Serabi Gold (SRB, SBI) – Strong Q2/20 Results & More Gold (Transcript)

Serabi Gold PLC
  • TSX: EQX
  • Shares Outstanding: 59M
  • Share price GB£0.83 (16.06.2020)
  • Market Cap: GB£49M

Interview with Clive Line, Finance Director of Serabi Gold following the Q2/20 Quarterly Results.

FULL ARTICLE AVAILABLE TO READ HERE.

We were keen to understand how this gold producer has been resolving their balance sheet balancing act of last year. This gold bull run has helped a lot of marginal gold producers build up cash reserve and resolve balance sheet issues. Serabi Gold has cash in the bank and are making money. The Sprott debt has now been paid. The company still owes Equinox $12M but has agreed to pay this off in instalments. And it seems to be coping with the COVID restrictions admirably. Line talks us through their thinking in terms of activity and sequencing to manage expenditure whilst they prepare their new asset Coringa.

We Discuss:

  1. 2:58 – Overview of the Press Release
  2. 4:38 – Run-Through of Numbers and Achievements
  3. 5:45 – Sprott, Equinox, and Greenstone: Debts, Partnerships, & Expectations
  4. 11:19 – AISC Up: Reasons & Mitigation
  5. 13:24 – Moving Coringa Forward: Priorities and Focus
  6. 17:15 – The Gold Market: Time to Talk to Lending Groups?
  7. 18:48 – Exploration Opportunities and Budget
  8. 20:26 – Post-COVID Normality and Additional Costs
  9. 24:17 – Optimal Productivity: Timeline & Balance
  10. 27:45 – Consolidation Talks?

CLICK HERE to watch the full interview.

Matthew Gordon: Clive. Good morning. How are you sir?

Clive Line: Good morning. I’m very well, Matthew.

Matthew Gordon: Where are you speaking from?

Clive Line: It’s a little bit warm.

Matthew Gordon: Oh yes. You’re in the UK like me. It’s absolutely ridiculous.

Clive Line: Yes, enjoying the enjoying the heatwave down here.

Matthew Gordon: I’m glad you are. My face is the wrong shade of red. It’s getting hotter by the moment. But anyway, less of that. Thanks very much taking our call this morning. We saw the press release. We wanted to take the chance to talk to you about some of those numbers. Generally, what are your thoughts?

Clive Line: I have to say, Matthew, looking in the context of these numbers and where we were at the beginning of the quarter, I think we have to be very, very happy. We went into the 2nd quarter, a huge amount of uncertainty, not even sure whether or not we were going to be able to keep the operations going for the next three months. So to come out of it with what has been a quarter where we’ve had best cashflow generation that we’ve experienced, best levels of profitability that we’ve experienced, has got to be a huge positive, and we’ve got to be very, very happy and very grateful for what we’ve managed to achieve. I think there will be disappointments here and the production is lower than we wanted, but that’s a direct impact of the pandemic and having to reduce staff numbers on site. We’ve already talked through that and what we’re doing and what we’re trying to address with that. But I think overall, it’s been a very satisfying quarter.

Matthew Gordon: Take us through a few of those numbers because I do want to talk about the impact of COVID and what additional costs you’ve had to, or measures you’ve had to put in place which do have a cost implication to them, because I specifically want to get on to the AISC number, because that is a lot higher than I think you had hoped. Why don’t we kick off first of all with some of the numbers which you’ve managed to hit?

Clive Line: We’ve got cashflow that has come through. We started the quarter at just over USD$9M. We ended the quarter at $9.6M in the bank. During that period of time, we paid off, using our cash flow, USD$3.5M out of the Sprott loan that was outstanding. We’ve got rid of that, and that’s why I look at it and say, that’s a fantastic quarter for us. We managed to get rid of USD$3.5M dollars’ worth of debt without any real impact on our cash balances. At the same time, we saw excellent profitability coming through, the best quarter for profitability that we’ve had ever since we started. EBITDA is up substantially, operating profit up substantially, earnings per share up substantially. There’s not a lot not to be liked about it.

Matthew Gordon:  Let’s talk about that before we move on to the AISC component, because like I say, that’s something I want to understand more. Let’s talk about those 3 moving parts: so, Sprott – removing them from the equation. You’ve still got Equinox that you need to remove from the equation and then Greenstone has come in for a larger slice of the pie. First of all, why did you want to get rid of Sprott? Why not refinance with Sprott?

Clive Line: We went through a number of issues and ultimately, lenders such as Sprott are not the cheapest. We have had a very good relationship with them, and we want to go, we will go back to them when we come back to looking for financing with Coringa, I’m sure you’ve got some questions later on, you’ll ask me about that particular subject as well. But the essence here was that we needed to, we have to go back even further, when you go back into the 3rd, 4th quarter of 2019, at that particular point we had the debt with Equinox that needed to be settled. We were looking around at sources of finance. It was a difficult equity market, and ultimately the decision to go with Greenstone to put in place that convertible loan was to give us a little bit more flexibility in terms of how much money we’d need going forward, but to make sure that we had funds available to be able to meet that particular debt with Equinox, which at the time was going to fall due on the 31st December. Now, we pushed that back and pushed that back to the 31st March. Subsequently we’ve been able to renegotiate that very well into a series of stage payments because of the pandemic. And that’s given us a great deal more flexibility, which actually should be beneficial ultimately to shareholders.

I think the decision to want to get rid of, or pay down the Sprott debt rather than refinance, that is because we couldn’t see Sprott, given where our cash flows were going to be, wanting to extend a debt facility to us that was large enough to take care of that potential balloon payment to Equinox. Greenstone were able to step in into their friendly shareholder that’s providing financial support into the company with a little bit more flexibility than we were likely to get.

Matthew Gordon: It’s quite an interesting discussion when you owe people money, you can either be in a position of weakness or a position of strength, but in a way the market worked in your favour with your negotiations with Equinox. I think.

Clive Line: It did. Circumstances helped. We were clearly coming up to a point at the end of March where we needed to do something. We thought that we’d have the facility in place. Of course, then coronavirus virus hit us, but I think circumstances then, that did work in our favour in some ways because Equinox looked at the situation, were sympathetic to where we were as a small junior producer, and gave us the leeway to be able to look at a stage payment basis rather than putting the company into a difficult situation. We were very grateful for that and we’ve been very grateful for Greenstone to continue to support it as well because we couldn’t, again, fulfil all of the needs and requirements. Ultimately, although they’re a shareholder, they’re a business; they’ve got their own thresholds to meet with their investor groups as well. I’m sure that the convertible doesn’t necessarily meet all of those thresholds, but that’s the sort of gesture of their support and longstanding support for the company.

Matthew Gordon: Like I say, timing and luck come into this a lot. Equinox also have been going on quite a rally. I think it has also helped you that they’ve done exceptionally well at building out their business. But just on Greenstone though, because obviously they are a very well-known investment group with very specific mining skills. They are very clear about the sorts of companies that they will invest in. That’s a real endorsement to the market that you’ve got something going on there, but they’ve also come in for a pretty big stake now. So what are their demands of you as an organisation in terms of performance?

Clive Line: Clearly, we have to perform on a day by day, month by month basis. They are represented on the board as is Fratelli, who is another large shareholder with the company. We work both closely with both groups, trying to understand what their long-term motivations are. But they are both long-term investors looking for a window in 3, 4-years out. They’re not looking for an instant return tomorrow. They will weather the storms with us and take a view on near-term and longer-term macro issues that are going to affect the company.

Matthew Gordon: Let’s look at AISC. I mentioned it earlier. It’s up. It’s not where you want it to be. Why is it so high?

Clive Line: I think you’ve got to look at it in context, Matthew; at the beginning of each quarter, our production plans and our manpower requirements, et cetera, are set out and we’re not going to be able to change those now, although we weren’t sure where we were going to be in terms of production at the beginning of the quarter, we set out with a mine plan and we’ve continued to try and follow that. The consequence of that has been that we’ve had slightly lower production. We’ve had reduced manpower at site. I know Mike talked to you about the reasons for lower Gold production in the quarter, when he did an interview with you a few weeks ago, looking at our operational results.

Our production has been down some 15% over what we would like it to be. Our cost base, however, whether or not we’re trying to do 45,000t at 8g/t or 45,000t at 6g/t is pretty much fixed and there’s not a great deal we can do about it.

So, the production being down over the quarter has directly influenced our AISC. And as a result of that, the ASIC is higher. Looking forward at Q3/20, I think we’re probably going to see a similar sort of situation; we’re not anticipating that production will start to get up. We’re working in Q3/20 to get the manpower levels up so that we can get the mine back up to the production rates that we would anticipate. Then hopefully in Q4/20, once production starts getting up about 10,000oz again, per quarter, we’ll see the AISC start to come back down again.

