Serabi Gold plc (AIM:SRB,TSX:SBI) 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.

Copies of this announcement are available from the Company’s website at www.serabigold.com.



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.

Full RNS Link Here


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