Annual Report
& Accounts 2017
Production
Development
Exploration
Hummingbird Resources plc
Strategic Review
Overview
Where We Operate
Hummingbird is currently an
African focussed gold company
with a producing mine in Mali, a
large development asset in Liberia
and further significant exploration
ground in both regions.
Mali
Liberia
Yanfolila
Hummingbird Resources
owns 80% of the Yanfolila
Gold project in southwest
Mali with a mineral resource
of 2.2Moz and a mine life of
7 years.
See more info on p.12
Dugbe
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.
See more info on p.14
“Opportunities aren’t born; they’re made”
Basil de Tent
Hummingbird Resources plc
Strategic Review
Overview
Our Highlights
Cash in the bank at year end
US$41m
Production
Yanfolila is a high grade, low cost
open pit gold mining operation
Development
Dugbe is Liberia’s largest gold
project with significant further
exploration potential
Exploration
Both in Mali and Liberia, the Company
has a large exploration footprint of
around 4,000km2. The Company has
committed to investing up to 15% of
its annual free cash flow to extend its
mine life through exploration.
Additionally, the Company has a 34%
interest in AIM listed Cora Gold with
prospects in Mali and Senegal
(AIM:CORA).
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Strategic Review
02 Chairman’s Statement
03 CEO’s Statement
06 Our Strategy
Production
Development
Exploration
12 Operational Review
Yanfolila Gold Project
Dugbe Gold Project
Exploration
Sustainability
19 Strategic Report
Corporate Governance
22 Board of Directors
24 Directors’ Report
27 Statement of Directors’ Responsibilities
28 Independent Auditor’s Report
Financial Statements
31 Consolidated Income Statement
31 Consolidated Statement of Comprehensive Income
32 Consolidated Balance Sheet
33 Consolidated Statement of Cash Flows
34 Consolidated Statement of Changes in Equity
35 Notes to the Consolidated Financial Statements
60 Company Balance Sheet
61 Company Statement of Cash Flows
62 Company Statement of Changes in Equity
63 Notes to the Company Financial Statements
68 Company Information & Advisers
Annual Report & Accounts 2017
01
Hummingbird Resources plc
Strategic Review
Chairman’s Statement
2017 was a year of significant transition for the Company. Having re-capitalised
and started construction in 2016, this past year centred on delivery. The Company
completed construction, commissioning and first gold pour to schedule and
budget. Post period end, the Company has also ramped-up through Q1,
as previously stated, and entered into commercial production on 1 April 2018.
Whilst delivery of Yanfolila is the Company’s most significant achievement, I would
like to focus on the other areas of the Company that also had significant success.
Post period end we appointed two new Non-Executive Directors to our Board and
also the Technical Advisory Committee (‘TAC’). Attie Roux is the former COO of
Endeavour Mining, who oversaw its growth from a single mine operation to the
multi-mine mid-tier operator it is today. His breadth of relevant experience will be
immensely important as we also look to follow a path of significant growth in the
coming years. He will also chair our TAC, which plays an important role in
overseeing our operations team and ensuring Yanfolila continues to deliver.
We have also welcomed Ernie Nutter to the Board. Ernie is a former Partner at RBC
Capital Markets and latterly Research Director and Partner of Capital International
Asset Managers, one of the largest money managers globally. He is a geologist by
training and will also sit on our TAC. His knowledge of capital markets, not to
mention his North American presence, will be invaluable to us as we are now a cash
flow positive company with significant growth plans, should the right opportunity
present itself. I believe these hires reinforce our Board, whilst maintaining its high
level of independence, which is crucial to good governance. The Company stands
in a stronger position with them on the team.
The Company is pleased to report that Yanfolila has a 95% Malian work force.
Our supervisors and control room operators, having been recruited from similar gold
operations within Mali, particularly add important local experience. Furthermore, the
plant operators have been hired from nearby villages, which is also in line with the
Company’s objective to provide local employment. Through comprehensive onsite
training and sound supervision, these teams are now operating the plant effectively
and have validated our endeavours to hire locally. What is more, we are very pleased
to report that 25% of our plant operators are women, against an industry average of
around 8%. We will continually look to maintain and expand this policy of local hires
and, where possible, seek to reach as equal a gender balance as possible.
Safety remains an integral part of the business and through construction the Company
achieved a Lost Time Injury Frequency Rate (‘LTIFR’) of 3.37 (per 1,000,000 hours),
which is lower than the Australian construction industry average of 4.0 LTIFR – this
is no mean feat given the location in which we were operating. Since reaching full
operations there has been a further improvement on the LTIFR of 1.66 in Q1 2018.
2017 has seen the development of our sustainability programme across five focus areas,
including WASH (water, sanitation and hygiene); education; community health; food,
security and agriculture; and local economic development. The 2018 plan aims to invest
directly in these areas and maximise impact by partnering with organisations already
active in these areas.
The Bougoudale water supply system, which aims to bring tapped water to 4,000
people, has now reached completion and work in the WASH is now focussed on
rolling similar projects out to other communities near the mine. Construction of a
new community health care centre started in March 2018 and construction will be
completed in Q2 2018. This seeks to transform the medical service provision within
the local community by expanding facilities and services available. Our medical team
has also continued to assist in teaching and skills transfer for local medical
professionals, while the soap-making organisations we helped to found in 2017 are
now reporting record profits. We are excited to further support these groups as the
year continues, with goals to upgrade their infrastructure and production capabilities.
I look forward to another stellar year for the Company and in next year’s report I look
forward to hopefully reporting that the Company has hit its guidance for the year by
producing 105,000-115,000ozs of gold and continuing to deliver and improve health,
safety, community engagement and good governance standards across the board.
As ever, we are extremely grateful to our shareholders and all stakeholders for their
support of Hummingbird as we look to deliver on our goals.
In my statement in last
year’s annual report, I
focussed significant
attention on the delivery of
Yanfolila by the end of
2017. I am pleased to
report that this goal was
achieved by the Company
on time and on budget.
As everyone in the industry
knows, this is an impressive
accomplishment - even
more so when you consider
it is the first mine this team
has built together.
Russell King
Non-Executive Chairman
02
Annual Report & Accounts 2017
Hummingbird Resources plc
Strategic Review
CEO’s Statement
Value. It’s a complicated
word.
It is gratifying to be able to
sit here writing my
statement for the 2017
financial year having
accomplished everything
we set out to achieve.
Dan Betts
Chief Executive Officer
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In our last annual report, we set out our ambitious targets to build the Yanfolila Gold
Mine in Mali for an exceptionally low cost of US$88.6m in an exceptionally short
period of time. We publicly stated that we aimed to pour gold on 19 December,
against all conventional wisdom, and that by the end of Q1 2018 we would have
successfully ramped up to full scale operations. These were ambitious objectives,
particularly in the context of an unproven team who had never collectively built a
mine before.
Fast forward to today and we actually poured first gold on 19 December, which in
itself is extraordinary! If all truth be told, we had hoped to be a week or two earlier
but the thousand moving parts coming together at the end of construction meant
that we hit the date on the nose. It goes without saying that huge credit must go to
every member of the Project team, for their herculean efforts sustained over a long
period of time that made these achievements possible. Furthermore, as I write this,
we have successfully ramped up the plant and mine to full capacity on time, and
once again shown an ability to meet our targets. This has all been achieved against
a backdrop of a robust and slightly rising gold price, and yet sentiment in the
market towards gold mining stocks remains damp. Today, Hummingbird trades on
under three times its first full year’s projected free cash flow to 31 March 2019 and
that valuation takes no account of the upside at Yanfolila, with 1.5Moz outside of
the current Reserves, the value of our Dugbe Gold Project in Liberia, or the calibre
of the skills now embedded in our proven team and what we may be able to do
with that skillset.
Our share price may have risen by over 50% from the placing price of 22p, but we
don’t see this as the achievement that others might. We see our value as more than
just a price on a screen, whilst we recognise that that is the ultimate arbitor of value
at any point in time. Our challenge now is to release that latent value for all to see
and we will do this in three ways: firstly, we will continue to develop Yanfolila into
a well operated, low cost, best in class gold producer and we will build on the
reputation that Hummingbird is rightfully earning as a company that delivers on
its commitments. Secondly, we will aggressively seek to develop the Reserves and
Resources around the Yanfolila mine to extend the mine life and prove longer-term
value in this business, but in a responsible and financially disciplined manner. Thirdly,
we will pursue other opportunities, including those within our own projects, where
we can bring the skills of our project team to bare by unlocking value in project
execution, but again in a strict and highly disciplined environment. Crucially though,
if we do not find projects that meet our strict return criteria, then we will not seek
growth for growth’s sake and we will examine all options to best use our cash flows
from Yanfolila, including the possibilities of dividends or share buybacks.
Our aim is to create shareholder ‘value’, which neatly brings me back to the start:
value is a complicated word, but I firmly believe that we have the skills, ambition
and now the platform to create considerable value for our business and all its
stakeholders. We have the ability to remain flexible in our capacity to unlock this
value for the long term, although it may present itself in a complex world with
an increasingly short-term horizon.
“Price is what you pay, but value is what you get.” Warren Buffet
Financial performance
Funding
During 2017 the Company raised no equity and completed the Yanfolila Gold
Project on budget. During the year we replaced our bridge loan finance with a
senior debt facility of US$60m from Coris Bank International. Coris is a large retail
bank based in Burkina Faso and this loan represents the single largest African led
debt financing of an African mining project to our knowledge. Coris has been an
excellent partner in the development of the Project and affords us a profile in the
region which is to the benefit of us all. The bank holds a refreshing understanding
of operating in Africa and the resource sector and we look forward to a long and
happy relationship with the team there. The terms of our debt facility are that we
will pay back the loan on a straight line basis over three years and we have ample
cash flow and cash on our balance sheet to comfortably meet these repayments.
Annual Report & Accounts 2017
03
Hummingbird Resources plc
Strategic Review
CEO’s Statement
continued
Gold production forecast
105,000 -
115,000oz
Spent teaching healthcare to local communities
1,000hrs
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Based on prices as at 1 May 2018
04
Annual Report & Accounts 2017
Financial performance continued
Balance Sheet
The Company poured first gold on 19 December 2017 and still had US$41m
of cash on the balance sheet at 31 December 2017. This was in excess of our
projections, largely owing to the delay in settlement of some construction costs.
After liabilities, the cash balance stood at approximately US$15m on completion
of construction and I am pleased to be able to report that the Company became
operationally cash flow positive in February 2018.
Cash Flow
The Yanfolila mine has always been attractive from a cash flow perspective, anticipated
to generate strong cash flows from the first year. Based on a $1,300 gold price and our
forecast production target in our first full year of production (1 April 2018 – 31 March
2019) of 120,000 oz - 135,000 oz at an AISC of $750-800 per ounce, this would
generate free cash flow of at least $60m. We believe that these cash flows are
sustainable for longer than the current mine plan represents and we will look to
extend and improve these forecasts through vigorous exploration in 2018.
Dividend Policy
Now that we have become cash flow positive, many of the conversations I have
with investors and commentators are regarding what we intend to do with the cash,
so now seems an appropriate time to address this issue head on. First and
foremost, Hummingbird is still a new company, having only declared commercial
production in the last few weeks. It needs time to become strong and stable and
it is too soon to make grand promises about dividend policies. That said, I will say
that this is an issue that is constantly addressed by the Board and it is our intention
to deliver shareholder value. If that denotes returning all the cash to shareholders,
then so be it, however, I would say that mining is unique. We manage a finite and
depleting Resource (our orebody) and if we are going to achieve our aim of
building a world class mining business then we must constantly re-invest in our
business through a combination of prudent exploration and disciplined corporate
activity, providing those options present real opportunities to create value. As ever,
we will continue to pursue our quest in the best interest of all shareholders,
maintaining the standards and flexibility we have always had.
Government of Mali
Much has been made in the media of late regarding the potential risk of the
Government of Mali (and African governments in general) changing the terms of mining
conventions and therefore disrupting the basis on which investors choose to invest in
the continent. As with any country, the countries in which we operate have their own
unique risks and challenges, which we are constantly evaluating, but it would seem
seem evidential from our strong and close relationship with the Government of Mali that
we are dealing with an authority that both understands and supports the mining sector
and would not intentionally damage the single largest contributor to its GDP.
Government of Liberia
The Government of Liberia recently completed its first transition of power through
a democratic election process in nearly three decades. This is a monumental
achievement for the country and we are enthused by the potential to grow on our
strong foundations in the Republic. We are engaged with the new administration,
and recently hosted a party of nine officials at our mine in Mali where we held
comprehensive presentations on our operations and discussed what Hummingbird
hopes to bring to Liberia. The Dugbe Gold Project is of significant importance to
the new government and we look forward to working closely with them to unlock
the value of this venture.
Yanfolila Gold Mine Status
Construction Summary
At the risk of repeating myself, the Yanfolila Gold Mine was a construction success,
for which I would like to thank the dedicated work of all the Hummingbird team and
the hard and disciplined work of our contractors. Special mention should go to our
EPCM contractors, SENET, our civil and SMPP contractors, Imagri, and our mining
contractors, AMS, for the delivery of their project responsibilities. Building this mine
has taken over 1.5 million man hours, we have used over 5,000 tons of concrete
and over 20km of piping in and around the plant. At its peak construction,
Hummingbird employed over 750 people to make this happen.
