For immediate release

27 September 2021

Serabi Gold plc

(“Serabi” or the “Company”)

Audited Results for the year ended 31 December 2020

Serabi (AIM:SRB, TSX:SBI), the Brazilian focused Gold mining and development company, today releases its audited results for the year ended 31 December 2020.

Key Financial Information

Financial Highlights

Post Year End Highlights

Update on Investigation into Unsubstantiated Payments

Clive Line, CFO of Serabi commented,

The Company produced a strong set of financial results for 2020, notwithstanding the many challenges that had to be faced over the year. With the successful completion of a share placing earlier in March 2021, raising gross proceeds of approximately UK£12.5 million and with continued good gold production combined with better than forecast gold prices and exchange rates, the Company is now in a very strong position and debt free.

Operating profit for 2020 (before finance and tax) of US$10.4 million represents an improvement of 24 per cent compared to 2019. EBITDA of US$15.52 million, whilst US$1.9 million lower than 2019, is also pleasing given that revenues were US$4.1 million lower for the year. Considering that gold production for the year was 22 per cent lower than in 2019, a consequence of the necessary actions we took to safeguard the workforce during the second and third quarters on 2020, I feel that this is an exceptional result.

During the year approximately US$11.6 million of cash flow was generated by the mining operations (after mine development capital), which compares with US$14.0 million in the preceding year. This broadly reflects the reduction in revenue of approximately US$4.1 million resulting from the lower level of gold sales in the year.

During the year, the balance sheet was improved through the repayment of the secured loan with Sprott in the first six months of 2020, totalling approximately US$7.0 million and settling US$6.5 million of the final acquisition payment for Coringa with Equinox Gold. In anticipation of the possibility that cash flow could be impacted during the year and in particular in light of the COVID-19 pandemic we did enter into a subscription agreement for convertible loan notes of up to US$12 million with Greenstone in April 2020. This was in part to ensure that the Group was able to meet its obligation to Equinox for Coringa. That we only needed to draw down US$2 million of the facility and were otherwise able to meet the monthly payment instalments from cash flow is very satisfying.

The proceeds of the March 2021 share placing allowed us to redeem the convertible notes and to settle the final balance due to Equinox.

Cash costs and All-In-Sustaining Costs have increased but this is a direct result of the lower levels of production. At the beginning of 2020 we had recruited additional personnel in readiness to accelerate development mining rates, which in turn would have resulted in increased gold production. Had we been able to match the 40,000 ounces of gold production achieved in 2019, I estimate that AISC would have been in the region of US$1,075 per ounce. When looking at our costs on a unit cost per tonne basis, we have seen a fairly flat profile over the last three years with annual mining costs ranging between US$120 to US$130 per tonne, process costs falling from US$39 per tonne in 2018 to US$29 per tonne in 2020 and other site costs declining slightly over the last three years to approximately US$28 per tonne. The production shortfall during 2020 was a direct consequence of labour reduction we had to make at site in the midst of the pandemic. With the reduced on-site workforce we had to reduce the number of mining faces significantly and lost optionality within the mining operation, which in turn negatively impacted grade and therefore production.

The Company has previously highlighted that revenue for the fourth quarter would be lower than in preceding periods as a result of lower levels of gold being sold in the period, a result of normal fluctuations in the timings of sales and gold stocks on hand. Subsequent to the period end the Group has finalised the pricing and the gold and metal content of four shipments of copper/gold concentrate that were sold during the third and fourth quarters of 2020. As advised in a news release issued on 1 April, the final agreed gold assay of the copper/gold concentrate these sales was lower than the provisional assay undertaken by the Palito laboratory and as a result the Group realised, during the first quarter of 2021, a revenue adjustment of approximately US$970,000. A smaller adjustment of approximately US$310,000 was realised in connection with the sales that were made during the fourth quarter where final pricing and agreement on the gold and metal content was made during the second quarter of 2021. As these adjustments related to sales undertaken during 2020 this adjustment has been reflected in the reported revenue for 2020.

Whilst it is normal for there to be variations between assays generated by the Palito laboratory and other laboratories these are normally within acceptable statistical tolerances. The Group has examined the reason for these specific variances which are of a level that had not been experienced in the past 6 years of operations. The sampling process when material arrives at the refinery is attended by a Group appointed independent observer and the final samples also subject to independent verification. The copper/gold concentrate is not a homogenous material, with each consignment being produced over a four to six week period. This gives rise to the potential for variances as a result of sampling processes and procedures and the Group has put in place additional procedures and controls to minimise the potential for future sampling variations to arise.

