Jamie Keech – Valuable Tips for Retail Investors

Interview with Jamie Keech, Co-Founder of ‘Resource Insider.’

A mining engineer, investor and writer, Keech’s job is to look at private mining deals. His company, Resource Insider, is a “deal-flow service.” The focus is on allocating capital to early-stage mining deals and private placements. All members are accredited investors. Keech spends most of his time searching for private placements to invest his own money in. Investors/subscribers are then given the opportunity to get in on the deal with their own capital at the same price, on the same terms. Resource Insider doesn’t take any kickback fees from companies; instead, the company is bankrolled via an annual subscription fee from each investor to fund the research and due diligence process. We were keen to hear his insights into how global markets are recovering from COVID-19, in addition to exploring numerous other retail-oriented themes.

Matthew Gordon talks to Jamie Keech, 17th June 2020


The Vancouver junior mining sector has been going “ballistic” over the last 6-8 weeks. In terms of private mining deals and private placements, there has been a real abundance in the market recently. Life is gradually getting back to normal, and while it is far from the ‘business as usual’ approach in some Australiasian countries, Canada is a little ahead of parts of Europe.

What are the key red flags for retail investors to look out for when considering investing in a company?

Remuneration and Timing

Watch out for management teams, company insiders and directors who are making “boatloads” of money paying themselves well, while their company isn’t driving share price growth for investors; this includes investors who have entered at any time period, from IPO, all the way to the present day. Investors should never be ripped off by timing.

Structure

A poorly structured company can suck every ounce of value out of an investment for a retail investor. Investors need to closely check a company’s history, especially when it comes to share transactions, before taking the plunge. The game is so often stacked against retail investors, and moves like “friends & cronies” getting in for a “fraction of a penny” during “seed round financings” can mean they get masses of shares at an incredibly discounted price, compared to the amount acquirable and cost attainable of shares for retail investors in the next round of financing. By getting in before retail investors have access, these early starters are able to obtain a 100X lift on their initial investment for zero work, and there hasn’t even been an IPO yet.

Investors want to search for teams that are genuinely working in their favour and have align interests; these are becoming increasingly rare. Just a few weeks ago, an undisclosed management team gave themselves 12M shares for just US$9. This is remarkable behaviour, and it serves as further evidence for why retail investors struggle so heavily. The brutal reality is that this “Ponzi scheme” is simply the name of the game. If retail investors want to call, they’ll need to make sure they’re playing a good hand.

How can retail investors level the playing field? Watch to our CRUX-Club.com videos to find out.

Getting In Early

Retail investors need to seek out the appropriate resources to get in as early as possible. Companies like Resource Insider seek to provide this opportunity.

Look At What Management Got In At

This will give investors a pretty good idea of how exactly the management is aligning themselves with the interests of shareholders.

Find Companies That Have Been “Beaten Down”

Look for companies that are well-funded with a good team behind them and have a depressed share price. However, the caveat to this is that it is getting harder and harder each day. There is currently a lot of capital available in the junior mining space that companies with absolutely nothing are fully-subscribing their public offerings. The euphoric sentiment is inflating the stock market enormously.

Retail investors need to recognise their limitations. They do not have the budget, capacity and resources to spend months carrying out incredibly extensive and technical due diligence. Retail investors need to know what they don’t know and compare that to their desired risk profile. It is very unlikely they will ever know everything.

We discuss more ideas and Red Flags with Keech in our extended version which you can find at CRUX-Club.com.

What did you make of Jamie Keech? Comment below and we will respond.

Company Website: https://resource-insider.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Integra Resources (TSX-V: ITR) – A Renowned Team And Exciting Drill Results

A gold tinted photo of some US$100 bills and a pile of gold coins with a white Crux Investor logo in the top right, and a white Integra Resources logo in the top left.
Integra Resources Corp.
  • TSX-V: ITR
  • Shares Outstanding: 119.6M
  • Share price CAD$1.25 (20.02.2020)
  • Market Cap: CAD$150M

We recently conducted an interview with George Salamis, President & CEO of gold-silver explorer, Integra Resources Corp.

