BUYING BEGINS @1.75P Growth Equities & Company Research initiated coverage of gold miner Serabi Mining* (SRB) at 1.8p with a 'speculative buy' stance and a 4p price target, noting that the firm recently raised 2.2 million net in a placing and open offer that was over-subscribed by 405%. "The company is now funded to pursue the first stage of an aggressive exploration programme designed to increase the size of the total resource and reserves as a pre-requisite for seeking additional finance to bring its prospects into production," observed analyst Jon Levinson. GE&CR values Serabi on the basis of its existing 668,228 ounces resource. "In the short term, any further strengthening of the gold price and any positive exploration results may improve sentiment and give additional upside but the long term value upside comes from turning "drill dollars" into an increased resource with a higher percentage of Measured and Indicated ounces, which offers the promise that Serabi can indeed establish a mine producing 60,000 ounces or more of gold per annum," concluded GE&CR. Serabi shares finished unchanged at 1.8p.

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Thursday's bonus report on UK-AnaIyst.com is from GE&CR and is on Serabi Mining
Thursday, 3 December, 2009 15:54
From:
"UK-Analyst.com"
Add sender to Contacts
To:
i_harkins@yahoo.co.uk
3rd December 2009
Analyst: Jon Levinson
jon.levinson@t1ps.com
020 7562 3357

Serabi Mining*/** Initiation of coverage at 1.8p: Speculative Buy with a 4.0p Target Price
Key Data


EPIC


SRB


Share Price


1.8p


Spread


1.60p 2.00p


NMS


20,000


Total Number of issued shares


317.3m


Market Cap


5.71m


12 Month Range


0.42p - 3.91p


Market


AIM


Website


www.serabimining.com


Sector


Mining


Contact


Clive Line
Finance Director
020 7246 6830


Serabi Mining has a mixed track record as a developer of gold mines in Brazil but has raised a net 2.2 million in a placing and open offer that was over subscribed by 405%, Serabi is well funded to develop an area where it has already proved up a measured, indicated and inferred resource of 668,228 ounces of gold equivalent. The company is now funded to pursue the first stage of an aggressive exploration programme designed to increase the size of the total resource and reserves as a pre-requisite for seeking additional finance to bring its prospects into production.

Whilst the board of Serabi believes that the existing flagship Palito Mine could be re-established and operated profitably albeit on a smaller scale than before it considers that it is necessary first to build a larger reserve and resource base in the vicinity of the Palito Mine by finding and developing more near surface gold deposits. This would create a more robust and economically attractive proposition and help eliminate many of the issues that the Company has tried to overcome in the past. A two year exploration and drilling programme is underway, of which the first year is now fully funded.
Serabi is seeking prospects sharing the same geological characteristics as the existing Palito Mine in the same region. An airborne geophysical EM survey carried out by Serabi over 6,000 hectares around the mine in 2008, has identified 18 anomalies with similar geophysical properties to Palito and these are worthy of further investigation. If only two of these were commercial and produced 20,000 to 25,000 ounces a year then combined with a restarted Palito the resulting 60,000 ounces to 70,000 ounces annual production rate should more than justify the capital expenditure needed for infrastructure development and upgrades. Given that the site already has existing plant and infrastructure these should be significantly less that would be normally expected for a similar size operation starting from scratch. Ahead of an intensive drilling programme, we initiate our coverage at 1.8p with a stance of speculative buy and a target price of 4.0p.


Forecast Table

Year to Dec
31


Sales ($million)


Pre-Tax Loss ($million)


Earnings Per Share (c)


Dividends Per Share (c)


Year End NAV(c)


PE Ratio


Yield (%)

2006


7.3


(2.21)


(2.04)


0


-


0


0

2007


25.1


0.01


(0.10)


0


-


0


0

2008


16.5


(10.97)


(7.83)


0


-


0


0

2009E


7.0


(8.00)


(2.70)


0


-


0


0

Net Cash 31/10/09 US $4.5 million (incl placing proceeds), Bank Debt and Hedging Nil.

*The SF t1ps Smaller Companies Gold Fund owns shares in Serabi Mining.

**RSCF assisted with the 2.3 million capital raise.



Overview

Established in1999 by mining entrepreneur Bill Clough, and admitted to AIM in 2005, the focus of Serabi has always been on gold and copper in the Tapajos area of Brazil. The Tapajos, covering an area of about 100,000 square kilometres, is a major, under-explored mineral province from which artisanal miners are thought to have extracted up to 30 million ounces of gold from mostly alluvial and surface weathered bedrock deposits since the 1970s.

