TIDMSRB
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:
Au Ag Contained Contained
Tonnes grade grade gold Silver Cut-off grade
Classification ('000's) (g/t) (g/t) (oz) (oz) (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:
1. 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.
2. Totals in the above table may not add due to rounding.
3. Grades are reported on a fully-diluted basis.
4. Chapleau Brazil is the Operator and owns 100% of Coringa such that gross
and net attributable resources are the same.
5. 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 6830
Chief Executive Mobile: +44 (0)7799 473621
Clive Line Tel: +44 (0)20 7246 6830
Finance Director Mobile: +44 (0)7710 151692
Email: contact@serabigold.com
Website: www.serabigold.com
Beaumont Cornish Limited
Nominated Adviser and Financial Adviser
Roland Cornish Tel: +44 (0)20 7628 3396
Michael Cornish Tel: +44 (0)20 7628 3396
Peel Hunt LLP
UK Broker
Ross Allister Tel: +44 (0)20 7418 9000
Chris Burrows Tel: +44 (0)20 7418 9000
Blytheweigh
Public Relations
Tim Blythe Tel: +44 (0)20 7138 3204
Camilla 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 TERMS
The 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 Statement
The 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 Statements
Certain 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
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Serabi Gold plc via Globenewswire
http://www.serabigold.com
(END) Dow Jones Newswires
November 14, 2017 02:00 ET (07:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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