TIDMSRB
For immediate release
13 November 2020
Serabi Gold plc
("Serabi" or the "Company")
Unaudited Results for the three and nine month periods ended 30
September 2020
Serabi (AIM:SRB, TSX:SBI), the Brazilian focused gold mining and
development company, today releases its unaudited results for the three
and nine month periods ended 30 September 2020.
Financial Highlights
-- Cash Cost for the year to date of US$1,013 per ounce.
-- All-In Sustaining Cost for the year to date of US$1,298 per ounce.
-- EBITDA for the third quarter of 2020 of US$6.3 million (Q3 2019: US$4.6
million) an improvement of 36 per cent.
-- EBITDA for the year to date ("ytd") of US$15.7 million (2019 ytd: US$12.1
million) an improvement of 28 per cent.
-- Post tax profit for the year to date of US$7.8 million (2019 ytd: US$2.8
million) an improvement of 175 per cent.
-- Earnings per share for the year to date of 13.28 cents.
-- Average gold price of US$1,707 received on gold sales in 2020.
-- US$5.5 million now paid to date of the remaining US$12 million
consideration for purchase of Coringa, due to Equinox Gold Corp.
("Equinox"). The balance will continue to be paid in monthly instalments,
until travel restrictions caused by Coronavirus are lifted. US$3.5
million has been settled from cash flow with a total of US$2.0 million
drawn down to date of the US$12 million Convertible Loan Notes (the "Loan
Notes") being subscribed for by Greenstone Resources II LP
("Greenstone").
Key Financial Information
9 months to 3 months to 9 months to 3 months to
30 September 2020 30 September 2020 30 September 2019 30 September 2019
US$ US$ US$ US$
--------------- ------------------ ------------------ ------------------ ------------------
Revenue 45,403,793 15,941,963 43,939,510 14,353,771
Cost of sales (24,908,688) (8,487,475) (27,661,873) (8,496,884)
------------------ ------------------ ------------------ ------------------
Gross operating
profit 20,495,105 7,454,488 16,277,637 5,856,887
Administration
and share
based
payments (4,838,661) (1,168,595) (4,051,905) (1,248,405)
------------------ ------------------ ------------------ ------------------
EBITDA 15,656,444 6,285,893 12,225,732 4,608,482
Depreciation
and
amortisation
charges (4,716,809) (1,484,715) (6,454,531) (2,204,030)
------------------ ------------------ ------------------ ------------------
Operating
profit /
(loss) before
finance and
tax 10,939,635 4,801,178 5,771,201 2,404,452
------------------ ------------------ ------------------ ------------------
Profit / (loss)
after tax 7,828,409 3,671,944 2,849,341 1,129,701
------------------ ------------------ ------------------ ------------------
Earnings per
ordinary share
(basic) 13.28c 6.23c 4.84c 1.92c
------------------ ------------------ ------------------ ------------------
Average gold
price received
(US$/oz) US$1,707 US$1,881 US$1,351 US$1,472
As at
30 September As at As at
2020 31 December 2019 31 December 2018
US$ US$ US$
--------------- ------------------ ------------------ ------------------ ------------------
Cash and cash
equivalents 10,968,059 14,234,612 9,216,048
Net assets 59,209,072 69,733,388 69,110,287
Cash Cost and
All-In
Sustaining
Cost ("AISC")
---------------
9 months to 30 9 months to 30 12 months to 12 months to
September 2020 September 2019 31 Dec 2019 31 Dec 2018
--------------- ------------------ ------------------ ------------------ ------------------
Gold production 24,748 ozs 29,878 ozs 40,101 ozs 37,108 ozs
for cash cost
and AISC
purposes
------------------ ------------------ ------------------ ------------------
Total Cash Cost US$1,013 US$844 US$832 US$821
of production
(per ounce)
------------------ ------------------ ------------------ ------------------
Total AISC of US$1,298 US$1,078 US$1,081 US$1,093
production
(per ounce)
------------------ ------------------ ------------------ ------------------
Operational Highlights
-- Third quarter gold production of 7,224 ounces, resulting in 24,748 ounces
for the year to date.
-- 44,077 tonnes of ore mined during the quarter at 4.84 grams per tonne
("g/t") of gold.
-- 46,135 tonnes of run of mine ("ROM") ore were processed through the plant
from the combined Palito and Sao Chico orebodies, with an average grade
of 4.75 g/t of gold.
-- 3,037 metres of horizontal development completed during the quarter, the
second consecutive quarter when more than 3,000 metres of development has
been achieved.
-- Fourth quarter production guidance of 8,000 oz, with full year guidance
of 33,000 oz.