Matthew Gordon: Mike did mention that. He said that there’s a plan and you can’t be bouncing around the property, just aiming for the high-grade stuff. You are systematically working through it. I know people should refer to that interview of a couple of weeks ago on that one.

Let me talk to you about Coringa please. I want to try to understand how you, I’m delighted we’ve got a CFO on, talking about proper numbers rather than generalities. So how do you go about planning and managing cash flows and having the funds in place to be able to move Coringa forward at the speed that the rest of the management team or the operational team is hoping to? The balance sheet seems to have been tidied up a lot with the discussions with Sprott, Greenstone, and Equinox, and you are generating cashflow, certainly at these prices. But there’s a plan for Coringa; this year you’ve got COVID to deal with, but you’ve also got to get this thing moving forward at some kind of pace. Have you got the cash to be able to do it? Is there going to be more balance sheet management activity to be able to get that through to the point where it can get into production?

Clive Line: The first priority for me is to get Coringa fully secured. Let’s get Equinox’s debt paid down. With that in place, we will be able to go out to lending groups, we’re already in conversations with various lending groups, we’re sharing with them our models for that. And they’re looking at that with a view to what sort of levels of debt they’re prepared to provide, what sort of terms they’d be considering and all the other parts that you would normally expect. But the first priority is to get 1 – Equinox paid off, because until that’s dealt with the lenders are not going to part with any money. And of course, as we’ve spoken about in the past that you’ve spoken with Mike about in the past, getting the licensing process up to a particular stage where the lenders will feel comfortable that everything is satisfied.

I think with COVID, we’ve had our challenges at Palito. I think we have to make sure that we’ve got the Palito, Sao Chico operations back up and running full steam before we want to start taking on another operational issue with Coringa. We’ve got to work that one into the equation at the moment.

Cashflow for the time being is going to be used primarily to get rid of the Equinox payments and pay those down. We’re going to try and do that as much as we can out of cashflow. We originally put Greenstone in place to give ourselves the ability to get rid of that in a single payment. Given how the situation has evolved we almost want to use that as a standby facility to draw down if and when we need to. And we will also have that funding available to use to start building Coringa, or developing Coringa, and doing some of the things once the licensing reaches its next stage. Once we get our LP approved, I know Mike’s talked about wanting to get in, do some underground development, get some bulk samples sorted, try and de-risk the geological aspects of the project for lenders – they’re all key parts of it, which will reduce our cost of borrowing going forward as well. I want to be able to blend that going forward and use a little bit of the Greenstone funding to be able to do that, provide sort of the equity capital, as it were, to get through those studies, and then we’ll go out to the lending groups to raise the debt capital that we need to be able to build the project and take it forward.

Matthew Gordon: It is interesting times at the moment, because obviously, this week it’s been interesting with regards to Gold price moving negatively. But the general trend has been phenomenal for the past couple of months. Isn’t this the time to be having discussions with lending groups because all sorts of companies, which I never thought would get funded are having money thrown at them, vast sums of money. Have you considered going and talking to some of these groups and taking Equinox out quicker? I know you’ve got this facility in place, but is that a discussion that you’re having?

Clive Line: We are having discussions with different groups to see what we can do. Whilst we’ve got a particular issue there with getting rid of Equinox and wanting to move things forward, there is a timetable within which we can move Coringa, and it’s not tomorrow. The immediate urgency is not there. That’s not to say that if we can’t find a new group to come in, it’s not the end of the world. We’ll continue to pay down Equinox according to the stage plan. If we can find a solution that is not going to be detrimental to existing equity holders, we don’t need to raise equity at this point to pay down the Equinox debt then it doesn’t seem appropriate to put dilution in place just for the sake of it.

Matthew Gordon: Exploration is something that Mike’s talked about, he’s very keen to work out what you’ve got on your properties. Obviously, there’s been some exploration happening, but it’s been restricted in the sense that you can’t get the crews in there. You don’t have the people to be able to do it at the moment. How much budget have you set aside for exploration for the rest of this year?

Clive Line: It will be limited and we’ll only really pick it up in Q4, and realistically in Q4, there’ll be a limit to how much we can spend anyway. It’s less about what budget can I set aside as to actually how fast can they spend it? Because there is a practical consideration there, that you can set aside a substantial budget, but actually if it’s not spent wisely, you’ll end up wasting 50% of that budget anyway. It’s always a case of making sure that we maximize the return that we’re getting on what we’re doing. We don’t want to bring in crews and half of them drilling blind and having just doing work for the sake of doing work. We know that this takes time, these sort of narrow vein deposits, you really need to understand them, and we need to work out what we’re doing each step of the way. It’s almost the pace at which we can do exploration sets its own budget. I think fourth quarter we’d be looking at spending USD$250,000, $300,000 on exploration and then looking to step that up into Q1/21.

Matthew Gordon: With regards to getting people back on site, getting back on location and actually working, Mike mentioned that you were building new dwellings, new facilities for people to be able to work safely and live safely on the camp. How’s that going? What’s that going to cost you? That’s an additional cost that you probably haven’t factored in, isn’t that?

Clive Line: It is. We’ve had a lot of additional costs here during this last quarter: we’ve had extra doctors on site to conduct testing. We’ve used third-party clinics to be able to test staff before they’re coming into site. As you said, we took a lot of the exploration staff away because we couldn’t control those 3rd-party contractors and how they were managing their own personnel. That was another reason why we stopped the exploration activity. In terms of the accommodation, most of this is containerized accommodation blocks, we’ll spend probably in the region of a few hundred thousand dollars on the upgrades that we need to do onto the camp. Hopefully they will get those through by the end of Q3 and we’ll then be in a position to accommodate a full complement of staff and start bringing those people back on site. I don’t think it’s going to happen instantaneously. Again, there’ll be a program to make sure that the rosters are working well and that these guys are coming in on a scheduled basis. We won’t be back up to the full complement on 1st October, they’ll come through and we’ll probably get there towards the beginning part of November.

Matthew Gordon: When you say a few hundred thousand, do you mean at the $200,000 or the $900,000?

Clive Line: I think we’re looking in the sort of USD$250,000 to $300,000 range up towards the USD$500,000 range.

Matthew Gordon: So, Q4/20 you are starting to bring people back in and they will start to ramp up and you’ll get back to sort of, I don’t know what normal means anymore, but normal levels of operational productivity.

Clive Line: We’d like to think that we would be looking at a normal, if we’d have met our original guidance, Q2, Q3, Q4, we would probably be looking at sort of the 12,000oz a quarter. That’s probably with the ore sorter of working well, getting additional lower-grade ore out of the Palito and Sao Chico deposits, being able to upgrade that through the ore sorter. Working with the residual flotation tailings that we’ve got, that’s the sort of levels of production that we’d like to be looking at, what we would have been expecting to achieve. We’re looking at getting back up to the 10 to hopefully 10,000oz in Q4/20 and hopefully starting to build on that into Q1/21.

One thing that we do have to factor in there is again, because there’s been lower numbers of crews, we’ve got a mine development that we’re going to have to catch up a little bit on. We’ve been trying to do that as best we can. That’s vitally important for keeping the mine sustainable and sustainable production going forward and keeping development ahead of us. We’ll just have to balance that out and look at what we need to do in the early parts of 2021 to make sure that we’re not falling behind on that and that we’re back up to the levels that we need.

Matthew Gordon: One final one: you’re the guy that’s got to balance the books, right? You’ve got Palito, it is producing cash for you. We’ve talked about ramping up and optimizing, COVID conditions allowing, but is it producing enough cash for you to be able to develop Coringa? That’s kind of the balancing act, I’m assuming you’ll deal with Equinox in the best possible way. You’re saying that you are trying to do it in the most anti-dilutory way for shareholders, but what you’ve got is 2 assets: Palito, which is throwing off cash, which you’re going to need to spend to develop Coringa. At some point when you’re totally debt free, both sites will be operating at some sort of optimal productivity. When is that? When is that moment? And how do you balance that with all the money that you’re going to need to plough into the blue sky of the exploration?

Clive Line: It is a juggling act. As I say, we’ve got to look at where our priorities are and where we hope the best returns will be. We will push forward with Coringa. Where we’re sitting at the moment, I’d like to think that we can meet those commitments, certainly in the near term, USD$1M/pm from our existing cash flow and start paying those down. Now, that means that the facility that we have with Greenstone can effectively sit in the background, then as Coringa is ready to be developed and we do those first bits and pieces with, of course, with Greenstone’s blessing, but that’s part of the agreed use of proceeds for that convertible, we’ll be able to start drawing down on those funds if we think that that is the best source of capital available to us at that point in time.

