Midas: Hummingbird on brink of gold success

By THIS IS MONEY
Updated: 05:17 EDT, 7 March 2011

With the Middle East in turmoil and investors shying away from risky markets, a gold explorer in Liberia may not seem the most obvious investment choice.

Digging deep: Daniel Betts raised £25mn

For most people, the country is just another war-weary African nation, wrestling with poverty, hunger and political corruption. But Daniel Betts, chief executive of Hummingbird Resources, has a rather different perspective.

Hummingbird has a licence from the Liberian government to explore and mine for gold in an area half the size of Wales. The territory is part of a rich seam of gold deposits stretching along west Africa, but in Liberia, decades of war have prevented any real exploration - until now.

Over six years, Betts and his team have worked hard to assess the potential of their Liberian assets.

They have performed countless tests, which have delivered positive results time and again. Last year, the company moved to the next stage when independent experts said that just one small stretch of Hummingbird's land could produce more than 800,000 ounces of gold. Mineral exploration is never certain but all the signs suggest there is a lot more to come.

Late last year, Hummingbird was admitted to the Alternative Investment Market and raised £25m in the process. That should provide enough money for the next two years, and the intention is to prove that at least three million ounces of gold lie beneath its land.

The target looks realistic but it will require continuous effort from Hummingbird. The land being explored is virgin territory and the climate is tropical, which can make the daily grind uncomfortable.

However, Liberia has a huge unemployment problem so Hummingbird's workers feel loyal to the company and are prepared to put in the hours. The firm is also building roads, funding community services and providing medical care.

Betts' family has run a Birmingham-based bullion trading company for more than 200 years and has amassed a string of contacts in the industry. Over the past decade it has developed a strong relationship with the post-war, anti-corruption Liberian government, which is highly supportive of its efforts.

Investors should also be reassured by the presence of Ian Cockerill as chairman. Cockerill was chief executive of renowned South African gold company Gold Fields and has more than 30 years' experience of the mining industry.

Midas verdict: Hummingbird joined Aim at 167p and today the shares are 1431/2p, hit largely by concerns about political risk. No one could describe the shares as riskfree, but the potential rewards are immense and at this price they look very tempting. The adventurous should have a punt.

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MIDAS UPDATE

CPP Group describes itself as an international 'life assistance' business, which boils down to card protection, with some mobile phone, legal and home emergency insurance thrown in.

The company floated last April and last week announced its first annual results as a public company.

Underlying turnover rose 12% to £326m last year and underlying pretax profits were up 33% to £47m, the fifth consecutive year of double-digit growth. There is also a maiden dividend of 7.54p.

Losing a wallet causes considerable disruption, especially where consumers have lots of cards, but customers can make a single call to CPP and it will sort everything out. Policies cost about £30 a year. In emerging markets, consumers have fewer cards but banks are much less likely to cover them for fraud so there is an incentive to take out cover.

Midas recommended CPP shortly after it floated when the shares were 256p. Today, they are 303p.

Midas verdict: Investors have done well but the price should continue to increase. The dividend may well rise too, as CPP generates plenty of cash and has no debt. Existing investors should hold on. New ones may choose to buy on weakness.