Serabi Gold: Net Cash Producer at a 46% Discount to Peers

• Serabi Gold holds 76,307,760 ordinary shares as of June 1, 2026, per the Total Voting Rights statement, and 78.5 million fully diluted shares as of May 27, 2026, producing a market capitalisation of US$353 million at £3.60 per share.
• Debt repayment of approximately US$20 million, completed in January and February 2026, leaves a cash balance of US$64.4 million as of March 31, 2025, and an enterprise value (EV) of US$288.8 million.
• 2026 production guidance of 53,000 to 57,000 ounces, at an estimated margin of approximately US$2,000 per ounce, produces a management-guided free cash flow (FCF) range of US$80 million to US$100 million for the year.
• The board has confirmed a dividend policy of 20% of annual FCF for both the 2025 and 2026 financial years, with the 2025 payment scheduled following the annual general meeting.
• Serabi trades at 1.9x enterprise value to earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA), against a peer group average of 3.5x, and at a 26% FCF yield, against a peer group average of 14%, based on consensus broker estimates.
• A US$5 million ball mill relocation targets an increase in processing capacity at the Palito Complex from 650 to 900 tonnes per day by the fourth quarter of 2026, with a parallel US$15 million, 6-rig drilling programme targeting a consolidated mineral inventory of 1.5 to 2 million ounces by the end of 2026.

Capital Structure & Balance Sheet Strength

Serabi Gold's (AIM: SRB | TSX: SBI | OTCQX: SRBIF) capital structure as of May 27, 2026, consists of 76,307,760 ordinary shares as of June 1, 2026, per the Total Voting Rights statement, and 78.5 million fully diluted shares. At £3.60 per share, the market capitalisation is US$353 million. With US$64.4 million in cash as of March 31, 2025, and no debt, the enterprise value (EV) is US$288.8 million.

Debt repayment of approximately US$20 million was completed in January and February 2026, funded by cash flow from the first quarter of 2026. In that quarter, the company reported earnings before interest, taxes, depreciation, and amortisation (EBITDA) of US$29.2 million and post-tax profit of US$21 million. The cash balance rose from US$50 million as of December 31, 2025, to US$64.4 million as of March 31, 2025. The shareholder register has been restructured, replacing two previous anchor shareholders, each holding approximately 25%, with a more distributed base. Daily trading volume of 500,000 to 1 million shares has been reported.

Chief Executive Officer of Serabi Gold, Mike Hodgson, commented on the resolution of that governance constraint:

"It's certainly more democratic than it was. If you recall, we had two big shareholders, both 25%, and at times they kind of had conflicting views on what, how the company should go forward, so that was a tricky situation to manage."

Cash Generation & Margin Expansion

The 2026 production guidance of 53,000 to 57,000 ounces draws from two underground operations: the Palito Complex, which has consistently produced between 30,000 and 40,000 ounces annually, reaching 44,200 ounces in 2025, and the Coringa Mine, which first produced gold in July 2022 and is ramping under a 3-year GUIA licence while the final operating permit remains pending. The all-in sustaining cost (AISC) for the first quarter of 2026 was US$2,293 per ounce, compared with US$1,816 per ounce for the full year of 2025.

At an estimated margin of US$2,000 per ounce at current gold prices, management has guided free cash flow of US$80.0 million to US$100.0 million for 2026. That figure includes an approximate US$15 million exploration budget and a further US$15 million for underground development.

The Coringa ore sorting circuit reduces transport cost per tonne by pre-concentrating run-of-mine material before the 340-kilometre road haul to the Palito Complex. The Comex ore sorter, operating on colour and density discrimination, is targeting a product grade above 12 grams per tonne gold from a feed grade below 6 grams per tonne in 2026, with a recovery rate above 98%. At those parameters, the sorter reduces haulage volume and tailings generation proportionally.

Capital Allocation Strategy: Dividends & Acquisitions

The board has confirmed a dividend policy of 20% of annual free cash flow (FCF) for both the 2025 and 2026 financial years. The 2025 payment is scheduled following the annual general meeting. On mergers and acquisitions, management has defined the target criteria as near-term or producing assets, with a preference for Brazil to leverage the existing in-country general and administrative cost base across a larger ounce base, and a widened secondary search across the broader Americas.

No acquisition has been completed. The binding constraint is the scarcity of appropriately sized assets in a Brazilian sector dominated by larger companies, which limits the available pool to private transactions, where vendor valuation expectations become the key variable.

Hodgson addressed how the company's improved equity valuation changes its acquisition position:

"I think ironically, when we had no money, there were lots of opportunities, you know, and we didn't have the paper, we didn't have the currency. Now we've gone off, you know the paper's getting better, and the currency is getting better. The opportunities mainly have gone"

Funding Organic Growth: The Path to 100,000 Ounces

Relocating a dormant ball mill from Coringa to the Palito Complex is estimated to cost US$5 million, funded from cash flow, with the aim of increasing capacity from 650 to 900 tonnes per day by the fourth quarter of 2026.  The mill was acquired as pre-existing infrastructure when Serabi purchased Coringa for US$22 million.

