Aim-listed Hummingbird Resources and African investment company CIG’s wholly-owned subsidiary Nioko Resources Company have announced a proposed debt restructuring, a partial debt-to-equity conversion and a possible offer.

This comes as Hummingbird reports continued challenges around operational performance at the Yanfolila gold mine, in Mali; and equipment availability, working capital constraints and further delays in the ramp-up of operations at the Kouroussa gold mine, in Guinea.

The company says these have placed significant strain on Hummingbird's balance sheet and ability to meet near-term debt repayment obligations.

This includes the requirement to defer $30-million in repayments to Coris Bank due on October 31.

To address the company's immediate obligations, Hummingbird says its shareholder CIG is providing the outstanding $10-million loan. Following the latest advance, the company now has about $30-million of unsecured debt owing to CIG.

As of the end of the third quarter in 2022, net bank debt stood at about $135-million with Coris Bank – including about $90-million that is secured against the company's assets.

Alongside this advance, CIG has proposed, and Hummingbird’s board has agreed in principle, to a debt-to-equity conversion by CIG, whereby the principal amount outstanding under the New CIG loan would be converted into shares at a conversion price of 2.68p increasing its voting rights to about 71.8%.

Meanwhile, Geoff Eyre has been appointed interim CEO of Hummingbird, at the request of Nioko and with the agreement of the Hummingbird board to drive a transformation plan focused on improving operational performance.

CIG and Nioko have informed Hummingbird that, following completion of the proposed debt-to-equity conversion, they will seek to procure the cancellation of the admission to trading of the company’s ordinary shares on Aim.

Nioko has also said it is prepared to consider announcing a firm intention to make an offer for the entire issued and to be issued share capital of the company that it does not then hold.

The pre-conditions for the making of the offer are the completion of Nioko’s due diligence to its satisfaction, the entry into the subscription agreement for the debt-to-equity conversion, and Hummingbird posting the circular and convening the requisite general meeting for the Rule 9 Waiver.

Nioko has confirmed that the proposed price for the offer, if made, would be 2.68p a share, which is the same price as the proposed debt-to-equity conversion.