#HUM
#1
A thread on my largest holding & why I think this will prove to be the best gold play in 2021.
Current mcap - £117m
Current SP - 33p

H1 2021 Target mcap - £290m
Target SP - 81p

H2 2021 Target mcap - £375m
Target SP - 105p

H1 2022 Target mcap - £550m
Target SP - 155p

#2
- A pureplay gold producer with producing asset in Mali (Yanfolila), soon to be acquired asset in Guinea (Karoussa) and huge asset in Libya (Dugbe).
- Debt as at Sep 30,2020 was c$19m and expected to be fully paid off by April.
- No.1 take over target as published by Quest.

#3
- 2021 expected to be a transformational year due to following milestones
a) New mine to be built at Karoussa thus becoming a multi asset producer
b) Dugbe DFS expected by Q3 to demonstrate value - Post tax NPV expected to be > $1bn on minimal % of resource.
c) Debt paid off

#4
The vision is to move from a 100-120koz current production to 220koz production company by 2022 and 350-500koz production by 2025.

#5
Yanfolila (Producing Asset)
FY20
Prod Expected: c102koz (Dec prod exp of 9koz)
ASIC Avg. Expected: c$1050/oz
Gold Price Avg. Expected: c$1750
I expect HUM to finish FY20 with,
Revs: $179m
EBITDA: $71m
A stellar performance given the headwinds of Covid, Mali coup & rains.

#6
FY21 Forecast (Expected Averages)
Prod: 110 - 120koz
ASIC: $950-975/oz
Gold Price - $2000

So,
Revenues - $220m to $240m
EBITDA - $110m to $120m
Margins >100% and whilst these numbers are assumptions, I've taken a rather conservative view. Optimistically I expect better.

#7
Yanfolila has a 5 year revolving resource plan and following extensive drilling this year, the updated reserves are expected shortly in Q1 with the expectation that reserves extend beyond the 5 year plan with potential to add more reserves through further drilling this year.

#8
Val on Yanfolila
Currently trading at an EV/EBITDA of c1.8x comp to peers of 3.5-4x.
Broker TP based on 'JUST' Yanfolila without LOM upgrade, gold@c$1.8k and debt inclusive is 57-67p.
Now - remove debt, add LOM upgrade & higher gold prices - you have a TP of 77-80p.

#9
Expected news flow from Yanfolila in Q1
- Q4 Production results & 2020 Performance
- 2021 Budgets for Capex at Yanfolila to further drill, increase resource
- Updated 5 year reserves/mine plan
- FY21 Production & Costs Guidance

#10
Karoussa (Guinea)
- SPA signed with Cassidy in June 2020 to acquire 100% of Karoussa
- Acquisition through upfront payment (made) and shares in HUM (Cassidy becomes LT holder - lock in period)
- Awaiting mining permit to close the transaction (expected imminently)

#11
Excellent asset and very similar economics to existing Yanfolila asset.
- 1.18Moz @ 3.08g/t with LOM upside through drilling
- AISC of $800-850/koz
- Production expected to be 100koz/pa
- 150kms from Yanfolila (Synergies)
- Existing Infrastructure worth $20m

#12
- Capex required : $100m
- Coris Bank (existing lenders) have provided letter of intent to fund the full $100m upon receipt of mine licence.
- Senet who constructed Yanfolila are expected to construct Karoussa.
- Mine construction time is 9 mths
- Expected first pour in 2022

#13
Currently HUM's value does not factor Karoussa at all however on receipt of mine licence and debt funding I expect to add 25% of the post tax NPV.
Karoussa pre-tax NPV @ $1.8k price is c$300m.
Add existing replacement value of $20m.
Total uplift expected - £50m (35m +15m)

#14
At current mcap of £117m, that's a c40% uplift.
Near term Karoussa milestones
- Mining Licence Permit
- FEED Update
- Confirmation of debt funding from Coris
- Appointment of SENET for mine construction
- FY21 Drilling program at Karoussa

#15
Dugbe (Libya)
This is the asset I'm most excited about given the quality of scale and is on par with GGP (bar the location) and once the DFS is out later this year, the value will reflect in the mcap as currently its valued at £0!

