Serabi Gold On Track to Target 38,000 oz Gold Production on Year End Through Optimization & Aggressive Exploration

• Serabi Gold's CEO Mike Hodgson reported the company is on track to meet its 2024 production guidance of 38,000 ounces, a 67% increase from the previous year.
• Key milestones in 2024 included commissioning an ore sorter at the Coringa mine to improve feed grade, publishing an updated technical report, and renewing mining licenses.
• The company plans to increase production from 40,000 to 60,000 ounces over the next 18 months through ore sorting, then target 100,000 ounces longer-term by doubling resources to 2 million ounces.
• Serabi is budgeting $8 million for brownfield exploration drilling in 2025 to grow resources around the Palito and Coringa mines after years of limited drilling.
• The company expects to end 2024 with $20-25 million cash, enabling organic growth plans, potential share buybacks or dividends, and ability to consider accretive M&A opportunities.

On Track on Target 2024 Gold Production Guidance

Brazilian gold miner Serabi Gold (LSE:SRB) is poised for transformational growth after achieving several key milestones in 2024. The company reported it is on track to produce 38,000 ounces this year, a 67% increase from 2023, through optimizing operations at its high-grade Palito and Coringa underground gold mines in northern Brazil.

Commissioning of Ore Sorter Boosts Feed Grade

A critical advancement was the successful commissioning of an ore sorting plant at the Coringa mine in December. CEO Mike Hodgson explained:

"The intention is to double our resource that will support a mining a production rate not at 60,000 ounces per year but 100,000 ounces per year."

The optical sorting technology enables Serabi to significantly upgrade the feed grade to its processing plant by separating out granite waste rock from the mineralized veins. Hodgson noted:

"It removes  some of the waste on the first pass and then we take the product away. We actually then clean the waste and run it again. We kind of scavenge the Ore out of the material."

By pre-concentrating run-of-mine ore from around 5 grams per tonne to 15 grams per tonne, Serabi can boost gold production without expanding its milling capacity.

"That's the beauty now and that that that's going to be good for us for the time being. Next year we're going to start the process of well. what next?"

Interview with Chief Executive Officer, Mike Hodgson

Aggressive Exploration Strategy to Double Resources

Looking ahead, Serabi has outlined a three-stage growth strategy. The first stage was the construction of the ore sorters, now complete. Stage two is increasing production from 40,000 to 60,000 ounces per year over the next 18 months as the benefits of ore sorting are realized.

The third stage involves an ambitious exploration program aimed at doubling resources from 1 to 2 million ounces. Hodgson elaborated:

"The two mines have about 500,000 ounces each. Great prospectivity to increase that to, I believe, 2 million ounces, double the size. Not quite sure whether it's going to be more growth at Coringa or more at Palito - that's going to be driven by by the drill bit and results."

Serabi is budgeting $8 million for brownfields exploration in 2025, a substantial increase from recent years. The 30,000 meter drill campaign will focus on growing resources in the immediate vicinity of the Palito and Coringa mines.

"For the first time we're going to spend $8 million dollar on brownfield exploration. We've never spent a budget like that before in fact [...] We've just parked brownfield exploration for ten years now. We've got opportunities and targets everywhere and that's what we're going to get our teeth into."

Potential for Increased Processing Capacity

If successful in doubling resources, Serabi would look to expand gold production to the 100,000 ounce per year level, which would require additional processing capacity. Options under consideration include building a second plant at Coringa or expanding the existing plant at Palito. Hodgson stated:

"That's going to need more processed capacity. That's going to be a new plant at Coringa again which we go back to that idea, or do we simply expand the Palito to continue with the trucking option. That's going to be driven by the drill bit and results, exploration resource growth and we'll decide what we do about that."

Strong Financial Position Enables Growth and Shareholder Returns

Serabi expects to end 2024 with a strong balance sheet, with $20-25 million in cash. This financial strength provides the company with flexibility to advance its organic growth plans while also considering potential share buybacks, dividends, or accretive M&A.

"If we build our cash like we're building it next year on top of this year, there's no way we can do that. We've either got to be looking at share buybacks or paying dividends if there's going to be no M&A. That's something we're seriously looking at -we're always looking at a creative meaningful M&A."

The Investment Thesis for Serabi Gold

• Near-term production growth to 60,000 ounces per year driven by successful ore sorting implementation
• Ambitious exploration strategy aimed at doubling resources to 2 million ounces to support expansion to 100,000 ounces per year
• Strong balance sheet with $20-25 million in cash to fund organic growth and potential shareholder returns
• Strategic optionality to expand processing capacity either at Coringa or Palito if resource growth supports
• High-grade underground mines with potential to improve feed grades through optimization
• Key mining licenses renewed, providing long-term stability to advance growth plans
• Focused management team executing well against clearly defined three-stage growth strategy

Serabi Gold is well-positioned for transformational growth over the next several years as it advances its three-stage strategy aimed at increasing gold production from 40,000 ounces to potentially 100,000 ounces per annum. With ore sorting now operational, near-term production growth to 60,000 ounces is underway. Beyond that, aggressive exploration targeting a doubling of resources could support a further expansion towards the 100,000 ounce per year level. Serabi's strong balance sheet provides flexibility to advance organic growth plans while also considering shareholder-friendly initiatives like buybacks or dividends. Overall, Serabi offers investors a compelling combination of near-term growth, long-term upside potential, and prudent capital allocation.

Macro Thematic Analysis

The junior gold mining sector is entering an exciting new era marked by a laser focus on optimizing existing operations to unlock value. After years of underinvestment due to challenging market conditions, many companies are now prioritizing exploration and incremental operational improvements rather than large-scale, capital-intensive developments.

A great example is Brazil-focused producer Serabi Gold, which is implementing ore sorting technology at its Coringa mine to boost feed grades and gold production without expanding processing capacity. As CEO Mike Hodson explained:

"By pre-concentrating run-of-mine ore from around 5 to 15 grams per tonne, Serabi can boost gold production without expanding its milling capacity."

This strategy of focusing on smaller, high-grade deposits that can be optimized relatively quickly and cheaply is a smart one in the current environment. With the gold price at elevated levels, the economics of these projects are highly attractive. Companies can grow production and cash flow rapidly by deploying capital efficiently and taking advantage of new technologies like ore sorting.

We expect more junior miners will adopt this playbook in the coming years. The rewards for those who execute well could be significant, with potential re-rate opportunities as the market recognizes the inherent value in optimized, high-grade assets. Astute investors would be wise to seek out the best management teams pursuing this new age business model for junior gold producers.