SUMMARY PRODUCTION STATISTICS FOR 2020 AND FOR 2019
Qtr 1 Qtr 2 Qtr 3 YTD Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total
------------ -------
2020 2020 2020 2020 2019 2019 2019 2019 2019
------------ ------- ------ ------ ------ ------- ------ ------ ------ ------ -------
Gold
production
(1) (2) Ounces 9,020 8,504 7,224 24,478 10,164 9,527 10,187 10,223 40,101
Mined ore --
Total Tonnes 42,036 43,519 44,077 129,632 42,609 44,784 44,757 44,092 176,243
Gold grade (g/t) 6.54 5.85 4.84 5.73 7.47 6.72 7.14 6.69 7.00
Milled ore Tonnes 40,465 44,235 46,135 130,835 43,451 43,711 45,378 44,794 177,335
Gold grade (g/t) 6.66 5.91 4.75 5.73 7.69 6.72 6.84 6.81 7.02
Horizontal
development
-- Total Metres 2,878 3,004 3,037 8,919 1,868 2,419 2,433 2,908 9,628
------------ ------- ------ ------ ------ ------- ------ ------ ------ ------ -------
1. Gold production figures are subject to amendment pending final agreed
assays of the gold content of the copper/gold concentrate and gold
doré that is delivered to the refineries.
2. Gold production totals for 2020 include treatment of 30,155 tonnes of
flotation tails at a grade of 3.50g/t (Q3 2019: 20,554 tonnes at a grade
of 4.13 g/t)
3. The table may not sum due to rounding.
Exploration and Development Highlights
-- The acquisition of two new highly prospective tenements to complement the
Sao Chico exploration potential including highly prospective Sao Domingos
exploration tenement, immediately to the west of Sao Chico. Sao Domingos
hosts multiple past and present artisanal working.
-- Licença Prévia (LP) for the Coringa gold project issued by
SEMAS on 8 October 2020.
-- Regional exploration activities at Calico and Juca prospects resumed
during the quarter.
Key Objectives for 2020
-- Continue advancing the licensing process for Coringa along with ongoing
engineering studies.
-- Advance financing package for the Coringa project to fund plant assembly
and other site developments.
-- Continue exploration drilling at Sao Chico with a view to producing a new
resource estimation.
-- Complete exploration discovery drilling programme over the geophysical
anomalies to the west and south of Sao Chico.
-- Maintain payment programme required to complete acquisition of Coringa
gold project.
-- The Company hopes to be able to commence an initial drilling programme at
Toucano prior to the end of 2020.
2020 Production Guidance
The impact of CV-19 pandemic has resulted in production of 24,748 ounces
of gold for the first nine months of the year. The third quarter was
probably the worst period for the pandemic, to date, in Brazil, with
private operations suspended and listed companies reducing operations
significantly. However, the Company has managed to keep its mines
operational and maintain production and cash flow throughout. By the
end of September 2020, with almost a full workforce complement back at
the mine sites, many ancillary activities were resumed. We anticipate
fourth quarter production being approximately 8,000 ounces resulting in
full year production of approximately 33,000 ounces.
Outlook for 2021
With a successful surface and underground drilling campaign over the
next six months to guide a concentrated mine development programme,
management are confident that production levels can start to be built up
to the levels that were expected prior to the intervention of COVID-19
from the beginning of the second quarter of 2021.
Clive Line, CFO of Serabi has been interviewed by Crux Investors and BRR
Media. These interviews can be accessed using the following links
Crux Investors -
https://www.globenewswire.com/Tracker?data=H_g2m7Ft8FtxOVEtG53aDjeG4gFGuoBoyqbcfdD3OhQt_i9QUP89mg3jzVHPEJz_dRBQDxnNGhchZM5p5YjicT0JtkzFz5mzRsxuBDZErJFIMNza8avfKAjqU6bY6Jat
https://youtu.be/HwchInuUwuk
BRR Media -
https://www.globenewswire.com/Tracker?data=H_g2m7Ft8FtxOVEtG53aDjBPRzD3MBMEp91CARLr-hZIYwK_WWg8NgOOl1XzAN9_y5HjCRxDDReGQlQVg-KBbdnFpbbmPgxuqbWvjnuEE6iOpAqVLPGSINxI5aqzozGGnf2NiImhNlum-j3Bm6ucbsdcIGUmhI4SeQq83DWqYjM4cnRMY0SALTVkQ-SNG5_oEkVf3SC3BhBIKy2yod20akdspaOsa-7hVb8JlXvO8Ptv8TLW2Tmb6A-ms9m0OhPuICCiaS8tRlf35S_qvzWwtEaYIcnqsK3JidV5zPfaAfY=
https://www.brrmedia.co.uk/broadcasts-embed/5fabf3ae39bad9268170c31d/?serabi-gold&popup=true
Clive Line, CFO of Serabi commented,
"Notwithstanding the lower than hoped for production for the third
quarter, the strong gold price has meant that the results for the third
quarter of 2020 have shown a slight improvement compared with second
quarter which itself was one of our best ever quarters.
"Cash flow generation has again been strong with cash flow from
operations of US$5.75 million and after accounting for capital
expenditures, the net operational cash flow of US$3.74 million, slightly
lower than was reported for the second quarter but reflecting an
increased level of expenditure on improvements to the mining fleet.
"Operating profit (before finance costs) of US$4.8 million is at the
same level as for the preceding quarter and represents a 100 per cent
improvement compared to the same quarter in 2019. For the year to date
the operating profit (before finance costs) of US$10.94 million
represents a 90 per cent improvement year on year.
