Serabi Gold's Three-Phase Growth Roadmap: 6 Things You Need to Know

Serabi Gold (AIM: SRB, TSX: SBI, OTCQX: SRBIF) spent roughly a decade producing between 30,000 and 40,000 ounces annually from the Palito Complex in Pará State, Brazil. Record output of 44,169 ounces in 2025, a year-end cash balance of US$54.3 million, and zero long-term debt following full retirement of US$7.1 million in January 2026 have placed the company at a different juncture. Management has outlined a three-phase strategy with a defined sequence: remove the plant constraint, build the resource inventory, then expand throughput. Each phase conditions the next, and the timetable runs through 2028. The sequence is internally funded, structurally defined, and carries one variable outside the company's control.

1. Phase 1 Starts With Removing the Plant Constraint, Not Building a New Mine

The single largest near-term value lever is a 4th ball mill installation that raises annual processing capacity to 330,000 tonnes per annum, funded entirely from the existing cash balance.

The Palito Complex has operated as a plant-constrained system for years. Feed from the Palito mine, Coringa, and stockpiles competes for limited milling capacity, which caps production regardless of how much ore is available. The solution is not a new processing facility. Two ball mills were acquired with the Coringa asset when Serabi purchased it in 2018, and have remained dormant since. One of those mills is now being installed at Palito. Capital expenditure is limited to installation costs; equipment procurement is not a line item. The mill is targeted for commissioning before the fourth quarter of 2026, with production output expected to be weighted materially toward the second half of the year. Consolidated 2026 guidance of 53,000 to 57,000 ounces reflects that production weighting.

Chief Executive Officer of Serabi Gold, Mike Hodgson, is direct about the strategic logic:

"It's our biggest bang for our buck without a doubt. No real increase in labor, no real increase in activity. Those extra ounces are just going to go straight to the bottom line."

2. The Entire Expansion is Being Funded From Cash Flow

A structurally controlled cost base, combined with sustained high gold prices, has produced a cash generation rate that covers plant expansion, underground development, exploration, and a planned shareholder return simultaneously, without new equity or additional debt.

Labor represents approximately 45% of Serabi's operating costs and is governed by annual collective agreements with Brazil's national mine workers union. Diesel is regulated and subsidized at the federal level. A dedicated grid power line replacing diesel generation at the Palito Complex is expected to come online in 2026. Between labor, diesel, and power, roughly 65% of the cost base is structurally insulated from commodity price volatility and contractor market pressures that affect peers in other jurisdictions.

The financial result of that cost structure against a rising gold price is visible in the reported figures. The company began 2025 with approximately US$20 million in cash and closed the year at US$54.3 million, after funding a US$12 million brownfield drilling program. Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first three quarters of 2025 totaled US$48.2 million, compared with US$35.9 million for the full year 2024. The plant expansion, US$13 million of underground development planned for 2026, a US$9 million exploration program, and a stated intention to return approximately 25% of 2025 free cash flow to shareholders are all being financed from this base.

3. Ore Sorting is the Operational Foundation the Whole Model Rests On

The two-mine, one-plant strategy is only economically viable because ore sorting at Coringa reduces the mass trucked approximately 200 kilometers to the Palito plant from run-of-mine feed to a pre-concentrated product representing roughly 10% of the original volume.

Coringa ore exists in the mine at feed grades of approximately 6 grams per tonne. After passing through the ore sorter, the product moves to 12 grams per tonne, a critical value-add that makes the project’s processing and logistics economic. As Coringa transitions from selective open stoping to longhole open stoping through 2026, the ore sorter's role becomes even more vital. While longhole stoping is a safer and less labor-intensive strategy, it naturally introduces additional dilution; however, the ore sorter is designed to remove this waste, maintaining the uplift from 6 grams per tonne to 12 grams per tonne. This shift to mechanized mining was planned well before recent safety incidents and is supported by the Coringa vein geometry, which is wider and more planar than Palito. With 12 months of operational ore-sorting results through 2025 providing validation, the company is focused on its broader growth strategy: increasing the total resource to a range of 1.5 - 2.0 million ounces, with the current 1.3 million ounces representing the lower end of that goal.

São Chico, the satellite mine currently under economic review, represents the notable exception. Ore sorting has never been successfully applied to São Chico material. Under current gold prices, management has concluded that São Chico ore is viable on grade alone, without pre-concentration. This differentiates the São Chico processing pathway from Coringa's and means that expanded plant capacity, not ore sorting performance, is the enabling condition for a potential restart.

4. Resource Growth Gates the Next Throughput Step, and the Drilling Program is Where It Gets Won or Lost

Management has drawn an explicit link between reaching a consolidated mineral inventory of 1.5 to 1.6 million ounces and the point at which a larger throughput expansion can be justified. The current inventory falls well short of that threshold, and the 2025 to 2026 drilling program is the mechanism to close the gap.

Palito carries Measured and Indicated resources of 350,000 ounces at 9.9 grams per tonne and Inferred resources of 162,000 ounces at 7.4 grams per tonne, based on an April 2025 estimate. Coringa carries Measured and Indicated resources of 179,000 ounces at 7.0 grams per tonne and Inferred resources of 271,000 ounces at 5.8 grams per tonne, based on an April 2024 estimate. Palito's more than 20-year track record of resource replacement is directly relevant: the operation began with resources of 405,000 ounces in 2005, has produced 444,000 ounces cumulatively since, and carries 512,000 ounces today, having replaced more than it has mined entirely through brownfield drilling.

