Serabi Gold Announces Major Resource Upgrade at Palito Mine

• Serabi Gold recently announced an increase in its resource at the Palito Gold Mine, with significant improvements in grades, signaling positive developments in its operations.
• The company emphasizes the longevity of its small underground operations, with half a million ounces mined and another half million ounces in resources, showcasing the potential for further growth.
• Serabi Gold is in a strong financial position, generating approximately $1 million in free cash flow per month. It's funding its development projects, including Coringa, through cash flow without significant dilution.
• The Coringa project is progressing, with an indigenous study impacting the timeline. However, the company remains confident about receiving the necessary permits and advancing its mining operations, focusing on high-grade production and growth plans.

About Serabi Gold

Serabi Gold is a Brazil-focused gold mining and exploration company dual listed on the London AIM and Toronto TSX exchanges. The company owns 100% of the high-grade Palito underground gold mine and processing plant in Para state. Serabi also recently acquired the neighboring Coringa project, where a feasibility study is underway to develop a new underground gold mine. The company's focus is on exploring and developing its existing assets to grow production and extend mine life.

Interview with President & CEO Mike Hodgson

Significant Resource Growth at Palito Complex

On October 6th, Serabi Gold announced a major 50% increase in measured and indicated resources at its flagship Palito mining complex, comprising the Palito and Sao Chico underground mines.

The new mineral resource estimate pegs total measured and indicated (M&I) resources at 377,800 ounces gold, representing a 1.17 million tonne resource grading 10.08 g/t gold. This compares very favorably to the previous December 2021 estimate of 252,500 ounces M&I at an average grade of just 5.23 g/t gold.

The large increase in M&I resources was driven by an aggressive 18-month underground drill program at Palito which has intercepted numerous high-grade vein extensions outside the previous resource envelopes. In particular, the average resource grade jumped 93% from 5.23 g/t gold to 10.08 g/t, highlighting the outstanding grades encountered in the deposit.

CEO Mike Hodgson noted "It bodes really well for the future. Palito lies in a 1 kilometre zone within a 4 kilometre corridor of mineralization. People could do the maths - if we've got half a million ounces on a 1 kilometre length and we think it's four or five kilometers long, four or five times half million ounces, well there you are, that's what Palito could be."

Inferred resources also grew significantly to 153,900 ounces gold, representing a 45% increase from the previous 221,900 ounce estimate. The average grade of inferred resources likewise increased 45% from 4.83 g/t gold to 7.01 g/t gold.

With only 20% of the known vein field tested and an additional 3 kilometres of untested strike length, Palito should continue yielding resource growth for the foreseeable future. An updated reserve estimate will be published shortly which will quantify mine life, but a significant conversion from resources to reserves is expected.

The updated resource will also feed into an ongoing expansion study examining the potential to increase Palito's processing capacity. Additional production from Palito will supplement the new Coringa mine currently under development.

Coringa Development on Track

The Coringa gold project located just 20km from Palito is Serabi's most exciting growth asset, which is being fast tracked to production. A feasibility study released in 2017 outlined reserves of 288,000 ounces gold from an indicated resource of 494,000 ounces grading 8.34 g/t gold. The project will involve developing a new underground mine and processing plant with initial forecast production of 40,000 ounces gold per year.

Coringa will be Serabi's second producing mine, doubling the company's gold production profile to approximately 100,000 ounces per year. Based on the existing reserves and resources, Coringa has an initial 8 year mine life which leaves significant upside potential from extending the deposit along strike and at depth.

The Coringa feasibility study outlined exceptional project economics including a low capital cost estimate of US$25 million, cash costs projected at US$656 per ounce gold, and an after-tax IRR of 110% using a base case gold price of $1,250 per ounce.

Serabi is targeting first gold from Coringa in early 2024, which will be a major catalyst for the company. Development is fully funded based on existing cash reserves and forecast Palito cash flow over the next 2 years.

Attractive Valuation for a Growing Producer

With a market capitalization of only around US$100 million, Serabi Gold offers investors excellent exposure to a growing gold producer. Cash flow from its producing Palito mine funds aggressive exploration driving resource growth, which feeds into the development pipeline exemplified by the Coringa project. This ensures a constant cycle of organic growth wholly funded through internal cash flow.

The current valuation prices Serabi at just over 0.25x its existing M&I resource base of nearly 400,000 ounces gold. Compared to mid-tier producer peers typically valued at 1-2x resources, Serabi appears attractively priced given its resource growth outlook and additional production coming online at Coringa over the next 18 months.

Serabi's cash balance of US$15 million and debt free status provide a solid foundation, while the upcoming Coringa mine is projected to transform Serabi into a 100,000 ounce per year gold producer in a very low risk and cost-effective manner.

As Serabi continues delivering exploration success to grow resources, converts these to reserves, and brings Coringa into production, the company should re-rate substantially higher to be more in line with mid-tier gold producer peers. Existing investors have the opportunity to ride this growth trajectory as the company continues unlocking value across its portfolio of Brazilian gold assets.

Conclusion

With a major resource increase cementing the long term potential of its flagship Palito mine, and first gold fast approaching at its second Coringa project, Serabi Gold is poised for strong growth over the coming years. The aggressive exploration driving resource expansion, low cost production profile, and funded growth pipeline provide an attractive investment opportunity at current valuations. Investors interested in leveraging the company's extensive organic growth prospects have an opportunity to buy into the story in advance of major catalysts. As gold production scales up towards 100,000 ounces per year, cash flow increases, and resources expand, Serabi has significant re-rating potential from its current discounted valuations.