was 3.60 cents (2015: 4.64 cents). As at 31 December 2016, the Group had net assets of $136.4m (2015: $73.6m), of which $53.8m (2015: $7.2m) was cash. The cash increase was due to the issue of new shares throughout the year, raising a total of $76.0m before costs. Construction of the Yanfolila Project commenced with additions of $13.1m to mine development assets, total expenditure to 31 December 2016 was $50.7m (2015: $37.6m). 2016 2015 709,800oz 709,800oz 6,438,000oz 6,438,000oz $50.7m $1.0m $53.8m £0.1825 $37.6m $11.1m $7.2m £0.125 Mineral reserves Mineral inventory Mine development expenditure (cumulative)Note 1 Exploration & development expenditure (annual) Cash balance Share price Note 1: includes historic exploration spend on Yanfolila and capitalised interest. This Strategic Report has been approved by the Board and signed on its behalf by: DE Betts Director 23 May 2017 Registered Office: 49-63 Spencer Street, Hockley, Birmingham, B18 6DE Company registered in England and Wales 05467327 Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore Directors’ Responsibilities Statement The directors are responsible for preparing the Strategic Report, 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; 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 statements may differ from legislation in other jurisdictions. 28 Financial Statements Opinion on the financial statements We have audited the group and parent company financial statements (“the financial statements”) on pages 29 to 61 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. In our opinion • • • • the financial statements give a true and fair view of the state of the group’s and the parent’s affairs as at 31 December 2016 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. 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/auditscopeukprivate Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements and, based on the work undertaken in the course of our audit, the Strategic report and the Directors’ Report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ report. 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. Respective responsibilities of directors and auditor As more fully explained in the Directors’ Responsibilities Statement set out on page 27, 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. 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. Michael Thornton (Senior Statutory Auditor) For and on behalf of RSM UK AUDIT LLP, Statutory Auditor Chartered Accountants 2 Whitehall Quay Leeds LS1 4HG 23 May 2017 Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreIndependent Auditor’s Report to Members of Hummingbird Resources plc For the year ended 31 December 2016 Consolidated Income Statement For the year ended 31 December 2016 Continuing operations Revenue 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) Consolidated Statement of Comprehensive Income For the year ended 31 December 2016 Notes 2016 $’000 2015 $’000 25 6 9 10 13 11 — (505) (7,114) (7,619) 668 (1,491) — — (436) (3,913) (4,349) 84 (244) (54) (8,442) (4,563) — — (8,442) (4,563) 12 (3.60) (4.64) 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 2016 $’000 2015 $’000 (8,442) (4,563) — — (8,442) (4,563) 30 Financial Statements Consolidated Balance Sheet As at 31 December 2016 Assets Non-current assets Intangible exploration and evaluation assets Property, plant and equipment Investment in joint venture Current assets Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Other financial liabilities Borrowings Total liabilities Net assets Equity Share capital Share premium Retained earnings Equity attributable to equity holders of the parent Notes 2016 $’000 2015 $’000 14 15 13 17 17 20 22 18 23 63,137 51,091 — 62,089 38,106 — 114,228 100,195 9,460 53,839 63,299 2,179 7,220 9,399 177,527 109,594 10,856 15,510 14,751 41,117 136,410 5,156 148,516 5,977 15,000 14,965 35,942 73,652 1,723 81,428 (17,262) (9,499) 136,410 73,652 The financial statements of Hummingbird Resources Plc were approved by the Board of Directors and authorised for issue on 23 May 2017. 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. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore Consolidated Statement of Cash Flows For the year ended 31 December 2016 Net cash outflow from operating activities Investing activities Purchases of intangible exploration and evaluation assets Purchases of mine development assets Purchases of property, plant and equipment Interest received Net cash used in investing activities Financing activities Net proceeds from issue of shares Loan interest paid Financial liabilities issued net of issue costs Net cash from financing activities Net increase/(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 26 2016 $’000 2015 $’000 (6,371) (4,639) (973) (9,610) (108) 160 (3,761) (6,651) (78) 38 (10,531) (10,452) 66,315 (1,303) — 65,012 48,110 (1,491) 7,220 53,839 10,139 (1,070) 4,950 14,019 (1,072) (244) 8,536 7,220 32 Financial Statements Consolidated Statement of Changes in Equity For the year ended 31 December 2016 As at 31 December 2014 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 net of costs Total transactions with owners in their capacity as owners Share based payments As at 31 December 2015 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 net of costs Total transactions with owners in their capacity as owners Share based payments As at 31 December 2016 Share capital $’000 1,385 — — 338 338 — Share premium $’000 71,627 Retained earnings $’000 (5,136) Total $’000 67,876 — — (4,563) (4,563) (4,563) (4,563) 9,801 9,801 — — — 200 1,723 81,428 (9,499) — — 3,433 3,433 — — — (8,442) (8,442) 67,088 67,088 — — — 679 10,139 10,139 200 73,652 (8,442) (8,442) 70,521 70,521 679 5,156 148,516 (17,262) 136,410 Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | Explore Notes to the Consolidated Financial Statements For the year ended 31 December 2016 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 projects, principally gold, focused exclusively in West Africa. 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 ended 31 December 2015. 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. IAS 7 IAS 12 IFRS 2 IFRS 9 IFRS 15 IFRS 16 IFRS10 & IAS 28 (effective 1 January 2017) (effective 1 January 2017) (effective 1 January 2018) (effective 1 January 2018) (effective 1 January 2018) (effective 1 January 2019) (effective 1 January 2019) Disclosure initiative Recognition of deferred tax assets for unrealised losses Classification and measurement of share-based payment transactions Financial Instruments Revenue from contracts with customers Leases Sale or contribution of assets between an investor and its associates or joint venture 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 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 $1.23016 (2015: $1.4802) . Going concern The development of the Group’s projects through to production and revenue generation is dependent on the Group’s ability to obtain financing through the raising of equity capital, debt financing and other means. As detailed in note 30 on 11 April 2017 the Company’s subsidiary Société Des Mines De Komana SA entered into a loan agreement with Coris Bank International for CFA 37 billion (approximately $60m) to fund the development of the Yanfolila Project. Having prepared forecasts and budgets based on current expected levels of expenditure and financing the Directors believe that the Coris loan together with existing funding is sufficient to develop the Yanfolila Project and that future revenues are sufficient to support commercial operation for the life of the mine. Accordingly, the Directors have prepared the financial statements on a going concern basis. 