In December 2008, after a strategic reappraisal the board was significantly restructured and Rich Robinson and Roger Davey stood down as directors. Additionally, Graham Robert became non-executive Chairman, while Bill Clough assumed a non-executive role. The company is now run by CEO Mike Hodgson .

The former team had delivered gold from Palito but the quantities produced were insufficient to cover the high fixed costs of the isolated operation. What is needed is to scale up, and to this end, Serabi has built up an extraordinarily large land holding of 158,000 hectares. The current exploration programme will focus on evaluating 18 geophysical anomalies located within just 10 kilometres of Palito, which are considered to have strong potential to host similar ore-bodies. Discovery of additional ore-bodies would allow Serabi to increase the reserve and resource base through the development of a series of satellite deposits so creating a mining opportunity with a significantly increased production base. Over $33 million has been spent to date on building the resource, underground mine development and mine-site infrastructure, such as a mine fleet, camp roads and mains power including an opera tional plant.

Resources

The objective of the current exploration programme is to evaluate and mine hard rock gold deposits previously unknown or technically too difficult for the artisanal miners to exploit. Having evaluated several opportunities, the company acquired the Palito Gold Mine in 2001. Preliminary underground mining and gold production commenced in late 2003 with commercial production achieved in October 2006. Producing over 100,000 gold equivalent ounces between 2005 and 2008, the Palito Gold Mine remains the only hard rock gold mine to have been established in the region. In retrospect production was commenced too early and before a full feasibility report, which would have identified that greater scale was needed for the operation to be economically attractive.

The rea l value in Serabis land-holdings is the hard rock ore sources that underlie the area and from which the oxidised ore is derived that historically the artisanal and now Serabi generates production. This potential has been highlighted by results from the airborne geophysical survey flown in early 2008.



Resumption of Mining

During 2008, Serabi experienced significant delays in the delivery of new mining equipment essential to maintaining development of the mine. As a result, mine development fell significantly behind schedule and forecast production levels could not be achieved. Following an extensive operational review, it was determined that the mine needed to be placed into an extended period of development during which time ore production would be limited. This review coincided with the global economic downturn a nd without access to capital markets and with cash resources impacted by lower than forecast production during the early part of 2008, the decision was taken, in September 2008, to place the underground mining operations onto care and maintenance from the end of 2008.

The regional activities were also suspended to conserve cash as the outlying tenements are not core assets and, therefore, partners are being sought to advance these properties.

The Group is currently seeking to maintain surface mining activities, along with the necessary exploration to support this, in order to at least continue to cover its Brazilian costs and overheads. Exploration is on-going and Serabi is also looking at the option to re-process some of the tailings from its past underground activity to supplement the surface mining operation.



Strategy /Milestones

The fund raising completed in November and December 2009 at 1.5p supports the first of two development stages. Initially, the proceeds are intended to be used for the exploration and further evaluation of the 18 prioritised anomalies identified within the surveyed area together with further oxide resource as well as to fund general working capital requirements, including the development of new projects.

The resumption of mining is not going to be considered until a larger resource and reserve base is established. Operations in remote regions need independently established infrastructure and support services. Hence, it is now clear that Serabi needs to grow production to comfortably meet and exceed such costs, and to achieve this, additional underground ore s ources are required in effect, it must be producing at least 60,000 ounces per annum. At Palito, the company encountered difficulties as it sought to expand production from this single deposit with the result that the fixed costs could not be spread over sufficient ounces of gold and, consequently, a high and unsustainable cost per ounce. To realistically overcome this, a second and third mine in the Palito district is the best option, and the Directors feel the most realistic one. The model is to feed a central process plant from a number of small mines, all in close proximity.

The 18 principal anomalies that were largely identified from the 2008 airborne geophysical survey are, therefore, a priority. These anomalies exhibit very similar geophysical characteristics to the Palito deposit, and their close proximity to the Palito infrastructure makes them all the more important.

Further testing (through a combination of drilling, and further geophysics and geochemistry) and advancing these targets could be achieved with an initial budget of around US $1.7 million for the first 12 months, followed by a further US $2.2 million over a subsequent 12 month period. It is also believed that oxide ore sources are likely to accompany these targets and, therefore, continued low cost surface oxide ore gold production can be an additional benefit from such a programme.

Phase One Q3 2009 end Q3 2010

Further geophysics and geochemistry analysis to be carried out over some of the more advanced anomalies bringing a number of the targets to drill-ready status and conducting an initial discovery drilling programme on 3 of these targets. E stimated cost US $1.7million.

