🕐21.09.10 - 06:27 Uhr

Serabi Mining plc (UK) - Announcement of Interim Financial Results for the 6 months to 30 June 2010



Serabi Mining plc
     

Published: 13:45 CEST 15-09-2010 /Thomson Reuters /Source: Serabi Mining plc /XLON: TICKER SRB /ISIN: GB00B074J639

Announcement of Interim Financial Results for the 6 months to 30 June 2010


PRESS RELEASE - 15  September 2010

 

SERABI MINING plc ("Serabi" or "the Company")

 

Announcement of Interim Financial Results for the 6 months to 30 June 2010

 

 

Highlights

 

  • Eldorado Gold subscribed for 120,000,000 new shares at 3 pence in June 2010 and have taken a 26.8% interest in the Company 

  • The IP survey undertaken in first half of the year has yielded nine drill targets - a better than expected result 

  • Cash balances at the end of the period were US$7.2 million 

 

 

 

Overview

2010 has so far been a year of relative success, with the identification of nine drill targets at Palito and the completion of a share subscription by senior Canadian based gold mining company Eldorado Gold Corporation ("Eldorado").

 

Exploration undertaken in the first half of the year yielded better than expected results, with activity comprising follow-up ground geophysics based on the first twelve of eighteen anomalies identified in the 2008 airborne geophysical survey.

 Based on these and other exploration results we are now planning a discovery drill programme that could potentially confirm the presence of additional resources in close proximity to the Palito mine.

 We believe that this could form the basis for achieving our objective of establishing a minimum 1.5 million ounce resource in the area.

 

Following a subscription agreement that was announced on 16 June 2010, Eldorado acquired 120,000,000 shares in Serabi, which equates to a 26.8% interest in the Company.

 The gross proceeds were £3.6 million, equivalent at the time to approximately US$5.4 million.

 Eldorado has also recently completed the acquisition of our near neighbour in the Tapajos, TSX listed Brazauro Resources Corp for a consideration of approximately C$120 million.

 As a result of this transaction Eldorado has acquired a 100% interest in the Tocantinzinho project which is located only 70 kilometres to the north-west of Palito.

 Eldorado has subsequently announced that it will be undertaking a pre-feasibility study ("PFS") on the project which it hopes to complete during Q4, 2010 and that, subject to the outcome of the PFS and the necessary permitting applications, it hopes to be in a position to complete a Feasibility Study by mid-2011 and make a construction decision prior to the end of 2011.

 We view all of this as very positive for the Tapajos region and its development and hope that with its strategic position at the eastern edges of the Tapajos, Serabi will be well placed to benefit from the improvements that the future potential development of the Tocantinzinho project could be expected to bring to the area.

 

The financial results for the first six months ended 30 June 2010 ("the Period"), show an operating loss for the Serabi Group of US$2,260,134, of which US$1,017,458 relates to depreciation charges.

 This compares with an operating loss for the equivalent period in 2009 of US$4.44 million and a loss for the 12 month period to 31 December 2009 of US$9.76 million.

 A total of 1,052 ounces of gold were sold during the period generating revenues of US$1.15 million.

 

Reflecting the increased activity in exploration and in particular the ground geophysical surveys undertaken at Palito during the second quarter, exploration charges recorded were US$799,564.

 These costs have been capitalised and are reflected in the Balance Sheet.

 

The share subscription by Eldorado has strengthened the working capital position of the Serabi Group which at the Period end, had cash holdings of US$7.2 million.

 

Tapajos Strategy

As previously stated, in light of our experience at Palito, we believe that it would be risky and therefore unwise to re-establish underground mining operations at Palito until such time that we are confident that a more substantial resource can be identified, thus underpinning production rates required to support a larger and sustainable operation.

 We consider that such an operation needs to be of the order of 70,000 ounces per annum but as with all mines, ultimately the production rate will be determined by the reserves and resources identified.

 Whilst there is clearly a desire from shareholders to use operational cash flows to fund capital needs whenever possible, the decision to go into production with any operation must be made on the basis of a solid reserve and resource and a long term mine development and production plan.

