Serabi Gold plc Serabi Gold Plc : Us$15 Million Strategic Investment And Board Changes

 
TIDMSRB 
 
 
   THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, 
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED 
STATES, AUSTRALIA, NEW ZEALAND, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER 
JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO. 
 
   THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO BUY, ACQUIRE OR 
SUBSCRIBE FOR (OR THE SOLICITATION OF AN OFFER TO BUY, ACQUIRE OR 
SUBSCRIBE FOR) ORDINARY SHARES. 
 
   For immediate release 
 
   23 March 2018 
 
   Serabi Gold plc 
 
   ("Serabi" or the "Company") 
 
   US$15 Million Strategic Investment and Board Changes 
 
   Serabi Gold plc (AIM:SRB, TSX:SBI) is pleased to announce that 
Greenstone Resources II L.P. ("Greenstone"), a leading mining focussed 
private equity group has today agreed to invest US$15.0 million to 
acquire a 29.82% interest in the Company (the "Subscription"). 
 
   Highlights: 
 
 
   -- US$15.0 million strategic investment by Greenstone to acquire a 29.82% 
      interest in Serabi via a subscription for 297,759,419 new ordinary shares 
      of 0.5 pence each ("New Ordinary Shares") in the Company at a price of 
      3.6 pence per share (the "Subscription Price") 
 
   -- Greenstone's investment provides strong endorsement of managements' 
      growth strategy 
 
   -- The Subscription Price of 3.6 pence per share represents a discount of 
      0.55% to the closing mid price on AIM of 3.62 pence per share on 22 March 
      2018 
 
   -- The Subscription provides the Company with a strong platform to deliver 
      the Company's ambition to become a 100,000 ounce per annum gold producer 
      within two years 
 
   -- Funds from the Subscription will be used to: 
 
          -- undertake drilling to delineate additional resources and expand 
             the life of mine at the Palito and Sao Chico projects; 
 
          -- satisfy the second instalment of the deferred consideration due 
             for the acquisition of the Coringa Project; 
 
          -- advance the recently acquired Coringa Project; and 
 
          -- for working capital and other corporate purposes; 
 
 
   Board Changes 
 
   Mr Mark Sawyer, a partner of Greenstone Capital LLP who provide advisory 
services to Greenstone, will join the Board of Serabi with immediate 
effect. 
 
   Michael Hodgson, Chief Executive Officer of Serabi, commented: 
 
   "We are delighted to welcome Greenstone as a long-term strategic 
investor in the Company and look forward to working closely with them to 
unlock the full potential of Serabi's gold projects and pursue other 
growth opportunities. The new funds generated by their subscription will 
significantly strengthen Serabi's financial position as the Company 
looks to expand and develop its Palito, Sao Chico and Coringa projects 
as well as providing a platform to pursue further regional 
opportunities." 
 
   This announcement contains inside information for the purposes of 
Article 7 of the EU Regulation 596/2014. The person who arranged for the 
release of this announcement on behalf of the Company was Clive Line, 
Director. 
 
   Enquiries: 
 
   Serabi Gold plc 
 
   Michael Hodgson                    Tel: [phone] 
 
   Chief Executive                      Mobile: [phone] 
 
   Clive Line                                Tel: [phone] 
 
   Finance Director                     Mobile: [phone] 
 
   Email: [e-mail] 
 
   Website:  www.serabigold.com 
 
   Beaumont Cornish Limited 
 
   Nominated Adviser and Financial Adviser 
 
   Roland Cornish                       Tel: [phone] 
 
   Michael Cornish                      Tel: [phone] 
 
   Peel Hunt LLP 
 
   UK Broker 
 
   Ross Allister                            Tel: [phone] 
 
   James Bavister                       Tel: [phone] 
 
   Blytheweigh 
 
   Public Relations 
 
   Tim Blythe                               Tel: [phone] 
 
   Camilla Horsfall                      Tel: [phone] 
 
   Copies of this announcement are available from the Company's website at 
www.serabigold.com. 
 
   Neither the London Stock Exchange, the Toronto Stock Exchange, nor any 
other securities regulatory authority, has approved or disapproved of 
the contents of this announcement. 
 
