Serabi Gold’s Four Catalysts, One Year: Seven Things You Need to Know

Project Overview

Serabi Gold (AIM: SRB | TSX: SBI | OTCQX: SRBIF) operates two producing gold assets in the Tapajós region of Pará State, northern Brazil: the Palito Complex, comprising the Palito and São Chico mines, and the Coringa Mine. Both assets process ore through a central plant, with Coringa ore trucked as pre-concentrated material to the Palito facility. The company produced a record 44,169 ounces in 2025 and carries 2026 production guidance of 53,000 to 57,000 ounces, reflecting the ramp-up underway across both assets.

Four discrete catalysts are scheduled across the 2026 calendar: a mineral resource and reserve update already delivered; the Coringa final operating permit, tracking through a defined regulatory sequence; commissioning of a fourth ball mill; and the potential restart of São Chico. Each constitutes an independent basis for re-rating a producer that currently trades at a material discount to its peer group on both enterprise value to earnings before interest, taxes, depreciation, and amortisation (EBITDA) and free cash flow yield.

1. Brownfield Drilling Drives Major Resource and Reserve Growth

The April 2026 mineral resource and reserve update delivered a major consolidated resource increase after only the first year of its Phase 2 brownfield drilling programme, with Measured and Indicated resources rising 29% to 730,800 ounces and Inferred resources growing 50% to 653,300 ounces. At the Palito Complex, Proven and Probable reserves increased 55% to 228,400 ounces, confirming that the Phase 2 brownfield drilling programme has replenished reserves faster than the rate of depletion. Technical Reports for both assets are to be filed within 45 days of the April announcement.

The update extends mine-life visibility at Palito and establishes material upside at Coringa at the precise moment the company is scaling throughput. A 2026 brownfield exploration programme is already underway, with an operational update planned for the second quarter of 2026. Reserve replenishment at this pace, combined with the commissioning of a fourth ball mill targeted for the fourth quarter of 2026, means incremental resource growth translates directly into producible ounces rather than inventory requiring future capital to unlock.

2. The Coringa Permit: Two Approvals Remaining

Coringa operates under a three-year Guia de Utilização licence, which authorises current production. Two conditions remain outstanding: a change of land use agreement with the Instituto Nacional de Colonização e Reforma Agrária (INCRA), which is characterised as nearly complete, and approval of the indigenous component study, which can follow once a compensation agreement is reached. Separately, the company is in discussions with the Ministry of Mines regarding a potential increase and extension of the operational licence.

The permit's significance is strategic rather than operational. Because Serabi trucks pre-concentrated ore from Coringa to the Palito plant rather than processing on-site, the Licença de Instalação does not enable a new processing configuration; it secures long-term mining rights for the asset. Receipt of the permit would remove what management has described as the last lingering doubts over the asset. Until both conditions are satisfied, Coringa's long-term production certainty carries a regulatory qualifier that the market is currently discounting.

3. Fourth Ball Mill: Funded & On Schedule

The fourth ball mill, targeted for commissioning in the fourth quarter of 2026, raises processing capacity to 330,000 tonnes per annum at a capital cost of US$5 million funded entirely from operating cash flow. The mill unit has been repurposed from equipment originally designated for Coringa, eliminating procurement lead time and reducing execution risk. At full throughput, the expanded capacity enables processing of lower-grade stockpiles from both Coringa and São Chico that cannot currently be accommodated.

Chief Executive Officer and Director of Serabi Gold, Mike Hodgson, explains the bottom-line case for the mill expansion:

"We're ramping up both mines to feed that plant; that's our biggest bang for our buck, without a doubt, and that's going to be no real increase in labour, no real increase in activity, it's just going to go straight to the bottom line, those extra ounces that will be coming in."

The mill expansion leaves execution dependent on the commissioning timeline rather than on capital availability.

4. São Chico: Closed on Plant Capacity Constraints

São Chico was placed on care and maintenance because the Palito plant was operating at full capacity, and gold prices at the time of closure made the ore marginal, not because the deposit had been mined out. Reserves remain unchanged since the 2023 reserve statement, with no mining activity having occurred since. Stockpiled material at the site is ready to be moved.

Hodgson distinguishes the closure rationale from the asset's underlying reserve position:

"We mustn't forget our old mine São Chico, which never got exhausted; we just closed it because, being plant constrained, we didn't have space to continue mining that deposit. It was marginal, really, at the time, with the gold price we had on the day. But at these gold prices, São Chico is very, very much a viable business again."

Restart is under active assessment with no committed timeline. The fourth-quarter 2026 mill expansion provides the processing capacity that was the primary constraint at the time of closure. The combination of an unchanged reserve base, ready stockpiles, and a gold price environment substantially above closure conditions means restart economics are materially different from the conditions that justified suspension.

5. Production Trajectory: Towards 70,000 to 80,000 Ounces

From the 2026 guidance midpoint of 55,000 ounces, the mill expansion alone supports a production trajectory toward 70,000 to 80,000 ounces, a step-change achievable without additional capital expenditure beyond the US$5 million already committed. The addition of São Chico and satellite deposits positions output toward 100,000 ounces by 2028. Each production band in this sequence represents a distinct inflection point in cash generation, given the fixed-cost structure.