Phase Two Q3 2010 end Q2 2011

Advancing through additional geophysics and geochemistry analysis the remaining anomalies to drill-ready status, and dependent on results, conducting discovery drilling programmes during the period on up to a further 7 of the anomalies. Estimated cost US $2.2 million.

As such, the next 12 months should see the company generate an active news flow.



Major Shareholders

Number of shares in issue 296.1 million (Fully Diluted 311.0 million)
Free Float 46.26%
Those owning more than 3% are:

Greenwood Investments Ltd 28.88%
WM Clough & related parties 13.20%
F&C Asset Management 9.47%
Other Directors 2.17%



Graham Roberts, Non-executive Chairman. Graham has over 35 years international experience as a senior executive in the mining industry and related financial markets.

Mike Hodgson, Chief Executive. Prior to joining Serabi, Mike was COO of Orvana Minerals and has extensive international experience at executive, operational and consultancy levels.

Clive Line, Finance Director. Clive has worked as Finance Director for a number of companies and has spent over 17 years working with companies in the natural resources sector.

Bill Clough, Non-executive Director. Founding partner of Serabi, Bill is also non-executive Chairman of ASX listed Mirabela Nickel, a Brazilian nickel resources company and has interests in a number of ASX and AIM listed and unlisted international exploration and mining companies.



Forecast & Valuation

Serabi is unlikely to generate meaningful cashflows for at least three years and will, without doubt, need to raise additional equity to complete its exploration programme, let alone bring its properties into meaningful production. There may be modest cashflows generated by selective open pit mining around the Palito plant but these are unlikely to do more than cover local Brazilian costs.

We have valued Serabi on the basis of its existing 668,228 ounces resource. Given that it is largely indicated, and the mixed track record of the company in th is region, we have valued it at $25 ounces and this together with Serabis net cash position gives a sum of the parts valuation of 12.8 million or 4.0p per share. In the short term, any further strengthening of the gold price and any positive exploration results may improve sentiment and give additional upside but the long term value upside comes from turning "drill dollars" into an increased resource with a higher percentage of Measured and Indicated ounces, which offers the promise that Serabi can indeed establish a mine producing 60,000 ounces or more of gold per annum. At 1.8p we initiate our coverage with a target price of 4.0p and a stance of speculative buy.

Forecast Table

Year to Dec
31


Sales ($million)


Pre-Tax Loss ($million)


Earnings Per Share (c)


Dividends Per Share (c)


Year End NAV(c)


PE Ratio


Yield (%)

2006


7.3


(2.21)


(2.04)


0


-


0


0

2007


25.1


0.01


(0.10)


0


-


0


0

2008


16.5


(10.97)


(7.83)


0


-


0


0

2009E


7.0


(8.00)


(2.70)


0


-


0


0

Net Cash 31/10/09 US $4.5 million (incl placing proceeds), Bank Debt and Hedging Nil.

*The SF t1ps Smaller Companies Gold Fund owns shares in Serabi Mining.

**RSCF assisted with the 2.3 million capital raise

edging up 1.85p now

...We have valued Serabi on the basis of its existing 668,228 oz resource. Given that it is largely in the indicated category and the mixed track record of the company in this region we have valued it at $25 oz and this together with Serabis net cash position gives a sum of the parts valuation of 12.95 million or 4.3p per share. In the short term, any further strengthening of the gold price and any positive exploration results may improve sentiment and give additional upside but the long term value upside comes from turning drill dollars into an increased resource with a higher percentage of Measured and Indicated ounces which offers the promise that Serabi can indeed establish a mine producing 60,000 oz or more of gold per annum. Our target price is 4.3p and our stance is speculative buy
The article is on www.uk-analyst.com

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yes been in for a while.. looking better since share issue.

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don't say it.....got to come down.....hope not lol

Market likes latest RNS:

Serabi shares leap 106%
StockMarketWire.com
Brazilian gold explorer, Serabi Mining saw its share price leap more than 100% after the Board announced that it had entered into a share subscription agreement with Eldorado Gold Corporation, a Canadian-based gold producer with existing interests and operations in Turkey, China, Brazil and Greece.

Eldorado has agreed to invest 3.6m in buying 120m new Serabi shares at 3.0p per share to give it a 26.8% stake in the Company.

The proceeds will enable Serabi to extend its current exploration programmes at Palito and support further IP surveys over the remaining VTEM targets.

After early morning trading, Serabi shares were standing at a mid -price of 2.38p - up 106.5% since the market open.