   Background to and reasons for the Subscription 
 
   The Company has been developing and operating the Palito Mining Complex 
since 2013 and management considers that production from the current 
Palito and Sao Chico orebodies has now reached a sustainable, steady 
state at approximately 40,000 ounces of gold production per annum. The 
Company however recognises that whilst it can be cash generative and 
profitable at these levels of production, it needs to grow in order to 
attract a wider investor base and generate long term value for 
shareholders. 
 
   Between 2008 and 2011, the Company undertook near-mine exploration 
activity which generated a number of discoveries within approximately 
four kilometres of the current Palito orebody and process plant. 
Management have seen these as an initial platform for resource growth 
and additional satellite orebodies which could provide incremental 
opportunities for mineral resource and production growth. However, with 
cash flow from the current operations being utilised to repay debt 
obligations the Company has had limited opportunity to develop these 
discoveries. An 8,000 metre drill programme was commenced in November 
2017 to further evaluate these discoveries. 
 
   In the vicinity of the Sao Chico orebody, the Company has undertaken 
some additional exploration activity since acquiring the property in 
July 2013, but the understanding of the wider area is limited. With a 
number of historic areas of artisanal mining and some significant 
anomalous areas highlighted by geophysics, the Company considers the 
area around Sao Chico to be highly prospective and would like to extend 
exploration across a five kilometre shear zone around the Sao Chico 
orebody. 
 
   In December 2017, the Company announced the acquisition of the Coringa 
gold project ("Coringa"), located approximately 200 kilometres to the 
south of the Palito Mining Complex. The Company paid an initial US$5.0 
million instalment to the vendor and was due to make a further 
instalment payment of US$5.0 million on or before 22 March 2018. The 
final instalment of US$12.0 million is payable on first gold production 
or 22 December 2019 whichever is earlier. Coringa hosts a declared 
Mineral Resource of 376,000 ounces of gold and a feasibility study 
report published in September 2017 projected average annual production 
of 32,000 ounces per annum with an average all-in sustaining cost of 
US$786 per ounce. 
 
   Coringa is currently in the permitting stage but is, in the short term, 
increasing the working capital needs of the Company. The Company hopes 
that it can be in the position to commence development and construction 
of the project during 2019 with first gold production being realised 
during the early part of 2020, assuming the necessary permits and 
licences can be obtained at the appropriate times. An earlier study of 
Coringa, published on 13 May 2015 in accordance with the reporting 
requirements of the standards of NI 43-101, estimated a total mineral 
resource of approximately 900,000 ounces. The Company is of the view 
that the most recent Coringa resource estimate (published on 8 September 
2017 prior to the acquisition of Coringa by Serabi) and also prepared in 
accordance with the reporting requirements of the standards of NI 
43-101, excluded a number of previously reported estimated areas that 
had been included in the earlier May 2015 estimation.  The Company is 
therefore of the view that a modest drill programme over some of these 
areas could quickly allow additional mineral resources to be reinstated 
increasing the mine life, the overall project economics and potentially 
the projected annual production rates. Whilst the Company is obtaining 
the necessary permits it will also conduct further studies to optimise 
mine and development plans for the project and fully assess the 
synergies that can be realised with the Company's existing operations. 
 
   Management is of the view that development decisions for the Palito 
Mining Complex and Coringa are closely linked and it is therefore 
important to increase understanding of the growth potential around the 
Palito and Sao Chico orebodies as these will affect capital procurement 
and development decisions for both the Palito Mining Complex and 
Coringa. As such, it is imperative to advance exploration activities as 
quickly as possible in order to progress the objective of building long 
term sustainable value for shareholders. 
 
   Greenstone is a respected and experienced private equity fund focussed 
solely on mining. As such, the Subscription is considered to be an 
endorsement of Serabi, its management, its projects and its strategy for 
achieving growth and building value. 
 
   With a clear pathway to achieving growth, a strong balance sheet and a 
supportive shareholder base, the Company considers the Subscription 
represents a transformative event, that will allow it to accelerate its 
growth plans, place it in a strong position when considering further 
acquisitions and create the critical mass that is important when looking 
to maximise the financing options available to the Company to advance, 
develop and grow its gold projects. 
 
