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Serabi Gold Plc LSE:SRB London Ordinary Share GB00BG5NDX91 ORD 10P
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Serabi Gold plc Coringa Pea Confirms Positive Economics

06/09/2019 7:00am

UK Regulatory (RNS & others)


 
TIDMSRB 
 
 
   For immediate release 
 
   6 September 2019 
 
   Serabi Gold plc 
 
   ("Serabi" or the "Company") 
 
   Coringa PEA Confirms Positive Economics 
 
   Serabi Gold plc (AIM:SRB, TSX:SBI), the Brazilian focused gold 
exploration and development company is pleased to announce the results 
of a Preliminary Economic Assessment (the "PEA") for its 100%-owned 
Coringa Gold Project ("Coringa" or "the Project"), located in Para State, 
Brazil. The PEA was completed by Global Resource Engineering ("GRE"), 
Serabi's independent engineering consultant, who has offices located in 
Denver, Colorado, USA. 
 
   The Directors believe that the PEA results fully support their intention 
to develop a high grade, underground mining operation and the Board 
intends to assess the financing options available and complete the 
permitting and licencing processes necessary for development of the 
Project.  The Board expects based on the current expected time-line for 
the award of licences, that construction could be commenced at the end 
of the second quarter of 2020, with first gold production being achieved 
approximately nine months later. 
 
   Highlights of the Coringa PEA are as follows 
 
 
   -- In accordance with normal practice the Base Case prepared by GRE has been 
      calculated using the three year trailing average gold price which 
      approximates to US$1,275 per ounce compared with the London PM fix on 5 
      September 2019 of $1,546 per ounce. 
 
 
 
 
   Table 1 - Summary of PEA Results 
 
 
 
 
                                              BASE CASE 
  Gold Price (per ounce)            Units        $1,275    $1,350    $1,450 
  Pre tax NPV (5%)                   US$m         $55.7     $71.3     $92.2 
  Pre tax NPV (10%)                  US$m         $37.2     $49.4     $65.8 
  Post tax NPV (5%)                  US$m         $47.3     $61.3     $79.6 
  Post tax NPV (10%)                 US$m         $30.7     $41.7     $56.1 
  Post tax IRR                        %             31%       37%       46% 
  Project after tax cash flow        US$m         $71.6     $90.1    $114.0 
  Average annual free cash flow      US$m         $11.5     $13.7     $16.6 
  Average gross revenue              US$m          43.4      46.0      49.4 
 
 
   --       The Base Case project payback is estimated to occur within 2.25 
years of first gold production; 
 
   --       Average Life of Mine ("LOM") All-In Sustaining Cost ("AISC") of 
US$852(1) per ounce including royalties and refining costs using the 
Base Case gold price; 
 
   --       Average gold grade of 8.34 g/t gold producing a total gold 
production of 288,000 ounces; 
 
   --       Typical annual production once the project is in full operation 
averages 38,000 ounces per year(2) ; 
 
   --       Initial capital requirement of US$24.7 million prior to 
sustained positive cash-flow; 
 
   --       Sustaining capital expenditures of US$9.2 million to be funded 
from project cash-flow; 
 
   --       Indicated mineral resource inventory of 125,000 ounces of gold, 
supported by a further Inferred Resources of 178,000 ounces of gold from 
a total geological resource of 195,000 indicated ounces of gold and 
346,000 inferred ounces of gold, to be produced by underground open 
stoping using a cut-off grade of 6.00 g/t gold; 
 
   --       Total Life of Mine of approximately 9 years; 
 
   --       The Base Case includes a 20 per cent contingency on both 
operating and capital costs; 
 
   --       Subject to permitting approvals and project financing, 
management expects that mine development start-up could occur at the end 
of Q2 2020, with initial processing of ROM feed set to commence 
approximately nine months later. 
 
 
 
 
[(1) Calculated when the Project has achieved sustained 
 positive cash flow and excludes the initial capital 
 requirements.] 
 [(2) For the first five full years of production] 
 
 
   This technical report is a preliminary economic assessment and partially 
utilises inferred mineral resources. Inferred mineral resources are 
considered too speculative, geologically, to have the economic 
considerations applied to them that would enable them to be categorized 
as mineral reserves and there is no certainty that the preliminary 
economic assessment will be realized. Mineral resources that are not 
mineral reserves do not have demonstrated economic viability. 
 
