Serabi Gold plc press release
Updated Coringa PEA Confirms Improved Economics
TSX - Toronto Stock Exchange · Gold · Copper · Lead · Silver · Zinc · United Kingdom
Serabi Gold plc (“Serabi” or the “Company”) (AIM:SRB, TSX:SBI, OTCQX:SRBIF), the Brazilian focused gold mining and development company, is pleased to announce the results of an updated Preliminary Economic Assessment (the “Updated PEA”) for its currently producing, 100%-owned Coringa Gold Project (“Coringa” or “the Project”), located in Para State, Brazil. (All financial amounts are expressed in U.S. dollars unless otherwise indicated).
At the beginning of 2024, it was decided by Serabi’s management to prepare the Updated PEA that reflects the Company’s current operating plan for Coringa. The Company commenced development of Coringa in June 2021 and first gold was produced in July 2022, and since then 18,458oz have been produced. The current operations have materially improved the understanding of the geology, and in particular, the amenability of the deposit to ore-sorting technology. This has allowed management to adopt a plan utilising the existing process plant capacity at Palito Complex in preference to the construction of a full stand-alone process plant at Coringa, which is significantly cheaper on initial capital, carries less operational risk and does not compromise the mine development plan or production rates of Coringa.
HIGHLIGHTS
Annual production is estimated at 28,000oz in 2025, and then averages 36,000oz per year between 2026 and 2031 with an 11-year mine life until 2034 Average Life of Mine (“LOM”) All-In Sustaining Cost (“AISC”) of $1,241/oz including royalties and refining costs using the Base Case gold price. The updated Mineral Resource Inventory at Coringa, upon which the Updated PEA is based were as follows: Measured & Indicated Resources (M&I) 795kt @ 7.03g/t gold (179koz contained); Inferred Resources 1,454kt @ 5.81g/t gold (271koz contained); Mine plan utilises 145koz M&I and 241koz Inferred which equates to 81% of the total M&I resource inventory and 89% of the inferred resource.
Average LOM gold grades from the mine of 5.38 g/t, which are increased to 8.50 g/t after ore sorting, producing a total gold production of 363koz. Under the Base Case scenario, the operation underscores robust economics: Post-tax NPV 10% of $145M; Average annual free cash flow of $19M; Sustaining Life of Mine (“LOM”) capital expenditures of $87M to be funded from project cash-flow;
Mining is by underground shrinkage stoping using a cut-off grade of 3.16 g/t gold. Resource widths and grades within the Updated PEA mine plan have been further diluted to 1 metre minimum mining widths.
An interview with Mike Hodgson by Crux Investor can be accessed here: https://youtu.be/gnWhxMMfMB8
An interview with Mike Hodgson by BRR Media can be accessed here : https://brrmedia.news/Coringa_PEA
Mike Hodgson, CEO of Serabi, commented:
“In Phase 1 of our growth plan, Serabi is focused on developing and growing our business and building a strong gold production base in Brazil. The publication of these very encouraging results of the Updated PEA is a major milestone in achieving this objective. Since the original PEA prepared by Global Resource Engineering (“GRE”), effective 6 September 2019 (“GRE PEA”), was issued, a number of factors, including the reduction in trucking costs and the success with ore-sorting changed our view of the best way to maximise returns from Coringa. Whilst we have communicated the perceived benefits to investors for some time, we historically had no independent study that supported this. The Updated PEA now addresses this. The Updated PEA has an NPV 10% of $145M compared with the GRE PEA result of only $31M indicating the improved economics of this revised strategy.
The Updated PEA demonstrates superior economics to the GRE PEA, supporting an initial 11-year mine life and a fully-ramped up mine production that will average approximately 34,000 ounces per annum. Combined with an expectation of production from Palito of ~25,000 ounces per annum, Serabi should reach our initial target of 60,000 ounces per annum for the 2026 fiscal year, which maximises the capacity of the Palito Complex with the best feed grades possible. Phase 2 of our growth plan will focus on brownfield exploration in 2025 and 2026 which will determine the quantum and timing of the next phase of Serabi’s growth, while Phase 3 of our growth plan will determine whether we add additional processing capacity at Palito Complex or build a stand-alone operation at Coringa.
The Base Case uses an average gold price of $2,100/oz and calculates an NPV 10% of $145M. Looking at a scenario using the average 6-month gold price of $2,280/oz, the NPV 10% improves to $170M, and using the spot gold price of $2,600/oz the NPV 10% is a stand-out $211M.