The 2026 exploration programme is budgeted at US$15 million, with 6 diamond drill rigs and 30,000 metres of drilling per year across both the Palito Complex and Coringa tenements. The 2025 programme added approximately 400,000 ounces in a single year, lifting the consolidated mineral inventory from 1 million ounces to 1.4 million ounces as of January 2026. A consolidated inventory of 1.5 to 2 million ounces is the threshold for committing to a plant expansion beyond 900 tonnes per day.

Coringa is the company's primary resource growth driver, hosting 304,000 ounces of measured and indicated resources at 8.9 grams per tonne gold and a further 495,000 ounces of inferred resources at 8.8 grams per tonne gold as of January 2026. The current resource footprint covers just 1.5 kilometres of an 8-kilometre artisanal mining trend, while drilling has only tested the system to approximately 250 metres vertical depth. Beyond this, a 20-kilometre gold anomaly across the broader land package remains completely undrilled. Management believes Coringa alone has the potential to host up to 1.5 million ounces of gold.

Permitting Risk at Coringa

The Licença de Instalação - the final operating permit required for Coringa - has not been issued. The Environmental Component Study (ECI), the required indigenous impact assessment, was completed and received unanimous approval from both indigenous groups proximate to the project, following engagement with the national land registry agency (INCRA) and the federal indigenous affairs agency (FUNAI). Management has stated that legal counsel is advising that permit receipt will occur by the end of 2026, with early 2027 as the alternative timeline, and that the company has already commenced plant expansion work ahead of that decision.

Valuation & Peer Comparison

Serabi trades at 1.9x EV/EBITDA on 2026 consensus estimates against a peer group average of 3.5x, and at a 26% FCF yield against a peer average of 14%, based on consensus broker estimates. Named peers in the same dataset include Andean Precious Metals, Mineros, Wesdome Gold Mines, Aris Mining, Cerrado Gold, Jaguar Mining, and West Red Lake Gold Mines. On a price-to-net asset value (P/NAV) basis, Serabi trades at 0.4x, in line with the peer average of 0.4x in the same dataset.

The full-year 2025 AISC of US$1,816 per ounce and the first-quarter 2026 AISC of US$2,293 per ounce provide cost inputs against the management-guided FCF range of US$80 million to US$100 million. Serabi generates the highest FCF yield in the peer group and is debt-free with an estimated US$5 million capacity expansion. Equity research coverage is provided by Peel Hunt, Tamesis Partners, and Zeus Capital.

Hodgson addressed the discipline underpinning capital deployment as cash accumulates:

"We won't, we're not going to sort of compromise what we're doing just to chase some scale because there are a lot of things out there that you don't want to buy."

Investment Thesis for Serabi Gold

• Debt repayment of approximately US$20 million, completed in January and February 2026, converts a previously leveraged capital structure into a net cash position of US$64.4 million, removing the constraint on simultaneous exploration funding, dividend payments, and acquisitions.
• The enterprise value of US$288.8 million, against full-year 2025 earnings before interest, taxes, depreciation, and amortisation of US$77.9 million, yields a 1.9x multiple, compared with a peer group average of 3.5x.
• The 2026 production guidance of 53,000 to 57,000 ounces, at an estimated margin of approximately US$2,000 per ounce, supports a management-guided free cash flow range of US$80 million to US$100 million, inclusive of an approximate US$15 million exploration budget and a further US$15 million for underground development.
• Expanding processing capacity from 650 to 900 tonnes per day requires a single capital item: relocating a dormant ball mill already on site at Coringa to the Palito Complex at an estimated US$5 million, funded from cash flow, targeted for the fourth quarter of 2026.
• The 2025 drilling campaign added approximately 400,000 ounces to the consolidated mineral inventory, lifting the total to 1.4 million ounces as of January 2026; the 2026 programme targets 1.5 to 2 million ounces, the threshold management has set for a further plant expansion commitment.
• The 20% annual free cash flow dividend policy, confirmed for both 2025 and 2026, returns capital to shareholders while simultaneously advancing the capacity expansion and exploration budget.

Coringa permit receipt, ball mill commissioning in the fourth quarter of 2026, and a resource update to 1.5 to 2 million ounces are each targeted by the end of 2026 or early 2027.

TL;DR

Serabi Gold holds US$64.4 million in cash as of March 31, 2025, and has no debt, resulting in an enterprise value of US$288.8 million. At 1.9x EV/EBITDA against a peer average of 3.5x and a 26% FCF yield against a peer average of 14%, per consensus broker estimates. A US$5 million ball mill relocation targets a capacity increase to 900 tonnes per day by the fourth quarter of 2026. The Coringa Licença de Instalação remains pending, with legal counsel advising that it will be issued by the end of 2026. A US$15 million, 6-rig exploration programme targets a consolidated mineral inventory of 1.5 to 2 million ounces by the end of 2026.

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