REG-Serabi Gold plc : Conditional acquisition of the Coringa gold project, Brazil <Origin Href="QuoteRef">SRB.L</Origin>

Serabi GoldAnnouncement

14/11/2017 07:07

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For immediate release
            14 November 2017

Serabi Gold plc
("Serabi" or the "Company")
Conditional acquisition of the Coringa gold project, Brazil

Serabi Gold plc (AIM:SRB, TSX:SBI), the Brazilian-focused gold mining and
development company, is pleased to report that, on 13 November 2017, it signed
a conditional acquisition agreement to acquire 100 per cent. of the issued
share capital and inter-company debt of Chapleau Resources Ltd ("Chapleau"), a
Canadian registered company wholly-owned by Anfield Gold Corp ("Anfield"),
which holds the Coringa gold project ("Coringa") located in the Tapajos gold
province in Para, Brazil.

Coringa hosts a mineral resource estimate of 376,000 ounces of gold, including
an Indicated Resource of 195,000 ounces of gold with an average grade of 8.4
grammes per tonne ("g/t"), which has been prepared in accordance with the
reporting requirements of the standards of NI 43 101.  Estimated mineral
reserves included with the mineral resource are 160,000 ounces of gold with an
average grade of 8.4g/t. Coringa is located some 70 kilometres to the
south-east of the town of Novo Progresso which is approximately 130 kilometres
by road to the south of Serabi's current mining operations at Palito.

Serabi will acquire the entire issued share capital of Chapleau together with
its outstanding inter-company debts owed to Anfield. Serabi will make an
initial payment to Anfield on closing of the transaction ("Closing") of US$5
million in cash ("Initial Consideration"). A further US$5 million in cash is
payable within three months of Closing and a final payment of US$12 million in
cash will be due upon the earlier of either the first gold being produced or
24 months from the date of Closing (both payments together being the "Deferred
Consideration"). The total proposed consideration for the acquisition amounts
to US$22 million in aggregate. The Board of Serabi considers that the Initial
Consideration and the first instalment of the Deferred Consideration can be
settled from an extension of its existing loan facilities and current cash
holdings (which, as at 30 September 2017, were US$9.75 million) and is
evaluating its options for the longer term development finance requirements of
the Coringa project and the Company's existing organic growth prospects.

Significant Benefits of the transaction

The Board of Serabi believes that the acquisition of the Coringa gold project
has a number of key benefits including:
* Coringa hosts an Indicated Mineral Resource of 195,000 ounces of gold at
8.36g/t and an Inferred Mineral Resource of 181,000 ounces gold at 4.32 g/t
(the "Coringa Mineral Resource Estimate") prepared in accordance with the
reporting requirements of the standards of NI 43 101. 
* Coringa is located only 200 kilometres from Serabi's current Palito mining
operation and process plant, allowing synergies for management and
infrastructure and potential reduction of unit operating costs. 
* The Coringa project is a near 'carbon-copy' of Serabi's current operation,
which has been in production since 2014.  The similarities mean Serabi is
very well placed to expedite the successful development and future production
potential of the project.   
* Past gold discoveries at Coringa including the Mae de Leite, Come Quieto,
Demetrio and Valdette veins, have not been included in the current Coringa
Mineral Resource Estimate and provide scope for growing the resources and
expanding the life of the project. 
* A feasibility report on Coringa issued by Anfield in September 2017 (the
"Coringa Feasibility Study"), prepared in accordance with the reporting
requirements of the standards  of NI 43-101, estimated: * an average
production rate of 32,000 ounces per annum and a total mineable reserve of
approximately 160,000 ounces of gold; 
* average all-in sustaining costs of US$783 per oz; and 
* a post-tax IRR of 30.8 per cent. 
 
* Serabi considers that scope exists to reduce capital and operating costs at
Coringa by utilising Serabi's existing gold processing facilities at Palito. 
* Book value attributed by Anfield to property, plant and equipment being
acquired, including a 750 tonnes per day crushing, milling and CIP process
plant, is C$20.8 million.
Michael Hodgson, CEO of Serabi commented.