We have that as a facility to utilise. Coringa, in the near term, we’re not into a suddenly needing USD$20M worth of cash available. And I wouldn’t want to get into making substantial commitments to the build of Coringa. The first bit is to deal with a little bit of underground development done, getting the bulk samples done and de-risking it from geological standpoint from lenders. And that is a USD$3M to $4M cost that we can deal with from our existing cashflow and the existing finance that we’ve got available to the company and continue to pay down the Equinox debt.

Exploration on top of that: exploration, unfortunately, is the tap that gets turned on and turned off when things get a little bit tough. If the cash flow is there, then we’ll try and step up the burn on the exploration and move that forward and accelerate it. And if the cash flow and the Gold price doesn’t stay where it is and the real doesn’t stay where it is, then that’ll unfortunately be the thing that probably will get turned down because it’s longer term, it’s more speculative and it’s not immediately being able to be turned around into cashflow.

Matthew Gordon: There’s a bit of consolidation happening in the marketplace. Have you had any inbound phone calls?

Clive Line: I wouldn’t be able to tell you, even if I could

Matthew Gordon: I just thought maybe, maybe Clive doesn’t know how this thing works, but apparently you do. It is interesting times at the moment around consolidation, M&A activity, and obviously, Gold being where it is today, there’s a lot of people sniffing around and having conversations.

Clive Line: I think what is interesting as well though with the markets is looking at people that have been starting to come to London looking for capital, realising that there is a lot of investors looking for opportunities. At the moment, maybe Serabi doesn’t register onto some of those radars. It’s a little bit small, and we’ve always said that we need to grow and that we are always looking for those opportunities to do it. It’s not lost on us that some of the bigger Canadian groups have suddenly decided that actually, London doesn’t have too many options when it comes to generalist investors and larger institutions looking for exposure into the Gold space. Hopefully we’ll be able to take advantage of that going forward.

Matthew Gordon: Clive, thank you very much. That’s a great update. Thanks for getting into the weeds with regards to these, they can be quite dry affairs. You have had an interesting year with regards to balancing books and moving money and liabilities around. It’s a good environment for you guys at the moment. So best of luck with the rest of this year, we’ll speak to you soon.

Clive Line: Thank you very much. Indeed. Matthew, take care.

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.

Serabi Gold (SRB, SBI) – Strong Q2/20 Results & More Gold

Serabi Gold PLC
  • LSE: SRB, TSX: SBI
  • Shares Outstanding: 59M
  • Share price GB£0.92 (17.08.2020)
  • Market Cap: GB£54M

An interview with Clive Line, Finance Director of Serabi Gold following the Q2/20 Quarterly Results.

Serabi Gold is a really solid Brazilian gold production story that we have been following. Brazil is country where lots of gold juniors have struggled, but this management team seems to know how to operate in country.

What is the latest news from Brazilian gold producer, Serabi Gold? The acquisition of Coringa this year looks set to double the company’s production profile to over 80,000oz pa with a cross-mine AISC below the magic US$1,000/oz figure. Earlier this year, Serabi Gold resolves its debt situation intelligently, securing US$12M Convertible over a 16-month term with existing shareholder Greenstone Resources to give it a 37.8% stake, whilst at the same time paying down the same amount owed to Equinox Gold. Sprott’s debt has now been paid off too, so they are debt free.

Matthew Gordon talks to Clive Line, July 2020


Extra exploration around San Chico, alongside the optimisation of an ore sorter, which continues to improve in efficiency and elevates the average grade around 7X and yearly ounces by up to 20%, allowed the company to achieve “miraculous” Q2/20 production results, despite being significantly hindered by COVID-19. Let’s have a little reminder of what exactly those looked like:

At 65% of its total workforce capacity, Q1/20 production was down c. 1,000oz from the original guidance, which is hardly a surprise as Brazil has been on lockdown. However, Serabi Gold emerged from Q2/20 with 85% of its budgeted production intact: 8,500oz gold. The grade dropped a little, c. 8g/t to c. 6g/t, but this was a planned operational decision to work through some lower grade material.

A few days ago, the company released its unaudited results for the 3 and 6-month periods ended 30 June 2020, and are strong.

  1. Cash Cost for ytd – US$961/oz
  2. AISC for ytd – US$1,265/oz
  3. EBITDA for Q2/20 – US$6.2M (Q2 2019: US$3.3M), an improvement of 89%
  4. EBITDA for ytd – US$9.4M (2019 ytd US$7.6M), an improvement of 24%
  5. Post-tax profit for ytd – US$4.2M (2019 ytd: US$1.7M), a huge improvement of 142%
  6. Earnings per share for ytd – US$0.0705
  7. Average gold price of US$1,647 received on gold sales in 2020.
  8. Outstanding loan from Sprott (US$6.9M at start of year) repaid in full at 30 June 2020.
  9. Agreement, concluded in April 2020, with Greenstone Resources II LP to subscribe for US$12M Convertible Loan Notes – US$2.0M drawn down to date with the balance available to be drawn until 30 June 2021.
  10. As previously mentioned, an agreement reached with Equinox Gold Corp. allowing the Company to pay, in monthly instalments, the remaining US$12M consideration for the purchase of Coringa, until travel restrictions caused by Coronavirus are lifted – US$2.5M settled to date.

Any gold investors would be encouraged by these sort of numbers. However, the AISC is problematic; it is not where the company or shareholders want it to be, but it is important to put this into context; COVID-19 has been immensely disruptive and production has been down c. 15% on guidance. This has directly influenced the AISC, and Serabi Gold has little control over this. It will look to over-mine to make up for the lost ounces in the coming months. Equinox is slowly but surely being taken out the picture and with a significantly strengthened balance sheet, Line and his fellow team members can now focus on the development of Coringa.

Ww want to see the company continue to operate as best it can in country. But the real upside will come when they start exploring with the drill bit as they can change the risk profile from purely underground miner to introduce open pit low-grade bulk tonnage. It is easier and cheaper than only chasing high-grade veins. And one last request, in these times of consolidation and mergers. Can this management team find an asset that needs their cashflow to cover debt financing get in to early production? We can think of a few names that might make sense. Then this company could become a very interesting prospect.

Serabi Gold will be heading out to lending groups (it is already in conversations with various ones) to discuss models for financing Coringa. Getting Equinox out of the picture remains the top priority because until then, a new lender won’t be interested in coming to the table. The second priority is to bring the licencing process up to a stage de-risked enough to ensure investor/lender confidence, driving the cost of lending down. Palito and Sao Chico have experience operational issues during the coronavirus pandemic, and the first port of call is to get these back operating optimally. Coringa is not on the back-burner, but Serabi’s cash flow, for the time being, is going to be primarily used to get rid of Equinox and rejuvenate Palito/Sao Chico. A little bit of the Greenstone funding will also come in handy.

Capital for exploration is going to be very limited for the time being, and explorative operations will only really recommence in Q4 with a modest budget of C$250,000-300,000. Additional expenditures have created some difficulties for Serabi; it has had to invest c. C$300,000, which it could have doubled the exploration budget with, in on-site doctors and new accommodation to ensure worker safety. This is a great shame because before COVID-19 threw a spanner in the works, a large number of geophysical and geochemical anomalies had been identified that demonstrated mineralisation at a depth of c. 200m below ground; Serabi’s land package looked like the dots could be connected and it could form a large, cohesive operation if consolidated. Investors will now have to wait a little longer to see if this materialises. The full complement of employees won’t be available until the start of November, so investors are going to have to be a little patient. It could well be worth it in the long run.

With gold as hot as it is right now, there has been a lot of talk about potential M&A in the space. It was nice to see that Line knows full well how this game works, and he kept his cards close to his chest.

What did you make of Clive Line and Serabi Gold? Comment below and we will respond.

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.

Serabi Gold (LSE: SRB, TSX: SBI) – “Miraculous” Q2 Results (Transcript)

Serabi Gold PLC
  • TSX: EQX
  • Shares Outstanding: 59M
  • Share price GB£0.83 (16.06.2020)
  • Market Cap: GB£49M

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

FULL ARTICLE ON THIS INTERVIEW HERE.

Our latest update with Brazilian gold-producer, Serabi Gold. Gold has been on a bull run, but Brazil has struggled more than most to mitigate the impacts of COVID-19. Exploration has been curtailed for now, but plenty is on the horizon and it looks exciting for gold investors.

Serabi Gold should be able to finance its exploration from cash flow, and its strong cash position can be used for a variety of strategic purposes. It currently awaits its mining permit for Coringa before gold production can really get moving.

Average grade is down and total mined production is down, but only slightly, and both for logical reasons. The new ore sorter could completely alter Serabi Gold’s value proposition once it is fully integrated into the entire Serabi Gold production process. Promising times are on the horizon for this gold player.

