Unaudited Interim Financial Results for the three and six month periods to 30 June 2019 and Management’s Discussion and Analysis

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Serabi Gold (AIM:SRB, TSX:SBI), the Brazilian focused gold mining and development company, today releases its unaudited interim financial results for the three and six month periods ending 30 June 2019 and at the same time has published its Management’s Discussion and Analysis for the same period.

“This second quarter has again been very pleasing from an operational perspective.  As we reported in our second quarter operational update on 22 July, we were very close to achieving our third successive quarter of producing more than 10,000 ounces. The financial performance for this second quarter represents a significant improvement the same quarter in 2018 when gold production levels were very similar and notwithstanding that in the same quarter in 2018, the average gold price that we achieved was in fact slightly higher that we received in the second quarter of 2019.

“Cash generated during the second quarter from the operations, after allowing for on-going mine development costs, was US$2.3 million which was US$2.0 million more than for the same quarter in 2018.  Whilst below the level achieved during the first quarter of 2019, it should be remembered that during the first two months of 2019 the cash position received a significant boost through the sales generated from the inventory held at the end of December 2018. The Group’s cash holdings have nonetheless increased slightly compared to the position at the end of March 2019, which is after the purchase in the period of US$1.1 million of plant and equipment, including US$800,000 relating to the final purchase payment for the ore-sorter and the importation taxes that were levied in Brazil.

“With the slightly lower level of production during this second quarter, compared to the first quarter of 2019, our AISC has crept up slightly but still represents an improvement compared with 2018 and, with the recent improvements in the gold price, the Board expects to continue to enjoy a good operating margin for the rest of the year.  Compared with the same period in 2018 total operating costs for the quarter of US$7.8 million are comparable with the same quarter in 2018, but the margin improvement has been driven by the increased level of sales made during the quarter which at 9,667 ounces were eight per cent higher that the same period in 2018.

“This gold price improvement has however impacted on the financial expenses for the period.  The implied value of gold call options that the Company granted to its secured lender in July 2017 has increased and resulted in a revaluation charge of US$427,000 for the six months to 30 June 2019.  In all other respects our cost profile quarter on quarter is remaining fairly steady.

“We announced earlier this month the expected timetable for our consultants to complete their work on the Preliminary Economic Assessment on Coringa (“PEA”).  As we had previously advised, in the wake of the concerns regarding mine tailings dams we have taken the decision to switch to a dry stacking solution and dispense with a conventional tailings dam.  Our consultants Global Resource Engineering (“GRE”) have assisted with the test-work, design, equipment specifications and location of the dry stacked tailings solution and the revisions necessary in the process design flow sheet. This has impacted on the ability to progress the PEA at the pace that we had previously hoped, but in all other respects the Coringa project continues to be advancing and steady progress is being made in securing the permits and licences that will put us in a position to commence the project development.

“Our current operations continue to perform well and July was another very good month of production keeping us on track to meet our annual production guidance.”

(1)           All revenue and expenses arise from continuing operations.

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 have been filed with the Registrar of Companies following their adoption by shareholders at the 2019 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 30 June 2019 the Group had cash in hand of US$12.3 million and net assets of US$71.5 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$502,707 as a deferred tax charge during the six month period to 30 June 2019.

The Group has also incurred a tax charge in Brazil for the six month period of US$116,517. 

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 and six month periods ended 30 June 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 .

More news and information about Serabi Gold plc

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Globe Newswire: 07:00 GMT Wednesday 14th August 2019

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