 Our planned exploration programme over the next 18 months is therefore targeted to establish just that.

Exploration Programme

Our exploration programme during the first half of 2010 comprised ground based follow-up work to the aerial electro-magnetic VTEM survey of 2008.

The term Head-frame Exploration is often used in the mining industry, to describe exploration focused in and around existing mining areas and related infrastructure.

 Such a strategy seeks to discover similar additional mineralised ore deposits in close proximity, whilst any discoveries made and resources and reserves defined can also ultimately take advantage of such infrastructure once production commences.

 With this in mind Serabi flew the original airborne geophysical survey in 2008, and the results of this survey have formed the basis of our recent exploration.

   

 

The majority of this activity to date has consisted of undertaking ground Induced Polarisation ("IP") surveys over a number of the anomalies that the VTEM work had identified.

 The purpose of these surveys was to better define the anomalies, with the view to either justify drilling, or discard the less interesting ones.

   

 

Our objective and hope was that out of the 18 VTEM anomalies we would eventually identify at least two "Palito look-a-like" deposits, with minimum gold resources of approximately 500,000 ounces each.

 We are therefore very encouraged that the initial IP programme has identified nine drill targets from the first twelve of the VTEM anomalies surveyed and believe that this success rate has improved the prospects of discovering these two new deposits.

 It is also worth noting that all of these drill targets are less than 3 kilometres from the existing plant and infrastructure, comfortably within viable haulage distance.

 Furthermore, a number of the targets are located within the existing mining lease, which should eliminate or at least simplify, the need for additional permitting required in the event of any production decision.

 

Based on these results, we are now preparing to begin a 7,500 metre discovery drill programme over the nine identified targets.

 This programme is intended to establish if the anomalies are sufficiently gold mineralised to justify further drilling in 2011.

 Any subsequent programmes would be for resource definition drilling to establish the size and continuity of identified mineralised structures.

 

 

Concurrently, we plan to undertake further IP surveys over the remaining VTEM anomalies not yet tested and, dependent on results, would then undertake a similar programme of drilling over those anomalies that warrant further evaluation.

 Clearly we need to keep the exploration programme flexible.

 In the event of initial success, we may consider re-prioritising the programme in order to accelerate the resource definition drilling phase on any early discoveries.

 Shareholders should be aware that we consider each anomaly to be mutually exclusive; success or failure in the discovery drilling phase of one anomaly is by no means indicative of the outcome of the drilling of another anomaly.

 It is important to note that geophysics, of which VTEM and IP are tools, is only an indicator of the potential for mineralisation.

 However, based on the knowledge and experience previously gained from the Palito ore bodies, we are very encouraged by these recent results.

 

 

In the event that the current outlined programme is successful, we are also evaluating other areas in the vicinity of Palito and the Jardim do Ouro district where we might consider undertaking further airborne VTEM surveys.

 Serabi has exploration tenement holdings of almost 60,000 hectares in this area but our recent activity has to-date focused on an area of only 6,000 hectares immediately adjacent to Palito.

 On the basis of our experience, we now consider that it is possible that in this part of the Tapajos, VTEM can be used as a very effective, low cost first-pass technique to screen large areas, subsequently deploying IP to follow-up the identified areas of interest.

 Such an approach provides a methodology that could rapidly unlock the potential to find new deposits and establish further mining opportunities.

 

IBAMA Suspension Notice

As previously announced, surface oxide mining operations at Palito were suspended following the issue of a notice by the Brazilian Federal Environmental Agency, IBAMA (Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renovavais) in June of this year.

 The oxide production was only ever expected to be a breakeven venture and after more than eighteen months of such activity it had become in any event increasingly difficult to identify further adequate surface resources to justify continuous operations of this nature and at a time when our priority has moved to exploration.

 Ultimately the long term value and growth of Serabi will be derived from exploration success and not small scale oxide mining, which could otherwise become a major distraction of management time.

 The current suspension of oxide mining activity has facilitated the transfer of personnel and equipment resources for exploration purposes.