"The financial performance has been assisted by the strong gold price
and the continued weakness of the Brazilian Real with the average gold
price for the third quarter of approximately US$1,908. For the year to
date the Group has averaged a realised price of US$1,707 for the sales
completed to the end of September 2020 which compares with the LBMA
average for the year to the end September 2020 of US$1,735.
"During the quarter the Company has repaid a further US$2.5 million for
the outstanding acquisition obligation for the Coringa project and
subsequent to the quarter end has settled a further US$2.0 million
leaving a balance, of the principal outstanding, of US$6.5 million.
Based on the current schedule of monthly repayments this remaining
obligation should be settled during in the second quarter of 2021. With
the cash flow generated, the Company has been able to fund US$2.0
million of these payments from cash flow drawing down since the start of
July 2020 only a further US$0.5 million of the US$12 million Convertible
Loan Note facility (the "Loan Note Facility") that was entered into with
Greenstone Resources II LP ("Greenstone") in April 2020. Currently only
US$2.0 million has been drawn down to date against this facility which
was initially put in place when gold prices were weaker and the impacts
of CV-19 difficult to assess, to provide certainty that the Company had
funding available to it to meet this acquisition obligation. Management
will continue to try to pay the on-going instalment payments for Coringa
from cash flow generated from operations and minimise the requirement to
make further drawdowns against the Loan Note Facility.
"The cash cost per ounce and the AISC per ounce for the year to date
need to be viewed in context. Gold production for the year to date has
been quite significantly lower than was originally forecast. In the
first quarter this was the result of a breakdown of the largest of the
three ball mils during February, whilst production levels for the second
and third quarters have been affected by the need to reduce the
workforce on site to allow socially distanced working conditions. As a
result the on-site workforce over the last two quarters has been
approximately 65 per cent of the normal staffing complement for much of
the time those staff who were at site, voluntarily extended their work
rosters with many spending up to three months at site to maintain the
mining operations as restrictions on travel and a lack of testing
capacity at the time rendered team changes very difficult. Had
production for the second and third quarters been at the original levels
expected, this would have potentially translated into a 21 per cent
improvement in the AISC and Cash Costs.
"Looking at the operational statistics during the first nine months of
the 2020, mined tonnage and plant throughput have been at similar levels
to the same period in 2019 with lower processed grades being the major
contributor to the reduction in gold production. The original plan for
2020 was to increase mining rates compared with 2019, and to use the ore
sorter to beneficiate the lower grade material and deliver a sorted
higher grade product to the process plant. The mine plan was therefore
deliberately designed to undertake more development (more diluted ore
given the mining method) as well as more lower grade stopes. The
intention was to beneficiate this lower grade material through the ore
sorter, screen out the majority of the waste and send the resultant
lower volume of higher grade product to the plant. The Company has
continued to follow the original mine plan, but with the reduced
workforce it has been necessary to simplify the operations, reducing the
number of faces available at any one time but this has in turn resulted
in a reduction of total volume and in so doing reducing the overall
level of optionality for selecting the ore. As a result, lower grade
ore that might normally have been stockpiled has been processed whilst
there was plant capacity available.
"By the end of September 2020, operations were returning to something
resembling normality and an aggressive surface and underground drilling
programme is underway, along with an accelerated underground development
programme targeted to replenish the reserve and resource base and allow
the Company to regain the optionality and flexibility that it has
benefitted from in the past. This will not be achieved overnight, and
it will take some time to recover the six months that have been lost.
With exploration and mine development activity being stepped up together
with the usual higher labour expense of settlement of the standard
"13(th) salary" payments that are due in November and December this will
impact on the level of cash generation for the rest of the year.
Nonetheless I expect that if our production estimates are attained the
Company can end in the year in a comfortable financial position."
This announcement is inside information for the purposes of Article 7 of
Regulation 596/2014. The person who arranged the release of this
statement on behalf of the Company was Clive Line, Director.
Enquiries:
Serabi Gold plc
Michael Hodgson Tel: +44 (0)20 7246 6830
Chief Executive Mobile: +44 (0)7799 473621
Clive Line Tel: +44 (0)20 7246 6830
Finance Director Mobile: +44 (0)7710 151692
Email: contact@serabigold.com
-----------------------------
Website: www.serabigold.com
-----------------------------
Beaumont Cornish Limited
Nominated Adviser
Roland Cornish Tel: +44 (0)20 7628 3396
Michael Cornish Tel: +44 (0)20 7628 3396
Peel Hunt LLP
UK Broker
Ross Allister Tel: +44 (0)20 7418 8900
Copies of this announcement are available from the Company's website at
www.serabigold.com.
Neither the Toronto Stock Exchange, nor any other securities regulatory
authority, has approved or disapproved of the contents of this
announcement.
The following information, comprising, the Income Statement, the Group
Balance Sheet, Group Statement of Changes in Shareholders' Equity, and
Group Cash Flow, is extracted from these financial statements.