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 December 2016. 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 period 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. 34 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 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 US 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 profit or loss in the period in which they arise. 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. 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) costs of 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. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 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 Mine Development 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 there to be two cost pools, the whole of Liberia and Mali to be one cost pool each and therefore aggregates all Liberian and Malian assets for the purposes of determining whether impairment of E&E assets has occurred. Property, plant and equipment Property, plant and equipment (“PP&E”) are carried at cost less accumulated depreciation and any recognised impairment loss. With the exception of mine development assets, depreciation and amortisation is charged so as to write off the cost or valuation of assets, over their estimated useful lives, using the straight-line method, on the following bases: Development assets – vehicles Development assets – other Other 10% – 33.3% per annum 10% – 33.3% per annum 10% – 33.3% per annum 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. Mine Development assets include appropriate exploration and evaluation costs transferred on development of an exploration property. Mine Development costs are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable, at least at every balance sheet date. Mine Development costs are not depreciated during the development phase until the property is considered capable of operating in a manner intended by management when it commences commercial production. Upon commencement of commercial production a Mine Development asset is transferred to a Mining property and is depreciated on a unit-of-production method. 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. 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. 36 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 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. 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 in 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. 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. Other financial liabilities (accounting for royalty financing) In order to determine the appropriate accounting treatment for the royalty financing which is described in note 22, assessment is required of whether the substance of the arrangements constituted a financial liability, 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. Borrowings As per IAS 39 Financial Instruments, loans are measured at amortised cost determined using the effective interest rate method. Equity Ordinary shares are classed as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds. Share-based payments The Group has applied IFRS 2 Share based Payment for all share based payments. The Group has used shares, share options and other share based payments as consideration for goods and services received from suppliers and employees. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 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 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 (or other instruments) that will eventually vest. For equity settled share based payments the corresponding amount is credited to retained earnings. For cash settled share based payments the corresponding amount is recognised as a liability and remeasured at each balance sheet date with any changes in fair value being recognised in the income statement. 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 of share options are 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. 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 during the year, the exploration and development of mineral resources, and two geographical segments, being Liberia and Mali. Business combinations The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated balance sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date, which is the date when control passes to the Company. The results of the acquired operations are included in the consolidated income statement from the date on which control was obtained. Any difference arising between the fair value and tax base of the acquiree’s assets and liabilities that give rise to a taxable deductible difference results in recognition of deferred tax liability. No deferred tax liability is recognised on goodwill. 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. Recoverability of mine development assets Determination as to whether, and by how much, an asset or cash generating unit is impaired involves management estimates on highly uncertain matters such as future commodity prices, expected production and sales volumes, estimates of future operating expenses, life of mine and applicable discount rates. There is a possibility that changes in circumstances will alter these projections, which may impact on the recoverability amount of the assets. 38 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 5 Segmental analysis Income statement for the year ending 31 December 2016 Segment result before and after allocation of central costs Finance income Finance expense Loss before tax Tax Loss after tax Other charges Depreciation charged to the income statement Share based payments charged to the income statement Balance Sheet at 31 December 2016 Segment assets Segment liabilities Segment net assets Income statement for the year ending 31 December 2015 Segment result before and after allocation of central costs Finance income Finance expense Share of joint venture loss Loss before tax Tax Loss after tax Other charges Depreciation charged to the income statement Share based payments charged to the income statement Balance Sheet at 31 December 2015 Segment assets Segment liabilities Segment net assets Mali S’000 (432) 67 — (365) — (365) — — Liberia $’000 Corporate $’000 Total $’000 (62) (7,125) (7,619) — — (62) — (62) — — 601 (1,491) (8,015) — 668 (1,491) (8,442) — (8,015) (8,442) (8) (505) (8) (505) Mali S’000 62,980 Liberia $’000 60,631 (19,965) (15,129) 43,015 45,502 Corporate $’000 53,916 (6,023) 47,893 Total $’000 177,527 (41,117) 136,410 Mali S’000 (488) 12 (52) — (528) — (528) — — Liberia $’000 Corporate $’000 Total $’000 (22) (3,839) (4,349) 1 — — (21) — (21) — — 71 (192) (54) 84 (244) (54) (4,014) (4,563) — — (4,014) (4,563) (21) (436) (21) (436) Mali S’000 Liberia $’000 Corporate $’000 Total $’000 42,743 60,098 6,753 109,594 (19,445) (15,052) (1,445) (35,942) 23,298 45,046 5,308 73,652 Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 6 Administrative expenses by nature Other income Depreciation of property, plant and equipment (note 15) Staff costs excluding share based payments and employers NI accrual on share options Net foreign exchange losses/(gains) Audit fees (note 7 including fees paid to subsidiary auditors) Non-audit fees payable to associates of the Company’s auditor (note 7) Communications and IT Insurance Marketing Charitable donations Rent under operating leases Office expenses Professional and consultancy Travel and accommodation Bank charges Share based payments Charge/(release) of employers NI accrual on share options 2016 $’000 (47) 8 3,145 1,668 68 8 91 162 222 — 98 175 1,187 281 16 505 32 7,619 2015 $’000 (62) 21 2,082 (16) 57 26 148 138 206 1 88 176 787 251 23 436 (13) 4,349 7 Auditor’s remuneration Amounts payable to RSM 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 Fees payable to the Company’s auditors for the audit of certain subsidiaries Total audit fees Non-audit fees payable to associates of the Company’s auditor Taxation services Total non-audit fees 2016 $’000 2015 $’000 41 9 50 8 8 51 — 51 26 26 40 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 8 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 Provision/ (release of provision) for potential social security costs related to share based payments 2016 Number 2015 Number 7 40 47 2016 $’000 7 78 85 2015 $’000 3,723 3,345 479 92 833 200 5,327 400 93 448 (13) 4,273 Within wages and salaries, $1,696,000 (2015: $1,093,000) relates to remuneration payable to Directors, included within share based payments is $153,000 (2015: $258,000) accrued under cash-settled share based payment scheme payable to Directors, and within pension is $75,000 (2015: $74,000) relating to pension contributions in respect of Directors. The total remuneration of the highest paid director is $688,000 (2015: $355,000) comprising $657,000 (2015: $327,000) in relation to wages and salaries and pension contributions of $31,000 (2015: $28,000). In addition, an amount of $153,000 (2015: $248,000) is accrued under the cash-settled share based payment scheme. The number of directors to whom benefits are accruing under defined contribution pension schemes is 2 (2015: 3). Included within staff costs is $428,000 (2015: $1,166,000) capitalised to intangible exploration and evaluation assets and $1,217,000 (2015: $1,072,000) capitalised in to Mine Development assets. 9 Finance income Interest on bank deposits Gain on revaluation of warrants (note 24) 10 Finance expense Foreign exchange loss The foreign exchange loss arose on non-functional currency bank deposits. 11 Tax The taxation charge for the period can be reconciled to the loss per the income statement as follows: Loss before tax Tax credit at the rate of tax 20% (2015: 20.25%) Tax effect of non-deductible expenses Items not subject to tax Deferred tax asset not recognised Tax expense for the year In the UK, the main rate of corporation tax for the year was 20% (2015: 20.25%) . 2016 $’000 209 459 668 2016 $’000 1,491 1,491 2015 $’000 34 50 84 2015 $’000 244 244 2016 $’000 (8,442) (1,688) 3 (36) 1,721 — 2015 $’000 (4,563) (923) 2 112 809 — Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 12 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 (8,442) (4,563) 2016 $’000 2015 $’000 Number of shares 2016 Number 2015 Number Weighted average number of ordinary shares for the purposes of basic loss per share 234,603,288 98,306,165 Loss per ordinary share Basic and diluted 2016 $ cents (3.60) 2015 $ cents (4.64) At the balance sheet date there were 23,446,146 (2015: 7,315,158) potentially dilutive ordinary shares. Potentially dilutive ordinary shares include share options issued to employees and Directors, warrants issued and the conditional acquisition of the 20% interest in the Joe Village licence, which the Group did not previously own as described in note 23. At 31 December 2016 the potential ordinary shares are anti-dilutive and therefore there is no difference between basic and diluted loss per share. 13 Joint venture Iron Bird Resources Inc (“Iron Bird”) is a joint venture on an equal 50% basis between the Group and Petmin Limited (“Petmin”) . Iron Bird previously held the Mount Ginka licence and conducted exploration of iron ore in northern Liberia. Petmin Limited has been listed on the JSE since 1986. Investment in joint venture: Investment in joint venture as at 31 December 2014 Share of joint venture results for the period from 1 January 2015 to 31 December 2015 Investment in joint venture as at 31 December 2015 Share of joint venture results for the period from 1 January 2016 to 31 December 2016 Investment in joint venture as at 31 December 2016 The Group’s interest in the joint venture as at 31 December 2016 is set out below: Share of: Non-current assets Current assets Current liabilities Net assets The joint venture had no revenue in the period. Both Petmin and the Company have the option to contribute equally to future fundraisings. $’000 54 (54) — — — $’000 — — — — 42 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 14 Intangible exploration and evaluation assets Cost At 31 December 2014 Additions for the year Transfer to Mine Development assets (note 15) At 31 December 2015 Additions for the year At 31 December 2016 Liberia $’000 Mali $’000 Total $’000 59,172 730 — 59,902 635 60,537 27,655 10,412 86,827 11,142 (35,880) (35,880) 2,187 413 2,600 62,089 1,048 63,137 Additions to intangible exploration and evaluation assets during the year include $49,000 (2015: $281,000) of capitalised depreciation of property, plant and equipment used in exploration and evaluation activities. The intangible exploration and evaluation assets in respect of Liberia principally relate to the Dugbe Gold Project. The Group has signed a Mineral Development Agreement with the Government of Liberia and once ratified by parliament, the Government will be granted a 10% carried interest in Hummingbird Resources (Liberia) Inc, the company owning the Dugbe Gold Project. The exploration licences in Mali provide the Government with the right to a 10% carried interest and the right to buy a further 10% share in any mining company set-up to hold exploitation licences granted in respect of these exploration licences. 