Hummingbird Resources plc
Strategic Review
CEO’s Statement
continued
Commercial production declared
1April
2018
High proportion of local workforce
5%
63%
32%
Local 32%
National 63%
Expat 5%
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Not only am I delighted that the team has worked together to build the Project
on time and on budget, but I am also proud of the meticulous attention paid to all
elements of SHEC (Safety, Health, Environment & Community), which we will look
to build upon as a fundamental part of our operational business. To name but a few
key figures, the LTIFR (Lost Time Injury Frequency Rate) through construction was
3.37 (per 1,000,000 hours), which is lower than the Australian construction industry
average of 4.0 LTIFR. In Q1 of 2018 we have achieved an LTIFR of 1.66, and this is
a key target against which we will monitor performance throughout the rest of
the year.
In addition, it is worth mentioning a few of the community initiatives already
accomplished by the Company in 2017, which further highlights our commitment
to all of the stakeholders and communities within our areas of operation. I would
particularly like to thank our partners CCI (Critical Care International) for their
assistance in the roll-out of our healthcare initiatives.
We have conducted over 1,000 hours of healthcare teaching, with 12 healthcare
workers reporting to use their newborn resuscitation skills on a weekly basis on
infants who would otherwise have died.
We have assessed 1,000 children for malnutrition, with 159 detected cases being
successfully treated. We have made a significant contribution to the Malian blood
bank and in February we proudly contributed 151 units of blood over three days.
Nationally, the blood bank records an average of just 15 donors per day. Company
doctors have assisted in several dozen community incidents, from road traffic
accidents to complex medical problems and birthing issues. We have been
involved in building the Bougoudale village clinic and are training the necessary
staff to run it. This is a significant facility that we believe will have a major benefit for
the community. In education, the Company has made donations to support salaries
of 20 teachers in three communes. The Company has more than doubled the water
supply to Bougoudale, with a sustainable solar powered water pump and
distribution facility. The Company has built sustainable livelihoods for over 300
women across 10 villages working in the now cash flow positive soap factory and
we will continue to support this further. Looking ahead, the Company has
committed significant investment to the community development plan which will
address the five pillars of:
• Water & sanitation
• Community health
• Education
•
•
Food, security & agriculture
Local economic development
Corporate
At a corporate level I would like to offer my sincere thanks to Mr Matthew Idiens
(Co-Founder) and Mr David Pelham for their services to Hummingbird over the
last decade, and for their guidance to me on a personal level. Both have been
instrumental in the formation and development of the Company and we would
not be where we are today without either one of them. Both will be stepping
down from the Board at the AGM in June.
To replace them, I am also extremely pleased to welcome to the Board,
Mr Ernie Nutter and Mr Attie Roux. Both individuals have a long and distinguished
track record of experience in the successful delivery of many aspects of the mining
industry and I am looking forward to working with them both as we build the next
chapter for Hummingbird.
Dan Betts
Chief Executive Officer
Annual Report & Accounts 2017
05
Production
The Yanfolila Gold
Project
Yanfolila, in Mali, poured first gold in December
2017 and in April 2018 Yanfolila commenced
commercial production. Yanfolila is a high grade,
3.1g/t Reserves, open pit gold mining operation.
Yanfolila is forecast to produce 105,000-115,000
ounces of gold in 2018. Construction, ramp-up
and commercial production was delivered on
time and on budget.
Hummingbird Resources plc
Strategic Review
Our Strategy
Development
Opportunities to create further
value in West Africa
08
Annual Report & Accounts 2017
Hummingbird Resources plc
Strategic Review
The Dugbe Gold
Project
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.
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Gold Resource
4.2Moz
Annual Report & Accounts 2017
09
Hummingbird Resources plc
Strategic Review
Our Strategy
Exploration
Unlock potential to increase mine
life and make new discoveries
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Annual Report & Accounts 2017
Hummingbird Resources plc
Strategic Review
Mali & Liberia
Opportunities
Both in Mali and Liberia the Company has a
large exploration footprint of around 4,000km2.
The Company has committed to investing up
to 15% of its annual free cash flow to extend its
mine life through exploration. Additionally,
the Company has a 34% interest in AIM listed
Cora Gold with prospects in Mali and Senegal.
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Exploration ground in West Africa
4,000km2
Annual Report & Accounts 2017
11
Hummingbird Resources plc
Strategic Review
Operational Review
Mali
The Yanfolila
Gold Project
The Yanfolila Gold Project is a high
grade, low cost open pit mining
operation situated in the southern
region of Mali, West Africa. The fully-
funded project commenced
construction in October 2016 and
was built on time and on budget to
pour first gold before year end 2017.
Delivered the Yanfolila Gold Mine on time
and on budget
Delivered for Capex
US$88.6m
First gold poured
19 December
2017
Post Period Update
Gold Poured (Ounces)
Ore mined (Tonnes)
Ore processed (Tonnes)
Avg grade mill feed (g/t)
Recovery (%)
Q1 2018
18,785
259,228
238,629
2.96
96.1
Jan 2018
2,131
79,391
67,730
2.18
96.1
Feb 2018 Mar 2018
9,912
121,998
92,606
3.39
95.8
6,742
93,839
78,293
3.11
96.4
In April 2018, 10,423ozs of gold was poured at the Yanfolila Gold Mine.
Process Plant
During Q1 2018, the plant was ramped up to full design capacity and the design
feed rate to the plant was achieved and sustained in February. While the plant feed
was initially lower grade to avoid gold loss in the event of any start-up problems,
the feed grade to the plant was gradually increased to the life of mine average
grade through February. Gold recoveries from the CIL circuit have been excellent
right from the initial start-up, with recoveries consistently exceeding the design
criteria at over 95%.
Although the plant is still being fed predominantly oxide ore, the secondary crusher
circuit was successfully commissioned and also ramped up to design capacity in
February. To facilitate the start-up of this circuit, a batch of harder laterite ore was
put through the plant.
The ramp up of the entire plant has been successful due to the experience of our
in-house construction team and SENET, our EPCM engineering contractor.
The Company is pleased to report that Yanfolila has a 95% Malian work force, with
the supervisors and control room operators having been recruited from similar gold
operations within Mali, adding important local experience. The plant operators are
from local villages, which is also in line with the Company’s objective to provide a
high proportion of local employment. Through onsite training and good
supervision, these teams are now operating the plant effectively and have validated
our plan to hire locally. Additionally, we are very pleased to report that 25% of our
plant operators are women, against an industry average of around 8%, and we will
continually look to maintain and expand this policy of local hiring and where
possible attempt to get as close to a gender balance as possible, given our
industry and operating location.
Mining
Operations focussed mainly in the south and centre of the Komana East (“KE”) pit.
KE southern section (‘stage 1’) was mined down to the 350RL. Work has also
commenced at the north of KE (‘stage 2’), allowing for higher daily production.
Better grade reconciliation results were achieved from the southern end of the pit,
which allowed for higher-grade ore delivery to the ROM pad than was originally
planned.
The ROM pad extension was completed successfully and now has an expanded
capacity of 330,000 tonnes. This will allow the appropriate management of ore
stockpiles and blending to the process plant through the wet season in Q3 of
this year.
Safety remains an integral part of the business and through construction the
Company achieved a Lost Time Injury Frequency Rate (‘LTIFR’) of 3.37 (per
1,000,000 hours), lower than the Australian construction industry average of
4.0 LTIFR. Since commencing full operations there has been a further
improvement on the LTIFR of 1.66 in Q1 2018.
MALI
Yanfolila
Gold Project
12
Annual Report & Accounts 2017
Hummingbird Resources plc
Strategic Review
Q1 2018 Highlights
Successful on schedule transition from
construction, through ramp up, to full scale
operations at Yanfolila with mine and plant
operating at name plate capacity by end Q1
with commercial production declared from
1 April 2018
Gold poured of 18,785 ounces at an average
grade of 2.96 g/t
• 9,912 ounces poured at an average grade
of 3.39g/t in March
Gold sold totalled 11,941 ounces at an average
price of US$1,332 per ounce
Total ore processed of 238,628 tonnes with the
plant operating at an average of over 95%
capacity through March
Achieved Lost Time Injury Frequency Rate
(’LTIFR’) of 1.66 in Q1 2018 with further
improvement seen since end of the period.
LTIFR through construction of 3.37 (per 1,000,000
hours), lower than the Australian construction
industry average of 4.0 LTIFR.
Production guidance for 2018 of 105,000 –
115,000 ounces gold
Construction and Commissioning
The Engineering, Procurement and Construction Management (“EPCM”) contract
was awarded to SENET (Pty) Ltd, a leading South African project management and
engineering company. SENET commenced detailed design and engineering of the
1.24Mtpa gold plant on 1 July 2016. The gold plant design consists of a two stage
crushing, single ball mill comminution circuit, followed by gravity concentration &
CIL, split AARL elution, carbon regeneration and cyanide destruction (SO2/Air Detox).
Power supply is provided by a 7.4MW, diesel turnkey power plant, installed
and operated by Aggreko, a major player in the global power market and
well established in West Africa.
The two main construction contracts, the Civil and the Structural Steel, Mechanical,
Piping and Platework (“SMPP”) contracts, were awarded to Imagri SARL, a Bamako
based construction contractor. The first concrete pour was on 24 October 2016 and
the SMPP works commenced in January 2017. Construction of the main plant was
completed by end of November 2017, on schedule and budget. Ore
commissioning of the gold plant commenced 9 December 2017 and first gold
was poured 19 December 2017.
The plant construction and ore commissioning was successfully completed within
the planned 18 month schedule and for the $88.6m budgeted capital cost.
Mine Development
The Mining contract was awarded in December 2016 to African Mining Services
(“AMS”), one of the largest contract mining companies in Africa with established
support networks in Africa, Australia and Europe. AMS is a wholly owned subsidiary
of Ausdrill Limited, a publicly listed Australian Company (ASX: ASL), and has
multiple West African mining contracts with firms such as Anglo-Gold Ashanti,
Resolute Mining, and Endeavour Mining.
Hummingbird has appointed AMS for an initial three-year period with an option for
the Company to extend the contract by a further year of mining at the Yanfolila Gold
Project. The total value of the contract is expected to be approximately US$112m
over three years.
AMS commenced mobilisation and establishment works on site in early 2017,
ahead of starting mining at Komana East in August 2017. Mining rates have been
increasing steadily and are now averaging over 1 million BCM per month, and are
expected to reach 1.3M BCM per month from April 2018.
Preparations are now underway to commence mining at the Komana West pit, in
line with the production schedule. Clearing and grade control drilling is expected
to commence by August 2018.
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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 study1
Total
Contained
Tonne Ounces (Au) Grade (g/t)
3.18
3.06
3.14
470,600
239,200
709,800
4,606,000
2,433,000
7,039,000
Tonnes
18,645,000
3,520,000
Ounces Grade (g/t)
2.64
1.98
1,587,600
224,400
6,324,200
28,489,200
390,700
2,202,700
1.92
2.39
Total Project Reserves and mineral inventory, Hummingbird interest is 80%
*
1 Non-JORC and non-SAMREC
Annual Report & Accounts 2017
13
Hummingbird Resources plc
Strategic Review
Operational Review
Liberia
The Dugbe
Gold Project
The Dugbe Gold Project is one of
the largest discoveries of gold in
West Africa. The completed
Preliminary Economic Assessment
(“PEA”) shows that the 4.2Moz
Resource would deliver a 20 year
LoM with 125,000ozs gold produced
per year.
Indicated mineral Resource at 1.4g/t
4.2Moz
LIBERIA
Dugbe
Gold Project
Key facts
Liberia’s largest gold deposit
PEA shows at US$1,300 Gold
• US$186m NPV
• 29% IRR
• 125,000ozs average production per year over
a 20 year LoM
MDA signed with the Government of Liberia for a
25 year term
Significant exploration upside
14
Annual Report & Accounts 2017
This is Liberia’s largest gold deposit and the Company strongly believes there
is significant potential to grow these Resources further.
The Company continues to evaluate ways to unlock the value of Dugbe.
The existing discovered Resources offer a compelling opportunity to build a
large bulk tonnage open pit gold mine, and combined with an extremely large
and unexplored highly prospective exploration area, there is clearly a large
amount of unlocked potential.
January 2018 saw the transition of power to the newly elected President Weah,
who has set out a pro-business agenda for the country. Hummingbird looks forward
to developing further its relationship with the Government of Liberia and all the
stakeholders in the Project. The Dugbe Gold Project has the ability to be a
transformational asset not only for the Company but also for Liberia; Dugbe when
in production would make a meaningful impact on the country’s GDP. In Mali,
Hummingbird has shown that it is committed to building mines for the benefit
of all stakeholders and would look to achieve the same in Liberia.
For further information on the Dugbe Gold Project please visit
www.hummingbirdresources.co.uk
Hummingbird Resources plc
Strategic Review
Operational Review
Exploration
Mali
A region home to multiple proven
deposits within truckable distance of
the Yanfolila Plant, available to be
converted into Reserves.
