Exploration Update - 22 July 2008

 

Serabi Mining plc (AIM : SRB) announces exploration developments from the Palito mining district and other Tapajos regional projects.  Highlights of exploration in the first half of 2008 include:

 

- extensive strike and plunge extensions of the high-grade G3 and Jatoba mineralised zones to the south-east of the Palito mine;

- high-grade mineralisation continues on strike in both directions at the Palito West zone, remaining open at depth, while the discovery of additional high-grade parallel zones demonstrates the potential for multiple mineralised zones in this area;

- electromagnetic geophysics technique confirmed as a prime exploration tool for rapid identification of mineralisation; further drill testing of anomalies expected to commence before year-end following detailed interpretation of potential targets;

- detailed drilling at the Ruari's Ridge prospect confirms new resource potential for shallow saprolite and oxide mineralisation in the Palito district; and

- regional project screening indicates widespread gold occurrences at Pison, with high expectations for exploration starting at the Rio Marupa project, one of the more prospective, historic high-grade artisanal production areas in the Tapajos.

 

Commenting on these exploration results Mike Hodgson, Chief Executive Officer of Serabi Mining plc, said:

 

"Serabi has significantly stepped up its exploration programme over the past year with success on a number of fronts that continue to point to near term potential at Palito, as well as the wider opportunities in the long term.

 

Following our recently announced Ore Reserve & Mineral Resource Update at Palito to March 31, subsequent drilling results continue to indicate good potential for additional resources, particularly to the south of the PMZ and along the very high-grade Palito West zone.   Underground development towards Palito West has already commenced and is expected to intersect the said mineralisation by year-end.  Development east of the PMZ into the Jatoba orebody similarly demonstrates the Company's ability to quickly turn discoveries into reserves and production.  Furthermore, although relatively small, the discovery of oxide resources at Ruari's Ridge forms a useful supplementary source of ore and we are now testing other areas in the Palito district which we believe may have similar potential.

 

While the main exploration focus has remained centred on the Palito/Jardim do Ouro district during this period, other regional projects continue to show good potential. We are particularly hopeful of the Rio Marupa (Goiano) project, which although a new district for Serabi, is rated very highly within the Tapajos region and we believe therefore warrants assessment sooner rather than later."

 

 

 

During the first half 2008, over 7,300 metres of drilling, consisting of 26 holes, was directed into extending the identification of the Palito Main Zone (PMZ) G1, G2 and G3 lodes.  These holes specifically targeted electromagnetic geophysical anomalies indicative of sulphide mineralisation along the projected southern and northern strike as well as depth extensions of known mineralisation on the PMZ.  The anomalies were identified by down-hole geophysical surveys completed in 2007 and/or the more recent helicopter-borne "VTEM" geophysical survey undertaken in January 2008. Results from this drilling have had mixed success with massive sulphide and quartz vein-sulphide zones intersected in all areas but yielding variable gold grades.

 

In the south, a programme of drill holes was undertaken to test the south-eastern plunge extension of the G1, G2 and G3 structures within the PMZ, beyond the defined resource model (see press release "Palito Ore Reserve & Mineral Resource Update" dated 9 July 2008).

 

The drill results received to date (which were not incorporated in the Ore Reserve and Mineral Resource Update) indicate good grades in this direction and significantly extend the strike and plunge extent of the main G3 orebody, by approximately 150 metres strike length and 150 metres in plunge extent.  Visual interpretation of subsequent drill core, from which assay results are outstanding, indicates the potential for the PMZ to extend at least 300 metres in this direction. Furthermore, this feature, which remains open along the south-east plunge extension, appears to broaden in width and is still open at depth. Results also indicate that the G2 and G1 structures appear less promising down plunge.

 

Palito South significant drill results received to date include:

 

 

At Palito North a series of drill holes were executed to test a range of targets including:

 

- depth extensions to the shallow mineralisation of the main G3 lode;

strike continuity of the G3 lode structure;

- electromagnetic anomalies defined from a programme of down-hole electromagnetic surveys; completed in mid 2007; and

- electromagnetic anomalies generated from the helicopter-borne VTEM survey.

 

All drill holes encountered the G3 structure to the north and significantly, intersected a number of zones in excess of 1.0 metre widths of massive pyrrhotite, associated with minor chalcopyrite and pyrite. The zone of pyrrhotite-bearing veins is hosted within the Fofoquinha granodiorite and not the Palito and Rio Novo granites, which are typically associated with the bulk of the gold-copper mineralisation discovered to date in the central and southern portions of the main Palito deposits. This change in sulphide mineralisation is believed to reflect a change in the geochemistry of the host rock, thus resulting in sulphide zonation within the mineralised structures.

 

The massive pyrrhotite veins so far tested generally contain lower gold values than the massive chalcopyrite pyrite-quartz veins commonly found in the mineralised zones in the adjoining central and southern sections of the PMZ.  As a result these intersections do not currently indicate any significant economic extension of the PMZ to the north-west of the currently defined resources.

