Hummingbird faces fresh headwinds at Guinea mine

Africa-focused Hummingbird Resources (AIM: HUM) is facing more challenges at its Kouroussa gold mine in Guinea after one of its main contractors, Corica Mining Services, halted activities because of contractual disputes.

The gold producer, with operations in Mali, Guinea and Liberia, called Corica’s move “a clear breach of the mining contract” as it alleges the contractor “failed to meet mining contract volumes due to delays in mining equipment mobilization, commissioning, and overall operating performance.”

Hummingbird issued a notice to Corica on Monday, demanding the resumption of mining by the end of Tuesday. The company warned that if the contractor failed to do so, it might step in to resume mining operations, or work with alternative suppliers.

According to Corica, Hummingbird Resources owes it US$27 million for work already completed. It noted the measure remains conditional and reversible provided the miner pays the pending invoices and provides a Deed of Company Guarantee by April 7.

“Corica has over two decades of history in contracting with major clients and is proud to have had zero litigation to this date,” it said in the statement.

The difficulties at the mine, located in West Africa’s prolific Siguiri basin, come as gold continues to enjoy historic highs, with prices reaching US$2,157.40 per oz. on Wednesday. 

Hummingbird issued a response to Corica on Wednesday, disputing the accuracy of the amount owed and the need for payment.

“Since the inception of the contract in September 2022, Corica has consistently underperformed against established contractual performance targets, failing to meet the mining contract volumes principally due to delays in mobilizing mining equipment, commissioning the equipment, as well as recruitment and training,” Hummingbird said.

The miner argues it has been cooperating with Corica in good faith since July 2023, when it informed the contractor of a contract breach due to the operation’s underperformance.

Kouroussa, Hummingbird’s second operating mine, achieved first gold pour in June 2023 and it is expected to churn out an average of 120,000 to 140,000 oz. in its first three years of commercial production. After that, Kouroussa would average 100,000 oz. of gold a year over an initial seven-year life. 

Hummingbird took on a US$55 million loan with Coris Bank in September, pledging to cut US$122.8 million in debt over three years starting with a US$77-million debt repayment by the end of this year. 

The miner also raised $30 million mainly through a share placement at an average price of 11.26 pence per share with shareholders including 45% shareholder CIG, an investment bank.

Hummingbird agreed at the time to hedge 30,000 oz. of gold, which represents about 15% of its total production. This decision was made amid soaring bullion prices, which hit a new all-time high of US$2,195.15 per ounce on March 8.

The miner has faced challenges in bringing the Kouroussa mine up to full production. Aside the ongoing issues with Corica, activities at the mine were disrupted last year by rain and delays associated with skills development.