Serabi Regulatory News (SRB)

24 Jan 2007 07:00

Serabi Mining plc24 January 2007 SERABI MINING plc ("Serabi" or "the Company") QUARTERLY INVESTOR UPDATE Serabi Mining plc ("Serabi" or "the Company") advises that today it hasdispatched to shareholders its investor newsletter for the fourth quarter toDecember 31, 2006 The company has highlighted in its newsletter the following matters. The fullversion of the quarterly update is available from Serabi's offices or from theCompany's website www.serabimining.com. > Expansion projects at the Palito mine result in 127% year-on-year production increase to 39,197 oz gold equivalent in 2006, compared with 17,261 oz in 2005 > Record quarterly production of 11,687 oz gold equivalent achieved in December, a 20% increase over the third quarter > Further positive production developments expected at Palito early in 2007 with the introduction of additional mining equipment and increased use of new mining method > Commissioning of new mill significantly increases process capacity > Follow-up work at various Jardim do Ouro projects highlights further potential close to the Palito mining operation Palito - Operating Results 2006(1) 2005 Q1 Q2 Q3 Q4 Year-end(2) Year-endTotal mined t 32,820 34,055 42,357 42,007 151,239 54,993(per day) (365) (374) (460) (457) (414) (151) Mined ore t 31,555 31,864 34,598 34,072 132,089 54,993(per day) (351) (350) (376) (370) (362) (151) Milled t 25,514 29,851 29,492 32,760 117,618 57,958(per day) (283) (328) (321) (356) (322) (159) Head grade g/t 9.3 9.7 9.2 9.4 9.4 9.2 Recovery % 91.9 91.3 91.4 91.0 91.4 89.4 Gold oz 7,017 8,527 7,974 8,980 32,498 15,345 Copper t 98.0 107.1 139.2 224.6 568.9 216.2 Gold equivalent oz 7,927 9,815 9,768 11,687 39,197 17,261(3) (1) Provisional (2) Reflects rounding and/or minor adjustments at year-end(3) Includes Copper and Silver PALITO MINE Mining Improved underground mining rates continued into the fourth quarter, with ayear-on-year increase of almost 175% and more than four fold since the beginningof 2005. The challenge is now to establish sufficient access drives anddevelopment fronts necessary to maintain and grow production further. To assistin this regard important progress has recently been made with the followingitems: • Production development drives established on levels 210m RL and 192m RL • Phase-2 decline extension completed to access deeper ore on the next level at 178m RL • Additional Jumbo drill and LHD loader purchased, due on site Q1 Supported by these developments, the first long-hole stope mining commencedshortly before the end of December on 210m RL. Early results have beensuccessful, with good ore extraction and limited dilution. As more developmentdrives are completed and additional equipment arrives, mining this year willincreasingly transition to long hole stoping at depth, resulting in improvedproduction and efficiencies throughout the year. Plant The new Mill-4 was placed on its foundations late in November and followingadditional engineering and test work, was successfully commissioned shortlybefore Christmas. Initial results have been very good with daily mining ratessubsequently averaging over 450 tonnes. Even before the introduction of Mill-4throughput from the existing mills had shown some improvement over the priorperiods as earlier problems were overcome. However, the success of Mill-4 nowenables additional maintenance on the existing mills, notably Mill-3, which canthen be used either as back-up or for additional capacity depending on futurerequirements. EXPLORATION, DEVELOPMENT AND GENERAL OUTLOOK After more than two year's operating at Palito extensive underground mining anddevelopment has demonstrated the good continuity of ore mineralisation.High-grade ore shoots ('cheroots') found at Palito, show that discreetmineralised zones can extended more than 200 metres on strike, averaging 1 to 2metres width, with localised grades often exceeding 50g/t gold and more than 1%copper. In a number of places the same mineralised features have been mined overat least 100 metres down-dip and still remain open at depth. Such continuityforms a good foundation for future mining. Drilling in 2005 extended the Palito Main Zone (PMZ) mineralisation from 20 to54 veins, from 900 metes to 1,050 on strike and from 125 metres to 220 metresdepth, whilst remaining open in all directions. Further work in 2006 hascontinued to confirm these trends, highlighting similar NW-SE, steeply dippinghigh-grade veins across a structural corridor at least 500 metres in width.Together with other nearby projects in the Jardim do Ouro district, thesefeatures will form primary evaluation targets during 2007 that could eventuallyresult in the development of satellite operations from which to feed thecentrally located process plant at Palito. Evaluation work during the fourth quarter focussed on such advanced projects atJardim do Ouro, notably Bill's Pipe, Ruari's Ridge, Palito West, Sao Chico andRio Nova South. Significant gold showings have been identified at each of theselocations, associated with known sulphide mineralisation similar to thatcurrently being mined at Palito. We expect to provide further results fromthese programmes during the first quarter With commercial production established at Palito and having expanded thecompany's support facilities, Serabi is now well placed to build on itsstrategic position. Deployment of four surface and three underground drillingrigs, combined with improved systems, will greatly assist future evaluation anddevelopment programmes. In this regard last year's achievements and objectivesfor 2007 are summarised in the following table. 