Serabi Gold (LON:SRB) Proposed placing of 20% of share capital announced in the last hour. I presume that such a heavy dilution will hit the SP hard. Is that the likely outcome?
Doesn’t look like a placing of new shares, more like a book-build sale of existing holdings (albeit big ones).
As far as I can see, Greenstone is selling 15.1 million shares of Serabi Gold to a fund managed by Starboard, which represents approximately 20% of Serabi's total issued share capital.
This transition of major shareholders was anticipated and I don't expect it to affect SRB's fundamentals. The buyer, Starboard, seems to be a strategic investor.
It seems to me that the market has reacted as anticipated. The placing price was 135p, which was well below the market price. I see this as a short term retracement caused by the reaction to news and profit-taking. The fundamentals appear to be unchanged.
Hi SCI20,
$140M would be lovely, but I don't see that as being possible for 2024. Their production was 37.5k ounces and the average price of gold was $2400/ounce over 2024.
Even taking into account their production was greater for each successive quarter and the price of gold steadily rose over the year, I would say the company's estimated revenue of $97.8M for 2024 sound reasonable.
The companies 2025 predicted numbers for both revenue and profit are to my mind quite conservative. It appears that they are being careful not to assume that the most recent gold prices rises will be sustained. They could easily beat the published numbers.
Serabi Gold (LON:SRB) is by far my largest holding, so I am biased, but barring mining or political disasters, I think it could double just on fulfilling current production estimates, and still be on a PE of 6. There are ambitious but achievable plans to increase production much further too.
I don't have any special insight here, but I have spent a lot of time looking at company presentation and understanding the wider drivers of why the gold price is increasing.
Also there seems to be some confusion about the share sales so here is a quick summary:
Greenstone Resources II LP sold most of their holding to 'Classe Roca Magma' a Brazilian investment fund managed by Starboard Asset Ltda.
Greenstone then sold their remaining stake and Fratelli Investments Limited sold the majority of their stake to as yet unnamed institutional investors through the 'bookbuilding' process run through Peel Hunt.
So they used to own about half of Serabi between them and now Fratelli own 10%.
I hope this is useful.
David
Hi David, I appreciate the detailed reply. Serabi Gold (LON:SRB) is my largest holding also and you are correct in your calculations for 2024. I was incorrectly applying 2025 projected figures to arrive at the $140M. Reworking on 2024 figures the figure is closer to $95M.
I have watched all the investor presentations and barring serious operational disruption believe that there is significant upside.
The key element is the bull/ bear case for gold. Bear case is a crowded, hyped, frothy price which often precedes a major fall. The bull case and a rise to $3800 is a move out of $ based instruments.
Because of the size of my holding and the Argentex wipeout Paul Hill suffered I am a little nervous of the SRB sp retracing.
Results due on the 28th. Hopefully we will also get production and forecasts updates too.
