Serabi Gold (LSE:SRB, TSX:SBI) – Q1/20 Unaudited Financial Results Are In

The Serabi Gold PLC company logo.
Serabi Gold PLC
  • LSE:SRB, TSX:SBI
  • Shares Outstanding: 59M
  • Share price GB£0.83 (15.05.2020)
  • Market Cap: GB£50M

A few weeks ago, I penned an article detailing Serabi Gold’s strong Q1/20 operational figures, in addition to some great financials for 2019.

A picture of cartoon gold bars.

What’s The Latest Update?

COVID-19 has obviously had a detrimental effect on the vast majority of mining companies, but we’re very interested to note the management team at Serabi Gold has managed to reduce the impact on productivity.

This morning, Serabi Gold has released its unaudited Results for the three month period ended 31 March 2020. What are the financial highlights?

Unaudited Results – Financial Highlights

  1. Cash Cost for the quarter of US$996/oz.
  2. All-In Sustaining Cost for the quarter of US$1,257/oz.
  3. EBITDA for the first quarter of 2020 of US$3.20M (Q1 2019: US$4.33M).
  4. Post-tax profit of US$0.77M reflecting the lower level of gold sales realised during the period compared with 2019 offset by higher average gold prices in 2020. 
  5. Earnings per share of 1.31 cents.
  6. An average gold price of US$1,549 received on gold sales in 2020
  7. Lower revenue, quarter on quarter, reflects sales of gold inventory realised in Q1/19 and lower production resulting from a mill stoppage in February 2020 (see news release 26 March 2020).
  8. An agreement, concluded in April 2020, with Greenstone Resources II LP, to subscribe for US$12M convertible loan stock.
  9. An agreement has been reached with Equinox Gold Corp. allowing the company to pay, in monthly instalments, the remaining US$12M consideration for the purchase of Coringa, until COVID-19-induced travel restrictions are lifted.

What Does This Tell Us?

Serabi Gold, like the majority of gold producers, has seen its AISC rise slightly, which is entirely understandable given the disruption caused by COVID-19. As a consequence, the EBITDA is also marginally down, as international mining operations become significantly less economic given this global health crisis. The primary cause behind Serabi’s financial tail-off this is the company’s mill stoppage in February 2020. However, another reason behind this decrease in revenue lies in the fact the Q1/19 figures were artificially inflated by the sale of existing inventory.

Serabi Gold - Palito
Serabi Gold’s Palito Gold Mine

When you combine these factors, despite receiving a substantially higher average gold price on gold sales, Serabi’s profits have fallen. It is important to note this is all within expectations, as was reflected in our most recent interview with CEO, Michael Hodgson.

Chief financial officer, Clive Line, has stated that Q2/20 has started off well, with both the soaring gold price and favourable exchange rate expected to provide support moving forward. Could the ore sorter also massively help economics? With exploration also on the cards for 2020, investors will see little reason for concern.

Thus far, Serabi Gold appears to have effectively mitigated the impacts of COVID-19 and its mill stoppage. The Q1/20 gold production figures, discussed in my previous article, were highly impressive. Hodgson predicted these financials, and the impacts of COVID-19 have been unavoidable for all. It’s now time for Hodgson and his team to push on, as we have no doubt they will, into Q2.

We have interviewed the CEO of Serabi Gold, Michael Hodgson, on several occasions. After you’ve listened to those, why not read a different gold article, or even watch one of our latest gold interviews?

Company Website: https://www.serabigold.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.

The Serabi Gold PLC company logo.

Serabi Gold (LSE: SRB, TSX: SBI) – Superb Q1/20 Figures As This Gold Producer Goes From Strength To Strength

The Serabi Gold PLC company logo.
Serabi Gold PLC
  • LSE: SRB, TSX: SBI
  • Shares Outstanding: 59M
  • Share price GB£0.92 (14.05.2020)
  • Market Cap: GB£54M

Crux Investor recently decided to check in on one of our favourite gold stories in an interview with Michael Hodgson, CEO of gold producer, Serabi Gold (LSE:SRB, TSX:SBI).

Serabi Gold has a smart business model that we are big fans of. Hodgson walks us through the Q1/20 figures, and while they are slightly below guidance, they are mighty impressive considering the sweeping impact of COVID-19.

Going forward, Hodgson is now talking the language of bulk gold processing and this is starting to get very exciting for gold investors. Could Serabi Gold be on course for serious share price growth?

We Discuss:

  1. Update on Progress: Q1 Numbers
  2. Ore Sorter Preliminary Test Results: Performing as Expected?
  3. Press Release on Exploration: An In-Depth Look into Findings
  4. Distractions from the Coringa Gold Project or Value Building Exercise
  5. Bulk vs High Grade: Preparation for New Opportunity
  6. Country Dynamics to Affect Q2 Results?

Company Website: https://www.serabigold.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.


The Serabi Gold PLC company logo.

Serabi Gold (LSE: SRB, TSX: SBI) – It’s bigger than everything we see (Transcript)

The Serabi Gold PLC company logo.
Serabi Gold PLC
  • LSE: SRB, TSX: SBI
  • Shares Outstanding: 59M
  • Share price GB£0.92 (14.05.2020)
  • Market Cap: GB£54M

Interview with Michael Hodgson, CEO of gold producer, Serabi Gold (LSE:SRB, TSX:SBI).

Serabi Gold has been one of our favourite gold stories. Share price has trebled since we started following them. The team has managed to create a strong, stable operation at the Palito and Sao Chico gold mines in Brazil, but with the debt financing agreement (convertible loan notes) for second acquisition, Coringa, looking to be settled, Serabi Gold can push the cross-mine AISC down towards the US$1,000/oz figure, and double production to c. 80,000oz+ per annum of gold.

The Q1/20 production figures were released recently.

– Cash position
– US$14.23M at year-end
– Net cash – USD$5M
– AISC slightly up on 2018: US$1,081/oz
– EBITDA – US$17.2M
– Average gold price received
– US$1,376 – Total mined ore up 8% (at an average grade of 7%)

COVID-19 has negatively impacted most gold producers, but Serabi Gold has managed to successfully mitigate any potential ramifications. It has achieved this through sensible workplace safety practices, and the health & safety stats are also pleasing. Rotating the workforce has been very effective. Any junior gold miner would be chuffed with those numbers. Serabi Gold has now started allocating some money towards exploration for the first time in a while. With its strong cash flow, and with most of its debt finally being repaid, Serabi Gold has now freed up its capital for growth. This could get the market even more excited. The focus is currently on step-out drilling at the west of Sao Chico. Hodgson thinks the company is working its way towards a geophysical anomaly that the company has already been drilling at. There is a possibility the 2 could connect, resulting in some serious upside for Serabi Gold.

What about the much-discussed ore sorter, which could have a further transformative impact on Serabi Gold’s economics? Serabi Gold recently conducted a preliminary test on it. What is the feedback? Hodgson claims the thing is “absolutely singing,” which will be music to gold investors’ ears. He doesn’t have the stats for April just yet, but in March it was upgraded to pass 2,500t at a grade of c. 3g/t, and it screened out a little over 300t at a grade of 21g/t, the rest was 2,200t at a grade of 0.7g/t. Through April, the grades at Palito (50% of feed ore) went up from the usual grade of 6.5g/t to 9g/t. Overall, combined with the non-ore-sorted Sao Chico ore, it is giving the average grade a 1g/t uplift. This might not sound like a lot, but it’s a big change. He expects another healthy increase in the Palito feed grade through April, which will free up space at the production plant to use for better quality material. Smart.

Will the exploration plans distract Serabi Gold from Coringa? It’s certainly a nice problem to have, with organic growth in the company’s “backyard.” Hodgson states Coringa is still just as important. Adding ounces at a low cost gives Serabi the cash flow it needs to grow, and he is not going to forget that anytime soon. Coringa is a very advanced project that Hodgson will continue to focus on. Another focus will be on the areas surrounding Serabi Gold’s producing assets because the company will eventually need to expand its processing plant somewhere. The company has been successful at chasing high-grade veins, but now Hodgson is talking the language of bulk production. However, one of the biggest problems in Brazil is power. He claims the mining infrastructure is improving in the region every day. The company is constantly assessing its cost profile, and its eventual wish is to add in some open-pit production.