We Discuss:

  1. 2:41 – A Look at Q2 Results: As Good as Expected?
  2. 7:18 – Ore Sorter Capabilities and Significance
  3. 9:48 – Coringa Project Update: Steps Left to Take
  4. 12:50 – Exploration Potential and Plan of Actions
  5. 18:18 – Financing it All: What are the Options?
  6. 20:02 – The Future for Serabi Gold: Back to Normality in Q3/Q4?

CLICK HERE to watch the full interview.

Matthew Gordon: Mike, how are you doing, sir?

Michael Hodgson: Very well, Matt. Nice to talk to you again.

Matthew Gordon: You are still home officing, are you?

Michael Hodgson:  Yes. I’m not quite sure when we are going to  get back into the London office, but I think we are all  pretty used to this new way of working and we are having regular  conversations amongst ourselves and I’m on the phone to site an awful lot so it is okay. It’s working well.

Matthew Gordon: It is working well. We saw a press release come out this morning to submit this quarter’s numbers. What do you make of them? Are you happy with them?

Michael Hodgson: In the circumstances, more than happy. Yes. I think I wrote in the press release. Totally delighted, to be honest. I think when you consider, I think like many companies, where we were at the beginning of the first second quarter, and where we might find ourselves by the end of the quarter, I think to actually come out with 85% of our budgeted production is a miraculous result. As we have talked before, and we have already put to the market, we took measures to really make sure that the safety of our workforce was paramount. We decided to remove nonessential workers from the site to create space so that we could socially distance our workers. We decided to remove anyone and send them home who is older; that sounds ageist, but it was the right thing to do, anyone that had a health issue. And we essentially kept a young, fit, healthy workforce at the site. We introduced what rotation we were doing. The workforce was super flexible. They were restricting, or limiting their rotation so that’s a risk, obviously; every time there is someone coming in or coming out, we reduced that to a minimum. And those coming in were all tested. We got all of the kits and we had them all tested and checked them for symptoms. So then of course, people coming in, we knew, good shape, healthy, that’s it. And we’ve actually managed to basically keep the camp clear and safe.

And it is a great achievement. I was really quite concerned that we were going to really struggle with this. To come out of that with 8,500oz was terrific. And look, it has meant some things we’ve got shelved: exploration, for example, has been shelved. A lot of the project work we were doing is going, but we have kept the core business going. And to produce 85% of the budget with 65% of the workforce – fantastic result, really pleased.

Matthew Gordon: Okay. I buy that. But I also noticed that the grade has gone down. It is sitting at just below 6g/t. You are typically around 8g/t, there or thereabouts.  What’s happening?

Michael Hodgson: Well, a little bit of a technical explanation here: the ore sorter spent a lot of time testing the source water. We know it works terrifically well, and it is designed to work on low-grade material. We set the mine up at the end of 2019 to start mining lower-grade areas, put in more development, which by its nature is lower grades, more diluted, and to feed the ore sorter with it. We committed to these areas. We committed to these areas. The plant was quite simplistically…the plant can do 45,000t per quarter. The mine can do more. The intention was to actually mine, say, 55,000t per quarter and feed that additional material into the ore sorter to screen it, to make the best 45,000t to go to the plant. Now, obviously, we have basically sent home 35% of our workforce so we were still committed to the same low-grade areas in the mine, but actually, we just couldn’t, let’s say, over-mine, because we didn’t have the workforce. And so, essentially, the ore sorter has been somewhat parked for well, used minimally, let’s say, for the last 2-months. We haven’t been able to take advantage of it. So that wrong mine material has gone straight from the mine to the plant without being sorted. So that’s why the grade has basically gone from 7.5g/t down to just around 6g/t. It will be back. No problem. Because in Q3/20, and more so in Q4/20, when we get the mining rate back up again, we will be over-mining, we will be passing through the sorter and the grade will be coming back up. The thing is to understand in a mine, and people will understand with an underground mine, you just can’t, because of an event you just can’t suddenly stop over here and mine grade over there. You eat what you kill, you are committed to an area. And we set this off, nobody knew this was going to happen. And we were there for in 2 areas that were lower-grade anyway, and we can’t suddenly, being plant-constrained with a workforce constraint with a workforce reduction, we didn’t do as well. But that said, I still think it’s a great result. And no fear, we will be back in a good shape towards the end of the year and the ore sorter will be working very, very hard.

Matthew Gordon: You gave us some idea last time we spoke about the ore sorter. You said it has been used minimally, so what do you know about its capabilities? Is it going to be able to significantly enhance your production going forward?

Michael Hodgson: Well, year to date, it’s basically lifting the grade around seven times. The thing about it is, what you have got to remember is that it does come at a price. It’s not a perfect piece of equipment. You still get losses with it. So for example, broadly speaking, we fed it with about 3,000t so far at a grade of around 2g/t, and it has turned 3,000t at 2g/t into 500t at 9g/t, which is real high-grade feed, but it has created 200,000t of low-grade, but you do get losses in that low grade. So when you are in a situation like we have been for the last two months and what’s coming out of the mine, the plant can handle, you don’t really want to pass that through the ore sorter because you will be losing Gold if you do. The whole purpose of the ore sorter to us was actually to treat surplus production, and we haven’t had surplus production in Q2/20 because of the manpower reduction. That’s the key. We will have surplus production again in later Q3/20 and Q4/20. his is when it will be used again.

Matthew Gordon: Just to stick with the ore sorter. People do like to understand what the capabilities are. So do you think the ore sorter, given the information that you have about it now, will allow you to  play some level of catch-up if you do get back to some sense of normality by the end of the year or even Q1/21 next year?

Michael Hodgson: Yes. I think it gives us an ability to increase our annual ounces by 15% to 20%. If we had actually not had this, and we kept going, normally we would have produced in Q2/20 probably 10,500oz, it will allow us to do an extra 2,000oz, 1,500oz, 2,000oz per quarter. That is what we know from test work and what it did start doing in Q1/20. That’s what it will give us. We are nominally a 40,000oz limited operation, because that’s what the plant can do today. If you screen 25% of your feed before it goes to the plants through the ore sorter, that 40,000oz p/a becomes 48,000oz p/a. That’s where we are going.

Matthew Gordon:  So you are very keen to get back to normality in that case. Tell me about the planning. I get the 8,500oz, and you are pleased with that. You said you are pleased with it, and under the current circumstances you are probably right to be pleased with it. We talked about what’s going on with Coringa. What is going to get the new asset started? We are not going to be able to say that soon because you have been on it a while. Where are you with that? Because I want to join up the dots for people. So where are you with Coringa?

Michael Hodgson: Coringa – behind the scenes, we obviously had a public hearing back in February. I’m absolutely relieved that we actually got that done because that was a huge milestone. And strewth, if we had been a month later, we would be stuck in limbo now completely with getting the public here. And can you imagine the public hearing now with social distancing? To get that done was huge, absolutely huge. And it allowed us in the meantime to do a lot of the follow-up work, which has been doing and froing with the environmental agency, answering their final questions on environmental impact, adjustments to the EIA. Because this environmental agency – SEMAS as they are called, these are the guys who ultimately have got to sign on a piece of paper to the court saying we fully recommend that Serabi are given the preliminary license. And this is the key license for any mining operation in Brazil. It’s the one where you need public support, authority support, agency support, court support – everyone. Once you get this one, the remaining licenses are basically procedural, really. We are so, so close. And the fact that we’ve now been going to and fro with SEMAS in the background doing this. I was on the call on Friday, we are so close to getting these guys to basically, in fact, they’re going to write the letter this week to the court. Now, the next step in all of this is the court, which is called Kohima. They have to meet to basically discuss the Serabi case. And they just look at the recommendation and go well. The guys that know which are, that’s got an environmental counsel claim, they meet, but the fact that they are made up of the same people, or part of the same people that have actually just advised that they recommend the license to be granted to the company, we are very hopeful that’s going to happen. The key is just getting that meeting to occur.

Obviously, the crisis is making it difficult for those guys to physically meet. I understand that they have never actually met with Zoom before and it’s something they are considering. We are hoping it is going to be first for us. And we are actually going to get our court hearing before the end of this quarter. And we will get our preliminary license at Coringa, which will be just great. Great. , it is somewhat out of our control, but we have done everything now and we are just waiting for that meeting to occur.

Matthew Gordon: The market got excited when you decided to buy Coringa because it is almost a cookie cutter asset. With Palito it is high-grade underground mining, which you understand how to do that, and you do it very well. I got excited though when you started talking to me, last time we spoke, about exploration. Because, you’ve got two assets, but in between, you’ve also got a big land package. You’ve got some anomalies, which you talked to me about, and to me, that struck me as even more exciting than Coringa – no disrespect to Coringa. Coringa will produce cash and you will do well there. But talk to me about what you have been able to do since we spoke? Because, obviously, you haven’t got people back on site. You haven’t got the exploration team on site. But has your thinking evolved in terms of how you are going to approach this over the next couple of quarters?

