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Debt-ridden Hummingbird Resources (AIM: HUM) announced on Monday that an agreement has been struck for Nioko Resources, a wholly owned subsidiary of creditor CIG, to acquire the company in an all-cash deal worth approximately £13.8 million ($17.5 million).
Under the agreement, Nioko, which currently holds approximately 41.81% of Hummingbird’s share capital, will buy all the shares it does not own for 2.6777 pence per share. The stock was trading at about 1.65 pence at press time.
Nioko’s offer — which has the unanimous recommendation of Hummingbird’s board — matches the subscription price under the proposed debt-to-equity conversion agreement signed with CIG in November 2024.
Hummingbird has flagged continued challenges around operational performance at its Yanfolila gold mine in Mali, as well as delays in the ramp up of operations at the Kouroussa mine in Guinea, which recently entered commercial production.
These challenges, the UK-based miner says, have placed “significant strain” on its balance sheet and ability to meet near-term debt repayment obligations to creditors like CIG and Coris Bank. The debt-to-equity conversion agreement with CIG was aimed at alleviating the company’s financial problems.
Nioko, as the only CIG party with voting rights in Hummingbird, would increase its stake to 71.8% following the conversion.
Earlier this year, Hummingbird also put its 53%-owned subsidiary subsidiary Pasofino Gold (TSXV: VEIN) up for sale, with a deal signed with one potential buyer.
Geoff Eyre, chief executive of Hummingbird, stated in a press release that the company requires “a very material amount in equity financing” to address numerous issues, including infrastructure improvements and creditor overhang.”
He also noted the need for external funding for upcoming payments, including a $30 million debt repayment due to CIG by the end of December, and the offer by Nioko represents an opportunity for Hummingbird’s minority shareholders to recuperate cash prior to its eventual delisting.
The transaction is anticipated to become effective in the first quarter of 2025, subject to the satisfaction or waiver of the conditions set out in the offer.
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