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(Alliance News) - Serabi Gold PLC on Friday saw production fall in the first half of 2020 but soaring gold prices, coupled with a weak Brazilian real, led to an excellent second quarter and good half year.
The Brazil-focused gold exploration and production company posted a pretax profit of USD5.6 million in the first half ended June 30, widening from USD2.3 million a year prior. Revenue for the period was slightly down to USD29.5 million from USD29.6 million the year before.
Gold production for the period was 17,524 ounces, down 11% from 19,691 ounces a year prior.
Serabi Gold said the Covid-19 pandemic was to blame for the drop in production and expects the third quarter, ending September 30, to be much the same, as the company works towards reaching pre-pandemic staffing levels. The company expects a return to full levels early on in fourth quarter.
Full year production is expected to be between 34,000 and 37,000 ounces.
Serabi Gold said revenue rose 31% in the second quarter, ended June 30, to USD16.4 million from USD12.5 million a year prior. Pretax profit for the quarter multiplied to USD4.3 million from USD575,523 a year ago.
Gold production was down 11% in the second quarter, to 8,504 ounces from 9,527 ounces a year prior.
Serabi Gold said: "Whilst production levels during the second quarter of 2020 were approximately 85% of the levels that the group had originally forecast, the weakness of the Brazilian real and the increased gold price that prevailed during the second quarter, resulted in strong cash flow being generated by the group."
A weaker real lowers production costs in Brazil in dollar terms. Gold was priced at USD1,948.85 per ounce on Friday morning, and Serabi said the average price received on gold sales so far in 2020 has been USD1,647. Meanwhile, the miner's cash cost of production has been USD961 per ounce of gold, with all-in sustaining costs of USD1,265.
Serabi pays no dividend.
The company said: "As we begin to return to normal mining rates during the second part of this year mine output is expected to exceed the current plant capacity and with that, the effects of the ore sorter will really come into their own. With this, I would fully expect to see unit costs coming down as we spread the costs of the operation, many of which are relatively fixed in the short term, over a growing production base.
Exploration programmes are expected to restart in the fourth quarter.
Serabi Gold shares were up 4.3% at 94.40 pence each on Friday morning in London.
By Greg Roxburgh; gregroxburgh@alliancenews.com
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