One to Watch: Serabi Gold
Serabi Gold (LON: SRB)
Share Price: 84.5p
No of Shares: 59m
Market Cap: £50m
Serabi Gold (LON:SRB) is a Brazil focused gold mining company, which has recently updated the market with its Q2 results. Gold production stood at 8,504 ounces for the quarter, resulting in 17,525 ounces for the year to date. A key factor for the quarter is also the fact that they became debt free for the first time by repaying in full a loan from Sprott Resource Lending Partnership, of which $7.0 million was outstanding at the start of 2020. The cash balance at end of June 2020 amounted to $9.6 million.
The company has a large area under its consideration and there is a real exciting prospect of a significant resource upgrade to come as we progress, and a future production increase target is a real possibility. Last year they produced over 40,000oz. This year with Covid, the expectations are once again to have a good go at that figure, going by H1, and ramping up in H2, they will probably be there or thereabout.
Serabi Gold rates as a ‘Super Stock’ on the Stockopedia system, with an overall StockRank of 99, and impressively hits green on 8 out of 9 on the Piotroski F-Score which aims to identify the healthiest companies amongst a basket of value stocks through applying a set of nine accounting-based stock selection criteria.
With the huge economic uncertainty and expectations of more fiscal stimulus being needed both in the US and Europe, the strength of the gold price is set to continue for the remainder of 2020 and 2021 at least in my opinion. Gold producers are a must for the portfolio and for me, I see considerable potential upside from the current £50m Market Cap, not only in the current production but also the exploration and potential resource and future production upside possibilities. With only 59m shares in issue, debt free and with the strength of gold and cash generation, Serabi Gold is one I am happy to have in the ISA portfolio.
Quarter 2, operational highlights:
Following the Q2 update, Michael Hodgson, CEO Serabi Gold took part in a detailed interview with Crux Investor, which is worth a view, link below:
00:00 - Introduction
2:41 - A Look at Q2 Results: As Good as Expected?
7:18 - Ore Sorter Capabilities and Significance
9:48 - Coringa Project Update: Steps Left to Take
12:50 - Exploration Potential and Plan of Actions
18:18 - Financing it All: What are the Options?
20:02 - The Future for Serabi Gold: Back to Normality in Q3/Q4?
https://www.youtube.com/watch?v=zidepQVcrwg&feature=youtu.be
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15 comments
Not a very good update today, shares are down 10%. Will they recover next year?
Yet another gold miner to be hit in the last few weeks, Anglo Asian Mining (LON:AAZ) and Centamin (LON:CEY), I'm beginning to regret investing in this sector.
Serabi is back on track as per their 3rd quarter report today. Their share price is a reflection of their future expected cash flows so if you believe gold will go a lot higher in 2021 (as I do) then they are undervalued right now if you run some basic NPV calculations on something like MrZeno.com or an Excel spreadsheet.
Thanks, my concern was the grade has gone down from around 7 to 5 now, so they are mining the same amount but the gold content is lower. I think that is why the sp has fallen back. I do feel gold prices will go higher next year, so I will hold.
They say in their report that they intend to have mine output once again exceeding plant capacity, and grades and gold production return to higher levels during 2021.
Remember they were previously bank rolled by Sprott and paid that debt off so in terms of due diligence they are a concrete mining operation. I think right now they are undervalued (as too is Centamin).
There is no fever like gold fever so if it starts to take off, Serabi will blow up in price I predict (hence the reason why I hold it).
Serabi Gold (LON:SRB) have just reported their half year numbers, as we get quarterly trading updates, much as expected, that Q2 was their best in terms of cash generation and profitability. The predictions for Q3 is like Q2, with a ramp up in production for Q4. The second half of the year is predicted to continue with good cash generation and profitability. Full year production is expected to be between 34,000 and 37,000 ounces of gold.
Q3 operating profit of US$4.64 million, is up by 253% compared to the same quarter in 2019. The financial performance has obviously been assisted by the strong gold price and the continued weakness of the Brazilian Real.