   Commenting on the announcement, Serabi's CEO, Mike Hodgson stated: 
 
   "Serabi is focussed on developing and growing our business and building 
a strong gold production base in Brazil. The publication of these very 
encouraging results of the Coringa PEA is a major milestone in achieving 
this objective.  The PEA supports an initial 9 to 10 year mine life and, 
after the initial ramp up, mine production is projected to initially 
average around 38,000 ounces per annum once the ramp up is complete. 
This will add to our existing annual 40,000 ounce production from our 
Palito operations. 
 
   "The Base Case has been produced using a 3 year trailing average gold 
price of US$1,275 per ounce and still produces a very healthy IRR of 31% 
and a NPV, using a 10% discount rate, of US$31million. Looking at a 
scenario using a gold price of US$1,450 per ounce, the IRR improves to 
46% and the NPV (at 10%) to US$56 million. 
 
   "The Coringa PEA also does not reflect the longer term growth potential 
of Coringa nor does it factor in how the increased level of gold 
production might change the investment case for Serabi as a whole.  The 
Base Case economic analysis indicates an AISC of US$852 per ounce which 
includes a 20% cost contingency on the operating and sustaining capital 
costs.  Our existing operation, which currently carries all the 
corporate costs, has an average AISC of approximately US$1,085 over the 
last two years.  The effect of bringing Coringa into production could, 
on this basis, bring Serabi's overall AISC to approximately US$970 per 
ounce not allowing for any improvement in the current AISC that could be 
generated by increased production from the Palito Complex. 
 
   "The overall capital requirement for the development of the project is 
estimated at approximately US$25 million and also includes a 20% cost 
contingency.  With Coringa located in relatively close proximity to our 
existing Palito Complex operations we have been able to provide GRE with 
significant cost data based on actual operational experience of the past 
few years.  This does mean that from a cost perspective the data used in 
compiling this PEA is significantly more robust than might normally be 
the case with similar studies and  I have every confidence that we will 
be able to achieve or even improve on the capital and operational costs 
estimates that GRE have forecast. 
 
   "We have, for the purpose of this study, prioritised minimising the 
initial capital requirements of the Project, but this does result in 
slower rates of production initially and a longer ramp up period.  Over 
the coming months we will be looking to optimise the mine plan to 
achieve full production rates quicker without any significant change in 
the overall capital requirement. 
 
   "We have already approached a variety of financing groups who have 
indicated interest in providing debt or other similar financing options 
to advance the project and they are awaiting the results of the PEA to 
start to assess the level of finance that could be made available.  We 
will be vigorously pursuing these options over the coming months.  At 
the same time we are continuing the make progress with the project 
licencing requirements which are necessary to allow development to 
commence in earnest and will be required as a condition of financing." 
 
   An interview with Mike Hodgson discussing the Coringa PEA can be 
accessed using the following link: 
 
   https://www.brrmedia.co.uk/event/164268 
 
   Further Information 
 
   The Coringa project consists of the Coringa gold deposit and currently 
comprises three discrete ore bodies which are included in the mine plan. 
Other potential ore bodies have been identified and subject to further 
evaluation could extend the current life of the project.  In addition, 
the Coringa deposit is hosted within a seven kilometre zone of past 
artisanal mining activity comprising a series of shallow pits which 
exploited the soft, near-surface oxidised ore but were abandoned at 
about 20 to 25 metre depths when the artisanal miners encountered the 
underlying hard rock sulphide ore. 
 
   The PEA anticipates that the project development will begin with the 
initial establishment of mine portals providing access to the Galena & 
Mae de Leite ("GAMDL") and Meio & Como Quieto ("MCQ") sectors of the 
deposit with access to the Serra sector being undertaken later in the 
mine life.  Run of mine ("ROM") feed extracted from the initial 
development of the GAMDL and MCQ sectors will be stockpiled until there 
is sufficient ROM feed being generated on a daily basis to justify 
starting up the processing plant.  GRE have anticipated that an initial 
period of up to 9 months will be required until first gold production 
and revenue can be generated during which time the process plant, a 
substantial portion of which has already been acquired and refurbished, 
will be assembled and commissioned. 
 
   The full NI 43-101 compliant Technical Report, supporting the economic 
results and including the updated mineral resource statement is being 
prepared by GRE and is required to be published with 45 days of this 
announcement.  A further news release will be made when it becomes 
available and copies will be available from the Company's website and on 
SEDAR. 
 
