Serabi Gold (LSE:SRB) - Unlocking Value Through High-Grade Gold Mining & Sustainable Practices

• Serabi Gold has seen its share price rise from 22p to 50p over the past six months due to the renewal of its mining license for the Coringa project.
• The company plans to increase production from 30,000 to 60,000 ounces over the next 18-24 months using a capital-light approach, focusing on high-grade ore and ore sorting to improve margins.
• Serabi Gold is working on reigniting its TSX listing and engaging with North American investors to raise the company's profile and explore potential partnerships or acquisitions.
• The company is exploring growth opportunities through its existing assets, such as the Palito and Coringa projects, as well as through its exploration alliance with Vale for copper and gold prospects.
• Serabi Gold is well-positioned to benefit from a favorable market for junior miners, with a focus on becoming a profitable, well-run company producing 50,000-60,000 ounces per year.

Company Overview

Serabi Gold (SRB) presents a compelling investment opportunity for those seeking exposure to the gold sector. The company's recent success in renewing its mining license for the Coringa project, combined with its plans to increase production and focus on high-grade ore, positions Serabi Gold for significant growth in the coming years.

Interview with Chief Executive Officer, Mike Hodgson

License Renewal & Production Growth

One of the key drivers behind Serabi Gold's recent share price appreciation, from 22p in September to 50p currently, has been the successful renewal of its mining license for the Coringa project. This renewal provides the company with the confidence to move forward with its plans to expand production from 30,000 ounces to 60,000 ounces over the next 18-24 months. As CEO Mike Hodgson states, "It's not the full license, the full license is what's called the installation license, and that's actually going to allow us to expand our production to the full and build a process plant."

Capital-Light Approach

To achieve this production growth, Serabi Gold is employing a capital-light approach. Instead of investing heavily in a new processing plant, the company is focusing on high-grade ore and ore sorting to maximize the efficiency of its existing facilities. This approach allows Serabi Gold to increase production while minimizing capital expenditure and dilution for shareholders.

Hodgson explains, "We've actually gone for what I call a capital-light approach. What actually happened around over the last 18 months – the road got paved, which meant the link between Palito and Sao Chico and Coringa got a lot easier, the trucking costs fell because of the number of trucks that were in the region, and most importantly, we got underground at Coringa and the ore body, the vein was so amenable to ore sorting, we thought, this is the way for us."

Focus on High-Grade Ore

Central to Serabi Gold's strategy is its focus on high-grade ore. By targeting higher-grade material, the company can improve margins and profitability, even with a relatively small production base. Hodgson emphasizes the importance of grade, stating,

"Grade is the delta with what's happened to us. Our grade of Coringa is amazing. So, with ore sorting, you're taking a sort of seven-gram, eight-gram ore body, and you're doubling the grade. It's all about grade, quality, quality, quality."

TSX Listing & Investor Engagement

Serabi Gold is actively working on reigniting its TSX listing and engaging with North American investors to raise the company's profile and explore potential partnerships or acquisitions. The company has hired a new VP of Business Development to lead these efforts, recognizing the importance of the TSX for future growth. Hodgson notes, "I do believe going forward, with likely projects, acquisitions, any M&A partners, it's almost certainly likely to be a TSX-listed company. There are very few in London on AIM involved in South America."

Exploration & Growth Opportunities

In addition to its focus on the Palito and Coringa projects, Serabi Gold is exploring growth opportunities through its exploration alliance with Vale. This alliance, which focuses on copper and gold prospects, provides Serabi Gold with exposure to potential new discoveries without the need for significant capital investment. The company is also actively exploring satellite deposits around its existing operations, with the goal of identifying new resources to support future production growth.

ESG Considerations

Serabi Gold's operations are well-positioned from an environmental, social, and governance (ESG) perspective. The company's underground mines have a small footprint, and the planned transition to hydroelectric power will significantly reduce diesel consumption and improve the company's carbon footprint. Hodgson emphasizes the ESG benefits of Serabi Gold's operations, stating,

"We're an underground mine with a tiny footprint, basically not using diesel anymore, and the power is all hydro. It's like an ESG dream."

Conclusion

Serabi Gold presents a compelling investment opportunity for those seeking exposure to the gold sector. The company's recent success in renewing its mining license, combined with its plans to increase production through a capital-light approach and a focus on high-grade ore, positions Serabi Gold for significant growth in the coming years. With a strong ESG profile, active exploration programs, and a renewed focus on engaging with North American investors, Serabi Gold is well-positioned to create value for shareholders in the years ahead.

The Investment Thesis for Serabi Gold

• Serabi Gold's successful renewal of its mining license for the Coringa project provides a strong foundation for future growth and production expansion.
• The company's capital-light approach, focusing on high-grade ore and ore sorting, allows for increased production while minimizing capital expenditure and shareholder dilution.
• Serabi Gold's emphasis on high-grade ore improves margins and profitability, even with a relatively small production base.
• The company's efforts to reignite its TSX listing and engage with North American investors could lead to increased visibility, liquidity, and potential partnerships or acquisitions.
• Serabi Gold's exploration alliance with Vale and its ongoing exploration of satellite deposits around existing operations provide exposure to potential new discoveries and resources.
• The company's strong ESG profile, with underground mines, small footprints, and a transition to hydroelectric power, positions it well for investors increasingly focused on sustainable and responsible mining practices.

Macro Thematic Analysis

The gold mining industry has experienced significant challenges in recent years, with rising costs, declining grades, and increasing environmental and social scrutiny. However, the current macro environment, characterized by economic uncertainty, low interest rates, and potential inflationary pressures, has renewed interest in gold as a safe-haven asset and a hedge against inflation.

In this context, junior gold miners like Serabi Gold, which focus on high-grade, low-cost operations, are well-positioned to benefit from the increased demand for gold and the potential for rising prices.

Furthermore, the increasing importance of ESG considerations in the mining industry favors companies like Serabi Gold, which have a strong focus on sustainable and responsible practices. With underground mines, small footprints, and a transition to hydroelectric power, Serabi Gold is well-aligned with the growing demand for ESG-friendly investments in the mining sector.