Coringa is transitioning from selective open stoping to mechanised longhole stoping during 2026, a method change that reduces labour intensity and improves safety, with the ore sorter continuing to upgrade run-of-mine material regardless of mining method. This transition, combined with expanded processing capacity, reinforces the production case without requiring new exploration success. The 100,000-ounce target by 2028 is conditional on São Chico restart and satellite contributions remaining under assessment, but the 70,000 to 80,000-ounce production band is supported by assets already in operation.

6. Financial Position: Debt-Free With Fixed-Cost Leverage

With US$64.4 million in cash and no debt following the retirement of its final US$5.3 million facility during the first quarter of 2026, Serabi enters its highest-catalyst-density year from a fully self-funding position. All planned capital expenditure, including the US$5 million mill expansion, is covered without recourse to equity or credit markets.

Hodgson identifies the fixed-cost structure as the mechanism through which throughput growth reaches the bottom line:

"Between power, diesel, and labor, that's 65% of our costs. We're a camp, as you know; both mines are a camp. So we accommodate our workforce, we feed them, and we transport them to and from home. There's a big fixed-cost component to our costs, so we actually know what our costs are month on month. It's the revenue that's just going up and up and up."

The full-year all-in sustaining cost for 2025 stood at US$1,816 per ounce. With 65% of the cost base fixed and revenue scaling with throughput, each ounce added through the mill expansion flows to the bottom line at a margin well above the average cost structure. The company is targeting a return of up to 20 to 30% of free cash flow to shareholders (with the inaugural 2025 dividend equating to 20%), establishing a capital return programme funded from current production before any of the four catalysts resolves.

7. Valuation: Discount to Peer Group Multiples

Serabi's current valuation multiples position it at a discount to its peer group on two of three standard measures. At an enterprise value of US$263.0 million, the 2026 estimated enterprise value to EBITDA multiple of 1.9 times compares to a peer average of 3.1 times, a material discount on that metric. The 2026 estimated free cash flow yield of 24% compares to a peer average of 11%, placing Serabi at more than double the peer group return on this basis.

Price-to-Net Asset Value of 0.6 times sits modestly above the peer average of 0.5 times, indicating the market assigns Serabi's in-ground assets a value broadly in line with the peer group. The discount is therefore concentrated in earnings and cash flow multiples rather than in asset value, consistent with market pricing that reflects execution risk rather than geological or reserve risk. Successful delivery of any single 2026 catalyst reduces execution risk without requiring a reassessment of the underlying asset base.

Key Takeaway for Investors

• The April 2026 resource and reserve update confirmed a 29% increase in consolidated Measured and Indicated resources to 730,800 ounces and a 55% increase in Palito Complex Proven and Probable reserves to 228,400 ounces, with the brownfield drilling programme replenishing reserves faster than depletion.
• Two regulatory approvals separate Coringa from its Licença de Instalação: a land use change with the Instituto Nacional de Colonização e Reforma Agrária, characterised as nearly complete, and sign-off on the indigenous component study.
• A fourth ball mill costing US$5 million, funded from operating cash flow, is targeted for commissioning in the fourth quarter of 2026, raising milling capacity to 330,000 tonnes per annum and enabling the processing of lower-grade ore from Coringa and São Chico at minimal incremental cost.
• São Chico holds an intact reserve base with ready stockpiles on site; the fourth quarter 2026 mill expansion removes the capacity constraint that justified closure, and current gold prices make the deposit economically viable again.
• With US$64.4 million in cash, no debt, and 65% of costs fixed across power, diesel, and labour, incremental ounces from expanded throughput flow disproportionately to the bottom line.
• At a 2026 estimated enterprise value to earnings before interest, taxes, depreciation, and amortisation of 1.9 times against a peer average of 3.1 times, and a free cash flow yield of 24% against a peer average of 11%, the discount to peers is concentrated in earnings and cash flow multiples rather than asset value.

Bottom Line

Serabi enters 2026 with a balance sheet that requires no external capital, a resource base that has just expanded materially, and four catalysts on a single calendar-year timeline. None of the four requires the others to succeed. The resource update is already complete, and the mill expansion is funded and on a fixed commissioning schedule. The Coringa permit tracks through a defined regulatory sequence, with the most advanced condition characterised as nearly complete, and the São Chico restart becomes economically assessable once the fourth ball mill is commissioned and the assessment concludes.

The asymmetry in the investment case lies in the gap between the current valuation multiples and what delivery of a single catalyst would imply for re-rating. Three near-term developments mark the watchlist: the second quarter 2026 operational update, which will indicate the brownfield programme's progress; any announcement on the INCRA land use agreement, the most advanced of the Coringa regulatory requirements; and fourth quarter commissioning confirmation for the fourth ball mill, which simultaneously triggers the production step-change and provides the capacity condition for a São Chico restart decision.