"Coringa is an advanced gold project that we have been interested to acquire
for some time and know well. It always appeared to us to be an excellent
bolt-on opportunity to expand Serabi's production and leverage our existing
infrastructure and management.  Anfield's recent NI 43-101 compliant
feasibility study for Coringa shows robust economics as a stand-alone project
and I am sure that, with our experience and resources, we can both reduce the
upfront construction and development costs as well as generate operating costs
synergies with our existing operations. 

"Last year Anfield undertook a 26,400 metre infill drilling programme at
Coringa, including 183 exploration holes over the principal Meio, Serra and
Galena veins. Anfield also completed the acquisition of a 750 tonnes-per-day
crushing, milling and CIP process plant for Coringa and invested in essential
initial infrastructure including a 200 person accommodation facility, offices
and laboratory facilities. 

"Anfield's feasibility study projects that Coringa will produce an average of
32,000 ounces over the life of the mineable reserves. This incremental
production, over and above our current levels, makes this project work very
well for us.  As well as this near-term gold production growth, the
feasibility study highlights a number of other areas of geological interest
within the tenement holdings of over 13,000 hectares. As we are finding with
our Sao Chico and Palito orebodies, I feel there is significant opportunity to
expand the resource and extend the life of the operation well into the
future. 

"With Anfield now involved in a merger with Trek Mining and Newcastle Gold, we
have taken the opportunity to acquire the Coringa project which, whilst no
longer core for this enlarged entity, makes clear sense for Serabi offering an
obvious opportunity to grow."

An interview with Michael Hodgson of Serabi, discussing the acquisition of
Coringa, can be accessed by using the following link:

https://www.brrmedia.co.uk/broadcasts-embed/5a09a55a2acfc74f9342e870/event/?popup=true

Acquisition Agreement

Serabi has today signed a conditional acquisition agreement to acquire 100 per
cent. of the issued share capital of Chapleau together with Chapleau's
outstanding inter-company debts owed to Anfield and other Anfield group
companies (the "Agreement").  Chapleau owns 100 per cent. of the shares of
Chapleau Exploração Mineral Ltda ("Chapleau Brazil"). Chapleau Brazil holds
mineral rights consisting of seven concessions totalling 13,648 hectares,
including Coringa. Chapleau also owns 100 per cent. of the shares of Chapleau
Resources (USA) Limited ("Chapleau USA") which holds a 10 per cent. interest
in the Patty JV covering 616 mining claims in Nevada, USA.   The other JV
participants are Barrick Gold US Inc. and McEwen Mining Inc.  The projected
costs to Chapleau USA for 2018, in respect of the JV, are approximately
US$20,000.

Serabi expects to make the payment of the Initial Consideration from existing
resources. Immediately following Closing a completion balance sheet will be
prepared and the Initial Consideration will be adjusted dollar-for-dollar for
the amount, if any, by which the working capital on Closing exceeds or is less
than US$nil. All outstanding intercompany loans between Chapleau and Anfield
will be assigned to Serabi on Closing.

A further US$17 million is the Deferred Consideration,  of which an initial
payment of US$5 million in cash is payable within three months of Closing and
a final payment of US$12 million in cash will be due upon the earlier of
either the first gold being produced or 24 months from the date of Closing.
The total consideration for the acquisition amounts to US$22 million in
aggregate (before any working capital adjustments).

The Agreement is conditional on a number of items including:
* Completion by Serabi of its due diligence, including the receipt of
satisfactory legal opinions as to mining title, labour, environmental  and
tax matters; 
* Approval of the shareholders of Anfield and approval of the TSX-V; and 
* Approval of Serabi's secured lender (Sprott).
Pursuant to the Agreement, Anfield has provided Serabi with certain
indemnities in respect of future claims relating to activities prior to
Closing, including labour and tax liabilities. In addition, the Agreement
includes representations and warranties from Anfield in favour of Serabi as
would be customary for a transaction of this nature both on execution of the
Agreement and at Closing.

