Brazil-focused mining and development company Serabi Gold (LSE:SRB) has announced plans to raise a minimum of $8m to fund the growth of its operations, just days after receiving a $15m strategic investment. With the firm also reporting a cash balance of $4.1m as at 31 December 2017 in its 2017 results, also released today, the two placings are likely to give it a total cash balance of around $27.1m. This figure converts to nearly £20m, which means Serabi currently has a very healthy amount of cash on its books given its current £28.7m market cap.
Today’s placing is planned to raise gross proceeds of a minimum of $8m through an accelerated bookbuilding process undertaken by Peel Hunt. Shares will be placed at 3.6p each, a 12.2pc discount to Serabi’s closing mid-price of 4.1p per share on 28 March. Last week, the business announced that mining-focused private equity group Greenstone Resources had invested $15m to acquire 29.8pc of its shares. The shares were placed at 3.6p each, a discount of just 0.6pc to Serabi’s closing mid-price of 2.6p the day before.
As we said at the time, the small discount could reflect a renewed interest in gold, with the metal hitting a two-week high as investors fled to the safe-haven asset amid fresh trade tensions between the US and China. The company said the proceeds from today’s placing and last week’s strategic investment would give it a ‘strong platform’ to deliver on its ambitions to become a 100,00oz per annum gold producer within two years. More specifically, the funds will be used to undertake phase 2 of the drilling programme at its Palito and Sao Chico projects and further advance its recently acquired Coringa Project. They will also be used to commence a regional exploration programme and repay an existing $3m loan facility.
Michael Hodgson, Chief Executive Officer of Serabi, said today: ‘The proposed placing alongside the $15 million raised from the Greenstone Subscription last week will allow us to accelerate our development and exploration programmes at Palito, Sao Chico and Coringa, as well as allowing management to focus on other regional growth opportunities as well as strengthening the company’s working capital position.’
Elsewhere, in its results for the year ended 31 December 2017, Serabi revealed a 7.9pc year-on-year decrease in revenues to $48.5m and a 55pc drop in profit to around $5m. It also revealed a post-tax loss of $2.4m. These decreases were primarily down to a fall in gold production, which slipped to 37,004oz from 39,390oz in 2016 as a result of an equipment commissioning issue.
However, Hodgson said the issue is ‘now well behind us’, and the firm expects gold production for 2018 to return to around or even slightly above that of 2016.
‘I hope that the favourable gold price and exchange rate that we have enjoyed during the first quarter of 2018, can continue and we will be able to enjoy a successful year,’ he added.