Nioko Resources, a subsidiary of creditor CIG, on Monday agreed to buy Hummingbird Resources (AIM: HUM) in an all-cash deal worth about £13.8 million.
Nioko, which owns 41.81% of debtor Hummingbird, will buy the rest at 2.6777 pence each. This is a premium to the stock’s 1.65 pence trading price at press time. The offer matches the subscription price in a deal earlier this year with CIG to convert debt to equity.
Hummingbird’s board has unanimously recommended the offer. It aims to fix the company’s financial troubles. Problems at its Yanfolila gold mine in Mali and delays in ramping up production at the new Kouroussa mine in Guinea have strained its finances. The miner can’t meet near-term debt repayments to creditors, including CIG and Coris Bank.
Nioko’s stake in Hummingbird would rise to 71.8% following the completion of the debt-to-equity conversion agreement. Earlier this year, the company also sought to sell its 53%-owned subsidiary, Pasofino Gold (TSXV: VEIN), signing a deal with a potential buyer.
CEO Geoff Eyre acknowledged the dire financial situation. He stated the company needs “a very material amount in equity financing” for infrastructure and debt. Hummingbird faces a critical US$30 million repayment to CIG by the end of December.
Eyre called Nioko’s offer a chance for minority shareholders to recover cash before Hummingbird’s expected delisting. We expect the transaction to close in the first quarter next year if it can meet certain conditions.
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