15 Property, plant and equipment Cost At 31 December 2014 Transfer of intangible E&E assets Additions Disposals At 31 December 2015 Additions Disposals At 31 December 2016 Accumulated depreciation At 31 December 2014 Charge for the year Disposals At 31 December 2015 Charge for the year Disposals At 31 December 2016 Carrying amount At 31 December 2016 At 31 December 2015 Mine Development assets $’000 Development assets – vehicles $’000 Development assets – other $’000 Other $’000 Total $’000 — 2,323 2,271 1,078 35,880 1,701 — 37,581 13,104 — 50,685 — — — — — — — 50,685 37,581 — — — 2,323 110 (138) 2,295 2,135 84 — 2,219 71 (138) 2,152 143 104 — 57 — 2,328 — (91) — 22 (1) 1,099 3 5,672 35,880 1,780 (1) 43,331 13,217 (229) 2,237 1,102 56,319 1,822 143 — 1,965 120 (79) 966 75 — 1,041 29 — 2,006 1,070 4,923 302 — 5,225 220 (217) 5,228 231 363 32 58 51,091 38,106 Of the property, plant and equipment depreciation charged in the year, $49,000 (2015: $281,000) was capitalised into intangible exploration and evaluation assets, and $163,000 (2015: $nil) was capitalised into mine development assets, with the balance being charged to the income statement. The additions to Mine Development assets include capitalised borrowing costs of $2,129,000 for the year ended 31 December 2016 (2015: $1,713,000) . As disclosed in note 30 ‘Events after the reporting date’, the Group has entered into a shareholders’ agreement with the Government of Mali in respect of Société des Mines de Komana SA (“SMK”), the company owning the Yanfolila Project. This Agreement confirms the Government’s participation in the share capital of SMK. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 16 Subsidiaries The Company had investments in the following subsidiary undertakings as at 31 December 2016: Name Directly held Country of incorporation and operation Proportion of voting interest % Trochilidae Resources Limited Hummingbird Resources (Liberia) Inc. Afro Minerals Inc. Isle of Man Liberia Liberia Golden Grebe Mining Limited United Kingdom Indirectly held Deveton Mining Company Sinoe Exploration Limited Hummingbird Security Limited Glencar Mining Plc Centrebind Agency Limited Liberia Liberia Liberia Ireland Cyprus Glencar International (BVI) Limited British Virgin Islands Mali Mali Mali Mali Isle of Man Isle of Man Isle of Man Glencar Mali SARL Sankarani Resources SARL Hummingbird Exploration Mali SARL Société des Mines de Komana SA Yanfolila Mining Limited Yanfolila Finance Limited Yanfolila Holdings Limited 17 Current assets Trade and other receivables Other receivables VAT recoverable Prepayments and accrued income 100 100 80 100 80 90 100 100 100 100 95 95 100 100 100 100 100 Activity Intermediate holding & service company Exploration & development Intermediate holding company Dormant Dormant Exploration Security Intermediate holding company Intermediate holding company Intermediate holding company Exploration Exploration Exploration Development Intermediate holding company Finance company Intermediate holding company 2016 $’000 5,594 666 3,200 9,460 2015 $’000 600 122 1,457 2,179 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 December 2016 of $53,839,000 (2015: $7,220,000) comprise cash held by the Group. The Directors consider that the carrying amount of these assets approximates their fair value. 44 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 18 Current borrowings At 1 January 2016 Received during the year New issue costs incurred and capitalised in the year Issue costs amortised in the year Total borrowing at 31 December 2016 Payable within one year included under current liabilities Payable after one year included under non-current liabilities $’000 14,965 — (783) 569 14,751 14,751 — The Group through its wholly owned subsidiary, Trochilidae Resources Limited (“Trochilidae”) , on 11 August 2014 entered into a Bridge Loan Agreement with Taurus Mining Finance Fund LP (“Taurus”) . On 15 August 2014 Trochilidae drew down the full $10m available under the Bridge Loan Agreement. On 1 September 2015 the group extended the Bridge Loan Agreement by a further $5m to a total of $15m. Amounts borrowed under the Bridge Loan Agreement bear interest at 9% per annum (payable semi-annually) and originally fell due for repayment in February 2016. During 2016 the repayment date was extended and on 5 December 2016 Taurus agreed an extension on the bridge facility to 8 April 2017. Additionally, on 5 December 2016 Taurus agreed to increase the Bridge Loan Agreement to a total of $25m and the additional funds were drawn down in February 2017. As per IAS 39 financial instruments the loans have been measured at amortised cost. During the year to 31 December 2016 total issue costs incurred in the year of $783,000 have been offset against the loan and $569,000 (2015: $172,000) of issue costs were amortised to mine development assets. During the year to 31 December 2016 $1,380,000 (2015: $1,070,000) of loan interest costs were charged to mine development assets. Security for the Bridge loan was granted to Taurus over the present and future inter group debt between Trochilidae, and Société des Mines de Komana SA (“SMK”) as well as the shares of Glencar Mining plc. Additionally the Company provided a guarantee to Taurus regarding the obligations of Trochilidae in respect of this agreement. 19 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 December 2016, the Group had unrecognised deferred tax assets of $5,761,000 (2015: $4,039,000) 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. 20 Trade and other payables Trade payables Other taxes and social security VAT payable Accruals Other payables 2016 $’000 3,566 2,841 465 3,372 612 10,856 2015 $’000 1,074 1,888 64 2,347 604 5,977 The average credit period taken for trade purchases is 91 days (2015: 55 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. Included within accruals is an amount of $ 284,000 (2015: $nil) being an apportionment of the cash award in respect of Hummingbird incentive plan – performance orientated (“HIPPO”) (note 25) . Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 21 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 2016 $’000 131 58 — 189 2015 $’000 69 169 17 255 Operating lease payments represent rentals payable by the Group for properties located in Liberia, Mali, and the head office in the UK. 22 Other financial liabilities Royalty liability Warrant liability (see notes 9 and 24) 2016 $’000 15,000 510 15,510 2015 $’000 15,000 — 15,000 Royalty liability 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 $15m in three equal tranches subject to the satisfaction of certain criteria. The first tranche of $5m was received on 14 March 2013 and the second tranche of $5m was received on 10 April 2013, the third tranche of $5m was received on 13 March 2014 giving a total of $15m due at 31 December 2016. During the year the advances were 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 $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. The amount advanced of $15m is repayable in certain limited circumstances, such as a change in control, and therefore is treated as a financial liability. Issue costs of $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. 