   Details of the Subscription 
 
   Under the terms of the Subscription, Greenstone has conditionally agreed 
to subscribe for 297,759,419 New Ordinary Shares at a price of 3.6 pence 
per share (the "Subscription Price"). The New Ordinary Shares to be 
issued pursuant to the Subscription will rank pari passu with the 
existing Ordinary Shares. Application will be made to the London Stock 
Exchange for the Subscription Shares to be admitted to trading on AIM 
("Admission") and listed for trading on the TSX. Completion of the 

Subscription and Admission is expected to take place at 8:00 a.m. on or 
around 12 April 2018. 
 
   The Greenstone Subscription is conditional, inter alia, on the receipt 
of a conditional approval letter from the Toronto Stock Exchange in 
respect of the issuance and listing of the Subscription Shares and the 
Company applying for the Subscription Shares to be admitted to trading 
on AIM. 
 
   Pursuant to the Subscription, the Company has given certain warranties 
relating to the Group and the operations of the Group and to pay certain 
costs incurred by Greenstone in connection with the Subscription. 
 
   The Directors intend to use the proceeds from the Subscription as 
follows: 
 
 
 
 
Use of proceeds 
Second Installment of acquisition payment for Coringa  US$5m 
 project 
2018 Working Capital for Coringa                       US$4m 
Expansion of Drilling programme Palito and Sao Chico   US$4m 
Corporate Working Capital                              US$2m 
Total                                                  US$15m 
 
 
   Under the Company's existing authorities as granted at the 2017 Annual 
General Meeting, the Company is authorised to issue up to 347,585,202 
New Ordinary Shares free of pre-meption rights (the "Existing 
Authority"). Accordingly, the Company will use the Existing Authority to 
issue the New Ordinary Shares to Greenstone pursuant to the Subscription 
Agreement. 
 
   The Company continues to take market soundings with institutional 
investors via its brokers concerning a possible further issue of new 
Ordinary Shares in the short term.  Any such issue of new Ordinary 
Shares would depend upon market demand and be subject to the approval by 
the Company's Shareholders of the requisite authorities at a General 
Meeting. Should the Company decide to proceed with any such further 
issue, an announcement will be made in due course. 
 
   Operational and Financial Update 
 
   As reported by the Company in a news release dated 18 January 2018, the 
Company reported gold production for the fourth quarter of 2017 of 9,337 
ounces and total gold production for 2017 of 37,004 ounces.  It has 
provided guidance that production for 2018 will exceed that of 2017 and 
be up to 40,000 ounces. 
 
   On 23 January 2018, the Company announced that it had received an 
additional US$3 million loan from Sprott Resource Lending Partnership to 
provide additional working capital for the Company and in particular to 
replace funds it had used to make the initial US$5 million cash payment, 
made on 21 December 2017, in connection with the acquisition of the 
Coringa gold project. 
 
   During the first two months of 2018, the Company's operations have 
performed in line with management's expectations and the Company's 
guidance. 
 
   The Company's cash balance at the end of February 2018 was approximately 
US$6.1 million.  The Company will announce its full year audited 
financial results on 29 March 2018.  It anticipates that the results 
will be broadly consistent with the unaudited financial results to 30 
September 2017.  The Company does expect that it will record a further 
provision in respect of the carrying value of its coarse ore stockpiles 
of approximately US$320,000 in the fourth quarter of 2017, and will 
classify approximately US$1.4 million of taxes that are owed to the 
Company as being due in more than 12 months. Previously the Company had 
reported these recoverable taxes as being due in less than 12 months. 
 
   Relationship Agreements 
 
   Greenstone will hold a 29.82% interest in the enlarged issued share 
capital of the Company on completion of the Subscription. Fratelli's 
interest in the issued share capital of the Company will reduce from 
55.13% to 38.69% following completion of the Subscription. The Company 
has today entered into a relationship agreement with Greenstone and a 
new relationship agreement with Fratelli. These agreements include 
protections to ensure Serabi is able to continue to operate 
independently of these two major shareholders and ensure that the 
Company always has two independent non-executive directors but also 
provides Greenstone and Fratelli with certain rights with respect to the 
Company. 
 