   Table 2 - Coringa Gold Project - Base Case Metrics 
 
 
 
 
                                                      Unit           Amount 
                                                ----------------  ------------ 
Gold Price                                                US$/oz        $1,275 
Cut-off grade                                        g/t of gold          6.00 
Run of Mine (ROM) Material to process                     tonnes     1,130,298 
Mining Method                                                     Open Stoping 
Throughput at 100% capacity(1)                  tonnes per annum       170,000 
Mining recovery                                                %           95% 
Process Gold recovery                                          %           95% 
Total gold production (recovered)                         ounces       288,046 
Mine Life                                                  years             9 
Initial Capital Expenditures                                US$M         $24.7 
Sustaining capital expenditures                             US$M          $9.2 
Mine closure costs                                          US$M          $1.0 
Cash Operating Costs (inc. Royalty + TC/RCs)              US$/oz        US$816 
All In Sustaining Cost (inc. Royalty + TC/RCs)            US$/oz        US$852 
Exchange Rate                                            R$: US$          3.80 
Royalties                                                      %         4.75% 
Profits Tax Rate                                               %        15.25% 
----------------------------------------------  ----------------  ------------ 
 
 
   1. Five years following initial ramp up 
 
 
   Coringa Updated Mineral Resource 
 
   The following table sets out the Company's Canadian Securities 
Administrators National Instrument 43-101 ("NI 43-101") compliant 
indicated mineral resources of 195,000 ounces and inferred mineral 
resources of 346,000 ounces estimated as at 31 August 2019.   This 
resource estimate is an update on the estimation issued by the Company 
on 4 March 2019 and takes account of updated and additional drilling 
results and the results of a re-logging and re-sampling programme that 
was completed on historic Coringa drill holes in the first half of 2019 
as announced by the Company on 20 June 2019. 
 
   Table 3 - Coringa Mine declared mineral resources 
 
 
 
 
Classification        Quantity  Grade  Contained Metal 
--------------------  --------  -----  --------------- 
                                Gold        Gold 
-------------------- 
                       000't     g/t       000'oz 
--------------------  --------  -----  --------------- 
Indicated Resources        735   8.24              195 
--------------------  --------  -----  --------------- 
Inferred Resources       1,645   6.54              346 
--------------------  --------  -----  --------------- 
 
 
   1. Mineral Resources have been rounded. Mineral Resources are not Mineral 
      Reserves and have not demonstrated economic viability. Mineral Resources 
      are reported inclusive of Mineral Reserves. All figures are rounded to 
      reflect the relative accuracy of the estimates. Mineral Resources are 
      reported within classification domains inclusive of in-situ dilution at a 
      cut-off grade of 2.0g/t gold assuming an underground extraction scenario, 
      a gold price of US$1,500/troy oz, an operating cost of $100/t, 
      metallurgical recovery of 95%. 
 
   2. Serabi is the operator and owns 100% of the Coringa gold project such 
      that gross and net attributable mineral resources are the same. The 
      mineral resource estimate was prepared by Global Resource Engineering in 
      accordance with the standard of CIM and Canadian National Instrument 
      43-101, with an effective date of 31 August 2019 by Mr Kevin Gunesch and 
      Dr Hamid Samari, who are both Qualified Persons under the Canadian 
      National Instrument 43-101. 
 
 
   Mineral Resources considered in the PEA 
 
   The PEA is based on a previous technical report produced by GRE and 
dated 18 April, 2019.  The PEA and the new technical report that GRE 
will produce supersedes the previous Feasibility Study Report produced 
by MTB Project Management Professionals Inc. dated 8 September, 2017. 
 
   The following tables are provided to illustrate the utilisation of the 
NI 43-101 compliant mineral resources within the mine plan assumed in 
the PEA and used to derive the average mined grade.  Of the total 1,130 
ktonnes of ROM feed to be delivered to the plant 334 ktonnes (30%) will 
be derived from the Indicated Resources and 473 ktonnes (42%) will be 
derived from the Inferred Resource.  An additional 323 ktonnes (28%) of 
dilution at a grade of 0gpt is also included. 
 