Hodgson acknowledges that Brazil is struggling, especially with its lack of medical infrastructure, but states he is confident Serabi will do what it can to keep producing. He states Serabi Gold might not make the guidance numbers it predicated at the pre-COVID-19 start of the year, but if the company reaches 90% of it, nobody will complain, especially at the current gold price. The exchange rate is also on the company’s side.

We Discuss:

  1. 2:17 – Update on Progress: Q1 Numbers
  2. 3:50 – Ore Sorter Preliminary Test Results: Performing as Expected?
  3. 5:41 – Press Release on Exploration: An In-Depth Look into Findings
  4. 14:46 – Distractions from the Coringa Gold Project or Value Building Exercise
  5. 16:49 – Bulk vs High Grade: Preparation for New Opportunity
  6. 18:18 – Country Dynamics to Affect Q2 Results?

CLICK HERE to watch the full interview.

Matthew Gordon: Hey Mike, how are you doing, Sir?

Mike Hodgson: Very well, thank you. Good to see you, Matt.

Matthew Gordon: Yes, good to see you. Are you bearing up still?

Mike Hodgson: Yes. Yes. We’re sort of running our operations remotely. We have daily calls, probably two or three calls a day, you know, thank god for Zoom and Skype and WhatsApp and anything else.

Matthew Gordon: It is a game changer. It is a game changer. We have seen your press release and I was interested because it is very different from what you normally talk about and I wanted to kind of get into it. Normally we have this conversation about production and productivity and what’s happening on site, but this is more around exploration at site almost. So, but let’s kick off first. I do need that usual update. So what is happening? Last month you had a bumper month. Have you been able to recreate that in April?

Mike Hodgson: Absolutely. We have. We’ve had another great month. It has really been superb. It is probably, we haven’t quite finalised the numbers yet, but they’re going to be close to 3,500oz, so great way to start a Q2/20, and we still hope that we’re going to be north of 9,000oz for the quarter, which in the circumstances is absolutely fabulous. The guys at site are working really well. We’ve managed to begin to, we’ve got some testing of some tests and we are managing to work out a system of actually rotating about 10 people a week at the moment. So we test people, we bring those 10 people to site. They’re in a separate part of the camp, which is quarantined. They spend sort of eight days there being quarantined and as long as the doctor’s happy with them and they’re all temperature tested, et cetera, they’re all fine they get integrated into the workforce.

That said, the guys at site have been brilliant. I mean, they normally work like 30-15 rostas and some of those guys have been there for 60-days now and they don’t want to leave. They keep going and we’re paying them a little bit of a bonus to keep the enthusiasm going and the motivation, and it is really showing you the numbers. I mean, the health and safety stats, before anyone gets alarmed, are fine: absolutely good. And the production stats are absolutely wonderful. So, you know, yes, I’m just delighted, delighted with the way the operation is going at the moment.

Matthew Gordon: Okay. And what about this ore-sorter? You have kind of done some preliminary tasks and you gave us some initial feedback as to what it has been able to do. Again, is that still performing as expected?

Mike Hodgson: The thing is absolutely singing, I haven’t got the stats for April yet, but in in March, it was upgrading, I think, just loosely in March has given me a bit of an idea; we passed about 2,500t at a grade of around 3g/t, and it screened out a little over 300t at a grade of 21g/t and the rest was 2,200t, the balance, at a grade of 0.7g/t. So it absolutely scavenged all this high-grade Gold.

Now, through April, our Palito grades, eventually go on, the normal Palito grades, because we’re only putting on the Palito part of the deposit at moment, the Palito grades, which generates about 50% of our ore feed, let’s say, the grades would normally have balanced sort of 6.5g/t, 7g/t, and we are basically passing about 9g/t.

So you know, overall, it is meaning, if you combine that with the Sao Chico ore as well, which doesn’t get ore-sorted, it is giving our feed grade at the plant about a 1g/t uplift. Now, 1g/t might not sound like a lot but if your feed grade is 7g/t and it is going to 8g/t, 8.5g/ – big difference. So, it is brilliant. It is working really well.

So yes, I’m looking forward, I mean I haven’t got them yet, but I think they’ll be a very significant contribution and another healthy increase in the Palito feed grade through April. That’s why we’re getting these extra ounces. That’s where it is coming from. It is taking waste out of the feed before it goes to the plant and using that plant capacity with better quality material. That’s the key.

Matthew Gordon: Okay. So that’s great. I mean I guess we’ll get a proper update from you maybe later this month if you can. I want to talk about this press release though. There’s some really nice numbers in here, but I think the bigger story in here is that you’re putting money towards exploration, which you haven’t done for some time. So, because obviously you’re producing, you’re throwing off cash now. So, tell me what you’re aiming to do here, what’s the plan here?

Mike Hodgson: Well, just to touch on your point there about that; I mean, we ever since we put Palito back in production in 2014 and we acquired Sao Chico a year or so later and then put that into production as well, we raised just enough money to do that and not, well, in fact, not quite enough, and we went to Sprott –  a great lender and we borrowed money off Sprott twice. USD$8M, which we paid off, and USD$8M again, which we’ve only got USD$2M left to pay on that and it will be gone by the end of June. So, we’ve basically paid USD$16 million, we borrowed USD$16M of debt and paid it off on a cashflow. So, we’ve never had money for exploration really, we have just been servicing and paying off debt. So, the opportunity for excavation was pretty much parked bar, you know, immediate mine site, head frame explorations, I like to call it, in around Palito and Sau Chico.

But obviously what we did in 2018, we did do a financing. We raised over USD$20M and we did set aside a chunk of money for exploration for the first time in about five years. So, it was great. But perhaps first I’ll talk about the Sao Chico exploration results, which is part of that headframe exploration I just talked about. And that is ongoing program. We have done a couple of releases already this year. It is the continued step out drilling of the Sao Chico extension, westerly, which we’re doing. And I think if one looks at the images in the press release, it is getting very interesting that as we actually stepped out West at Sao Chico, which is all we’re doing beyond the mine limits with surface drilling, we are working our way towards a geophysical anomaly, which is called Cicada, which we’ve also been drilling. And what the compelling thing here is, it is beginning to look like we’ve got the various sort of interesting possibility that this is all going to join up.

So essentially, what we’re drilling is the gap; the gap between Sao Chico and this geophysical anomaly called Cicada.

Matthew Gordon: So, let’s look at that. There’s a couple of diagrams in the press release. Do you mind sort of talking me through those?

Mike Hodgson:  Well, if we look here, we can see the Sao Chico deposit. You can see the mine limits down there in the sort of the South East corner. And that’s what we’ve been mining over the last few years. It is open to the South East, which is the area called Highway. We’ve got no holes in this release on that area at the moment. We are going to go back there, but we’ve been focusing on the area to the West. You can see there, I know it is not exactly showing the scale, but you can see we’ve got sort of 6 or 7 holes now in that area beyond the Western limit of the mine area, going towards that Lake area.

Now, we’ve got some really nice intersections in there, minable grades. Of course, what’s beginning to interest us is, at the same time with this release, we’ve got our first results from the Cicada anomaly. Now, those sort of coloured areas you see to the West there, they’re all to terrestrial or geophysical anomalies, which we obtained from the site last year. And we actually started drilling at the beginning of this year.

We’ve got our first our first sort of start results. So, we’re drilling, not with core drilling here, we’re drilling with what’s RC drilling. So, it is much courser drilling where you just collect rock chips. You don’t get such an accurate sample, but it is kind of discovery drilling. But there’s enough there for us to get pretty excited about. We’ve got three metres at 2g/t, including one at over 5g/t, which is very, very Gold bearing. And the interesting point is it is bang on projection of the Sao Chico ore zone and as we’re moving West it is becoming to become quite possible for us that these things might all join together, which is really very interesting.

