Serabi cuts gold outlook as Coringa permits stall growth

Serabi Gold (TSX: SBI; AIM: SRB) cut its annual production outlook about 17% after permit delays blocked a planned increase in gold output from its Coringa mine in Brazil.

The company now expects production near last year’s 44,169 oz., down from previous guidance above 53,000 ounces. Coringa and the Palito complex are in the Tapajós region of Pará state, about 2,120 km northwest of Rio de Janeiro.

“These approvals would have enabled us to process additional Coringa material through the expanded Palito plant in the fourth quarter,” CEO Mike Hodgson said in a release on Wednesday.

The setback leaves Serabi with expanded processing capacity but a regulatory limit on how much Coringa ore it can haul to the plant. Its growth plan depends on securing permission to ship more material, while its existing trial mining licence expires on Jan. 29.

Shares fell 13% to $3.70 apiece in Toronto on Wednesday. Shares have touched $3.42 and $6.99 over the past 12 months, giving it a market capitalization of $282.3 million (US$201 million).

Permit ceiling

Coringa’s trial licence allows Serabi to transport up to 100,000 tonnes of ore annually to Palito. The company said it had shipped 85,602 tonnes against the current annual allowance by Sept. 30. Without a higher limit or an operating licence, it can’t send additional stockpiled and newly mined ore beyond that allowance.

Serabi is pursuing an extension of its trial licence through Brazil’s National Mining Agency while working toward receiving the operating licence. That requires land-use approvals from the country’s land reform agency and approval of an Indigenous impact study by Funai, the federal Indigenous affairs agency.

Both Indigenous groups involved have approved the study, but Funai’s final approval remains outstanding, the company said. The land-use process also requires final approvals at state and federal levels.

Pará’s environmental agency agreed in September that Coringa could bypass the installation-licence stage and apply directly for an operating licence once the outstanding approvals are secured, Serabi said. Approval of the operating licence would then allow the National Mining Agency to issue the mining concession.

In March 2019, federal prosecutors recommended that Pará withhold Coringa’s installation licence pending consultation with affected Indigenous peoples, particularly the Kayapó, and called for specific studies of Indigenous impacts.

Plant expansion

Serabi has increased Palito’s processing capacity from 650 tonnes a day to more than 900, with a fourth ball mill in final commissioning. The extra capacity is intended to accommodate more Coringa ore once the permits allow it.

The company uses crushing and ore sorting at Coringa to remove waste before trucking material to Palito, allowing the two mines to share a processing plant.

Group gold production fell 9% year-on-year to 11,008 oz. in the third quarter, reflecting lower-than-expected grades at Palito. Coringa contributed 8,101 oz., up 18% from a year earlier.

Hodgson expects Palito’s grades to improve in the current quarter as mining moves into higher-grade areas of the G3 vein. Serabi also expects to complete Coringa’s transition to more mechanized mining before year-end.

Management plans to provide a further production-guidance update with third-quarter financial results in late November.