Gold not currently converted into Reserves
1.5Moz
MALI
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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 (the previous owner of the Company’s permits in Mali) invested
significant amounts of money in exploration and there are several drilled
discoveries, as well as drill ready exploration targets. The Company has reviewed
the exploration potential on its mining permit and has created a plan to exploit
these opportunities. Now that Yanfolila is in production, the Company is looking
forward to building a fully operational exploration team and executing an active
exploration programme, with the specific focus on achieving a 10+ year Reserve
mine life in the short to medium term.
Additionally, there is a large amount of under-explored exploration ground on the
three exploration licences, with many new exciting targets to be reviewed. We are
looking forward to both further exploring our existing licence packages and keeping
an open view to augment existing ground where synergies with other exploration
companies exist. This prospective area has the potential to become a prolific
economic gold-producing region.
The 2018 exploration strategy aims to bring as much as possible of the nearly
1.5Moz of Resources, not currently in Reserves, into the Life of Mine plan. The focus
is on prioritising those areas that will have the greatest impact to the mine life,
as well as discovering extensional Resources within the licence area to ensure a
healthy pipeline of ore Reserves. A budget of no more than 15% the Company’s
annual free cash flow, which equates to circa. US$8m, will allow the freedom to drill
the metres required to meet our aim.
The exploration targets in southern Mali will form part of the 2018 exploration
strategy: Komana East Underground; Komana West; Guirin West; Gonka;
Sanioumale West and Sanioumale East. Much of this sits within a 25km trucking
radius of the Yanfolila process plant.
The five brownfields deposits sit along gold-bearing splays off the regional
Sankarani Shear Zone, a major regional structure. Exploration will focus on
conducting various programs of targeted infill and extensional drilling at each
of these deposits.
Komana East Underground
A study was recently completed by external consultants DRA Global to target
high-grades at depth beneath the current Komana East pit shell. The study
concluded the economics are positive, based on the current Indicated and Inferred
Resources. As part of the 2018 exploration strategy, Hummingbird Resources will
be drilling deep holes to target and convert the current Inferred Resources to the
Indicated category. The benefits of this drilling will be to add mine life and to
improve the grade profile of operation towards the end of the current mine life.
Komana West
A deposit over a 2.5+km strike length, there is exploration potential to the north
and south of the current pit design, with possible underground potential also.
Gonka
An exciting deposit on strike, 5km south of the Komana East pit, it is a basalt and
mafic dyke-hosted gold deposit with higher grades at depth. All resources for this
deposit are Inferred and need to be converted into Measured and Indicated
categories with the drilling planned for 2018. This deposit has the potential to
improve the operation’s production profile by improving the process plant feed
grade in the middle years of the current mine plan.
Sanioumale East
A basalt and mafic dyke-hosted gold deposit similar to the Komana East and
Gonka deposits. It has a 2.0+km strike length and an open mineral Resource at
depth, as only the weathered zone was historically drilled, leaving the fresh rock
beneath open to drilling and additional Reserves.
Annual Report & Accounts 2017
15
Hummingbird Resources plc
Strategic Review
Operational Review
Exploration / continued
Liberia
Hummingbird owns permits of over
2,000km2 of exploration ground in
southeast Liberia. Situated in the
highly prospective region of the
Birimian gold province, the Project
offers huge upside potential for
future gold discoveries.
Exploration package
2,000km2
LIBERIA
Mali (continued)
Sanioumale West
A more complex deposit, this sediment hosted gold deposit has an ore body
geometry that is favourable for good pit economics. This deposit is similar to
Sanioumale East; the mineral resource is open at depth, as only the weathered
zone was historically drilled, leaving the fresh rock open to drilling and additional
reserves. A notable intersection showing potential for underground is 14m @
4.21g/t from 138m depth.
Guirin West
A sediment-hosted gold deposit 1.5km to the west of the Komana East open pit
(closer to the process plant). Given its strategic location close to the Komana East
haul road, the Life of Mine planning requirements may fast-track this deposit to top
priority as a source of high-grade oxide material. Infill drilling is required to convert
the current resource into Indicated and Measured Reserves, which is part of the
2018 exploration plan.
Conclusion
The Company aims to delineate an additional circa. 400kozs of Indicated and
Inferred Resources into Reserves, equivalent to circa. $22/reserve ounce. Drilling
is due to commence by June 2018.
There is a recently published Exploration Presentation which can be found on
the Mali Exploration page of our website; www.hummingbirdresources.co.uk.
Liberia
Hummingbird has over 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 the Company 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.
16
Annual Report & Accounts 2017
Hummingbird Resources plc
Strategic Review
Operational Review
Sustainability
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.
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.
Malian employees
95%
Community key facts
638 person hours of teaching to local
community healthcare workers
12 healthcare workers received newborn
resuscitation teaching
1,100 children assessed for malnutrition
and 159 treated
Partnership with Yanfolila based NGO focussing
on sex worker health and infectious diseases
Assistance in care to 26 community patients
including motorbike crashes, drowning, and
an artisanal mining pit collapse
Safety remains an integral part of the business and the Company achieved through
construction a Lost Time Injury Frequency Rate (‘LTIFR’) of 3.37 (per 1,000,000 hours)
lower than the Australian construction industry average of 4.0 LTIFR. Since reaching
full operations there has been a further improvement on the LTIFR of 1.66 in Q1 2018.
As we transition into the operational phase of the Project we will strive to improve
this performance and can already see the frequency reducing now we are no longer
in construction.
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Yanfolila LTIFR
8.00
4.00
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
LTI LTIFR 12 Month Rolling Average Project LTIFR LTIFR 3 Month Rolling Average
Induction and training programmes are developed by the Company and its
contractors to address specific workplace risks and hazards. All employees are
required to have completed training modules in hazard awareness, job safety
analysis, basic fire response, first aid, and chemicals awareness.
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.
The plan in Mali focusses on five main pillars:
• Water and sanitation
• Education
• Community health
•
•
Food, security and agriculture
Local economic development
In 2017 over US$150,000 was spent on projects, and during 2018 we expect
to spend US$450,000 on direct investment projects.
Annual Report & Accounts 2017
17
Hummingbird Resources plc
Strategic Review
Operational Review
Sustainability / continued
Community Development (continued)
Hummingbird 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 also to bring new knowledge and
practices to these providers through our UK registered doctors.
Investment in safe drinking water resources remains a key focus for many in Mali.
The Project has delivered a safe drinking water system in Bougoudale that
comprises an equipped borehole, elevated 40m3 water storage tank, solar power
supply, and over 5km of pipework that delivers clean drinking water to nine new
water access points across the village. The net impact of this is that the number
of water access points in the village has more than trebled.
In the frame of local economic development, Hummingbird engaged with a local
NGO to deliver a soap making project that would ultimately benefit over 300 local
women across 10 communities. Thanks to the hard effort of the women producer
groups, all are now making positive cashflow, and further investment is expected
in these groups over the coming years to assist in the move to formalised soap
production and sales.
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.
During the construction phase, peak Project employment stood at just over 1,400
people, of which 90% were Malian and around 35% were from the local
communities that surround the mine.
Training programs have been developed to take ‘unskilled’ workers from the
surrounding communities and put them into positions of responsibility and skills
working as operators on the plant or truck drivers for our mining contractor, AMS.
A state of the art simulator is used by AMS to develop these skills. Hummingbird’s
local subsidiary, La Société des Mines de Komana (“SMK”) is proud to report that
of the 36 process plant operators, 32 are from the local community and 25% are
women. This compares to an Australian survey in 2014 which cited that only 9%
of full time mine employees are women.
Following the construction phase of the Project there has been a decrease in direct
Project employment as the operation transitions from construction into operation.
However, by working closely with those local workers who have been retrenched,
Hummingbird aims to manage labour risks and also identify opportunities for future
employment or development of skills that will leave a lasting positive legacy.
During the operations stage around 800 workers will be employed by
Hummingbird and its contractors and early indications suggest that around 95%
of these will be Malian. Commitment to local hiring and development of skills is
a key priority.
Stakeholder Engagement
At both sites in Liberia and Mali, Hummingbird employs a full time team
responsible for engagement with local communities, authorities and other
stakeholders. A robust grievance mechanism is in place to receive, record and
handle grievances in a clear and transparent manner.
In Mali over 300 community meetings were held during the course of 2017.
This included weekly meetings with community leaders on local employment and
monthly formal meetings on community development projects held with leaders
and representatives from all stakeholders.
High proportion of local workforce
5%
63%
32%
Local 32%
National 63%
Expat 5%
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Annual Report & Accounts 2017
Hummingbird Resources plc
Strategic Review
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 elsewhere in the Strategic Review
(the Chairman’s Statement, CEO’s Statement, Our Stratagies and Operational Review form part of this Strategic Report) , in order to
achieve compliance with the provision of the CA06.
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:
Gold price risk
As an unhedged junior mining company operating its first gold mine, 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 (MINUSMA), established in April 2013 and consisting of over 13,000 military and police, has helped maintain
the security situation throughout the remainder of the country. However, France is now overtly supporting the military of the G5 Sahel
countries (Burkina Faso, Chad, Mali, Mauritania and Niger) who, in late 2017, commenced active military operations in the north of Mali
against Jihadists in the north of the country. The result has been an increase of retaliatory terrorist attacks against the UN and G5 forces during
2018, although this has largely been in the north of Mali. There was one security incident in Bamako in the reporting period when, on 18 June
2017, terrorists attacked a hotel complex just outside of Bamako during which five people were killed. As a result the Group takes the security
situation in Mali extremely seriously and has implemented a comprehensive security plan to mitigate the various security risks associated with
operating in the country.
Liberia has not been affected by any security incidents during the past year and at the end of March 2018, the United Nations mission in
Liberia (UNMIL), which had been present in the country since the end of the civil war in 2003, came to a conclusion with the final departure
of UN troops from the country. In December 2017 presidential elections were peacefully held and there was a subsequent smooth transition
from President Ellen John-Sirleaf to the former footballer, George Weah, who was inaugurated on 22 January 2018.
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 in two countries.
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19
Hummingbird Resources plc
Strategic Review
Strategic Report
continued
Principal risks and uncertainties (continued)
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.
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.
Mining risk
The successful operation of the Yanfolila Project is dependent on sufficient ore of the right grades and types being mined on a timely basis.
There is a risk that the amounts of ore delivered to the plant are not sufficient to fully supply the plant, leading to reduced gold production
and revenues.
Additionally, there is the risk that the mining may not be as efficient as expected, leading to higher costs (e.g. through a lower grade and or
more costly than expected, (through dilution, inefficient mining, ore losses, higher strip ratios etc.)). Any significant delays or additional costs
of mining, ore losses or additional dilution could result in a significant reduction or delay in revenues, which could lead to the project requiring
additional working capital or becoming uneconomic.
Dependence on key personnel risk
The Group has entered into contractual arrangement to secure the services of its key personnel, however the retention of these services and
the future costs cannot be guaranteed. The loss of any key individuals in the Group’s management team or the inability to attract appropriate
personnel could impact the Group’s performance.
Social licence to operate risk
The Group’s ability to develop and operate its projects is dependent on the support of its host communities.
To date relations with the host communities in Mali have been positive, however there is a risk that if the relationship deteriorated then
the ability of the Group to operate in Mali could be temporarily or permanently adversely impacted.
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.
Mineral Reserves
Mineral inventory
Mine development expenditure (cumulative) (1)
Exploration & development expenditure (annual)
First gold pour date achieved (2016 target)
Cash balance
Share price
1
Includes historic exploration spend on Yanfolila and capitalised interest.
2017 2016
700,000oz 700,000oz
6,400,000oz 6,400,000oz
$129.2m $50.7m
$1.3m $1.0m
19/12/2017 19/12/2017
$40.6m $53.8m
£0.3425 £0.1825
20
Annual Report & Accounts 2017
Hummingbird Resources plc
Strategic Review
Review of financial performance and position
The Group made a loss after tax of $5.3m compared to a loss of $8.4m for the previous year. There were no gold sales made in the year and
no revenue was recognised. The loss for the year included other administrative expenses of $6.4m (which had reduced from $7.1m in the prior
year largely as a result of a reduced loss on foreign exchange), gain on disposal of subsidiaries of $1.9m arising on the disposal of two
exploration subsidiaries in exchange for a significant stake in an associate (Cora Gold Limited), finance income of $6.5m (representing foreign
exchange gains and interest receivable in respect of cash balances) and finance expense of $6.8m (arising on the revaluation of warrants
issued by the Group and foreign exchange losses on the CFA denominated loan from Coris Bank).
As at 31 December 2017 the Group had consolidated net assets of $144.8m compared to $136.4m as at 31 December 2016.
The net assets included Non Current Assets of $197.1m (2016: $114.2m), Current Assets of $57.1m (2016: $63.3m), less total liabilities
of $109.4m (2016: $41.1m).
Non Current Assets increased from $114.2m to $197.1m in the year, largely through additions to the Yanfolila Mine of $78.5m, funded from
the proceeds of the loan from Coris Bank and working capital. Non Current Assets includes Property Plant and Equipment of $130.0m
principally representing the historic cost of acquiring, developing and constructing the Yanfolila mine, $61.0m and $2.2m of intangible
exploration and evaluation assets in Liberia and Mali respectively, $0.2m in respect of software and $3.7m in respect of the Group’s 33.85%
interest in its associate Cora Gold Limited which was acquired in the year following the sale of two exploration subsidiaries in Mali to Cora
Gold Limited.