We regularly discuss interesting gold market proceedings on this platform. Check out one of our other recent gold company interviews, or maybe some of our recent informative gold investment articles.

The management team at Integra Resources is the former executive team of Integra Gold Corp, renowned for turning a C$15M gold company into a C$590 million (sold to Eldorado in 2017). What have they got this time around? We discussed:

  1. The share price increase: doubled in less than a year.
  2. Its flagship asset purchased from Kinross Gold Corp. in 2017.
  3. Promising drill results in 2019.
  4. Exploration plans for 2020.

We were also keen to ask why a gold-producing giant like Kinross Gold Corp. would sell its gold-silver asset to Integra Resources unless it was a dud? We explored some very impressive drill results and big plans for 2020. Do shareholders have a reason to get excited? With these results and a management team with such an impressive track record, maybe they do…

Company Website: https://www.integraresources.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A gold tinted photo of some US$100 bills and a pile of gold coins with a white Crux Investor logo in the top right, and a white Integra Resources logo in the top left.

China Gold Int (TSX: CGG) – Gold And Copper On A Grand Scale

A photo of a silhouette hand picking out a gold Chinese ring.
China Gold International Resources Corp.
  • TSX: EQX
  • Shares Outstanding: 113.5M
  • Share price C$12.6 (21.02.2020)
  • Market Cap: C$1.43B

We recently sat down for an intriguing interview with Jerry Xie, Executive Vice President and Corporate Secretary of China Gold International Resources Corp. (TSX: CGG, HKSE: 2099).

Investors may want to read one of our most recent gold-related articles, or even watch a different gold interview.

Gold had a good year and an especially positive 2H/19. However, China Gold Int. had a negative correlation on its share price throughout 2019. The company operates two producing gold mines that form a low-grade, bulk-tonnage gold operation with a copper by-product. The operational statistics look good on paper, so why this share price tail-off? We discuss:

  1. The Decline In Share Price: Why?
  2. The Gold Market Outlook For 2020
  3. How China Gold Int. Plans To Get The Share Price Back Up

Company Website: http://www.chinagoldintl.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A photo of a silhouette hand picking out a gold Chinese ring.

Equinox Gold (TSX: EQX) – The Sum of the Parts Sets it Apart.

A graph of rising gold bars with a red arrow curving up them.
Equinox Gold Corp.
  • TSX: EQX
  • Shares Outstanding: 113.5M
  • Share price C$9.73 (29.02.2020)
  • Market Cap: C$1.1B

We recently interviewed Christian Milau, CEO of large-cap gold producer, Equinox Gold (TSX: EQX). CLICK HERE to watch the full interview.

Equinox Gold Corp.

Equinox Gold is a story most gold investors should be familiar with: it is the model of how to build a gold producer in a short timeframe. This gold producer has had a remarkable rise over the past 18 months. Its share price hovered around C$5 at the start of 2019 and rose to heights of C$13.54 this year.

However, this week has seen even successful gold producers, like Equinox Gold, have their share prices brought to a shuddering halt, and even drop back. Equinox Gold’s share price has fallen this week alone from C$13.34 to C$9.73; this has been a truly extraordinary and noteworthy week of panic selling of a commodity that has been traditionally positioned and heralded as a ‘safe haven.’ It seems that truism isn’t true.

Let’s try to look to the world before the Coronavirus and hopefully the world after it. I know that may seem like a casual, almost dismissive statement, but it is not meant to be. There is clearly great global concern about the near-term impact on society and business, and possibly in the light of the current media spotlight, a normal future seems implausible, but history tells us that we humans persevere, adapt and survive, and we will again.

So let’s look to the future, if we may.

Equinox Gold was listed around 2 years ago, with the prodigious Ross Beaty as the main shareholder; if you are familiar with the school of ‘Bet on Beaty Bets’ investing, it will be no surprise to see Equinox Gold doing so well. Its founding goal was to become a multi-jurisdiction, large-cap, low-grade, bulk-tonage gold mining company.

