Serabi Mining - an introductionSRB Serabi Mining is a Brazilian microcap gold miner/explorer (Eldorado a C$9bn Canadian miner has bought its near neighbour Brazauro for C$120m and bought 26% of SRB recently for 3p a share a 50% premium at the time)
SRB Serabi Mining
Mkt Cap : £24m @ 35p
Cash : $7m
Resources current : 600k oz
Resources target : 1.5m+ oz
Comparitors : Brazauro (next door in Brazil) bought by Eldorado (a C$9bn market cap Canadian gold miner) for C$120m
Magellan Minerals : Mkt Cap $111m
Brazilian Gold Corp : Mkt Cap $84m
Investor Presentation :-
https://www.serabimining.com/documents/391.pdf
Minesite article :-
https://www.minesite.com/nc/minews/singlenews/article/serabis-exploration-strategy-at-palito-receives-a-clear-endorsement-from-eldorado-gold-in-the-shap.html
June 22, 2010
Serabi’s Exploration Strategy At Palito Receives A Clear Endorsement From Eldorado Gold, In The Shape Of A £3.6 Million Investment
By Alastair Ford
The sudden, and, at least to the uninitiated, unexpected announcement that Eldorado Gold will take a 26.8 per cent stake in Serabi Mining came as a welcome fillip at the end of last week to shareholders in the company who’d started out the week somewhat embattled. The company once again seemed about to tip into crisis mode after yet another problem surfaced relating to the Palito mining operation on Serabi’s ground in the Tapajos region of Brazil. But if there’s one way of emphasizing that things aren’t as bad as they seem, it’s convincing a C$9 billion company to come and take a piece of you. The markets certainly appreciated that, and the 14 per cent dip in the shares that had followed news of the suspension of mining and a possible US$2 million fine, was completely undone two days later on the news that Eldorado had come in for £3.6 million at the premium price of 3p per share, albeit that there are warrants attached.
What a difference a couple of days makes! From the low of 1.1p hit after one of Brazil’s environmental agencies put the kybosh on mining, the shares are now trading at 2.2p. Who knew that news of that US$2 million fine was actually a potential buying opportunity? But actually, what the intervention of Eldorado does make plain is that the claims of Serabi finance director Clive Line that this fine is likely to go away, or at least be substantially reduced, have a lot of validity. Eldorado is no stranger to operating in Brazil, and its list of former or current operations there includes a gold project and an iron ore project, and exploration ground in Para State in the north of the country.
More pertinently, as far as Serabi is concerned, Eldorado has also recently acquired the Canadian company Brazauro Resources in a deal worth just over C$122 million. The principal Brazauro asset is the Tocatinzinho gold project, currently weighing in at 1.9 million measured and indicated ounces and described in the literature accompanying the deal as a “late stage exploration project”. With Tocantinzinho comes two other exploration properties in the same neighbourhood, and all are in close proximity to Serabi’s own Tapajos exploration properties in the vicinity of Palito.
Drilling up and around Palito is about to get underway in earnest, and although Clive Line says that at Serabi they’ve not been made party to the strategic thinking at Eldorado, it’s hardly a leap to speculate that Eldorado is interested in the possibility of more discoveries along the lines of, or at the very least complementary to Tocantinzinho across the licence boundaries. With that as a given, getting in early would seem the pertinent move.
The possibility of the potential of a US$2 million fine wiping serious value off Eldorado’s new investment almost as soon as they sealed the deal doesn’t seem to have phased the Eldorado boys in the slightest. After all, as Clive Line points out, Eldorado has worked in far more difficult jurisdictions that Brazil. Clearly the Serabi line that the environmental agencies have got all in a tangle with each other holds some water with Eldorado, and even if the worst does come to the worst on that score, there’s a certain game-changing element to this deal.
For some time Serabi has been struggling with the bad hangovers it left after full scale mining at Palito was abandoned more than a year ago. That news hit market sentiment hard, and there are still lingering doubts around the company amongst old mining hands in the City. The bears would have it that Serabi’s new and improved strategy of turning the company from a producer with small exploration upside to a serious explorer with small-scale production is nothing more than sleight of hand designed to continue a long-drawn out process of appeasing angry investors.
The transformation may have had that function, but Eldorado has underlined that it’s a serious value proposition in its own right. Of course the targets that Serabi has identified up at Palito have yet to yield up their secrets to the drill-bit, and only time will tell on that score. But we won’t have long to wait for the news to start coming in. Already some in the market, following Eldorado’s lead, have clearly decided that even that wait is too long, and have been buying in ahead of the drilling. That’s a risky way to play, but ultimately it can be very rewarding too.