Serabi has agreed, on Closing, to grant to Anfield, subject to the approval of
Serabi's secured lender and, if required, sub-ordinated to any security
granted by Serabi to its secured lender, a pledge over the shares of Chapleau
as security for the full and irrevocable payment of the Deferred
Consideration.

Anfield proposes to hold its shareholder meeting to approve the proposed
transaction on 19 December 2017, and Closing is anticipated to occur shortly
thereafter.

The Board of Serabi considers that the Initial Consideration and the first
instalment of the Deferred Consideration can be settled from an extension of
its existing loan facilities and current cash holdings and is evaluating a
number of options for the longer term development finance requirements of the
Coringa project and the Company's existing organic growth prospects.

Further information on Coringa

Coringa is located in north-central Brazil, in the State of Pará, 70
kilometres southeast of the city of Novo Progresso.  Access to the property
is provided by paved (National Highway BR-163) and gravel roads.  Coringa is
in the south eastern part of the Tapajós gold district, Brazil's main source
of gold from the late 1970s to the late 1990s. Artisanal mining at Coringa
produced an estimated 10 tonnes of gold (322,600 oz) from alluvial and primary
sources within the deep saprolite or oxidized parts of shear zones being mined
using high-pressure water hoses or hand-cobbing to depths of 15 metres. Other
than the artisanal workings, no other production has occurred at Coringa.
Artisanal mining activity ceased in 1991 and a local Brazilian company (Tamin
Mineração Ltda.) staked the area in 1990.  Subsequently, the concessions
were optioned to Chapleau (via its then subsidiary, Chapleau Brazil) in August
2006. On 1 September 2009, Magellan Minerals Ltd. ("Magellan Minerals")
acquired Chapleau.  Between 2007 and 2013, extensive exploration programmes
were completed on the property, including airborne magnetic, radiometric and
electro-magnetic surveys; surface IP surveys; stream, soil, and rock sampling;
and trenching and diamond drilling (179 holes for a total length of 28,437
meters).  On 9 May 2016, Anfield acquired Magellan Minerals. Anfield
subsequently completed an infill drill programme (183 holes for a total length
of 26,413 meters) for the Serra and Meio veins in 2016 and 2017. 

Coringa is an advanced project currently at the resource development stage.

Following completion of the drilling programme undertaken by Anfield and the
Coringa Feasibility Study, activity has been significantly reduced whilst
Anfield has progressed the licencing and permitting process.  There are
currently approximately 70 personnel employed by Chapleau Brazil, but this is
expected to be reduced prior to Closing.  

The Coringa Feasibility Study has an effective date of 1 July 2017 and it
incorporates all expenditures prior to that date. The base case economics are
based on a gold price of US$1,250 per ounce ("oz"), silver price of US$18 per
oz and an exchange rate of 3.2 (US$ to Brazilian Real). The Coringa
Feasibility Study highlights included the following estimates:

·       Gold production of approximately 32,000 oz per year averaged
over a 4.8 year mine life;

·       Average life of mine process fully-diluted gold grade of 6.5
g/t;

·       Post-tax internal rate of return of 30.8 per cent.;

·       Post-tax net present value of US$31.0 million at a 5 per cent.
discount rate;

·       Remaining capital costs of US$28.8 million;

·       Average net cash operating costs of US$585/oz and all-in
sustaining costs of US$783/oz; and

·       Probable mineral reserves of 161,000 oz of gold and 324,000 oz
of silver.

The total fully-diluted estimate of mineral resources for Coringa, prepared in
accordance with the reporting requirements of the standards of NI 43-101,
included in the Coringa Feasibility Study were reported as follows:

 Classification            Tonnes ('000's)  Au grade (g/t)  Ag grade (g/t)  Contained gold (oz)  Contained Silver (oz)  Cut-off grade (g/t Au)  
 Serra Probable Reserves         498              6.0            12.8              97,000               204,000                  2.50           
 Meio Probable Reserves          196              7.4            14.6              46,000                92,000                  2.38           
 Galena Probable Reserves         74              7.1            11.2              17,000                27,000                  2.50           
 Total Probable Reserves         769              6.5            13.1             161,000               324,000                                 
                                                                                                                                                