   Under the terms of the Relationship Agreements: 
 
 
   -- Each of Fratelli and Greenstone shall have, for as long as it holds an 
      interest of 23% or more in the share capital of the Company, the right to 
      appoint two directors to the Board and, for so long as it holds an 
      interest of 15% or more but less than 23% of the share capital of the 
      Company, the right to appoint one director to the Board. 
 
   -- Each of Fratelli and Greenstone shall have, for as long as it holds an 
      interest of 15% or more in the share capital of the Company: 
 
 
   -       certain information rights regarding the Company's business; and 
 
   -       anti-dilution rights such that they will have the right, but not 
the obligation, to participate in new placings of Ordinary Shares 
(including placings in connection with an acquisition or for non-cash 
consideration) in order to retain their ownership percentage. Where 
Greenstone and/or Fratelli elect to exercise this anti-dilution right: 
 
   (i)            if the new placing is for cash, each of Fratelli and 
Greenstone will participate on substantially the same terms as any other 
participant in the new placing; or 
 
   (ii)           if the new placing is for non-cash consideration, 
Fratelli and Greenstone will each have the right to subscribe for such 
number of shares as are required to maintain their current percentage 
holdings at a price per Ordinary Share equal to the VWAP of the 
Company's Ordinary Shares for the 5-day period ending on the date ending 
two business days prior to the announcement of that new placing. 
 
   --         Unless otherwise approved by Greenstone and Fratelli, the 
Company has agreed not to undertake, for a period of six months 
commencing on the completion of the Subscription, any further issue of 
Ordinary Shares (other than exercise of share options to employees) 
unless such further issue is undertaken at a price greater than the 
Subscription Price. 
 
   As a further undertaking and subject to certain customary exemptions, 
Greenstone has undertaken that it will not, for a period of six months 
from admission of the Subscription Shares, offer, lend, mortgage, assign, 
charge, pledge, sell or contract to sell or issue any interest in any 
Ordinary Shares held by it. 
 
   The new relationship agreement with Fratelli is conditional on the 
Subscription having completed. Until the Subscription completes or in 
the event that the Subscription does not complete for any reason, 
Fratelli will continue to be bound by their relationship agreement with 
the Company dated 28 January 2014. 
 
   As Fratelli Investments is interested in more than 10 per cent. of the 
issued ordinary share capital of the Company, the new Fratelli 
relationship agreement ("Revised Agreement") is a related party 
transaction for the purposes of Rule 13 of the AIM Rules.  As Eduardo 
Rosselot and Nicolas Banados, Non-executive Directors of the Company, 
are both nominated Board appointees of Fratelli Investments, they are 
not independent for the purposes of the AIM Rules. For the purposes of 
the AIM Rules, the Independent Directors, comprising the Board (other 
than Eduardo Rosselot and Nicolas Banados) consider, having consulted 
with the Company's nominated adviser, that the terms of the Revised 
Agreement are fair and reasonable insofar as Shareholders are concerned. 
 
 
   Project Steering Committee 
 
   Pursuant to the terms of the Relationship Agreements, the Company has 
agreed to establish a Project Steering Committee, which will include 
appointees from both Fratelli and Greenstone. 
 
   The primary role of the Project Steering Committee is to, among others, 
recommend a governance and reporting framework for the Group's portfolio 
of producing assets, its existing exploration portfolio, the recently 
acquired Coringa Gold Project and assess and review any proposed mergers 
and acquisitions. The Project Steering Committee will make 
recommendations to the Board on key matters but will not have the power 
to take decisions in respect of the Group's business. 
 
   The Project Steering Committee will be chaired by the Chief Executive 
Officer. 
 
   Further AIM disclosures relating to Mr Sawyer's appointment 
 
   Further disclosures on Mr Sawyer, as required under Schedule Two, 
paragraph (g) (i)-(viii) of the AIM Rules for Companies, are as follows. 
Mark Raymond Sawyer (age 49), has held the following directorships 
and/or partnerships in the past five years: 
 
 
 