Current Assets largely consisted of unrestricted cash balances of $36.2m (2016: $53.8m) and restricted cash of $4.4m which is held by Coris
Bank as partial security for their loan. Current Assets also included inventories of $1.4m (2016: $Nil) of reagents, spares and consumables and
trade and other receivables of $15.1m (2016: $9.5m) which included $10.9m (2016: $nil) due from the Government of Mali as a result of it
exercising its rights to acquire an additional 10% in Societe Des Mines De Komana SA (the Group’s subsidiary which owns the Yanfolila mine).
Total liabilities increased from $41.1m to $109.4m, largely as a result of the new loan from Coris Bank ($53.4m due in more than one year
and $11.2m due in less than one year) replacing the previous borrowings of $14.8m, and increased trade and other payables ($28.4m as
at 31 December 2017) in connection with the construction of the Yanfolila Mine. Additionally included within total liabilities are amounts
of $15m (2016: $15m) in respect of the royalty liability in relation to the Dugbe project in Liberia and $1.4m (2016: $0.5m) in respect of
warrants issued and outstanding.
This Strategic Report has been approved by the Board and signed on its behalf by:
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DE Betts
Director
23 May 2018
Registered Office:
49-63 Spencer Street, Hockley, Birmingham, B18 6DE
Company registered in England and Wales 05467327
Annual Report & Accounts 2017
21
Hummingbird Resources plc
Corporate Governance
Board of Directors
Russell King
Chairman
Daniel Edward Betts
Chief Executive Officer
Thomas Hill
Finance Director & Company Secretary
Russell is Senior Independent Director
of Spectris plc and Interserve plc and an
Independent Non-Executive Director of BDO
LLP. Between 2010 and 2013 he was a Senior
Advisor to RBC Capital Markets on Metals and
Mining. Prior to this Russell served as Chief
Strategy Officer at Anglo American plc where
he had global responsibility for strategy,
business development, government relations,
safety and sustainable development. He was
also a member of Anglo American’s executive
committee for eight years. Additionally, Russell
was Senior Independent Non-Executive
Director of Aggreko plc, the FTSE 100
temporary power company, from
February 2007 to April 2017.
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.
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.
Stephen Alexander Betts
Non-Executive Director
Richard David Straker-Smith
Non-Executive Director
Matthew Charles Idiens
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.
22
Annual Report & Accounts 2017
David Straker-Smith is a Director of
CrossBorder Capital Ltd, which he joined in
April 1999. CrossBorder Capital is a London-
based investment research and advisory firm
regulated by the FCA. Previously, he worked at
ING Barings Securities Ltd from 1996 to 1999,
where he was Head of Equity Sales for Eastern
Europe, and at Gerrard & National Holdings
plc from 1980 until 1995, a firm which
operated as a discount house, futures broker,
money broker, stockbroker and fund manager.
During his time at Gerrard & National Holdings
plc, he became a main Board Director and
active Fund Manager. He is a Director of New
Vision Management Limited, a Dublin
regulated management company, and a
Director of Nomad Energy UK Limited.
Matthew co-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.
* Matthew is stepping down at the AGM
in June 2018
Hummingbird Resources plc
Corporate Governance
David Almgren Pelham
Non-Executive Director (and member of TAC)
George Ernest (Ernie) Nutter
Non-Executive Director (and member of TAC)*
Ian Cockerill
Technical Advisory Committee
Technical
Advisory
Committee
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 worked in several West African
countries, and oversaw the discovery and early
evaluation of the +6 Moz Chirano Gold Mine in
Ghana and 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. David is a Non-Executive
Director of Cora Gold Ltd, which is listed on
AIM with Hummingbird as a major shareholder.
* David is stepping down at the AGM in June 2018
Ernie is a highly regarded mining analyst,
formerly with one of the world’s largest money
managers, Capital International Asset
Managers, from 2004 until his retirement in
2017. Prior to this, he spent over 13 years with
the Royal Bank of Canada where he was
Managing Director of RBC Capital Markets,
Director of RBC’s Global Mining Research
team and former Chairman of RBC Dominion
Securities’ (now RBC Capital Markets) Strategic
Planning Committee.
Mr. Nutter holds a Bachelor of Science degree
in Geology from Dalhousie University.
* Appointed to the Board on 30 April 2018
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.
Adriaan (Attie) Roux
Non-Executive Director (and Chairman of TAC)*
David Lunt
Technical Advisory Committee
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Attie is a Metallurgical Engineer with over
42 years Operational, Technical and Executive
Management experience in the Mining
Industry. He was until recently the COO
of Endeavour Mining and was instrumental in
the development and growth of Endeavour.
He has been internal director of a number
of Companies in Anglogold Ashanti and
Endeavour. He is a Registered Professional
with the SA Council for Natural Scientific
Professions.
* Appointed to the Board on 30 April 2018
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
Annual Report & Accounts 2017
23
Hummingbird Resources plc
Corporate 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 2017.
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 nine 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 2017 are set out in the Consolidated Income Statement. The Directors do not
recommend payment of a dividend for the year (2016: 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:
Number of Number of
shares at shares at
Appointment 31 December 31 December
date 2017 2016
17 November 2014 53,955 53,955
RJ King
SA Betts (1 & 2)
28 April 2006 712,542 712,542
31 October 2005 2,741,607 2,741,607
MC Idiens
01 April 2008 25,052 25,052
DA Pelham
DE Betts (2 & 3)
30 October 2005 4,949,149 4,949,149
TR Hill (4)
17 July 2012 148,235 148,235
RD Straker-Smith (5)
- -
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.
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.
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.
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.
5 RD Straker-Smith was appointed on 24 May 2017. Additionaly AA Roux and GE Nutter were appointed on 30 April 2018.
24
Annual Report & Accounts 2017
Hummingbird Resources plc
Corporate Governance
The Directors’ interests in the share options of the Company at 31 December 2017 were as follows:
Options Options
Options at granted at 31
1 January during December Exercise Date First date Final date
2017 the year 2017 price of grant of exercise of exercise
RJ King 125,000 - 125,000 £0.01 17/11/2014 17/11/2015 17/11/2024
RJ King 125,000 - 125,000 £0.01 17/11/2014 17/11/2016 17/11/2024
SA Betts 337,500 - 337,500 £0.22 26/10/2010 24/12/2011 26/10/2020
SA Betts 33,000 - 33,000 £0.22 05/12/2013 01/06/2014 01/06/2024
SA Betts 33,000 - 33,000 £0.22 05/12/2013 01/06./2015 01/06/2025
MC Idiens 450,000 - 450,000 £0.22 26/10/2010 24/12/2011 26/10/2020
MC Idiens 33,000 - 33,000 £0.22 05/12/2013 01/06/2014 01/06/2024
MC Idiens 33,000 - 33,000 £0.22 05/12/2013 01/06/2015 01/06/2025
DA Pelham 225,000 - 225,000 £0.22 26/10/2010 24/12/2011 26/10/2020
DA Pelham 65,000 - 65,000 £0.22 05/12/2013 01/06/2014 01/06/2024
DA Pelham 65,000 - 65,000 £0.22 05/12/2013 01/06/2015 01/06/2025
DE Betts 1,125,000 - 1,125,000 £0.22 26/10/2010 24/12/2011 26/10/2020
DE Betts 217,000 - 217,000 £0.22 05/12/2013 01/06/2014 01/06/2024
DE Betts 217,000 - 217,000 £0.22 05/12/2013 01/06/2015 01/06/2025
DE Betts 150,000 - 150,000 £0.22 05/12/2013 Note 1 Note 1
DE Betts 426,136 - 426,136 £0.01 30/09/2016 19/12/2017 19/12/2022
DE Betts 426,136 - 426,136 £0.01 30/09/2016 Note 2 -
DE Betts 426,136 - 426,136 £0.01 30/09/2016 Note 2 -
DE Betts 426,137 - 426,137 £0.01 30/09/2016 Note 2 -
67,500 - 67,500 £0.22 26/10/2010 24/12/2011 26/10/2020
TR Hill
100,500 - 100,500 £0.22 05/12/2013 01/06/2014 01/06/2024
TR Hill
100,500 - 100,500 £0.22 05/12/2013 01/06/2015 01/06/2025
TR Hill
100,000 - 100,000 £0.22 05/12/2013 Note 1 Note 1
TR Hill
340,909 - 340,909 £0.01 30/09/2016 19/12/2017 19/12/2022
TR Hill
340,909 - 340,909 £0.01 30/09/2016 Note 2 -
TR Hill
340,909 - 340,909 £0.01 30/09/2016 Note 2 -
TR Hill
340,909 - 340,909 £0.01 30/09/2016 Note 2 -
TR Hill
6,670,181 6,670,181
Total
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 the exercise dates are dependent on meeting certain vesting criteria (see note 25).
Directors’ Remuneration
Directors Directors
emoluments emoluments
2017 2016
Directors $’000 $’000
RJ King 47 51
SA Betts 44 47
MC Idiens 44 48
DA Pelham (1) 41 44
RD Straker-Smith (appointed as director on 24 May 2017) 28 -
DE Betts (2) 479 688
TR Hill 383 491
WBT Cook (resigned as director 30 September 2016) - 293
Total Directors’ remuneration 1,066 1,662
In addition to the amounts above, the Directors are accruing potential benefits under incentive schemes as set out in note 25.
1 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.
2 DE Betts is entitled to a contingent deferred bonus as disclosed in note 25.
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Annual Report & Accounts 2017
25
Hummingbird Resources plc
Corporate 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 2017 were equivalent to
55 (2016: 91) days’ purchases, based on the average daily amount invoiced by suppliers during the year. Trade payables of the Company
at 31 December 2017 were equivalent to 124 (2016: 118) 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 (2016: $nil) during the year. The Company has not made any payments to political parties
during the year (2016: $nil).
Financial risk mnagement
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.
Future developments
Details of future developments are set out in the CEO’s Statement and Chairman’s Statement.
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 2018
Registered Office:
49-63 Spencer Street, Hockley, Birmingham, B18 6DE
Company registered in England and Wales 05467327
26
Annual Report & Accounts 2017
Hummingbird Resources plc
Corporate Governance
Statement of Directors’
Responsibilities
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.
select suitable accounting policies and then apply them consistently;
In preparing the group and company financial statements, the directors are required to:
•
• make judgements and accounting estimates that are reasonable and prudent;
•
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the company
state whether they have been prepared in accordance with IFRSs adopted by the EU;
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.
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Annual Report & Accounts 2017
27
Hummingbird Resources plc
Corporate Governance
Independent Auditor’s Report
to the members of Hummingbird Resources plc
Opinion
We have audited the financial statements of Hummingbird Resources plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 31 December 2017 which comprise the consolidated income statement, consolidated statement of comprehensive income,
consolidated and parent company balance sheet, consolidated and parent company statement of changes of equity, consolidated and parent
company statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. 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 of the parent company’s affairs as at 31 December 2017
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 company 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.
•
•
•
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are
independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
•
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the
•
group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including
those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Ownership, existence and valuation of the Liberian exploration and evaluation assets
As detailed in note 14, the group continues to hold significant exploration and evaluation assets in the balance sheet of $61m at 31 December
2017 relating to the Liberian cost pool and, more specifically, the Dugbe gold project (the “Project”). The future recoverability of the Project is
dependent upon a number of factors including holding appropriate licences, the local political landscape and the financial viability of the
project. There is a risk that any of these factors may prevent the Group from commercially realising the Project and given the amount
capitalised in the balance sheet we consider this to be one of the most significant risks of material misstatement.
Our work included, but was not restricted to:
• Reviewing the register of licences and relevant correspondence for material changes to, or breaches of, the terms of licences including
ownership rights and expiration; and
• Discussing with management their latest intended plans for developing the Project (including funding) and challenging their assessment
of impairment indicators.
28
Annual Report & Accounts 2017
Hummingbird Resources plc
Corporate Governance
Independent Auditor’s Report
to the members of Hummingbird Resources plc
Development of the Yanfolila Mine Development Asset (“MDA”)
As set out in note 15, the group has a significant MDA capitalised within property plant and equipment of $129.2m at 31 December 2017
relating to the construction of the gold mine at Yanfolila in Mali. Given that construction continued throughout 2017, these financial
statements include substantial capitalisation during the year of $78.5m. We assessed the most significant risks of material misstatement to
be the existence and ownership of the mine and also the risk of impairment in the event that the mine could not be successfully operated.
Management have disclosed uncertainties relating to the recoverability of the MDA in note 4.
Our work included, but was not restricted to:
• Reviewing the financial performance of the mine subsequent to construction and assessing that performance against management’s
projections; and
• Confirming operation and existence of the mine by instructing an independent Malian accountancy firm to perform a site visit and
ownership of the mine by reference to the mining permit.
Investment by the Government of Mali (the “Government”) in Societe des Mines de Komana SA (“SMK”)
As disclosed in note 17, the Government exercised its option during the year to subscribe for a further 10% interest in SMK for a consideration
of CFA6,024,516,660 (approximately $11 million) taking the Government’s overall interest in SMK to 20%. The basis upon which the
consideration would be received by the Group was subject to agreement between the Government and the Group at a later date and given
that this was not agreed at 31 December 2017 we considered the risk of non-payment to be one of the most significant risks of material
misstatement.