 Indicated Resource              726              8.4            17.0             195,000               396,000                  2.00           
 Inferred Resource              1,301             4.3             5.1             181,000               215,000                  2.00           

Notes:
1. Additional information, including with respect to the mineral resource
estimate, metallurgy, data verification and quality control measures, can be
found in Anfield's technical report titled "Coringa Gold Project, Brazil,
Feasibility Study NI 43-101 Technical Report" with an effective date of 1 July
2017, which is filed on SEDAR at www.sedar.com The mineral resource estimate
was prepared in accordance with the standard of CIM and NI 43-101. 
2. Totals in the above table may not add due to rounding. 
3. Grades are reported on a fully-diluted basis. 
4. Chapleau Brazil is the Operator and owns 100% of Coringa such that gross
and net attributable resources are the same. 
5. Serabi has not independently verified the information.
There are approximately 40,000 ounces of estimated inferred mineral resource,
which are not included in the Feasibility Study's mine plan, that are adjacent
to areas mined as part of the Feasibility Study. In addition, Chapleau Brazil
controls a twenty kilometre area in the district with delineated gold soil
anomalies, of which, the drill-defined mineral resource strike length is
approximately two kilometres.

On 14 August 2017, Anfield announced that it had received key permits required
to commence construction of the Coringa project, being (1) the license of
operation for exploration and trial mining, (2) the vegetation suppression
permit and (3) fauna capture permit, all issued by the Secretaria de Estado de
Meio Ambiente e Sustentabilidade ("SEMAS"). The SEMAS permits contain a list
of conditions for the conservation and protection of fauna and flora. In
addition, Chapleau Brazil is required to comply with requirements related to:
fuel storage; waste storage; transportation, storage and use of explosives;
surface water drainage; archaeology; and worker health and safety programmes.
The Company is also required to submit regular reports on operational,
environmental, and social performance. These conditions and requirements will
be met as part of normal course operations.

The next step in the permitting process will be for a formal trial mining
licence to be issued by the Departamento Nacional de Produção Mineral
("DNPM").  The trial mining licence will authorise the Company to commence
mine development and production from Coringa.   The trial mining license
will authorise mining and processing of up to 50,000 tonnes of ore per year at
Coringa. Under applicable regulations, once the mine is operational, Chapleau
Brazil may apply to the DNPM to increase the processing limit.

On 27 September 2017, Anfield announced that it understood the Brazilian
Ministério Público Federal ("MPF") was bringing an action against SEMAS, the
DNPM and Chapleau Brazil. The action seeks to nullify the operating license
previously granted to Chapleau Brazil by SEMAS and states that SEMAS should
not have granted the license without requiring Chapleau Brazil to prepare a
full socio-economic analysis and Environmental Impact Study ("EIS") for
Coringa. Anfield and its legal counsel believe that Chapleau Brazil has
complied with all applicable regulations.  At an initial hearing the court
denied a request from the MPF to cancel the operating licence and requested
submissions from SEMAS, DNPM and Chapleau Brazil.  A further hearing has not
yet been scheduled. Anfield and Chapleau Brazil have in the meantime continued
to progress the completion of a full EIS, which is anticipated to be completed
before the end of 2017 and prior to Closing.

Serabi and its legal advisers have considered the position adopted by the MPF,
and believe that the completion of the EIS should significantly address the
main concerns of the MPF and have concluded, based on the current available
information, that there is a low risk of significant delay to the licencing
and permitting process.  Serabi will continue to monitor this position up
until Closing.

Progress has also been made in several other areas relating to the development
of Coringa. Applications for required camp and start-up water have been
submitted and the tailings storage permit request is nearing completion.
Discussions for long-term land access agreements are underway with the
Instituto Nacional de Colonização e Reforma Agrária ("INCRA"), a government
agency which claims ownership of the surface rights where the project is
situated.