Michael Hodgson: Well, I want to talk about Palito and the Sao Chico operation before we walk away from Coringa itself, which we have never talked about to you about before, it has amazing potential exploration, potential upsides around it.

Matthew Gordon: Okay, talk to me about that then.

Michael Hodgson: It is a garimpo, an artisan mine that produced 30,000oz Gold. And it is a huge step. I don’t want to underplay Coringa, it is a producing asset, but it can be so much more. But you are absolutely right; we were flying with exploration before the pandemic really meant that we would actually have to stop. And unfortunately, the exploration guys, as is often the case when something negative happens, like the company has got no money, which was not that case, but there’s some need, they are the guys that get stopped. And unfortunately, it was with huge reluctance that we stopped the drilling at Palito and Sao Chico. But we needed the bed space. As I explained before, we have a camp good for 360 people, in normal conditions, in pandemic conditions we don’t have the camp to accommodate those people. The exploration people, we had to kick them out of bed and say, sorry, guys, you are going to have to go home for a few months because we need the space for the producing guys and the workforce to actually have more social space. So that was the key, and everyone understood it; keeping the workforce safe, etc, the right thing to do.

I am pleased to say you remember that we were doing basically, the exploration was on all 3 fronts, but the main one we are doing at Sao Chico, we were doing deep drilling in the mine itself. Exploration drilling really going tremendously well. We got some fantastic minable intersections, 200m below, off feet, below our lowest level. It is going down at depth, which is great. It is open going in that direction. And of course, we were drilling to the west, particularly of the main deposit, and we had done step drilling going forward up to nearly 400m West of the mine limit, which basically doubles the strike length of the deposit. And then a further 700m. We have these geophysical anomalies, which we found from the survey in 2018, which we had done our first intersections into those, bearing Gold of a minable width. You don’t have to be a rocket scientist to go: hang on, this all lines up and if it all joins up, we’ve got a very nice 2km-long potential ore zone here. And, if that all comes through with drilling, improving up, we are looking at a resource that can certainly support our minable rate far greater than what we do today. Which then brings the question, are you still going to keep trucking ore from Sao Chico all the way to Palito? Surely, you’re going to want to put some kind pre concentration or a little plant down yet. We are not there yet, but this question needs answering.

Between Palito and Sao Chico, the other big work that we did was the geo-chemical program we were doing. And that was, we got to the culmination of that in April time. And we found we have got this tremendous Copper anomaly, soil of anomaly, which sits over a big geophysics’ anomaly. And we got very excited about that because that may show potential of many deposits, it has actually got multiple ones, but it could also be an indicator of bigger, large-scale type mineralisation, which is something which, , mining high-grade veins is great, but if we can find some scale in there too, that would be brilliant.

And 2 in particular lie to the south of Palito, called Juka and Calico, and these, we have actually done more work on low, tighter space geochemistry, et cetera. And they have got really nice coincidental, really nice high-grade Gold anomalies in the geochemistry as well. And these really do look like Palito lookalikes, both of them. And the good news about those two is that they are only 5km from Palito. So again, we can drill those out.

So we have got a really interesting conundrum: it is almost like a race between what is actually happening at Sao Chico and what’s going to happen to Juco and Calico and, where’s the plant expansion going to be? Because today, we have a plant that is too small. The ore sorter liberated some space, but it’s not going to liberate, if these things start coming off, it won’t be able to handle what the mine can throw at it. We do need to expand the plant somewhere. The question is, we don’t know where. The only way we are going to find out is to push off the exploration, so I’m keen to get going with that. Hopefully we are going to get everyone back at site, probably in September, and the contractors, and it will be back to where we left off.

Matthew Gordon: How do you go about planning something like that? Because, we are getting into juicy, interesting areas. If the plant isn’t big enough to deal with the potential, potentially, you’ve got to work out how you finance all of this as well. Does this come out of cashflow? What is the opportunity that it opens up? People want to know, are we talking about some fund raising, or actually, we are petitioning enough cash to actually develop this into the next iteration, the next step change in the company’s organic growth?

Michael Hodgson: Yes, so we are certainly, well, I’ve just explained to you, that’s coming out of the cashflow. We are not looking at that. We are not doing that. Yes.  When it comes to building the plants, we will have to see where we are. But when we do put a plant in, or wherever we might do it, now all the exploration work we are talking about, that is coming out of the cash flow. Maybe I didn’t really talk about that earlier on, but I’m on the cash side. People will notice in the press release: we started the quarter with USD$9M in the bank. We ended the quarter with USD$9.6Bn in the bank. We paid off Sprott. We are debt free. We paid out of cashflow. We also in that quarter paid down nearly USD$4M to Sprott. So the irony was despite the backdrop of COVID and all the problems financially Q2 2020 was Serabi’s successful quarter on record, which the irony is it’s remarkable.

We are sitting today with nearly double the cash that we thought we were going to have within the budget. Even though we didn’t produce the ounces, we actually have enjoyed a tremendous run. It is continuing; we don’t see any reason why Q3/20 won’t be similar to Q2/20. And we are hoping to be back to normal by Q4/20 and going into next year. I don’t see, with current economic conditions, we can fund all this with cashflow.

Matthew Gordon: Well, that’s interesting. So Q3/20, we don’t know what Q3/20 holds because we are in the middle of it. You think by Q4/20, you are taking steps to ensure that you can get the rest of the people back on site. And is that a process you’ve started? What does that look like?

Michael Hodgson: Indeed, we’ve been basically expanding the camp. We have been making more lodges for people to basically be accommodated in, in much better socially distanced conditions. So the whole idea is, we just have to make the camp half as big again to accommodate the original 360 people back at site under much better conditions in terms of socially distancing. So yes, we think we can have all that done by the end of the August. We would like to think that September will be a month of transition. We should be able to get to Q4 with a resumption of normal conditions. We will be testing forever, I think, but that’s just, and the under huge difference is that we have actually enjoyed it. We have been rotating our workforce. If there is anything good, that has come out of this crisis; we’ve been rotating our workforce 20:10 -20-days in the camp, 10-days out. We have all agreed, the workforce has agreed, the unions have agreed, that we are going to go 40:20. So people are at camp 40 days at site and 20 days on break. That means half as many changeovers. That means half as much travel costs for us. And it allows people, once they get to site, to really get their teeth into the job and work for 40 days. And then when they go home, they have a good rest for 20-days. We have been wanting to do this for like about two or three years -not a chance. Because of the crisis, everyone now realises this is the way to work. So that’s a great result for us.

Matthew Gordon: I think there are a lot of people and a lot of different sectors who are going to have to find a new way of working. And obviously, that does sound like a good solution for you guys. What I’m hearing is that production numbers are good. You are happy with what you’ve got. I’m hearing that when the ore sorter comes back online, whenever you have got everyone back at site, that should enhance your numbers by 15%. By Q4/20, you hope to have everyone back up and running so exploration can start again. That’s the bit that I’m really excited about. You are waiting on that permitting license on Coringa, obviously, once people feel safe enough to get back to the office and they can give that to you and that will be fantastic. What else have we got to look forward to? I know you are in planning mode, but for investors, what do you think? Is there anything more that they should be looking forward to here?

Michael Hodgson: If the cashflow, if the economic conditions are right, there is nothing to stop us starting at Coringa with the underground mine. The reason we didn’t start, we were poised to start in Q2/20, we were just worried about the money situation. The irony is we’ve actually got the money to do it, but we didn’t want to start another, in the middle of all of this, it’s been enough of a challenge to actually keep people safe in Palito and in Sao Chico. To have another centre where we are going to have to another area of concern and tracking the virus and all that, let’s let the dust settle on all this before we start that. So as soon as we think it’s safe enough, we’ll start at Coringa. We will start digging that mine and we will start going underground. That’s it. I’m really hopeful that’s going to be before the end of this year. And that would be a great. It is always great fun starting a mine.

Matthew Gordon: Mike, good update. Well done with the numbers. As you say, it is in a tough environment. We speak to a lot of companies who are struggling. You’ve done well to keep the assets coming in and the cash coming in and to pay down debt. I like that. Well, stay in touch with us, let us know how you get on, as things progress, I would be delighted to take that phone call from you.

Michael Hodgson: Okay. Thanks very much, Matt.

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.

Serabi Gold (SRB) – “Miraculous” Q2 Results

Serabi Gold PLC
  • LSE: SRB, TSX: SBI
  • Shares Outstanding: 59M
  • Share price GB£0.83 (16.06.2020)
  • Market Cap: GB£49M

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

What is the latest news from Brazilian gold producer, Serabi Gold?