The Updated PEA demonstrates the robust viability of our strategy and we believe there is still plenty of upside. First, the grade uplift of 1.6 times from ROM to sorted ore is conservative and test-work indicates this can be significantly enhanced with improvements in controlling and reducing the production of fines in the crushing circuit. This will result in better grades, reduced mass and offer the opportunity for accelerated production. The Updated PEA also does not consider the longer-term growth potential we believe in at Coringa, and this will be a high priority for us in 2025. The Base Case economic analysis indicates an AISC of $1,241/oz. Whilst we have reported a consolidated AISC for the first six months of 2024 of $1,782/oz, this has been adversely affected by the lower mined grades and therefore, production generated from Palito compared with 2022 and 2023, further exacerbated by the accelerated mine development undertaken at Coringa. By returning Palito to an average mined grade of 5.5 g/t to 6.0 g/t and with the expectation of an average AISC for Coringa of below $1,300/oz, on this basis we forecast an average future AISC for the Company of between $1,300/oz and $1,360/oz.
The total sustaining capital requirement for the development of the project in 2025, including further mine development, is estimated at approximately $14 million. This and all future sustaining and development capital projected in the Updated PEA will be funded from the Company’s operational cash flow. With Coringa located in close proximity to our existing Palito Complex and based on existing operational cost data at Coringa, we have provided NCL with actual cost information of the past few years. This entails that from a cost perspective, the data used in compiling the Updated PEA is significantly more robust than might normally be the case with PEA studies.”
Table 1 – Summary of Updated PEA Results (in Millions)
| Gold Price (per ounce) | $1,950 | BASE CASE $2,100 | $2,280 | SPOT $2,600 | | Pre-tax NPV 5% | $193 | $230 | $275 | $356 | | Pre-tax NPV 10% | $151 | $181 | $217 | $281 | | Post-tax NPV 5% | $159 | $184 | $214 | $267 | | Post-tax NPV 10% | $125 | $145 | $169 | $211 | | Project Post-tax Cash Flow | $210 | $242 | $281 | $350 | | Avg. Annual Free Cash Flow | $16 | $19 | $22 | $27 | | Avg. Gross Revenue | $52 | $56 | $61 | $69 |
The Updated PEA was completed by NCL Ingeniería y Construcción SpA (“NCL”) of Santiago, Chile, Serabi’s independent engineering consultant.
The Base Case considers the operation from 1 January 2025 onwards. All prior development and capital expenditures including 2024 expenditures on the classification plant, of which US$5 million has been spent to date, are considered sunk costs and are not included in the evaluation.
This technical report is a preliminary economic assessment and partially utilises inferred mineral resources. Inferred mineral resources are considered too speculative, geologically, to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the preliminary economic assessment will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
An updated Mineral Resource estimate has been made using a gold price of $1,950/oz. As of September 2024, Serabi's median analyst consensus long-term gold price was approximately $2,200/oz. As of September 28, 2024, the 12-month trailing average LBMA (AM Fix) gold price was approximately $2,189/oz. The Base Case utilises a constant gold price of $2,100/oz and a constant exchange rate of 5.5 BRL per 1.00 USD in the economic analysis completed for the Updated PEA. Sensitivities are also shown for the 36-month trailing average LBMA (AM Fix) gold price of $1,950/oz the 6-month trailing average LBMA (AM Fix) gold price of $2,280/oz and current spot gold price estimate of $2,600/oz.
Implications of the Updated PEA Results for the Consolidated Production and AISC
The Updated PEA demonstrates that over its life, Coringa will produce on average 36,000oz per annum from 2026 to 2031 (with a range of 29,000oz to 41,000oz over the LOM) at an average LOM AISC of $1,241/oz.
On 30 June 2024, Serabi reported a Group AISC of $1,782/oz for the production of 18,010 ounces, of which 9,837oz was produced at Palito and 8,623oz at Coringa.
During this period, the AISC for Palito Complex has been adversely affected by the lower grade and therefore lower production generated from the mined ore tonnage. An average mined grade of 4.63g/t compares with an average mined grade of 6.08g/t and 6.15g/t for 2023 and 2022, respectively. The calculated AISC for Palito for the 6-month period to 30 June of $1,822/oz is estimated to be $1,534/oz had an average grade of 5.5g/t been achieved and $1,406/oz at an average grade of 6.0g/t. Such an increase in average grades would raise annual Palito production for the same mined tonnage to between 22,000oz and 24,000oz.
By inference, the AISC for Coringa for the same 6-month period was $1,739/oz, reflecting the on-going investment and prioritisation of mine development over stope production. This compares to the average LOM AISC projected by the Updated PEA of $1,241/oz.
With production of 22,000oz to 24,000oz per annum from Palito and an average production from Coringa of 36,000oz between 2026 and 2031, the Company projects sustainable production of approximately 60,000oz going forward. With this assumption, the average AISC would be $1,400/oz to $1,550/oz for Palito (dependent on grade) and $1,241 for Coringa resulting in a consolidated average AISC of between $1,300/oz and $1,360/oz.