Serabi's plans for Coringa following Closing of the Acquisition

Serabi intends to continue the work started by Anfield on the permitting and
licencing process and will, to any extent necessary, complete the EIS and any
supplementary work requested following its initial submission to the relevant
Brazilian government departments for approval.  Serabi will review the cost
estimates contained in the Feasibility Study and optimise these, prepare its
own development plan and evaluate alternative construction development and
processing options that Serabi's management could enhance the economics of the
project.

Following Closing, development and construction at Coringa will be placed on
care and maintenance whilst the permitting process is completed.

Additional disclosures pursuant to the AIM Rules

Chapleau is not required to prepare audited financial statements.  Based on
information provided by Anfield and extracted from the unaudited consolidated
financial statements of Anfield to 31 December 2016, Chapleau on a
consolidated basis, reported a loss before taxation of C$22.3 million for the
12 month period ended 31 December 2016 after (i) expensing exploration and
evaluation expenditure of C$7.9 million, (ii) recognising a foreign exchange
loss of the capitalisation of intergroup loans into shares of Chapleau Brazil
of C$13.7 million, and (iii) other one-off costs estimated at C$1.3 million.
Chapleau had no revenues. As at 30 June 2017 total assets and shareholders'
equity amounted to C$19.6 million and C$(20.3 million) respectively with
shareholder loans totalling C$38.6 million. The balance sheet carrying value
of property, plant and equipment associated with the Coringa project as at 30
June 2017 amounted to C$16.6 million which excludes past exploration costs as
these have been expensed.   As at 30 June 2017 Chapleau had net cash and
cash equivalents of C$2.5 million and except for intercompany loans (amounting
to C$38.6 million), which will be assigned to Serabi on Closing, had no
borrowings.

Enquiries:

Serabi Gold plc 
Michael Hodgson             Tel: +44 (0)20 7246 6830
Chief Executive                 Mobile: +44 (0)7799 473621
Clive Line                             Tel: +44
(0)20 7246 6830
Finance Director               Mobile: +44 (0)7710 151692 
Email: contact@serabigold.com 
Website:  www.serabigold.com

Beaumont Cornish Limited
Nominated Adviser and Financial Adviser           
Roland Cornish                  Tel: +44 (0)20 7628 3396
Michael Cornish                               
Tel: +44 (0)20 7628 3396

Peel Hunt LLP
UK Broker           
Ross Allister                        Tel: +44 (0)20 7418
9000
Chris Burrows                    Tel: +44 (0)20 7418 9000

Blytheweigh 
Public Relations               
Tim Blythe                           Tel: +44 (0)20
7138 3204
Camilla Horsfall                 Tel: +44 (0)20 7138 3224

Copies of this announcement are available from the Company's website at
www.serabigold.com.

Neither the Toronto Stock Exchange, nor any other securities regulatory
authority, has approved or disapproved of the contents of this announcement.

This announcement is inside information for the purposes of Article 7 of
Regulation 596/2014.

GLOSSARY OF TERMS
The following is a glossary of technical terms:

"Au" means gold.

 "assay" in economic geology, means to analyse the proportions of metal in a
rock or overburden sample; to test an ore or mineral for composition, purity,
weight or other properties of commercial interest.

"CIM" is the Canadian Institute of Mining, Metallurgy and Petroleum.

"development" - excavations used to  establish access to the mineralised rock
and other workings.

"doré - a semi-pure alloy of gold silver and other metals produced by the
smelting process at a mine that will be subject to further refining.

"DNPM" is the Departamento Nacional de Produção Mineral.

"grade" is the concentration of mineral within the host rock typically quoted
as grams per tonne (g/t), parts per million (ppm) or parts per billion (ppb).

"g/t" means grams per tonne.

"granodiorite" is an igneous intrusive rock similar to granite.

"igneous" is a rock that has solidified from molten material or magma.

"Indicated Mineral Resource" is that part of a Mineral Resource for which
quantity, grade or quality, densities, shape and physical characteristics, can
be estimated with a level of confidence sufficient to allow the appropriate
application of technical and economic parameters, to support mine planning and
evaluation of the economic viability of the deposit. The estimate is based on
detailed and reliable exploration and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough for geological and
grade continuity to be reasonably assumed.

