Serabi Gold (SRB) - $18M in Cash & Best Production Numbers Since Q3/19

Serabi Gold Plc. is a gold exploration and production company involved in the evaluation and development of gold deposits in Brazil. The company's primary project is the fully-owned Palito Mining Complex and the recently acquired Coringa Gold Project in northern Brazil. The company is listed on the Toronto Stock Exchange (TSX: SBI) and London Stock Exchange (LSE: SRB).

We met with Mike Hodgson, CEO, Serabi Gold. Mike has over 25 years of international experience in the mining industry. He specializes in narrow vein underground mining operations. A mining geologist, Mike is a Fellow of the Institute of Materials, Minerals and Mining, and a Chartered Engineer of the Engineering Council of the UK. 

Company Overview

Serabi Gold is an exploration and development company with major operations in Brazil. The company was founded in 1999 and is headquartered in the United Kingdom. Serabi Mineraçao Ltd, Kenai Resources Ltd., Serabi Mining Services Pty Ltd., and Serabi Mining Limited are the company's subsidiaries. 

Financial Position

Serabi Gold posted strong results in Q2 2021 with a 27% increase in their overall ounces. This has been the company's strongest quarter in the last 2 years, producing 9,300 oz, accounting for 6% of their overall budget. They are looking to produce 35,000 oz in 2021. 

The company currently has $18M in cash flow. They are currently facing a shortage of ancillary supplies such as pumps, vents, and ducting due to the covid market closures in Brazil. As the country's industrial sector was hit the hardest due to lockdowns, the company is making do by repairing existing supplies to ensure an uninterrupted operation.

Serabi Gold was able to pay off its debts and strengthen its balance sheet. The company retired its Greenstone loan facility and raised $3.5M in equity. The proceeds were utilized towards making the final acquisition payment for Coringa.

Serabi Gold has $3M allocated towards planned development in 2022. The company is looking to catch up on the delayed operations caused due to covid restrictions in the past year. In 2021, the company intends to over-develop the mine this year to build back the depleted reserves. 

The company is currently generating a cash flow of $500,000-$750,000 on a monthly basis from its ongoing operations. Due to the higher grades, the company finds itself in a $1.5M stronger cash position than previously anticipated. The company now has a 6% higher budget as a result of increased production, better exchange rates, and gold pricing. 

Palito Gold Mine

The Palito Gold mine is a high-grade, narrow-vein underground mine that was previously under operation between 2003 and 2008. A PEA (Preliminary Economic Assessment) was carried out on the site in 2012 which indicated a high-grade selective mining operation with a potential to generate 90,000 t/year gold, enabling an $11M post-tax cash flow over 8-year mine life. 

Serabi Gold recently discovered multiple intersections in the Sao Domingo and Tapajós Zone at the Palito complex mine. They are looking to put out a resource by 2021 end or early 2022. The company has carried out mining at the Palito and Sao Chico sites for the past 6-7 years and there are strong indications of mechanized mining opportunities.  

At the Palito deposit, the company has a big drilling campaign planned at Currutela. The deposit features a series of 25 veins that are open to striking to the east, north, and south. There are indications that the Currutela asset might join these veins. 

It features a resource spread over a 1km strike length and the company is looking to bridge the two sites, which has a potential for a significant increase in resource. This drilling campaign is scheduled in mid-2021. The company currently has 2 rigs at the site and is looking to publish the details of the exploration over the course of the coming months. 

The company is currently producing 40,000oz monthly and is looking to double its production numbers through the Coringa site. They are rethinking their strategy at the Calico Dominican Red Mountain deposit, carrying out a blanket, deep geochemistry over the entire area through a RAB (Rotary Air Blast) rig. This site offers the opportunity to generate huge anomalies and mineralization which offer the potential for scaling up operations. 

At the Palito site, the company is looking for scalable deposits in the central portion of the asset which features porphyry-style mineralization. The company has two additional sites featuring strong geochemistry and geophysics. These sites are planned for exploration through the RAB rig. This drilling method allows easy sampling of the area, which can then be targeted using diamond drilling. 

The company is currently in the process of sourcing the RAB rig and they plan to test it at the Calico site. The site currently features a 30km anomaly which is 5km in width. They plan to carry out a blanket drill, test several areas and identify potential drill targets. 

The company's current cash flow is generated from the narrow-vein high-grade deposits located at the Palito and Sao Chico sites. 

Coringa Gold Project

The Coringa Gold Project is located in the southeast of the Tapajós gold district. It features underlying Proterozoic granites and rhyolitic volcanics. The main shear zone is spread across 7km and features five zones of vein mineralization.  

At the Coringa Gold Project, the company is carrying out hard rock blasting. This site will be the company's third functional mine. The company seeks to acquire a construction license in 2022 and assemble a processing plant. The company has allocated $3M-$4M to bring the underground Coringa site into operation. 

The underground mining operations provide an opportunity to cherry-pick the best grades and stockpile the lower grade supply. This strategy has enabled the company to increase its overall grade from 5g to 7-7.3g in 2021.

Brazil offers a mining-friendly jurisdiction with low mining costs. This allows for the extraction of higher grades at the same price, leading to an increased supply and higher margins. 

The covid restrictions resulted in the reduction in the company's workforce and a slowdown in exploration and development. However, the company was still able to keep the plant running despite the challenges, moving from a plant-constrained operation to a mine-constrained operation.

To find out more, go to the Serabi Gold Website