Serabi Gold Reports Strong H1 2024 Performance

• Serabi Gold's first half of 2024 gold production is up by 9% to 18,010 ounces from H1 2023's 16,524 ounces.
• The company's revenue increased 40% to $42.7 million and EBITDA grew an impressive 96% to $13.0 million year-on-year.
• SRB maintained a stable cash position of $12.0 million showing the company's ability to generate cash flow while continuing to invest in its operations and development projects.
• Coringa mine development progressing with new levels and ore sorting plant, while operations are ongoing at the Palito Mining Complex.

Serabi Gold plc (AIM:SRB) is a Brazilian-focused gold mining and development company, operating the Palito Mining Complex and advancing the nearby Coringa gold project in the Tapajos region of northern Brazil. The company has demonstrated its ability to operate profitable and sustainable gold production, while simultaneously developing new assets to drive future growth.

In the first half of 2024, Serabi Gold has delivered a strong financial and operational performance, showcasing the company's resilience and growth potential in the face of a favorable gold price environment. With increased production, revenue, and profitability, coupled with ongoing development at the Coringa project, Serabi is positioning itself as an attractive investment opportunity for those seeking exposure to the gold mining sector in a stable jurisdiction.

Financial Highlights: Robust Growth Across Key Metrics

Serabi Gold's financial results for the first half of 2024 demonstrate significant improvements across multiple key performance indicators:

Revenue Growth: The company reported revenue of $42.7 million for the six-month period ended 30 June 2024, representing a substantial 40% increase compared to the $30.5 million recorded in the same period of 2023. This growth was driven by both higher gold production and a favorable average gold price of $2,209 per ounce, up from $1,940 in H1 2023.

EBITDA Expansion: Earnings before interest, taxes, depreciation, and amortization (EBITDA) saw an impressive 96% year-on-year increase, reaching $13.0 million in H1 2024 compared to $6.6 million in H1 2023. This significant growth in EBITDA underscores the company's improved operational efficiency and ability to capitalize on higher gold prices.

Profitability Boost: Serabi Gold reported a post-tax profit of $9.2 million for the six-month period, nearly doubling the $5.0 million recorded in H1 2023. This translated to earnings per share of 12.18 cents, up from 6.58 cents in the previous year, representing an 85% increase.

Cash Position: The company maintained a stable cash position of $12.0 million as of 30 June 2024, slightly higher than the $11.6 million reported at the end of 2023. This demonstrates Serabi's ability to generate cash flow while continuing to invest in its operations and development projects.

Operational Performance: Increased Production

Serabi Gold produced 18,010 ounces of gold in the first half of 2024, marking a 9% increase from the 16,524 ounces produced in H1 2023. This growth in production reflects the company's ongoing efforts to optimize its operations at the Palito Mining Complex and the gradual ramp-up of production at the Coringa project.

While the company experienced some cost pressures, it maintained relatively stable cost metrics:

• Total Cash Cost of production: $1,401 per ounce (H1 2023: $1,258 per ounce)
• All-In Sustaining Cost (AISC): $1,782 per ounce (H1 2023: $1,519 per ounce)

The increase in costs can be attributed to higher mine development expenditures, which rose by $1.6 million compared to H1 2023. This additional investment, while impacting short-term costs, is crucial for supporting future production growth and is expected to contribute to long-term cost reductions.

Coringa Project: Advancing Towards Full Production

Serabi Gold continues to make significant progress in developing its Coringa gold project, which is expected to be a key driver of future growth:

Mine Development

The company reported ongoing development across multiple levels at Coringa:

• Active mining on levels 320m, 290m, and 260m
• Continued development on levels 260m, 225m, and 190m
• Main ramp approaching the 155m level, scheduled to open in September

This multi-level development strategy puts the mine in a strong position for future production expansion, with three (soon to be four) development levels ahead of production.

Ore Sorting Plant

Serabi has made significant investments in enhancing Coringa's processing capabilities: delivery of the ore sorter to the site, ongoing ground works for installing the crushing plant and related infrastructure, and targeting for the plant to be operational in Q4 2024.