Following internal reviews and having eliminated the possibility of an error at the refinery and focussed on its own procedures and processes, management has concluded that these variances and in particular those arising on production and sales completed during the third quarter of 2020 were the result of human and equipment error during the early months of the pandemic and a number of inaccurate high assay readings had elevated the average grade of the material sold to the refinery Subsequently management have noted that the deviation in assays between production batches has reduced giving confidence that the potential for such material errors to arise in the future has been significantly reduced.

When we look back at 2020, I think all things considered it was a very satisfying year. The pandemic and reduction in personnel at the operation did mean a lot of non-essential activities had to be suspended, one of these was exploration. In addition, mine development could not continue at the rates we had budgeted. We simply had to ‘hunker down’ and keep the rest of the operation running as well as possible. We therefore consider producing over 75% of our budgeted ounces with what was a skeleton workforce for over half of the year as a very commendable result.

The pandemic did not adversely affect the plans for our development asset, Coringa, and we did make good progress in advancing the licensing process, with the award of the all-important Licença Prévia LP in October.

The investigation into the financial irregularities, whilst taking longer than I had originally hoped, has been very thorough and has looked back at transactions over a number of years. All businesses hope that their control processes are robust enough to prevent such events occurring but as this instance shows where there has been co-operation and collusion these events can be difficult to identify. With the assistance of Deloitte, we will have an Internal Audit function that will report directly to the Audit Committee and which I expect to prevent any recurrence of the situation that allowed these irregular expenditures to occur.

Chairman’s Statement

During 2020 Serabi was able to navigate successfully through one of the most challenging periods for mining and many other sectors of the economy. When we look back at 2020, in the years to come, I am sure we will realise that overcoming these challenges made us stronger and better prepared to achieve our future goals and take advantage of the opportunities that lie in front of us.

The mining sector has in general been quite resilient and unlike many business sectors we can be grateful that a market for our products has continued to be available and certainly the gold market, as is often the case in times of uncertainty, reacted strongly over the past year, posting a new record high of US$2,061 per ounce in August 2020 and ending the year at US$1,891 per ounce, a 24 per cent increase compared with 31 December 2019 (US$1,523 per ounce).

As we look forward, Serabi is now well positioned and financed to deliver on its growth plans. Following a successful placing of new shares completed in March 2021, raising gross proceeds of approximately £12.5 million, the Company now has a strong and debt free balance sheet. At the same time, we have attracted a number of new institutional investors to the share register, reflecting the Group’s ability to deliver its current plans and its opportunities for further growth. The initial development of the Coringa project is now underway in anticipation of first gold being produced during 2023, whilst simultaneously, the Company also now has the funding available to continue its exploration programmes and develop some of the very exciting resource growth opportunities that exist within its Palito Complex land tenement.

As was reported during 2020, Serabi’s own operations were quite significantly impacted by the pandemic and I am grateful to the efforts of our staff and management who ensured the Palito Complex continued to operate, uninterrupted throughout. Rapid action to lockdown the mine site allowed the creation of a working environment for our personnel who essentially lived and worked in a safe bubble whilst longer term solutions were developed and implemented. This approach was not without its hardships and my thanks go out to all the staff who volunteered to remain at site, continued working and did not return to their homes for many weeks. Without their sacrifice and commitment, management would, in all likelihood, have had to place the operation onto care and maintenance with all the costs and logistical implications that this might have entailed.

Having had such an excellent year in 2019, Serabi’s management were rightly optimistic about the prospects for 2020. A planned public hearing for the Coringa project had been set to take place in February 2020, potentially opening up the opportunity to progress the licensing of that project, and the ore-sorter had been installed and initial commissioning tests completed putting the Company in a strong position to improve gold production. Whilst a mill breakdown early in the first quarter was a minor setback, March 2020 was a record month for production. However, it was clear during the latter part of March that action was needed to protect the operations and our staff from the continued spread of COVID-19 across the globe. Now, more than ever, was the time to prioritise the safety and preservation of the welfare and lives of our employees. Personnel numbers at site were reduced, and contractors released to maximise the ability to establish social distancing in the workplace and minimise the possibility of any infection entering the camp. At the same time capital investment, exploration programmes and all other non-essential expenditures were temporarily suspended to conserve cash resources whilst management assessed the longer-term options.