Statement of Comprehensive Income
For the three and nine month periods ended 30 September 2020
For the three months ended For the nine months ended
30 September 30 September
2020 2019 2020 2019
(expressed in US$) Notes (unaudited) (unaudited) (unaudited) (unaudited)
--------------------------- ---------- ----------------- -------------- ------------- ------------
CONTINUING OPERATIONS
Revenue 15,941,963 14,353,771 45,403,793 43,939,510
Cost of sales (8,487,475) (8,496,884) (24,908,688) (28,161,873)
Release of inventory
impairment provision -- -- -- 500,000
Depreciation and
amortisation charges (1,484,715) (2,204,030) (4,716,809) (6,454,531)
--------------------------- ---------- ----------------- -------------- ------------- ------------
Total cost of sales (9,972,190) (10,700,914) (29,625,497) (34,116,404)
Gross profit 5,969,773 3,652,857 15,778,296 9,823,106
Administration expenses (1,042,013) (1,174,204) (4,705,158) (3,973,168)
Share-based payments (182,740) (65,484) (344,578) (196,455)
Gain on sales of assets
disposal 56,158 (8,717) 211,075 117,718
--------------------------- ---------- ----------------- -------------- ------------- ------------
Operating profit 4,801,178 2,404,452 10,939,635 5,771,201
Foreign exchange loss 51,642 (169,113) (99,032) (235,216)
Finance expense 2 (484,457) (735,003) (1,583,318) (1,871,914)
Finance income 2 16,547 -- 737,705 175,129
--------------------------- ---------- ----------------- -------------- ------------- ------------
Profit before taxation 4,384,910 1,500,336 9,994,990 3,839,200
Income tax expense 3 (712,966) (370,635) (2,166,581) (989,859)
--------------------------- ---------- ----------------- -------------- ------------- ------------
Profit after taxation 3,671,944 1,129,701 7,828,409 2,849,341
--------------------------- ---------- ----------------- -------------- ------------- ------------
Other comprehensive income
(net of tax)
Items that may be reclassified subsequently to profit
or loss
Exchange differences on
translating foreign
operations (1,259,213) (5,187,377) (18,873,162) (4,695,527)
--------------------------- ---------- ----------------- -------------- ------------- ------------
Total comprehensive profit
/(loss) for the period(1) 2,412,731 (4,057,676) (11,044,751) (1,846,186)
--------------------------- ---------- ----------------- -------------- ------------- ------------
Profit per ordinary share 4 6.23c 1.92c 13.28c 4.84c
(basic)
--------------------------- ---------- ----------------- -------------- ------------- ------------
Profit per ordinary share 4 5.80c 1.85c 12.36c 4.67c
(diluted)
--------------------------- ---------- ----------------- -------------- ------------- ------------
(1) The Group has no non-controlling interests and all losses
are attributable to the equity holders of the parent company.
Balance Sheet as at 30 September 2020
As at As at As at
30 September 30 September 31 December
2020 2019 2019
(expressed in US$) (unaudited) (unaudited) (audited)
------------------------------ ------------ ------------ ------------
Non-current assets
Deferred exploration costs 25,583,666 28,439,970 30,686,652
Property, plant and equipment 27,788,820 36,704,931 37,597,100
Right of use assets 2,207,297 2,102,183 1,997,176
Taxes receivable 828,083 1,549,463 848,845
Deferred taxation 229,464 1,542,803 1,321,782
-------------------------------- ------------ ------------ ------------
Total non-current assets 56,637,330 70,339,350 72,451,555
-------------------------------- ------------ ------------ ------------
Current assets
Inventories 5,308,012 6,610,477 6,577,968
Trade and other receivables 2,076,263 872,325 802,275
Prepayments and accrued income 2,329,770 4,390,107 3,473,288
Cash and cash equivalents 10,968,059 13,440,173 14,234,612
-------------------------------- ------------ ------------ ------------
Total current assets 20,682,104 25,313,082 25,088,143
-------------------------------- ------------ ------------ ------------
Current liabilities
Trade and other payables 4,573,988 7,158,839 6,113,789
Acquisition payment outstanding 8,909,397 11,810,372 12,000,000
Other interest bearing
liabilities 2,060,558 6,949,152 6,952,542
Derivative financial
liabilities 411,123 -- --
Accruals 293,062 344,502 319,670
------------ ------------ ------------
Total current liabilities 16,248,128 26,262,865 25,386,001
-------------------------------- ------------ ------------ ------------
Net current assets 4,433,976 (949,783) (297,858)
-------------------------------- ------------ ------------ ------------
Total assets less current
liabilities 61,071,306 69,389,567 72,153,697
-------------------------------- ------------ ------------ ------------
Non-current liabilities
Trade and other payables 82,261 564,524 183,043
Other interest bearing
liabilities 181,348 -- --
Provisions 1,598,625 1,364,487 2,237,266
Total non-current liabilities 1,862,234 1,929,011 2,420,309
-------------------------------- ------------ ------------ ------------
Net assets 59,209,072 67,460,556 69,733,388
-------------------------------- ------------ ------------ ------------
Equity
Share capital 8,905,116 8,882,803 8,882,803
Share premium reserve 21,905,976 21,752,430 21,752,430
Option reserve 984,358 1,171,501 1,019,589
Other reserves 9,970,276 6,464,152 7,149,274
Translation reserve (63,152,108) (45,502,650) (44,278,946)
Retained surplus 80,595,454 74,692,320 75,208,238
-------------------------------- ------------ ------------ ------------
Equity shareholders' funds 59,209,072 67,460,556 69,733,388
-------------------------------- ------------ ------------ ------------
The interim financial information has not been audited and does not
constitute statutory accounts as defined in Section 434 of the Companies
Act 2006. Whilst the financial information included in this announcement
has been compiled in accordance with International Financial Reporting
Standards ("IFRS") this announcement itself does not contain sufficient
financial information to comply with IFRS. The Group statutory accounts
for the year ended 31 December 2019 prepared under IFRS as adopted in
the EU and with IFRS and their interpretations adopted by the
International Accounting Standards Board have been filed with the
Registrar of Companies following their adoption by shareholders at the
2020 Annual General Meeting. The auditor's report on these accounts was
unqualified. The auditor's report did not contain a statement under
Section 498 (2) or 498 (3) of the Companies Act 2006.
