Serabi Gold : Financial Results for Second Quarter 2017 and Management’s Discussion and Analysis

Unaudited Interim Financial Results for the three and six month periods to 30 June 2017 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 and six month periods ending 30 June 2017 and at the same time has published its Management's Discussion and Analysis for the same period. Key Financial Information SUMMARY FINANCIAL STATISTICS FOR THE THREE AND SIX MONTHS ENDING 30 JUNE 2017

3 months to 30 June 2017 US$	6 months to 30 June 2017 US$	3 months to 30 June 2016 US$	6 months to 30 June 2016 US$
Revenue	10,142,676	23,316,260	14,232,086	25,911,175
Cost of Sales	(6,849,960)	(16,862,310)	(8,923,316)	(15,612,822)
Depreciation and amortisation charges		(2,710,157)	(4,610,861)	(2,428,213)	(3,644,940)
Gross profit		582,559	1,843,089	2,880,557	6,653,413
Profit / (loss) before tax		(794,176)	(827,667)	60,924	1,562,228
Profit after tax		(891,637)	(1,005,680)	(341,483)	1,006,182
Earnings per ordinary share (basic)		(0.13c)	(0.15c)	(0.05c)	0.15c
Average gold price received	US$1,221	US$1,216
As at 30 June 2017	As at 31 Dec 2016
Cash and cash equivalents	3,832,218	4,160,923
Net assets	61,894,630	63,378,973
Cash Cost and All-In Sustaining Cost ("AISC")	6 months to	6 months to
30 June 2017	30 June 2016
Gold production for cash cost and AISC purposes		18,009	19,667
Total Cash Cost of production (per ounce)	US$819	US$763
Total AISC of production (per ounce)	US$1,072	US$945

Key Operational Information

Quarter 1	Quarter 2	Year to Date	Quarter 1	Quarter 2	Quarter 3	Quarter 4
2017	2017	2017	2016	2016	2016	2016
Metres	2,251	1,855	4,106	2,925	2,941	2,649	2,694

SUMMARY PRODUCTION STATISTICS FOR THE TWO QUARTERS TO 30 JUNE 2017

Total

Horizontal development - Total

2016

11,209

36,918	42,075	78,993	37,546	33,606	43,133	44,579	158,864
10.12	7.80	8.89	11.02	9.56	9.61	8.94	9.74

Mined ore - Total Tonnes Gold grade (g/t)

46,663	43,905	90,568	36,615	39,402	42,464	40,485	158,966
7.09	6.26	6.69	8.58	8.17	8.08	7.60	8.11
9,861	8,148	18,009	9,771	9,896	10,310	9,413	39,390

Milled ore Tonnes Gold grade (g/t)

Gold production (1) (2) Ounces

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 refineries.

2. Gold production totals for the first six months of 2017 include treatment of 4,042 tonnes of flotation tails

   Financial Highlights

   • Cash Cost for the year to date of US$819.

   • All-In Sustaining Cost for the year to date of US$1,072.

   • Temporary operational issues in Q2 2017, which have now been fully resolved, restricted production and, in combination with a strengthening Brazilian Real, impacted financial results for the first half of the year.

   • Gross profit from operations for the first six months of 2017 of US$1.84 million.

   • Loss per share of 0.15 cents for the first six months of 2017.

   • Cash holdings of US$3.83 million at 30 June 2017.

   • The Company has entered into a new US$5 million facility with Sprott Resource Lending Partnership for a term expiring on 31 December 2019.

   • Average gold price of US$1,221 received on gold sales in the first six months of 2016.

     2017 Guidance

   • Serabi remains on track to meet forecast gold production for 2017 of approximately 40,000 ounces at an All-In Sustaining Cost of US$950 to US$975 per ounce.

     Operational Highlights

   • Second quarter production of 8,148 ounces of gold.

   • Mine production totalled 42,075 tonnes at 7.80 grammes per tonne ("g/t") of gold.

   • 43,905 tonnes processed through the plant for the combined mining operations, with an average grade of 6.26 g/t of gold.

   • 1,855 metres of horizontal mine development completed in the quarter.

   • At the Palito sector, expansion of working areas continues, with development and production now coming from eight veins from the 25 included in the geological resource. The main ramp has now reached the -50 metre relative level ("mRL"), with the G3 vein intersected, the deepest working area in the deposit. To date grades have been very encouraging.