Our work included, but was not restricted to:
• Reviewing the Shareholder Agreement and relevant correspondence with the Government to confirm the terms of the subscription; and
• Challenging management on the risk of default and the consequence of non-payment.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures and to evaluate the effects of misstatements, both individually and on the financial statements as a whole. During planning we
determined a magnitude of uncorrected misstatements that we judge would be material for the financial statements as a whole (FSM). During
planning FSM was calculated as $1,841,000, which was not changed during the course of our audit. We agreed with the Audit Committee that
we would report to them all unadjusted differences in excess of $90,000, as well as differences below those thresholds that, in our view,
warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach covered 100% of group revenue and expenditure, group profit, and total group assets and liabilities. It was performed
to the materiality levels set out above.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
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Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
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
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
•
Annual Report & Accounts 2017
29
Hummingbird Resources plc
Corporate Governance
Independent Auditor’s Report
to the members of Hummingbird Resources plc
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which 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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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
Central Square
Fifth Floor
29 Wellington Street
Leeds
23 May 2018
30
Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
Consolidated Income Statement
For the year ended 31 December 2017
Continuing operations
Revenue
Share based payments
Other administrative expenses
Administrative expenses
Finance income
Finance expense
Profit on disposal of subsidiaries
Share of associate loss
Loss before tax
Tax
Loss for the year attributable to equity holders of the parent
Loss per ordinary share
Basic and diluted ($ cents)
None of the above results were attributable to non-controlling interest (2016: $nil).
Notes
25
6
9
10
13
13
11
12
2017
$’000
-
(424)
(6,351)
(6,775)
6,514
(6,877)
1,919
(117)
(5,336)
-
(5,336)
(1.55)
2016
$’000
-
(505)
(7,114)
(7,619)
668
(1,491)
-
-
(8,442)
-
(8,442)
(3.60)
Consolidated Statement of
Comprehensive Income
For the year ended 31 December 2017
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
None of the above results were attributable to non-controlling interest (2016: $nil).
2017
$’000
(5,336)
-
(5,336)
2016
$’000
(8,442)
-
(8,442)
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Annual Report & Accounts 2017
31
Hummingbird Resources plc
Financial Statements
Consolidated Balance Sheet
As at 31 December 2017
Assets
Non-current assets
Intangible exploration and evaluation assets
Intangible assets software
Property, plant and equipment
Investment in associate
Current assets
Inventory
Trade and other receivables
Unrestricted cash and cash equivalents
Restricted cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
Current liabilities
Trade and other payables
Other financial liabilities
Borrowings
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
Total equity
Notes
2017
$’000
2016
$’000
14
14
15
13
17
17
17
17
18
20
22
18
23
63,249
163
129,954
3,704
197,070
1,392
15,135
36,210
4,410
57,147
254,217
53,404
28,422
16,368
11,246
109,440
144,777
5,176
148,930
2,000
(15,500)
140,606
4,171
144,777
63,137
-
51,091
-
114,228
-
9,460
53,839
-
63,299
177,527
-
10,856
15,510
14,751
41,117
136,410
5,156
148,516
-
(17,262)
136,410
-
136,410
The financial statements of Hummingbird Resources Plc were approved by the Board of Directors and authorised for issue on 23 May 2018.
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.
32
Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
Consolidated Statement of
Cash Flows
For the year ended 31 December 2017
Net cash outflow from operating activities
Investing activities
Purchases of intangible exploration and evaluation assets
Purchase of intangible assets software
Purchases of mine development assets
Purchases of property, plant and equipment
Purchase of shares in associates (see note 13)
Interest received
Net cash used in investing activities
Financing activities
Net proceeds from issue of shares
Exercise of warrants
Loan interest paid
Loans repaid
Loans received net of issue costs
Net cash from financing activities
Net (decrease)/increase 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
2017
$’000
(649)
(1,233)
(185)
(55,858)
(510)
(741)
320
(58,207)
-
434
(3,955)
(15,000)
57,980
39,459
(19,397)
6,178
53,839
40,620
2016
$’000
(6,371)
(973)
-
(9,610)
(108)
-
160
(10,531)
66,315
-
(1,303)
-
-
65,012
48,110
(1,491)
7,220
53,839
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Total
$’000
73,652
(8,442)
(8,442)
70,521
70,521
679
136,410
(5,336)
(5,336)
1,000
10,849
434
12,283
1,420
144,777
Hummingbird Resources plc
Financial Statements
Consolidated Statement of
Changes in Equity
For the year ended 31 December 2017
As at 31 December 2015
Share
capital
$’000
1,723
Share
premium
$’000
81,428
Other
reserves
$’000
-
Retained
earnings
$’000
(9,499)
Total equity
attributable
to the parent
$’000
(73,652)
Non-
controlling
interest
$’000
-
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
3,433
3,433
-
5,156
Comprehensive loss for the year:
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners
Acquisition of minority interest (see note 23)
Disposal of minority interest (see note 17)
Exercise of warrants
Total transactions with owners in their
capacity as owners
Share based payments
As at 31 December 2017
-
-
-
-
20
20
-
5,176
-
-
-
-
67,088
67,088
-
148,516
-
-
-
-
414
414
-
148,930
-
-
-
-
-
-
-
-
(8,442)
(8,442)
(8,442)
(8,442)
-
70,521
-
679
(17,262)
70,521
679
136,410
(5,336)
(5,336)
(5,336)
(5,336)
-
-
-
-
-
-
-
-
2,000
-
-
2,000
-
2,000
(1,000)
6,678
-
5,678
1,420
(15,500)
1,000
6,678
434
8,112
1,420
140,606
-
4,171
-
4,171
-
4,171
Share capital
The share capital comprises the issued ordinary shares of the company at par value.
Share premium
The share premium comprises the excess value recognised from the issue of ordinary shares for consideration above par value.
Other Reserves
Other reserves comprise of shares that are awaiting to be issued in connection with the purchase of minority interest.
Retained earnings
Retained earnings comprise the group’s cumulative accounting profits and losses since inception less dividends.
Non-controlling interest
The non-controlling interest relates to the 20% stake the Government of Mali has in Société Des Mines De Komana SA (“SMK”)
which owns and operates the Yanfolila Mine.
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Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
1 General information
Hummingbird Resources Plc is a public limited company with securities traded on the AIM market of the London Stock Exchange.
It is incorporated and domiciled in the United Kingdom and has a registered office at 49-63 Spencer Street, Hockley, Birmingham,
West Midlands, B18 6DE.
The nature of the Group’s operations and its principal activities are the exploration, evaluation, development, and operating of mineral
projects, principally gold, focused 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 2016. The following standards have been adopted in the year with no material impact on the financial
statements of the Company or the Group.
IAS 7
IAS 12 (effective 1 January 2017) Recognition of deferred tax assets for unrealised losses
(effective 1 January 2017) Disclosure initiative
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).
IFRS 2 (effective 1 January 2018) Classification and measurement of share-based payment transactions
IFRS 9 (effective 1 January 2018) Financial Instruments
IFRS 15 (effective 1 January 2018) Revenue from contracts with customers
IFRS 16 (effective 1 January 2019) Leases
IFRS 17 (effective 1 January 2021) Insurance contracts
IFRIC 22 (effective 1 January 2019) Foreign Currency Transactions and Advance Consideration
IFRIC 23 (effective 1 January 2019) Uncertainty over Income Tax Treatments
IAS 28 (effective 1 January 2019) Sale or contribution of assets between an investor and its associates or joint venture.
IFRS 15 is intended to introduce a single framework for revenue recognition and clarify principles of revenue recognition. This standard
modifies the determination of when to recognise revenue and how much revenue to recognise. The core principle is that an entity recognises
revenue to depict the transfer of promised goods and services to the customer of an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. Management have completed an assessment of the gold sale contract and,
based on the analysis performed, do not anticipate any material impact to the recognition of revenue upon adoption of this standard given
2018 will be the first year of revenue generation in the history of the Group.
IFRS 16 introduces a single lease accounting model. This standard requires lessees to account for all leases under a single on balance sheet
model. Under the new standard, a lessee is required to recognise all lease assets and liabilities on the balance sheet; recognise amortisation
of leased assets and interest on lease liabilities over the lease term; and separately present the principal amount of cash paid and interest in
the cash flow statement. The requirements of IFRS 16 extend to certain service contracts, such as mining contractors in which the contractor
provides services and the use of assets, which may impact the Group. Accordingly, the Group has initiated a review of relevant contracts to
complete an impact assessment.
IFRS 9 ‘Financial instruments’ addresses the classification and measurement of financial assets and financial liabilities. The complete version
of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39, that relates to the classification and measurement of financial instruments.
IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets:
amortised cost, fair value through other comprehensive income (“OCI”) and fair value through profit or loss. The basis of classification
depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments
are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI.
There is now a new expected credit loss model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there
were no changes to classification and measurement except for the recognition of changes in credit risk in other comprehensive income, for
liabilities designated at fair value through profit or loss. Management do not anticipate any material impact on adoption of this standard.
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Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
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 $1.3491 (2016: $1.23016).
Going concern
Having prepared forecasts and budgets based on current expected revenues, expenditures and financial commitments, the Directors believe
that the Group will be able to meet its obligations as they fall due, and accordingly have adopted the going concern basis for the preparation
of these financial statements.
Should additional costs arise then additional funding may need to be raised to continue the activities of the Group through the raising of
equity capital, debt financing, joint venture projects, farm-outs or other means. There is no guarantee that such financing will be obtained
if or when required.
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 2017. 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.
Associates
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or jointly control,
through participation in the financial and operating policy decisions of the investee.
Investments in associates are recognised in the consolidated financial statements using the equity method of accounting. The Group’s share
of post-acquisition profits or losses is recognised in the profit or loss and its share of post-acquisition movements in other comprehensive
income are recognised directly in other comprehensive income. The carrying value of the investment, including goodwill is tested for
impairment when there is objective evidence of impairment. Losses in excess of the Group’s interest in those associates are not
recognised unless the Group has incurred obligations or made payments on behalf of the associate.
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.
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Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
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
Once the legal rights are obtained to explore all costs of E&E are initially capitalised as E&E assets. Payments to acquire the legal right to
explore, costs of technical services and studies, seismic acquisition, exploratory drilling and testing are capitalised as intangible E&E assets.
Such costs include directly attributable overheads, including the depreciation of property plant and equipment utilised in E&E activities,
together with the cost of other materials consumed during the E&E phases.
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration licence/prospect are carried forward, until the existence (or otherwise) of commercial
reserves has been determined. If commercial reserves have been discovered, the related E&E assets are assessed for impairment on a cost
pool basis as set out below and any impairment loss is recognised in the income statement. The carrying value, after any impairment loss,
of the relevant E&E assets is then reclassified as Mine Development assets.
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Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
3 Significant accounting policies (continued)
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.
Intangible assets software
Intangible software assets are carried at cost less accumulated amortisation. Amortisation of the software to the income statement will be
completed in line with the useful life of the software. However, where the software assets relate to mine development assets, amortisation
to mine development will occur and follow the amortisation of mine development as shown below.
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:
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. Although
first gold pour was achieved pre year end on 19 December 2017 there is a ramp up phase before the Group reaches commercial production.
Commercial production was declared on 1 April 2018 and at this point Mine Development assets are 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.
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.
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Hummingbird Resources plc
Financial Statements
Borrowing costs
Borrowing costs are capitalized when they are directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that take a substantial period of time to get ready for their intended use or sale. Borrowing costs are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use or sale, or if construction is interrupted for an extended period.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
Inventory
Inventory consists of consumable stores and are valued at weighted average cost after appropriate impairment of redundant and slow moving
items. Consumable stock for which the group has substantially all the risks and rewards of ownership are brought onto the statement of
financial position as current assets.
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.
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Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
3 Significant accounting policies (continued)
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.
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.
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Hummingbird Resources plc
Financial Statements
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.
Other receivables due from Government of Mali
Included in trade and other receivables is an amount of $10,955,000 due from the Government of Mali. This arose on the Government of Mali
exercising its right to acquire an additional 10% of Societe Des Mines De Komana SA during the year, and the Company is in discussions with
the Government of Mali as to the timing and mechanism of payment of this consideration. The relevant shares will not be issued until the
payment mechanism has been agreed. The Company reassesses the recoverability of this balance at each reporting period taking into account
the relevant facts and circumstances, and there is the possibility that a change in circumstances may impact the recoverability of this asset.
Deferred tax assets
In assessing the probability of realizing potential deferred tax assets, management makes estimates related to expectations of future taxable
income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken
will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive
and negative evidence that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operations
and the application of existing tax laws in each jurisdiction. Forecasted cash flows from operations are based on life of mine projections
internally developed and reviewed by management. Weight is attached to tax planning opportunities that are within the Company’s control,
and are feasible and implementable without significant obstacles. The likelihood that tax positions taken will be sustained upon examination
by applicable tax authorities is assessed based on individual facts and circumstances of the relevant tax position evaluated in light of all
available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably
possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. At the end of each
reporting period, the Company reassesses unrecognized and recognized income tax assets, and there is the possibility that a change in
circumstances may impact on the recoverability of the relevant deferred tax asset.
