TORONTO (miningweekly.com) – Bolstered by a second project delivering ore to its mill, dual-listed miner Serabi Gold has plans to use its first-mover status in the Tapajos region of Para state, Northern Brazil, to look for suitable acquisitions as low metal prices and a muddled financing market have taken their toll on careworn juniors.

“I look at these terrible metals prices and the inaccessible financing market and see an opportunity to grow. It might be time to look at acquisitions in the region. These tough times bring opportunities and we’re in a good position to take advantage,” CEO Mike Hodgson told Mining Weekly Online during an interview.

The company’s main asset was the fully owned Palito gold mine and a surrounding package of 53 000 ha of highly prospective exploration tenements under the company’s control. Gold production at Palito started in January 2014, and higher-grade ore from the Sao Chico project, about 25 km from Palito, was reaching the Palito mill “as we speak”, Hodgson said.

“Certainly some of the companies we’re looking at had market capitalisations of several hundred million dollars a few years ago and now they’re down to the last five. It’s a time to be opportunistic and take a chance,” he noted.

TSX- and Aim-listed Serabi had set itself the goal of becoming a leading low-cost junior gold producer in Brazil through mining high-grade, low-capital gold deposits and was making progress towards achieving this goal.

The immature nature of the Tapajos region meant less competition and Serabi had few peers in the region. Serabi, as the only producer, was, therefore, strongly placed to use this advantage, Hodgson explained.

“We continue to explore possibilities to combine and acquire assets both private and public that could offer operational and/or commercial synergies with Serabi. Serabi will continue to look elsewhere in Brazil as we look to build on current production to become a robust, high-margin gold producer in Brazil.

“Through further acquisitions there is significant potential to add further near-term production ounces in the region,” Hodgson stressed.

REGIONAL ADVANTAGE
According to Hodgson, the Tapajos region was reported to have historically produced in excess of 30-million ounces of gold from artisanal operations, while only seven-million ounces of gold in hard rock resources had been identified to date.

Palito was well located for access, surrounded by local infrastructure and a local employee base.

Serabi saw the Tapajos region and Para state as a great opportunity, reinforced by the combination of Palito and Sao Chico. Together these sites comprised a massive package of exploration ground, with many targets already identified at both projects.

At Palito, three mine site discoveries had already been made within 3 km of the plant and were ready for infill and step-out drilling. 
At Sao Chico, the resource was totally open in all directions and the exceptional grade made it a high priority for future exploration campaigns.


“With resource growth success – any future modular plant expansion is straightforward,” Hodgson added.

OUTPUT RAMPING UP
Hodgson noted that the company’s keystone Palito underground mine was a successful restart of a brownfield site, having completed its maiden year of production in 2014. It was now in full commercial production, generating some 25 000 oz/y at average grades of 8 g/t to 9 g/t of gold.

The Sao Chico underground mine was currently under development, with a National Instrument 43-101-compliant mineral resource of 100 000 oz, grading more than 26 g/t of gold. The main vein structure was intersected early in 2015, cutting 3.6 m at a grade of 42 g/t of gold.

“The surplus capacity of the Palito plant, within comfortable trucking distance of Sao Chico, made the combination of the assets an obvious decision. With considerable available capacity, [as] much of the plant is capable of 600 t/d, additional feed from Sao Chico could be comfortably accommodated,” Hodgson noted.

Palito mine production only used about half of the plant capacity, with Sao Chico high-grade feed bringing obvious strong economic benefits and environmental and logistical advantages.

The Palito plant started operating in January last year, with commercial production declared since July 2014.

The plant was now fully operational, consistently producing about 2 500 oz/m of gold over the past five months. Processing was accomplished through copper/gold flotation, followed by cyanidation of flotation tails, with gold recoveries exceeding 92%.

Two milling lines had been installed, with the view to dedicate one line to Sao Chico during the second half of the year. In the meantime, both lines were being used to treat Palito run-of-mine and stockpiled material.

Serabi was processing more than 50 000 t of flotation tails from the first nine months of operations in 2014 through the carbon-in-pulp plant.

Sao Chico ore was expected to increasingly complement Palito ore in the plant during the second half of the year, with the company now expecting full-year output of between 30 000 oz and 35 000 oz of gold. The company expected its full-year all-in sustaining costs to range between $900/oz and $950/oz. 


In 2016, Palito was expected to produce about 90 000 t at a grade of 8 g/t to 9 g/t for 24 000 oz of gold, boosted by Sao Chico's output of about 35 000 t, grading 15 g/t for 20 000 oz of gold.

Contrary to the case of many other junior gold miners, Serabi Gold’s TSX-listed stock had traded flat since the start of the year, holding steady at C$0.08 apiece.