46 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 23 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 Issued and fully paid Ordinary shares of £0.01 each 2016 2015 Number $’000 Number $’000 343,241,250 5,156 106,952,469 1,723 The Company has one class of Ordinary shares which carry no right to fixed income. At 1 December 2015 Issue of shares (a) – Tranche 1 Issue of shares (b) – Warrants Issue of shares (c) At 31 December 2015 Issue of shares (d) Issue of shares (e) At 31 December 2016 (a) Issue of shares Ordinary Shares of £0.01 Number 84,843,267 9,934,206 53,784 12,121,212 106,952,469 225,188,781 11,100,000 343,241,250 On 20 March 2015, the Company announced details of a funding package for the Yanfolila Project in Mali. The funding package consisted of two tranches of a placing of units. Each placing unit consists of one new ordinary share of £0.01 each a half of one warrant to subscribe for a new ordinary share (“placing units”) . The placing units were priced at £0.30 per share. Each warrant granted the holder the right to subscribe for one new ordinary share at £0.33 at any time during the 6 month period from the date of issue. Additionally, an open offer was provided to eligible shareholders to subscribe for placing units on the basis of 1 new ordinary share for every 12.64 existing ordinary shares held on 19 March 2015. Tranche 1 funding On 25 March 2015 3,638,292 placing units were issued, including 3,638,292 ordinary shares and 1,819,146 warrants. Tranche 2 funding On 16 April 2015 4,963,498 placing units were issued, including 4,963,498 ordinary shares and 2,481,749 warrants. Open offer On 16 April 2015 1,332,416 placing units were issued, including 1,322,416 ordinary shares and 661,208 warrants. In total from tranches 1 and 2 and the open offer 9,934,206 ordinary shares and 4,967,103 warrants have been issued. The gross proceeds of the placing units were $4,420,000. (b) Issue of shares – Warrants As part of the funding described in (a) above, each warrant granted the holder the right to subscribe for one new ordinary share at £0.33 at any time during the 6 month period from the date of issue. Of the 4,967,103 warrants issued a total of 53,784 warrants were exercised for 53,784 ordinary shares raising a total net proceeds of $27,000. During the prior year 4,913,319 warrants lapsed. (c) Issue of shares On 30 June 2015 12,121,212 shares were issued at a price of £0.33 in return for £4,500,000 ($6,290,000) before costs. (d) Issue of shares On 21 June 2016 225,188,781 shares were issued at a price of £0.22 in return for £49,542,000 ($72,370,000) before costs. (e) Issue of shares On 15 August 2016 11,100,000 shares were issued at a price of £0.26 in return for £2,886,000 ($3,727,000) before costs. 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 December 2016 the acquisition had not yet completed and the shares had not been issued. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements The total number of outstanding warrants and share options are: Warrants Share options Total 2016 Number 2015 Number 9,899,505 1,612,903 13,443,386 5,599,000 23,342,891 7,211,903 24 Warrants issued a) On 21 June 2016 the Company granted 8,286,602 warrants as part of the fundraising described in note 23(d) : Total number of warrants granted Exercise price of the warrants Final exercise date: 8,286,602 £0.22 31/12/2019 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 21 June 2016 and to fair value the warrants at 31 December 2016: Share price Expected dividend yield Expected volatility Expected life Risk free interest rate 31 Dec 2016 21 Jun 2016 £0.1825 £0.2225 Nil 47.5% 3 years 0.164% Nil 49.00% 3.5 Years 0.87% The gain arising on the change in value of the warrants between 21 June 2016 and 31 December 2016 is disclosed in note 9. b) On 12 December 2012 the Company granted 1,612,903 warrants to the IFC as part of its subscription: Total number of warrants granted Exercise price of the warrants Final 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 December 2016: Share price Expected dividend yield Expected volatility Expected life Risk free interest rate 31 Dec 2016 31 Dec 2015 £0.1825 — 47.5% 1 year 0.164% £0.125 Nil 47.00% 2 Years 1.34% The gain arising on the change in value of the warrants between 31 December 2015 and 31 December 2016 is disclosed in note 9. c) As described in note 23 during 2015 4,967,103 warrants were issued, a total of 53,784 warrants were exercised for 53,784 ordinary shares raising a total net proceeds of $27,000, with the remaining warrants lapsing during 2015. 48 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 25 Share based payments Share based payment charge for equity settled share based payments granted 17 November 2014 Share based payment charge for equity settled share based payments granted 5 December 2013 Share based payment charge for equity settled share based payments granted 26 October 2010 Share based payment charge for cash settled share based payments granted 2 July 2014 Share based payment charge for equity settled share based payments granted 30 September 2016 Total share based payment charge 2016 $’000 34 104 214 153 327 832 2015 $’000 90 110 — 248 — 448 Included within share based payments for the year is $327,000 (2015: $12,000) capitalised to mine development assets. Share options granted 17 November 2014 Share options granted 5 December 2013 Share options granted 26 October 2010 Share option granted 30 September 2016 Total number of share options Weighted average exercise price 2016 Number 250,000 2,144,000 3,095,000 Granted Number Lapsed Number 2015 Number — — — — 250,000 (110,000) 2,254,000 — 3,095,000 — — 7,954,386 7,954,386 13,443,386 7,954,386 (110,000) 5,599,000 £0.09 £0.01 £0.41 £0.43 On 17 November 2014 the Company granted 250,000 share options to the Non-Executive Chairman Russell King. Total number of share options granted Exercise price of the options Exercise period: Tranche 1 – 17 November 2014 and 18 November 2024 Tranche 2 – 17 November 2014 and 18 November 2024 Number of share options lapsed during the current period Number of share options outstanding as at 31 Dec 2015 250,000 $0.015 (£0.01) 125,000 125,000 — 250,000 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 17 November 2014: Share price at the date of grant Expected dividend yield Expected volatility Expected life Risk free interest rate $0.55 (£0.355) Nil 49.94% 5 years 1.40% Repricing of historic share options On 21 June 2016, all existing share based incentive schemes including the long term incentive plan (excluding share options issues to RJ King) were rebased to £0.22, so as to align management with shareholders as the Company moves into construction following the recapitalisation (see note 23(d) ) . The effect of the repricing was an additional charge to the income statement of $104,000 in respect of share options issued on 5 December 2013 and $214,000 in respect of share options issued on 26 October 2010. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 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 all options that were rebased to £0.22: Share price at the date of grant Expected dividend yield Expected volatility Expected life Risk free interest rate £0.224 Nil 49.00% 3 years 0.87% Share based payment charge for cash settled share based payments granted 2 July 2014 On 1 June 2014, contingent on the successful acquisition by the Company (or a subsidiary of the Company) of the Yanfolila Project the Company awarded the Chief Executive Officer a deferred contingent bonus in the form of a cash settled share based payment equivalent to the cash value on the date of payment of 1,785,714 shares (subject to a maximum share price of £2.016) . This bonus is deferred and except in the event of a change of control, only becomes payable after a vesting period of 2 years and at the earlier of the Chief Executive Officer ceasing to be a Director of the Company or 10 years. The Yanfolila Project was acquired on 2 July 2014 and accordingly this share based payment was granted on that date. The