For immediate
release 14
November 2017
Serabi Gold plc("Serabi" or the
"Company")Conditional acquisition of the Coringa gold
project, Brazil
Serabi Gold plc (AIM:SRB, TSX:SBI), the
Brazilian-focused gold mining and development company, is pleased
to report that, on 13 November 2017, it signed a conditional
acquisition agreement to acquire 100 per cent. of the issued share
capital and inter-company debt of Chapleau Resources Ltd
("Chapleau"), a Canadian registered company wholly-owned by
Anfield Gold Corp ("Anfield"), which holds the Coringa gold
project ("Coringa") located in the Tapajos gold province in
Para, Brazil.
Coringa hosts a mineral resource estimate of
376,000 ounces of gold, including an Indicated Resource of 195,000
ounces of gold with an average grade of 8.4 grammes per tonne
("g/t"), which has been prepared in accordance with the reporting
requirements of the standards of NI 43 101. Estimated mineral
reserves included with the mineral resource are 160,000 ounces of
gold with an average grade of 8.4g/t. Coringa is located some 70
kilometres to the south-east of the town of Novo Progresso which is
approximately 130 kilometres by road to the south of Serabi's
current mining operations at Palito.
Serabi will acquire the entire issued share
capital of Chapleau together with its outstanding inter-company
debts owed to Anfield. Serabi will make an initial payment to
Anfield on closing of the transaction ("Closing") of US$5
million in cash ("Initial Consideration"). A further US$5 million
in cash is payable within three months of Closing and a final
payment of US$12 million in cash will be due upon the earlier of
either the first gold being produced or 24 months from the date of
Closing (both payments together being the "Deferred
Consideration"). The total proposed consideration for the
acquisition amounts to US$22 million in aggregate. The Board of
Serabi considers that the Initial Consideration and the first
instalment of the Deferred Consideration can be settled from an
extension of its existing loan facilities and current cash holdings
(which, as at 30 September 2017, were US$9.75 million) and is
evaluating its options for the longer term development finance
requirements of the Coringa project and the Company's existing
organic growth prospects.
Significant Benefits of the
transaction
The Board of Serabi believes that the
acquisition of the Coringa gold project has a number of key
benefits including:
- Coringa hosts an Indicated Mineral Resource of 195,000 ounces
of gold at 8.36g/t and an Inferred Mineral Resource of 181,000
ounces gold at 4.32 g/t (the "Coringa Mineral Resource
Estimate") prepared in accordance with the reporting
requirements of the standards of NI 43 101.
- Coringa is located only 200 kilometres from Serabi's current
Palito mining operation and process plant, allowing synergies for
management and infrastructure and potential reduction of unit
operating costs.
- The Coringa project is a near 'carbon-copy' of Serabi's current
operation, which has been in production since 2014. The
similarities mean Serabi is very well placed to expedite the
successful development and future production potential of the
project.
- Past gold discoveries at Coringa including the Mae de Leite,
Come Quieto, Demetrio and Valdette veins, have not been included in
the current Coringa Mineral Resource Estimate and provide scope for
growing the resources and expanding the life of the project.
- A feasibility report on Coringa issued by Anfield in September
2017 (the "Coringa Feasibility Study"), prepared in
accordance with the reporting requirements of the standards
of NI 43-101, estimated:
- an average production rate of 32,000 ounces per annum and a
total mineable reserve of approximately 160,000 ounces of
gold;
- average all-in sustaining costs of US$783 per oz; and
- a post-tax IRR of 30.8 per cent.
- Serabi considers that scope exists to reduce capital and
operating costs at Coringa by utilising Serabi's existing gold
processing facilities at Palito.
- Book value attributed by Anfield to property, plant and
equipment being acquired, including a 750 tonnes per day crushing,
milling and CIP process plant, is C$20.8 million.
Michael Hodgson, CEO of Serabi
commented.