Further Information
The Coringa project consists of the Coringa gold deposit and currently comprises four discrete ore bodies which are included in the mine plan. Other potential ore bodies have been identified and subject to further evaluation, could extend the current life of the project. In addition, the Coringa deposit is hosted within an 8km zone of past artisanal mining activity comprising a series of shallow pits which exploited the soft, near-surface oxidised ore but were abandoned at about 20 to 25 metre depths when the artisanal miners encountered the underlying hard rock sulphide ore.
The access to Serra and three production levels have been already developed. The Updated PEA anticipates that the project development will continue with the establishment of mine portals providing access to the Galena & Mae de Leite (“GAMDL”) and Meio & Como Quieto (“MCQ”) sectors of the deposit with access to the Demetrio sector being undertaken later in the mine life. NCL have considered 2024 as the start of the ramp-up period which continues through 2025 with the initial development of the GAMDL and MCQ sectors with 2026 being the first year at full long-term mining rates. The primary crusher and ore sorter at Coringa have already been acquired with assembly being completed prior to commissioning in early Q4-2024.
The full NI 43-101 compliant Technical Report, supporting the economic results and including the updated mineral resource statement is being prepared by NCL and is required to be published with 45 days of this announcement. A further news release will be made when it becomes available with copies available on the Company’s website and on SEDAR.
Table 2 – Coringa Updated PEA - Base Case Metrics
| | Unit | Amount | | Gold Price | $/oz | $2,100 | | Cut-off grade | g/t | 3.16 | | Run of Mine (ROM) Material to Process | Tonnes | 2,232,919 | | Mining Method | Method | Shrinkage Stoping | | Annual Throughput at 100% Capacity | Tonnes | 215,000 | | Ore Sorter Efficiency (Tonnes) | % | 61% | | Ore Sorter Upgrade | x | 1.59 | | Process Gold Recovery | % | 97% | | Total Gold Production (Recovered) | Ounces | 363,108 | | Mine Life | Years | 11 | | Sustaining Capital Expenditures | $M | $87 | | Mine Closure Costs | $M | $1 | | Cash Operating Costs (inc. Royalty + TC/RCs) | $/oz | $965 | | All In Sustaining Cost (inc. Royalty + TC/RCs) | $/oz | $1,241 | | Exchange Rate | R$:US$ | 5.5 | | Royalties | % | 4.00% | | Profits Tax Rate | % | 34% |
_*Base Case Metrics are from year 2025+ _
Coringa Updated Mineral Resource
The following table sets out the Company’s Canadian Securities Administrators National Instrument 43-101 (“NI 43-101”) compliant indicated mineral resources of 179,000oz and inferred mineral resources of 271,000oz estimated as of 6 April 2024. This resource estimate is an update on the estimation issued by the Company on 6 September 2019 and takes account of additional drilling results and updated geological interpretation.
Table 3 - Coringa Updated Mineral Resource Estimate
| Classification | Quantity | Grade | Contained Metal | | | Gold | Gold | | | 000 't | g/t | 000' oz | | | Measured Resources | 172 | 8.96 | 49 | | Indicated Resources | 623 | 6.49 | 130 | | Measured & Indicated Resources | 795 | 7.03 | 179 | | Inferred Resources | 1,454 | 5.81 | 271 | | (1) Mineral Resources are not Mineral Reserves and have not demonstrated economic viability. Mineral Resources are reported inclusive of Mineral Reserves. All figures are rounded to reflect the relative accuracy of the estimates. Mineral Resources are reported within classification domains inclusive of in-situ dilution at a cut-off grade of 3.16g/t gold assuming an underground extraction scenario, an operating cost of $107/t for mining, crushing and sorting, sorting efficiency of 61% of the tonnes and 1.59 upgrade factor, $88/t for hauling to Palito, processing at Palito plant and site costs, metallurgical recovery of 97%, 4% on royalties and 2.3% for refining, insurance, freight and sales, and a gold price of $1,950/troy oz.
(2) Serabi is the operator and owns 100% of the Coringa Gold Project such that gross and net attributable mineral resources are the same. The mineral resource estimate was prepared by NCL Ingeniería y Construcción SpA in accordance with the standard of CIM and Canadian National Instrument 43-101, with an effective date of 6 April 2024 by Mr Nicolás Fuster, who is a Qualified Person under the Canadian National Instrument 43-101.