share price and resultant fair value of this cash settled share based payment was estimated as at the date of grant as £0.56 and $1,774,000 respectively, which is spread over the vesting period of 2 years and re-measured at each balance sheet date using the share price on that date (share price as at 31 December 2016: £0.1825 (2015: £0.125) . The amounts recognised in the income statement for year is as follows: Amounts in respect of the year ended 31 December 2015 Amounts in respect of the year ended 31 December 2016 Initial charge $’000 Revaluation $’000 1,330 443 (1,082) (290) Total $’000 248 153 Long term incentive plan (“LTIP”) On 1 July 2014 the shareholders approved the adoption of a LTIP for the purpose of retaining and motivating the executive directors to deliver the proposed new strategy. As detailed above, the LTIP was rebased on 21 June 2016 as part of the fundraise to recapitalise the Company (see note 23(d) ) . Participants in the LTIP are limited to selected executive directors (“executives”) except in exceptional circumstances. Allocations of the LTIP are proposed by the Principal Director (currently the CEO) and ratified by the board. As at 31 December 2016 no allocation had been proposed. The LTIP will issue shares to the participants for adding material long term shareholder value and therefore align the interest of the executives with the shareholders by providing a strong incentive for the executives to drive shareholder value. The value that may be delivered to executives and the dilution of shareholders are commensurate with levels applying in schemes implemented by industry comparators. Under the LTIP, shares may be distributed to participants depending upon the value that has been added to shareholders over the vesting period. No value will accrue to the LTIP if the growth in shareholder value is less than 50% of the market capitalisation of Hummingbird on 21 June 2016. If the growth in shareholder value is over 50%, a proportion of value added to shareholders will accrue to the LTIP, increasing progressively, starting at 5% of the value added to shareholders up to a maximum of 15% of the value added to shareholders above 150%. Shares with a value equal to the value accrued in the LTIP will be issued on vesting or the value can be settled in cash at the Company’s option. There is also the flexibility to allow early payments under the LTIP where assets or companies are disposed of and value has been added exceeding 50% on the same principles. Hummingbird incentive plan – performance orientated In recognition of the critical importance of delivering the Yanfolila Mine on time and on budget and to retain and incentivise key team members, and to align management and shareholders, the Company has granted options to certain group employees and directors of the Company under the rules of HIPPO. As the core team is developed further awards may be made under HIPPO subject to a maximum dilution limit from HIPPO of 5% of issued share capital. 50 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 On 30 September 2016 the Company granted 7,954,386 share options to certain Directors and Group employees, representing 2.3% of the issued share capital at 31 December 2016. Additionally, cash awards were granted with a total value of $2,045,000 based on a 95% probability of meeting the vesting criteria. Total award granted Exercise price of the options Fair value of the options at the date of grant Exercise period: 25% – from the first gold pour at the Yanfolila Gold Mine 25% – from the passing of the Company’s completion tests in respect of the Yanfolila Gold Mine 25% – 12 months from first gold pour at the Yanfolila Gold Mine Note 1 25% – 24 months from first gold pour at the Yanfolila Gold Mine Note 1 Number of share options lapsed during the current period Number of share options outstanding as at 31 December 2016 Share award 7,954,386 £0.01 £0.24 1,988,597 1,988,597 1,988,597 1,988,595 — 7,954,386 Cash award ($’000) 2,045 — — 511 511 511 511 — — Note 1 these are conditional of all completion tests being passed. Note 2 the company has the option to defer the first tranche until sufficient funds are available or settle in shares. Additionally, the cash awards can be increased or decreased by 25% depending on performance against timetable and budget. If the first gold pour is either 3 months behind target completion date or the costs to the first gold pour are more than $8,000,000 over budget, the options will be forfeited. The fair value of the cash award has been capitalised to mine development assets on a straight-line basis over the vesting period of the award. During the year $283,000 (2015: $nil) was capitalised to mine development assets. 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 30 September 2016: Share price at the date of grant Expected dividend yield Expected volatility Expected life Risk free interest rate Multiplied by the probability of meeting the vesting conditions at date of grant The absolute dilution limit relating to awards under employee share incentive schemes is 20%. 26 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 Share of joint venture loss Operating cash flows before movements in working capital Increase in receivables Increase in payables Net cash outflow from operating activities £0.249 Nil 47.78% 3 years 0.164% 95% 2016 $’000 2015 $’000 (8,442) (4,563) 8 505 (668) 1,491 — (7,106) (329) 1,064 (6,371) 21 436 (84) 244 54 (3,892) (861) 114 (4,639) 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. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 27 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: Categories of financial instruments Loans and receivables Financial liabilities measured at amortised cost Financial liabilities at fair value through profit or loss 2016 2015 2016 2015 2016 2015 Financial assets Cash and cash equivalents Other receivables Financial liabilities Borrowings (note 18) Trade payables (note 20) Other payables (note 20) Accruals Royalty liability (see note 22) Warrant liability1 (see note 24) 53,839 5,594 59,433 7,220 600 7,820 — — — — — — — — — — — — — — — — — 14,751 3,566 612 2,906 15,000 — — — — 14,965 1,074 604 2,019 15,000 — 36,835 33,662 — — — — — — — — 510 510 — — — — — — — — — — 1 The fair value of the warrant liability (see note 24) 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 Group’s finance function 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: 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. 52 Notes to the Consolidated Financial Statements continued For the year ended 31 December 2016 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 work programmes. 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 borrowings including maturity dates are detailed in note 18. Interest rate risk Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that the Group uses. Interest bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. The Group’s interest bearing financial liabilities are at a fixed rate of interest. 