Serabi Gold Plc (LON: SRB)
Serabi Gold Plc (LON: SRB) is a gold mining and production company with its principal place of operation being the country of Brazil. The company has mining and operating licenses for two gold mining operations in the Tapajos region of northern Brazil. The first is the Palito Mining Complex, which is already in-operation while initial mine development of its second mine, the Coringa gold project is expected to start later in 2020. The Palito Mining Complex is located within an overall 50,800 hectares area of exploration tenements that are controlled by the company and where there have been numerous small historic artisanal mines operating, indicating significant prospects for locating further mines in the future. During 2019, the Palito Mining Complex produced over 40,000 ounces of gold, a record for the company. The Coringa gold project is located nearby and is located within 13,000 hectares of exploration tenements controlled by the company, and a recent independent report indicated it should produce an average of 38,000 ounces of gold per year once it is full production.
The Palito Mining Complex has ore grades between 7.0 g/tonne and 9.0 g/tonne, while the Coringa Gold Project has an average measured and indicated resource grade of 8.4 g/tonne. On 6 January 2020, the company via a regulatory news release reported that it was undertaking further drilling over the Sao Chico orebody (which forms part of its Palito Mining Complex) and had encountered ore grades of between 15.39 g/tonne up to 114.49 g/tonne.
The Coringa Gold Project
(Picture source – Company’s website)
News Updates for Serabi Gold PLC (LON:SRB)
The company reported on 14 January 2020, its annual gold production figures achieved in the fourth quarter of 2019, as well as the full-year production figures along with the production guidance for the year 2020.
- During the fourth quarter of 2019, the total gold production achieved by the company stood at 10,223 ounces, which coupled with the production figures of the previous three quarters sums up to a total production of 40,101 ounces. This result was in line with the company’s guidance for the year and represents a seven per cent improvement over the full year production figures of 2018.
- The total ore mined during the period was 44,092 tonnes, having an average grade of 6.69 g/tonne.
- The total Run Of Mine (ROM) ore processed by the plants from the combined Palito and Sao Chico orebodies totalled 44,794 tonnes, having an average gold grade of 6.81 g/tonne.
- A new ore sorter section is being added to the processing plant of the company between the crushing and the milling sections. Currently, electrical and mechanical testing being carried on this section and it is all set to commence operation in this quarter.
- Regarding the permission at Coringa Gold complex, a public hearing on the project is set to take place on 6 February 2020. This is a crucial stage in the licensing process where the company will present its case before the public and other stakeholders. A positive response from their side will be the final step before Licencia Previa (Preliminary License) is granted to the company.
- For the year 2020, the company has given production guidance in the range of 45,000 ounces to 46,000 ounces of gold.
- At the end of the year 2019, the company was holding US$14.3 million of cash in its books.
Stock Performance for Serabi Gold Plc At The London Stock Exchange
Source – Thomson Reuters (one-year price chart)
At the time of writing of the report at 10.52 AM GMT on 14 January 2020, the shares of the company were trading on the London Stock Exchange at GBX 78.00, the shares of the company during the past 52 weeks of trading at the London Stock Exchange have registered a high of GBX 92.80, while registering a 52-week low of GBX 24.00. The total outstanding market capitalisation of the company stood at around £45.02 million on the London Stock Exchange at the time of writing this report on 14 January 2020.
The beta of the stock of the company as on the reported date was 0.66, which reflected a lower volatility when compared to the benchmark index. In the last one month, the shares have generated a return of +8.57 % and +16.92 % on a year to date basis, respectively.
Outlook For 2020
The production volumes achieved by the company for 2019 were within the guidance provided by the company and represented record levels for the company. The guidance that the management is giving for the year 2020 is between 45,000 and 46,000 ounces, which is 13 per cent higher than 2019 production figures. The production guidance for 2020, if achieved by the company will not only represent a new record but will represent another significant jump in production for the company and will be achieved through production improvements and operating efficiencies which should be beneficial in terms of its profitability.
The step-out drilling programme undertaken by the company in the Sao Chico orebody within the Palito Mining Complex has yielded excellent ore grades. These ores, when mined, will yield high production volumes per unit of ore and should lower the unit production costs of the company.
On the Coringa Gold complex, the company is most likely to get the Licencia Previa (Preliminary License) without much difficulty. Once the mine complex starts production, this will also add significantly to the production volume figures of the company in the coming years.
Combining both the developments of the Palito Mining Complex and the Coringa Gold complex and if all other factors remain stable, it can be reasonably expected that the company will be able to achieve good production growth for the coming few years.
The most important aspect, however, that is working in favour of the company is the strengthening of gold prices. While the increased volume figures will be achieved over the next few years, the heightened international prices of the metal will immediately add to the bottom-line of the company. Given the hostile situation developing between the United States and Iran, the prices of gold could remain volatile in the near term.