Serabi Regulatory News (SRB)

22 Jun 2005 07:01

Serabi Mining plc22 June 2005 Capital Projects Update: Initiatives Herald a New Era ----------------------------------------------------- • Investments underpin operating benefits and company's growth potential • Palito set to benefit from the introduction of grid electricity • Significant mining efficiencies from new underground equipment Following the successful completion of Serabi's public market listing on theLondon AIM last month, management has moved quickly to review and implement anumber of its planned critical capital projects worth a total of US$ 1.5million. These are expected to have a significant impact on production at thePalito gold mine, in order that it can meet its forecast production rates andthe evaluation of other projects. Notable amongst these are: • Palito power line project • Underground mining and drilling equipment • Surface drilling rigs Power line project Currently the Palito mine relies completely on power from on-site dieselgenerators. The company has for some time been in discussions with the localpower company CELPA, for the construction of a suitable external power line tothe operation. With the management having now obtained firm cost proposals andundertaken a feasibility study, the Board of Serabi has now given its approvalto proceed with the project. Estimated to cost approximately US$ 580,000, theproject should take approximately four months to complete and will providesignificant costs savings; at the same time, the introduction of grid power willalso benefit local inhabitants in the area. Power costs on completion areexpected to be about R$0.14/Kwh, in line with the company's original estimatesof the long-term power costs for its operations. This compares with the currentcosts using diesel generation of R$0.75/Kwh. Underground equipment During the initial start-up of the Palito operation, much of the mining has beencarried out manually, inevitably resulting in slower and less efficientdevelopment of the mine. The mine is now about to take delivery of undergroundshovels and other mining equipment that will have a marked impact on developmentand mining rates, resulting in much higher production levels by year-end andsignificant cost efficiencies. These planned improvements will enable mineproduction rates to be brought in to line with a plant capacity upgrade to 300tpd that is already underway. Until now mine planning and development has been directed using the results fromsurface drilling, combined with geological interpretation obtained fromunderground development. The recent order of underground drill rigs at a cost ofUS$ 110,000, which are expected to be on-site in about eight weeks, will enablemajor improvements to this process through better geological understanding ofthe ore body, thereby improving mining and grade control, as well as long-termmine planning. Surface drilling rigs The company's two surface operated diamond drill rigs are currently fullyengaged in round-the-clock drilling of the Palito Main Zone ore body. Thisprogramme has the principle objectives of, (i) increasing the size and quality of the current JORC resource to a depth of 100m and over 900m strike length, with infill drilling and, (ii) expanding the strike and depth extension of the resource beyond the currently established JORC boundaries. The drills are operated by Serabi teams, resulting in good quality control withfull drilling costs at least 40% less than available contract terms. Based onthis success and with a large number of advanced projects to assess within thenearby Jardim do Ouro district, as well as across the Tapajos gold region, twonew drill rigs have been ordered at a total cost of US$ 430,000 and additionaldrill teams are being trained. The introduction of this equipment later thisyear will enable a significant escalation of the company's exploration andevaluation programmes. General In addition to the above, a wide variety of other capital projects are nowunderway in order to achieve: increased production, operating efficiencies,improved safety, better operating and living conditions and upgraded systems.The plant upgrade is already well advanced and includes the introduction ofadditional mills, improved crushing and additional flotation cells and CIPtanks. During this transitional period from development to production, Serabi isalso investing in other equipment and systems that will greatly improve theoperating conditions and efficiencies of the company. The Chairman, Graham Roberts said: "The availability of additional funds following the company's IPO in May, hasenabled Serabi to introduce a number of important initiatives that will havesubstantial benefits for the Palito operation in the future, as well asenhancing the evaluation of the company's other opportunities in the region;these mark the beginning of a new era for the company. Our original assessmentof the Palito mine had not anticipated the introduction of the power line toprovide grid electricity. This is a particularly exciting project, not justbecause of the cost and production benefits it will bring to Serabi, but alsobecause the introduction of grid power to the area will bring benefits to thelocal community. Furthermore, it has the potential to significantly changeproject economics in the future." Enquiries and further information, contact Graham Roberts, Chairman Tel: 01737 773 691 Mobile: 07768 902 475 Clive Line, Finance Director Tel: 020 7618 7754 Mobile: 07710 151 692 Email contact@serabimining This information is provided by RNS The company news service from the London Stock Exchange