Shares in Hummingbird Resources PLC (LON:HUM) should continue to re-rate as it moves towards first production at Yanfolila in Mali before the year end, reckons broker Cantor Fitzgerald.
Shares have broken through the broker's previous range and it has now hiked up its target to 41p from 32 previously. Shares are at around 33p currently.
Pre-production mining already started..
Pre-production mining has already started and by the end of November, the firm expects that over 3Mt (million tonnes) of material will have been moved with ore stacked ahead of fourth quarter commissioning.
The mine is slated to produce 132,000 ounces of gold in its first year of full production.
READ: Hummingbird building a gold production presence in Africa and on the London market
READ: Hummingbird commences mining operations at Yanfolila
Cantor notes that from the last quoted cash position in mid-July of US$70mln, it expects a cash position of US$10m at year end, with net debt of around US$50mln.
It expects commercial production to be declared in April, 2018, which should see the cash position rise rapidly to over US$40mln by the end of 2018, it suggests, leaving the miner well placed to meet subsequent debt repayments.
"The onset of production at Yanfolila will also bring a greater commitment to further reserve definition and exploration at the project," noted Cantor analyst Asa Bridle.
More than 1mln ounces outside initial plan..
"At present over 1Moz of resources lie outside of the initial mine plan, and HUM will look to reclassify this inventory into reserves to increase the average annual production rate and/or the overall mine life," he added.
Bridle said that based on various metrics taken from a peer group of “in construction” gold companies, he values the group's 80% stake in the Yanfolila project at US$121mln or 27p a share.
Using the same metrics from a 'PFS' peer group for the company’s Dugbe property in Liberia generates a valuation of US$66mln or 14p a share for Hummingbird's second gold project.
Combining these gives the new target price of 41p target price. The recommendation is 'buy'.