Broker commentsDespite the good news, the share price has not reacted accordingly and moved up a trading range. The shares started the year at 36p-40p and are currently quoted 30.5p-32p. The price is clearly sensitive to news releases and generally reacts well to positive newsflow, but tends to drift (particularly in the current climate) on any perceived lack of news.
To us the stock seems unduly range bound in the 30-40p range, perhaps indicative that despite positive news, production is a way off.
By way of background, the current market capitalisation seems to assign little value to an existing gold mine, which has 650,000 ounce gold resources, a mill, 158,000 hectares licence area and enough cash to carry out the necessary resource upgrade activities.
Close to the Palito gold mine, 18 primary targets have been identified, each of which possess a similar geophysical signature to the Palito deposit. A 7,500 metre drilling programme on nine of these drill targets has begun and the plan is to identify two or three mineralised areas, similar in size to the Palito gold deposit, within the immediate mine site area.
The board's multi-mine scenario envisages three 25,000 ounce per annum satellites trucking material to the existing mill. With the level of reserves suggested, the greater Palito project could become a 75,000 ounces of gold a year operation, with a mine life in excess of ten years.
Further news on drilling results should emerge throughout the year. We expect Serabi to generate plenty of news as it continues to journey towards the establishment of a resource of 1.5 million ounces (gold equivalent).