Serabi Mining plc ("Serabi or "the Company"), the AIM-listed gold production and exploration company with operations in Brazil (AIM:SRB), announces that it has today issued its 2nd Quarter shareholder update.

 

The full text of the update can be accessed by following the link at the end of this announcement or direct from the Company's offices or the Company's website: www.serabimining.com

 

The highlights of the update are:

 

-  improved operating results at the Palito mine evident during June and July following commissioning of new mining equipment and revised mine planning;

 

-  overall production of 5,754 gold equivalent ounces for the quarter;

 

-  2H production expected to show marked improvement as a number of operating initiatives begin to take effect;

 

-  new resource estimate demonstrates wider ore potential and operational flexibility at Palito;

 

-  for the first time Serabi declares an Ore Reserve at the Palito mine indicating a minimum mine life of 4 years; and

 

-  exploration success on a number of fronts points to potential for important expansion of established mineralised structures.  

 

The Management Review presented by the Chairman and Chief Executive summarsies the quarter as follows:

 

As noted in past communications, we had anticipated a much improved year in 2008 with greater emphasis on production improvements and also on realizing the wider ore potential of the Palito / Jardim do Ouro district.  However, despite our best efforts operational problems reported in Q1 continued well into Q2 and it was not until June that we finally saw significant improvement, which we are encouraged to see is continuing into July.  As reported in the Q1 Investor Update, the first items of key new equipment were seriously delayed and not commissioned until mid-May.  As reported at the time of the AGM, this had a detrimental effect on Q2 production.

 

We are pleased to confirm, however, that the majority of the new mining fleet was at Palito and in operation by the end of the Q2 period.  As a consequence, better results have immediately begun to flow through and after what has been a delay amounting to four-and-a-half months, we are now realizing the production levels that were originally forecast for 2008.  The key equipment procured include two new mini-jumbos, two mini-scoops and a long-hole drilling rig.   During Q3 and Q4, we expect to see further operational improvements as two further mini-jumbos arrive at site, along with two further mini-scoops and some specialized haulage trucks at the end of the year.

 

In the plant, we have a programme of expansion works in place to increase throughput and improve recovery.  We have completed an overhaul of mill # 2, and now have three rebuilt ball mills providing much improved reliability and operating efficiencies.  This has led to a return to mill throughput of 500 tonnes per day (tpd).  Attention has now turned to mill # 3 which is in the process of being overhauled and expected to be operational by the middle of Q3.  This will increase daily milling rates by a further 20% to 600 tpd.  With flotation capacity sufficient for this volume, the cyanidation plant (CIP) has also been expanded to accommodate increased throughput when required.  This increased capacity will be operational during Q3.

 

As a result we are now confident that the improved performance seen in June will continue through Q3, and with much of July completed, we can say that it is on schedule to be the best month for twelve months.  We continue to remain optimistic that over the next two quarters we will meet our quarterly targets of approximately 10,000 gold equivalent ounces.   As was advised at the AGM the original 2008 annual target of 40,000 gold equivalent ounces is now not achievable and we would expect production for 2008 to be no more than 34,000 gold equivalent ounces.

 

During the quarter, Serabi finalised the "Palito Ore Reserve and Mineral Resource Update" dated July 9th 2008, for the first time reporting an ore reserve for Palito.  The highlights of the estimate were:

 

-  a mineral resource of 0.67 million total contained gold equivalent ounces from 25 mineralised structures;

 

-  a total proven and probable ore reserve of 187,538 gold equivalent ounces from within the mineral resource; and

 

-  ongoing exploration demonstrates possible further significant extension of a number of the mineralised veins which also remain open at depth and on strike.

Establishing a reserve provides improved confidence for mine planning and indicates a minimum approximate life of four years.  These estimates include exploration and evaluation activity only up to the end of Q1 2008 and, therefore, the entire Q2 drilling activity as well as a large number of outstanding assays still not received at the time of the database closure (March 31st 2008) remain outside this estimate.  Exploration activity in Q2 focused heavily on strike and depth extensions at the Palito Main Zone (PMZ), Palito West (PW) and Chico do Santa (CdS). By the end of the June quarter, drilling supported by assays indicated significant southerly strike and depth extensions of PMZ G3 lode and Jatoba high-grade gold mineralisation.  Drill results also confirm significant strike and depth extensions to the PW zone. This drilling, which remains ongoing is likely to contribute to a significant increase in the recently disclosed resource.

 

In addition, drilling into the PMZ and PW strike and depth extensions confirmed the electromagnetic geophysics (EM) technique as a prime exploration tool for rapid identification of mineralization. Further drill testing of eight large EM anomalies is expected to commence before year-end following detailed interpretation of potential targets.     

 

Meanwhile, detailed drilling at the Senna oxide prospect (Ruari's Ridge project) confirmed that the resource potential of shallow saprolite and oxide mineralisation at the Palito district may be greater than first thought.  As a result programmes are now underway to test other potential areas.

 

With the objective of expanding production in and around Palito, and with the disclosure of the first ore reserve at Palito now undertaken, we feel confident that continued near-mine exploration and evaluation is likely to justify a review of the resource and reserve position at year-end.  In parallel to this we remain committed to progressing regional exploration that we believe will lead to the discovery of a second mineral district in the Tapajos.  This is all with the intention of placing Serabi in a strengthened position to make investment decisions that will enable it to achieve its goal of becoming an established and growing producer.

 

 

Serabi Mining plc

 

Notes to Editors

 

The Tapajos region of northern Brazil encompasses an area of approximately 100,000 km�, primarily situated in south-west Para State. It has a significant history of alluvial gold production with estimated gold production of some 30 million ounces having being recovered, primarily from artisanal workings.

 

Present in the Tapajos since 1999, Serabi has established the only 'hard rock' mine in the region to date at its Palito gold mine..

 

Serabi has a significant exploration programme focused on the Tapajos region, operates four surface drilling rigs and has its own assay laboratory.