Market Minnows: Why it could be time to buy Serabi Gold
Gold prices have hit record highs already this year and for investors wanting a piece of the action Serabi Gold looks like a good bet.
The firm has been quietly accumulating assets in Brazil and, as a result, its share price has risen steadily over the past few years.
Current investors have been further boosted by recent fourth-quarter results showing record production. Annual production came in at 40,101oz, a 7% improvement year-on-year from 37,108oz during 2018.
The firm expects production to rise next year to about 46,000oz, as the miner is installing an ore sorter. It will also be boosted if the company can bring on its latest gold find, Coringa.
The Coringa operation in central Brazil recently gained its preliminary licence, allowing development works to begin. However analysts have calculated that Serabi requires a $20 million loan to fund the work there.
Peter Mallin-Jones at Peel Hunt said: “Neither the ore sorter nor Coringa look priced into the shares at the moment.” As a result Peel Hunt has put a mammoth target price of 157p on the stock, up from its current 76p.
Current backers include River and Mercantile Asset Management and Greenstone Capital. Potential investors should also note that Serabi could be an M&A target. The gold mining industry has consolidated rapidly recently, led by the Chinese.
In December China’s state-backed Zijin Mining agreed a $1 billion acquisition of Colombia-focused Continental Gold and Kirkland Lake Gold launched an offer for rival Canadian miner Detour Gold.
It also looked like Endeavour Mining and rival Centamin might get together, but this possibility ended last week after fractious takeover talks were terminated.
Investors should take a look, it could be Serabi’s time to shine.