   Table 4 - Reconciliation of mineral inventory with the PEA mine plan 
 
 
 
 
                       Geological Inventory in PEA Mining Inventory 
             ----------------------------------------------------------------- 
 
 
 Category          Tonnes          Au g/t          Contained Gold Ounces 
----------   ------------------  -----------  -------------------------------- 
Indicated               334,000        11.65                           125,000 
-----------  ------------------  -----------  -------------------------------- 
Inferred                473,000        11.70                           178,000 
Dilution                323,000            0                                 0 
 
                  Geological Inventory in PEA Mining Inventory in Pillars 
             ----------------------------------------------------------------- 
 
 
 Category                Tonnes       Au g/t             Contained Gold Ounces 
----------   ------------------  -----------  -------------------------------- 
Indicated                 9,000        13.71                             4,000 
-----------  ------------------  -----------  -------------------------------- 
Inferred                 10,000        12.18                             4,000 
-----------  ------------------  -----------  -------------------------------- 
 
 
               Geological Inventory not scheduled in PEA (low grade/isolated 
                                      areas/remnants) 
             ----------------------------------------------------------------- 
 
 
 Category                Tonnes       Au g/t             Contained Gold Ounces 
----------   ------------------  -----------  -------------------------------- 
Indicated               392,000         5.23                            66,000 
-----------  ------------------  -----------  -------------------------------- 
Inferred              1,162,000         4.39                           164,000 
-----------  ------------------  -----------  -------------------------------- 
 
 
   1. Geological inventory is reported at a cut-off grade of 2.0 g/t, an 
      assumed gold price of US$1,500 per tonne, an assumed metallurgical 
      recovery of 95% and an assumed operating cost of US$100 per tonne. 
 
   2. The geological inventory as set out in the above tables has been derived 
      from the NI 43-101 compliant Mineral Resources estimated by Mr Kevin 
      Gunesch, PE and Mr Hamid Samari, QP MMSA who are both qualified persons 
      under NI 43-101. 
 
   3. The Coringa Gold Project is wholly owned by Chapleau Exploracao Mineral 
      Ltda, an indirectly held, wholly owned subsidiary of the Company. The 
      gross geological inventory detailed above is therefore also the net 
      geological inventory attributable to the Company.  Chapleau Exploracao 
      Mineral Ltda  is the operator of the Coringa Gold Project. 
 
   4. Numbers may not add up due to rounding. 
 
   5. The provisions of NI 43-101 require that Inferred Resources may not be 
      aggregated with other categories of mineral resources.  Accordingly, it 
      is not permitted to provide in these tables the overall total tonnage or 
      weighted average grade for ore comprising each of the Mining Inventory, 
      the Mining Inventory in Pillars and Material Not Scheduled in the PEA. 
 
 
   GRE believes that the resource estimates shown in the table above meets 
the CIM standards for a resource estimate based on CIM Standards of 
Mineral Resources and Reserves Definitions and Guidelines adopted by the 
CIM council 10 May, 2014. 
 
   Mine 
 
   The Coringa gold project will be owner-operated.  The selective open 
stoping that is planned is already employed at Serabi's neighbouring 
Palito Complex operation in the Tapajos, where the relevant skills and 
track record in narrow vein mining are well established. 
 
   Based on the mine schedule, the mine plan delivers some 1,130,000 tonnes 
of run-of-mine ("ROM") feed during a nine year period at an average gold 
grade of 8.34 g/t, which includes a 2 year ramp up in production. 
 
   Metallurgy and Processing 
 
   The Coringa project will utilise a process plant which is located at 
site, awaiting assembly.  The plant has been previously operated, in 
Brazil, on a continuous basis producing gold bullion. The plant has a 
total milling capacity of approximately 580 tonnes per day ("tpd") using 
two ball mills. 
 
   The process flow-sheet comprises a crushing circuit, a milling circuit, 
a gravity concentration circuit, as well as a  Carbon in Leach ("CIL") 
plant.  Feed passes through the gravity circuit where a portion of gold 
is concentrated, leached and recovered by electrowinning.  Gold not 
recovered by gravity, passes through the CIL circuit. 
 
   The tailings from the CIL circuit flow to a filter press which extracts 
the majority of the fluid content of the slurry material.  The fluids 
are passed back and re-used in the process plant whilst the resulting 
de-watered tailings are transported for long term storage in a dry 
storage tailings facility. 
 
   Infrastructure 
 
   Power Supply -- the Coringa mine-site is located close to the paved 
BR163 highway along which route a mains grid power line exists. However, 
to expedite the start-up of operations the PEA anticipates that power 
for the project will be generated by on-site diesel generators. 
 
