Serabi Gold amends deal with Equinox amid Covid lockdown

The AIM-traded firm said the revised terms agreement with Equinox extended the final date for the completion of the final $12m payment owed to Equinox for the acquisition of Coringa until such time as there were no international travel restrictions imposed by the Brazilian authorities, and also no travel restrictions within or into the state of Para, where the company’s Palito Complex operations and the Coringa project are located.

It said that, under the terms of the extension, it would start to make instalment payments in respect the Coringa acquisition payment of $0.5m per month payable on each of 1 May, 1 June and 1 July 2020, which would increase to $1m per month thereafter until the travel restriction condition is satisfied.

The balance of the Coringa acquisition payment outstanding was expected to be settled within six weeks of the travel restriction condition being satisfied.

Serabi also advised that it was in advanced discussions with Greenstone II to amend the loan note subscription deed, to allow for partial subscriptions in respect of $12m of convertible loan notes in individual amounts of $0.5m.

The partial subscriptions would provide funds to the firm to assist Serabi in paying the monthly instalments to Equinox during the deferral period, until the balance of the Coringa acquisition payment can be satisfied in full.

Greenstone and the firm said they expected that, shortly after the travel restriction conditions have been satisfied, they would then be able to satisfy all the other conditions required to close the issue and subscription for the remaining portion of the loan notes and allow the company to settle any remaining balance of the payment.

As it said on 26 March, in recognition of a number of uncertainties created by the Covid-19 coronavirus pandemic, the company and Greenstone had agreed to delay the completion of a subscription by Greenstone for the loan notes to allow both parties more time to satisfy the conditions required for closing.

The net proceeds from the issue of the notes were to be used to make the Coringa acquisition payment, which was originally due to be settled on or before 31 March.

Serabi said it would continue to repay the existing secured loan that it has with Sprott Resource Lending Partnership in accordance with the terms of its agreement with Sprott.

As of Thursday, the principal due to Sprott was $3.5m, which was to be paid in monthly instalments, with the final payment to be made on 30 June.

“We are extremely grateful for the continued support of Greenstone and the understanding and flexibility shown by Equinox,” said chief executive officer Mike Hodgson.

“It goes without saying we are living testing times, but we are delighted that we have identified a very workable solution for the company to complete the acquisition of Coringa which is key to the growth plans of Serabi.

“Despite the problems Covid-19 is bringing to the world, we have enjoyed an excellent end to the quarter and, subject to final reconciliation, I expect the production for the quarter to be slightly above 9,000.”

Hodgson said that was not quite as high as budgeted, but considering the firm lost one of its three ball mills in February for 15 days, he described it as “an excellent result” and reflected a strong performance in March.

“The Covid-19 virus has required us to introduce multiple measures to protect the health and welfare of our employees, contractors and communities which remain paramount.

“Nevertheless, with these now being put in place, we have experienced minimal short-term impact on the operation to date.

“Much of this is due to the excellent attitude and response from our employees and I am pleased that those who are currently on site have agreed to extend their rosters in order to eliminate crew changeovers in the immediate term, thereby minimising the potential for the virus to be introduced to the mine site.”

Hodgson said the company was hoping to introduce a Covid-19 testing regime during April which would, in time, allow for crew changeovers to be re-introduced and keep the mine site virus-free.

“At the current time, various individual states within Brazil have implemented measures restricting movement of people in an effort to contain the spread of the virus, but at present, these have not affected us.”

At 1323 BST, shares in Serabi Gold were up 14.56% at 59p.