Final Results

Serabi Mining plc (AIM: SRB), the gold mining and exploration Company with its operations in Brazil, today announces preliminary un-audited results for the year ended 31 December 2006.

Highlights

*   Commercial production at Palito gold mine announced from 1 October 2006

*  2006 production of 39,197 ounces gold equivalent represents a 127% improvement over 2005

*  Cash operating costs achieved of US$252 per ounce of gold equivalent production for the final quarter of 2006

*   Serabi reports a loss of US$2.2 million for 2006, with underlying profit from operations from the Palito mine of US$2.4 million for the fourth quarter

*   Palito West to be first satellite ore source developed for Palito

*   Improved geological and exploration facilities should allow considerable progress in exploration in 2007; recent results from the Jardim do Ouro district already encouraging   

 

 

Whilst 2005 was a period of discovery for the Company, 2006 has been one of consolidation. Substantial strides were made during the year culminating with the achievement of commercial production at the Palito gold mine from 1 October, in addition to numerous underlying improvements to operating, support and exploration facilities. As a result production increased throughout the year, reaching another record in the fourth quarter of 11,687 ounces of gold equivalent and resulting in a 127% year-on-year increase to 39,197 ounces gold equivalent. Furthermore, the average cash cost of US$252 per equivalent ounce (US$328 per ounce of gold) over that last quarter reflects very favourably on Serabi's progress.

 

As a result of these activities, Serabi reports a loss of US$2.2 million for 2006 but with underlying profit from operations from the Palito mine of US$2.4 million for the fourth quarter since declaring commercial production. In considering these results for the year two important points need to be borne in mind. Firstly, that the revenue and costs reported are only for the three months since the declaration of commercial production, whilst other expenses are for the full twelve month period. We would therefore expect to see substantial improvement in 2008 over the 2007 figures. Secondly, the comparative 2005 period was only for a three month period. Overall these results and other operational and exploration developments position the Company well for 2007, with targeted production of approximately 50,000 ounces gold equivalent and cash costs of below US$250 per ounce.

 

The Company continued to make substantial investments at Palito during the year, not only in terms of plant, equipment and mine infrastructure but also within the mine itself. The escalated investment in mine development will eventually provide more working areas, thus enabling an improved mix between ore produced from the stopes and development. The switch to mechanised underground mining has required us to spend much of the last nine months of 2006 undertaking such development in preparation for long-hole stope production. This will continue into 2007 and will initially impact on mining grades, before the full benefit of production from stoping becomes apparent later in the year, and through 2008.

 

Development of our existing portfolio within the Tapajos remains at the forefront of our plans for growing and developing Serabi. As outlined in our September 2005 and March 2006 press releases, we are encouraged by the early progress of our exploration programmes undertaken throughout the year. The Company has a large portfolio of projects where the level of existing data is often limited. It has therefore sometimes been necessary to focus initially on preliminary assessment programmes to improve our understanding of the geology and potential opportunities, in order to provide information that will allow us to concentrate future efforts on the most promising targets identified. With much improved geological and exploration facilities established last year, we expect considerable progress in this area during 2007.  In this regard, we recently reported good results from a number of prospects in the Jardim do Ouro district, situated immediately adjacent to Palito.  This area will initially form an important focus for evaluation during the early half of the year, with advanced exploration and drilling planned at the Ruari's Ridge, Chico do Santo and Palito Main Zone south projects.  The objective of this work is to expand the Palito resource and so extend the life of the operation.       

 

Notwithstanding, we also seek to expand our project portfolio and are looking at other opportunities both in the Tapajos and in other regions of Brazil. Management recognises that the long-term future of the Company is in part dependent on expanding the resource base, accompanied by continuing production growth. While the Tapajos is a highly prospective area where the Company has a strong competitive advantage, given our growing reputation and achievements to date, we believe we should also now look at opportunities in other parts of Brazil. The country has a diverse and attractive geology, which remains relatively unexplored with the potential for significant size deposits.

 

Further expansion of the Company is, we believe, fundamental to obtaining more widespread recognition in the market of the Company's already considerable achievements. Serabi remains one of only a few producers in the London AIM mining sector and despite major operational achievements and a robust gold price, up 50% since the Company listed in 2005, there is limited evidence of an upward re-rating of the shares to reflect this. We continue to make considerable efforts to raise the profile of the Company but are conscious that until we can further increase the asset base we may continue to be 'below the radar' of some investors and industry commentators.