"Coringa is an advanced gold project that we
have been interested to acquire for some time and know well. It
always appeared to us to be an excellent bolt-on opportunity to
expand Serabi's production and leverage our existing infrastructure
and management. Anfield's recent NI 43-101 compliant
feasibility study for Coringa shows robust economics as a
stand-alone project and I am sure that, with our experience and
resources, we can both reduce the upfront construction and
development costs as well as generate operating costs synergies
with our existing operations.
"Last year Anfield undertook a 26,400 metre
infill drilling programme at Coringa, including 183 exploration
holes over the principal Meio, Serra and Galena veins. Anfield also
completed the acquisition of a 750 tonnes-per-day crushing, milling
and CIP process plant for Coringa and invested in essential initial
infrastructure including a 200 person accommodation facility,
offices and laboratory facilities.
"Anfield's feasibility study projects that
Coringa will produce an average of 32,000 ounces over the life of
the mineable reserves. This incremental production, over and above
our current levels, makes this project work very well for us.
As well as this near-term gold production growth, the feasibility
study highlights a number of other areas of geological interest
within the tenement holdings of over 13,000 hectares. As we are
finding with our Sao Chico and Palito orebodies, I feel there is
significant opportunity to expand the resource and extend the life
of the operation well into the future.
"With Anfield now involved in a merger with
Trek Mining and Newcastle Gold, we have taken the opportunity to
acquire the Coringa project which, whilst no longer core for this
enlarged entity, makes clear sense for Serabi offering an obvious
opportunity to grow."
An interview with Michael Hodgson of Serabi,
discussing the acquisition of Coringa, can be accessed by using the
following link:
https://www.brrmedia.co.uk/broadcasts-embed/5a09a55a2acfc74f9342e870/event/?popup=true
Acquisition Agreement
Serabi has today signed a conditional
acquisition agreement to acquire 100 per cent. of the issued share
capital of Chapleau together with Chapleau's outstanding
inter-company debts owed to Anfield and other Anfield group
companies (the "Agreement"). Chapleau owns 100 per
cent. of the shares of Chapleau Exploração Mineral Ltda
("Chapleau Brazil"). Chapleau Brazil holds mineral rights
consisting of seven concessions totalling 13,648 hectares,
including Coringa. Chapleau also owns 100 per cent. of the shares
of Chapleau Resources (USA) Limited ("Chapleau USA") which
holds a 10 per cent. interest in the Patty JV covering 616 mining
claims in Nevada, USA. The other JV participants are
Barrick Gold US Inc. and McEwen Mining Inc. The projected
costs to Chapleau USA for 2018, in respect of the JV, are
approximately US$20,000.
Serabi expects to make the payment of the
Initial Consideration from existing resources. Immediately
following Closing a completion balance sheet will be prepared and
the Initial Consideration will be adjusted dollar-for-dollar for
the amount, if any, by which the working capital on Closing exceeds
or is less than US$nil. All outstanding intercompany loans between
Chapleau and Anfield will be assigned to Serabi on Closing.
A further US$17 million is the Deferred
Consideration, of which an initial payment of US$5 million in
cash is payable within three months of Closing and a final payment
of US$12 million in cash will be due upon the earlier of either the
first gold being produced or 24 months from the date of Closing.
The total consideration for the acquisition amounts to US$22
million in aggregate (before any working capital adjustments).
The Agreement is conditional on a number of
items including:
- Completion by Serabi of its due diligence, including the
receipt of satisfactory legal opinions as to mining title, labour,
environmental and tax matters;
- Approval of the shareholders of Anfield and approval of the
TSX-V; and
- Approval of Serabi's secured lender (Sprott).
Pursuant to the Agreement, Anfield has provided
Serabi with certain indemnities in respect of future claims
relating to activities prior to Closing, including labour and tax
liabilities. In addition, the Agreement includes representations
and warranties from Anfield in favour of Serabi as would be
customary for a transaction of this nature both on execution of the
Agreement and at Closing.
