1st Quarter Results

For immediate release

15 May 2019

Serabi Gold Plc
(“Serabi” or the “Company”)
Unaudited Interim Financial Results for the three month period to 31 March 2019 and Management’s Discussion and Analysis

Serabi Gold (AIM:SRB, TSX:SBI), the Brazilian focused gold mining and development company, today releases its unaudited interim financial results for the three month period ending 31 March 2019 and at the same time has published its Management’s Discussion and Analysis for the same period.

Key Financial Information

Key Operational Information

1. Gold production figures are subject to amendment pending final agreed assays of the gold content of the copper/gold concentrate and gold doré that is delivered to the refineries.
2. Gold production totals for 2019 include treatment of 3,136 tonnes of flotation tails at a grade of 4.00 g/t (2018 full year: 16,466 tonnes at 3.71g/t).
3. The table may not sum due to rounding.

FINANCIAL HIGHLIGHTS

• EBITDA for the first quarter of U$4.3 million up 47% on the same quarter in 2018
• Profit after tax of US$1.5 million with earnings per share of 2.63 cents.
• Cash holdings at the end of March 2019 of US$12.1 million an increase of US$2.9 million since the end of 2018.
• AISC for the quarter of US$1,021 per ounce with a Cash Cost of US$796 per ounce.
• Operational cash flow for the period of US$6.5 million (US$5.7 million after mine development costs), compared with US$3.1 million (US$2.1 million after mine development costs) for the same period in 2018.

OPERATIONAL and DEVELOPMENT HIGHLIGHTS

• First quarter gold production of 10,164 ounces of gold, maintaining the momentum from the end of 2018.
• Second successive quarter of production above 10,000 ounces for the first time.
• Mine tonnage totalled 42,609 tonnes at 7.47 grams per tonne (“g/t”) of gold.
• 43,451 tonnes of run of mine (“ROM”) ore were processed through the plant from the combined Palito and Sao Chico orebodies, with an average grade of 7.69 g/t of gold.
• 1,868 metres of horizontal development completed during the quarter.
• Completion and announcement of the Company’s updated mineral resource estimate for its Coringa gold project (“Coringa”):
  • the new mineral resource estimate represents a 37% increase over the previously disclosed estimation (as of May 3, 2017).
  • an Indicated Resource for Coringa of 216,000 ounces of contained gold (845,000 tonnes at an average in-situ grade of 7.95 g/t).
  • an additional Inferred Resource of 298,000 ounces of contained gold (1,436,000 tonnes at an average in-situ grade of 6.46 g/t).
• Production guidance for 2019 is maintained in the range of 40,000-44,000 ounces representing a significant improvement on 2018 production of 37,108 ounces.

Mike Hodgson, CEO of Serabi commented:

“The last two quarters have been excellent from an operational perspective and represent the first occasion that the Company’s operations have achieved two successive quarters with gold production in excess of 10,000 ounces. These financials results reflect the operational improvements that we have enjoyed with revenue, profit and cash generation all having significantly improved over the same quarter in 2018.

“Most pleasing, however, is to see a reduction in the unit costs of production, with a reported AISC of US$1,021 compared with US$1,166 for the same quarter in 2018 and an average AISC for the 2018 calendar year of US$1,093. Given the nature of the operations, Serabi has a fairly fixed level of monthly costs, in the form of labour, power and consumable costs. With the mine and plant producing and processing broadly consistent tonnages of ore, the key to profitability is maximising the grade of the ore mined and processed. Whilst the improvements in the last 6 months to the processed grade have been relatively small, the benefits have been quite significant.

“The financial results for the first quarter have benefitted from the high level of gold inventory held at the end of 2018 and which was sold during the quarter. A total of 12,309 ounces were sold during the period compared with production of 10,164 ounces and with inventory levels now back to more normal levels we would expect sales and production volumes to more closely track each other over the rest of the year.

“Net cash generated in the period was slightly less than US$3.0 million after taking account of mine development, exploration and other capital expenditure but again has been helped by the delayed sales carried over from the end of 2018. Provided the Company can maintain the current levels of production, I am confident that we can maintain a good cash flow for the rest of the year. The Company’s cash holdings as at 31 March 2019 were US$12.2 million.

“We are being helped by a strong gold price when looked at in Brazilian Reais, and with so much of our cost base incurred in Brazil this is the true indicator of our margin and profitability. Following the election of Jair Bolsonaro as president in November 2018, many, myself included, saw the potential for the Real to strengthen as he pursued public spending reforms and implemented business friendly policies to promote growth. To date however the exchange rate has remained in the range of BrR$3.80 to US$1.00 and the gold price in Brazilian Reais has averaged BrR$4,850 for the quarter compared with BrR$4,264 for the same period in 2018 and BrR$4,600 for the 2018 calendar year.”

