Serabi Gold’s Coringa project in Brazil hit by court ruling

Shares in Serabi Gold (TSX: SBI; LSE: SRB) fell today after a Brazilian judge ruled that no future licenses or titles should be granted to the company until it is proven that its Coringa gold project doesn’t pose harm to indigenous tribes, or until they are consulted.

The miner clarified that, in its view, the ruling does not imply a project suspension, and that it continues with current development plans at Coringa.

Serabi also said its advisers consider the local courts have not followed proper legal processes, and are in the process of filing legal papers for this decision to be reconsidered.

The company noted today’s decision will not affect the current expected timeline for the award of the project’s installation license.

The gold miner said it is preparing a consultation and impact report for the state environmental agency regarding the indigenous communities located near Coringa.

Permitting a mine in Brazil – in particular the waste storage element – has become trickier over the past few years, following two major tailings dam collapses at iron ore mines in the country.

In 2017, Serabi’s local subsidiary was hit with a lawsuit from the Federal Prosecutor’s Office, seeking to revoke the operating licence granted by the state environmental agency. The suit was dismissed in April 2018 in a ruling that also denied any right to appeal the decision.

Last year the federal prosecutor insisted with new claims, which ended on December 6 with the reporting judge of the appeal determining that no further licenses or titles should be granted to Serabi in relation to its Coringa project.

Strategic asset

Coringa, located 200 km away from Serabi’s Palito gold mining complex in northern Brazil, is expected to double the company’s gold output once at full tilt.

Combined gold production from Palito sits at about 40,000 ounces per year. The Coringa project is forecast to yield an average of 38,000 ounces once in production.

The project is located in the Tapajos region, in the Brazilian state of Para, which is reported to be the world’s third largest alluvial gold field.

Serabi Gold believes that the region is a major, under-explored mineral province as historical data shows that artisanal miners, called “garimpeiros,” have mined about 30 million ounces of gold mostly from alluvial and surface weathered bedrock deposits in the region since the 1970s.

Serabi’s shares dropped almost 10% in London on the news, trading last at £60.33 each. The company has a market capitalization of £45.77 million.