World News: 07:00 GMT Wednesday 15th May 2019. [Serabi Gold plc via Globe Newswire via SPi World News]
Serabi Gold (AIM:SRB, TSX:SBI), the Brazilian focused gold mining and development company, today releases its unaudited interim financial results for the three month period ending 31 March 2019 and at the same time has published its Management’s Discussion and Analysis for the same period.
“The last two quarters have been excellent from an operational perspective and represent the first occasion that the Company’s operations have achieved two successive quarters with gold production in excess of 10,000 ounces. These financials results reflect the operational improvements that we have enjoyed with revenue, profit and cash generation all having significantly improved over the same quarter in 2018.
“Most pleasing, however, is to see a reduction in the unit costs of production, with a reported AISC of US$1,021 compared with US$1,166 for the same quarter in 2018 and an average AISC for the 2018 calendar year of US$1,093. Given the nature of the operations, Serabi has a fairly fixed level of monthly costs, in the form of labour, power and consumable costs. With the mine and plant producing and processing broadly consistent tonnages of ore, the key to profitability is maximising the grade of the ore mined and processed. Whilst the improvements in the last 6 months to the processed grade have been relatively small, the benefits have been quite significant.
“The financial results for the first quarter have benefitted from the high level of gold inventory held at the end of 2018 and which was sold during the quarter. A total of 12,309 ounces were sold during the period compared with production of 10,164 ounces and with inventory levels now back to more normal levels we would expect sales and production volumes to more closely track each other over the rest of the year.
“Net cash generated in the period was slightly less than US$3.0 million after taking account of mine development, exploration and other capital expenditure but again has been helped by the delayed sales carried over from the end of 2018. Provided the Company can maintain the current levels of production, I am confident that we can maintain a good cash flow for the rest of the year. The Company’s cash holdings as at 31 March 2019 were US$12.2 million.
“We are being helped by a strong gold price when looked at in Brazilian Reais, and with so much of our cost base incurred in Brazil this is the true indicator of our margin and profitability. Following the election of Jair Bolsonaro as president in November 2018, many, myself included, saw the potential for the Real to strengthen as he pursued public spending reforms and implemented business friendly policies to promote growth. To date however the exchange rate has remained in the range of BrR$3.80 to US$1.00 and the gold price in Brazilian Reais has averaged BrR$4,850 for the quarter compared with BrR$4,264 for the same period in 2018 and BrR$4,600 for the 2018 calendar year.”
(1) All revenue and expenses arise from continuing operations.(2) On 19 June 2018, the Group completed a capital reorganisation with every 20 existing shares being consolidated into one new share. The total number of existing ordinary shares in issue immediately prior to the capital reorganisation was 1,175,281,440. The total number of ordinary shares in issue following the capital reorganisation was 58,764,072. For comparative purpose the weighted average ordinary shares in issue and the diluted ordinary shares in issue for the three month period ended 31 March 2018, has been adjusted to reflect the share consolidation of 20 existing shares into one new share.
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 2018 prepared under IFRS as adopted in the EU and with IFRS and their interpretations adopted by the International Accounting Standards Board will be filed with the Registrar of Companies following their adoption by shareholders at the next 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.
These financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.
As at 31 March 2019 the Group had cash in hand of US$12.1 million and net assets of US$70.2 million. The Directors have reviewed the forecast cash flow of the Group for the next 12 months. Based on this forecast, which includes planned capital and exploration programmes, the Group may not be able to generate sufficient cash flows to settle, in full, the deferred consideration of US$12 million payable for the acquisition of Coringa which falls due in December 2019.
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 deferred consideration payable for the acquisition of Coringa as and when they fall due in the next 12 months and have prepared the financial statements on a going concern basis.
As at the date of this report the outcome of raising further funds remains uncertain and this represents a material uncertainty surrounding going concern. If the Group fails to raise the 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 Parent’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 Parent company if this was to occur.
At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered impairment. Prior to carrying out of impairment reviews, the significant cash generating units are assessed to determine whether they should be reviewed under the requirements of IFRS 6 - Exploration for and Evaluation of Mineral Resources or IAS 36 - Impairment of Assets. Such determination is by reference to the stage of development of the project and the level of reliability and surety of information used in calculating value in use or fair value less costs to sell. Impairment reviews performed under IFRS 6 are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise; typically when one of the following circumstances applies:
(i) sufficient data exists that render the resource uneconomic and unlikely to be developed
(ii) title to the asset is compromised
(iii) budgeted or planned expenditure is not expected in the foreseeable future
(iv) insufficient discovery of commercially viable resources leading to the discontinuation of activities
Impairment reviews performed under IAS 36 are carried out when there is an indication that the carrying value may be impaired. Such key indicators (though not exhaustive) to the industry include:
(i) a significant deterioration in the spot price of gold
(ii) a significant increase in production costs
(iii) a significant revision to, and reduction in, the life of mine plan
If any indication of impairment exists, the recoverable amount of the asset is estimated, being the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Such impairment losses are recognised in profit or loss for the year.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss for the year.
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$145,012 as a deferred tax charge during the three month period to 31 March 2019.
The Group has also incurred a tax charge for the period in Brazil of US$68,367.
(1) On 19 June 2018, the Group completed a capital reorganisation with every 20 existing shares being consolidated into one new share. For comparative purpose the weighted average ordinary shares in issue and the diluted ordinary shares in issue for the three month period ended 31 March 2018, has been adjusted to reflect the share consolidation of 20 existing shares being consolidated into one new share.
Copies of this announcement are available from the Company's website at .
Neither the Toronto Stock Exchange, nor any other securities regulatory authority, has approved or disapproved of the contents of this announcement.
The Company will, in compliance with Canadian regulatory requirements, post the Unaudited Interim Financial Statements and the Management Discussion and Analysis for the three month period ended 31 March 2019 on SEDAR at . These documents will also available from the Company’s website – .
Serabi’s Directors Report and Financial Statements for the year ended 31 December 2018 together the Chairman’s Statement and the Management Discussion and Analysis, are available from the Company’s website – and on SEDAR at .
Globe Newswire: 07:00 GMT Wednesday 15th May 2019
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