Assets

Equinox Gold has a promising portfolio of assets:

  1. Mesquite Gold Mine, a Californian project producing 125,000-145,000oz gold per annum with an AISC of US$930-$980/oz and a grade of 0.46g/t gold (exclusive of reserves)
  2. Aurizona Gold Mine, a Brazilian gold mine producing 75,000-90,000oz per annum with inferred Resources of 1.1Moz @ 1.98g/t gold (with an exploration upside) and an AISC of US$950-$1,025
  3. Castle Mountain Gold Mine, an under-construction gold mine with a PFS and production potential of 200,000oz per annum and a 16-year life-of-mine (LOM)
  4. A copper-focussed spin-out operation in the form of Solaris Copper Inc.

Our Interview

Milau covered a variety of topics. Equinox Gold’s targets have been well and truly delivered. Mesquite and Aurizona are up and running, producing at a reasonable scale with a good AISC. Castle Mountain should be ready to rock by Q3/20.

These have not been without their hiccups; after all, this is mining. Equinox Gold has, however, kept things simple and it is reaping the rewards. The portfolio is focussed. The management team has created a relentless mining business for low-grade bulk processing. Equinox Gold’s message is simple: make strong acquisitions, then get that gold out of the ground!

Equinox Gold's Corp.'s share price for the last year.
Despite a late tail-off, what a year for Equinox Gold!

Equinox Gold has a significant 11% insider ownership: another reassuring fact for investors. The management team has succeeded in attracting a diversified shareholder base since the last time we spoke with Milau.

Milau also discussed Equinox Gold’s spending strategy and his view on the gold macro environment. What does the outlook for the gold market look like for 2020? He states this is only the beginning of this new gold cycle. He is conscious it won’t all be plain sailing in the gold sector, but this is in the early stage of the turn (US$17T of negative-yielding debt, solid stock markets and slowing global growth). Is the best really yet to come? Gold investors will be breathing heavily and hoping for more.

Equinox Gold has no intention of being taken out, and why would it? The company plans to become a long-term investment opportunity that can last through several cycles. Equinox Gold has had great momentum for those seeking fast returns, but it now also looks supremely appealing to those looking for steadier returns. Could it be a dividend payer in the next 2-3 years? Milau suggest so, but that is a long way away, and markets change. Let’s focus on today. Can that share price continue to grow at the same rate?  

As a gold producer, Equinox Gold has the rising gold price working in its favour, should the price continue on its recent trajectory. Can the management team start to accumulate cash, given they have been buying ounces in the ground? We appreciate Milau’s pragmatic take on gold margins: Equinox Gold is not rushing to produce and there is no spike in production. Equinox Gold is managing a steady, structured increase. However, the markets often don’t reward pragmatism and sensible management decisions. They often prefer pie in the sky stories of twenty-baggers and miracle proprietary technology. The fact the market has latched onto Equinox Gold with such excitement is a testament to just how solid this project seems to be. 1Moz per annum of gold is impressive, but this degree of investor enthusiasm is rare to say the least.

To continue on this trend of growth, Equinox Gold will proceed to develop its current assets and look at new acquisitions when the time is right. On the 28th January, Equinox Gold announced a merger with Leagold Mining Corporation that will combine the companies, ‘creating one of the world’s top gold producing companies operating entirely in the Americas.’ This should position Equinox Gold even more strongly.

one of the world’s top gold producing companies operating entirely in the Americas

Equinox Gold has recently received Serabi Gold’s C$14M payment for the Coringa project in Brazil, as it targets becoming a 1Moz per annum producer.

As far as remuneration, one of our favourite elements of the story, Milau stated that Equinox Gold has continued with its directors’ remuneration policy of paying them mainly shares. Milau claims he hasn’t cashed any in yet, but we can’t see any reason why he’d want to.

A photo of a Seal with a sign saying 'yes.' The words seal of approval are written underneath.
We Are Big Fans Of The Equinox Story

Equinox Gold is an anomaly. It is an abnormal story of inspired management, favourable prices, excellent assets and, as is always the case in mining, luck. We expect Equinox Gold to keep delivering on its promises for shareholders; the team has shown us nothing to make us believe otherwise. No, they don’t pay us and no we don’t own any shares. In an industry of over claiming and under delivering, we see Equinox Gold as company that does what it says.