"Inferred Mineral Resource" is that part of a Mineral Resource for which
quantity and grade or quality can be estimated on the basis of geological
evidence and limited sampling and reasonably assumed, but not verified,
geological and grade continuity. The estimate is based on limited information
and sampling gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes.

"Intrusive" is a body of igneous rock that invades older rocks.

"Induced polarization" or "IP" is a geophysical imaging technique used to
identify the electrical chargeability of subsurface materials, such as ore.

"Measured Mineral Resource" is that part of a Mineral Resource for which
quantity, grade or quality, densities, shape, and physical characteristics are
so well established that they can be estimated with confidence sufficient to
allow the appropriate application of technical and economic parameters, to
support production planning and evaluation of the economic viability of the
deposit. The estimate is based on detailed and reliable exploration, sampling
and testing information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes that are spaced
closely enough to confirm both geological and grade continuity.

"Mineral Resource" is a concentration or occurrence of diamonds, natural solid
inorganic material, or natural solid fossilized organic material including
base and precious metals, coal, and industrial minerals in or on the Earth's
crust in such form and quantity and of such a grade or quality that it has
reasonable prospects for economic extraction. The location, quantity, grade,
geological characteristics and continuity of a Mineral Resource are known,
estimated or interpreted from specific geological evidence and knowledge.

"Mineral Reserve" is the economically mineable part of a Measured or Indicated
Mineral Resource demonstrated by at least a Preliminary Feasibility Study.
This Study must include adequate information on mining, processing,
metallurgical, economic and other relevant factors that demonstrate, at the
time of reporting, that economic extraction can be justified. A Mineral
Reserve includes diluting materials and allowances for losses that may occur
when the material is mined.

"Probable Mineral Reserve" is the economically mineable part of an Indicated
and, in some circumstances, a Measured Mineral Resource demonstrated by at
least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic, and other relevant
factors that demonstrate, at the time of reporting, that economic extraction
can be justified.

 "saprolite" is a weathered or decomposed clay-rich rock.

 "Vein" is a generic term to describe an occurrence of mineralised rock
within an area of non-mineralised rock.

Qualified Persons Statement
The scientific and technical information contained within this announcement
has been reviewed and approved by Michael Hodgson, a Director of the Company.
Mr Hodgson is an Economic Geologist by training with over 30 years' experience
in the mining industry. He holds a BSc (Hons) Geology, University of London, a
MSc Mining Geology, University of Leicester and is a Fellow of the Institute
of Materials, Minerals and Mining and a Chartered Engineer of the Engineering
Council of UK, recognising him as both a Qualified Person for the purposes of
Canadian National Instrument 43-101 and by the AIM Guidance Note on Mining and
Oil & Gas Companies dated June 2009.

Forward Looking Statements
Certain statements in this announcement are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''will'' or the negative of
those, variations or comparable expressions, including references to
assumptions. These forward looking statements are not based on historical
facts but rather on the Directors' current expectations and assumptions
regarding the Company's future growth, results of operations, performance,
future capital and other expenditures (including the amount, nature and
sources of funding thereof), competitive advantages, business prospects and
opportunities. Such forward looking statements reflect the Directors' current
beliefs and assumptions and are based on information currently available to
the Directors. A number of factors could cause actual results to differ
materially from the results discussed in the forward looking statements
including risks associated with vulnerability to general economic and business
conditions, competition, environmental and other regulatory changes, actions
by governmental authorities, the availability of capital markets, reliance on
key personnel, uninsured and underinsured losses and other factors, many of
which are beyond the control of the Company. Although any forward looking
statements contained in this announcement are based upon what the Directors
believe to be reasonable assumptions, the Company cannot assure investors that
actual results will be consistent with such forward looking statements.

ENDS
This announcement is distributed by Nasdaq Corporate Solutions on behalf of
Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for
the content, accuracy and originality of the information contained therein.
Source: Serabi Gold plc via Globenewswire