   Water Supply - the site has an adequate supply of water and will recycle 
process water from the drying of the process tailings and utilise small 
dams to provide adequate water storage for all mining and processing 
needs. 
 
   Camp - A full mining camp has already been constructed at Coringa. 
Serabi contracts its own security service and there is a guard house at 
the entrance to the mine. 
 
   Access - the mine is accessed by unsealed road directly from the BR163 
highway which links the city of Cuiaba in the state of Mato Grosso to 
the city of Santarem in the state of Para.  Coringa is approximately 70 
kilometres southeast of the city of Novo Progresso and approximately 200 
kilometres to the south of Serabi's existing gold production operations 
in the Tapajos region.  A commercial airstrip, suitable for light planes, 
is located at Novo Progresso. 
 
   Capital and Operating Expenditures 
 
   Capital expenditure 
 
   A breakdown of initial, sustaining and total capital expenditure is 
tabulated below: 
 
   Table 5 - Projected capital expenditure requirements 
 
 
 
 
Category                    Initial Capital  Sustaining Capital  Total Capital 
--------------------------  ---------------  ------------------  ------------- 
                                 (US$)             (US$)             (US$) 
--------------------------  ---------------  ------------------  ------------- 
Mine Equipment                   $1,852,000          $4,091,000     $5,943,000 
--------------------------  ---------------  ------------------  ------------- 
Mine Infrastructure              $6,449,000          $2,993,000     $9,442,000 
--------------------------  ---------------  ------------------  ------------- 
Site Facilities                  $2,262,000          $1,211,000     $3,473,000 
--------------------------  ---------------  ------------------  ------------- 
Process Plant                    $9,353,000                $ --     $9,353,000 
--------------------------  ---------------  ------------------  ------------- 
Permitting                         $300,000                $ --       $300,000 
--------------------------  ---------------  ------------------  ------------- 
Exploration and 
 Engineering Studies               $500,000                $ --       $500,000 
--------------------------  ---------------  ------------------  ------------- 
Closure Cost                           $ --          $1,000,000     $1,000,000 
--------------------------  ---------------  ------------------  ------------- 
Working Capital - 
 Recapture at End                $1,775,000         -$1,775,000           $ -- 
--------------------------  ---------------  ------------------  ------------- 
Contingency                      $3,983,200          $1,659,000     $5,642,200 
--------------------------  ---------------  ------------------  ------------- 
Net Pre-production income      $(1,790,636)                $ --   $(1,790,636) 
--------------------------  ---------------  ------------------  ------------- 
TOTAL                           $24,683,564          $9,179,000    $33,862,564 
--------------------------  ---------------  ------------------  ------------- 
 
 
   Operating expenditure 
 
   The average operating cash costs, once sustained positive cash flow has 
been achieved, are tabulated below: 
 
 
 
 
 Category          US$ / oz  US$ / tonne 
-----------------  --------  ----------- 
Mining Ore             $362          $92 
Process Plant          $213          $54 
G&A                     $40          $10 
                   --------  ----------- 
Op. Cash Costs         $615         $156 
Refining Costs          $18           $5 
Royalties               $60          $15 
Contingency            $123          $31 
                   --------  ----------- 
Total Cash Costs       $816         $207 
Capital                 $36           $9 
                   --------  ----------- 
Total Cash Costs       $852         $216 
-----------------  --------  ----------- 
 
 
   Financial Analysis 
 
   The cash flow model that has been generated by GRE is based on the mine 
production and processing schedule, associated gold grades, 
metallurgical recoveries and capital and operating costs summarised in 
Table 2 above. The economic analysis assumes delivery of gold doré 
bars to a refinery located in Brazil for onward sale to gold traders. 
GRE has assumed that overall transportation, treatment, refining and 
insurance charges will be approximately US$18 per ounce.   In addition, 
account has been taken of royalty payments totalling 4.75% including an 
existing net smelter royalty in favour of Sandstorm Gold Ltd. of 2.5%, a 
government royalty of 1.5% and a royalty potentially payable to the 
landowners of 0.75%. 
 
   The Base Case economic analysis assumes a gold price of US$1,275 per 
ounce. 
 
   The table below summarises the sensitivity of the Project's Net Present 
Value ("NPV") to variations in gold price, and, for each gold price 
scenario, the impact of a +/-10% sensitivity for capital and operating 
costs. The gold price Base Case of US$1,275 per ounce has been 
highlighted in the table. 
 
