For immediate
release 22
December 2017
Serabi Gold plc("Serabi" or the
"Company")Completion of 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 it has now completed the acquisition of 100 per cent
of the issued share capital and inter-company debt of Chapleau
Resources Ltd ("Chapleau"), a Canadian registered company
previously wholly-owned by Anfield Gold Corp
("Anfield"). Chapleau 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. 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.
Completion of the acquisition occurred on 21
December 2017 ("Closing"). Serabi has made an initial
payment to Anfield on 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.
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 8.36 g/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 ounce; 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, as at 30 September 2017, 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 asset we have been
trying to secure for some time now, and its proximity, and
similarity to the Palito and Sao Chico ore-bodies make this
acquisition something of a 'must have' for us.
"We pride ourselves on being the best at what
we do in Brazil. The existing Palito and Sao Chico operations
demonstrate our strong credentials as high-grade, quality,
underground operators, and we see Coringa as the next 'cab off the
rank'.
"The Coringa project brings with it
approximately 400,000 ounces of high grade resources which,
combined with our own recently updated resource estimation for the
Palito and Sao Chico ore-bodies, brings the Group close to having
one million ounces of gold resources. This is a key milestone
for any junior gold company, and within this resource we have a
total combined mineral reserve of approximately 350,000
ounces.
"However, we very much see Coringa as an
asset that can be grown, and grown quickly, into what can become a
significant, long-life asset. The strike extent and
continuity of the historical artisanal gold mining activity shows
the deposit has very significant upside, with abundant drilling
targets. We therefore consider the current and maiden mineral
reserve at Coringa as very much just the start of what we believe
to be a very exciting opportunity.
"With our experience, team and the knowledge
acquired from building Palito and then Sao Chico, we feel very well
positioned to develop Coringa quickly and efficiently. The
orebody, the mining, the processing and environmental management of
the operation are all so similar to Palito and Sao Chico, that it
fits perfectly with our known strengths. Our management and key
personnel in Serabi will be able to accelerate project advancement
and this will be the third time that they will have worked together
on developing such an operation.
"Coringa is ready to build once the final
permits are in place and the early part of 2018 will be a key time
for advancing the issuance of the necessary approvals and
licences. With Coringa being located in the state of Para, we
can benefit from the excellent relationships we already enjoy with
such agencies as the Departamento Nacional de Produção Mineral
("DNPM") and Secretaria de Estado de Meio Ambiente e
Sustentabilidade ("SEMAS") to get the operation permitted
efficiently and into production.
"The proximity of the project to the current
Palito complex also brings obvious operational synergies.
Senior management, finance, H.R. and maintenance, are all obvious
areas where resources can be shared.
"With exploration drilling now underway at
Palito and shortly to begin at Sao Chico, we see excellent organic
growth prospects there, where we feel confident we can quickly turn
exploration success into increased production ounces. At
Palito the 27 veins that comprise the mineral resource are
currently within an overall one kilometre strike length.
However, numerous intersections suggest the veins are traceable for
up to four kilometres, so the current step-out drilling is
essential. The story is much the same at Sao Chico where the
main vein remains open in all directions along strike and at
depth.
"Over the next 12-24 months, we aim to see
the fruits of our organic growth effort at Palito and Sao Chico
along with the development of Coringa, place Serabi in amongst the
100,000 ounces per annum producers, but, I emphasise, not at the
expense of compromising on quality. Our niche is quality,
high grade mining and our aim, is to do more of it."
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/5a3943e115a38759b1b01bc7/event/?livelink=true&popup=true
Acquisition Agreement
The acquisition agreement initially signed on 13
November provided for Serabi to acquire 100 per cent of the issued
share capital of Chapleau and to be assigned the benefit of all of
Chapleau's outstanding inter-company debts that had been advanced
by 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$20,000.
Serabi has paid the Initial Consideration from
its existing cash resources. Following Closing a completion balance
sheet will now be prepared and the Initial Consideration will be
adjusted dollar-for-dollar for the amount, if any, by which the
working capital on Closing exceeds or is less than US$nil. Anfield
has assigned to Serabi all the benefit of all outstanding
intercompany loans between Chapleau and Anfield, and Chapleau is
now obliged to repay these to Serabi.
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).
Anfield has provided Serabi with certain
indemnities in respect of future claims relating to activities
prior to Closing, including labour and tax liabilities and the
Agreement includes representations and warranties from Anfield in
favour of Serabi as would be customary for a transaction of this
nature.
Serabi has, with the approval of Serabi's
secured lender and sub-ordinated to the security granted by Serabi
to its secured lender, granted to Anfield a pledge over the shares
of Chapleau as security for the full and irrevocable payment of the
Deferred Consideration.
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
ounces) 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 35 personnel employed by Chapleau Brazil.
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, silver price of US$18 per ounce and an exchange
rate of 3.2 (US$ to Brazilian Real). The Coringa Feasibility Study
highlights included the following estimates:
· Gold production
of approximately 32,000 ouncse 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 per ounce and all-in sustaining
costs of US$783 per ounce; and
· Probable
mineral reserves of 161,000 ounces of gold and 324,000 ounces 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
Coringa Feasibility Study's mine plan, that are adjacent to areas
mined as part of the Coringa Feasibility Study. In addition,
Chapleau Brazil controls a 20 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 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 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 and this was submitted to SEMAS for approval on 24 November
2017.
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.
Progress has also been made in several other
areas relating to the development of Coringa. Applications for
required camp and start-up water were submitted prior to the date
of the Agreement and the tailings storage permit request was
submitted on 11 December 2017. 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 pursue the
formal approval of the EIS and undertake any supplementary work or
reports that may be requested. Serabi will review the cost
estimates contained in the Coringa 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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