So now, if we look at that in terms of the long section, so now we can see long section-wise, the mine on the right hand side, you can see all the levels in blue, you can see the areas we’ve been mining and are mining in yellow. And you can see where we’re drilling all around the edges, obviously to the West, sorry, to the East, at depth. We still have some intersections right down there at the bottom and the mine is going down and down and down. But we’re drawn in a drill, that area to the West of the mind, the information gap as I call it, between Sau Chico and Cicada, that is a terrestrial geophysics anomaly, which we’ve just actually started drilling and got those hits up at the top. So, we’ve got a nice area, about 6,000 to 7,800m there to fill in, and we’re just stepping along, going West, time, time and time. The last intersections we actually got were not so wide, but the structure was still going strong and it was still over 1g/t.

But you can see in there, we’re picking up some really nice numbers; we’ve got over 5n at 12g/t, another sort of 12g/t in there. So right at the top there we’ve got nearly 2 metres to 28g/t. So it is some really nice numbers and a big area to obviously justify extending that mine West as we go. And we’ll just continue drilling that gap all the way to Cicada. And if this thing joins up, we’re sitting on some pretty, some pretty nice resource growth at Sao Chico.

Okay. So here we have the results of that airborne geophysics survey with the geochemistry superimposed. When we first received this, we were pretty, well pretty excited about this because there we have the Palito mine at the top where our plant deposit is, and Sao Chico down there in the Southwest corner.

And never in a moment did we think we’d have this huge geophysical magnetic, anomalous high with all those little black areas. They are the little, they’re the electromagnetic anomaly, which is another type of geophysics, and they are usually an indicator of massive sulphide. So, you can see, there’s a chain of them that sit on the flank – so that big magnetic highlight.

It is a huge feature and it obviously makes us think that there’s a different rock type, a favourable rock type of sulphide mineralization. And we obviously have those black dots that give the electromagnetic highs going along with it. So, what we’ve done, we’ve actually superimposed soil geochemistry over the top and hey ho, we’ve got a nice coincidental Copper anomaly as well.

So, the plan now is to hone in on those anomalies and actually see if we get a coincidental Gold anomaly. And you can see down there on the Cinderella shear, we do. And that’s got a really nice series of contiguous Golden anomolies there. So that’s really excellent. And what we’re going to do there is do even tighter lines like closest space sampling and see if we can join all those, if they become, they join up and actually become a really nice continuity anomaly there, make those drill-ready.

But probably the two that really excite us now is this one area called Calico and Jura, which are over at the West end. Really looking at the closeup apps, Calico and Jura. We, this is an area where we’ve actually already taken the Copper soil samples that were anomalous and re-assayed them for Gold and got some really terrific results. And you can see there at Calico, we’ve got a series of really high grade, 30 parts per billion Golden soil anomalies. And they, interestingly enough, I look at that, I see the orientation of those anomalies and they are exactly the same orientation strike, as we call it as the Palito deposit. So, I think that’s going to be a big stack of veins, just like at Palito. And I’m sure that’s what that’s going to end up being. The geology is very similar, so it really does look like a Palito copy so far, at this stage, from a geochemical anomaly viewpoint. There are only 5km to Palito, so it is pretty easy to actually start something there and truck it up to the Palito plants. That’s not going to be an issue.

And to the South, we’ve got this one called Jura, now, this one probably is even more exciting because it has all the components that you would want to see for some type of scalable deposit. It is over a kilometre in diameter. It has got coincidental Copper, Gold and other elements like molybdenum, tellurium bismuth. Multi elements that you would actually find in a porphyry type deposit. And we already know the rocks that we have are right for that. So, these are the two that we actually want to sort of move forward with and get close to space sampling on, see if we can tighten these up and all being well, drill them in Q4/20 and see what we can find there.

It is looking very much like a Palito: the rocks are the same. It is only 5km from Palito, so it is pretty exciting.

Matthew Gordon: Okay. So what I’m hearing is that you’re very excited. I can hear that and you know how you’re going to tackle it. I guess, people, you know, shareholders and people are looking at you afresh are going to be like, well, is this going to distract you from the work that you’re going to do at Coringa?

Mike Hodgson: I’ve been asked that a few times from investors in the past, and obviously, I suppose it is a nice problem to have. We’ve got such good organic growth upside in our backyard. Look, Coringa is very advanced, established, as you, as you quite rightly say; it is a Palito lookalike and it is going to do very nicely. Thank you.

I think what these results show us is how important organic growth is as well. You know, we can actually add ounces in our own backyard very cheaply. We can actually find satellite deposits which are all sort of built, dovetailed into our sort of plant expansion plans, whether they be at Palito or Sao Chico. So it is important to realise that potential in and around our 2 producing areas to see where are we going to do a plant expansion, which obviously we need to do at some point in time. And  this is what it is about.

I suppose I would like to add though that, you know, when you see something so big on the geochemical anomalies and the geophysical anomalies like this, we are mining high-grade veins at Palito, at Sao Chico and we will be at Coringa. But the scale of these anomalies, the size of them is, and the rock types they’re in, do look very similar to what the Anglo Americans of the world were looking at in Matagroso state in the South. And you know, not that we’re going to jump into bed with Anglo American or RTZ or any major, we’ve had several visits at site about these guys, wanting to come and look at what we’ve got. They’re very excited about it also; about the potential.

You know, these big magnetic anomalies are indicative of magnetic altered granites, which are usually hosts for bulk, porphyry type mineralisation. And so, we’re pretty excited about that we might have something, some real scale in our own backyard. So, you know, all we can do now is work our way through the process, prove the mineability.

Matthew Gordon: That’s kind of interesting to me. So, obviously, you have been used to chasing high-grade veins and you’re good at it, you know, you have been able to do it economically and you are obviously throwing off cash at the moment, but you are now talking the language of a different type of opportunity. You’re talking about bulk. I presume therefore, more homogenous low-grade type activity. Are you equipped or set up to deal with that as well?

Mike Hodgson: Well, a fair bit of water is going to flow into the bridge first. I mean, obviously I think, you know, one of the biggest challenges in the region is power, and that’s why probably high-grade veins work in this part of the world at the moment. But it is I think, I think as every day passes in this part of Brazil, you know, the road improvement and infrastructure improvements happening. You know, I think there’s a lot of will to actually improve the power situation in the region. And certainly, we can look at that. It just depends on the scale. But certainly, one thing that we want to do is, is address our cost profile and you know, adding in some open pit production one day with our sort of high-grade vein in mining is our wish. That’s our wish. And if we can do it organically, all the better, all the better.

Matthew Gordon: Fantastic. Okay. Well look, Mike, it sounds like things are going well. You’re coping with COVID-19, keeping the numbers flowing, which, I guess, should excite the market because I think others are struggling somewhat there. Should we expect more of the same for Q2? Or is it just see how it goes? Because what’s happening in-country, I guess is where I’m getting to?

Mike Hodgson: Well it is, Brazil is struggling and there’s no doubt and there’s no denying that. We are remaining very isolated from what’s actually happening outside. You know, people only need to read the news and see; there’s a lot of, particularly in the north of Brazil, they haven’t got the infrastructure, the medical infrastructure that we enjoy in in Europe or the US. So it certainly is challenging. What we’re doing, we think we have found a formula for rotating the workforce. The workforce has become very, very flexible and they’re working much longer periods of time than they normally would work. And as long as that will stays, we think we can find a way through of having a good Q2/20 and now we think we can have a very reasonable Q3/20. We might not make the guidance numbers that we said at the beginning of the year, but I think if we got 90% of it, no one’s going to complain. And to be perfectly honest, with the Gold price that we’ve got, 9,400, 9,500/Real an oz, and certainly making 3,000 pounds plus months, our cash flow is going to be in pretty good shape.

Matthew Gordon: And is the exchange working in your favour?

