Serabi Gold swings to loss in first quarter

Brazil-focussed gold mining and development company Serabi Gold released its unaudited interim financial results for the three months to 31 March on Monday, with revenue rising to $13.17m from $11.68m in the same period last year.

The AIM-traded firm reported a cost of sales of $9.79m, rising from $6.69m, with a $0.22m provision for the impairment of inventory - a charge not included in the comparative figures.

Depreciation and amortisation charges reached $1.9m from $1.22m, with the firm making a gross profit of $1.26m - down from $3.77m.

Its loss after tax for the period totalled $0.11m, swinging from a profit of $1.35m in the same period last year, with losses per share of 0.016 cents, compared to earnings of 0.195 cents.

“Following on from a very successful 2016, I am pleased that 2017 has started with a strong first quarter during which the group produced almost 10,000 ounces of gold with a cash cost of $800,” said Serabi Gold CEO Mike Hodgson.

“Cash holdings are slightly down compared with the end of December 2016 but this is simply a consequence of the timing of receipts from gold sales and at 31 March 2017 the group was due approximately $1.8m for sales made in March, which would otherwise have improved the cash position to $5.2m compared with $4.2m at the end of December 2016.”

Hodgson said the overall working capital position of the group had improved by approximately $0.75m over the last three months, which also reflected the consumption of some of the surface stockpiles during the quarter, although the release of the costs associated with those was reflected in its reported operating costs being higher than in prior quarters.

“The treatment of this lower grade stockpiled material also impacted slightly on the overall grades processed during the quarter.

“Our quarterly operating costs, compared with the same quarter in 2016, are, in local currency terms, generally tracking well and are also, for the most part, close to or below our internal forecasts for 2017.

“The relative strength of the Brazilian real compared with the exchange rate that prevailed in the first quarter of 2016, and even compared with the average exchange rate for 2016 calendar year masks this.”

The company estimated that, had it experienced the same exchange rate as prevailed for the first quarter of 2016, its AISC for the first quarter of 2017 would have reduced by approximately $170 per ounce, Hodgson claimed.

“Even considering the average rate for the 2016 calendar year the effect is approximately $80 per ounce,” he added.

“We continue to look for improvements in the cost structure to improve margins but in the longer term increased production and the ability to spread costs over a larger production base will have the greatest effect on unit costs.

“With this objective, I am keen to re-start the exploration programmes on both the Sao Chico and Palito orebodies, which were suspended late last year due to the wet season.”

Hodgson said the results were “very encouraging”, especially at Sao Chico with some “excellent” new targets identified within 500 metres of the current operation.

“Considering the extent of past artisanal activity in the vicinity, we feel very confident the programme will bring new discoveries.

“At Palito the down-the-hole geophysics programme was completed and we have a number of drill targets identified which I hope will confirm and prove up the current known discoveries.”