 

Building on the strong foundation now established in Brazil, our strategy for growing the Company centres on optimising a number of key criteria:

*    unexplored areas with excellent geological potential;

*    strong land title;

*    political and economic stability;

*    projects with potential of more than 500,000 ounces and operating costs of US$250 or less; and

*    geographical focus.

 

The original decision to enter Brazil in 1999 was driven by the country's ability to meet all of the above criteria and this remains true today. These advantages are being increasingly recognised within the mining industry as new opportunities are sought internationally.

 

Brazil is often grouped with other "developing" countries when looking at such potential. These include South American peers such as Argentina, Bolivia, Chile and Peru, the African nations of Ghana, Tanzania, and the DRC, the Eastern European countries such as Russia and Kazakhstan and in the Far East Indonesia, PNG and the Philippines, amongst others. Recent studies* show that, with the exception of Chile, Brazil is significantly ahead of all these countries when judged by its mineral potential, combined with favourable regulatory and land use policies. This reinforces the Company's strategy in Brazil, which we believe with its well established mining industry and security of title, provides one of the best balances of risk and reward in today's world. Against this background, combined with the improved operating and exploration foundations now established, Serabi is exceptionally well positioned to move forwards on all fronts in 2007 and achieve it's goal of becoming a mid-tier producer with growing exploration potential by the end of the decade.

 

For Serabi 2006 marked the end of the beginning, with profitable production established, new operational developments taking place and exploration set to expand.

 

Good mining projects are nothing without good people. In this respect I would first like to thank all of Serabi's staff for their dedicated efforts and contributions towards the considerable progress made by the Company last year. I would also like to welcome Mike Hodgson to the Board of the Company. His experience will strengthen the Board and the executive management and provide key day-to-day guidance in order to optimise and develop our operations further. Finally, thanks to our shareholders for their continuing interest and support in Serabi. I look forward to reporting the continuing success of your Company at the end of 2007.

 

Chairman

10 April 2007

 

 

 

for the year ended 31 December 2006

 

(1) Revenue and operating expenses are only for the 3 month period commencing 1 October 2006 being the date from which mining operations have been in commercial production.

 

Consolidated Balance Sheet
as at 31 December 2006

Consolidated Statement of Changes in Shareholders Equity
for the year ended 31 December 2006

 

 

(1) Exploration and development expenditure is stated net of pre-operating income of US$2,839,018

 

 

The financial information set out above for the year ended 31 December 2006 and the 3 month period ended 31 December 2005 does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985, but is derived from those accounts. Whilst the financial information included in this preliminary 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. A copy of the statutory accounts for 2005 has been delivered to the Registrar of Companies and those for 2006 will be issued to shareholders prior to the Company's Annual General Meeting. The Company expects to publish full financial statements that comply with IFRS in its Annual Report and Accounts 2006. This announcement has been agreed with the auditors and was approved by the Board on 10 April 2007.  Whilst the auditors have not yet reported on the financial statements for the year ended 31 December 2006, they anticipate issuing an unqualified report which will not contain statements under the Companies Act 1985, s237 (2) or (3). The auditors issued an unqualified report in respect of the 2005 Financial Statements.

 

The financial information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) and with IFRSs adopted for use in the European Union.

 

The calculation of the basic loss per share of 2.04 cents per share is based on the loss attributable to ordinary shareholders of $2,208,769 and on the weighted average number of ordinary shares of 108,412,130 in issue during the period.

 

 

 

(1) Exploration and development expenditure is stated net of pre-operating income of US$2,839,018

 

 

 

 

 

The Annual Report will be sent to shareholders on or around 2 May 2007. Additional copies will be available to the public, free of charge, from the Company's offices at Cleary Court, 21-23 St Swithins Lane, London, EC4N 8AD.

 

Graham Roberts           Tel: 020 7220 9550                     John Harrison              Tel: 020 7260 1000

Chairman                        Mobile: 07768 902475                James Black                 Tel: 020 7260 1000

 

Clive Line                    Tel: 020 7220 9553                         Parkgreen Communications

Finance Director            Mobile: 07710 151692                 Simon Robinson           Tel: 020 7851 7480        

E-mail:                             contact@serabimining.com       Clare Irvine                   Tel: 020 7851 7480

Website:                         www.serabimining.com               clare.irvine@parkgreenmedia.com