Serabi Gold Posts Strong H1 2023 Results, Advances Growth Projects

• Serabi Gold (LSE:SRB) is a Brazilian-focused gold mining company.
• Released financial results for H1 2023, reporting 16,524 ounces of gold production.
• Cash balance at end of June is $13.3 million, with net cash position improving by about $5 million in the first half of the year.
• Costs have decreased, with reported AISC (all-in sustaining cost) dropping by $200 to just over $1,500 per ounce.
• Steady state production, unlocking licensing for growth at the Coringa project, and advancing the exploration alliance with Vale for copper prospects within their tenement area.

About Serabi Gold

Serabi Gold is a gold producer focused on high-grade underground mining operations in Brazil. The company owns the Palito Mining Complex and the Coringa Gold Project, located in the Tapajos region.

The Palito Complex includes the Palito and Sao Chico mines and a 500 tonne per day processing plant. Using shrinkage and longhole stoping techniques, Palito produces around 40,000 ounces of gold per year from narrow vein deposits grading 7-9 g/t.

Serabi acquired the nearby Coringa Project in 2017, which hosts over 800,000 ounces of gold reserves grading 8.24 g/t. Once permits are secured, Coringa will add an average of 38,000 ounces per year at low costs. Combined, the two operations will produce approximately 80,000 ounces annually.

Cash flow from the Palito mining operations funds ongoing exploration and development work across Serabi's highly prospective land package. The company is focused on expanding resources to extend mine life and unlock the potential of its Brazilian assets.

Interview with Finance Director, Clive Line

Serabi Gold Delivers Strong First Half Results

Serabi Gold plc is a Brazil-focused gold mining and development company operating the Palito and Sao Chico mines in the Tapajos region. The company also owns the larger Coringa gold project, which is advancing through permitting and initial production ramp-up.

On August 31, 2023, Serabi announced financial results for the first six months of 2023, highlighting steady production, lower costs, and growing cash balances.

Highlights

• Gold production for Q2 2023 of 8,518 ounces, up from 8,418 ounces in Q2 2022. Total H1 2023 production of 16,524 ounces, a 7% increase over 15,480 ounces in H1 2022.
• Cash balance increased to US$13.3 million as of June 30, 2023, up from US$7.2 million at December 31, 2022.
• EBITDA of US$6.6 million in H1 2023, a 28% increase compared to EBITDA of US$5.2 million in H1 2022.
• Net profit after tax of US$5.0 million in H1 2023, up 140% from US$2.1 million in H1 2022.
• Earnings per share of 6.58 cents in H1 2023, a 140% increase compared to 2.74 cents in H1 2022.
• Net cash inflow from operations of US$7.8 million in H1 2023, versus a US$1.5 million outflow in H1 2022.
• Average realized gold price of US$1,940/oz in H1 2023, up from US$1,869/oz in H1 2022.
• Cash costs lowered 11% to US$1,258/oz in H1 2023, compared to US$1,415/oz in H1 2022.
• AISC decreased 11.5% to US$1,519/oz in H1 2023, versus US$1,716/oz in H1 2022.

Production and Costs Improve

In the first half of 2023, Serabi produced 16,524 ounces of gold, a 7% increase over the 15,480 ounces produced in the first half of 2022. With production of 8,518 ounces in the second quarter, a 6% improvement over Q1, the company remains on track to meet full year guidance of 33,500 to 35,000 ounces.

Cash costs for the first half declined 11% to $1,258 per ounce, compared to $1,415 per ounce last year. All-in sustaining costs (AISC) also dropped 11.5% to $1,519 per ounce, versus $1,716 in the first half of 2022. Lower costs were achieved despite inflationary pressures, demonstrating the improvements in operational efficiency.

Strong Financial Performance

Higher production volumes and reduced costs drove strong financial performance in the first six months. Revenues increased slightly to $30.5 million. With lower costs, gross profit jumped 48% to $9.5 million.

EBITDA grew 28% to $6.6 million, while net income after tax more than doubled to $5.0 million ($0.07 per share).

Operations generated $7.8 million of net cash flow, funding continued mine development. Cash on hand increased from $7.2 million at the start of the year to $13.3 million at June 30, 2023. The company remains well funded to advance projects and exploration.

Advancing Coringa Development

The Palito mining complex provides steady production around 25,000-30,000 ounces per year. Serabi sees its Coringa project as the key to doubling gold output over the next couple years.

Coringa hosts a resource of over 800,000 ounces grading 8.24 g/t gold. Once final permits are received, likely by end of 2023, Serabi can commence plant construction and underground development to ramp up production. The company continues to invest in mine development at Coringa in anticipation of expanded operations.

At the producing Palito mine, new development is opening up additional production areas to provide greater flexibility. Ongoing drilling around Palito continues finding vein extensions, which will support mining for years to come.

Exploration Upside from Vale Alliance

Beyond its own mines, Serabi is benefitting from a major exploration program funded by partner Vale S.A. Under a strategic alliance announced in May 2023, Vale is spending up to $5 million to drill for copper deposits across Serabi's extensive 50,000 hectare land package.

While Vale retains rights to any copper discoveries, Serabi keeps ownership of all gold mineralization. With 15,000 meters drilled so far this year, the alliance provides tremendous exploration upside for Serabi at no cost.

Strong Platform for Growth

For investors seeking exposure to gold producers, Serabi Gold presents an attractive opportunity to benefit from near-term growth.

The company has established a strong operational foundation, with steady gold production, declining costs, and growing cash flows. This provides financial flexibility to fund project development and exploration, even amidst inflationary pressures.

With permitting progressing smoothly, Serabi's Coringa project is poised to double the company's gold output over the next couple years. The added scale will further boost margins and cash flow. Coringa's construction is the key catalyst for significant production and financial growth.

Meanwhile, ongoing drilling continues expanding resources around existing mines and generating new discoveries across Serabi's district-scale land package. The Vale exploration alliance also provides upside potential through aggressive drilling programs.

As a streamlined, low-cost gold producer unfettered by debt, Serabi Gold offers leveraged exposure to higher gold prices. With gold currently around $1,800/oz, the company can generate robust margins to fund growth.

For investors, Serabi represents an undervalued gold mining stock with near-term re-rating potential. As permitting hurdles clear the way for Coringa development, the shares could reflect the company's compelling growth outlook.

With new production from Coringa on the horizon, now is an opportune time for gold investors to take a close look at Serabi Gold.