Company Website: https://www.equinoxgold.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A graph of rising gold bars with a red arrow curving up them.

Search Minerals (TSXv: SMY) – 10 Years: Anything To Show For It?

The Search Minerals Logo.
Search Minerals Inc.
  • TSXv: SMY
  • Shares Outstanding: 230.7M
  • Share price CAD$0.05 (21.02.2020)
  • Market Cap: CA$10.4M

We recently sat down to interview Greg Andrews, President and CEO of rare earths company, Search Minerals (TSXV: SMY). He answered a lot of difficult questions. Investors will need to watch the video to decide if they think he answered them well…

We discussed several topics, including:

  1. Rare Earths? What Are They And What Are They Used For?
  2. Raised CAD$20M, worth CAD$10M. What Happened?
  3. Struggling To Fill A CAD$500,000 Private Placement: Has The Market Had Enough Of Search Minerals?

This is an important interview for investors to watch, especially for its educational exploration of critical rare earth elements (CREEs).

Company Website: http://www.searchminerals.ca/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Search Minerals Logo.

MOGO Finance Technology Inc (TSX: MOGO) – Making Investors Money By Saving People Money

MOGO Finance Technology Inc.
  • TSX: MOGO
  • Shares Outstanding: 27.5M
  • Share price CAD$3.40 (21.01.2020)
  • Market Cap: CAD$93.5M

We recently interviewed Greg Feller, President of Canadian fintech, MOGO Finance Technology Inc. We discussed some very interesting topics:

  1. The Battle Of The Banks
  2. Carbon Offset Cards
  3. Saving Young People Money
  4. Big Plans For The Future

This was Crux Investor’s first interview with a fintech. We found Mogo’s business model intriguing, but we have some question marks surrounding certain areas.

If Feller can pull this off, he’s going to make his investors some serious dollars, and all while saving customers many dollars of their own.

Company Website: https://www.mogo.ca/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Pan African Resources (LSE: PAF) – A Gold Producer That’s Movin’ On Up

A photo of Pan African Gold CEO, Cobus Loots.

We recently interviewed Cobus Loots, CEO of South African gold-producer Pan African Resources (AIM:PAF). CLICK HERE to watch the full interview.

A Decisive, Ambitious Team

One thing that has become very clear after conducting several interviews with Loots is that the Pan African Resources management team gets things done.

Mining is never easy. Mining in South Africa is even harder, but the management team consistently hit their targets.

Pan African Resources is well on its way to becoming a mid-tier gold producer. The team is targeting a solid 185,000oz of gold this year.

Loots ran us through the highs and lows of the last 6 months, including the recently released operational update.

The key highlights from the update?

  1. Pan African Resources is on track to deliver the full-year production guidance of 185,000oz.
  2. Group gold sales increased by 14.7% to 92,941oz (2018: 81,014oz).
  3. The Evander 8 Shaft Pillar project development is progressing according to plan, with steady-state production planned from March 2020.

We’re big fans of the tailings slant on the business because green is very fashionable right now. Some of the best companies we’ve interviewed recently have figured out a way to slot into the green narrative effectively.

Barberton Tailings Retreatment Plant produces a steady stream of gold, c. 25,000oz per annum, and the Shaft Pillar at Evander, an area of developmental focus in the near future for Pan African, could provide 20,000oz, rising to 30,000oz+ “in the years ahead.”

Pan African Resources is now mining more economically, courtesy of a strategy modification: mining at the shaft rather than at deeper levels. The result is an intended sub-US$1,000 AISC for the Pillar project. Solid numbers, and in line with the rest of Pan African’s other operations.

Elikhulu Tailings Retreatment Plant has had a mining feasibility study conducted that is now being independently vetted by a third party, with the view to expand it to a full feasibility study. Loots says it looks like c. 90,000oz per annum, with a 9-year life-of-mine, rising to 20 years with further resource modeling.

