SERABI MINING plc ("Serabi" or "the Company")
AGM Statement
Serabi Mining plc advises that at 11:00 today, it will be holding its
Annual General Meeting.
The following reproduces the text of the statement that will be made
by Graham Roberts, Chairman of the Company:
"The continuing modest success of the oxide mining operations at
Palito has made a valuable contribution to the Company's cash flow
this year potentially allowing us the opportunity to benefit from the
improved markets and investor sentiments, compared with those
prevailing in the earlier part of this year. The oxide ores had not
previously formed a significant part of our production strategy for
Palito because of processing issues when being treated together with
the sulphide ore. For this reason we had never focused before on
establishing significant oxide resources; what resources had been
identified were an incidental consequence of exploration targeted
towards the underlying sulphide mineral deposits.
Heavy seasonal rains earlier this year have precluded us from
undertaking any more systematic exploration of the oxide potential
and, for this reason, production has so far only been derived from
the limited number of known occurrences previously outlined.
However, now the rains have finished I am pleased to say that this
month we will start a drill programme that we hope will lead to the
identification of additional oxide ore feed and thus establish a
longer term source of gold production. In addition we are currently
assessing the potential to reprocess Palito's tailings as a further
source of gold production.
We consider there are now two paths that can be pursued in order to
generate returns for shareholders. A transaction could be undertaken
that would result in value being generated through the disposal of
the projects in Brazil or we raise new funding in order to advance
identified projects and thus enhance the underlying value of those
assets. As noted in our investor newsletters, the production levels
that we are likely to be able to sustain from the oxide gold sources
and the resulting cash flow this will generate, is unlikely to be
adequate to allow the Company to grow and so new capital is needed
for this purpose.
Whilst we understand that any new funds raised would be dilutive for
existing shareholders, the Directors are of the view that this should
be outweighed by the potential for a successful outcome of the
planned exploration and development programmes, that could result in
a significant upward revision of the project values and hence the
Company. In considering the potential success of this strategy it is
noteworthy that some 66 anomalies were successfully identified
following last year's airborne geophysical survey, of which 18 are
considered priority targets. These anomalies exhibit very similar
characteristics to the known Palito mineralisation, and their close
proximity to the Palito infrastructure makes them all the more
important.
As has been noted in the recent quarterly Investor Updates, the
Directors believe that the long term success for Palito requires a
return to more selective mining methods and the establishment of a
larger reserve and resource base to support an expanded operation.
For this reason we are unlikely to pursue a strategy that would see
the early re-opening of Palito and currently prefer to focus on
securing a larger reserve and resource base by concentrating the
Company's efforts and capital on exploration and evaluation of the
near mine anomalies that have already been identified. We consider
that it could take up to four years to fully undertake the work
necessary to bring the project to a stage which would permit project
finance to be used to cover the cost of additional plant,
infrastructure and mining equipment required to support an expanded
operation; the final time frame will of course be dictated by
results. During this time the company's operations will continue to
focus on the oxide mining opportunities, which would be expected to
generate limited cash flow to supplement any new capital raised.
We are working closely with our advisers on indentifying new
potential funding, the levels required and timing. In the event of
successfully pursuing this strategy it should, however, be expected
that further funding would be required over the evaluation period,
though in this event each further raising of new funds would be
undertaken with a greater degree of confidence as to the outcome of
the programmes being financed. We are also working to raise "soft
loans" from one of the Brazilian development agencies SUDAM. We have
lodged an initial application which has been accepted by the agency
but is still subject to amongst other things, technical and legal due
diligence, approval of the business strategy and financial review of
the business plan.
An alternative to progressing Palito on our own would be the
introduction of an industry partner as a means to achieving our
objectives. Accordingly we are continuing our discussions with a
number of potential partners who are interested in the Tapajos region
and the potential that the company's asset base offers. In such a
situation we would look to a partner with sufficient cash resources
that would allow them to follow their initial investment right
through to a project development decision. Whilst to-date none of
our discussions have yet resulted in a suitable proposal, we continue
to be active in pursuing this route as an alternative means of
achieving improved value for shareholders.
It should be remembered that Palito and the related exploration
targets are already a very advanced project, with significant
infrastructure in place, that is clearly not reflected in the current
market valuation of the parent company. Notwithstanding the current
generally depressed valuations placed on mining and exploration
properties worldwide, in the opinion of the Directors Serabi still
represents a significantly undervalued opportunity. The success of
the oxide mining and better markets now provides us with options to
secure this value for shareholders.
As matters progress we will of course continue to keep shareholders
informed."
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: contact@serabimining.com
Website: www.serabimining.com
Beaumont Cornish Limited
Nominated Adviser and Broker
Roland Cornish Tel: 020 7628 3396
Michael Cornish Tel: 020 7628 3396
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