Statements of Changes in Shareholders' Equity
For the three and nine month periods ended 30 September 2020
(expressed in
US$)
Share Other
Share Share option reserves Translation Retained
(unaudited) capital premium reserve (1) reserve Earnings Total equity
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Equity
shareholders'
funds at 31
December
2018 8,882,803 21,752,430 1,363,367 4,763,819 (40,807,123) 73,154,991 69,110,287
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Foreign
currency
adjustments -- -- -- -- (4,695,527) -- (4,695,527)
Profit for the
period -- -- -- -- -- 2,849,341 2,849,341
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Total
comprehensive
income for
the period -- -- -- -- (4,695,527) 2,849,341 (1,846,186)
Transfer to
taxation
reserve -- -- -- 1,700,333 -- (1,700,333) --
Share options
lapsed in
period -- -- (388,321) -- -- 388,321 --
Share option
expense -- -- 196,455 -- -- -- 196,455
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Equity
shareholders'
funds at 30
September
2019 8,882,803 21,752,430 1,171,501 6,464,152 (45,502,650) 74,692,320 67,460,556
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Foreign
currency
adjustments -- -- -- -- 1,223,704 -- 1,223,704
Profit for the
period -- -- -- -- -- 983,643 983,643
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Total
comprehensive
income for
the period -- -- -- -- 1,223,704 983,643 2,207,347
Transfer to
taxation
reserve -- -- -- 685,122 -- (685,122) --
Share options
lapsed in
period -- -- (217,397) -- -- 217,397 --
Share option
expense -- -- 65,485 -- -- -- 65,485
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Equity
shareholders'
funds at 31
December
2019 8,882,803 21,752,430 1,019,589 7,149,274 (44,278,946) 75,208,238 69,733,388
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Foreign
currency
adjustments -- -- -- -- (18,873,162) -- (18,873,162)
Profit for the
period -- -- -- -- -- 7,828,409 7,828,409
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Total
comprehensive
income for
the period -- -- -- -- (18,873,162) 7,828,409 (11,044,753)
Shares issued
in the
period 22,313 153,546 -- -- -- -- 175,859
Transfer to
taxation
reserve -- -- -- 2,821,002 -- (2,821,002) --
Share options
exercised in
period -- -- (31,752) -- -- 31,752 --
Share options
lapsed in
period -- -- (348,057) -- -- 348,057 --
Share option
expense -- -- 344,578 -- -- -- 344,578
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
Equity
shareholders'
funds at 30
September
2020 8,905,116 21,905,976 984,358 9,970,276 (63,152,108) 80,595,454 59,209,072
-------------- --------- ---------- --------- --------- ------------ ----------- ------------
(1) Other reserves comprise a merger reserve of US$361,461
and a taxation reserve of US$9,608,815 (31 December 2019: merger reserve
of US$361,461 and a taxation reserve of US$6,787,813).