By utilising assets with existing infrastructure, Pan African Resources can keep costs down and get things going quicker. This is still a little way off but could be a good addition to the portfolio.

In terms of dividends, Pan African Resources recently released its first dividends for years. Loot states the company was recently one of the highest yielding gold dividend shares in the world, and that is the direction he wants to go in this time round. Let’s see how things turn out.

For now, it’s full speed ahead developing the projects, overcoming issues pertaining to jurisdiction, community and environment difficulties, and getting the share price where investors will no doubt want to see it.

Feel free to check out the full in-depth interview on YouTube. Don’t forget to comment and subscribe. If you have any questions for Cobus Loots, comment below!

Company page: https://www.panafricanresources.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A photo of Pan African Gold CEO, Cobus Loots.

Harvest Minerals (LON: HMI) – There Is More To Invest In Than Mining

An aerial photo of a Brazilian soybean field being harvested. There are 2 Crux Investor logos added.
Harvest Minerals Ltd.
  • LON: HMI
  • Shares Outstanding: 185.84M
  • Share price GB$0.37 (12.02.2020)
  • Market Cap: GB£6.88M

Recently, we interviewed Mark Heyhoe, Chief Operating Officer for Harvest Minerals, an AIM-listed organic natural fertiliser producer located in Brazil. CLICK HERE to watch the full interview.

Crux Investor has previously investigated potash investment, but this one is a little different. Harvest Minerals says it has a unique fertiliser product: KPfertil. Heyhoe claims KPfertil has significant cost, production and technical advantages; let’s unpack them.

  1. KPfertil is much easier to produce than many other fertilisers. It is found at surface in the form of a heavily weathered rock/lava. The only processing step required is for the material to be crushed. The conventional crusher appears to be a relatively inexpensive overhead. Once crushed, KPfertil can be applied to soil to enhance crops.
  2. At surface means KPfertil is cheaper to produce than conventional fertilisers. Heyhoe quotes a current production figure of around US$18 per ton, with a reduction to US$7.50 once Harvest Minerals scales up their operation. This is good news for farmers: Harvest plans to undercut the competition.
  3. KPfertil claims to be considerably more environmentally friendly than other fertilisers, given its organic, natural properties. The modular plant allows for more simple production than more conventional fertilisers: the product is excavated, trucked, homogenised, crushed, then is ready to sell. This is far less environmentally impactful courtesy of the simplified, more energy-efficient process.
  4. Heyhoe says KPfertil has some interesting consumer advantages. With KPfertil there is no leaching, the loss of water-soluble plant nutrients from the soil, due to rain and irrigation, which can reduce the yield of crops significantly. KPfertil goes straight into soil and stays there for longer than other fertiliser options. This is means farmers use less fertiliser and therefore save money in time and product. Studies have shown the remineraliser releases phosphate and other nutrients into the soil in a more gradual way, finding that it was over ten times as effective as TSP in sandy soil after 80 days.

So, what does their business model look like?

Harvest Minerals has performed “extensive” trials in order to the get the product registered; there have been numerous trials performed on KPfertil’s primary markets, such as coffee, sugar cane and maize. Last year, Harvest Minerals produced 50,000t of KPfertil for potential customers to test on their crops; now they have to wait for the reaction from the farmers testing the product.

A photo of some budding plants with a hand placing fertiliser around them.
A long way to grow…

In June 2018, Harvest Minerals had cash and had conducted trials efficiently, but they were missing something; the market wasn’t listening to their story. The company was offered a distribution deal by a local operator that Heyhoe says looked strong on paper. However, disappointing sales figures by their chosen sales partner left Harvest Minerals with a decision to make. They decided to bring sales in house and now have 10 salespeople and a sales manager covering the area. It’s hard to tell if that exercise has delayed their sales efforts in the market or whether it’s just slow getting traction in Brazil at this level. We appreciate it can take time to establish relationships and build trust in a new market, and a few more salespeople on the ground would have helped.

