Serabi Gold Focuses on Sustainable Growth & Value Creation While Advancing Exploration

• Serabi Gold is a proven gold producer in Brazil with a track record of consistent production and reserve replacement at its Palito Complex.
• The Coringa Gold Project is set to drive production growth, with the company targeting over 60,000 ounces per year by 2026.
• Serabi has a robust balance sheet and is generating strong cash flows to fund organic growth.
• Exploration upside across its large, prospective land package in the Tapajós region provides a pathway to +100,000 ounces per year.
• The company is committed to sustainable mining practices and supporting local communities in Brazil.

Serabi Gold is a gold exploration, development and production company focused on the prolific Tapajós region in Para State, northern Brazil. The London and Toronto-listed company has been operating in the country for over 20 years, establishing itself as a sustainable gold producer. Serabi's primary operation is the Palito Complex, which has been consistently producing 30,000-40,000 ounces of gold per year. The company is now focused on doubling production over the next two years through the development of its fully-permitted Coringa Gold Project.

Stable Production Base

The Palito Complex has been the foundation of Serabi's success over the past decade. The operation consists of two underground mines, Palito and São Chico, which feed a centralized 600 tonne per day processing plant. In 2023, Palito produced 33,152 ounces of gold at an all-in sustaining cost (AISC) of $1,635 per ounce.

A key aspect of Palito's success has been Serabi's ability to consistently replace mined reserves through exploration. Since initial production in 2014, the operation has produced over 414,000 cumulative ounces of gold while increasing its mineral reserves and resources. As of October 2023, Palito has proven and probable reserves of 206,000 ounces at 7.78 g/t Au and measured and indicated resources of 378,000 ounces at 10.1 g/t Au. Exploration efforts continue both in and around the existing mines, with the ore bodies remaining open laterally, on strike and to depth.

Pathway to Production Growth

Serabi is now focused on doubling its production profile through the development of the Coringa Gold Project. Coringa was acquired by Serabi in 2017 for US$22 million after the project had seen extensive drilling, a feasibility study, and initial construction by the previous owner. Located approximately 200km from Palito, Coringa hosts gold resources of 179,000 ounces at 7.0 g/t Au (M&I) and 271,000 ounces at 5.8 g/t Au (Inferred).

Under Serabi's ownership, Coringa has been significantly de-risked and advanced towards production. Early works including mine portal development and plant earthworks have been completed, with the project now in the final stages of permitting. In 2022, Serabi made the strategic decision to truck ore from Coringa to the Palito processing plant, deferring construction of a stand-alone plant. This approach takes advantage of excess capacity at Palito following the installation of an ore sorter.

A recently completed preliminary economic assessment outlines a low capital intensity path to production at Coringa. The study envisions a mine life of 11 years producing an average of 33,000 ounces per year at an AISC of $1,241 per ounce. Initial development capital is estimated at US$19.5 million (largely spent in 2024/25) which will be funded from Serabi's existing cash balance and cash flow.

Exploration Upside

While the Palito Complex and Coringa underpin near-term production growth, Serabi sees significant exploration potential across its wider tenement holdings in the Tapajós region. The company controls some 100,000 hectares of highly prospective ground along a major structural corridor known to host numerous multi-million ounce deposits.

Recent exploration success has highlighted the potential for new discoveries. At the São Domingos target, located just 5km west of Palito, initial drilling in 2021 returned one of the best gold intercepts globally with 7.15m at 258 g/t Au. Follow-up drilling is planned to determine the extent of this high-grade mineralization.

The Matilda target, a large Cu-Au-Mo-W geochemical anomaly also in close proximity to Palito, represents a potentially significant porphyry discovery. Initial drilling in 2022/23 confirmed the presence of a copper-gold-molybdenum mineralized system over an extensive area. Serabi has estimated a conceptual exploration target of 81 million tonnes at 0.28% Cu, highlighting the scale potential. Further drilling is planned to expand the mineralized footprint and identify higher grade zones.

In addition to São Domingos and Matilda, Serabi has a pipeline of earlier stage targets that will see first pass exploration in the coming years. This includes the Calico target which has been mapped as a 2km x 2km intrusive center with extensive hydrothermal alteration. With a growing cash balance, Serabi is well positioned to advance these exploration opportunities and unlock the full potential of its land package.

Financial Position

Serabi has a strong balance sheet to support its organic growth plans. As of September 2024, the company held US$20.0 million in cash with debt of just US$5.4 million. For the first nine months of 2024, Serabi generated operating cash flow of US$23.1 million and EBITDA of US$24.7 million on revenue of US$70.3 million. This reflects the cash generating capabilities of the Palito Complex at current production levels and gold prices.

Importantly, Serabi expects its AISC per ounce to decrease as production levels increase due to the largely fixed cost nature of its operations. This should drive strong free cash flow growth as Coringa ramps up over the next two years. The development of Coringa is being funded from current cash reserves, existing cash flow, and an US$5 million debt facility. Based on current plans, Serabi does not anticipate the need for any equity financing in the foreseeable future.

Valuation Upside

Serabi appears undervalued relative to its gold producing peers on both a near-term cash flow and production basis. Based on consensus analyst estimates, Serabi is trading at 2.1x 2024 EV/EBITDA and US$1,999 per ounce of production versus peer group averages of 4.1x and US$3,424, respectively.

As the company delivers on its growth objectives and demonstrates the full value of its portfolio, there is a clear opportunity for a re-rating towards peer multiples.

Commitment to Sustainability

Throughout its history in Brazil, Serabi has prioritized responsible mining practices and proactive engagement with local stakeholders. The company's underground mines have a small footprint with no conventional tailings dams, instead utilizing dry stack tailings technology. Serabi maintains a very low carbon intensity with its operations powered by renewable electricity from the grid.

Supporting local communities is also core to Serabi's approach. Over 70% of the company's workforce comes from the states and communities around its operations. Serabi provides employment opportunities, skills training, and invests in local infrastructure and services. This has helped the company build strong, positive relationships with its host communities.

Conclusion

Serabi Gold represents a compelling investment opportunity in the junior gold sector. With a proven track record of operating in Brazil, a clear path to production growth and a deep pipeline of exploration targets, the company is well positioned to create value for all stakeholders in the years ahead. For investors looking for a sustainable gold producer with organic growth and exploration upside, Serabi is an attractive option that warrants further due diligence.