Mike Hodgson: Very much so. Very much so. That’s huge. I mean, the exchange rate today is BRLR$5.3/USD$1. BRLR$5.42 you know, our budgets were done at 3.70, so it is a, yes, let’s say that costs 85% in reals, and you know, exchange rate, 9,500 Reals/oz. You know, two months ago it was 6,000 Real/oz, it is a great time to be a producer in Brazil. Well from an economic perspective.

Matthew Gordon: Certainly. Certainly, yes. Mike, thanks very much for that update. You know, your story we quite like and we follow you avidly because I think that the potential is there and I think with, maybe, exploring; the possibility of adding bulk to this high-grade story could be very interesting for you. So, keep us up to date about things going on. I guess it is very fluid at the moment, so I appreciate the phone call.

Mike Hodgson: Many thanks.

Company Website: https://www.serabigold.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.


The Serabi Gold PLC company logo.

Serabi Gold (LSE:SRB, TSX:SBI) – Record Q1/20 Production Figures!

The Serabi Gold PLC company logo.
Serabi Gold PLC
  • LSE:SRB, TSX:SBI
  • Shares Outstanding: 59M
  • Share price GB£0.83 (15.05.2020)
  • Market Cap: GB£50M

With the spot price of gold hovering above US$1,700/oz, gold producers have been taking advantage of a cost environment that makes any reasonable gold operator economic.

A photo of a pile of 24k gold bars.

One gold story we’ve followed closely for the last year is Serabi Gold. The Brazilian gold developer has been quietly going about its business, perhaps a little under the radar, and has been working hard on its latest acquisition: the Coringa Gold Mine. Coringa adds to the already wholly-owned Palito Gold Mine and should double the company’s production profile.

Before COVID-19, to fund the development of Coringa, a proposal of US$12M in convertible notes was put on the table by an existing shareholder, Greenstone Resources. It was proposed to allow Serabi Gold to finance Coringa while maintaining its leverage without the need for further dilution. It would have allowed Serabi Gold to have greater control over its financing strategy, repaying debts owed to Equinox and Sprott. Greenstone Resources may have eventually owned 37.8% of Serabi Gold.

However, COVID-19-related disruptions, including Brazilian travel restrictions, have made the deal drag out. Progress has been particularly slow because Greenstone Resources wanted to evaluate the changing market conditions with the intention of ensuring an appropriate sum of capital is available for the company. They have now reached an elegant solution.

Serabi Gold - Palito
Palito Gold Mine

Serabi Gold has agreed on a payment plan with both Equinox and Sprott. Repayments will be conducted to ensure Serabi’s cash flow isn’t adversely impacted, and it will allow the company to pay off all the Sprott debt by the end of June. Serabi will maintain cash on hand at all points and, therefore, options. When mining does finally get back to normal, this means Coringa can proceed, with Serabi Gold targeting doubled total gold production of c. 80,000oz and a cross-mine AISC of just c. US$950/oz across Palito and Coringa.


What About The Here And Now?

A few weeks ago, in an interview with Crux Investor, the CEO of Serabi Gold, Michael Hodgson, discussed the company’s strong year-end 2019 financial results.

What Are The Headline Stats?

  1. Cash position – US$14.23M at year-end
  2. Net cash – USD$5M.
  3. AISC slightly up on 2018 – US$1,081/oz.
  4. EBITDA – US$17.2M (2018: US$6.3M).
  5. Average gold price received – US$1,376.
  6. Total mined ore up 8% (at an average grade of 7%).
  7. Earnings per share of 6.51 cents for 2019.
  8. Net cash generated in the year of US$5.0M, resulting in cash holdings of US$14.23M at year-end (31 December 2018: US$9.2 million).
  9. Post-tax profit of US$3.83M, reflecting a higher level of gold sales realised during the period compared with 2018 as well as higher average gold prices in 2019 when compared with 2018.

While the AISC is slightly up, resulting in US$295/oz profit, the rest of the specifications look promising. Serabi Gold is in a much stronger cash position than most gold juniors, and the EBITDA of US$17.2M gives them options. Operations are clearly improving, as additional optimisations, such as the ore sorter, continue to come into play, evidenced by the total mined ore increasing.

2019 was solid for Serabi Gold, but the real catalyst moment will be bringing Coringa into production. To see the kind of growth gold investors are craving, Coringa needs to come into play. Until that time, Hodgson’s task is to manage the company’s growth plans, hopefully taking advantage of the bull market.

How has Q1/20 treated Serabi Gold so far? The company released its Q1/20 gold production results just a few weeks ago, and Hodgson explains them.

Q1/20 Operational Results

  1. Gold produced in March 2020 – 3,674oz, the highest monthly level since the operation opened.
  2. Q1 gold production – 9,020oz
  3. Ore mined during the quarter – 42,036t at 6.54g/t gold
  4. ROM ore processed through the plant from combined Palito and Sao Chico orebodies – 40,465t at an average grade of 6.66 g/t gold
  5. Horizontal development completed during Q1 – 2,878m
  6. Ore sorter in full-scale operation in March following completion of commissioning during the quarter.
  7. Coringa Project public hearing was held on 06/02/20 with positive feedback. Serabi is now awaiting submission of the final recommendation to, and approval of, the State Environmental Council (“COEMA”) for the award of the Licencia Previa (the Preliminary License)

COVID-19 is slowing down a lot of gold companies, but despite operational difficulties generated by domestic policy, Serabi Gold managed to achieve record production in March.

That is some feat, especially considering the excuse we’re hearing from gold CEOs around the world is that COVID-19 has ruined their share price. Hodgson isn’t making any excuses, and perhaps the presence of Serabi’s big institutional partners is reassuring the market.

February production was disrupted by the unanticipated failure of a ball-mill; it was down for 2 weeks. However, with Serabi’s ore sorter at Palito now in its test period, results have been incredibly impressive. Q1/20 ended up ever so slightly down on Serabi’s forecast, but the message is clear: with the ore sorter now in play, things are really looking up. April should be a different story altogether.

Gold nuggets on top of dirt.

At 6.54g/t, the average grade is strong, and c. 2.9km of horizontal development shows that operations are proceeding rapidly. We can’t wait to see how quickly Serabi Gold moves forward once lockdown restrictions are relaxed and Coringa is brought into production.

For a gold stock of this type, with a coherent business model and intelligent management, GB£0.83 per share looks an absolute steal. If you have faith in the gold macro story, Hodgson and his team, the business model, and Serabi’s strategic partners, it may well be worth considering as a gold investment proposition.

While this gold environment is making it much easier for gold producers to turn a profit, for long-term investors, it is worth considering if a company has the longevity to last through a full gold cycle, or maybe even multiple cycles. Serabi Gold appears to have the capacity for sustained growth, alongside the potential catalysts needed for short-term returns. It’s an intriguing opportunity, and we’ll definitely be researching the Brazilian miner more as the weeks pass by. Will you?

We have interviewed the CEO of Serabi Gold, Michael Hodgson, on several occasions. After you’ve listened to those, why not read a different gold article, or even watch one of our latest gold interviews?

Company Website: https://www.serabigold.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.

The Serabi Gold PLC company logo.

Serabi Gold (LSE: SRB, TSX: SBI) – But it’s business as usual, Day after day (Transcript)

The Serabi Gold PLC company logo.
Serabi Gold PLC
  • TSX: EQX
  • Shares Outstanding: 60M
  • Share price GB£0.75 (17.04.2020)
  • Market Cap: GB£44.5M

Interview with Michael Hodgson, CEO of gold producer, Serabi Gold (LSE:SRB, TSX:SBI).

Hodgson gives us his take on the 2019 figures, the highlight being the cash position of USD$14.23M at the end of the year. Other notable numbers are Net cash USD$5M; the AISC at USD$1,081 up from 2018; EBITDA $17.2M; average gold price received of USD$1,376; total ore mined increased by 8% at average grade of 7%. The company continues to produce free cash flow and the Brazil Real exchange rate is also helping.