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, and from holding non-functional currency 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, Sterling, South African Rand, West Africa CFA Franc and the Euro, the Group holds the majority of its funds in these 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: Euros (“€”) Sterling (“GBP”) Canadian Dollars (“CAD”) South African Rand (“ZAR”) Australian Dollars (“AUD”) West African CFA Franc (“FCFA”) Liabilities Assets 2016 $’000 1,192 421 25 — 56 917 2015 $’000 72 530 10 72 73 547 2016 $’000 8,419 13,437 401 7,052 571 1,273 2015 $’000 366 3,344 50 353 100 179 Foreign currency sensitivity analysis The Group is exposed primarily to movements in the $ against the GBP, € and ZAR. 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 each of these currencies. The analysis is based on a weakening and strengthening of these key currencies by 10% against the $ 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 each of the key currencies strengthen against the $. For a 10% weakening of the key currencies against the $, 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 various currencies against the $. Increase in income statement and net assets – GBP Increase in income statement and net assets – EUR Increase in income statement and net assets – ZAR 2016 $’000 1,311 728 705 2015 $’000 283 29 23 Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 28 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 Stephen Betts & Sons Limited charged the Company $85,000 (2015: $69,000) under a contract for the provision of staff, office equipment and premises. $34,000 was accrued outstanding between the parties as at 31 December 2016 (2015: $nil) . The amounts outstanding are unsecured and will be settled in cash. Stephen Betts & Sons Limited is a related party of the Group because Stephen Betts and Daniel Betts are shareholders and Directors of that company. Joint venture with Petmin Limited (Iron Bird Resources Inc) Petmin Limited is a related party of the Group because Petmin Limited is a joint venture partner in Iron Bird Resources Inc (note 13) . During the year the Group received management fees of $nil (2015: $62,000) from Iron Bird Resources Inc. Transactions with D Pelham David Pelham is a related party as he is a Non-Executive Director during the current year. During the year D Pelham received geological consultancy fees of $nil (2015: $9,000) . 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 Provision/ (reduction in provision) for potential social security costs on share options 2016 $’000 1,696 223 75 617 118 2,729 2015 $’000 1,093 138 74 422 (6) 1,721 29 Commitments As at 31 December 2016 the Group had commitments of $25,340,087 (2015: $Nil) in respect of the Yanfolila Project. 30 Events after the reporting date Increase Taurus debt facility On 5 December 2016 Taurus agreed to increase the existing bridge loan in place between Trochilidae Resources Limited and Taurus Funds Management Pty Limited to $25m. These additional funds were fully drawn down in February 2017. On 10 April 2017 the bridge loan was repaid. HIPPO – options lapsed Since the year end 181,818 share options that were granted on 30 September 2016 have lapsed. Shareholder agreement with Government of Mali On 2 February 2017 the Group signed a shareholder agreement with the Government of Mali in respect of Société des Mines de Komana SA (“SMK”) , the company holding the Komana Mining Permit which contains the Yanfolila Gold Project. The agreement confirms the terms of the Government of Mali’s participation in SMK and enables the Group to proceed with the process of issuing the Government of Mali 10% free carried shares in SMK, which are non dilutable and carry the right to a priority dividend. The agreement also provides for the Government of Mali to acquire an additional 10% of SMK for a consideration of CFA6,624,516,660 (approximately $11 million) . The first instalment of CFA600,000,000 ($1 million) payable by the Government of Mali will be satisfied in settlement of an equivalent sum owed by SMK to the Malian Government in respect of historical costs. Debt facility with Coris Bank International On 11 April 2017 the Company’s subsidiary Société Des Mines De Komana SA entered into a loan agreement with Coris Bank International for CFA 37 billion (approximately $60m) on a four-year term at a fixed interest rate of nine percent with a 12-month deferral of capital payment. Interest will be payable during the 12-month deferral period. Share purchase agreement Cora Gold Limited On 11 April 2017 the Company entered into an agreement to sell its interests in Sankarani Resources SARL and Hummingbird Exploration Mali SARL to Cora Gold Limited, in exchange for 50% of the issued share capital of Cora Gold Limited. 54 Company Balance Sheet As at 31 December 2016 Notes 2016 $’000 2015 $’000 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 Total liabilities Net assets Equity Share capital Share premium Retained earnings Total equity 35 36 37 38 38 39 39 53,924 12 35,208 89,144 9,369 48,223 57,592 38,114 17 32,690 70,821 1,527 6,170 7,697 146,736 78,518 5,513 510 6,023 140,713 40 5,156 148,516 (12,959) 140,713 1,487 — 1,487 77,031 1,723 81,428 (6,120) 77,031 The financial statements were approved by the Board of Directors and authorised for issue on 23 May 2017. They were signed on its behalf by: DE Betts Director The notes to the Company financial statements form part of these financial statements. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements Company Statement of Cash Flows For the year ended 31 December 2016 Net cash outflow from operating activities Investing activities Purchases of property, plant and equipment Investment in subsidiaries Decrease/(increase) in amounts lent to subsidiaries Interest received Net cash used in investing activities Financing activities Net proceeds from issue of shares Interest paid 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 41 2016 $’000 2015 $’000 (8,188) (3,108) (3) (15,000) 492 95 (18) (4,013) (1,003) 24 (14,416) (5,010) 66,315 10,139 (130) 66,185 43,581 — 10,139 2,021 (1,528) (194) 6,170 48,223 4,343 6,170 56 Company Statement of Changes in Equity For the year ended 31 December 2016 As at 31 December 2014 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 December 2015 Comprehensive loss for year: Loss for year Total comprehensive loss for the year Transactions with owners in their capacity as owners: Issue of shares net of costs Total transactions with owners in their capacity as owners Share based payments As at 31 December 2016 Share capital $’000 1,385 — — 338 338 — Share premium $’000 71,627 Retained earnings $’000 Total $’000 (2,808) 70,204 — — (3,512) (3,512) (3,512) (3,512) 9,801 9,801 — — — 200 10,139 10,139 200 1,723 81,428 (6,120) 77,031 — — 3,433 3,433 — — — (7,518) (7,518) (7,518) (7,518) 67,088 67,088 — — — 679 70,521 70,521 679 5,156 148,516 (12,959) 140,713 Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements Notes to the Company Financial Statements For the year ended 31 December 2016 31 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 income statement for the year. Hummingbird Resources Plc reported a loss for the year ended 31 December 2016 of $7,518,000 (2015: $3,512,000) . 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. 