Serabi Gold

Serabi Gold plc is a Brazilian-focused gold mining and development company operating in the globally significant Tapajós mineral province in Para State, northern Brazil. The company trades on AIM (SRB), TSX (SBI), and OTCQX (SRBIF) with a market capitalization of £143.8 million as of July 2025. Serabi operates two primary assets: the established Palito Complex and the emerging Coringa Mine, which together form the foundation of its strategy to double production from historical levels of 30-40,000 ounces annually to over 60,000 ounces by 2026.

The company has demonstrated operational consistency over more than 20 years in Brazil, with the Palito Complex serving as a stable production base. Serabi has built significant local expertise and relationships, with 68% of employment sourced from Para State and 24% from local communities. The company's operations benefit from improved infrastructure in the region, including the paving of federal highways that have made the transportation of ore between sites economically viable.

Serabi's operational model centers on underground selective open stoping at both properties, with conventional flotation and CIP processing capabilities. The company has implemented ore sorting technology to maximize resource efficiency and minimize waste, particularly effective given the stark contrasting nature of mineralization at Coringa. The business maintains minimal environmental impact through underground operations and dry stacking technology, avoiding conventional tailings dams.

The investment opportunity in Serabi Gold centers on the company's positioned transition from a stable 30-40,000 ounce annual producer to a 60,000+ ounce producer by 2026, with potential for further expansion beyond 100,000 ounces annually. This growth trajectory is underpinned by three distinct phases of development that address production scaling, resource expansion, and capacity optimization.

The immediate opportunity lies in Phase 1 execution, where Serabi is ramping production through a de-risked growth plan requiring minimal initial capital expenditure of less than US$10 million, with an additional $9.5 million of underground development planned for 2025. The Coringa Mine addition provides operational leverage, as the company can maximize existing processing infrastructure at Palito Complex without expansion, utilizing the 200-kilometer road connection between sites.

Phase 2 presents resource expansion potential through an aggressive brownfield exploration program targeting a consolidated 1.5-2.0 million ounce resource base. The company initiated a $9 million exploration program in January 2025, including 30,000 meters of diamond drilling. Initial results have been encouraging, with high-grade intersections including 1.65 meters at 80.50 g/t Au at São Domingos and multiple intercepts exceeding 20 g/t Au across various targets.

The broader Tapajós region represents significant geological upside, described as a globally significant mineral province covering approximately 90,000 square kilometers. The region has reportedly produced up to 30 million ounces through artisanal methods, yet only 7 million ounces have been defined in hard rock deposits, suggesting substantial untapped potential. Serabi's extensive land position provides access to this underexplored goldfield, with priority targets including São Domingos, Matilda porphyry discovery, and multiple other prospects across an 8-kilometer trend.

Serabi's management team brings extensive international mining experience with specific expertise in Brazilian operations and underground mining. Chief Executive Mike Hodgson provides over 40 years of worldwide mining experience focused on operating and building underground mines, with previous executive roles at Orvana Minerals and qualification as a Chartered Engineer and Qualified Person under NI 43-101 standards.

Chief Financial Officer Colm Howlin contributes 15 years of progressive accounting and financial reporting experience, having joined Serabi in 2013 and demonstrated fluency in Portuguese, which provides operational advantages in Brazil. Chief Operating Officer Marcus Brewster adds 20 years of mining experience primarily in Brazil and West Africa, with previous roles at Troy Resources, Gold Fields, Endeavour Mining, and Nordgold, along with advanced degrees from Camborne School of Mines.

The board structure includes Non-Executive Chairman Michael Lynch-Bell, who brings 38 years of experience with Ernst & Young leading global oil and gas, mining, and transaction advisory practices. Non-Executive Director Luis Mauricio Azevedo provides Brazilian legal and geological expertise as founder of FFA Legal, specializing in natural resources, with previous senior positions at WMC, Barrick, and Avanco Resources.

Director of Operations Helio Tavares contributes over 20 years of international experience as a Brazilian mining engineer, with previous general manager roles at Serabi from 2002-2005 and 2012-2019. This management continuity and local expertise provide operational stability and regulatory navigation capabilities essential for Brazilian mining operations.