We also discuss the Q1/20 Operational Announcement. Feb production was impacted by an unexpected failure of a ball-mill, which was down for 2-weeks. However the new ore-sorter, allebit in a test period, is delivering astonishing results. Hodgson gives us an indication of the sorts of numbers it is delivering and can expect to continue delivering. The quarter ended up only slightly down on production forecast as a result.

Coringa is still progressing. Progress is slow as Greenstone wanted to evaluate the market to ensure that right amount of capital is available for the company. They have agreed a payment plan with Equinox and Greenstone involving a payment plan. All parties are agreed as money is being paid in a manageable way and allows Serabi to pay down the Sprott debt in full by the end of June. It also means that Serabi has cash on hand at all points. And what it means is that Coringa will, when mining resumes to normal levels, be able to double the production numbers as expected.

Currently it is business as usual for the moment. March figures where above forecast (best aver month on record), and expectation is that April will be similar. COVID-19 precautionary measures have been taken but the company is looking at the situation on a daily basis.

Apologies for not grilling Hodgson, but the line was quite poor, so conversation was difficult to have. They seem on top of things for now and we look forward to resuming normal conversations eventually.

We Discussed:

  1. 2019 Audited Results
  2. Coringa Gold Project: Impact of Covid-19, Financing and Plan Moving Forwards
  3. Palito Gold Mine: Is it Still Operating?
  4. New Ore Sorter Saves the Day: The Potential Future Capacity

CLICK HERE to watch the full interview.

Matthew Gordon: Hello, Mike. How are you, sir?

Michael Hodgson: Very well thank you, and yourself?

Matthew Gordon: Yes. Holed up at home, I guess like you? How have you been whiling away your hours?

Michael Hodgson: Well, a lot of Skype and a lot of WhatsApping and a lot of management through the Wifi to Brazil. Yes, a lot of communication between the corporate guys here in the UK but, yes, it is good Wifi – that’s what you need.

Matthew Gordon: It is. It is. I think it’s going to change the way we work and certainly change the way we interact with our people for sure. ‘Mike, a couple of things happened last week: audited end of year came out and I think today, operational announcement as well. Can we start off with last years audited results? There’s quite a few nice numbers in there. You must be pleased?

Michael Hodgson:  Probably the biggest number, the most important number is cash and we ended the year with over USD$14M in the bank; which is great. It really probably meant that we were generating about USD$1.5M per quarter, more or less. We started the year with about USD$8M. We built that cash up to about USD$8. The plan behind that was to try to accumulate as much cash as possible to actually put towards the effort to start Coringa. That was the plan. It still is the plan but of course, I think that the world has changed ever so slightly since then. But it’s great to have that cash in the bank. All In Sustaining Costs (AISC) came in at about USD$10.80: which is a little bit of an improvement on 2018. That was a function of just optimisation; more ounces, we did over 40,000oz. More, more ounces over the same cost base. Our costs are very stable in real terms. That’s important because, obviously, we are enjoying, did enjoy for much of 2019, and certainly today we are enjoying great economic tailwinds on the Gold price as I call them. Particularly today, the Gold price in Brazilian reals because of that exchange rate. So that has been terrific and that is really helping our All in Sustaining Costs and our continued cash generation as we go into Q2 2020.

Matthew Gordon: Brilliant. I think the thing that people want to know most about is Coringa. So last year, generating positive cashflow, which is great and you ended the year with a lot of cash in the bank, but you are going through a process, and I appreciate that everyone has had things held up with regards to what they are doing because of COVID-19. Is that still progressing?

Michael Hodgson: It is. People will have seen the press release late last week of the rescheduling of the final payment to Equinox through the Greenstone loan. Greenstone have been super supportive. Equinox have been super understanding. At the end of the day, I think it is fair to say that when Corona really started biting at the beginning of March, Greenstone wanted to pause, and we put out a press release, we were somewhat pressured into having to do it but I think the press release was received, I think some of the wording was perhaps a little harsh and people possible misinterpreted. I think there was a general feeling that people felt that Greenstone were getting cold absolutely not. I was in touch with them all of the time. All that they wanted to do was a pause, and they just wanted to say, look, you know, we don’t know how this is going to pan out. We know that the company might need, if for example, our business gets completely interrupted we might need that money. I don’t think Greenstone have got endless amounts of money just to keep supporting all of their investments. They just wanted to see that we were safe and secure and the production was still going okay before we went forward.

Now, we have come to a very, I think, eloquent solution, I think, Equinox, where we are going to start the payments so we can have early drawdowns on Greenstone’s loan, but we do keep the bulk of it there just in case whatever, something might happen. At the end of the day, we are going to make a USD$0.5M payments April, May, June, and then it will go to USD$1M payments. And as soon as the whole international travel bans are lifted we make the bullet payment to Equinox and we get Coringa.

In a way, you know, it’s a very nice solution for us. Probably not quite so good for Equinox; they’re not getting it all in one chunk but they are getting something, they are getting it at least. And we are paying it down in a very manageable way. So I’m delighted about that and we will continue to keep doing that during Q2. And the great thing about doing that is that it gives us some breathing space to pay off Sprott: USD$1.2M per month, April, May, June, so we will be debt-free by the end of June as well, and cash in the bank still.

Matthew Gordon: Fantastic. So that little triumvirate of related parties, they are all happy with this elegant solution?

Michael Hodgson: Yes they are. I mean, obviously, Clive, my colleague, he has had to go around a lot of, they were, the lawyers took a bit of time to get their heads around it. But no, it has all been very much agreed and Sprott are happy. Greenstone are happy and Equinox are happy.

Matthew Gordon: That is good news, especially difficult in the current climate etc. That’s nice to see. So we can expect you to be progressing with Coringa and developing Coringa as part of your new stable, your new portfolio?

Michael Hodgson: Yes. I will just add that we have just taken the precaution of suspending any non-essential activity during Q2 because of, obviously, movement of people is difficult etc. So the idea was to start Coringa in Q2. That’s been pushed back to, well, Q3 at least. Diamond drilling and exploration at Palito and Sao Chico has actually been put on stop. To be honest, the contractors couldn’t keep their people there, they couldn’t keep their supplies coming in themselves. So it was going to stop anyway. So we are just focussing completely at the moment on mine development and Gold production, and we will do that for the next 3-months, and then hopefully in Q3 we will pick everything up.

Matthew Gordon: So you are focussing on Palito, which is making money, but you have set the times back slightly for Coringa in terms of where you spend money for future growth. That makes sense to me. How are things at Palito? Is there anyone working?

Michael Hodgson: Absolutely. Up until now we are unaffected. Completely unaffected. I suppose that the advantage of being isolated but not that remote but at least fairly isolated is that we are completely virus-free. We have a workforce which is pretty local. And we have agreed with our workforce that they all are forgoing their usual 20:10, or 30:15 rotations; they are all going to stay there for the foreseeable future and just work on – the movement of people in Parai is restricted so they are going to stay on because once they leave they won’t be able to get back. They have said that they will stay on working there as long as no new people come to site and we therefore eliminate any risk of bringing this into the site, because we are a camp and as I am sure you can appreciate, if we have someone coming in with the virus, it would go through the camp like a bushfire. As long as we can keep the camp virus-free, and therefore no new people coming in, they all stay there working.

March was terrific. Those three weeks that we put out at the beginning of March we did, as you say, we had a problem in February with the bull mill, an unforeseen failure of one of our main bull mills, that actually took 15-days to resolve and really ate into our February production. We thought that would really damage the quarter but the guys responded in March absolutely magnificently and we posted our best ever monthly Gold production since operations began. Fantastic response – 3,700oz. So we ended the quarter with a very respectable 9,020oz, which was by no means a bad result at all. And I am pleased to say that we have started April absolutely screaming. We are on for a really good April by the looks as well.