 

Palito North significant drill results received to date include:

 

 

 

In November 2007, Serabi completed a definition drill programme on the Palito West prospect which returned significant results indicating the presence of a high-grade ore shoot plunging to the south-east, with dimensions of approximately 150 metres strike and 200 metres down plunge.  In February 2008, an eight hole drilling programme commenced to test the north-west strike extension of this mineralisation with four shallower diamond drill holes, in addition to a projected south-east plunge extension with four deeper diamond drill holes.

 

The results so far received have extended the strike and plunge extent of the main Palito West orebody to dimensions of approximately 200 metres strike length and 300 metres plunge extent.  Following this drilling, the Palito West zone still remains open in both north-west strike extension and south-east plunge extension.  In addition other drill intersections indicate the presence of multiple parallel mineralised zones in the same area.

 

Palito West significant drill results received to date include:

 

 

 

Located within the Ruari's Ridge area, exploration drilling in early 2007 aimed at evaluating the primary rock mineralisation on the Senna zone. This also revealed the presence of a relatively low-grade gold resource within the first 10 to 15 metres of saprolite-oxidised rock immediately above the vein structures.  As a result a programme of 35 shallow drill holes along the Ruari's Ridge prospect has now been undertaken to test the economic potential of this resource, with very good results.

 

Close-spaced drill holes on 25 metre traverses delineated a gold-bearing oxide cap of 250 metres length, 50 metres width and averaging 2-4 metres thickness.  At an average gold grade of 4 g/t and containing high-grade sections, this material has been shown to be amenable to CIP recovery.

 

Senna oxide significant drill results included:

 

 

 

 

 

 

 

In January 2008 Serabi undertook its most ambitious non-drilling exploration activity to date by flying a 6,000 hectare helicopter-borne electromagnetic ("VTEM") geophysical survey (see Q1 Investor Update and 2007 Annual Report for further background information).  Detailed interpretation of the results is ongoing but from an initial assessment eight large anomalies have been identified including strike extensions of the massive sulphide zones beyond the PMZ mine area. These targets have already been drilled with success, although a number of results remain outstanding.

 

Outside of the immediate mine environment, three holes have been drilled on a series of massive sulphide targets in the Copper Hill South area, situated approximately 500 metres to the west of the Palito Mine. These holes intersected a series of narrow massive sulphide zones, enveloped in a broad zone of sulphide-silica alteration, hosted within the Fofoquinha granodiorite on the contact with the Palito granite.  Consistent with the results of the PMZ North drilling discussed earlier, the massive sulphide and disseminated sulphides encountered in this area are mainly of pyrrhotite, containing lower tenor gold grades.  Significantly, however, in some of the narrow massive sulphide veins intersected higher grades were obtained particularly around the contact with the Palito granite.

 

Further drilling of the VTEM anomalies will be undertaken following completion of a detailed analysis of the geophysical survey anticipated during the third quarter.

 

Significant VTEM anomaly drill intercepts received to date include:

 

 

 

 

 

The Rio Marupa project covers an area of some 20,000 hectares (200 square kilometres) and is located adjacent to Serabi's existing Castenheira project some 150 km to the south west of Palito and close to the Transgarimpeiro highway.

 

Within the central 5 x 5km Goiano prospect area, bonanza grade gold has in the past been mined by the garimpeiros from a series of parallel quartz vein-massive sulphide zones.  The mineralisation at Rio Marupa is significantly different from that of Palito, with the mineralised veins varying from 0.50 metres to 2.50 metres wide accompanied by high gold grades in the adjacent vein wall rock over several metres.  The veins and adjacent sulphide-altered wall rock, some of which have been exploited for over 4 km in strike length, contain historic channel sampling from gallery faces of 2.5 metres @ 92.66 g/t and 3.9 metres @ 9.56g/t gold.  Recorded production statistics also report grades obtained from this material exceeding 500 g/t gold from the quartz-sulphide veins.

 

Outside of the Goiano prospect area, the remaining Rio Marupa exploration tenements are regarded as one of the most prospective gold districts in the Tapajos.

 

Preliminary exploration is scheduled to start at Rio Marupa in July 2008, with initial drilling anticipated to commence in the August - September period, targeting the main vein structures that are already well defined. Management regards this project as a high priority target within the Company portfolio.

 

 

The Pison project covers an area of approximately 123,000 hectares of highly prospective geology located in the north-western extreme of the Tapajos region.  Continuing the campaigns initiated in 2007 to establish basic exploration knowledge of Serabi's main regional exploration projects, stream sediment coverage has now been completed over all drainage catchments of the Pison area.

 

Results from the 597 sample sites are still pending from the programme as a result of delays experienced from the commercial laboratory being used.  Encouragingly, however, panning by the geological teams reported visible gold over large areas at a number of sites, suggesting the potential for a significantly large surface expression of mineralisation in several catchments.

 

In addition, similar stream sediment sampling is ongoing across the project areas surrounding the Palito mine and Jardim do Ouro district.  This work is expected to be completed in the third quarter of 2008.

 

 

Technical and geological information in this report has been read and approved by Serabi's Chief Geologist, Mr. Chris Spurway. Mr. Spurway BSc (Honours) is a graduate of the University of Sydney in Geology. He is a member of the AusIMM and has worked for over 16 years in mineral exploration including four years in Brazil.

 

 

 

 

The Tapajos region of northern Brazil encompasses an area of approximately 100,000 km², 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.