The company previously recorded record gold production in March, courtesy of the introduction of an ore sorter. However, the impacts of the COVID-19 crisis in Brazil, which have been exacerbated by the government’s response to the COVID-19 pandemic, have been unavoidable. Q1/20 production was down c. 1,000oz from the original guidance. In a situation this difficult, the question for Serabi Gold revolves around how successfully the company has managed to motivate the ramifications of these most difficult of circumstances.

Let’s start with the Q2 results. Hogdson is “totally delighted” and this “miraculous result,” considering where it was at the beginning of the quarter. At 65% of its total workforce capacity, the company is emerging from this turbulent period with 85% of its budgeted production intact: 8,500oz gold. Hodgson has grabbed this situation by the horns; maybe the Brazilian administration could learn a thing or two. By imposing a strict social distancing policy alongside removing at-risk workers from the site, Serabi Gold has been able to continue churning out success.

The grade has fallen from c. 8g/t to c. 6g/t, but Hodgson attributes this to a planned operational decision. Serabi Gold’s ore sorter is designed to work on low-gade material, and at the end of 2019, the mine was set up to develop and mine lower-grade areas. The company committed to lower-grade material, hoping to make use of its 45,000t PQ plant and +45,000t PQ mine to mine extra ore, c. 55,000t pq, feeding this additional material into the ore sorter to screen it and ascertain the best 45,000t to go to the plant. Serabi Gold was simply unable to mine this much ore given its weakened workforce. Investors should expect this grade to bounce back in Q3/4, as the company begins “overmining” again. Exploration has obviously been shelved for the time being, and a lot of the project work has been placed on the backburner. The foremost focus has been on keeping the core project up and running.

The ore sorter is an immensely capable element of this story that isn’t quite being given the attention it should be. Moreover, Serabi Gold does not currently make use of anywhere near its full potential. In the YTD, it lifts the average grade around 7X, and this is without it being fully integrated into Serabi Gold’s production process. However, it’s not a perfect piece of equipment and still creates losses by making more room for low-grade material in the plant. The originally intended purpose for the ore sorter was to treat surplus production, and this is clearly something Serabi Gold hasn’t had access to recently. The ore sorter gives the company the ability to increase its annual ounces by 15-20% (c. 2000oz PQ); could this mean it catches up on lost production? Watch this space.

What is there left to do at Coringa? Handily, Serabi Gold got the public hearing over the line in February before things went awry. There has been a lot of back and forth with the environmental agency, but Hodgson is keen to placate them; this is the group that will have to approve the issuance of Serabi’s crucial preliminary licence. The remaining licences are basically procedural, and Serabi Gold looks on the verge of getting everything over the line. The letter to the court is going out this week. This starts the next step: an environmental council review. It is difficult to arrange a physical meeting right now, but Serabi Gold expects to participate in its court hearing and receive ita preliminary licence by the end of the quarter. Great news.

On the exploration side of things, Coringa has “amazing exploration potential;” it can be so much more than a producing asset, and that’s without even getting into the Sao Chico Gold Mine or the Palito Gold Mine. The company’s exploration plan had been soaring before COVID-19, and Serabi Gold will look to recommence this as soon as possible. A large number of geophysical and geochemical anomalies have demonstrated mineralisation at a depth of c. 200m below ground, and Serabi’s land package is looking like it could form a much larger operation if consolidated successfully. Let’s wait to see of all of the stars align, but the signs are promising.

The company has ended Q2 with US$9.6M in the treasury, up from US$9M at the start of it. It has paid off Sprott and is debt-free. However, Serabi Gold does not plan to dip into this cash until the plant construction/ore trucking discussion becomes a more pressing issue. With current economic conditions, all of this exploration can be financed out of cash flow.

What did you make of Michael Hodgson and Serabi Gold?

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.

Serabi Gold (SRB, SBI) – 2020 AGM – CEO Summaries 2019 & 2020 Guidance (Transcript)

Serabi Gold PLC
  • TSX: EQX
  • Shares Outstanding: 59M
  • Share price GB£0.83 (16.06.2020)
  • Market Cap: GB£49M

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

FULL ARTICLE ON THIS INTERVIEW HERE.

We last touched base with Hodgson in May. This time around, he’s here to discuss the outlook for 2020.

Like most gold producers, Serabi Gold is likely to miss it’s guidance for 2020, but not by as much as investors would expect. The company has mitigated the impacts of the market reset and COVID-19 effectively. Sprott is out of the picture, and now the company is debt-free and cashed-up, it can proceed forward with exciting gold exploration at Sao Chico, in addition to creating operational optimisations at Palito and Coringa.

This gold producer has been consistently on the up, but now Hodgson has put his foot to the floor, and Serabi Gold appears to be accelerating into top gear.

What did you make of Micahel Hogdson and Serabi Gold? Are you a gold investor? Does gold mining interest you? Comment below and we will respond.

We Discuss:

  1. 2019 Overview: Great Year for Serabi Gold. Looking at 3 Areas of Progress
  2. Rough Starting 2020, yet Great Results so Far: What’s the Rest of the Year Got in Store
  3. Exploration Potential: Prospective Land Package and Great Possibilities

CLICK HERE to watch the full interview.

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

Mike Hodgson: Very well. Thank you. Nice to speak to you, Matt.

Matthew Gordon: Well, thanks for joining us today. You should be, today, at your AGM, but obviously things are what they are, and unfortunately people can’t get together and your shareholders aren’t able to see you in person. So, you’ve kindly agreed to talk to us, and I guess sort of kill 2 birds with one stone and talked to us about a couple of things. One, 2019 performance and obviously 2020, and what has been happening and what your hopes are for the coming year under the current conditions. So, if you don’t mind, why don’t you give us your rundown of 2019?

Michael Hodgson: Well, you are right, it is the wonder of technology, isn’t it? I mean, yes, we would have been there today. It was always a good day in our calendar. Over the last few years, we’ve had more and more interest with our AGM and had lots of, well, a fair number of shareholders coming along and asking some pretty good, intelligent questions, a good following and sadly this year we can’t do it. But you know, forums like yourself are brilliant for doing that. So, this is an opportunity to meet, to give out more information. Well, a lot of it would all be repetition of what we did in 2019, but it’s a very important moment to sort of reflect on because it was a great year for us. And possibly more importantly, people are going to want to know where we are now and where we’re going, as with many companies. I will come on to that.

But 2019 first: well, you know, as I said before, you know, 3 main areas of progress for us, really with Serabi. The production from two mines ore bodies: Palito and Sao Chico, great year. It was the first time we exceeded 40,000oz in our history. We have been ramping up, not quite making 40,000 for the last four years, but finally we made it in 2019, which was great, and it was our best year ever. We are really pleased with that. So, production went really well. The plant was full. The ore body is working very well. So really, plant loads of operation. So, you know, our push was obviously, where do we go from here? And during the year, we obviously did all that test work on the ore-sorter, which we’ll come on to a little bit. That obviously arrived at site at Q4/19. In the last months of the year, we were basically assembling all of that and it has been a terrific purchase because in Q1/20 this year, it has really helped us, particularly in the second part in March and April,  just after commissioning, it has had some tremendous results. In fact, if we hadn’t had it, we probably would’ve have had quite a poor quarter, but in the end, the ore-sorter was a great way of turning our quarter around.

The back of 2019: so, as well as Palito going very nicely, and Sao Chico, exploration success, we brought in a surface diamond drill rig, a couple of contractors, and we really got our teeth into those geophysical anomalies in and around the mine site. What’s called headframe exploration in and around Sao Chico, particularly. And we did a fair bit of that in the second half of the year. The results didn’t really flow through until the end of the year, but we’re very nicely doing step out drilling at Sao Chico, and I’ll probably talk more about that in the results of 2020, that’s when we get the results. We got going, focusing on Sao Chico in particular. That has been pretty good. And the final part of the 2019 story was really Coringa, which was our, what we call our Palito lookalike down the road, which is going to be probably our most obvious growth strategy. We have our Palito 40,000oz to 50,000oz, and we have another project down the road, which looks pretty much the same. So that means 40,000oz, 50,000oz going to 90,000oz. That’s our plan.

We did a new resource update in 2019 in the first quarter. We did a PEA that came out in September, which showed what we thought, you know: yes, robust 40,000oz, above USD$900 All In Sustaining Costs. 8g/t, 8-year mine life Palito lookalike. We got that out, off the rank on end of Q4/19 last year. And now we have completed an environmental impact assessment on it, and we are very busily doing our permitting, final stage of permitting for Coringa. Hopefully with a view that we can actually start building the plant, assembling the process plant that’s already there in the backend of this year coming, this year, 2020.