   Table 6 - Project sensitivities 
 
 
 
 
                                                  NPV (post    NPV (post 
                                                    tax)         tax) 
-------------  ------  -----------               -----------  -----------  ---------- 
                Metal                                                       IRR (post 
                Price    Capital Expenditure             10%           5%        tax) 
-------------  ------  ------------------------  -----------  -----------  ---------- 
                           Initial   Sustaining 
-------------  ------  -----------  -----------  -----------  -----------  ---------- 
               USD/oz 
               (gold)          USD          USD          USD          USD 
-------------  ------  -----------  -----------  -----------  -----------  ---------- 
Sensitivity to Gold Price 
------------------------------------------------------------------------------------- 
               $1,450  $19,286,000   $9,179,000  $56,070,000  $79,647,000       45.8% 
               $1,350  $22,370,000   $9,179,000  $41,683,000  $61,327,000       37.4% 
               $1,275  $24,684,000   $9,179,000  $30,696,000  $47,278,000       30.7% 
               $1,200  $27,020,000   $9,179,000  $19,680,000  $33,196,000       23.8% 
 
Sensitivity to Opex at varying gold prices 
------------------------------------------------------------------------------------- 
10% increase 
 in opex       $1,450  $22,385,000   $9,179,000  $45,916,000  $66,933,000       39.2% 
10% increase 
 in opex       $1,350  $25,475,000   $9,179,000  $31,259,000  $48,194,000       30.6% 
10% increase 
 in opex       $1,275  $27,814,000   $9,179,000  $20,241,000  $34,109,000       23.8% 
10% increase 
 in opex       $1,200  $30,192,000   $9,179,000   $9,183,000  $19,975,000       16.5% 
 
10% decrease 
 in opex       $1,450  $16,186,000   $9,179,000  $66,134,000  $92,245,000       52.7% 
10% decrease 
 in opex       $1,350  $19,271,000   $9,179,000  $52,011,000  $74,309,000       44.2% 
10% decrease 
 in opex       $1,275  $21,584,000   $9,179,000  $41,113,000  $60,405,000       37.7% 
10% decrease 
 in opex       $1,200  $23,898,000   $9,179,000  $30,126,000  $46,356,000       30.9% 
 
Sensitivity to Capex at varying gold prices 
------------------------------------------------------------------------------------- 
10% increase 
 in capex      $1,450  $21,277,000  $10,009,000  $53,791,000  $77,130,000       43.1% 
10% increase 
 in capex      $1,350  $24,362,000  $10,009,000  $39,404,000  $58,810,000       34.9% 
10% increase 
 in capex      $1,275  $26,675,000  $10,009,000  $28,416,000  $44,761,000       28.5% 
10% increase 
 in capex      $1,200  $29,012,000  $10,009,000  $17,401,000  $30,679,000       21.7% 
 
10% decrease 
 in capex      $1,450  $17,294,000   $8,350,000  $58,349,000  $82,164,000       48.8% 
10% decrease 
 in capex      $1,350  $20,379,000   $8,350,000  $43,962,000  $63,844,000       40.0% 
10% decrease 
 in capex      $1,275  $22,692,000   $8,350,000  $32,975,000  $49,795,000       33.2% 
10% decrease 
 in capex      $1,200  $25,029,000   $8,350,000  $21,959,000  $35,713,000       26.0% 
-------------  ------  -----------  -----------  -----------  -----------  ---------- 
 
 
   NB -- Initial capital expenditure includes pre-production revenue and 
therefore varies with the gold price assumption. 
 
   Taxation 
 
   The profits tax assessable on the project takes into account a tax 
incentive that was granted to the Serabi's existing operating 
subsidiaries, initially during 2008 and renewed in 2018, by SUDAM 
(Amazon Development Superintendence). This incentive consists of a 
reduction by 75% of the regular corporate income tax (also referred to 
as IRPJ) and currently levied at a rate of 25%.  The incentive may only 
be applied for once the project is in operation and, at the present time 
and based on past experience, management is not aware of any reason why 
an application for this incentive should not be approved.  The incentive 
is awarded for an initial term of 10 years. The CSLL tax (a social 
welfare tax amounting to 9%) has been assumed to apply for the duration 
of the project life. 
 