The 2025 program totaled 38,400 metres across 154 drill holes at both assets, with 65 returning grades above 3 grams per tonne. Significant results came from Serra South at Coringa, a structurally distinct zone approximately 500 metres south of the existing Serra mine infrastructure, and from the Senna target at Palito, where mineralization was confirmed both north and south of the existing resource. A US$9 million, 30,000-metre follow-on program commenced in January 2026. A consolidated resource estimate update incorporating all 2025 drilling, to be prepared by NCL Ingeniería y Construcción, is expected in the first quarter of 2026. That update will serve as the first quantitative measure of progress against the Phase 2 inventory target. Hodgson has indicated he expects the update to bring the consolidated inventory to approximately 1.3 million ounces, roughly midway toward the 1.5 to 1.6 million ounce threshold that supports the next throughput step.

5. São Chico Adds a Low-Capital Production Option That Did Not Exist at Lower Gold Prices

São Chico was suspended in 2023 because the Palito plant lacked ore capacity that was marginal relative to higher-grade feed from Palito and Coringa. The economics have changed: expanded capacity and a higher gold price environment have made the deposit viable without requiring a new mine build.

The geological case for São Chico was not the reason for the suspension. The deposit was not exhausted. The geological case for São Chico was not the reason for the suspension. Existing underground development reduces the capital requirement for a restart; management is currently assessing rehabilitation of the upper levels as the initial step. The combination of incremental ounces from an already developed asset and the absence of a standalone processing facility means the capital intensity of a São Chico restart is substantially lower than adding equivalent production through a new project.

São Chico's role in the longer-term production outlook is material. Hodgson frames its contribution in the context of the 100,000-ounce scenario:

"If we continue with São Chico as well, and there are two or three other little satellites we're talking to, we can be knocking on the door of 100,000 ounces in 2028."

That framing positions São Chico as one component within a multi-source production base feeding the enlarged Palito plant, rather than as a standalone driver.

6. Coringa Permitting is the One Variable Outside the Sequence

Every other component of the three-phase plan is internally controlled. Coringa permitting is not. The current Guia de Utilização (GUIA) licence expires on January 29, 2027, and the full mining licence requires two external approvals that remain outstanding.

The full mining licence, issued by the Secretaria de Estado de Meio Ambiente e Sustentabilidade (SEMAS), the state environmental agency, requires a change of land use authorization from the Instituto Nacional de Colonização e Reforma Agrária (INCRA) and approval of the Estudo de Componente Indígena from the Fundação Nacional dos Povos Indígenas (FUNAI). The INCRA application has cleared state-level review and will proceed to federal-level approval in Brasília, with management targeting receipt in the first half of 2026. The FUNAI process is at the stage where the study is being presented to the indigenous community, from which a compensation study must be agreed upon before formal approval can be issued. Separately, Serabi has held discussions with the Agência Nacional de Mineração (ANM) regarding the existing GUIA licence, including the possibility of an extension or modifying the current terms. That dialogue provides a secondary regulatory pathway that could support operational continuity beyond January 2027 if the full licence process extends beyond that date.

The risk is not that Coringa stops producing in the near term. The risk is that an unresolved full licence limits the long-term production and resource delineation contribution Coringa can make to Phase 3 throughput growth. Both are interconnected: Phase 3 depends on a resource base that includes Coringa, and Coringa's resource delineation depends on the operational continuity that the full licence secures.

Hodgson addresses the permitting timeline:

"This year is going to be a year of positive news on permitting at Coringa, and I do think at that point the last lingering doubts over Coringa will hopefully be extinguished."

What to Watch Next in Serabi’s Plan

Serabi's three-phase roadmap is sequenced rather than parallel. The 4th ball mill addresses the plant constraint that has capped production for a decade. The 2025 to 2026 drilling program builds the resource inventory that justifies the next, larger throughput step. São Chico and additional satellites extend the production base at low incremental capital cost. The sequence is internally funded and, on current financial performance, does not depend on equity markets or new debt. Three near-term milestones will indicate whether the sequence is holding: the first-quarter 2026 consolidated resource update, which will show whether the Phase 2 inventory target is within reach; the 4th ball mill commissioning timeline, which determines when the Phase 1 production step-up materializes; and INCRA approval, which is the first of two external consents required before the January 2027 GUIA expiry. Coringa permitting remains the one variable the company cannot control, and it sits across the path of every phase that follows.

TL;DR

Serabi Gold has exited a decade of constrained production at the Palito Complex with a record 2025 output of 44,169 ounces, US$54.3 million in cash, and zero debt. A fourth ball mill, funded entirely from existing cash and using already-owned equipment, will lift processing capacity and drive a production step-up in the second half of 2026. Resource drilling through 2025 to 2026 is building toward the 1.5 to 1.6 million ounce consolidated inventory threshold that justifies the next throughput expansion. São Chico adds a low-capital production option at current gold prices. Coringa permitting, specifically INCRA and FUNAI approvals, remains the one variable outside management's control and carries consequences for every phase that follows.

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