 
Current:                                 Past: 
Future Fuels No.1 LLP                    Ardea Exploration Pty Limited 
Greenstone Capital LLP                   Atriplex Pty Limited 
Greenstone Management Limited            Twenty First Century Legacy Limited 
Greenstone Management II Limited         Kalgoorlie Nickel Pty Ltd 
Greenstone Resources Limited (Guernsey)  Triausmin Pty Limited 
Greenstone Resources (UK) Limited        Yerilla Nickel Pty Limited 
Greenstone Resources L.P. 
Greenstone Resources II L.P. 
Hampton Nickel Pty Limited 
Heron Resources Limited 
Metro Mining Limited 
North River Resources PLC 
Ochre Resources Pty Limited 
Tarago Exploration Pty Limited 
Tarago Operations Pty Limited 
Waterfall Management Limited 
Waterfall Resources L.P. 
Waterfall Resources II L.P. 
Waterfall Management II Limited 
Woodlawn Mine Holdings Pty Ltd 
 
 
   As at the date of this announcement, Mr Sawyer does not have any direct 
personal interest in any ordinary shares of the Company. As set out 
further above, Greenstone Resources II L.P. has subscribed for 
297,759,419 New Ordinary Shares in the capital of Serabi which on 
completion of the Subscription will represent 29.82 per cent. of the 
enlarged issued share capital of Serabi. Mr Sawyer is a director of 
Greenstone Resources II L.P. There is no further information to be 

disclosed in relation to Mr Sawyer's appointment pursuant to AIM Rule 17 
or paragraph (g) of Schedule Two of the AIM Rules for Companies. 
 
   Total Voting Rights 
 
   Following the issue of the Subscription Shares, the Company's issued 
share capital will consist of 998,602,989 Ordinary Shares with a nominal 
value of 0.5p each, with voting rights. The Company does not hold any 
Ordinary Shares in Treasury. Therefore the total number of Ordinary 
Shares in the Company with voting rights will be 998,602,989. 
 
   Following completion of the Subscription, the above figure of 
998,602,989 Ordinary Shares may be used by shareholders in the Company 
as the denominator for the calculations by which they will determine if 
they are required to notify their interest in, or a change to their 
interest in, the share capital of the Company under the Financial 
Conduct Authority's Disclosure Guidance and Transparency Rules. 
 
   Qualified Persons Statement 
 
   The scientific and technical information contained within this 
announcement has been reviewed and approved by Michael Hodgson, a 
Director of the Company. Mr Hodgson is an Economic Geologist by training 
with over 26 years' experience in the mining industry. He holds a BSc 
(Hons) Geology, University of London, a MSc Mining Geology, University 
of Leicester and is a Fellow of the Institute of Materials, Minerals and 
Mining and a Chartered Engineer of the Engineering Council of UK, 
recognizing him as both a Qualified Person for the purposes of Canadian 
National Instrument 43-101 and by the AIM Guidance Note on Mining and 
Oil & Gas Companies dated June 2009. 
 
   Glossary of Technical Terms 
 
   The following is a glossary of technical terms: 
 
   Note: Mineral resources and reserves were estimated in conformity with 
the widely accepted CIM Estimation of Mineral Resource and Mineral 
Reserves Best Practices Guidelines (the "Guidelines") and are reported 
in accordance with the Canadian Securities Administrators' National 
Instrument 43-101" and the definitions applicable to individual 
categories of reserves and resources are set out in the Guidelines. The 
Glossary below includes only a summary of these definitions and readers 
can access the full definitions at 
http://web.cim.org/standards/menupage.cfm?sections=177&menu=178 
 
   "Au" means gold. 
 
   "CIM" means Canadian Institute of Mining, Metallurgy and Petroleum. 
 
   "development" - excavations used to establish access to the mineralised 
rock and other workings. 
 
   "grade" is the concentration of mineral within the host rock typically 
quoted as grams per tonne (g/t), parts per million (ppm) or parts per 
billion (ppb). 
 
   "g/t" means grams per tonne. 
 
   "Indicated Mineral Resource" is that part of a Mineral Resource for 
which quantity, grade or quality, densities, shape and physical 
characteristics can be estimated with a level of confidence sufficient 
to allow the appropriate application of technical and economic 
parameters, to support mine planning and evaluation of the economic 
viability of the deposit. The estimate is based on detailed and reliable 
exploration and testing information gathered through appropriate 
techniques from locations such as outcrops, trenches, pits, workings and 
drill holes that are spaced closely enough for geological and grade 
continuity to be reasonably assumed. 
 