So, 3 areas, good production, great exploration start-up, progress at Coringa with permitting.

Matthew Gordon: Well, not only that, your share price moved. It was quite a year for your shareholders.

Michael Hodgson: Yes, sorry, that’s a very good point, and probably the most critical point. Yes, we went from, we had been sort of bumbling along about £0.40p, I suppose. And we had a bit of a dip in May down to about £0.23p, and we had a tremendous recovery in the second half of the year. And I think at the end of the year, we even exceeded, we didn’t quite make the pound, but we got sort of £0.90p and we have pretty much stayed there since. So, we’ve enjoyed a great run in the second half of the year, tremendous on share price. So yes. So, all those, I’d like to see those three things, as well as great marketing and good management got us to where we are today.

Matthew Gordon: Well, like I say, we follow you quite closely. For us, you are one of those sort of turnaround stories of last year, after sort of a, you know, a while of stagnation and, you know, you kind of got yourself over the line and you are getting noticed by people, for sure. I think I would agree – you had a great 2019. A good year for you guys. Is it going to continue? Let’s talk about 2020. It’s been a very difficult start for everyone. There has been a market reset. We’ve obviously got the coronavirus, COVID-19 affecting people’s ability to work. You had a strong start, but how’s it gone since then?

Michael Hodgson Well, as you say, before the virus actually really started impacting in Brazil, we had a very decent January. We then had a bit of a tough February because we had a mill go down on us. But fortunately, that ore-sorter I talked about earlier was really our salvation. The beauty about this ore-sorter is that it takes waste out and it allows the basically high-grade material to go to the plant. It gives you catch up facility in a plant-constrained operation. So, we’ve had a phenomenal March and a phenomenal April; our two best months on record. In the middle of all this virus too, which was pretty surprising. I remember sitting at PDAC in March thinking this, we don’t know how this is going to go. I don’t think anybody thought in PDAC how bad it was going to be, but I did suspect it was going to be tough. But you know, after that March and April; two phenomenal months, and let’s say our best months ever.

So, we finished Q1 with 9,000oz, which is very respectful number, and our target was 10. Our budget for this year is 45,000. It’s actually 20,000oz by the end of the second quarter, we have a stronger second half of the year. I know I spoke to you about three, four weeks ago. You know, we’re not going to be able to make our 10,000oz in that second quarter, but we’re going to, we’re doing well. We are going to probably do about 8,000oz. We’re doing pretty well. And I think all things considered, that’s a tremendous effort.

The reason we’re not going to do that is, what we actually did in anticipation, and with what’s actually happened with the virus. We just started being a camp: we just wanted to get everybody who wasn’t really critical to the operation off the site, just to reduce risk. That allows us to socially distance everybody, people have much better sleeping arrangements, better sort of eating arrangements. We just basically sent everybody out so that people have got space. Just good common sense. So, we’ve got less, we haven’t got the optimal workforce there. We’ve only got, for example, we have a workforce of about 500 people. Normally we’ve got about 350 people at site. We have now reduced that to 250 people. And so therefore it’s unreasonable to expect that we can actually have normal production with that level of people, but those people who are there, they are just purely on Gold production duties, that’s it.

And they are doing a fantastic job. We’ve actually done. We’ve kept people there, the union has been tremendous in terms of cooperation. We’ve managed to have people working much longer stints than they normally would. They want to do this. They want to spend more time at site and then more time away. And we’ve been rotating people through with quarantining. Anybody new coming to site gets tested for the virus. So those of them who are symptom-free and negative, obviously they come in and allow people to leave. So, we feel we can maintain a level of production of about sort of 7,500oz to 8,000oz per quarter. So not as high as we did, but that’s a pretty decent effort all things considered. And I would say we’ve enjoyed, obviously, fantastic economic tailwinds with the Gold price in terms of dollars and in terms of the Real exchange rate.

So, we might not be producing the answers we thought we were going to produce, but we forecast our cash position to be, at the end of Q2/20, to be about USD$6M. And we’re going to see well above that. At the end of Q1/20, we probably had about USD$3M more in the bank. We ended Q1 with USD$9M in the bank, when before we thought we’d have USD$6M. So actually, our cash position is great. And the great news is at the end of this month, Sprott, who have been a fantastic debt partner for us for many years are gone. They are out. Finished. We are debt free, completely debt free. So, we’re going to be a company going into Q3/20 debt-free.

We also managed to renegotiate the purchase of Coringa in smaller parcels rather than actually paying the trigger payment of the outstanding USD$12M that we still owed them to finally purchase all of Coringa at the end of March. We renegotiated that.  We are paying them in $500,000 payments per month, which would go up to USD$1M a month in July, but that’s very affordable with our current level of production, et cetera.

So, it’s, you know, it has all worked out quite well. So, we’ve managed to sort of tidy up the balance sheet. We’ve probably got about USD$2M more in the bank than we thought we were going to have. We might not have the ounces of production, but we’re getting better money for the ounces that we do produce. And we do feel that we can actually continue as we are for sort of 2000oz, 2,500oz a month – so 7,500oz, 8,000oz quarters in Q3, Q4  well, you know, one would like to think we can do a little bit better and things will begin to, we can man up a little bit more and get back to a more normal quarter in Q4/19. So, whilst we might not reach our guidance, as I said before, we’re hopefully going to make a pretty decent stab at a good proportion of it.

Matthew Gordon: Okay. That’s fantastic. Can I ask you about a couple of things you said though? Because I’m intrigued. First of all, congrats on being able to continue to work and putting the plans in place to have most of your workforce able to work and, you know, and you say 8,000 versus the 10,000 is a pretty good effort all things considered. But the 2 things I want to talk to you about are, one: how important is the exploration component to what you’re doing?

Michael Hodgson:  Well, we stopped exploration about a month ago, that was surface drilling. And that was with a contractor. And again, that was kind of, reluctantly we had to do it, but we just needed the space and they come and go, we just couldn’t have people coming and going to the site. We basically wanted to isolate the site and keep it safe. So, our sort of priority was with our workforce. We said to the exploration contract, look, unless you are prepared to keep your guys there for a longer duration, like we’re all doing you know, they can’t come and go. And they wouldn’t do that. So, we said, okay, well let’s just down tools on the surface, we have kept the underground drilling going in fact, with short breaks, and the underground exploration is back starting up again now. So that’s good. And that’s going now.

Sao Chico in particular, it’s not just about going out along strike east and west, which is what we were doing, but going down, which looks tremendous. That’s something that we can continue. So, we actually have got the exploration drills underground, turning again, and they are doing the down dip exploration beyond the mine limits, actually in the mine. So, whilst the surface part is parked the underground part will continue. And you know, you are right; I mean, I was very reluctant just to sit and stop exploration and just mine for sort of 3 to 6-months. That’s ultimately going to come back and bite you. So, we didn’t want to do that. So, we’ve got at least the underground drilling going again, which is great.

Matthew Gordon: Okay. So that’s something. And then the reason I ask that is because obviously I think people in the market understand the concept of, you know, you’ve got Palito, and in Coringa you’ve got Palito 2. You have doubled, or are potentially doubling, the size of the company because they are both high-grade, underground. You know what you’re doing. I’m intrigued by the land package that you’ve got because potentially, that’s where a lot of upside can come through the trail. But when do you think you’re going to be able to kind of get back into that properly with some kind of a vengeance and with the new cash that you’ve got, do you plan to ramp that up as well?

Michael Hodgson Yes. Well, what we did do, what we stopped in May or April was the surface drilling, which was particularly…, our exploration over the last 6-months has focused in three areas. It’s been step-out drilling at Sao Chico, principally, where we’ve got this whole sort of, you know riches of geophysical anomalies, ore satellites in and around Sao Chico. Sao Chico itself is a geophysical anomaly but looks quite poor compared to the ones in and around it. So, we’re obviously very excited about those. And we did start intersecting sulphide mineralisation at Sao Chico before we stopped. And then we have just got a bit of a tiger by the tail there, so that’s absolutely brilliant. And we’re drilling the gap in between the two, so that’s fantastic. That’s the bit that’s all to play for. It’s parked for the time being, but we’ll get back into that in no time. And that’s fine.

One thing we were able to do though, was we were doing a big regional geochemistry program. And that’s not specialised labour. That’s our guys, we just have field crews just doing, you know, it’s donkey work really, but it’s really fantastic work. They just sit there taking ore samples over the entire area. And we finally, after that six months hard work, produce those, if you remember; three weeks ago, those maps. Really great geophysical maps, which show geochemical sort of contours on top of the geophysics. So, we can see how that great big geophysical anomaly bridges between Palito and Sao Chico. We’ve got a great big booming magnetic geophysical anomaly with lots of electromagnetic geophysical knowledge. And now we’ve got a beautiful big 100, 200 PPM Copper anomaly over this.

