Serabi Regulatory News (SRB)

23 Oct 2006 07:00

Serabi Mining plc23 October 2006 SERABI MINING QUARTERLY INVESTOR UPDATE Serabi Mining plc ("Serabi" or "the Company") advises that it has todaydespatched to shareholders its investor newsletter for the Third Quarter toSeptember 30, 2006. The company has highlighted in its newsletter the following matters. The fulltext version of the quarterly update is available from Serabi's offices or fromthe Company's website www.serabimining.com. • Palito Gold Mine achieves commercial production • Quarterly production of 9,768 oz gold equivalent • Cash operating costs of US$300 per ounce achieved • Mining production continues to show improvements, with long-hole mine production expected to commence very soon • Production improvements anticipated for the fourth quarter with commissioning of additional milling capacity now underway • Benefiting from mine and process improvements, provisional target for 2007 production at Palito of approximately 50,000 oz gold equivalent, at an operating cash cost of between US$200 to US$225 per ounce • Early drilling results and new geochemistry at Jardim do Ouro highlights further potential close to Palito operation • Regional exploration indicates a new poly-metallic project along strike from Palito Palito - Operating Results (1) 2006 2005 Q1 Q2 Q3 YTD YTDTotal Mined 32,820 34,055 42,357 109,232 36,034(per day) (365) (374) (460) (400) (132) Mined Ore t 31,555 31,864 34,598 98,017 36,034(per day) (351) (350) (376) (359) (132) Milled t 25,514 29,851 29,492 84,859 36,543(per day) (283) (328) (321) (311) (134) Head Grade g/t 9.3 9.7 9.2 9.4 10.1 Recovery % 91.9 91.3 91.4 91.5 88.3 Gold oz 7,017 8,527 7,974 23,518 10,509 Copper t 98.0 107.1 139.2 344.4 141.5 Gold oz 7,927 9,815 9,768 27,510 11,733 Equivalent (2) PALITO MINE Mining Mining rates continued to improve noticeably during the quarter, with totaldaily mining rates routinely exceeding 500 tonnes during September, reflectingthe impact of the introduction of trackless mining on the deeper levels. Phase-2extension of the decline has now started in order to access deeper ore,accounting for the increase in waste tonnage over the period. Meanwhile, following an extended period of pre-production development sincecompletion of Phase-1 of the decline in February, we expect the first oreproduction from long-hole stopes to start in November. As a result of similarongoing developments from the decline, there will be a noticeable shift ofproduction over the next six months from the upper levels under Palito Hillusing a shrinkage mining technique, to the more productive long-hole stopes atdeeper levels that will now be mainly used for ore production. To furthersupport this increased level of mechanised mining and improve productionscheduling, additional equipment is currently being purchased. Plant Problems with the mills reported at the end of Q2 continued during the lastquarter, resulting in similar daily process rates for both periods. In additionto planned relining of Mill-2, Mill-3 suffered a serious breakdown of itsbearing, resulting in only 67% availability. Although this has now beenrepaired, given the ongoing need for routine maintenance, combined withincreasing levels of ore production now being achieved, plans are underway toimprove and increase the size of the mill circuit. As a result a new, largermill has already been sourced, purchased and transported to site. In combinationwith one of the established mills, the new primary mill circuit will comfortablyachieve a daily process capacity of 450 tonnes, with an additional mill onstandby providing back-up. On-going beneficiation test-work is being conducted to confirm the optimalflow-sheet to upgrade the lower grade ore material. In addition to an optionusing coarse milling and spirals separation, preliminary results using screeningand a Dense Media Separation circuit have been encouraging. With these itemsalready well advanced, such a combination is set to provide a wide range ofbenefits to future production: • Improved reliability • Expanded capacity • Greater flexibility • Improved recoveries General As a result of the lower than anticipated mill availability, quarter-on-quarterproduction remained broadly flat for the September period, which will result inproduction of less than the original target of 45,000 oz gold equivalent thisyear. However, with the new primary mill circuit expected to be commissioned bythe end of November, production levels should show a marked improvement from thelatter part of the fourth quarter, leading to annualised production levels inexcess of 45,000 oz gold equivalent by year-end. EXPLORATION During 2005 geological activities were focussed mainly on the Palito Main Zoneand accompanied by a strengthening of the company's exploration capacity. Thisexpansion culminated last quarter in the first progress report for projectsoutside of Palito mine (see Press Release dated September 13), whichhighlighted: • Improved exploration facilities, equipment and increased budget providing a strong basis for expanded exploration programme; • Expanded geochemical survey highlighting additional targets at Jardim do Ouro which are expected to form the basis for new drill targets; • Geological survey and geochemistry results indicate new targets at Rio Novo South, directly along strike of the Palito Main Zone mineralisation; • Drilling of a major coincident geochemical and geophysical anomaly at the Bill's Pipe project, situated near to the Palito Mine, intersecting massive sulphides, with anomalous gold and copper grades; • Initial drill results at Ruari's Ridge returning attractive gold and copper grades; • Drilling results from the recently discovered Sucuba project, located 10km west of Palito, indicate the occurrence of a poly-metallic deposit; • Drilling at Pombo confirming the presence of a wide mineralised structure, with indications of porphyry associated alteration at depth. Serabi now owns and operates four surface exploration drilling rigs, which inconjunction with extensive geological and laboratory facilities, provides amajor advantage to the company for rapid in-house assessment of projects.Against this background the company is planning to expand its programme ofexploration and evaluation and in this regard expects to increase the annualexploration budget from approximately US$3 million in 2006, to between US$4 toUS$5 million in 2007. GENERAL The highlight of the September quarter was the attainment of commercialproduction at the Palito mine, which took effect from October 1. Thisachievement is the culmination of a period of intense development and investmentthat has taken place over more than two years, such that the operation has nowreached a point of sustainable commercial production. This reflects that amongstother criteria which have now been achieved, the mine is generating positiveoperating cash flow, providing a strong basis for further developments at Palitoand throughout the Company. The unique status that Serabi has now established in Brazil, places the companyin a strong competitive position to assess and potentially acquire new projects.It remains the goal to build-up the resources and production of Serabi and inthis regard we now plan to expand the new business development activities of thecompany. Building on this success and with preparations for the coming year, it isexpected that the full potential of Serabi will become more evident during 2007,with the following goals: • Increase Palito annual mine production to at least 50,000 ounces gold equivalent with a cash cost of US$200 - US$225 per ounce • Further increase of the mineral resource base on Palito Main Zone • Review expansion potential for the Palito mine • Establish mineral resources on other Jardim do Ouro projects • Expand exploration across the Tapajos project portfolio • Increase project portfolio Enquiries Serabi Mining plc Numis Securities LimitedGraham Roberts Tel: 020 7220 9550 John Harrison Tel: 020 7776 1500Chairman James Black Tel: 020 7776 1500 Clive Line Tel: 020 7220 9553 Parkgreen CommunicationsFinance Director Mobile: 07710 151 692 Simon Robinson Tel: 020 7493 3713 E-mail: contact@serabimining.com Ana Ribeiro Tel: 020 7493 3713Website: www.serabimining.com ana.ribeiro@parkgreenmedia.com This information is provided by RNS The company news service from the London Stock Exchange