A recently financed 320,000t per annum processing plant is clearly under-utilised, because the testing period by local farmers means smaller orders until they are confident of the product. Even when they are confident of the KPfertil product, the farmers still have relationships with other sales forces and fertiliser companies. This is similar to the pharmaceutical industry: it takes time and the competition won’t let up. Hayhoe defends the decision to spend the money upfront to build a plant of that scale. The cost to build is around US$1M, with the hope that sales dramatically improve once the results of this year’s growing season are in.

The buying season for fertiliser is May to December. Heyhoe may be correct about the order in which they chose to spend their available cash. Current cash to hand is c.$5M and given current plans and the relatively low overheads and burn-rate should not need to go to market to raise more money anytime soon. It rests on how quickly the farmers and grouping groups take up KPfertil and how the competition responds.

The main difficulty with selling KPfertil is inherent in the nature of the market itself. While Harvest Minerals claims Brazil has the world’s fastest-growing fertiliser market, the simple reality is that local agriculturalists were unwilling to risk their entire harvest on an unfamiliar product; normal, prudent, and not alarming. The demand could be there, with 4.5M hectares of potential agricultural land between their operation and the nearest major Brazilian airport.

Heyhoe explains the company currently sells c. 50,000t of KPfertil per annum, to around 70-75 customers. Their largest customer constitutes 9% of total sales. In addition, Heyhoe says there have been ‘positive indications’ that farmers will move to 100% KPfertil use. The number of customers and quantity is unknown. Hayhoe is unwilling to speculate or give guidance as to what they are targeting: a major frustration to Harvest Minerals investors.

Harvest Minerals is waiting for a permit, and the management team is currently working on upgrading storage capacity so that it is more in line with the company’s production capability.

It is very early days, but the share price has seen little movement. We will continue to follow this story closely to see if they do what they say and to see how their competition reacts.

Company Website: http://www.harvestminerals.net/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

An aerial photo of a Brazilian soybean field being harvested. There are 2 Crux Investor logos added.

Serabi Gold (LSE: SRB, TSX: SBI) – Double the Fun

A picture of a man wearing a suit in a grey room. He looks at a laptop and dollar bills are flying out towards him. He smiles with his arms raised triumphantly.
SERABI GOLD PLC
  • LSE: SRB
  • Shares Outstanding: 58.91M
  • Share price: GB£0.77(15.01.2020)
  • Market Cap: GB£45M

There is no doubting the last few years have been tough for gold mining explorers & developers, and mining investors. However, gold producers have seen an uptick in share price since the end of August 2019 and the price of gold emerged from the $1,200 doldrums. Some gold producers have done better than others and have broken away from the pack. Serabi Gold looks to have safely made that cut by more than trebling their share price since the lows of May 2019.

Serabi had a quiet if unspectacular time until mid-2018 until May. A small, high-grade, high-cost, underground South American mine doesn’t usual capture retail investors’ interests, but it was consistent in its output and didn’t encounter any production problems. However, despite having an experienced and lively management team, they were loaded with debt, low margins (if any), and were unable to raise funds cheaply; there were lots of reasons for investors to look elsewhere.

The big move in May was due the market finally seeing the data from the acquisition of another underground gold asset, Coringa Gold Project, which is near their core project, Palito Mining Complex. A break in the gold price in August saw a further resurgence of interest in Serabi Gold and in the share price. In addition, it became clear there could be an opportunity to restructure their debt. Investors became very interested.

The acquisition of Coringa is the game changer for Serabi. Not only will it reduce their AISC to nearer the magical $950 mark, but it also will double their production to c.80,000 oz pa. This small, sleepy gold producer is suddenly on the radar of institutional investors, which should drive volume of trading and solidify the shareholder register.

Today’s record production news caps off a great 2019 for Serabi. The company achieved its highest quarter gold production of the year, 10,223oz. This brings the total annual gold production to 40,101oz, a 7% improvement over the course of 2019.