Serabi has agreed, on Closing, to grant to
Anfield, subject to the approval of Serabi's secured lender and, if
required, sub-ordinated to any security granted by Serabi to its
secured lender, a pledge over the shares of Chapleau as security
for the full and irrevocable payment of the Deferred
Consideration.
Anfield proposes to hold its shareholder meeting
to approve the proposed transaction on 19 December 2017, and
Closing is anticipated to occur shortly thereafter.
The Board of Serabi considers that the Initial
Consideration and the first instalment of the Deferred
Consideration can be settled from an extension of its existing loan
facilities and current cash holdings and is evaluating a number of
options for the longer term development finance requirements of the
Coringa project and the Company's existing organic growth
prospects.
Further information on Coringa
Coringa is located in north-central Brazil, in
the State of Pará, 70 kilometres southeast of the city of Novo
Progresso. Access to the property is provided by paved
(National Highway BR-163) and gravel roads. Coringa is in the
south eastern part of the Tapajós gold district, Brazil's main
source of gold from the late 1970s to the late 1990s. Artisanal
mining at Coringa produced an estimated 10 tonnes of gold (322,600
oz) from alluvial and primary sources within the deep saprolite or
oxidized parts of shear zones being mined using high-pressure water
hoses or hand-cobbing to depths of 15 metres. Other than the
artisanal workings, no other production has occurred at Coringa.
Artisanal mining activity ceased in 1991 and a local Brazilian
company (Tamin Mineração Ltda.) staked the area in 1990.
Subsequently, the concessions were optioned to Chapleau (via its
then subsidiary, Chapleau Brazil) in August 2006. On 1 September
2009, Magellan Minerals Ltd. ("Magellan Minerals") acquired
Chapleau. Between 2007 and 2013, extensive exploration
programmes were completed on the property, including airborne
magnetic, radiometric and electro-magnetic surveys; surface IP
surveys; stream, soil, and rock sampling; and trenching and diamond
drilling (179 holes for a total length of 28,437 meters). On
9 May 2016, Anfield acquired Magellan Minerals. Anfield
subsequently completed an infill drill programme (183 holes for a
total length of 26,413 meters) for the Serra and Meio veins in 2016
and 2017.
Coringa is an advanced project currently at the
resource development stage.
Following completion of the drilling programme
undertaken by Anfield and the Coringa Feasibility Study, activity
has been significantly reduced whilst Anfield has progressed the
licencing and permitting process. There are currently
approximately 70 personnel employed by Chapleau Brazil, but this is
expected to be reduced prior to Closing.
The Coringa Feasibility Study has an effective
date of 1 July 2017 and it incorporates all expenditures prior to
that date. The base case economics are based on a gold price of
US$1,250 per ounce ("oz"), silver price of US$18 per oz and
an exchange rate of 3.2 (US$ to Brazilian Real). The Coringa
Feasibility Study highlights included the following estimates:
· Gold production
of approximately 32,000 oz per year averaged over a 4.8 year mine
life;
· Average life of
mine process fully-diluted gold grade of 6.5 g/t;
· Post-tax
internal rate of return of 30.8 per cent.;
· Post-tax net
present value of US$31.0 million at a 5 per cent. discount
rate;
· Remaining
capital costs of US$28.8 million;
· Average net
cash operating costs of US$585/oz and all-in sustaining costs of
US$783/oz; and
· Probable
mineral reserves of 161,000 oz of gold and 324,000 oz of
silver.