Now we all know that the Gold that we have at Palito and Sao Chico lives with the Copper. So now we’re doing sort of follow up Gold on all of those, and we can do all this work in the background while all of this drop down is going up. So, what we’re doing is we’re actually moving forward with all the geochemistry, and really homing in on the best target areas so that when we do actually come back, they will be drill ready and we can actually start drilling the targets. So, we’ll have a coincidental geophysical anomaly, geochemical anomaly, and then we drill it. And we’re obviously pretty excited about some of the ones we talked about a few weeks ago, which were on that big belt that you’ll see between Palito and Sao Chico.

Matthew Gordon: Well, you certainly did sound quite excited about it when we went through it a few weeks ago, was it three weeks ago? Because I think the potential there is to really, to, you know, develop the land package that you’ve got, quite inexpensively at this point, whilst obviously getting Coringa up and running.

Michael Hodgson: Well, I think the thing that is compelling about these anomalies is, I know they are early stage and people sort of go, oh, you know, they are only geophysical anomalies, but everything that’s discovered starts off as an anomaly. That’s what the base of this is. These look they’ve got such signatures, similar to Palito and Sao Chico. I mean, that’s the great thing: we’ve got templates, you know, we know what Sao Chico looked like as just an anomaly before we started mining it and look what the hell it is now. It’s a great deposit.

We’ve got these ones like Calico and Juco, which are immediately to the south of Palito, they are 5km away. I mean, that’s nothing. That’s a road to our process plant.  Easy, easy. They are high priority because of where they are. And you know, if we get a, say, some hits there and we can actually go to another 2,000oz, 300,000oz resource and with all these different satellites, they add great value. We can very quickly turn exploration success into production ounces.

And this whole exploration effort that we’re doing at the moment is because we know, with planned constraint, the ore-sorter is going to free up some place in our process, some space to, you know, for the next step, but it’s not going to be the solution to all of our problems. It’s going to buy us another 10,000oz basically, at this stage, that’s it. So, we can make our little plant go from 40,000oz, 50,000oz, which is great, a great bottom line, you know, additions to us, but where do we go from there? Where do we go from there? That’s the next question? You know,

I’m absolutely convinced that our tenements hold much more than 50,000oz worth of Gold per year, without doubt, without any doubt whatsoever. The question is, where? And so therefore, what we have got to figure out is, okay, all these sorts of central riches that we actually have, you know, how big are they and where are we going to process it? Because we are going to, you know, you asked the question: obviously, Sao Chico keeps growing. Do we put some kind of processing down there? If these two ore bodies that we’ve got near around Palito are coming to, or have the prospects to become ore bodies, do we put a slight expansion at Palito? It’s a wonderful problem to have.

We’ve actually got, it’s pretty interesting because we’ve got a plant at Coringa that’s too big for Coringa and we’ve got a plant at Palito that’s too small for Palito, or we haven’t got a plant at Sao Chico. And what we’ve got is resources everywhere, potentially. And then just kind of figuring out what’s best to put where and when. So, but I think it’s a nice problem to have. I think we’ve got great upside in all of them. And it’s just a case of doing it in the most logical way that makes most sense to shareholders, which means we can build our company with as much cashflow as possible and as little sort of borrowing and dilution than we’ll ever have to do. And that’s what we’re trying to do.

Matthew Gordon: Well, as you say, Mike, some nice problems to have. It’s a nice environment to be working in. You’re building up the cash position. You are debt free. Things are looking better for you. I know this is part of your AGM discussion. So, from me, congratulations on last year. I really liked what you did there. You have got a good team. They seem to know what they are doing. This year, we look forward to hearing more of the same please, I think would be the call from the shareholders, but I’d just say for anyone listening to this, please send us your questions that you’d like to ask, because I’m sure we’ll be speaking again soon to Michael, or I hope we will. Or indeed, send them directly to Mike at Serabi Gold

Michael Hodgson: There is the opportunity. If anyone has got questions, please come back to us, we are always willing to talk through with interested shareholders what our plans are.

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.

Serabi Gold (SRB) – 2020 AGM Update

Serabi Gold PLC
  • LSE: SRB, TSX: SBI
  • Shares Outstanding: 59M
  • Share price GB£0.83 (16.06.2020)
  • Market Cap: GB£49M

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

We last touched base with Hodgson in May. At the time, Brazilian gold-producer Serabi Gold had released some COVID-19-affected, but still impressive, Q1/20 results; the company recorded record gold production in March. A mill going down was an unexpected obstacle for the company to overcome, but the new ore-sorter made up for the downtime. Impressive operational number despite being in a lockdown. The management team continues to astonish.

Total Q1/20 gold production was c. 9,000oz, down on the 10,000oz guidance. This reinforced some excellent 2019 annual numbers, as Serabi Gold continues to establish itself as a solid gold producer.

Matthew Gordon talks to Michael Hodgson, 15th June 2020


Today was supposed to be Serabi Gold’s AGM. Instead, because of COVID-19, Hodgson is talking to us.

The company’s 2019 highlights included:

  1. US$14.23M cash position.
  2. USD$5M in net cash.
  3. A slightly increased, but still economic, AISC of US$1,081.
  4. An EBITDA of US$17.2M, up massively from US$6.3M in 2018.
  5. US$1,376 was the average gold price received.
  6. An 8% increase in total mined ore.
  7. The earnings per share were US$0.065.
  8. Serabi Gold created a huge amount of cash flow, generating US$5M in net cash.
  9. The company’s US$14.23M cash holdings were up from US$9.2M the year before.
  10. Serabi Gold achieved a solid post-tax profit of US$3.83M.

2020 has been a difficult year so far for all gold producers, developer and explorers. The market reset, followed by COVID-19, has created major difficulties and share prices were put under stress as shareholder sold down. Operations have ground to a halt for many in South America. However, in amongst all this uncertainty, Serabi Gold achieved record gold production in March. 3,674oz of gold was produced, the highest monthly level since operations began. The company also had a “phenomenal April,” capping off the company’s “best 2-years on record.”

The ore sorter becoming fully-operational, freeing up space for higher-grade ore to go into the plant, has likely had a lot to do with this performance. The guidance for this year is 20,000oz total production by the end of Q2, with 45,000oz by the end of the year, and this is likely to get gold investors even more excited. However, it is clear that Serabi Gold unlikely to hit its 10,000oz target in Q2, but the company should reach around 8,000oz courtesy of its hard working team at camp, who are pulling out all the stops.

The company ended Q1/20 with US$9M in the bank, and Hodgson expects to end Q2/20 with well above the US$6M originally targeted. The really exciting headline? At the end of this month, Sprott is finally out of the picture, and Serabi Gold will be DEBT-FREE. The game-changing Coringa acquisition has been structured smartly, so there will be no bulk payment upfront, and instalments will be staggered conducive to the stability of Serabi’s cash flow.

Debt-free, throwing off the ounces and the cash, with significant potential in the form of an doubling the output with both Coringa and Palito in operation and further possible operational optimisation. It’s quite the concoction, and investors seem to be appreciating Hodgson’s leadership.

However, for us. We are most excited by the potential of the exploration in and around Sao Chico and Palito. These are cheap, quick and accessible ounces. We are not sure the market yet understand what this does to the bottomline. It can all be financed from cashflow. It’s a significant land package, at site. Can they join Sao Chico and Palito together as one ore body. This is the game changer investors should be looking at. We will explore this line of questioning with the company once the AGM news is out of the way. PAY ATTENTION folks.

Most explorative above ground drilling was reluctantly halted a month ago because of health concerns around drill teams coming in and out of the camp. However, underground drilling has continued, and it’s back starting up again now. Hodgson hopes to exploit the “tremendous” potential of Sao Chico by drilling at it from all angles. A real area of excitement is the area that bridges Palito and Sao Chico together, which is packed full of exciting magnetic and electromagnetic geophysical anomalies. Right now, the company is progressing the geochemistry of its land package, honing in on the best target areas. Some of the exploration targets in the Jardim do Ouro District, just 5km away from Palito, carry meaningful potential: Hodgson is confident he can quickly turn exploration into production ounces.

In terms of operational optimisations, it is impressive that Serabi Gold is performing so well when so much can be enhanced. The company has a plant at Coringa that is too big for it, a plant at Palito that is too small for it, and no plant whatsoever at Sao Chico, with geophysical anomalies scattered all across the properties. Once Serabi Gold cracks how to best organise and utilise its land package operationally, investors could look forward to yet more growth.

What did you make of Michael Hodgson and Serabi Gold? Comment below and we will respond.

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.

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.