#16
In pit contained ounces (based on 3-4 years of drilling until 2015)
- 2.3 million ounces @ 1.51g/t
- 1.3 million ounces @ 1.47 g/t
Only based on 3 out of 100+ targets across a licence area of 2,650 km!
Two key target areas where mines to be built are Dugbe F & Tuzon

#17
As this is a monstrous asset with potential to have multiple mines in the same location, HUM entered into a JV with Pasofino gold with Pasofino funding all expenses to DFS by Q3 2021. HUM retains 51% and focusses on Yanfolila & Karoussa whilst waiting for DFS on Dugbe.

#18
From Pasofino's website, the following slides indicate the scale, size and the opportunity here.

#19
Ian Stalker (CEO) and the management have huge pedigree and have made Dugbe their priority.
Dugbe Plan
- Targeting a mineral resource in 2021 of 5-6moz (From existing 3.6moz)
- ESIA by H2 2021
- DFS by H2 2021
- Production of 200-25koz/pa
- 12 months from DFS to construction

#20
Dugbe Valuation
So this remains the biggest disparity I've seen in my short investment experience.
Currently valued at £0 but Dugbe I would argue is worth several hundred million to HUM at present but the market seems to have completely missed it.

#21
Dugbe Valuation (contd.)
In 2010 HUM listed on AIM with just Dugbe asset and a resource of 812koz with a FV of £60m. Following years of drilling they improved that to a resource of 4.2moz,with 3.6moz published as Inferred & Indicated.

#22
This mineral resource estimate of 4.2moz is based only on a fraction of the asset - i.e. 3 out of 100+ exploration targets across a licence area of 2500km+ land, considered to be the last remaining unexplored parts of Birimian area of West Africa.

#23
To put things in perspective, GGP are currently valued at £1.4bn based on a recently released resource estimate of 4.2moz and brokers expect the value to double on DFS later. Sure they are based in Aus, but what do you value Dugbe on such a resource with open pit mining?

#24
Pasofino have created an investment case below on the Dugbe project and I understand that once the numbers are tweaked for higher gold prices, the NPV is expected to be > $1bn.
https://investors.pasofinogold.com/one-billion-nav/?utm_campaign=d_core_leads&utm_source=google&utm_medium=display&utm_content=r1_ginvest&gclid=EAIaIQobChMIqO_goOXN7QIV2NDVCh0lZwRGEAEYASAAEgLxcvD_BwE

#25
Whilst the value of a gold resource to a company is debatable, I'd argue that the Dubge asset is worth hundreds of millions (in current state) based on 4.2moz of I&I resource and will be worth more on DFS with a post tax NPV > $1bn.

#26
Sum of parts
Yanfolila value c£275m (80p)
Karoussa value (on licence & funding) (25% post tax NPV + Replacement value) - £50m (14p)
Dugbe value (51% ownership) on DFS (25% post tax NPV) - min of £150-200m (55-60p)
Overall - 155-160p
Current mcap - 33p

#27
When you add the sum of parts you are presented with a value disparity that makes HUM the most appealing gold play in the market for me.
Whilst a location risk being in Mali, this is negated through established relationship, transition to multi asset/mine & debt deleverage.

#28
Due to the apparent disparity in valuation, i.e. £117m vs target mcap of c£400m+, HUM are being touted as being the number 1 target by Quest at Cannacord. I expect that one of two things will happen,
- Rerate to a more sensible mcap
- Take over if mcap doesn't rerate

#29
HUM also has the following two investments that often is missed by investors,

- 12.25% holding in Cora Gold
- 5.7% holding in Bunker Hill Mining