The total mined ore for Q4 was 44,092oz, at a high-grade of 6.69g/t of gold. 44,794t of run of mine (ROM) ore was processed through Serabi’s plant (combining the Palito and Sao Chico orebodies) at an average grade of 6.81g/t. On the exploration side of things, a sizeable 2,908m of horizontal development was completed in Q4. Serabi has managed to optimise its assets at little detriment to its share price or cash position: the company sits at GB£0.78 on the LSE today (moving back towards 2019’s peaks of GB£0.89), and claims year-end cash holdings of US$14.3M.

In terms of infrastructure, Serabi has also seen great improvements; chief of them is the installation of an ore sorter (sited between the crushing and the milling sections), which entered its final stages at the end of 2019, beginning electrical and mechanical testing. Investors should take note of this. Based on similar ore sorter data, this could improve productivity by as much as 20%. That is significant economically.

A screenshot of a diagram of a sensor-based ore sorter.
A sensor-based ore sorter

Serabi’s step out drilling campaign at Sao Chico has significantly extended the resource beyond current mine limits. A projection of full year production for 2020 stands at 45-46,000oz: a further improvement on an already strong figure as systems continue to be optimised. Serabi Gold has been positively moving along with consistent results.

Rough Assessment Of Serabi’s Current Debt Situation

Serabi currently owes c.USD$12M to Equinox Gold Corp. and c.USD$7M to Sprott Resource Lending Partnership, which it agreed to pay back over 22 months, (30/09/18-30/06/20), in addition to providing 145,479 new ordinary shares of £0.10 each (a 10% discount to the closing price on 14 September 2018).

The company is going to need to give guidance as to how it plans to restructure this. We would imagine Sprott would roll over as Serabi has been consistent with their debt payments. There is cash in the bank to pay back Equinox, but either that gets deferred at the deference of Equinox, which we think unlikely, or Serabi replaces that with cheap debt, serviced by their much-improved net cash production. If this indeed proves to be the case, Serabi holders will not be diluted and should be satisfied with how management has performed for them this year. The big question is how many will take the opportunity to cash-in and who will replace them? I suspect that this is now attractive to institutional gold funds.

The Palito Mining Complex, a high-grade, narrow vein underground mine, is already producing good results with an AISC of US$1,078 per ounce. However, Serabi’s aim to bring that figure down below the $1,000 mark. This is where the Coringa Gold project comes in. Serabi acquired Coringa from Anfield Gold Corp. in December 2017 for US$22M, and they have plans to get in to Production by end of 2021. Coringa is far more than an option: the team at Serabi feel it has an almost identical setup to Palito in terms of geology, size and necessary mining operations.

An aerial drone shot of the Coringa Gold Mine in Brazil.
Coringa Gold Mine

Coringa has a higher grade than Palito, at 8.34g/t, with a total gold production of 288,000oz, and a life of mine standing at around 9 years. Typical fully-operational annual production should stand at 38,000oz. Corringa would require an initial capital investment of around US$25M prior to sustained positive cash-flow, followed by sustaining capital expenditures of around US$9M that would likely be funded by project cash-flow.

To continue developing Coringa, I expect to see a revised PEA to whet the market’s appetite. Once Coringa is up and running, an annual production average of 38,000 oz pa, in addition to an AISC of US$852, could create a quarterly net revenue of c. US$2.5M within 12-18 months. When combined with the US$1.5M of stable cash flow from Palito, Serabi Gold could be churning out a net profit of US$3.5M per quarter for years to come, and this is without Palito’s ore sorter’s impact on results being taken into account.

The sense in the market has always been that Serabi will aim to be a 100,000oz per year gold producer in the not so distant future; institutional investors will likely push for further acquisitions, as mentioned in a recent Crux Investor interview with Nicolas Banados, Managing Director of Family Office Megeve Investments and investor in Serabi Gold.

To conclude, Serabi is performing well. It has a clear plan to create a business with a cross-mine AISC, production level and revenue that investors will welcome. With permitting at Coringa continuing to progress (the date for the public hearing is set for 6 February 2020), this ambition is moving closer to reality, and assuming public and stakeholder support, this is the solid final step for Serabi before receipt of the Licencia Previa (the Preliminary License). My message to the company is more of the same please with both assets; show us success with the drill on your exploration targets. We are watching.

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