Brazilian firm Serabi Gold is planning to restart mining operations at its wholly owned Palito Gold Project in Para State, based on positive results of a Preliminary Economic Assessment (PEA).

The PEA study, completed by Serabi’s independent engineering consultant NCL Ingenieria Y Construccion, supports a small scale, high-grade operation at the project using selective mining techniques and indicates an after-tax internal rate of return of 68%.
It also indicates project payback within two years of first gold production and net after-tax cash flow generated over project life of $72.2m.

The mine is expected to produce average gold grade of 8.98g/t to a total gold equivalent production of 201,300 ounces, and produce 24,400 gold equivalent ounces per year over the initial eight-year period.

According to the report, the project will require initial capital expenditures of $17.8m prior to start of production, and $26.4m to sustain it for a total life of nine years.

Serabi CEO Mike Hodgson said the established infrastructure, year-round road access and a permitted fully licensed operation translate into the opportunity for a rapid return to production.

"The capital requirements are therefore relatively modest and with much of the infrastructure in place an initial capital estimate of US$17.8 million is considered sufficient to see the mine into full production during the latter half of 2013," Hodgson added.

"Most encouraging is that the PEA only considers 30% of the total mineral inventory and with plant capacity more than double the PEA production rate, the opportunity to expand production in time from satellite deposits is clear to see."

The PEA study indicated 69,000 gold equivalent ounces of measured and indicated mineral resource inventory, supported by 153,000 gold equivalent ounces of inferred resources.

Serabi Gold intends to start mine development in the fourth quarter of 2012, and produce the first gold from the project in the third quarter to 2013.

De-watering a portion of the existing mine will initially be done as part of the mine development, followed by development of the Palito Main Zone and Palito West sectors.