Once operational, the ore sorting plant is expected to process lower-grade stockpiled material, potentially boosting gold production in the final quarter of the year.

Capital Expenditure

The company invested $4.0 million in capital equipment during H1 2024, including $1.3 million specifically allocated to the crushing plant and ore sorter at Coringa. This investment underscores Serabi's commitment to enhancing operational efficiency and setting the stage for increased production.

Serabi Gold's Financial Liquidity

Cash Flow & Debt Management

In January 2024, Serabi completed a $5.0 million unsecured loan arrangement with Itaú Bank in Brazil. The loan, carrying an interest coupon of 8.47%, is repayable as a bullet payment on 6 January 2025. This new facility replaced a similar arrangement that was repaid in February 2024, demonstrating the company's ability to manage its debt effectively and maintain access to financing.

Serabi reported a net cash inflow from operations of $6.6 million for the six-month period, after accounting for $3.0 million in mine development expenditure. This positive cash flow, despite significant investments in development, highlights the company's ability to generate cash while funding growth initiatives.

Directorate Change: Ensuring Continuity in Financial Leadership

On 22 August 2024, Serabi Gold announced a planned change in its financial leadership. Clive Line, the current Finance Director, has informed the Board of his intention to retire at the end of December 2024. Mr. Line has agreed to remain available to assist the company for up to six months following his departure, ensuring a smooth transition.

The Board will appoint Colm Howlin, the current Group Controller, to the role of Chief Financial Officer (CFO) upon Mr. Line's departure. Mr. Howlin, a member of the Institute of Chartered Accountants of Ireland, has been with Serabi since 2013 and is fluent in Portuguese, making him well-suited to lead the company's financial operations in Brazil.

This succession plan demonstrates Serabi's commitment to maintaining strong financial leadership and ensuring continuity in its financial strategy. The transition period will allow for a thorough handover of responsibilities, minimizing any potential disruption to the company's operations.

Market & Operational Outlook

Serabi Gold has benefited from a favorable gold price environment, with an average realized gold price of $2,209 per ounce in H1 2024, up from $1,940 in the same period of 2023. This higher gold price has contributed significantly to the company's improved financial performance and, if sustained, could continue to support strong results in the future.

With the ongoing development at Coringa and the planned commissioning of the ore sorting plant in Q4 2024, Serabi is well-positioned to increase its gold production in the coming months and years. The company's focus on mine development and infrastructure improvements is expected to support this growth trajectory.

While costs have increased in the short term due to higher development expenditures, these investments are aimed at improving long-term operational efficiency. As production ramps up, particularly at Coringa, the company anticipates that economies of scale will help drive down per-ounce costs. Serabi's presence in the Tapajos region of Brazil, known for its gold potential, suggests opportunities for future exploration and resource expansion.

Key Takeaways

Serabi Gold's performance in the first half of 2024 presents a compelling investment case for those looking to gain exposure to the gold mining sector:

• Strong Financial Growth: The company has demonstrated significant improvements in revenue, EBITDA, and profitability, showcasing its ability to capitalize on favorable gold prices and operational improvements.
• Advancing Development: The progress at the Coringa project, including multi-level mine development and the upcoming ore sorting plant, points to near-term production growth potential.
• Stable Cash Position: Serabi has maintained a healthy cash balance while funding development activities, indicating prudent financial management.
• Experienced Leadership: The planned CFO transition ensures continuity in financial leadership, with a successor who has deep knowledge of the company and its operations.
• Favorable Jurisdiction: Operating in Brazil, a country with a strong mining tradition, provides a stable environment for continued growth and exploration.

For investors seeking a gold mining company with a track record of profitable production, near-term growth prospects, and exposure to a rising gold price environment, Serabi Gold presents an attractive opportunity. The company's ability to generate strong cash flows while investing in future growth initiatives positions it well for potential share price appreciation as it continues to execute on its strategic plans.

However, as with any mining investment, investors should be aware of potential risks, including gold price volatility, operational challenges inherent in underground mining, and the general risks associated with operating in emerging markets. Nonetheless, Serabi Gold's recent performance and clear growth strategy make it a noteworthy contender in the junior gold mining space.