A video update by Mike Hodgson on current operations can be accessed using the following link

https://www.brrmedia.co.uk/broadcasts-embed/5cda93c79ebae53e0fb331a6/serabi-gold-palito-update?popup=true

Serabi Gold Plc
Condensed Consolidated Statements of Comprehensive Income

(1) All revenue and expenses arise from continuing operations.
(2) On 19 June 2018, the Group completed a capital reorganisation with every 20 existing shares being consolidated into one new share. The total number of existing ordinary shares in issue immediately prior to the capital reorganisation was 1,175,281,440. The total number of ordinary shares in issue following the capital reorganisation was 58,764,072. For comparative purpose the weighted average ordinary shares in issue and the diluted ordinary shares in issue for the three month period ended 31 March 2018, has been adjusted to reflect the share consolidation of 20 existing shares into one new share.

Serabi Gold Plc
Condensed Consolidated Balance Sheets

The interim financial information has not been audited and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. Whilst the financial information included in this announcement has been compiled in accordance with International Financial Reporting Standards (“IFRS”) this announcement itself does not contain sufficient financial information to comply with IFRS. The Group statutory accounts for the year ended 31 December 2018 prepared under IFRS as adopted in the EU and with IFRS and their interpretations adopted by the International Accounting Standards Board will be filed with the Registrar of Companies following their adoption by shareholders at the next Annual General Meeting. The auditor’s report on these accounts was unqualified. The auditor’s report did not contain a statement under Section 498 (2) or 498 (3) of the Companies Act 2006.

Serabi Gold Plc
Condensed Consolidated Statements of Changes in Shareholders’ Equity

1. Other reserves comprise a merger reserve of US$361,461 and a taxation reserve of US$4,575,958 (31 December 2018: merger reserve of US$361,461 and a taxation reserve of US$4,402,358).

Serabi Gold Plc
Condensed Consolidated Cash Flow Statements

Notes

1. Basis of preparation
These interim condensed consolidated financial statements are for the three month period ended 31 March 2019. Comparative information has been provided for the unaudited three month period ended 31 March 2018 and, where applicable, the audited twelve month period from 1 January 2018 to 31 December 2018. These condensed consolidated financial statements do not include all the disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2018 annual report.
The condensed consolidated financial statements for the periods have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” and the accounting policies are consistent with those of the annual financial statements for the year ended 31 December 2018 and those envisaged for the financial statements for the year ending 31 December 2019.

Accounting standards, amendments and interpretations effective in 2019
The Group has not adopted any standards or interpretations in advance of the required implementation dates.
As of 1 January 2019, IFRS “16 Leases”, became effective and requires lessees to recognise all lease assets and liabilities on the balance sheet for both finance leases and operating leases. The adoption of IFRS 16 has not had any significant impact on the Group’s financial statements as the operating leases held by the Group are of low value and the majority of the existing contracts either relate to service agreements or otherwise do not result in right of use assets or lease liabilities.

These financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

1. Going concern

As at 31 March 2019 the Group had cash in hand of US$12.1 million and net assets of US$70.2 million. The Directors have reviewed the forecast cash flow of the Group for the next 12 months. Based on this forecast, which includes planned capital and exploration programmes, the Group may not be able to generate sufficient cash flows to settle, in full, the deferred consideration of US$12 million payable for the acquisition of Coringa which falls due in December 2019.

The Directors believe there is a reasonable prospect of the Group securing further funds as and when required in order that the Group can meet all liabilities including the deferred consideration payable for the acquisition of Coringa as and when they fall due in the next 12 months and have prepared the financial statements on a going concern basis.

As at the date of this report the outcome of raising further funds remains uncertain and this represents a material uncertainty surrounding going concern. If the Group fails to raise the necessary funds the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. The matters explained indicate that a material uncertainty exists that may cast significant doubt on the Group and Parent’s ability to continue as a going concern. These financial statements do not show the adjustments to the assets and liabilities of the Group or the Parent company if this was to occur.

(ii) Use of estimates and judgements
There have been no material revisions to the nature and amount of changes in estimates of amounts reported in the 2018 annual financial statements.