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Annual Report & Accounts 2017
41
Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
5 Segmental analysis
Income statement for the year ending 31 December 2017
Segment result before and after allocation of central costs
Finance income
Finance expense
Profit on disposal of subsidiaries
Share of associate 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 2017
Segment assets
Segment liabilities
Segment net assets
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
Mali
$’000
(1,081)
5,142
(6,019)
1,919
-
(39)
-
(39)
-
-
Mali
$’000
177,674
(87,269)
90,405
Mali
$’000
(432)
67
-
(365)
-
(365)
-
-
Mali
$’000
62,980
(19,965)
43,015
Liberia
$’000
33
-
-
-
-
33
-
33
-
-
Liberia
$’000
61,098
(15,192)
45,906
Liberia
$’000
(62)
-
-
(62)
-
(62)
-
-
Liberia
$’000
60,631
(15,129)
45,502
Corporate
$’000
(5,727)
1,372
(858)
-
(117)
(5,330)
-
(5,330)
(10)
(424)
Corporate
$’000
15,445
(6,979)
8,466
Corporate
$’000
(7,125)
601
(1,491)
(8,015)
-
(8,015)
(8)
(505)
Corporate
$’000
53,916
(6,023)
47,893
Total
$’000
(6,775)
6,514
6,877
1,919
(117)
(5,336)
-
(5,336)
(10)
(424)
Total
$’000
254,217
(109,440)
144,777
Total
$’000
(7,619)
668
(1,491)
(8,442)
-
(8,442)
(8)
(505)
Total
$’000
177,527
(41,117)
136,410
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Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
6 Administrative expenses by nature
Other income
Depreciation of property, plant and equipment (see note 15)
Staff costs excluding share based payments and employers NI accrual on share options
Net foreign exchange losses
Audit fees including fees paid to subsidiary auditors (see note 7)
Non-audit fees payable to associates of the Company’s auditor (see note 7)
Communications and IT
Insurance
Marketing
Rent under operating leases
Office expenses
Professional and consultancy
Travel and accommodation
Bank charges
Share based payments
Charge of employers NI accrual on share options
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 compliance
Taxation advice
Total non-audit fees
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 for potential social security costs related to share based payments
2017
$’000
(98)
10
2,210
377
60
17
121
159
208
134
123
2,574
300
3
424
153
6,775
2016
$’000
(47)
8
3,145
1,668
68
8
91
162
222
98
175
1,187
281
16
505
32
7,619
2017
$’000
2016
$’000
39
8
47
8
9
17
2017
Number
7
102
109
2017
$’000
6,403
1,056
97
1,844
361
9,761
41
9
50
8
-
8
2016
Number
7
40
47
2016
$’000
3,723
479
92
832
200
5,326
Within wages and salaries, $1,007,000 (2016: $1,587,000) relates to remuneration payable to Directors, included within share based payments
is $424,000 (2016: $153,000) accrued under cash-settled share based payment scheme payable to Directors, and within pension is $59,000
(2016: $75,000) relating to pension contributions in respect of Directors.
The total remuneration of the highest paid director is $479,000 (2016: $688,000) comprising $444,000 (2016: $657,000) in relation to wages
and salaries and pension contributions of $35,000 (2016: $31,000). In addition, an amount of $424,000 (2016: $153,000) 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 (2016: 2).
Included within staff costs is $258,000 (2016: $428,000) capitalised to intangible exploration and evaluation assets and $6,797,000
(2016: $1,217,000) capitalised in to Mine Development assets.
Annual Report & Accounts 2017
43
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Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
9 Finance income
Interest on bank deposits
Foreign exchange gain
Gain on revaluation of warrants (see note 24)
The foreign exchange gain arose on non-functional currency bank deposits and foreign currency loans.
10 Finance expense
Foreign exchange loss
Loss on revaluation of warrants (see note 24)
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 19.25% (2016: 20%)
Tax effect of non-deductible expenses
Items not subject to tax
Deferred tax asset not recognised
Tax expense for the year
2017
$’000
336
6,178
-
6,514
2017
$’000
6,019
858
6,877
2017
$’000
(5,336)
(1,027)
3
191
833
-
2016
$’000
209
-
459
668
2016
$’000
1,491
-
1,491
2016
$’000
(8,442)
(1,688)
3
(36)
1,721
-
In the UK, the main rate of corporation tax for the year was 19.25% (2016: 20%). The standard rate of tax in the UK changed from 20% to 19%
with effect from 1 April 2017. Accordingly, the company’s profits for this accounting period are taxed at an effective rate of 19.25%.
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
Number of shares
Weighted average number of ordinary shares for the purposes of basic loss per share
Loss per ordinary share
Basic and diluted
2017
$’000
2016
$’000
(5,336)
(8,442)
2017
Number
343,566,800
2016
Number
234,603,288
2017
$ cents
(1.55)
2016
$ cents
(3.60)
At the balance sheet date there were 20,515,061 (2016: 23,446,146) 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. In addition the Group acquired the 5% equity stake in Société Des
Mines De Komana SA (“SMK”) from La Petite Mine D’Or and a 1% royalty for ordinary share capital as disclosed in note 23. At 31 December
2017 the potential ordinary shares are anti-dilutive and therefore there is no difference between basic and diluted loss per share.
44
Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
13 Associate
On 11 April 2017 the Group entered in to a sale and purchase agreement to sell two exploration companies containing exploration permits,
Hummingbird Exploration Mali SARL (“HEM”) and Sankarani Resources SARL (“SKR”), to Cora Gold Limited (“Cora”) in exchange for 50%
shareholding in Cora.
Cora issued 50,000 shares to Trochilidae Resources Limited (“TRL”), a 100% owned subsidiary of the Company, representing 50% of the total
shares in issue. The Company purchased 3,967 new shares in Cora for a consideration of $242,000 on 28 April 2017 representing 50% of the
shares issued to maintain the combined total shares owned by the Group at 50%.
On 30 August 2017 the Company was issued 491 shares in Cora as settlement of an invoice of $30,000 in relation to accounting
and administration costs incurred in relation to the amalgamation.
On 15 September 2017 Cora sub-divided each share in issue into 300 ordinary shares. As a result the Company owned 1,337,400 shares
and TRL owned 15,000,000 shares.
On 9 October 2017 the Company purchased 2,272,727 new shares in the Cora Initial Public Offering.
As at 31 December 2017 the Group holds a total of 18,610,127 shares in Cora representing 33.85% of the issued share capital at
31 December 2017. The market value of the shares at 31 December 2017 is $3,013,000. The Group has significant influence through virtue
of its shareholding together with the right to appoint two representatives to the board of directors. The investment held in Cora is recognised
in the consolidated financial statements using the equity method of accounting.
Cora Gold Limited (“Cora”) is incorporated and domiciled in the British Virgin Islands with securities traded on the AIM market of the London
Stock Exchange. The principal activity of Cora and its subsidiaries is the exploration and development of mineral projects, with a primary focus
in West Africa, which is aligned with the principal activities of Hummingbird.
Profit on disposal of subsidiaries
Assets disposed
Liabilities disposed
Net assets disposed
Fair value of assets at disposal
Profit on disposal of subsidiaries
Investment in associates
At 31 December 2016
Fair value of the assets at disposal of subsidiaries
Share purchased for cash
Cost of transactions paid in shares
Share of losses during the year
At 31 December 2017
The Group’s interest in the associate as at 31 December 2017 is set out below:
Share of:
Non-current assets
Current assets
Current liabilities
Net assets
$’000
1,155
(24)
1,131
(3,050)
1,919
$’000
-
3,050
741
30
(117)
3,704
$’000
1,773
1,195
(58)
2,910
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Annual Report & Accounts 2017
45
Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
14 Intangible assets
Intangible exploration and evaluation assets
Cost
At 31 December 2015
Additions for the year
At 31 December 2016
Additions for the year
Disposal to associate
At 31 December 2017
Liberia
$’000
59,902
635
60,537
467
-
61,004
Mali
$’000
2,187
413
2,600
800
(1,155)
2,245
Total
$’000
62,089
1,048
63,137
1,267
(1,155)
63,249
Additions to intangible exploration and evaluation assets during the year include $34,000 (2016: $49,000) 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. The Mali licences transferred
to Cora Gold (see note 13) resulted in the intangible exploration and evaluation assets of these licences no longer forming part of the group,
as a result these have been shown as discontinued operations in the above note.
Intangible software assets
Cost
At 31 December 2016
Additions for the year
At 31 December 2017
Accumulated amortisation
At 31 December 2016
Amortisation for the year
At 31 December 2017
Carrying amount
At 31 December 2017
Total
$’000
-
185
185
-
(22)
(22)
163
Intangible software assets include software purchased for the operations of the mine. Amortisation for the year has been capitalised in to mine
development assets $22,000 (2016: $nil).
46
Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
15 Property, plant and equipment
Cost
At 31 December 2015
Additions
Disposals
At 31 December 2016
Additions
Disposals
At 31 December 2017
Accumulated depreciation
At 31 December 2015
Charge for the year
Disposals
At 31 December 2016
Charge for the year
Disposals
At 31 December 2017
Carrying amount
At 31 December 2017
At 31 December 2016
development
assets
$’000
Mine Development Development
assets -
assets -
other
vehicles
$’000
$’000
37,581
13,104
-
50,685
78,537
-
129,222
-
-
-
-
-
-
-
129,222
50,685
2,323
110
(138)
2,295
117
-
2,412
2,219
71
(138)
2,152
69
-
2,221
191
143
2,328
-
(91)
2,237
80
-
2,317
1,965
120
(79)
2,006
89
-
2,095
222
231
Other
$’000
1,099
3
-
1,102
312
(42)
1,372
1,041
29
-
1,070
25
(42)
1,053
319
32
Total
$’000
43,331
13,217
(229)
56,319
79,046
(42)
135,323
5,225
220
(217)
5,228
183
(42)
5,369
129,954
51,091
Of the property, plant and equipment depreciation charged in the year, $34,000 (2016: $49,000) was capitalised into intangible exploration
and evaluation assets, and $139,000 (2016: $163,000) 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 $5,012,000 (2016: $2,129,000).
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47
Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
16 Subsidiaries
The Company had investments in the following subsidiary undertakings as at 31 December 2017:
Name
Directly held
Trochilidae Resources Limited
Falcon Cliff, Palace Road, Douglas, Isle of Man, IM2 4LB
Hummingbird Resources (Liberia) Inc.
Hummingbird House, Sophie Area, Congo Town,
Monrovia, Montserrado County, Republic of Liberia.
Afro Minerals Inc.
Hummingbird House, Sophie Area, Congo Town,
Monrovia, Montserrado County, Republic of Liberia.
Golden Grebe Mining Limited
49-63 Spencer Street, Hockley, Birmingham,
West Midlands, England B18 6DE, UK
Country of
incorporation
Isle of Man
Liberia
Liberia
United Kingdom
Indirectly held
Deveton Mining Company
Hummingbird House, Sophie Area, Congo Town,
Monrovia, Montserrado County, Republic of Liberia.
Sinoe Exploration Limited
Warren & Carey Street Intersection, Opposite Central Bank,
Monrovia, Montserrado County, Republic of Liberia.
Hummingbird Security Limited
Hummingbird House, Sophie Area, Congo Town,
Monrovia, Montserrado County, Republic of Liberia.
Glencar Mining Plc
10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland
Centrebind Agency Limited
17 Gr. Xenopoulou, 3106 Limassol, Cyprus
Glencar International (BVI) Limited
Craigmuir Chambers, Road Town, Tortola,
British Virgin Islands
Glencar Mali SARL
Sebenicoro Villa Fatoumata Bangoura Cissoko
Lot B11 Commune IV Bamako, Mali
Société des Mines de Komana SA
Sebenicoro Villa Fatoumata Bangoura Cissoko
Lot B11 Commune IV Bamako, Mali
Yanfolila Mining Limited
Falcon Cliff, Palace Road, Douglas, Isle of Man, IM2 4LB
Yanfolila Finance Limited
Falcon Cliff, Palace Road, Douglas, Isle of Man, IM2 4LB
Yanfolila Holdings Limited
Falcon Cliff, Palace Road, Douglas, Isle of Man, IM2 4LB
British Virgin Islands
Liberia
Liberia
Liberia
Ireland
Cyprus
Mali
Mali
Isle of Man
Isle of Man
Isle of Man
Proportion
of voting
interest %
100
100
80
100
80
90
100
100
100
100
100
90
100
100
100
Activity
Intermediate holding & service company
Exploration & development
Dormant
Intermediate holding company
Dormant
Exploration
Security
Intermediate holding company
Intermediate holding company
Intermediate holding company
Exploration
Development & Mining
Intermediate holding company
Finance company
Intermediate holding company
Additionally the Group has a 33.85% investment in Cora Gold Limited. This interest is treated as on associate, see note 13.
48
Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
17 Current assets
Inventory
Inventory consists of reagents, spares and consumables for the mine. The carrying value of inventory at 31 December 2017 was $1,392,000 (2016: $nil).