Whilst Brazil was, for a long time, a centre of attention for COVID-19, it is now expected that all adults will have received at least one vaccine dose very soon, and we have noted only a very few cases of infection within our own staff. Whilst there remains caution, we now seem to have a path forward and we expect the lessons learned will help us become a stronger and more efficient company in the future. The need to simplify the mining operations in light of the reduced staffing and the lack of contractors to undertake drilling required for mine planning for over six months now necessitates a period of catch up with mine development and opening up additional working faces. This should re-establish the optionality that has been enjoyed over the past years, which has been the backbone of our success, and which should allow the deposits to continue to prosper for many years to come. Both underground and surface drilling contractors returned to site during the fourth quarter of 2020, and we now have two underground rigs operating at each of Palito and São Chico with two surface drilling rigs also involved in a drill programme for near mine planning purposes. We also have taken on additional mine crews to increase the rate of development mining and, in so doing, make up for the activity lost during 2020.

Whilst the pandemic has limited the opportunities to interact with the local communities we have continued to try and provide support through this difficult time. Our ability to continue to foster and build on our good relations with the neighbouring communities is important to us and we have continued to support projects to enhance the lives of the local populations from drilling new wells for water, providing street lighting and helping with new sports facilities for the school. During this third quarter of 2021, we have also been working in partnership with the City of Itaituba and the public health department to organise and facilitate vaccination programmes for the local communities and for our own personnel.

We had harboured high hopes of exploration success during 2020 and building on the exciting work that had been completed in the preceding 18 months. Organic growth from the development of our very promising land holding in the Tapajos is a key element of our growth aspirations. The Tapajos region remains one of the great unexplored gold fields of the world and, having been present in the region for many years, we have a significant first mover advantage as the only hard-rock gold mining operation in the area. While the exploration programme was curtailed in 2020, activity re-started in the fourth quarter of 2020 and have already reported some very encouraging results from the work completed so far in 2021 and I hope that we will continue to deliver positive news during the rest of the year.

The acquisition of the São Domingo tenements, in the latter part of 2020, provides another excellent opportunity for identifying further satellite deposits and initial exploration drilling produced some extremely encouraging results and further follow up work is planned during the remainder of 2021. Exploration work has already been undertaken and will continue over several other key prospects within the Palito Complex tenement and around São Chico. During the remainder of the year programmes will cover the Cinderella zone near São Chico, testing of the extensions of the Palito deposit to the south west where an eight-kilometre trend has been identified and parts of the large Mata Cobra anomaly that bisects the Palito Complex tenement holdings and could host lower grade but bulk mineable mineral opportunities We have set ourselves a target of identifying a resource of at least two million ounces in our tenement holdings over the coming years. With the level of historic artisanal activity in the region, we remain confident that there are significant undiscovered hard rock resources which underlie the reported 20 to 30 million ounces of gold that have been extracted by artisanal miners across the Tapajos region.

The Coringa project remains, in the near term, the clear production growth opportunity for Serabi. The licencing process was delayed by the pandemic and, following a supportive public hearing in February 2020, it was not until the end of September 2020 that the State Environmental Council of Para (“COEMA”) was able to meet to consider and approve the award of the Licença Previa (“Preliminary Licence” or “LP”). The LP represents the first of a three-stage licencing process required for mining projects in Brazil. The second stage is the award of an Installation Licence (“LI”) which allows processing plant and other infrastructure to be constructed and following completion of the construction stage, the issue of the full Operating Licence (“LO”) is the final stage in the licensing process. The LP is generally considered the most critical stage as it involves input and approval from a number of interested government agencies as well as local stakeholders, communities and includes consideration of the social, environmental and economic impacts and benefits of the project. We are already well advanced with the submissions required for the LI and in discussion with lenders and other financing groups to secure the balance of the funding required to complete the development of the project.

Coringa will, once in full production, double the existing production and more importantly, as it is not expected to add significantly to the fixed cost base, will provide a reduction in the All-In Sustaining Cost (“AISC”) by spreading these fixed costs over a larger production base. With Coringa in production and the benefits of the ore-sorter being realised there is a clear path to getting very close to annual production of 100,000 ounces of gold over the next couple of years.

The Board sees significant future value in Serabi and a huge potential to grow its gold mining activities in Brazil. Serabi has demonstrated a solid track record over the past years of operating underground vein mines and built an experienced and skilled operational team. Its unique skills and opportunities have attracted a group of professional and sophisticated investors that also understand the opportunity that the Group presents for the future.