As things stand at the moment, we are going to continue with normal business and it will be, we will make the best efforts to keep on to the budget. I think we will have to be cautious and say that we are doing absolutely everything that we can to make sure that we don’t actually have an interruption. We are trying to stockpile as much consumables as we can: mill balls, cyanide, carbon, lime, explosives; these are all things, food as well for the people, we are trying to keep all of these things there to try and keep people at site. We have literally got half of the workforce, well, the normal workforce at site but we are not rotating, so we have just got to try and keep them happy and motivated. So far they are happy, and that’s what we will do.

You know, it would be foolish for me to say, look, we can do this indefinitely; at some point in time we are going to have to, those guys will ultimately get tired and we will have to replace them, but we are not going to do that until we can and when I say we can, that’s with testing. We don’t know where we are with tests. We are trying to get tests, but we all know in this country, tests are very hard to come by. They are all being allocated, quite correctly, to the health services rather than private companies. So we will endeavour, however, to get some tests eventually so we can start to rotate the workforce.

But for the foreseeable future we expect a good April and a moderately good May. We will just do the best as we possibly can, but what can I say? Business as usual at the moment. Probably one thing that I do want to add is that this is one of those things where, I wouldn’t say we knew about this but the impact of the ore sorter has been absolutely phenomenal and probably has come in at exactly the right time. Here’s a piece of equipment that can really improve the grade and it probably was instrumental in the ounces that we produced in March that we could recover and salvage to make a very respectable quarter out of what could have been a poor quarter. And that is still operating today and will be all through Q2 and is really adding some, screening out waste on the Palito ore and really getting the grade up , and the plant is singing as a result. There’s some high-grade going in and some high-level ounces being mined.

Matthew Gordon: If I can just ask, the ore sorter, sorry, I was going to ask you about your Q1 operational announcement but I think you have covered a lot of the components there, so thanks for that. With the ore sorter, I appreciate that it has contributed to you being able to recover some of the losses from the failure at the Ball mill. But can you give me some numbers. Give me a sense of what the future could look like in terms of what is the ore sorter doing for you?

Michael Hodgson: It’s kind of hard to say exactly what – January and February, we were just literally playing around with any old material, just to see what we could scavenge out of low-grade piles to see what it could do, and it was pretty impressive, but March was probably the first month where we really, seriously measured and we fed it with typical run of mine material, lower grade, admittedly, and see what it would actually pull out. These numbers are basically the March numbers. So we fed this ore sorter in March with 2,500 tons at a grade of 3.2g/t. So that 2,500 tons was then separated into 300 tons of product at 21g/t, and 2,200 tons of reject at 0.8g/t. So essentially, we have scavenged all of that high grade out of that 3g pile. All that ore into the 300t high-grade pile and the reject was 0.8g/t. That’s 21g/t and it went to the plant and it was a real sweetener on the typical ROM feed of about the typical 7g/t to 8g/t. You can imagine that 2,500t would have normally been going through the plant and instead we reduced that to 300t.

Matthew Gordon: That’s amazing. And what will the ore sorter capacity be going forward? What sort of numbers will be going through it?

Michael Hodgson: Well, I think in time we will probably pass all of the Palito ore through the ore sorter. I think we will. We will be running at about 250 tons per day. It can easily do that. It is actually capable of doing about 40 tons per hour so it can comfortably do that. In fact, it is so efficient that crushing them becomes our bottle neck; we can’t crush enough. We are now looking at ways of expanding our crushing facility so we can actually…the bottle neck just moves around, that is the problem, but certainly at the moment, all of the Palito ore, the majority of the Palito ore is going through the ore sorter, just screening. And then the plants, the capacity that we liberate, we use Sao Chico ore for because that doesn’t work so well with the ore sorter; it doesn’t need to be sorted because it is sort of 9g long-haul material and that just goes straight in. So this is just the ounces, we are generating more ounces through the processing plant but not by increasing the throughput, just by increasing the head grade.

Matthew Gordon: Mike, that’s really fascinating with regards to the fact that the ore sorter is liking the ore that you are putting through it. Those sorts of numbers are phenomenal. It bodes well for the future for sure. Great to hear that it is business as usual for now. Numbers: and hopefully you can continue to hit those numbers. I know that it is difficult times for you guys. I think that the market is going to give you guys, well miners, a pink ticket for a while because it is exceptional times here. It is nice to see some companies, with the cooperation of their staff, their team, to be able to continue to work. I appreciate the update today. We loved the turnaround last year, with Coringa coming on board I think it will be pretty exciting times this year if we can get back to some semblance of normality soon.

Michael Hodgson: Yes, well we are certainly, definitely, definitely looking forward to that day.

Matthew Gordon: We all are. We all are. Well look, I’m going to let you get back to the sunshine down on the South coast and your WhatsApp and your Zooming. Do pick up the phone if anything does change because yours is one of our favourite stories, certainly here in the UK. We wish you well and we will speak to you soon.

Michael Hodgson: I appreciate it, Matthew. Speak to you soon.

Company Website: https://www.serabigold.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.


The Serabi Gold PLC company logo.

Serabi Gold (LSE:SRB, TSX:SBI) – How Is COVID-19 Affecting This Gold Producer?

The Serabi Gold PLC company logo.
Serabi Gold PLC
  • LSE:SRB, TSX:SBI
  • Shares Outstanding: 59M
  • Share price GB£0.74 (14.04.2020)
  • Market Cap: GB£44M

In the wake of the COVID-19 crisis, how are strong gold producers coping? Crux Investor recently conducted an uplifting interview with Michael Hodgson. He’s the CEO of succesful gold producer, Serabi Gold (LSE:SRB, TSX:SBI). 

We also interviewed Michael Hodgson a few months back. It might be worth checking out. While you’re at it, why not read a different gold article, or even watch one of our latest gold interviews?

Serabi Gold has been quietly going about its business unlocking gold potential and continuing strong gold production. However, has COVID-19 put a spanner in the works?

We discuss:

  1. 2019 Audited Results
  2. Coringa Gold Project: Impact of COVID-19
  3. Palito Gold Mine: Is it Still Operating?
  4. New Ore Sorter Saves the Day: The Potential Future Capacity

Company Website: https://www.serabigold.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.

The Serabi Gold PLC company logo.

Serabi Gold (LSE: SRB) – Ready or Not At All, So Close Enough to Taste It (Transcript)

The Serabi Gold PLC company logo.

CLICK HERE to watch the full interview.

Interview with Michael Hodgson, CEO of Serabi Gold (LSE:SRB, TSX:SBI)

Apologies for the quality of the internet connection, Mike was dialling in from the country-side.

Off the back of yesterday’s press release, Mike spoke to us to give us a bit more colour on the details about :

  1. The Public Hearing
  2. The result of the first months test on the new ore sorter. Link here to a video of the ore sorter working: https://www.brrmedia.co.uk/broadcasts-embed/5e3a8fe1397af40afa52b27e/event/?previewEventId=5e3a8fe1397af40afa52b27e&popup=true

Interview Highlights:

1:30 – Public Hearing: A Positive Outcome
3:43 – Ore Sorter: How Does it Work?
9:56 – Focus for 2020: Exploration, Drilling and Building Value

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

Matthew Gordon: Hello, Mike, how are you, Sir?

Mike Hodgson: Hi, Matthew, very well, thank you.

Matthew Gordon: Good. Well, look, we saw the press release this morning, thought we’d try and catch you, and it sounds like we caught you at a good time, you’re off to Brazil tomorrow. So, why don’t we talk about the public hearing first of all which you told us about last time we spoke, but it seems to have gone well?

Mike Hodgson: Yes, yeah, I mean, you don’t get a definitive answer in the actual public hearing itself but you obviously… it could go very wrong on the day, so I mean if you have a positive public hearing in terms of like, everyone sits down and listens and all the stakeholders have the conversations and are all heard over 6-hours and there’s no… you know, it’s all done in a cordial manner, which is exactly what happened, you can’t have anything more.