Oxide ore processing in the future will only be undertaken on a campaign basis,  thus running the plant when adequate stocks of ore were available.

 We have also now reduced and reconfigured the workforce to a more versatile team who can be used in exploration, mining and processing as required.

 

 

We have delayed the start of the initial discovery drill programme in the light of the suspension notice.

 Despite considerable efforts, IBAMA have not yet provided formal confirmation that exploration activities are excluded by the notice and we are therefore unwilling to risk further possible sanctions by undertaking work that could be considered to be in breach of the IBAMA suspension notice.

 Notwithstanding this delay, the IBAMA suspension notice has to date not had serious implications for our exploration activities.

With respect to the suspension, we have made our submission to IBAMA rebutting the alleged breaches of the operating licence and have made representations to senior officials within the Mines Department and IBAMA in Brasilia.

 Whilst they are verbally supportive of Serabis case, at this stage a resolution rests with the IBAMA officials within Para state.

 In the light of the delays in obtaining any formal decision we have also lodged an injunction with the courts in Para for the suspension notice to be lifted whilst the matter is discussed and resolved between ourselves and IBAMA.

 We are pressing the court for a decision to be made as soon as possible.

 There is no provision within the law establishing specific time frames within which the defence must be considered or within which a judge must rule on an application for an injunction.

We remain confident that the matter can be resolved satisfactorily.

 

Taking account of developments during 2010 so far, we believe that the drilling programme can soon be started and are hopeful that the potential exploration success will mark a new, positive and exciting chapter in Serabis life.

 

 

Graham Roberts

Mike Hodgson

Chairman

Chief Executive

15 September 2010

 

 

 

 

Enquiries

 

Serabi Mining plc

 

Graham Roberts

Tel: 01737 773691

Chairman

Mobile: 07768 902475

 

 

Clive Line

Tel: 020 7246 6830

Finance Director

Mobile: 07710 151 692

 

 

Email:

 

Website:  www.serabimining.com

 

 

 

Beaumont Cornish Limited

Nominated Adviser and Broker

 

Roland Cornish

Tel: 020 7628 3396

Michael Cornish

Tel: 020 7628 3396

 

 

Hybridan LLP

Broker

 

Claire Noyce

Tel: 020 7947 4350

 

 

Farm Street Communications

Public Relations

 

Simon Robinson

07593 340107

 

Copies of this release and the interim Financial Statements are available from the companys website www.serabimining.com.

 

STATEMENT OF COMPREHENSIVE INCOME

 

 

Group

 

 

For the

For the

For the

 

 

six months

six months

year

 

 

ended

ended

ended

 

 

30 June

30 June

31 December

 

 

2010

2009

2009

(expressed in US$)

Notes

(unaudited)

(unaudited)

(audited)

CONTINUING OPERATIONS

 

 

 

 

Revenue

 

1,148,999

3,601,349

5,512,804

Operating expenses

 

(1,494,386)

(3,061,975)

(5,755,002)

Gross profit/(loss)

 

(345,387)

539,375

(242,198)

Administration expenses

 

(842,391)

(1,178,935)

(1,851,937)

Option costs

 

(50,204)

(40,161)

(147,038)

Write-off of past exploration costs

 

-

-

(495,138)

Increase in rehabilitation provision

 

-

-

(346,000)

Loss on asset disposals

 

(4,694)

(209,661)

(181,237)

Impairment

9

-

(2,422,737)

(4,343,048)

Depreciation of plant and equipment

 

(1,017,458)

(1,126,106)

(2,157,026)

Depreciation of mine asset

 

-

-

 

Operating loss

 

(2,260,134)

(4,438,226)

(9,763,622)

Foreign exchange gain

 

(272,573)

93,755

(14,533)

Finance costs

 

(60,579)

(158,936)

(215,916)

Investment income

 

5,103

1,481

3,569

Loss before taxation

 

(2,588,183)

(4,501,926)

(9,990,502)

Income tax expense

 

-

-

-

Loss for the period from continuing operations (1) (2)

 

(2,588,183)

(4,501,926)

(9,990,502)

 

 

 

 




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