Trade and other receivables
Other receivables
VAT recoverable
Prepayments and accrued income
2017
$’000
14,107
476
552
15,135
2016
$’000
5,594
666
3,200
9,460
Included within other receivables is an amount of CFA 6,024,516,660 ($10,955,000) due from the Government of Mali, which arose during the
year on the Government of Mali exercising its rights to acquire an additional 10% interest in the share capital of Société des Mines de Komana
SA to take its interest to 20%. The shares can only be issued once the payment mechanism is agreed and the Company is in discussions with
the Government of Mali regarding the timing and mechanism for payment of this consideration. 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 2017 of $36,210,000 (2016: $53,839,000) comprise cash held by the Group.
Restricted cash and cash equivalents
Restricted cash and cash equivalents of $4,410,000, is cash held in an escrow account as part of the security for the Coris Bank loan (see note 18).
The Directors consider that the carrying amount of these assets approximates their fair value.
Net debt reconciliation
Unrestricted cash
Restricted cash
Total cash and cash equivalents
Borrowings (see note 18)
Net debt
18 Borrowings
At 1 January 2017
Repaid during the year
Received during the year
Foreign exchange loss during the year
New issue costs incurred and capitalised in the year
Issue costs amortised in the year
Total borrowing at 31 December 2017
Payable within one year included under current liabilities
Payable after one year included under non-current liabilities
At 1 January
2017
$’000
53,839
-
53,839
Foreign
Exchange Amortisation
Cashflow Movement of issue costs
$’000
-
-
-
$’000
(23,512)
4,115
(19,397)
$’000
5,883
295
6,178
At 31
December
2017
$’000
36,210
4,410
40,620
(14,751)
39,088
(42,980)
(62,377)
(6,019)
159
(900)
(900)
(64,650)
(24,030)
Taurus Loan
$’000
14,751
(15,000)
-
-
-
249
-
-
-
Coris Loan
$’000
-
-
61,629
6,019
(3,649)
651
64,650
11,246
53,404
The Groups subsidiary, Société des Mines de Komana SA (“SMK”), on 10 April 2017 entered into a senior secured term debt facility with Coris
Bank International (“Coris”) for CFA 37,000,000,000 (approximately $60,000,000). On 11 April 2017 SMK drew down the CFA 15,500,000,000
(approximately $25,000,000) and on 4 July 2017 drew down the remaining CFA 21,500,000,000 (approximately $35,000,000).
The senior secured term debt facility has the following key terms:
• A 4 year term
•
• A deferral period of 12 months from first draw down.
Interest at 9% per annum (payable monthly).
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As per IAS 39 financial instruments the loans have been measured at amortised cost. During the year to 31 December 2017 total issue costs
incurred in the year of $3,649,000 (2016: $783,000) have been offset against the loan and $900,000 (2016: $569,000) of issue costs were
amortised to mine development assets. During the year to 31 December 2017 $4,112,000 (2016: $1,380,000) of loan interest costs were
charged to mine development assets.
Security for the loan was granted to Coris over the assets of SMK, a parent company guarantee and restricted cash held in an escrow account (see note 17).
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49
Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
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 2017, the Group had unrecognised deferred tax assets of $6,554,000 (2016: $5,761,000) 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
2017
$’000
11,939
4,694
310
9,762
1,717
28,422
2016
$’000
3,566
2,841
465
3,372
612
10,856
The average credit period taken for trade purchases is 55 days (2016: 91 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 $792,000 (2016: $284,000) being an apportionment of the cash award in respect of Hummingbird
Incentive Plan – Performance Orientated (“HIPPO”) (see note 25). The pension creditor at 31 December 2017 was $9,000 (at 31 December
2016 $8,000).
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
Greater than five years
2017
$’000
1,731
6,785
2,436
10,952
2016
$’000
131
58
-
189
Operating lease payments represent rentals payable by the Group for the Yanfolila Gold Mine power plant generators, in addition lease costs
for properties located in Liberia, Mali, and the head office in the UK.
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Hummingbird Resources plc
Financial Statements
22 Other financial liabilities
Royalty liability
Warrant liability (see notes 10 and 24)
2017
$’000
15,000
1,368
16,368
2016
$’000
15,000
510
15,510
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 prior 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 therfore 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.
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Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
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
2017
2016
Number
$’000
Number
344,741,250
5,176
343,241,250
$’000
5,156
The Company has one class of Ordinary shares which carry no right to fixed income.
At 1 January 2016
Issue of shares (a)
Issue of shares (b)
At 31 December 2016
Issue of shares – exercise of warrants (c)
Issue of shares - exercise of warrants (d)
At 31 December 2017
Ordinary
Shares
of £0.01
Number
106,952,469
225,188,781
11,100,000
343,241,250
750,000
750,000
344,741,250
Issue of shares
(a)
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.
(b) 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.
Issue of shares
(c)
On 11 September 2017 750,000 warrants were exercised at a price of £0.22 in return for £165,000 ($217,607).
(d) Issue of shares
On 14 November 2017 750,000 warrants were exercised at a price of £0.22 in return for £165,000 ($216,251).
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 2017 the acquisition had not yet completed and the shares had
not been issued. The total number of outstanding warrants and share options are:
Warrants
As at 31 December 2016
Exercised
Lapsed
As at 31 December 2017
Share options
As at 31 December 2016
Issued
Lapsed
As at 31 December 2017
Total
Number
9,899,505
(1,500,000)
(1,612,903)
6,786,602
13,443,386
727,272
(545,454)
13,625,204
20,411,806
Share capital to be issued
On 13 June 2017 the Group took up the option with La Petite Mine D’Or (“LPMDO”) to acquire its 5% interest in the Yanfolila project
for $1,000,000. The Group also acquired the 1% royalty over the Yanfolila mine from LPMDO for consideration of $1,000,000. The total
consideration of $2,000,000 was paid through issuing 6,197,353 ordinary shares in the Company on 30 April 2018, at 31 December 2017
these shares were still to be issued.
24 Warrants issued
a) On 21 June 2016 the Company granted 8,286,602 warrants as part of the fundraising described in note 23(a):
Total number of warrants granted
Exercise price of the warrants
Final exercise date:
52
Annual Report & Accounts 2017
8,286,602
£0.22
31/12/2019
Hummingbird Resources plc
Financial Statements
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 2017:
Share price
Expected dividend yield
Expected volatility
Expected life
Risk free interest rate
31 Dec 2017
£0.3425
Nil
46.02%
2 years
0.446%
21 Jun 2016
£0.2225
Nil
49.00%
3.5 Years
0.87%
The loss arising on the change in value of the warrants between 31 December 2016 and 31 December 2017 is disclosed in note 10.
On 11 September 2017, 750,000 warrants were exercised as described in note 23(c).
On 14 November 2017, 750,000 warrants were exercised as described in note 23(d).
On 12 December 2017, 1,612,903 warrants lapsed.
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
Share based payment charge for equity settled share based payments granted 26 September 2017
Total share based payment charge
(a)
(b)
(b)
(c)
(d)
(d)
2017
$’000
-
-
-
424
1,281
139
1,844
2016
$’000
34
104
214
153
327
-
832
Included within share based payments for the year is $1,420,000 (2016: $327,000) 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
Share option granted 26 September 2017
Total number of share options
Weighted average exercise price
2016
Number
250,000
2,144,000
3,095,000
7,954,386
-
13,443,386
£0.09
Granted
Number
-
-
-
-
727,272
727,272
£0.01
Lapsed
Number
-
-
-
(181,818)
(363,636)
(545,454)
£0.01
2017
Number
250,000
2,144,000
3,095,000
7,772,568
363,636
13,625,204
£0.09
a) Issue of share options
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:
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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%
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Annual Report & Accounts 2017
53
Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
25 Share based payments (continued)
b) 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(b)).
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.
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%
c) 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 2017: £0.3425 (2016: £0.1825).
The amounts recognised in the income statement for the year is as follows:
Amounts in respect of the year ended 31 December 2016
Amounts in respect of the year ended 31 December 2017
Initial charge
$’000
443
-
Revaluation
$’000
(290)
424
Total
$’000
153
424
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, in the prior year the LTIP was rebased on 21 June 2016 as part of the fundraise
to recapitalise the Company (see note 23(b)).
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 2017 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.
d) 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.
54
Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
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 $2,045,000 based on a 95% probability
of meeting the vesting criteria.
Total award granted
Exercise price of the options
Fair value of the options at the date of grant
Exercise period:
25% - from the first gold pour at the Yanfolila Gold Mine
25% - from the passing of the Company’s completion tests in respect of the Yanfolila Gold Mine
25% - 12 months from first gold pour at the Yanfolila Gold Mine (1)
25% - 24 months from first gold pour at the Yanfolila Gold Mine (1)
Number of share options lapsed during the current period
Number of share options outstanding as at 31 December 2017
1
these are conditional of all completion tests being passed.
Share award
7,954,386
£0.01
£0.24
1,988,597
1,988,597
1,988,597
1,988,595
181,818
7,772,568
Cash award
($’000)
2,045
-
-
511
511
511
511
-
-
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 $946,070 (2016: $283,000) 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
£0.249
Nil
47.78%
3 years
0.164%
95%
On 26 September 2017 the Company granted 727,272 share options to certain Directors and Group employees, representing 2.3% of the
issued share capital at 31 December 2017. Additionally, cash awards were granted with a total value of $205,000 based on a 95% probability
of meeting the vesting criteria.
Total award granted
Exercise price of the options
Fair value of the options at the date of grant
Exercise period:
25% - from the first gold pour at the Yanfolila Gold Mine
25% - from the passing of the Company’s completion tests in respect of the Yanfolila Gold Mine
25% - 12 months from first gold pour at the Yanfolila Gold Mine (1)
25% - 24 months from first gold pour at the Yanfolila Gold Mine (1)
Number of share options lapsed during the current period
Number of share options outstanding as at 31 December 2017
1
these are conditional of all completion tests being passed.
Share award
727,272
£0.01
£0.33
181,818
181,818
181,818
181,818
363,636
363,636
Cash award
($’000)
205
-
-
52
51
51
51
-
-
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.
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Annual Report & Accounts 2017
55
Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
25 Share based payments (continued)
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 $46,000 (2016: $283,000) 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 26 September 2017:
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
Profit on disposal of subsidiaries
Finance income
Finance expense
Share of associate loss
Operating cash flows before movements in working capital
Decrease/(increase) in receivables
Increase in payables
Net cash outflow from operating activities
£0.34
Nil
46.52%
2 years
0.447%
95%
2016
$’000
(8,442)
8
505
-
(668)
1,491
-
(7,106)
(329)
1,064
(6,371)
2017
$’000
(5,336)
10
424
(1,919)
(6,514)
6,877
117
(6,341)
3,902
1,790
(649)
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.
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, unissued 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.
56
Annual Report & Accounts 2017
Hummingbird Resources plc
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
Financial assets
Cash and cash equivalents (see note 17)
Other receivables (see note 17)
Financial liabilities
Borrowings (see note 18)
Trade payables (see note 20)
Other payables (see note 20)
Accruals
Royalty liability (see note 22)
Warrant liability (1) (see note 24)
Loans
and receivables
2017
Financial liabilities
measured at amortised cost
Financial liabilities at fair
value through profit or loss
2016
2017
2016
2017
2016
40,620
14,107
54,727
53,839
5,594
59,433
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
64,650
11,939
1,717
9,762
15,000
-
103,068
-
-
-
14,751
3,566
612
2,376
15,000
36,305
-
-
-
-
-
-
-
-
1,368
1,368
-
-
-
-
-
-
926
-
510
1,506
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, and amounts due from the Government of Mali. The Group seeks
to deposit funds with reputable financial institutions until such time as it is required.
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.
Annual Report & Accounts 2017
57
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Hummingbird Resources plc
Financial Statements
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2017
27 Financial Instruments (continued)
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
2017
$’000
206
1,922
-
42
50
81,497
2016
$’000
1,192
421
25
-
56
917
2017
$’000
2,623
7,195
79
1,022
4
34,447
2016
$’000
8,419
13,437
401
7,052
571
1,273
Foreign currency sensitivity analysis
The Group is exposed primarily to movements in the $ against the GBP, €, ZAR and FCFA. 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 – FCFA
Increase in income statement and net assets - ZAR
2017
$’000
527
242
(4,705)
98
2016
$’000
1,311
728
-
705
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 associate – Cora Gold Limited
During the year the Company charged Cora Gold Limited $5,000 in respect of Non-executive director’s fees. There was no outstanding
balance as at 31 December 2017.
During the year the Company charged Cora Gold Limited $30,000 in respect of historical costs. This was settled by the receipt of 491
Cora Gold Limited shares.
Cora Gold Limited is a related party of the Group because It is a 33.85% shareholder in Cora Gold Limited and David Pelham is a common
Director.
Transactions with Aggreko International Projects Limited
During the year Aggreko International Projects Limited (“Aggreko”) charged the Group $461,000 in rental fees for generators at the Yanfolila
Gold Mine. At 31 December 2017 there was $265,200 outstanding to Aggreko and $46,800 due to the Government on Mali in withholding
taxes on payment of these amounts.
Aggreko International Projects Limited is a related party as Russell King, was until 26 April 2018, a Director of the ultimate parent.