The total fully-diluted estimate of mineral
resources for Coringa, prepared in accordance with the reporting
requirements of the standards of NI 43-101, included in the Coringa
Feasibility Study were reported as follows:
Classification |
Tonnes ('000's) |
Au grade (g/t) |
Ag grade (g/t) |
Contained gold (oz) |
Contained Silver (oz) |
Cut-off grade (g/t Au) |
Serra Probable
Reserves |
498 |
6.0 |
12.8 |
97,000 |
204,000 |
2.50 |
Meio Probable
Reserves |
196 |
7.4 |
14.6 |
46,000 |
92,000 |
2.38 |
Galena Probable
Reserves |
74 |
7.1 |
11.2 |
17,000 |
27,000 |
2.50 |
Total Probable Reserves |
769 |
6.5 |
13.1 |
161,000 |
324,000 |
|
|
|
|
|
|
|
|
Indicated Resource |
726 |
8.4 |
17.0 |
195,000 |
396,000 |
2.00 |
Inferred Resource |
1,301 |
4.3 |
5.1 |
181,000 |
215,000 |
2.00 |
Notes:
- Additional information, including with respect to the mineral
resource estimate, metallurgy, data verification and quality
control measures, can be found in Anfield's technical report titled
"Coringa Gold Project, Brazil, Feasibility Study NI 43-101
Technical Report" with an effective date of 1 July 2017, which is
filed on SEDAR at www.sedar.com The mineral resource estimate was
prepared in accordance with the standard of CIM and NI 43-101.
- Totals in the above table may not add due to rounding.
- Grades are reported on a fully-diluted basis.
- Chapleau Brazil is the Operator and owns 100% of Coringa such
that gross and net attributable resources are the same.
- Serabi has not independently verified the information.
There are approximately 40,000 ounces of
estimated inferred mineral resource, which are not included in the
Feasibility Study's mine plan, that are adjacent to areas mined as
part of the Feasibility Study. In addition, Chapleau Brazil
controls a twenty kilometre area in the district with delineated
gold soil anomalies, of which, the drill-defined mineral resource
strike length is approximately two kilometres.
On 14 August 2017, Anfield 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 Secretaria de Estado de
Meio Ambiente e Sustentabilidade ("SEMAS"). The SEMAS
permits contain a list of conditions for the conservation and
protection of fauna and flora. In addition, Chapleau Brazil is
required to comply with requirements related to: fuel storage;
waste storage; transportation, storage and use of explosives;
surface water drainage; archaeology; and worker health and safety
programmes. The Company is also required to submit regular reports
on operational, environmental, and social performance. These
conditions and requirements will be met as part of normal course
operations.
The next step in the permitting process will be
for a formal trial mining licence to be issued by the Departamento
Nacional de Produção Mineral ("DNPM"). The trial
mining licence will authorise the Company to commence mine
development and production from Coringa. The trial
mining license will authorise mining and processing of up to 50,000
tonnes of ore per year at Coringa. Under applicable regulations,
once the mine is operational, Chapleau Brazil may apply to the DNPM
to increase the processing limit.
On 27 September 2017, Anfield announced that it
understood the Brazilian Ministério Público Federal ("MPF")
was bringing an action against SEMAS, the DNPM and Chapleau Brazil.
The action seeks to nullify the operating license previously
granted to Chapleau Brazil by SEMAS and states that SEMAS should
not have granted the license without requiring Chapleau Brazil to
prepare a full socio-economic analysis and Environmental Impact
Study ("EIS") for Coringa. Anfield and its legal counsel believe
that Chapleau Brazil has complied with all applicable
regulations. At an initial hearing the court denied a request
from the MPF to cancel the operating licence and requested
submissions from SEMAS, DNPM and Chapleau Brazil. A further
hearing has not yet been scheduled. Anfield and Chapleau Brazil
have in the meantime continued to progress the completion of a full
EIS, which is anticipated to be completed before the end of 2017
and prior to Closing.
Serabi and its legal advisers have considered
the position adopted by the MPF, and believe that the completion of
the EIS should significantly address the main concerns of the MPF
and have concluded, based on the current available information,
that there is a low risk of significant delay to the licencing and
permitting process. Serabi will continue to monitor this
position up until Closing.
Progress has also been made in several other
areas relating to the development of Coringa. Applications for
required camp and start-up water have been submitted and the
tailings storage permit request is nearing completion. Discussions
for long-term land access agreements are underway 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.
