Quarterly Investor Update

19 Apr 2006 08:00

Serabi Mining plc19 April 2006 SERABI MINING QUARTERLY INVESTOR UPDATE Serabi Mining plc advises that it has today despatched to shareholders itsquarterly investor newsletter for the First Quarter of 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. • Record quarterly production of 7,927 oz gold equivalent, a 43% increase over the fourth quarter of 2005 • 74% year-on-year increase in total resources at Palito Gold Mine to 825,900 ounces gold equivalent • Set for growth: decline development completed, critical equipment and facilities in place • Grid electricity and other important capital projects finished, resulting in major cost savings • Regional drilling underway, results imminent Palito - Operating Results (1) 2005 2005 2006 Q1 Q4 Q1 Mined t 9,964 23,453 31,555(per day) (110) (255) (351) Milled t 8,222 21,415 25,514(per day) (92) (233) (283) Head Grade g/t 9.3 7.7 9.3 Recovery % 84.2 91.8 91.9 Gold oz 2,077 4,837 7,017 Copper t 22.4 74.7 98.0 Gold oz 2,262 5,528 7,927Equivalent(2) (1) Provisional (2) Includes copper and silver PALITO MINE Mining The improvement in mining rates seen at the end of 2005 continued in the firstquarter of 2006, leading to a 35% increase in tonnes mined over the fourthquarter of last year. This increase resulted from several factors which includedmore efficient ore scheduling and handling, the discovery and mining of newareas and the use of more productive mining methods. Phase 1 of the decline, which commenced in December 2005, was completed to192mRL elevation at the end of February. Development drives along the strike ofthe orebody subsequently began in March. The impact of this important initiativewill become more evident during the next two quarters, both in terms of highertonnages and eventually grade, although daily mining rates have already shown amarked improvement to above 400 tonnes by the end of March. Following completionof the development drives from the decline, initially on the higher 210mRLelevation, the 'new' longhole mining method will commence and is expected tohave a major impact on production later in the year. However, in the meantime ahybrid longhole-shrinkage method is already being used in suitable areas of theexisting mine with noticeable benefits to production. Plant Phase 2 of the previously outlined process plant upgrade (see September &December Investor Updates) was completed during the March quarter. Primarilythis involved the introduction of a third ball mill and a number of improvementsthroughout other parts of the plant. The resulting daily plant capacity is nowrated at approximately 350 tonnes. With the success in achieving much highermining rates, the focus is now back on the process plant. Furtherde-bottlenecking projects should lead to daily capacity of 400 tonnes from theplant by the end of the second quarter of this year. Commercial Production At the time of Serabi's IPO, the Board set a variety of operating and financialtargets that the Palito Gold Mine had to achieve over a period of three monthsin order to declare 'commercial production'. As an operation in development,costs associated with mining are currently being capitalised on Serabi's balancesheet. As a result of investments in grid electricity, the decline, mechanisedmining equipment and other productivity enhancing initiatives, managementexpects to declare commercial production in the third quarter of 2006. At thatpoint, Serabi will report total cash costs under the Gold Institute Standardmethodology and on this basis, is targeting a total cash cost of US$200 perounce by the end of 2006. TAPAJOS EXPLORATION UNDERWAY Serabi owns and operates its own exploration drills, which completed a total of18,235 metres of drilling in 2005. In order to undertake regional projectevaluation, two additional surface drill rigs were ordered in 2005 and, in themeantime, new drill crews have been trained alongside experienced drillers.Early in 2006 the two additional surface rigs arrived and for the first timedrilling has commenced at projects other than Palito. In addition, the Companyhas significantly expanded its support facilities for exploration and drillingto deal with the anticipated substantial increase in samples, in particularwithin the geology department and the assay laboratory. As a result, Serabi isnow well positioned to evaluate its extensive project portfolio. With severalexciting prospects identified, it has been decided to increase the explorationbudget for 2006 from US$2.6 million by up to a further US$3.0 million. CORPORATE Management recently decided to implement several additional optimisationprojects at Palito with a total investment of up to US$3.0 million identified.In addition, the planned 2006 exploration budget will be increased from US$2.6million by up to a further US$3.0 million, in order to accelerate the evaluationof Serabi's portfolio of projects. To assist with the funding of theseinitiatives, the Company successfully raised net proceeds of US$4.3 million atthe end of March, through the issue of 6.5 million shares with a number ofinstitutions, at a price of 40p. Enquiries: Serabi Mining plc Graham Roberts Tel: 020 7220 9550Chairman Mobile: 07768 902 475 Clive Line Tel: 020 7220 9553Finance Director Mobile: 07710 151 692 Chris Sattler Tel: 020 7220 9552Investor Relations Mobile: 07717 748 275 E-mail: contact@serabimining.comWebsite: www.serabimining.com This information is provided by RNS The company news service from the London Stock Exchange