Transactions with Stephen Betts & Sons Limited
During the year Stephen Betts & Sons Limited charged the Company $73,000 (2016: $85,000) under a contract for the provision of staff,
office equipment and premises. $5,800 was accrued outstanding between the parties as at 31 December 2017 (2016: $34,000). 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 the ultimate parent company.
58
Annual Report & Accounts 2017
Hummingbird Resources plc
Financial Statements
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 for potential social security costs on share options
2017
$’000
1,281
167
59
929
223
2,659
2016
$’000
1,696
223
75
617
118
2,729
29 Commitments
As at 31 December 2017 the Group had commitments of $5,790,000 (2016: $25,340,000) in respect of the Yanfolila Project.
30 Events after the reporting date
Incentive plan 2018
On 30 April 2018 the Company issued 6,157,819 share options under the Hummingbird Incentive Plan – Performance Orientated 2018
(“HIPPO2018”) scheme.
Options under HIPPO2018 are subject to performance criteria, if the performance criteria is met the respective tranche, under normal
circumstances, the options shall vest 50% by 31 March 2019, 25% by 31 December 2019 and 25% by 31 December 2020 subject to
continuous employment with the Company:
a) Production Tranche: 1/3 of the options will vest if 100,000 ounces of gold are poured between 1 April 2018 and 31 December 2018.
The number of options vesting under this tranche shall be reduced proportionally at each date by 10% of the total for each 1,000 ounces
produced in the period less than the targeted 100,000 ounces.
b) Cost Tranche: 1/3 of the options will only vest if the Yanfolila AISC (as announced by the Company) as normalised for a US$0.6/litre
fuel price and a US$1,250 gold price is equal to or lower than US$750 per ounce sold.
c) Performance Tranche: 1/3 of the options will vest based on the individual performance of the Participant and the Company’s safety
performance, which is at the Board’s discretion.
Issue of shares
As disclosed in note 23 on 30 April 2018 the Company issued 6,197,353 ordinary shares as consideration for the purchase of the 5% equity
stake in Société Des Mines De Komana SA (“SMK”) and the 1% royalty from Le Petite Mine D’Or.
Joint venture - Betts Investments Limited (“BIL”)
The Company has entered into a joint venture agreement (“JV Agreement”) with Stephen Betts and Sons Limited (“SBS”) and Betts
Investments Limited (“BIL”). Daniel Betts and Stephen Betts who are both directors of the Company, are also directors of and shareholders
in SBS. BIL is currently 50% owned by SBS.
BIL has been established for the marketing of gold and other precious metals investment products (including the Hummingbird 1oz gold coin),
marketing coin manufacturing services to the mining industry and for the development of the Single Mine Origin (“SMO”) brand, concept and
accreditation procedures.
Under the JV Agreement, the Company will invest £75,000 for a 19% interest in BIL, with the option to increase its stake to 49% for a further
investment of £75,000. The Company has agreed to sell Hummingbird 1 oz gold coins to SBS to fulfil orders placed by customers via BIL.
Additionally, the Company will provide marketing support and treasury services to BIL.
SBS shall be responsible for the fulfilment of all orders of gold and other precious metals investment products and BIL will receive
a commission equal to 50% of the gross margin on all sales of gold and other precious metals investment products.
The JV Agreement constitutes a related party transaction pursuant to AIM Rule 13. Accordingly, the Company's Directors, other than
Daniel Betts and Stephen Betts, consider, having consulted the Company's Nominated Adviser, that the terms of the JV Agreement
are fair and reasonable insofar as Hummingbird’s shareholders are concerned.”
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Hummingbird Resources plc
Financial Statements
Company Balance Sheet
As at 31 December 2017
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
Other reserves
Retained earnings
Total equity
Notes
2017
$’000
2016
$’000
35
36
37
38
38
39
39
40
57,404
296
73,626
131,326
4,962
11,183
16,145
147,471
5,606
1,368
6,974
140,497
5,176
148,930
2,000
(15,609)
140,497
53,924
12
35,208
89,144
9,369
48,223
57,592
146,736
5,513
510
6,023
140,713
5,156
148,516
-
(12,959)
140,713
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 2017 of $4,070,000 (2016: $7,518,000).
The financial statements were approved by the Board of Directors and authorised for issue on 23 May 2018.
They were signed on its behalf by:
DE Betts
Director
The notes to the Company financial statements form part of these financial statements.
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Hummingbird Resources plc
Financial Statements
Company Statement of
Cash Flows
For the year ended 31 December 2017
Net cash outflow from operating activities
Investing activities
Purchases of property, plant and equipment
Investment in subsidiaries
(Increase)/decrease in amounts lent to subsidiaries
Purchase of shares in other companies
Interest received
Net cash used in investing activities
Financing activities
Net proceeds from issue of shares
Exercise of warrants
Interest paid
Net cash from financing activities
Net (decrease)/increase 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
42
2017
$’000
(2,863)
(294)
(449)
(34,483)
(741)
175
(35,792)
-
434
-
434
(38,221)
1,181
48,223
11,183
2016
$’000
(8,188)
(3)
(15,000)
492
-
95
(14,416)
66,315
-
(130)
66,185
43,581
(1,528)
6,170
48,223
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61
Hummingbird Resources plc
Financial Statements
Company Statement of
Changes in Equity
For the year ended 31 December 2017
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
Total transactions with owners in their capacity as owners
Share based payments
As at 31 December 2016
Comprehensive loss for year:
Loss for year
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Shares to be issued
Exercise of warrants
Total transactions with owners in their capacity as owners
Share based payments
As at 31 December 2017
Share
capital
$’000
1,723
-
-
3,433
3,433
-
5,156
-
-
-
20
20
-
5,176
Share
premium
$’000
81,428
-
-
67,088
67,088
-
148,516
-
-
-
414
414
-
148,930
Other
reserves
$’000
-
-
-
-
-
-
-
-
-
2,000
-
2,000
-
2,000
Retained
earnings
$’000
(6,120)
(7,518)
(7,518)
-
-
679
(12,959)
(4,070)
(4,070)
-
-
-
1,420
(15,609)
Total
$’000
77,031
(7,518)
(7,518)
70,521
70,521
679
140,713
(4,070)
(4,070)
2,000
434
2,434
1,420
140,497
Share capital
The share capital comprises the issued ordinary shares of the company at par value.
Share premium
The share premium comprises the excess value recognised from the issue of ordinary shares for consideration above par value.
Other Reserves
Other reserves comprise of shares that are awaiting to be issued in connection with the purchase of minority interests.
Retained earnings
Retained earnings comprise the group’s cumulative accounting profits and losses since inception less dividends.
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.
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.
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Hummingbird Resources plc
Financial Statements
Notes to the Company
Financial Statements
For the year ended 31 December 2017
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 and mine development 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.
the likely future commerciality of each cost pool of assets;
This assessment involves judgement as to:
(i)
(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 2017,
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 mine development assets and
exploration and evaluation assets the Directors considered that there was no impairment as at 31 December 2017.
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 for potential social security costs related to share based payments
2017
Number
7
7
14
$’000
2,778
370
97
1,844
361
5,450
2016
Number
7
7
14
$’000
2,880
363
92
832
200
4,367
Within wages and salaries, $1,281,000 (2016: $1,587,000) relates to remuneration paid to Directors, included within share based payments
is $424,000 (2016: $153,000) accrued under cash-settled share based payment scheme payable to Directors, and within pension is $59,000
(2016: $75,000) relating to pension contributions in respect of Directors.
The total remuneration of the highest paid director is $479,000 (2016: $688,000) comprising $444,000 (2016: $657,000) in relation to wages
and salaries and pension contributions of $35,000 (2016: $30,000). In addition, an amount of $424,000 (2016: $153,000) 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 (2016: 2).
Key management remuneration is disclosed in note 28 to the consolidated financial statements.
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Hummingbird Resources plc
Financial Statements
Notes to the Company
Financial Statements
For the year ended 31 December 2017
35 Investments
Cost at the beginning of the year
Additions
At Total
Investments in Investment in
subsidiaries
2017
$’000
53,924
2,709
56,633
associates
2017
$’000
-
771
771
Investment
Investments in subsidiaries
2016
$’000
38,114
15,810
53,924
2017
$’000
53,924
3,480
57,404
The Company’s subsidiaries are disclosed in note 16 to the consolidated financial statements. The additions in the year include $2,731,000
(2016: $810,000) in respect of HIPPO incentive scheme that have not been recharged to subsidiaries.
Hummingbird Resources Plc did not subscribe for any additional nil par value shares in its wholly owned subsidiary Trochilidae Resources
Limited (2016: $15,000,000).
Hummingbird Resources Plc invested in Cora Gold Limited as disclosed in note 13 for a value of $741,000 and received $30,000 worth
of shares in Cora Gold in settlement of costs. The market value of the shares at 31 December 2017 were $585,000.
36 Property, plant & equipment
Cost
At 1 January 2016
Additions
At 1 January 2017
Additions
Disposals
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Charge for the year
At 1 January 2017
Charge for the year
Disposals
At 31 December 2017
Carrying amount
At 31 December 2017
At 31 December 2016
Development
assets - other
$’000
Other
$’000
Total
$’000
59
-
59
-
-
59
59
-
59
-
-
59
-
-
356
3
359
294
(42)
611
339
8
347
10
(42)
315
296
12
415
3
418
294
(42)
670
398
8
406
10
(42)
374
296
12
37 Receivables from subsidiaries
At the balance sheet date amounts receivable from the subsidiaries were $73,626,000 (2016: $35,208,000). These amounts are denominated
in US Dollars and 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.
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Financial 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.
2017
$’000
3,039
461
1,462
4,962
2016
$’000
5,526
446
3,397
9,369
Cash and cash equivalents
Cash and cash equivalents as at 31 December 2017 of $11,183,000 (31 December 2016: $48,223,000) 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.
At 1 January
2017
$’000
48,223
-
48,223
Net debt reconciliation
Cash and cash equivalents
Borrowings
Net debt
39 Current Liabilities
Trade and other payables
Trade payables
Other taxes and social security
VAT
Accruals
Other payables
Foreign
Exchange Amortisation
Cashflow Movement of issue costs
$’000
-
-
-
$’000
(38,828)
-
(38,828)
$’000
1,788
-
1,788
At 31
December
2017
$’000
11,183
-
11,183
2017
$’000
1,833
340
306
2,750
377
5,606
2016
$’000
1,686
70
465
2,917
375
5,513
The average credit period taken for trade purchases is 124 days (2016: 118 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.
Operating lease commitments
At the balance sheet date, the Company had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
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.
41 Share based payments
The Company’s share based payments information is disclosed in note 25 to the consolidated financial statements.
2017
$’000
252
925
1,177
2016
$’000
89
-
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Hummingbird Resources plc
Financial Statements
Notes to the Company
Financial Statements
For the year ended 31 December 2017
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
Decrease/(increase) in receivables
(Decrease)/increase in payables
Net cash outflow from operating activities
2017
$’000
(4,070)
10
424
(1,372)
858
(4,150)
2,482
(1,195)
(2,863)
2016
$’000
(7,518)
8
505
(603)
1,663
(5,945)
(2,621)
378
(8,188)
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
Financial assets
Cash and cash equivalents
Other receivables
Intercompany trade receivables
Loans due from subsidiaries
Financial liabilities
Trade payables
Other payables
Accruals
Warrant liability(1)
Loans
and receivables
Financial liabilities
measured at amortised cost
Financial liabilities at fair
value through profit or loss
2017
11,183
3,039
1,462
73,626
89,310
-
-
-
-
-
2016
48,223
5,526
3,397
35,208
92,354
-
-
-
-
-
2017
2016
2017
2016
-
-
-
-
-
1,833
377
2,750
-
4,960
-
-
-
-
-
1,686
375
2,917
-
4,978
-
-
-
-
-
-
-
-
1,368
1,368
-
-
-
-
-
-
-
-
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).
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Financial 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.
Société des Mines de Komana SA
Trochilidae Resources Limited
2017
$’000
34,140
2
40,942
2016
$’000
33,231
-
1,977
These amounts are repayable on demand and no interest is currently charged.
The Company’s transactions with other related parties and remuneration of key management personnel are disclosed in note 28
to the consolidated financial statements.
45 Events after the balance sheet date
Events after the balance sheet date are disclosed in note 30 to the Consolidated Financial Statements.
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Hummingbird Resources plc
Financial Statements
Company Information & Advisers
Company Secretary
Thomas Hill
Registered Office & Head Office
49-63 Spencer Street, Hockley,
Birmingham, West Midlands, B18 6DE,
United Kingdom
Company number
05467327
Nominated Adviser & Broker
Strand Hanson Limited
26 Mount Row
London, W1K 3SQ, United Kingdom
Auditors
RSM UK Audit LLP
5th Floor, 29 Wellington Street
Leeds, LS1 4DL, United Kingdom
Solicitors to the Company (UK Law)
Gowlings WLG (UK) LLP
4 More London Riverside
London, SE1 2AU, United Kingdom
Registrars
Link Asset Services
6th Floor, 65 Gresham Street
London, EC2V 7NQ, United Kingdom
Bank
Barclays Bank
1 Churchill Place, Canary Wharf
London, E14 5HP, United Kingdom
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Financial Statements
Designed and produced by effektiv
+44 (0)20 7251 7720 / www.effektiv.co.uk
Annual Report & Accounts 2017
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