So what we actually have there. It’s chaired by the State Environment Agency, called SEMAS, and they chaired it and all the various stakeholders had their say and we had pretty much overwhelming support, which was great. So they will now go away and digest all of those comments, people’s concerns, people’s wishes, people’s wants, and they will then make a recommendation to a governing body which is called KOHIMA. They’re the guys that actually, ultimately, either ratify it and take it to the board. So they’ll listen to all of the, as I say, all the comments and concerns and they’ll come back, hopefully, with an LP for us, we hope within the next sort of six to eight weeks. That’ll be a great result, we’ll be delighted to get it done so quickly.

Okay, it’s slipped a bit compared to what we hoped, but you’ll remember we had to live through all of those tailings dam problems of 2019 with Brumadinho and how that affected everybody in the mining industry in Brazil. We’ll obviously get the EIA resubmitted and the public hearing still early in 2020 and seemingly gone through in such a positive climate in a way. Yeah, I think we did a really… we’re very pleased. Very pleased.

Matthew Gordon: Well I guess you had the benefit of obviously Palito, existing business, running without any issues and you obviously had the support of the local community from that, so that all helps. And I think people mustn’t underestimate the importance of this, and we’ve certainly spoken to a few companies in the last couple of weeks who are suffering from not being able to get through the process, as it were.

Let’s talk about the ore sorter, because I’ve watched the video which kind of explains it all to me and we’ll put the link up above here now so people can go to that. Can you tell us the impact? You’ve been running it for the best part of a month and it seems to be delivering quite well. I’m looking at some numbers here, so you fed in 1,266 tonnes and you’ve identified 1,076 tonnes of waste, so that’s significant.

Mike Hodgson: Those numbers aren’t really terribly indicative. I put them in there because obviously we switched it on just over a month ago and we’ve been putting through some pretty miniscule tonnages, and we’re just playing around with it really, trying to find the sweet spot. And we’re using different types of ore. Some of the ore is actually sort of more massive sulphide ore. So really, I put those numbers in there to show people, hey, you know, it was a pile of rubbish, basically, sub-economic, very uneconomic material.

We passed it through the ore sorter and we just pulled out 200t at, like, 7g/t and the rest of it is a big pile of waste, and that just shows what this thing can do. And the video shows it, that it’s going in, you know, it’s crushed material which is 80% waste rock and if you look at underground face, underground, if you just eyeball that you can see, well hello, 80% of that face there is waste and 20% of it is a band of ore. That’s exactly what the ore sorter does. When that thing’s all been crushed it can actually eliminate all that waste and just scavenge out that sort of high-grade band of the sulphides where the Gold sits, and that’s what it does.

So I think we can see straight away it’s a very… it’s great at just scavenging out the ore out of the waste. And we won’t put our best material through it because it’s not an exact science, there are always going to be losses. Like, you will get ore going into the waste system and you will get waste going into the ore system, but I think the best way of describing it is, it is a waste remover. That’s what it is, it’s a waste remover and it’s an ore scavenger.

So we are only really using it at the moment and will be only using it until we’ve got this absolutely nailed, we’ll only be using it on our lower grade ore development, which is where we’re just driving along the [inaudible 00:06:06] in its most diluted materials, that’s the material with all the waste rock in, and it’s great for just recovering the ore out of that material and not having to pass all that stuff through the process pond which up until now had been completely constipating our process plans with this material.

So if we get rid of that, first of all we save ourselves, just by getting rid of that material and going for 500 tonnes a day at 7g/t, 400t per day at, say, 9g/t, you’re going to save yourself about USD$1M a year at cost which means the payback on this machine is about 18 months. But, more importantly, what it will do is it will liberate 100t a day of free space, which we can then use again to add more high grade or make our little process plant produce, instead of 40,000 ounces, which it can do today, the same plant with the same size and through-put can do 50,000 ounces. That’s the beauty.

Matthew Gordon: That’s truly remarkable. But it doesn’t actually identify Gold per se, does it? Explain to people what it’s actually doing? They can watch it in the video but I thought it was interesting to…

Mike Hodgson: Very, very important, the distinction. When you look at that video you see that yellow shiny stuff, people I know would be very excited if that was a band of Gold. It’s not. That is a band of sulphides, mostly charcoal pyrites which is a copper sulphide and pyrites which is an iron sulphide. And all of our Gold is very fine-grained contained within those sulphides. So, our ore sorter has two metals that actually split differentiating between ore and waste. What you’re always after with any type of ore sorting, whether it be diamonds or, as we’re doing, Gold, or whatever, you need contra between your ore and your waste, dark contrast. So it won’t work terribly well on a disseminated ore body? On an ore body like ours, which is very sharp, it will. So, what it’s actually doing, you crush it down to about a quarter of an inch, half an inch, so you can see there, an inch to half an inch, and you pass it through either a colour sorter or an x-ray sorter. So, let’s take the colour sorter first. In our case as you’re dealing with video, pink-based and the rest is ore. So you can just simply say, right then, I want to collect anything that’s not pink and it will just literally identify any stone that’s not pink and throw it off on to different belts as you saw in the video and the pink, the granite, will just fall off the edge as waste. Alternatively, you can sort on atomic density which is where you use the x-ray sorter, so it’s a piece of equipment not dissimilar to what we have at airports, you pass through it, and it’s actually penetrating every stone on 1mm centres, so it’s hugely detailed. And there’s a 3D sample so every stone gets analysed for a percentage or its atomic density and, of course, the granite rocks are much less dense than the sulphides and the ore rocks so, again, there’s a big contrast in density between what is the ore and what is the granite. So, again, we can sort on x-ray as well. And, if we really want, we can’t do it at the same time but we can – we haven’t tried that yet – but what we can do, we can sort once on, say, density, save the pile, and then you can pass the pile again and sort on colour. So, the permutations are endless and we’re just at the beginning of this journey really. But we’ve just simply by sorting on x-ray. It seems to be brilliantly separating the waste and putting some more add to the waste. The closing shot of the video you see that little pile and the big pile. We pulled that little pile. That’s now a big pile and before it was just lost in that big pile.

Matthew Gordon: It’s amazing. We were talking to a lot of companies about bringing ore sorters in to improve their productivity and throughput. As you say, the savings are, or can be, immense. You had a great year last year in terms of the share price. Obviously, shareholders, the share register must be quite pleased with your performance. I know you’re excited obviously about the ore sorter here but you’re obviously more excited about bringing Coringa into production. You’re off to Brazil tomorrow you tell me, before we started the call. What are you going to do?

Mike Hodgson: Well, we’re closing in on our sort of three-year, we’re doing, we’re updating our mine plans and our resource estimations. So that’s basically what I’m going down there to actually sort of oversee, have a good look at that. We’ve got some exciting drilling going on at Sao Chico. I just to make sure we can as much of those results into this resource estimate we’ve just done There will be an update coming out too some very couple of intersections on the further step outs yet. That’s not probably get the results on, quite, even the official results, but certainly it’s looking very good. We’ve got some very nice-looking introspection, visual at this moment in time so I’m going to be looking at all of that.

Coringa, a year, well that’s obviously going on very well. We’re, as you know, we talked about this last time, we have Greenstone the convertible loan note coming in at the end of next month, and that will, of course, be the catalyst to us to start work at Coringa, start on the decline and getting on the ground. And, again, the exciting thing about that is getting underground, getting the bulk sample done or getting that earth moving, see how that responds to ore sorting as well. So, I’m completely sold on the whole thing. I mean I must admit when it was all, when we all talked about it, it was about two years ago the scary thing was it basically going to amount to USD$2M on something like this was you know… Well, I don’t want it just to be an ethical success. We really hope it works in earnest. I’m completely sold. I think it’s a paradigm shift in this part of the world with all of its sulphite hosted Gold deposits. It’s going to be terrific.

Matthew Gordon: I think that’s what the shareholders bought into last year when the share price was moving rapidly up having been stagnant for so long. A couple of million bucks and a payback of, as you said, less than a couple of years, 18 months to 24 months. Fantastic. But, also the ability to double your production and get up towards that wonderful 100,000 ounce a year number it has got to be in the crosshairs for you. I mean Coringa could get you up to 80,000 and with your exploration at Sao Chico you’ve got to be aiming higher, haven’t you?