Serabi's plans for Coringa following Closing
of the Acquisition
Serabi intends to continue the work started by
Anfield on the permitting and licencing process and will, to any
extent necessary, complete the EIS and any supplementary work
requested following its initial submission to the relevant
Brazilian government departments for approval. Serabi will
review the cost estimates contained in the Feasibility Study and
optimise these, prepare its own development plan and evaluate
alternative construction development and processing options that
Serabi's management could enhance the economics of the project.
Following Closing, development and construction
at Coringa will be placed on care and maintenance whilst the
permitting process is completed.
Additional disclosures pursuant to the AIM
Rules
Chapleau is not required to prepare audited
financial statements. Based on information provided by
Anfield and extracted from the unaudited consolidated financial
statements of Anfield to 31 December 2016, Chapleau on a
consolidated basis, reported a loss before taxation of C$22.3
million for the 12 month period ended 31 December 2016 after (i)
expensing exploration and evaluation expenditure of C$7.9 million,
(ii) recognising a foreign exchange loss of the capitalisation of
intergroup loans into shares of Chapleau Brazil of C$13.7 million,
and (iii) other one-off costs estimated at C$1.3 million. Chapleau
had no revenues. As at 30 June 2017 total assets and shareholders'
equity amounted to C$19.6 million and C$(20.3 million) respectively
with shareholder loans totalling C$38.6 million. The balance sheet
carrying value of property, plant and equipment associated with the
Coringa project as at 30 June 2017 amounted to C$16.6 million which
excludes past exploration costs as these have been
expensed. As at 30 June 2017 Chapleau had net cash and
cash equivalents of C$2.5 million and except for intercompany loans
(amounting to C$38.6 million), which will be assigned to Serabi on
Closing, had no borrowings.
Enquiries:
Serabi Gold plc Michael
Hodgson
Tel: +44 (0)20 7246 6830Chief Executive
Mobile: +44 (0)7799 473621Clive
Line
Tel: +44 (0)20 7246 6830Finance
Director
Mobile: +44 (0)7710 151692 Email: contact@serabigold.com
Website: www.serabigold.com
Beaumont Cornish LimitedNominated
Adviser and Financial
Adviser
Roland Cornish
Tel: +44 (0)20 7628 3396Michael
Cornish
Tel: +44 (0)20 7628 3396
Peel Hunt LLPUK
Broker
Ross Allister
Tel: +44 (0)20 7418 9000Chris Burrows
Tel: +44 (0)20 7418 9000
Blytheweigh Public
Relations
Tim
Blythe
Tel: +44 (0)20 7138 3204Camilla Horsfall
Tel: +44 (0)20 7138 3224
Copies of this announcement are available from
the Company's website at 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.
GLOSSARY OF TERMSThe following is a
glossary of technical terms:
"Au" means gold.
"assay" in economic geology, means to
analyse the proportions of metal in a rock or overburden sample; to
test an ore or mineral for composition, purity, weight or other
properties of commercial interest.
"CIM" is the Canadian Institute of Mining,
Metallurgy and Petroleum.
"development" - excavations used to
establish access to the mineralised rock and other workings.
"doré - a semi-pure alloy of gold silver and
other metals produced by the smelting process at a mine that will
be subject to further refining.
"DNPM" is the Departamento Nacional de Produção
Mineral.
"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.
"granodiorite" is an igneous intrusive rock
similar to granite.
"igneous" is a rock that has solidified from
molten material or magma.
"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.
"Intrusive" is a body of igneous rock that
invades older rocks.
"Induced polarization" or "IP" is a geophysical
imaging technique used to identify the electrical chargeability of
subsurface materials, such as ore.
"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.
"saprolite" is a weathered or decomposed
clay-rich rock.
"Vein" is a generic term to describe an
occurrence of mineralised rock within an area of non-mineralised
rock.
Qualified Persons StatementThe 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
30 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 StatementsCertain
statements in this announcement are, or may be deemed to be,
forward looking statements. Forward looking statements are
identified 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 reflect 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
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