1st Jul 2014 14:03
LONDON (Alliance News) - Serabi Gold PLC is planning to start work on updating the mineral resource for its Sao Chico gold site in Brazil during the third quarter this year, in order to help prove up the economics of its operations, Chief Executive Officer Michael Hodgson says.
"One thing we would like to do, is to go back into Sao Chico, to put out an updated resource there," Hodgson told Alliance News in an interview. "We're going to start a surface drill programme probably in the third quarter at Sao Chico with a view to try and drill out a lot more of the deposit, to be in a position to better understand the resource earlier.?
Serabi is a gold exploration and development company with operations in Brazil. It is currently close to commercial production from its Palito mine in the Tapajos region of northern Brazil, and also expects initial production to start at its Sao Chico deposit by the end of the year.
The company said in February that its exploration programme at the Sao Chico gold project had intersected further high-grade gold deposits, suggesting a significant extension of the mineralisation at the site. It said at the time that it would undertake some initial development of the deposit.
"Our official gold resource at Sao Chico is 100,000 ounces, but we've seen significant improvements in this through non-disclosed drilling,? Hodgson said.
?I want to put out a resource of around 400,000 ounces," he added. "We'll start in the third quarter and finish around October or November. To have a resource update by the first quarter next year.?
Once it has its new mineral update, the company can begin creating a mine plan, with the aim of bringing the mine into full production by mid-2015.
The Palito and Sao Chico sites are close to each other, and ore will be processed at the same facility. The plant currently has one mill for Palito ore, and a second mill is due to come online soon which will initially process stockpiled Palito ore before being used for Sao Chico ore.
?We?ve bought a second mill which should be functioning by the end of June for Sao Chico, but until then it will eat the stockpile down,? Hodgson said.
The Palito mine was switched on last December. In the first quarter of this year, it produced 2,300 ounces of gold from 11,387 tonnes of ore at an average grade of 7.09 grams per tonne.
The company needs three months of sustained levels of production before it can achieve its first sales from the site, something it expects very soon. ?If June goes as per budget, we will have achieved commercial production. If not it will be July,? Hodgson said.
The company expects that production at Palito, production from stockpiles, and the initial production from Sao Chico, will provide it with between 23,000 and 24,000 ounces of gold by the end of the year.
While the company has raised enough money to develop Sao Chico, it is not holding enough to finish it and put it into full production, according to Hodgson. As a result, Serabi is expecting to have to raise cash through debt or by holding cash flow in order to complete the development process.
?Dependent on the gold price, probably the next USD5 million or USD6 million to finish Sao Chico for full production will be funded by cash flow or some sort of debt facility,? Hodgson said. ?I?m pretty confident it wont be an equity raise.?
Looking ahead, the company wants Palito and Sao Chico to be considered the beginning of its development process. Hodgson wants a step change for the company and is aiming for a market cap of GBP120-140 million, in order to get proper market attention.
?What we need to do there is to find another asset using Palito and Sao Chico, that's what our board and the major shareholders want to do,? Hodgson said. ?So we are definitely on the hunt for something bigger, it will be in Brazil I'm sure and in the same region, I hope. We've got to position ourselves to either be an acquirer or to be acquired?
In May, the Brazil-focused gold miner said its pretax loss narrowed to USD1.3 million for the three months ended March 31, from USD1.4 million a year earlier, due mainly to lower foreign exchange costs.
Serabi Gold shares were untraded at 5.15 pence on Monday.
By Tom McIvor; [email protected]; @TomMcIvor1
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