   "Inferred Mineral Resource" is that part of a Mineral Resource for which 
quantity and grade or quality can be estimated on the basis of 
geological evidence and limited sampling and reasonably assumed, but not 
verified, geological and grade continuity. The estimate is based on 
limited information and sampling gathered through appropriate techniques 
from locations such as outcrops, trenches, pits, workings and drill 
holes. 
 
   "Measured Mineral Resource" is that part of a Mineral Resource for which 
quantity, grade or quality, densities, shape, and physical 
characteristics are so well established that they can be estimated with 
confidence sufficient to allow the appropriate application of technical 
and economic parameters, to support production planning and evaluation 
of the economic viability of the deposit. The estimate is based on 
detailed and reliable exploration, sampling and testing information 
gathered through appropriate techniques from locations such as outcrops, 
trenches, pits, workings and drill holes that are spaced closely enough 
to confirm both geological and grade continuity. 
 
   "Mineral Resource" is a concentration or occurrence of diamonds, natural 
solid inorganic material, or natural solid fossilized organic material 
including base and precious metals, coal, and industrial minerals in or 
on the Earth's crust in such form and quantity and of such a grade or 
quality that it has reasonable prospects for economic extraction. The 
location, quantity, grade, geological characteristics and continuity of 
a Mineral Resource are known, estimated or interpreted from specific 
geological evidence and knowledge. 
 
   "Mineral Reserve" is the economically mineable part of a Measured or 
Indicated Mineral Resource demonstrated by at least a Preliminary 
Feasibility Study. This Study must include adequate information on 
mining, processing, metallurgical, economic and other relevant factors 
that demonstrate, at the time of reporting, that economic extraction can 
be justified. A Mineral Reserve includes diluting materials and 
allowances for losses that may occur when the material is mined. 
 
   "Probable Mineral Reserve" is the economically mineable part of an 
Indicated and, in some circumstances, a Measured Mineral Resource 
demonstrated by at least a Preliminary Feasibility Study. This Study 
must include adequate information on mining, processing, metallurgical, 
economic, and other relevant factors that demonstrate, at the time of 
reporting, that economic extraction can be justified. 
 
   "Proven Mineral Reserve" is the economically mineable part of a Measured 
Mineral Resource. A Proven Mineral Reserve implies a high degree of 
confidence in the Modifying Factors. 
 
   "t" means tonnes 
 
   "Vein" is a generic term to describe an occurrence of mineralised rock 
within an area of non-mineralised rock. 
 
   Forward Looking Statements 
 
   Certain statements in this announcement are, or may be deemed to be, 
forward looking statements. Forward looking statements are identified by 
their use of terms and phrases such as "believe", "could", "should" 
"envisage", "estimate", "intend", "may", "plan", "will" or 
the negative of those, variations or comparable expressions, including 
references to assumptions. These forward looking statements are not 
based on historical facts but rather on the Directors' current 
expectations and assumptions regarding the Company's future growth, 
results of operations, performance, future capital and other 
expenditures (including the amount, nature and sources of funding 
thereof), competitive advantages, business prospects and opportunities. 
Such forward looking statements reflect the Directors' current beliefs 
and assumptions and are based on information currently available to the 
Directors. A number of factors could cause actual results to differ 
materially from the results discussed in the forward looking statements 
including risks associated with vulnerability to general economic and 
business conditions, competition, environmental and other regulatory 
changes, actions by governmental authorities, the availability of 
capital markets, reliance on key personnel, uninsured and underinsured 
losses and other factors, many of which are beyond the control of the 
Company. Although any forward looking statements contained in this 
announcement are based upon what the Directors believe to be reasonable 
assumptions, the Company cannot assure investors that actual results 
will be consistent with such forward looking statements. 
 
   ENDS 
 
   This announcement is distributed by Nasdaq Corporate Solutions on behalf 
of Nasdaq Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 
responsible for the content, accuracy and originality of the information 
contained therein. 
 
   Source: Serabi Gold plc via Globenewswire 
 
 
  http://www.serabigold.com 
 

(END) Dow Jones Newswires

March 23, 2018 03:00 ET (07:00 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.