Cash Flow Statement
For the three and nine month periods ended 30 September 2020
For the three months For the nine months
ended ended
30 September 30 September
2020 2019 2020 2019
(expressed in US$) (unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------------ ----------- ----------- ----------- -----------
Operating activities
Post tax (loss) / profit for period 3,671,944 1,129,701 7,828,409 2,849,341
Depreciation -- plant, equipment and mining properties 1,484,715 2,204,030 4,716,809 6,454,531
Net financial expense 416,268 904,116 944,645 1,932,001
Provision for impairment of inventory -- -- -- (500,000)
Provision for taxation 712,966 370,635 2,166,581 989,859
Share-based payments 182,740 65,484 399,284 196,455
Foreign exchange (loss) / gain (79,732) 22,685 (125,537) (360,116)
Changes in working capital
(Increase)/decrease in inventories 55,650 (193,156) (733,883) 1,972,184
(Increase) in receivables, prepayments and accrued
income (997,396) 119,905 (1,997,572) (993,117)
Increase/(decrease) in payables, accruals and
provisions 277,539 461,603 220,307 1,979,991
----------------------------------------------------- ----------- ----------- ----------- -----------
Net cash inflow from operations 5,724,694 5,085,003 13,419,043 14,521,129
------------------------------------------------------ ----------- ----------- ----------- -----------
Investing activities
Purchase of property, plant and equipment and assets
in construction (860,020) (1,138,120) (2,049,973) (2,599,412)
Mine development expenditure (784,203) (1,342,675) (2,005,880) (2,835,238)
Geological exploration expenditure (267,338) (290,503) (1,352,610) (1,087,027)
Pre-operational project costs (149,457) (433,526) (627,097) (1,277,048)
Acquisition of mining project (2,500,000) -- (3,500,000) --
Acquisition of other property rights (150,789) (196,037) (483,302) (1,352,112)
Proceeds from sale of assets 72,188 16,741 400,047 169,822
Interest received -- -- 911 2,217
------------------------------------------------------ ----------- ----------- ----------- -----------
Net cash outflow on investing activities (4,639,619) (3,384,120) (9,617,904) (8,978,798)
------------------------------------------------------ ----------- ----------- ----------- -----------
Financing activities
Drawdown of convertible loan 500,000 -- 2,000,000 --
Repayment of secured loan -- -- (6,983,492) --
Payment of finance lease liabilities (203,080) (125,804) (249,354) (588,025)
Interest paid and other finance costs (2,753) (117,308) (265,751) (421,241)
----------- ----------- ----------- -----------
Net cash (outflow) / inflow from financing activities 294,167 (243,112) (5,498,597) (1,009,266)
------------------------------------------------------ ----------- ----------- ----------- -----------
Net increase / (decrease) in cash and cash equivalents 1,379,242 1,457,771 (1,697,458) 4,533,065
Cash and cash equivalents at beginning of period 9,627,412 12,366,683 14,234,612 9,216,048
Exchange difference on cash (38,596) (384,281) (1,569,095) (308,940)
------------------------------------------------------ ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period 10,968,059 13,440,173 10,968,059 13,440,173
------------------------------------------------------ ----------- ----------- ----------- -----------
Notes
1. Basis of Preparation
These interim condensed consolidated financial statements are for the
three and nine month periods ended 30 September 2020. Comparative
information has been provided for the unaudited three and nine month
periods ended 30 September 2019 and, where applicable, the audited
twelve month period from 1 January 2019 to 31 December 2019. These
condensed consolidated financial statements do not include all the
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the 2019
annual report.
The condensed consolidated financial statements for the periods have
been prepared in accordance with International Accounting Standard 34
"Interim Financial Reporting" and the accounting policies are consistent
with those of the annual financial statements for the year ended 31
December 2019 and those envisaged for the financial statements for the
year ending 31 December 2020.
.
Accounting standards, amendments and interpretations effective in 2020
The Group has not adopted any standards or interpretations in advance of
the required implementation dates.
The following Accounting standard has come into effect as of 1 January
2020 have been
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment -- Definition of Material)
The adoption of this standard has had no effect on the financial results
of the Group.
There are a number of standards, amendments to standards, and
interpretations which have been issued that are effective in future
periods and which the Group has chosen not to adopt early. None of
these are expected to have a significant effect on the Group, in
particular
IAS 1 Presentation of Financial Statements
IFRS 3 Business Combinations (Amendment -- Definition of a Business)
These financial statements do not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006
Going concern and availability of finance
As at 30 September 2020 the Group had cash in hand of US$10.97 million
and net assets of US$59.21 million.
The occurrence of the Coronavirus (COVID-19) pandemic has created
significant uncertainty for all business sectors including Serabi.
Whilst unable to operate at expected production levels during the second
and third quarters of 2020, the Group has nonetheless maintained its
gold mining operations without interruption. The levels of workforce at
site were reduced as a pre-cautionary measure to improve social
distancing whilst additional accommodation and other facilities could be
put in place prior to a return to full workforce numbers. Whilst
production levels during the second and third quarters of 2020 have been
below the levels that the Group had originally forecast, the weakness of
the Brazilian Real and the increased gold price that prevailed during
the same period, resulted in strong cash flow being generated by the
Group. In addition to paying off a US$6.9 million secured loan during
2020, the Group has also made payments totalling US$5.5 million (as at
12 November 2020) to Equinox Gold Inc. ("Equinox") for the outstanding
sum due for the acquisition of the Coringa project.
At the current time the Directors have assumed that mining operations
and gold production will continue at the Palito Complex at similar
levels of production for the fourth quarter and expect that, with a
return to a full workforce during the fourth quarter and the
reintroduction of surface and underground drilling crews for mine
planning purposes that production can be expected to improve during the
early part of 2021. There is no evidence, at this time, to suggest that
the authorities in Brazil have any intention to try and close down or
suspend mining activities as a result of the current Coronavirus
pandemic. On 20 March 2020, it was stipulated in Decree 10,282/20 that
mineral activity was considered an essential business sector and further
actions have subsequently been invoked to prevent any restrictive
measures being applied to the supplies required by the mining industry
including transportation of supplies, availability of materials required
for processing, and the sale and transportation of the mineral products.
