Right at the end of the year Serabi Gold completed on the drawdown of the US$8 million debt finance facility that had been provided to it by Sprott. Sprott doesn’t lend lightly, as anybody who’s been in the mining finance business for more than a day or two will readily appreciate, even allowing for the fairly generous terms that Serabi was offering.
If Sprott is willing to risk its money on the Palito and Sao Chico projects, two things are immediately apparent. Firstly: the projects are not pie-in-the-sky, they’re real. And secondly, one of Canada’s leading mining finance operations thinks it will get the money it’s risking on Palito and Sao Chico back, and more besides.
For a junior company listed in London with a small operation deep in the heart of Brazil, that’s no mean tick in the box.
But it’s nothing that the chaps at Serabi haven’t been saying themselves, and for quite some time.
The thing is, the reputation of Serabi got tarnished when, under an earlier mining plan, the company’s original operation at Palito foundered and had to be put on care and maintenance. With a falling gold price added into the mix, that hiatus of production lasted a good few years.
But the company picked itself up, dusted itself off and moved on. Palito is now in production again and, according to the latest information, is delivering as planned.
And make no mistake, getting a gold mine up and running in the financial and economic context of the past year or two is no mean achievement. There have been precious few other gold mines brought into production round the world, be they brownfields or greenfields operations.
This is a team that’s showed it can deliver production in tough markets. So, when Serabi calculates that securing additional capital from Sprott at 10 per cent will be worth its while, even though there was no urgent need for the cash, that gives some indication about the expectations the company has about the kind of returns the combination of Palito and Sao Chico will give.
The latest news is that recoveries from Palito have hit a very respectable 92%, and that initial production from Sao Chico should come on stream this year as development gets underway. For a sector that’s been starved of good news of late, the progress at both Palito and Sao Chico represents a small shot in the arm.