Interview with Michael Hodgson, CEO of Serabi Gold PLC

Our previous interview: https://www.cruxinvestor.com/posts/serabi-gold-lsesrb-brazil-miner-capitalizes-on-high-grade-assets-drives-20-production-boost-5940

Recording date: 30th September 2024

Serabi Gold, a gold mining company operating in Brazil, has recently unveiled results from its Preliminary Economic Assessment (PEA) study, revealing a compelling growth trajectory that merits investor attention. The company is poised for significant expansion, with plans to nearly triple its annual gold production from current levels of 18,000-20,000 ounces to 35,000 ounces by 2026, ultimately aiming for group production of 60,000 ounces.

One of the most striking aspects of Serabi's strategy is its innovative use of ore sorting technology. This advanced process has the potential to dramatically improve ore grades, potentially doubling them from 5.3-5.4 g/t to up to 10 g/t. Such a significant grade improvement could substantially enhance the project's economics, potentially leading to lower production costs and higher profitability.

The financial projections from the PEA study are equally encouraging. At a base case gold price of $2,100 per ounce, the project's Net Present Value (NPV) is estimated at $145 million. This figure rises to an impressive $211 million when current spot prices are applied, underscoring the project's sensitivity to gold price movements. Moreover, the company projects annual free cash flow of $17-78 million, providing substantial financial flexibility for future growth initiatives.

Serabi's All-In Sustaining Cost (AISC) figures are another highlight, coming in lower than expected at around $1,240-$1,250 per ounce. This competitive cost structure, coupled with the potential for grade improvements through ore sorting, positions Serabi favorably within the industry.

The company's growth strategy extends beyond its current operations. Serabi has outlined ambitious exploration plans, particularly at its Coringa project, where it aims to potentially double the resource to around 1 million ounces through an extensive drilling program over the next 18-24 months. Additional exploration at the Palito Complex, including the promising São Domingos property, further enhances the company's growth prospects.

However, investors should still be mindful of the risks inherent in mining investments. The success of Serabi's plans hinges on factors such as exploration results, operational execution, and the volatile nature of gold prices. The company's ability to effectively implement its ore sorting technology and achieve projected grade improvements will be crucial to realizing its full potential.

From a macro perspective, Serabi is operating in a favorable gold market environment. Global economic uncertainties, inflationary pressures, and low real interest rates continue to support gold prices, creating a positive backdrop for well-positioned gold producers.

In conclusion, Serabi Gold presents an intriguing opportunity for investors seeking exposure to a growth-oriented gold producer. The company's focus on innovation, coupled with its clear expansion plans and exploration upside, positions it to potentially deliver significant value in the coming years. As Serabi advances its projects and delivers on its objectives, it may increasingly attract attention from both institutional and retail investors in the precious metals space.

View Serabi Gold's company profile: https://www.cruxinvestor.com/companies/serabi-gold

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Chapters 18-19: Focused Summary