2006 Progress and 2007 Objectives Period 2006 Achievements 2007 Objectives Palito Mine • Commercial production declared October 2006 • Production of 50,000oz gold equivalent • Mining and mill rates increased to over 450 • Improve operating efficiencies and lower tpd cash costs to approximately US$225 /oz • Phase 1 and 2 decline completed, trackless • Assess and develop initiatives to expand mining and long hole stoping underway production • Infrastructure and capital projects to • Complete long term mine plan support near term production targets completed Palito Mine • Global PMZ resource increased 74% to • Improve resource definition for mineResources 825,900 oz of gold equivalent planning • Introduction of underground drilling • Continue PMZ strike and depth drilling improves definition of mining resources Exploration and • Geological support facilities expanded • Escalate assessment and acquisition ofdevelopment projects through increased exploration budget • Four surface exploration drill rigs from US$3 million to US$5 million operating Jardim do Ouro • Assessment of projects reaches an advanced • Drill priority targets and establish new stage as drilling gets underway resource areas for potential mining Tapajos • Exploration starts on regional projects • Identify at least one priority project andProjects establish preliminary resource for possible • Preliminary drill programme completed at mining Pombo • Instigate assessment of potential large tonnage projects Corporate • Institutional funding £2.60m @ 40p • Expand investor initiatives • Developed institutional and retail investor • Consolidate strategic position relations programme • Consider new opportunities in Brazil GENERAL The benefits of widespread investment at the Palito mine were evident throughoutlast year, but none more so than in the fourth quarter, in which productionreached 11,687 oz gold equivalent, a 20% increase on the previous quarter or111% compared with the same period in 2005. In addition, throughout 2006 all keyproduction measures showed good improvement, resulting in annual productiongrowth of 127% to 39,197 oz gold equivalent. We have already set a provisional target for Palito in 2007 of 50,000 oz goldequivalent and cash operating costs of approximately US$225 per ounce, theseresults highlight considerable progress towards these goals. Furthermore, anumber of items are already set to impact on first half results this year:decline access recently completed to the next level, the purchase of additionalmining equipment, increased use of long-hole stoping and increased processcapacity following the successful commissioning of the new fourth ball mill atthe end of 2006. In addition to the potential direct impact on production,these developments are also expected to result in improved reliability,efficiencies and safety. Meanwhile, investigations previously highlighted on other initiatives that couldresult in additional improvements to production, have reached an advancedstage, notably an open pit study and test work on the use of an upgrade processto beneficiate lower grade material. The possible introduction of such anupgrade circuit would have major positive economic implications for the Palitomine and, in particular, potential satellite resources. Results from thesestudies are expected during the first quarter of 2007. Against this background the focus during 2007 remains similar to that of lastyear but with some important distinctions: (i) Increased production, accompanied by improved efficiencies, leading to stable cash flow generation that can be used to grow the company (ii) The establishment and development of additional resources at Jardim do Ouro, across the Tapajos and potentially elsewhere in Brazil (iii) Continue to strengthen the position of the company through the above and other initiatives Resources and management time has by necessity, been largely focused on making asuccess of the Palito mine and establishing assets and facilities from which tobuild on the success of Palito in the future. Having now achieved many of thesegoals at Palito increased emphasis will now be placed developing the companyfrom its strong foundation, which we expect will become increasingly evidentduring 2007. 2006 SHARES AND MARKET FOCUS 2006 was a year of three parts. The period to early May, dominated by a rampantgold price and ever higher base metal prices too, saw investor interest surgeand share prices alike. After the gold price reached a 26-year high of US$725/oz on May 12, the sector turned down until early October as a result ofsubsequent price weakness accompanied by a number of AIM market 'casualties',after which a limited degree of interest has slowly returned. While mirroringthese general trends, the price of Serabi shares showed a strong out-performanceof the sector through much of the year before coming in line since late summeronwards. Most notably the liquidity of the shares has significantly improvedduring 2006, with turnover of the public float increased from 20% in 2005 to 64%last year. As an established producer current metal prices still remain very beneficial toSerabi and have enabled ongoing capital projects to be funded from the operatingcash flow being generated at the Palito mining operation. The outlook forcontinued production growth combined with a reduction of operating costs in 2007will further strengthen this position and provides an important distinction forSerabi in the AIM mining sector. Serabi Share InformationListed: London AIMTicker: SRBBasic shares: 110.75 millionFully Diluted shares: 123.47 millionPublic Float: 63%Share Turnover * 2006 64%2005 20%* percentage of public float ENQUIRIES Serabi Mining plc Numis Securities LimitedGraham Roberts Tel: 020 7220 9550 John Harrison Tel: 020 7776 1500Chairman Mobile: 07768 902475 James Black Tel: 020 7776 1500 Clive Line Tel: 020 7220 9553 Parkgreen CommunicationsFinance Director Mobile: 07710 151 692 Simon Robinson Tel: 020 7851 7480 E-mail: contact@serabimining.com Clare Irvine Tel: 020 7851 7480Website: www.serabimining.com clare.irvine@parkgreenmedia.com This information is provided by RNS The company news service from the London Stock Exchange