What we have seen is Gold prices further strengthen in Q3 where the previous all-time high was overtaken for a period, with the current price at $1944. Up to the 14th of August Serabi reported that the average gold price for this current third quarter of approximately US$1,880 to date, compared with the average price achieved for the year to date of US$1,647 per ounce, this obviously bodes well for cash generation.
Again following the half year report and strong price of gold, Serabi at £56m market cap and a broker target of £1.50 is one I am happy to hold in the ISA. Q3 and Q4 should be good earing quarters for the company.
Half year interview with Clive Line, CFO of Serabi are below:
Crux Investors -
BRR Media - https://www.brrmedia.co.uk/broadcasts-embed/5f33db75b14d872626436cbb/copied-from-5f292eef65023062edd7e282?popup=true
On the chart price is tightening up nicely in conjunction with supply decreasing.
I'm looking for a bullish breakout close above 97p on the daily chart.
From a fundamental perspective I'm bullish, both on the company and gold.
JC
I came across this thread by accident. I've been looking at this company for a while. They appointed a new non-exec director in late April, who is also associated with Harvest Minerals and is VP on the fairly new Mining Council of the National Confederation of Industry ('CNI') in Brazil. I think, in a country like Brazil, having such connections makes Serabi (and Harvest Minerals) interesting as a long-term story.
Full disclosure: I don't hold any shares in Serabi but I am going to research them further. For now, my preferred smaller gold stocks are Greatland Gold (GGP) and Ariana Resources (AAU), which may help anyone decide whether I'm worth listening to.
Serabi Gold (LON:SRB) currently has a StockRank of 98 right now making it one of the best valued UK listed gold miner I can find. The perceived C-19 issue in Brazil seems to be the reason for this discount perhaps. They don't payout a dividend however but they are still cheap considering their expected future cash flow. Any thoughts?
Serabi now has a stockrank of 99!
This probably looks like one of the best value gold miner at the moment. Perhaps this is due to the perceived C-19 risk in Brazil? Either way I just topped up my holding, the R$ (Brazilian Real) hasn't been this cheap against GBP for over 20 years - the R$ is really getting hammered with C-19.
To digress slightly: As the R$ is a commodity currency and therefore likely to appreciate against GBP in an inflationary environment, I also bought some Blackrock Latin American Investment Trust (LON:BRLA) as the expected yield is >6% and has a 15% discount...
I must say I appreciate the way the CEO Mike Hodgson communicates with investors, very clear, open and no fluff, this is a great plus.
This is another new interview on Thursday with BRR Media, yet another excellent and informative communication with holders.
https://www.brrmedia.co.uk/broadcasts/5f171a294c167c121579821e/serabi-gold-encouraging-level-of-gold-production-for-the-second-quarter-of-2020
What is the safety record like?
How will Covid impact the mines, as infection rates are high in Brazil?
herbie47: Brazil's death per capita is much lower than the UK's (pls see below). In terms of number of deaths they have a high number because Brazil is a very large country - you can fit the whole of the UK into the state of Sao Paulo.
As for their safety record I haven't a clue but I imagine it is acceptable, they have their own onsite ambulance/medical service.
Source: https://www.statista.com/statistics/1104709/coronavirus-deaths-worldwide-per-million-inhabitants/
But how accurate are the reported figures? Yes I realise the population is larger. But they are getting around 60,000 cases per day, the UK never had more than 8,000 per day, as cases soar then deaths
may well follow? I would say the UK is at a later stage than Brazil, the UK deaths and cases peaked in April, Brazil may not even have reached their peak yet. The UK has also done far more testing per million persons.
Parts of Brazil are like the Isle of Man in terms of C-19(84) i.e. 100% virus free. The BBC news et al aren’t reporting this, nor are they showing people walking around in the Isle of Man 100% back to normal with no need for facemasks or social distancing (i.e. as the virus has been completely vanquished).
The fact that they were originally bankrolled by Sprott means they pass my due diligence criteria. Also the R$ has never been this cheap so investing in Brazilian based assets is a wise move.