   Other tax incentives are available and in particular the RECAP is a 
special tax regime for the acquisition of goods by export companies and 
applies to the exemption of PIS and COFINS (Brazilian social 
contribution taxes) on purchases of imported machinery and equipment. 
In the past Serabi has been able to benefit from this tax regime and 
will make application in respect of the Coringa project and management 
is not aware of any current reason why such an application should not be 
approved. 
 
   Permitting 
 
   On 14 August 2017, Anfield Gold Corp ("Anfield"), the previous owners of 
Coringa, announced that it had received key permits required to commence 
construction of the Coringa project, being (1) the license of operation 
for exploration and trial mining, (2) the vegetation suppression permit 
and (3) fauna capture permit, all issued by the SEMAS. The SEMAS permits 
contain a list of conditions for the conservation and protection of 
fauna and flora. 
 
   In May 2018 trial mining licences for each of the concessions 
850568/1990 and 850567/199, valid until 25 May 2020 and 25 November 2020 
respectively, were issued by the DNPM permitting the commencement of 
mine development and limited mining production from Coringa. The trial 
mining licenses and the concurrent operating licence authorises mining 
of up to 50,000 tonnes of gold bearing mineralisation per year at 
Coringa.  In the absence of the necessary processing permits, any gold 
bearing mineralisation recovered at this stage will be stockpiled for 
future processing. Under applicable regulations, once the mine is 
operational, Chapleau Exploracao Mineral Ltda ("Chapleau Brazil") may 
apply to the DNPM and SEMAS to increase the mining and processing 
limits. 
 
   On 23 May 2018, Serabi was informed, following an action brought by the 
Brazilian Ministério Público Federal ("MPF"), on 27 September 
2017, seeking to nullify the operating license previously granted to 
Chapleau Brazil by SEMAS, that the court and judge who presided over the 
hearing on 26 April 2018, denied the MPF any action against SEMAS, the 
DNPM and Chapleau Brazil and also denied any right to appeal the 
decision, thus allowing Chapleau Brazil to proceed with advancing the 
project. 
 
   Progress has also been made in several other areas relating to the 
development of Coringa. Applications for required camp and start-up 
water were submitted by Anfield prior to the acquisition of Coringa by 
Serabi ("the Acquisition").  The Environmental Impact Assessment ("EIA") 
which had already been prepared and submitted by Anfield prior to the 
Acquisition was approved by SEMAS late in 2018.  However, in light of 
concerns over conventional tailings dams in Brazil, following the 
failure of the Brumadinho dam in January 2019, Serabi, as envisaged in 
the PEA, intends to install a filtration plant allowing for the dry 
stacking of tails and eliminating the need for a conventional tailings 
dam.  The Company is working with SEMAS on an amendment to the EIA to 
reflect this change in the planned process flowsheet and following the 
approval of SEMAS will then arrange the necessary public hearings.  It 
is hoped that these hearings can be held during the fourth quarter of 
2019, following which management hopes to receive the Preliminary 
Licence ("Licencia Previa") before the end of 2019. 
 
   Discussions for long-term land access agreements with the Instituto 
Nacional de Colonização e Reforma Agrária ("INCRA"), a 
government agency which claims ownership of the surface rights where the 
project is situated are ongoing and being progressed. 
 
   Historical Estimates 
 
   Historical resources estimates for the Coringa ore-body are documented 
in the technical reports entitled NI 43-101 Technical report, Coringa 
Project, Mineral Resource Estimate dated 18 April 2019, Coringa Gold 
Project, Brazil Feasibility Study NI 43-101 Technical Report, dated 
September 8, 2017 and Coringa Gold Project, Brazil NI 43-101 Technical 
Report, dated July 1, 2017 which are filed on the Company's website at 
www.serabigold.com and SEDAR at www.sedar.com. 
 
   Qualified Persons and Quality Control 
 
   The scientific and technical information ("the Technical Information") 
contained in this news release pertaining to the Coringa gold project 
has been reviewed and approved by the following qualified persons under 
National Instrument 43-101 -- Standards of Disclosure for Mineral 
Projects ("NI 43-101") in accordance with the rules of the Canadian 
Institute of Mining, Metallurgy and Petroleum ("CIM"), which is an 
internationally recognised standard pursuant to the AIM Rules. 
 