32 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 December 2016, 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 part of the impairment review of the carrying value of the Groups exploration and evaluation assets the Directors considered that there was no impairment as at 31 December 2016. 33 Auditor’s Remuneration The auditor’s remuneration for audit and other services is disclosed in note 7 to the consolidated financial statements. 34 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 Provision/ (release of provision) for potential social security costs related to share based payments 2016 Number 2015 Number 7 7 14 7 8 15 $’000 $’000 2,880 1,733 363 92 832 200 4,368 212 93 436 (6) 2,468 Within wages and salaries, $1,587,000 (2015: $1,089,000) relates to remuneration paid to Directors, included within share based payments is $153,000 (2015: $258,000) accrued under cash-settled share based payment scheme payable to Directors, and within pension is $75,000 (2015: $74,000) relating to pension contributions in respect of Directors. The total remuneration of the highest paid director is $688,000 (2015: $355,000) comprising $657,000 (2015: $327,000) in relation to wages and salaries and pension contributions of $30,000 (2015: $28,000). In addition, an amount of $153,000 (2015: $248,000) is accrued under the cash-settled share based payment scheme. 58 Notes to the Company Financial Statements continued For the year ended 31 December 2016 The number of directors to whom benefits are accruing under defined contribution pension schemes is 2 (2015: 3). Key management remuneration is disclosed in note 28 to the consolidated financial statements. 35 Investments Cost at the beginning of the year Additions At Total Investment in subsidiaries 2016 $’000 Investment in subsidiaries 2015 $’000 38,114 15,810 53,924 34,101 4,013 38,114 The Company’s subsidiaries are disclosed in note 16 to the consolidated financial statements. The additions in the year include $810,000 in respect of HIPPO incentive scheme that have not been recharged to subsidiaries. Hummingbird Resources Plc subscribed for additional nil par value shares in its wholly owned subsidiary Trochilidae Resources Limited for a value of $15,000,000 (2015: $4,000,000) . 36 Property, plant & equipment Cost At 1 January 2015 Additions At 1 January 2016 Additions At 31 December 2016 Accumulated depreciation At 1 January 2015 Charge for the year At 1 January 2016 Charge for the year At 31 December 2016 Carrying amount At 31 December 2016 At 31 December 2015 Development assets – other $’000 59 — 59 — 59 56 3 59 — 59 — — Other $’000 338 18 356 3 359 321 18 339 8 347 12 17 Total $’000 397 18 415 3 418 377 21 398 8 406 12 17 37 Receivables from subsidiaries At the balance sheet date amounts receivable from the subsidiaries were $35,208,000 (2015: $32,690,000) . 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. Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 38 Current Assets Trade and other receivables Other receivables Prepayments and accrued income Trade receivables – intercompany There are no past due or impaired receivables. 2016 $’000 5,526 446 3,397 9,369 2015 $’000 358 500 669 1,527 Cash and cash equivalents Cash and cash equivalents as at 31 December 2016 of $48,223,000 (31 December 2015: $6,170,000) 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. 39 Current Liabilities Trade and other payables Trade payables Other taxes and social security VAT Accruals Other payables 2016 $’000 1,686 70 465 2,917 375 5,513 2015 $’000 351 66 65 630 375 1,487 The average credit period taken for trade purchases is 118 days (2015: 59 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 22 of the consolidated financial statements. Amounts due to joint venture Amounts due by the Company to the joint venture are disclosed in note 13 of the consolidated financial statements. 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 Operating lease payments represent rentals payable by the Company for the UK head office. 40 Share Capital The movements on this item are disclosed in note 23 to the consolidated financial statements. 2016 $’000 89 2015 $’000 27 41 Share based payments The Company’s share based payments information is disclosed in note 25 to the consolidated financial statements. Categories of financial instruments Financial assets Cash and cash equivalents Other receivables Intercompany trade receivables Loans due from subsidiaries Financial liabilities Trade payables Other payables Accruals Warrant liability1 Loans and receivables Financial liabilities measured at amortised cost Financial liabilities at fair value through profit or loss 2016 2015 2016 2015 2016 2015 48,223 5,526 6,170 358 3,397 669 35,208 92,354 32,690 39,887 - - - - - — — — — — — — — — — 1,686 375 2,452 — 4,513 — — — — — 351 375 336 — 1,062 — — — — — — — — 510 510 — — — — — — — — — — 60 Notes to the Company Financial Statements continued For the year ended 31 December 2016 42 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 Increase in payables Net cash outflow from operating activities 2016 $’000 2015 $’000 (7,513) (3,503) 8 505 (603) 1,658 (5,945) (2,621) 378 21 436 (71) 194 (2,923) (236) 51 (8,188) (3,108) 43 Financial Instruments The Company’s strategy and financial risk management objectives are described in note 27. Principal financial instruments The principal financial instruments used by the Company from which risk arises are as follows: Categories of financial instruments 2016 2015 2016 2015 2016 2015 Loans and receivables Financial liabilities measured at amortised cost Financial liabilities at fair value through profit or loss Financial assets Cash and cash equivalents Other receivables Intercompany trade receivables Loans due from subsidiaries Financial liabilities Trade payables Other payables Accruals Warrant liability1 48,223 5,526 3,397 35,208 92,354 — — — — — 6,170 358 669 32,690 39,887 — — — — — — — — — — 1,686 375 2,452 — 4,513 — — — — — 351 375 336 — 1,062 — — — — — — — — 510 510 — — — — — — — — — — 1 The fair value of the warrant liability (see note 24) 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. The risks that the Company is subject to in addition to the Group risks described in note 27 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 27, which affect the Group, the Company is also subject to credit risk on the balances receivable from its subsidiaries (see note 37) . 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 27) . Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreFinancial Statements 44 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. Trochilidae Resources Limited These amounts are repayable on demand and no interest is currently charged. 2016 $’000 33,231 1,977 2015 $’000 32,690 — The Company’s transactions with other related parties and remuneration of key management personnel are disclosed in note 28 to the consolidated financial statements. 45 Events after the balance sheet date Events after the balance sheet date are disclosed in note 29 to the Consolidated Financial Statements. 62 Hummingbird Resources | Annual Report & Accounts 2016 Produce | Develop | ExploreNotes Designed and produced by london@blackandcallow.com www.blackandcallow.com 020 3794 1720 A N N U A L R E P O R T 2 0 1 6 H U M M I N G B I R D R E S O U R C E S P L C