Operations

Overview

Serabi is a gold mining and exploration company focused on the Tapajos geological region of northern Brazil. The Company has operated an underground mining operation producing over 100,000 ounces (gold equivalent) since 2005. The Company underwent restructuring at the end of 2008 and in 2009 the focus has been on gold production from the mining of surface oxide ore.  The underground mine is currently under care-and-maintenance.

Serabi was established in Brazil in 1999 and acquired 100% of the Palito project which commenced development in 2003.  Palito is a high-grade, narrow vein, gold-copper orebody, which remains open in all directions.  The operation serves as the template for the development of other projects in the Tapajos which is well endowed with numerous small scale historical mining operations exploiting the surface outcroppings of larger hydrothermal vein systems.

The Tapajos is an under-explored region in northern Brazil covering some 100,000 sq kilometers.  Estimated production from artisanal mining operations, much of which has been extracted in the last 35 years, is up to 30 million ounces. Through its subsidiary entity Serabi Mineraçao Limitada the Company holds all necessary mining and environmental licences for the Palito mine area.  Serabi has a total exploration land holding totalling 158,000 hectares.  Much of this is concentrated around the Jardim do Ouro region at the southern end of the Tocantinzinho trend, a major controlling structural feature running SE to NW across the Tapajos.   The Company’s other major exploration interest is the Pizon project, a 48,600 hectare tenement, some 300km NW of Palito, where in 2008 stream sampling returned numerous results in excess of 0.5 g/t over a 15km by 5km catchment area.

Serabi’s principal asset is the 100% owned Palito Gold Mining Operation which has been in production since late 2003. The operation consists mostly of an underground mine extracting high-grade, gold-copper veins, and more recently lower grade gold-only surface deposits, mined by open-pit.  Production from the underground operations exceeded 110,000 gold equivalent ounces from 2003 to 2008. 

Last year turned out to be very difficult for Serabi, compounded further by the global financial crisis.  

The buoyant metal prices throughout the 2004-2008 cycle meant the industry essentially reached ‘full employment’ and whilst this was seen to the uneducated eye as a good thing, it did make the recruitment of personnel for junior companies with operations in remote locations extremely difficult.  In addition to this, delays in critical supplies and equipment meant many junior operations were severely restricted and left unable to meet targets. 

Palito and Serabi was no exception and quite simply a 12 month wait for essential underground mining equipment took its toll on the operation.  By late 2008, mine development was delayed to the point that it was impossible for the operation to sustain production at viable levels.

Operating a small hard rock underground mine of this nature in a remote location means a minimum level of production is essential just to meet fixed costs.  Despite reducing manpower from 350+ in March 2008 to 130 by year-end, and 70 by early 2009, the lack of developed reserves rendered a continuation of underground operations unviable beyond 2008 year-end.  At this time the underground mining was suspended and placed on a care-and-maintenance status.  However, open pit mining of surface oxidised ore sources has continued into 2009, albeit on a small scale.   

All regional exploration activity has been reduced to a level that meets essential minimum commitments and is only likely to be expanded once the company has successfully secured new funding.