 
   -- Kevin Gunesch, PE, Global Resource Engineering 
 
   -- Hamid Samari, QP-MMSA, Global Resource Engineering 
 
   -- Todd Harvey QP, MMSA, Global Resource Engineering 
 
   -- Larry Breckenridge PE, Global Resource Engineering 
 
 
   The Technical Information is extracted from information that has been 
compiled by Mr Gunesch, Mr Samari, Mr Harvey and Mr Breckenridge PE who 
have carried out the assignment on behalf of the firm Global Resource 
Engineering ("GRE"). Mr Gunesch, Mr Samari, Mr Harvey and Mr 
Breckenridge are each familiar with NI 43-101 and, by reason of 
education, experience and professional registration, fulfil the 
requirements of a Qualified Person as defined in NI 43-101 and for the 
purposes of the AIM Rules. Mr Gunesch, Mr Samari, Mr Harvey and Mr 
Breckenridge are responsible for the preparation of the Preliminary 
Economic Assessment. Mr Gunesch, Mr Samari, Mr Harvey and Mr 
Breckenridge have all consented to the publication of the Preliminary 
Economic Assessment and Mineral Resources estimate and the inclusion of 
the information contained in this announcement in the form and context 
in which it appears. 
 
   The PEA study was completed by GRE who is responsible for the 
preparation of the overall study including mine design, mine capital 
cost, mine operating cost, costing for the process plant replacement, 
refurbishment and operating, construction and operating costs for the 
tailings management facilities and economic models. 
 
   GRE is not an associate or affiliate neither of Serabi, nor of any 
associated company, or any joint-venture company. GRE's fees for this 
Technical Report are not dependent in whole or in part on any prior or 
future engagement or understanding resulting from the conclusions of 
this report. These fees are in accordance with standard industry fees 
for work of this nature, and GRE's previously provided estimates are 
based solely on the approximate time needed to assess the various data 
and reach appropriate conclusions. This report is based on information 
known to GRE as of 4 September 2019. 
 
   Enquiries: 
 
 
 
 
Serabi Gold plc 
Michael Hodgson                           Tel: +44 (0)20 7246 6830 
Chief Executive                           Mobile: +44 (0)7799 473621 
 
Clive Line                                Tel: +44 (0)20 7246 6830 
Finance Director                          Mobile: +44 (0)7710 151692 
 
Email: contact@serabigold.com 
---------------------------------------- 
Website: www.serabigold.com 
---------------------------------------- 
 
Beaumont Cornish Limited 
 Nominated Adviser and Financial Adviser 
Roland Cornish                            Tel: +44 (0)20 7628 3396 
Michael Cornish                           Tel: +44 (0)20 7628 3396 
 
Peel Hunt LLP 
 UK Broker 
Ross Allister                             Tel: +44 (0)20 7418 9000 
James Bavister                            Tel: +44 (0)20 7418 9000 
 
 
   Copies of this announcement are available from the Company's website at 
https://www.globenewswire.com/Tracker?data=AFRhPe2hnd1ey2SasMqshNzwiz7TBjqpSToEA5YGL2L2FPekrBWPkUOfCa0AR2n_CfvvTB6SOBNyRqeUjfR1ElYFn5n9APz3aYpSSv4BEIY= 
www.serabigold.com. 
 
   Neither the Toronto Stock Exchange, nor any other securities regulatory 
authority, has approved or disapproved of the contents of this 
announcement. 
 
   This announcement is inside information for the purposes of Article 7 of 
Regulation 596/2014. The person who arranged for the release of this 
announcement on behalf of the Company was Clive Line, Director. 
 
   GLOSSARY OF 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 
https://www.globenewswire.com/Tracker?data=o-tyvScJB3IWrz_6SQ1JBTKSFvYNL7jIgGuVoQ_q9JSqdMA9opyPy34l-vUKtzoRFVvGQha3GbAJZ2IRaB4hV22lOSorpLuPzkL8A8pVQFgzKrSxuS0_GVYpmVjuKazjc9RcFBfQB_ddWnEIoVM0boTI52QYB1EDpRIV07bzWeW1ZpIhfUYR81g8jogw7s_1pBJVMwSRIsmKANdSjW2Exg== 
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. 
 
   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, 
recognising 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. 
 
   Forward Looking Statements 
 
   Certain statements in this announcement are, or may be deemed to be, 
forward looking statements. Forward looking statements are identi ed 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 re ect 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 
 
 
 
 

(END) Dow Jones Newswires

September 06, 2019 02:00 ET (06:00 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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