Serabi's three-phased growth strategy provides a structured pathway from current production levels to becoming a 100,000+ ounce annual producer. Phase 1 focuses on ramping production to 60,000 ounces by 2026 through organic funding and minimal capital requirements. The company achieved record quarterly production of 10,532 ounces in Q2 2025, representing 17% year-over-year growth and positioning it to meet 2025 guidance of 44,000-47,000 ounces.

The Coringa Mine represents a central component of near-term growth, with the updated 2024 Preliminary Economic Assessment demonstrating robust economics including pre-tax NPV5% of $230 million and AISC of $1,241 per ounce over an 11-year mine life producing 363,108 total ounces. The classification plant was fully commissioned in December 2024, enabling pre-concentration of ore for processing at Palito Complex and eliminating the need for a standalone processing plant.

Phase 2 emphasizes resource expansion through systematic brownfield exploration across the Palito Complex and Coringa Mine areas. The company targets consolidated resources of 1.5-2.0 million ounces, with current combined resources of approximately 1 million ounces providing a foundation for expansion. High-priority targets include São Domingos, where initial drilling produced exceptional results including 7.15 meters at 258 grams per tonne gold, ranking as the 7th highest intercept for TSX companies in 2021.

Phase 3 involves capacity expansion decisions based on exploration success, with multiple options including Palito Complex plant expansion or standalone processing at Coringa. The strategy acknowledges that success at the drill bit will drive production capacity expansion decisions, with commercial production run-rates of over 100,000 ounces annually targeted for 2028. The company's extensive exploration license area provides numerous targets for resource definition and potential satellite operations.

Serabi Gold demonstrates strengthening financial performance with improving cash generation and balance sheet metrics. The company reported cash balances of $30.4 million as of June 30, 2025, compared to $22.2 million at December 2024, reflecting strong operational cash flow generation. Net cash position reached $24.6 million after accounting for interest-bearing loans and lease liabilities, compared to $16.2 million at year-end 2024.

Revenue performance shows consistent growth trajectory with trailing twelve-month revenue of $102 million as of March 2025. The company achieved EBITDA of $12.4 million for the first quarter of 2025, with full-year 2024 EBITDA of $35.9 million and post-tax profit of $27.8 million. All-in sustaining costs averaged $1,700 per ounce in 2024, with first quarter 2025 AISC of $1,636 per ounce, demonstrating cost discipline in operations.

The company maintains manageable debt levels with a $5.0 million loan from Banco Santander carrying a 6.16% interest rate, repayable as a bullet payment in January 2026. This replaced a previous $5.0 million Itau Bank facility with higher 8.47% interest, demonstrating active debt management and cost optimization. The effective tax rate benefits from development incentives in Para State, resulting in a favorable 15.25% rate for operations.

Capital expenditure requirements remain modest for near-term growth, with less than $10 million required for Phase 1 production increases plus $9.5 million of underground development planned for 2025. The asset-light growth model leverages existing infrastructure and avoids major processing plant construction through the ore sorting and transportation strategy between Coringa and Palito Complex.

Serabi Gold presents a compelling investment opportunity as an established Brazilian gold producer positioned for significant production growth with minimal capital requirements. The company's transition from a stable 30-40,000 ounce annual producer to a 60,000+ ounce producer by 2026 provides near-term value creation potential, while longer-term expansion opportunities could deliver 100,000+ ounce annual production.

The investment thesis rests on several key strengths: proven operational capability over 20 years in Brazil, experienced management team with local expertise, robust financial position with growing cash generation, and access to a globally significant but underexplored mineral province. The three-phased growth strategy provides clear milestones for value creation while maintaining operational flexibility.

Recent operational performance supports the investment case, with record Q2 2025 production of 10,532 ounces representing 17% year-over-year growth and strengthening financial metrics including $30.4 million cash balance. Exploration results demonstrate resource expansion potential with high-grade intersections across multiple targets within the established geological framework.

Relative valuation metrics suggest Serabi trades at a discount to peers, with 2025E free cash flow yield of 19% and EV/EBITDA multiple of 2.4x, both favorable compared to peer group averages. The company's position within the Tapajós region provides exposure to a mineral province with significant untapped potential, as evidenced by historical artisanal production far exceeding defined hard rock resources.

Risk factors remain manageable through active mitigation strategies and management experience, while the Brazilian operational environment benefits from improved infrastructure and supportive tax regime. The combination of near-term production growth visibility, exploration upside potential, and attractive valuation metrics positions Serabi Gold as a differentiated opportunity within the intermediate gold producer segment.