The publication of the Company’s Annual Report and Accounts for the year ended 31 December 2020 (“2020 Annual report”), was delayed as a result of the identification and subsequent enquiries into the nature of unexplained cash withdrawals made from the Group’s Brazilian subsidiary Serabi Mineracão SA (“SMSA”). The Company initially engaged its legal advisers in Brazil (“FFA”) to undertake enquiries into these transactions and, following the presentation of their initial findings, subsequently engaged the services of the Forensic Investigations group of Deloitte Touche Tohmatsu Consultores Ltda in Brazil (“Deloitte”) The enquiries made by FFA and Deloitte of the accounting and banking records of SMSA, identified a total of approximately US$349,000 of cash that had been withdrawn from SMSA over a period between January 2015 and December 2020. Deloitte have also completed a review of all other electronic and physical records including electronic communications and have not identified any further instances of irregular cash withdrawals. The Company confirms that all the identified cash withdrawals were recorded through the accounts of SMSA and expensed in the period in which they were incurred. The enquiries undertaken on behalf of the Company did not identify direct evidence of improper payments occurring within the scope of licencing and/or payments to obtain benefits in connection with public agencies. However, notwithstanding that the Board consider that all reasonable and practicable steps have been taken at this time, based on the conclusions of the enquiries, the Board is unable to definitively conclude on the precise nature of the payments made. The enquiries also identified a number of other potential irregularities relating to expense claims and travel and other expense advances made to some Brazilian based members of staff during the same period. It has been identified that these advances have been expensed through the Group’s Income Statement in each of the relevant years. However, analysis indicates that no claims for reimbursement of expenses were ever submitted for these advances, and it would appear therefore that, in the absence of documented expense claims, these advances which over the period from January 2016 to March 2021 totalled approximately US$510,000 remain due to be repaid to SMSA. In addition, the enquiries identified claims for reimbursement of expenses submitted by certain members of staff in Brazil that lacked appropriate and adequate supporting documentation or were not necessarily of a nature that appeared business related. The total value of such expenses over the period 1 January 2015 to 31 March 2021 was approximately US$904,000. All these costs have been expensed through the Group’s Income Statement in each of the relevant years. In respect of the advances that remain due to be repaid and the claims for expenses, no direct evidence has been identified of improper payments occurring within the scope of licencing and/or payments to obtain benefits in connection with public agencies. Management have made certain changes to the Group’s control procedures for the processing of bank payments, advances to staff and the reimbursement of out-of-pocket expenses and is working with Deloitte to establish an internal audit function reporting directly to the Audit Committee to improve the overall internal control environment.

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Serabi is committed to developing its Coringa project and building new opportunities from its exploration ground. Growth will broaden the Company’s appeal, widen its investor base and in so doing address the valuation gap that we see compared with small producers operating elsewhere in the world. However, whilst we have hopes of identifying opportunities that might be suitable for open-pit mining, we recognise that in the near-term new discoveries will generally be high grade vein deposits similar to Palito, São Chico and Coringa. Whilst Serabi has demonstrated its credentials in developing underground mining, future production growth should also present a diversification of technical risk to broaden investor appeal. For this reason, we continue to see carefully selected M&A as important for the future of the Company. With its strong operating credentials and team, Serabi is well placed to part of any consolidation of the best gold mining opportunities in Brazil, a situation that the Board and management of the Company considers would serve the interests of all stakeholders, through risk diversification, broadening of the capital base, economies of scale and opening up the financing opportunities for new developments.

Nicolas Banãdos

Chairman

Serabi’s Directors Report and Financial Statements for the year ended 31 December 2020 together the Chairman’s Statement will be available from the Company’s website – www.serabigold.com and will be posted 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 the release of this statement on behalf of the Company was Clive Line, Director.

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 following information, comprising, the Income Statement, the Group Balance Sheet, Group Statement of Changes in Shareholders’ Equity, and Group Cash Flow, is extracted from these financial statements.

Annual Report

The Annual Report has been published by the Company on its website at www.serabigold.com and printed copies are expected to be available before 31 October 2021. Additional copies will be available to the public, free of charge, from the Company’s offices at The Long Barn, Cobham Park Road, Downside, Surrey, KT11 3NE and will be available to download from the Company’s website at www.serabigold.com.

The data included in the selected annual information tables below is taken from the Company’s annual audited financial statements for the year ended 31 December 2020, which were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The Parent Company financial statements have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under International Financial Reporting Standards (“IFRS”)..

The audited financial statements for the year ended 31 December 2020 will be presented to shareholders for adoption at the next General Meeting of the Company’s shareholders and filed with the Registrar of Companies.

Statement of Comprehensive Income

For the year ended 31 December 2020

(1)         The Group has no non-controlling interests and all profits are attributable to the equity holders of the parent company.

Balance Sheet as at 31 December 2020

Statements of Changes in Shareholders’ Equity

For the year ended 31 December 2020

Other reserves comprise a merger reserve of US$361,461 and a taxation reserve of US$9,892,587 (2019: merger reserve of US$361,461 and taxation reserve of US$6,787,813)

Cash Flow Statement

For the year ended 31 December 2020