The Group has renegotiated the terms relating to the settlement of a
final acquisition payment of US$12 million due to Equinox in respect of
the purchase of Chapleau Resources Limited and its Coringa gold project
(the "Coringa Deferred Consideration"). Under the revised arrangement
the Group began paying monthly instalments commencing 1 May 2020 of
US$500,000 per month, increasing to US$1 million per month from 1 August
2020 and payable thereafter ("the "Deferral Period") until such time as
certain conditions relating to travel into and within Brazil are lifted
(the "Travel Restriction Conditions"). Within 6 weeks of the
satisfaction of the Travel Restriction Conditions the remaining portion
of the Coringa Deferred Consideration will become payable.
The Company announced on 22 January 2020 that it had entered into an
agreement with Greenstone Resources II LP ("Greenstone") for the issue
of and subscription by Greenstone of US$12 million of Convertible Loan
Notes the proceeds of which would be used to satisfy the Coringa
Deferred Consideration. However, due to the uncertainties created by
the impact of the Coronavirus, the Company and Greenstone agreed to
extend the period for the satisfaction of the conditions required for
completion of the subscription by Greenstone. On 24 April 2020 the
Company announced that it had agreed certain amendments to the original
agreement with Greenstone (the "Amended Subscription Deed").
Under the Amended Subscription Deed and a further subsequent amendment
agreed with Greenstone
(a) the Company may, prior to the satisfaction of the Travel
Restriction Condition only submit a subscription request in respect of
Convertible Loan Notes in the amount of US$500,000 each month. Following
the satisfaction of the Travel Restriction Condition, the Company may
then issue further subscription request for amounts of not less than
US$100,000 and not exceeding an amount equal to US$12,000,000 less the
sum of the aggregate principal amount of all Notes outstanding at that
time.
(b) the Convertible Loan Notes were initially unsecured and
subordinated to the Sprott Loan. Following the completion of the
repayment of the Sprott Loan on 30 June 2020, the security interests of
Sprott have been discharged and the Company has granted to Greenstone
the security package as originally envisaged save that a pledge of the
shares of Chapleau Resources Limited ("CRL") will continue to be held by
Equinox until such time as the Coringa Deferred Consideration is settled
in full. CRL holds 100% of the shares of Chapleau Exploração
Mineral Ltda which in turn holds the exploration licences for the
Coringa gold project
(d) The period during which the Company may issue an Issue
Notice to Greenstone expires on 30 September 2021
(e) Subject to Greenstone not having exercised its option to
convert the amount outstanding into Conversion Shares, the Convertible
Loan Notes are due to be repaid 16 months after the first Issue Date
which was 30 April 2020.
The Balance Sheet of the Group shows a net current asset position of
US$4.43 million at 30 September 2020 including the fair value of a cash
liability (including accrued interest) of US$8.9 million in respect of
Coringa Deferred Consideration of which a further US$2.0 million has
been settled subsequent to the period end. The Group plans to try to
continue to finance this liability as much as possible from its
operational cash flow but can also obtain additional working capital
through the issue of the balance of the US$12 million of Convertible
Loan Notes to Greenstone which will not be repayable until 31 August
2021. As at the current date, US$2.0 million has been drawn down against
the Convertible Loan Notes and US$6.5 million remains outstanding in
respect of the Coringa Deferred Consideration.
Whilst the Directors consider that the assumptions they have used are
reasonable and based on the information currently available to them,
there remains significant uncertainty regarding further actions that
have not been anticipated but which may be required or imposed and may
impact on the ability of the Group to meet the operational plan and cash
flow forecast.
Whilst recognising all the above uncertainties, the Directors have
prepared the financial statements on a going concern basis. In the
event that additional short term funding is required, the Directors
believe there is a reasonable prospect of the Group securing further
funds as and when required in order that the Group can meet all
liabilities including the Coringa Deferred Consideration as and when
they fall due in the next 12 months. The Directors have been successful
in raising funding as and when required in the past and consider that
the Group continues to have strong support from its major shareholders
who been supportive of and provided additional funding when required on
previous occasions.
As at the date of this report both the medium and long term impact of
COVID-19 on the underlying operations, and the outcome of raising any
further funds that may be required, remains uncertain and this
represents a material uncertainty surrounding going concern. If the
Group fails to achieve the operational plan or to raise any additional
necessary funds, the Group may be unable to realise its assets and
discharge its liabilities in the normal course of business. The matters
explained indicate that a material uncertainty exists that may cast
significant doubt on the Group and Company's ability to continue as a
going concern. These financial statements do not show the adjustments to
the assets and liabilities of the Group or the Company if this was to
occur
2. Finance expense and income
3 months ended 3 months ended 9 months ended
30 September 2020 30 September 2019 30 September 2020 9 months ended
(unaudited) (unaudited) (unaudited) 30 September 2019 (unaudited)
US$ US$ US$ US$
Interest expense on secured loan -- (173,637) (203,127) (474,177)
Interest expense on convertible loan (33,899) -- (72,806) --
Interest expense on mineral property acquisition
liability (239,071) -- (823,361) --
Unwinding of discount on mineral property acquisition
liability (280,344) -- (812,615)
Expense in respect of non-substantial modification (155,237) (39,900) (390,274) (53,212)
Amortisation of arrangement fee for convertible loan (56,250) -- (93,750) --
Loss on revaluation of derivatives -- (241,122) -- (531,910)
(484,457) (735,003) (1,583,318) (1,871,914)
Gain in respect of non-substantial modification -- -- 724,438 172,912
Gain on revaluation of derivatives 16,547 -- 12,356 --
Interest income -- -- 911 2,217
------------------ ------------------ ------------------ ------------------------------
Net finance expense (467,910) (735,003) (845,613) (1,696,785)
------------------ ------------------ ------------------ ------------------------------
3. Taxation
The Group has recognised a deferred tax asset to the extent that the
Group has reasonable certainty as to the level and timing of future
profits that might be generated and against which the asset may be
recovered. The Group has released the amount of US$794,044 as a
deferred tax charge during the nine month period to 30 September 2020.