(iii) Impairment

At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered impairment. Prior to carrying out of impairment reviews, the significant cash generating units are assessed to determine whether they should be reviewed under the requirements of IFRS 6 - Exploration for and Evaluation of Mineral Resources or IAS 36 - Impairment of Assets. Such determination is by reference to the stage of development of the project and the level of reliability and surety of information used in calculating value in use or fair value less costs to sell. Impairment reviews performed under IFRS 6 are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise; typically when one of the following circumstances applies:

(i) sufficient data exists that render the resource uneconomic and unlikely to be developed

(ii) title to the asset is compromised

(iii) budgeted or planned expenditure is not expected in the foreseeable future

(iv) insufficient discovery of commercially viable resources leading to the discontinuation of activities

Impairment reviews performed under IAS 36 are carried out when there is an indication that the carrying value may be impaired. Such key indicators (though not exhaustive) to the industry include:

(i) a significant deterioration in the spot price of gold

(ii) a significant increase in production costs

(iii) a significant revision to, and reduction in, the life of mine plan

If any indication of impairment exists, the recoverable amount of the asset is estimated, being the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Such impairment losses are recognised in profit or loss for the year.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss for the year.

2. Finance Costs

3. Taxation

The Group has recognised a deferred tax asset to the extent that the Group has reasonable certainty as to the level and timing of future profits that might be generated and against which the asset may be recovered. The Group has released the amount of US$145,012 as a deferred tax charge during the three month period to 31 March 2019.

The Group has also incurred a tax charge for the period in Brazil of US$68,367.

4. Earnings per share

(1) On 19 June 2018, the Group completed a capital reorganisation with every 20 existing shares being consolidated into one new share. For comparative purpose the weighted average ordinary shares in issue and the diluted ordinary shares in issue for the three month period ended 31 March 2018, has been adjusted to reflect the share consolidation of 20 existing shares being consolidated into one new share.

Enquiries:

Copies of this announcement are available from the Company's website at www.serabigold.com.

Neither the Toronto Stock Exchange, nor any other securities regulatory authority, has approved or disapproved of the contents of this announcement.

The Company will, in compliance with Canadian regulatory requirements, post the Unaudited Interim Financial Statements and the Management Discussion and Analysis for the three month period ended 31 March 2019 on SEDAR at www.sedar.com. These documents will also available from the Company’s website – www.serabigold.com.

Serabi’s Directors Report and Financial Statements for the year ended 31 December 2018 together the Chairman’s Statement and the Management Discussion and Analysis, are available from the Company’s website – www.serabigold.com and on SEDAR at www.sedar.com.

This announcement is inside information for the purposes of Article 7 of Regulation 596/2014. The person who arranged for the release of this announcement on behalf of the Company was Clive Line, Director.

GLOSSARY OF TERMS
The following is a glossary of technical terms:
“Au” means gold.
“assay” in economic geology, means to analyse the proportions of metal in a rock or overburden sample; to test an ore or mineral for composition, purity, weight or other properties of commercial interest.
“development” - excavations used to establish access to the mineralised rock and other workings.
“doré – a semi-pure alloy of gold silver and other metals produced by the smelting process at a mine that will be subject to further refining.
“DNPM” is the Departamento Nacional de Produção Mineral.
“grade” is the concentration of mineral within the host rock typically quoted as grammes per tonne (g/t), parts per million (ppm) or parts per billion (ppb).
“g/t” means grammes per tonne.
“granodiorite” is an igneous intrusive rock similar to granite.
“igneous” is a rock that has solidified from molten material or magma.
“Intrusive” is a body of igneous rock that invades older rocks.
“on-lode development” - Development that is undertaken in and following the direction of the Vein.
“mRL” – depth in metres measured relative to a fixed point – in the case of Palito and Sao Chico this is sea-level. The mine entrance at Palito is at 250mRL.
“saprolite” is a weathered or decomposed clay‐rich rock.
“stoping blocks” – a discrete area of mineralised rock established for planning and scheduling purposes that will be mined using one of the various stoping methods.
“Vein” is a generic term to describe an occurrence of mineralised rock within an area of non-mineralised rock.

Qualified Persons Statement
The scientific and technical information contained within this announcement has been reviewed and approved by Michael Hodgson, a Director of the Company. Mr Hodgson is an Economic Geologist by training with over 26 years' experience in the mining industry. He holds a BSc (Hons) Geology, University of London, a MSc Mining Geology, University of Leicester and is a Fellow of the Institute of Materials, Minerals and Mining and a Chartered Engineer of the Engineering Council of UK, recognising him as both a Qualified Person for the purposes of Canadian National Instrument 43-101 and by the AIM Guidance Note on Mining and Oil & Gas Companies dated June 2009.

Forward Looking Statements
Certain statements in this announcement are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ‘‘believe’’, ‘‘could’’, “should” ‘‘envisage’’, ‘‘estimate’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘will’’ or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors. A number of factors could cause actual results to differ materially from the results discussed in the forward looking statements including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel, uninsured and underinsured losses and other factors, many of which are beyond the control of the Company. Although any forward looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements.

ENDS

Attachments

• Press Release - Q1 results 2019
• Q1 2019 Financial Statements