Mike Hodgson: Yes definitely, I think the ease of mining at Sao Chico ore body, that’s why we put a lot of effort on exploration now. We obviously get a bigger bang for our buck with our exploration work that we do there. If we do get a bit of a tiger by the tail there and, at the same time, the space that we’re liberating by cleaning up the Palito ore creates more space to put through more Sao Chico ore, but we’re not dismissing the possibility of being able to sort the Sao Chico ore as well. It might be a different way of doing it, but we are beginning to get some pretty good results on that. So, it’s three deposits. Coringa, Sao Chico and Palito as being sortable in the end. We’re going to squeeze, I was always saying, my comment there, low-grades and tonnes cost, we’re always going to try and get the grade up as much as possible and not just chase scale but chase quality so we can actually get to, you know, 100,000 ounces with mining as high a grade as possible so we don’t actually have the enormous through points that a lot of 100,000 ounce producers have to have to get that level of production. That’s the name of the game.

Matthew Gordon: And that’s the focus for this year or, have you got more surprises on the horizon?

Mike Hodgson: I think if we get a nice big resource increase at Sao Chico and we get successful or we get on the ground at Coringa and we bring back a bulk sample and that works very well with the ore sorter and Palito’s achieving its 45,000oz, I’d be very happy with that outcome.

Matthew Gordon: Very good. Thanks very much. I appreciate you taking our call with regard to this morning’s press release. We were keen to speak to you because it was one of the stories, success stories, of last year, certainly in terms of share price, which is the name of the game after all. So, we’re kind of keen to see how you get on this year and see if you can repeat that success. Stay in touch.

Mike Hodgson: I will Matthew. 

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 Serabi Gold PLC company logo.

Serabi Gold (LSE:SRB, TSX:SBI) – A Business Model Investors Should Pay Attention To

The Serabi Gold PLC company logo.
Serabi Gold PLC
  • LSE:SRB, TSX:SBI
  • Shares Outstanding: 58.9M
  • Share price GB£0.96 (24.02.2020)
  • Market Cap: GB£56.6M

Crux Investor recently interviewed Michael Hodgson, CEO of Brazil-focussed gold producer/developer, Serabi Gold.

Why not read a different gold article, or even watch one of our latest gold interviews?

Serabi Gold has recently undergone an impressive transformation from a solid performer into a real contender. Hodgson chimed in to give us the details, and even more reasons to be excited for what the rest of 2020 has to offer.

We discuss:

  1. Operational Update
  2. Convertible Loan with Greenstone
  3. Outlook For Gold in 2020
  4. Serabi Gold Strategy For 2020

Company Website: https://www.serabigold.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.

The Serabi Gold PLC company logo.

Serabi Gold (LSE: SRB, TSX: SBI) – A Big Step Forward?

A cartoon man, dressed in a shirt and tie, cuts himself free from the shackles of debt.
SERABI GOLD
  • LSE: SRB
  • Shares Outstanding: 58.91M
  • Share price GB£0.76 (21.01.2020)
  • Market Cap: GB£44M

Gold is a hot commodity at the moment, and promising juniors like Brazil-based gold exploration and production company Serabi Gold have been a central focus for many investors. Serabi Gold has been trying to create a positive outcome for investors from its debt situation for over a year. However, according to today’s press release, they seem to have reached a solution. What sort of package has been formulated and how will this impact investors?

The Background

With gold now sitting at c. $1560/oz, many gold companies reaped the rewards and performed reasonably well last year. However, Serabi’s trebled share price in less than 6 months during 2019 is something of an anomaly; it seems to dispute the notion that Serabi Gold has simply benefited from a good year for gold, or has just recovered well from the sale of shares from two key investors. There appears to be more to this story.

In terms of productions figures, last year Serabi Gold broke the 40,000oz mark for the first time ever with grades of well over 6g/t from Palito Gold Mine. In addition, 5 out of their last 6 quarters have seen them reach 10,000oz. This level of consistent, strong performance is rare in junior mining companies; most trip over many hurdles before attaining stable productivity.

Serabi seems to have hit the ground running, and with the imminent introduction of an ore-sorter that is currently being calibrated on-site, Serabi will hope to see its production capacity increase further. This will be courtesy of liberated processing space at their plant. The ore-sorter will reduce the amount of ore going into the processor, and increase gold output, to see a 10-15% rise in production with the equivalent rise in mining costs but no increase in production cost.

A photo of Serabi Gold's Palito Gold Mine
Palito Gold Mine

However, this is all a long way off. Serabi has been drilling at San Chico for 2 months, performing step-out drilling and extensions to current mine limits. Deep underground drilling and strike at surface drilling will continue into Q2. Geophysical anomalies first discovered in 2018 now finally have a drill rig assigned to them and a resource update is expected by the end of Q2. Investors will want to see the share price rise again.

If everything goes to plan, this means Serabi Gold could see an increase in its US$6-7M revenue to add to the US$14M cash that sits in its coffers at present. However, Palito can only take Serabi’s share price so far. In order to gain access to a higher-grade resource, increase production, and reduce its AISC, Serabi’s Coringa Gold Project needs to be brought into production. How will this financial restructuring free up the Serabi’s management team to make decisions in 2020?

The Debt Package

The encouraging story of Serabi Gold has always had something of an Achilles heel. Serabi’s debt to Sprott Lending Partnership, c. US$6.5M, and Equinox Gold Corp., US$12M, has been something of an elephant in the room.

We imagine one option Serabi may have considered would be the standard route of raising equity, but this isn’t the option they have taken; perhaps Coringa’s status, at a PEA stage without significant underground development, may have deterred some potential investors. The solution Serabi has opted for is US$12M of convertible notes with existing shareholder Greenstone Resources, which will enable them to pay back Equinox. The remaining debt owed to Sprott will be settled from cash reserves. The convertible loan is a flexible arrangement that enables Greenstone to be repaid via cash or shares at their own discretion. Based on the terms set out in their release, conversion of the convertible loan notes would see Greenstone’s stake in Serabi Gold potentially rise to 37.8%. Will large shareholders Megeve Investments be happy? Is this good for liquidity in the long run? We shall see.

Investors will be happy to see dilution warded off, but a convertible loan can still lead down this path at the end of the 16-month term.

Coringa – Full Speed Ahead

With this loan in place, Serabi Gold can now look to push forward with the development of Coringa. It has not just been an inability to spend that has held Serabi back on this front; the collapse of the Valé tailings dam, in Brumadinho, Brazil in January 2019, meant mining companies had to spend a great deal of 2019 adjusting their tailings plans to create safer, more environmentally friendly dry-tailings arrangements. Serabi were not immune from this requirement. This also delayed Coringa’s preliminary permit hearing, because of the need to complete a new Environmental Impact Assessment (EIA).

However, with the tailings issue resolved and payments to Sprott and Equinox settled, Serabi will no doubt look to replicate their success at Palito. On the face of things, this does appear to be a bit of a rinse and repeat story. Coringa is geophysically and metallurgically similar to Palito, but with a higher grade of 8.34g/t. This is reliable, consistent and relentless underground mining which is exactly what Serabi has been demonstrating for the last couple of years.

Serabi’s team says Coringa is close with their preliminary licence, a hearing scheduled for the 6th February. Serabi claims to have worked with the local community to ensure the project will run in an environmentally and socially sound manner; the indigenous communities in the area have signaled their approval for the development.

Serabi now has plenty to do; the management team is certainly going to be busy! They will likely use their freed-up cash flow to bring Coringa through to production by Q1/21, with the target of a combined, cross-mine AISC of c.$950. Investors will want to see eventual production double. Until then, it remains to be seen exactly how this debt arrangement pans out and if Serabi Gold has what it takes to get Coringa up and running. History would suggest they do, but this is mining. Let’s remain quietly upbeat. There’s a long way to go.

CLICK HERE to read the full press release.

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 cartoon man, dressed in a shirt and tie, cuts himself free from the shackles of debt.

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.

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 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.