The Group has also incurred a tax charge in Brazil for the nine month
period of US$1,372,535.
4. Earnings per Share
3 months ended 3 months ended 9 months ended 9 months ended
30 September 2020 30 September 2019 30 September 2020 30 September 2019
(unaudited) (unaudited) (unaudited) (unaudited)
---------------- ------------------ ------------------ ------------------ ------------------
Profit
attributable to
ordinary
shareholders
(US$) 3,671,944 1,129,701 7,828,409 2,849,341
---------------- ------------------ ------------------ ------------------ ------------------
Weighted average
ordinary shares
in issue 58,981,290 58,909,551 58,946,229 58,909,551
Basic profit per
share (US
cents) 6.23c 1.92c 13.28c 4.84c
---------------- ------------------ ------------------ ------------------ ------------------
Diluted ordinary
shares in issue
(1) 63,362,694 60,997,145 63,327,628 60,997,145
Diluted profit 5.80c 1.85c 12.36c 4.67c
per share (US
cents)
---------------- ------------------ ------------------ ------------------ ------------------
(1) Based on 2,345,088 options vested and exercisable as at 30 September
2020 and 2,036,316 shares that could be issued pursuant to any exercise
of conversion rights attaching to the Convertible Loan Notes as at 30
September 2020 (30 September 2019: 2,087,594 options)
4. Post balance sheet events
Subsequent to the end of the quarter, there has been no item,
transaction or event of a material or unusual nature likely, in the
opinion of the Directors of the Company to affect significantly the
continuing operation of the entity, the results of these operations, or
the state of affairs of the entity in future financial periods.
Qualified Persons Statement
The scientific and technical information contained within this
announcement has been reviewed and approved by Michael Hodgson, a
Director of the Company. Mr Hodgson is an Economic Geologist by training
with over 26 years' experience in the mining industry. He holds a BSc
(Hons) Geology, University of London, a MSc Mining Geology, University
of Leicester and is a Fellow of the Institute of Materials, Minerals and
Mining and a Chartered Engineer of the Engineering Council of UK,
recognising him as both a Qualified Person for the purposes of Canadian
National Instrument 43-101 and by the AIM Guidance Note on Mining and
Oil & Gas Companies dated June 2009.
Assay Results
The assay results reported within this release include those provided by
the Company's own on-site laboratory facilities at Palito which may not
have been independently verified. Serabi closely monitors the
performance of its own facility against results from independent
laboratory analysis for quality control purpose. As a matter of normal
practice the Company sends duplicate samples derived from a variety of
the Company's activities to accredited laboratory facilities for
independent verification. Based on the results of this work, the
Company's management are satisfied that the Company's own facility shows
good correlation with independent laboratory facilities. The Company
would expect that in the preparation of any future independent
Reserve/Resource statement undertaken in compliance with a recognised
standard, the independent authors of such a statement would not use
Palito assay results but only use assay results reported by an
appropriately certificated laboratory.
Forward Looking Statements
Certain statements in this announcement are, or may be deemed to be,
forward looking statements. Forward looking statements are identi ed by
their use of terms and phrases such as "believe", "could", "should"
"envisage", "estimate", "intend", "may", "plan", "will" or
the negative of those, variations or comparable expressions, including
references to assumptions. These forward looking statements are not
based on historical facts but rather on the Directors' current
expectations and assumptions regarding the Company's future growth,
results of operations, performance, future capital and other
expenditures (including the amount, nature and sources of funding
thereof), competitive advantages, business prospects and opportunities.
Such forward looking statements re ect the Directors' current beliefs
and assumptions and are based on information currently available to the
Directors. A number of factors could cause actual results to differ
materially from the results discussed in the forward looking statements
including risks associated with vulnerability to general economic and
business conditions, competition, environmental and other regulatory
changes, actions by governmental authorities, the availability of
capital markets, reliance on key personnel, uninsured and underinsured
losses and other factors, many of which are beyond the control of the
Company. Although any forward looking statements contained in this
announcement are based upon what the Directors believe to be reasonable
assumptions, the Company cannot assure investors that actual results
will be consistent with such forward looking statements.
ENDS
Attachment
-- Q3 2020 Financial Report
https://ml-eu.globenewswire.com/Resource/Download/37586146-062a-48a8-88ac-d768198b9220
(END) Dow Jones Newswires
November 13, 2020 02:00 ET (07:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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