Serabi Regulatory News (SRB)

20 Jul 2006 07:01

Serabi Mining plc20 July 2006 SERABI MINING QUARTERLY INVESTOR UPDATE Serabi Mining plc advises that it has today despatched to shareholders itsinvestor newsletter for the Second Quarter of 2006. The Company has highlighted in its newsletter the following matters. The fulltext version of the quarterly update is available form Serabi's offices or fromthe Company's website www.serabimining.com • For the second consecutive quarter, Palito Gold Mine has posted record production levels. Q2 output of 9,815 oz gold equivalent was an increase of 24% on the previous period • Production has now risen almost uninterrupted since the start of 2005 • Higher underground mining output at Palito successfully established following the introduction of new equipment and revised mining methods • New initiatives underway to reduce costs and improve operating efficiencies • Important optimisation & expansion alternatives under review for Palito Gold Mine • Regional exploration gathers pace Palito - Operating Results (1) 2006 2006 2005 2006 Q1 Q2 YTD YTD Mined (per day) t 31,555 34,055 21,442 65,610 (351) (374) (118) (362) Milled (per day) t 25,514 29,851 22,228 55,365 (283) (328) (123) (306) Head Grade g/t 9.3 9.7 8.9 9.5 Recovery % 91.9 91.3 86.7 91.6 Gold oz 7,017 8,527 5,504 15,544 Copper t 98.0 107.1 60.6 205.1 Gold Equivalent (2) oz 7,927 9,815 6,009 17,742 PALITO MINE Mining Introduction of trackless mining at the end of first quarter of 2006 continuedto impact favourably on results during the second quarter, with a 7% increase indaily tonnage mined. Looked at over the first half of the year the impact iseven more striking, up by over 200% compared with last year. Althoughimpressive, we were again frustrated by delays to delivery of some of the newequipment which hampered mining rates at the beginning of the quarter. However,this has now been resolved and total daily mining rates are now routinelyexceeding 400 tonnes. From here on, development and production will increasingly move from the PalitoHill shrinkage mining stopes, to the long-hole trackless mining accessed fromthe Palito decline, completed at the end of the previous quarter. Mining fromthe decline is initially focused directly beneath known and already mined,high-grade areas on the upper levels. Notwithstanding, the need to sustainfuture ore mining rates of 400 tonnes will require higher development rates fora while, inevitably placing some pressure on run-of-mine grades in theshort-term. However, wherever possible this will be supplemented fromhigh-grade underground sections, which we are now able to better locatefollowing the introduction of underground drilling. Plant In conjunction with increased mining rates, the process plant throughput alsoincreased by some 16% compared with the first quarter. During much of March andApril production throughput was affected by an above average number ofelectricity outages, caused mainly by an unusual number of lightning strikes inthe area at the end of a protracted wet season. As a result the electricitycompany will now introduce equipment that should substantially eliminate suchinterruptions next season. Although peak daily throughput of up to 400 tonnes has recently been achieved,the need for critical maintenance and long, often unpredictable lead times foressential parts, also impacted on the overall capacity during the quarter. As aresult, investigations are now at an advanced stage to introduce a new, largermill of at least 600 tonnes daily throughput, with the existing smaller millsbeing transferred to a new upgrade circuit. As well as providing back-up to themain mill, such a configuration would enable sustainable levels of much higherthroughput and improve reliability. Such an investment would also provide scopefor possible expansion and improvement in the economics through the processingof lower-grade ore that is expected to be mined from time-to-time. Milling & Beneficiation After investigation of a number of separate process issues, consideration is nowbeing given to the introduction of a large new mill and a beneficiation /upgrade circuit at Palito. This change may be required in order to deal withthe anticipated increased proportion of lower-grade ore which is oftenassociated the high-grade ore shoots (see Press Release, February 14), combinedwith the increased mining development and dilution that will arise from theintroduction of trackless mining and preparation of long-hole stopes. Inaddition, beneficiation testwork is now at an advanced stage and shows that thecombination of screening and possibly spirals, could significantly enhance thelower-grade ore. If successful this relatively low-cost operation would resultin such ore being 'converted' to a lower tonnage with higher grade, forsubsequent processing through the primary process circuit. Open Pit Study A feature of the 2005 year-end resource review of the Palito Main Zone was anincrease in the number of high-grade mineralised veins identified, from 20 to54 and a commensurate 50% increase in gold per vertical metre (see MarchQuarterly Update); the mineralised ore zone remains open in all directions. Itis particularly noteworthy that a high density of these veins is located alongthe south-east section of the ore zone, close to the surface. Such adistribution provides possible scope for open pit mining, thereby achieving ahigher production rate, higher resource to reserve conversion, superiorcash-flows and a lower risk profile than a stand-alone underground operation inthe same area; underground mining of this mineralisation would ultimately beresumed at deeper mining levels beneath the projected pit base. If furtherscoping studies prove positive, additional close space drilling will be requiredin order to test the distribution and continuity of the mineralisation for apossible open pit operation. EXPLORATION PROGRAMME We intend soon to report on the results from the company's explorationprogramme. Following the deployment of two new surface core drill rigs earlierin the year, work is gathering pace, with some 4,500 metres completed to-date atJardim do Ouro and elsewhere in the Tapajos region on four separate targets. Inaddition, extensive geochemistry has recently been completed across the Jardimdo Ouro district adjacent to the Palito mine and at the nearby Rio Nova Southproject. GENERAL The first half of 2006 has proved to be very successful, with year-to-dateproduction rising to 17,742 oz gold equivalent from 6,009 oz a year ago, a 74%increase of the Palito resource and regional exploration underway. We expectthe second half of the year will see further developments on all these fronts,as well as new opportunities emerging from the studies currently underway. Enquires: Serabi Mining plc Graham Roberts Tel: 020 7220 9550Chairman Mobile: 07768 902475 Clive Line Tel: 020 7220 9553Finance Director Mobile: 07710 151 692 E-Mail: contact@serabimining.com Website: www.serabimining.com This information is provided by RNS The company news service from the London Stock Exchange