(3) NCL believes that the resource estimates shown in the table above meets the CIM standards for a resource estimate based on CIM Standards of Mineral Resources and Reserves Definitions and Guidelines adopted by the CIM council 10 May, 2014 | | | |
The updated mineral resource has been calculated using an assumption of a 0.7m minimum mining width and using a cut-off of 3.16 g/t. The mine plan uses a 1.0m minimum mining width. By comparison the previous estimation undertaken in 2019 by GRE reported an Indicated Resource of 195,000oz and an Inferred Resource of 346,000oz. However, this was calculated using at 2g/t Au COG and an average 0.7m mining width. Following 2 years of operational activity, the Company prefers to apply a 1.0m minimum mining width, which is more dilutive, but feels is appropriate.
Mineral Resources Considered in the Updated PEA
The Updated PEA and the new technical report that NCL will produce supersedes the previous Preliminary Economic Assessment produced by GRE dated 19 October 2019.
Empirical findings following two years of underground operations at Coringa have led the company to consider more dilution in the mining operation. The GRE PEA did not have the benefit of these findings and used an average resource minimum mining width of 0.7m. This meant some resources had widths less than 0.7m. NCL have taken the view that a 0.7m minimum mining width should be applied, which means resources with a width less than 0.7 metre are diluted to a 0.7m width. Furthermore, resources included in the PEA have been further diluted at 0.0 g/t gold grade to a mineable width of 1.0m.
The following table is provided to illustrate the utilisation of the NI 43-101 compliant mineral resources within the mine plan assumed in the Updated PEA and used to derive the average mined grade. Of the total 2,233kt of ROM feed to be delivered to the crushing plant 74kt (3%) will be derived from the Measured Resources, 274kt (12%) will be derived from the Indicated Resources and 915kt (41%) will be derived from the Inferred Resource. An additional 969kt (43%) of dilution at a grade of 0g/t is also included.
Table 4 – Mineral Resources Considered in the Updated PEA
| Classification | Quantity | Grade | Contained Metal | | | Gold | Gold | | | 000 't | g/t | 000' oz | | | Measured Resources | 74 | 15.32 | 37 | | Indicated Resources | 274 | 12.31 | 109 | | Inferred Resources | 915 | 8.19 | 241 | | Dilution | 969 | - | 0 | | Measured & Indicated Resources | 2,233 | 5.38 | 386 |
Comparison of Updated PEA to GRE PEA
The Updated PEA envisions a more economically robust mine plan than the GRE PEA forecasting a post-tax NPV 10% of $145M vs $31M.
Table 5 – Comparison of Updated PEA to GRE PEA
| | | Updated PEA 2024 | GRE PEA 2019 | $ Change | % Change | | Gold Price | US$/oz | $2,100 | $1,275 | $825 | 65% | | Pre-tax NPV 5% | US$M | $230 | $56 | $175 | 313% | | Pre-tax NPV 10% | US$M | $181 | $37 | $144 | 387% | | Post-tax NPV 5% | US$M | $184 | $47 | $137 | 290% | | Post-tax NPV 10% | US$M | $145 | $31 | $114 | 371% | | Project Post-tax Cash Flow | US$M | $242 | $72 | $171 | 238% | | Average Annual Free Cash Flow | US$M | $19 | $12 | $7 | 62% | | Average Gross Revenue | US$M | $56 | $43 | $12 | 29% | | Total Gold Production (Recovered) | Ounces | 363,108 | 288,046 | 75,062 | 26% | | Mine Life | Years | 11 | 9 | 2 | 22% |
Qualified Persons and Quality Control
The scientific and technical information (“the Technical Information”) contained in this news release pertaining to the Coringa gold project has been reviewed and approved by the following qualified persons under National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101") in accordance with the rules of the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM"), which is an internationally recognised standard pursuant to the AIM Rules.
Mr. Carlos Guzmán, RM CMC, FAusIMM, Principal/Project Director, NCL Mr. Gustavo Tapia, RM CMC, Metallurgical and Process Consultant, GT Metallurgy Mr. Nicolás Fuster, RM CMC, MAusIMM, Geologist
The Technical Information is extracted from information that has been compiled by Mr Guzmán, Mr Tapia and Mr Fuster who have carried out the assignment on behalf of the firm NCL Ingeniería y Construcción SpA (“NCL”). Mr Guzmán, Mr Tapia and Mr Fuster are each familiar with NI 43-101 and, by reason of education, experience and professional registration, fulfil the requirements of a Qualified Person as defined in NI 43-101 and for the purposes of the AIM Rules. Mr Guzmán, Mr Tapia and Mr Fuster are responsible for the preparation of the Preliminary Economic Assessment. Mr Guzmán, Mr Tapia and Mr Fuster have all consented to the publication of the Preliminary Economic Assessment and Mineral Resources estimate and the inclusion of the information contained in this announcement in the form and context in which it appears.
The PEA study was completed by NCL who is responsible for the preparation of the overall study including mine design, mine capital cost, mine operating cost, costing for the process plant replacement, refurbishment and operating, construction and operating costs for the tailings management facilities and economic models.