   • At the Sao Chico sector, the main ramp has now been deepened to the 40mRL, approximately 200 vertical metres below surface. Production is coming from the 140mRL and 128mRL levels with levels 116mRL, 100mRL, 86mRL, 70mRL, 56mRL and with the 40mRL now being developed, development remains well ahead of production.

   • By the end of the second quarter, surface ore stocks were approximately 12,000 tonnes (31 March 2017: 13,000 tonnes) with an average grade of 3.15 g/t of gold.

   • SRK Ltd hired to commence a new 43-101 Technical Report on the property, hopefully to be issued early Q4, 2017.

Mike Hodgson, CEO of Serabi commented,

"As I noted in the Company's announcement of its second quarter production, the Company has achieved mid-year production of over 18,000 ounces of gold and I remain very satisfied with the production results for the year to date and the prospects for the rest of the year.

"The operational issues that we encountered and restricted gold production in April and May, are now fully resolved, and June and July has seen production levels return to those levels that we achieved through much of 2016 and during the first quarter of 2017. Furthermore, the month of July was the highest monthly production for the year to date and I remain confident that we can recover shortfall over the remainder of the year and will be able to meet our full year production guidance of 40,000 ounces.

"Nonetheless, in the short term, the production shortfalls during that six week period have impacted on our financial results for the second quarter of the year. Whilst at the operating level the Company has reported a gross profit of approximately US$580,000 and a gross profit to date of US$1.8 million, revenue is probably some US$2 million lower than we might have expected had production in the second quarter mirrored that of the first quarter of 2017. That being said, if, I as I expect, we recover this lost production through the second half of the year, we should recover the lost revenue and cash flow with relatively low increase in operating cost and therefore see a stronger financial performance in the second half of the year.

"The results when compared against 2016 have also been adversely affected by the relative strength of the Brazilian Real. The average rate for the first six months of 2017 is 14 per cent stronger than for the same period in 2016 which has the effect of increasing operating costs when reported in US Dollars. In fact, when looked at in local currency terms, our operating costs are in fact tracking slightly lower than in 2016 notwithstanding that the mined and processed ore tonnages have been higher in the first six months of 2017 than for the same six months period in 2016.

"Our cash balances remain relatively strong but again the production shortfalls have not allowed us to build up our cash balances to the extent that we had hoped although considering timing differences of sales receipts, particularly in relation to sales of concentrate, the cash position is approximately US$1 million better than at the start of the year.

"The Company has, at the period end, taken out a new working capital loan facility with Sprott Resource Lending Partnership of US$5 million which is for a 30 month period. The new funding from this was not, however, received until early July so is not reflected in our cash holdings as at 30 June 2017. This loan funding will allow the Company to expedite some of its capital investment programmes that it feels will improve operations and bring costs efficiencies in the medium term and thus reduce unit production costs.

"Some of the areas of investment focus on improving the quality of the mill feed. This includes a reduction in the size of the underground development drives and continuing the trials on ore sorting using x-ray technology to further eliminate waste and low grade ore in the mill feed before it enters the plant.

"Despite our success with narrow vein mining, development still produces high and unavoidable levels of low grade and waste material. This not only increases costs but this waste material consumes vital capacity within the process plant. Reducing the size of underground development galleries is now more of a reality with the availability of numerous suppliers manufacturing smaller units of equipment than were available when we re-opened Palito in 2013. The idea is to initially purchase two to three units for trial and, if successful, more to follow.

"These ore sorting initiatives are very exciting and, I feel, could bring a paradigm shift to vein mining in the region. We will seek to reduce as much dilution as we can in the mining process, but inevitably cannot remove all of it. If ore sorting can be successfully introduced the ramifications are very significant, with the potential to reduce feed tonnage and concurrently increase the grade of the ore delivered to the process plant."

SERABI GOLD PLC Condensed Consolidated Statements of Comprehensive Income

For the three months ended 30 June

For the six months ended 30 June

(expressed in US$)	Notes	2017 (unaudited)	2016 (unaudited)	2017 (unaudited)	2016 (unaudited)
CONTINUING OPERATIONS Revenue	10,142,676	14,232,086	23,316,260	25,911,175
Cost of sales	(6,849,960)	(8,923,316)	(16,642,310)	(15,612,822)
Provision for Impairment of Inventory	-	-	(220,000)	-
Depreciation of plant and equipment	(2,710,157)	(2,428,213)	(4,610,861)	(3,644,940)
Gross profit	582,559	2,880,557	1,843,089	6,653,413
Administration expenses	(1,178,903)	(1,412,120)	(2,420,358)	(2,544,320)
Share based payments	(112,412)	(25,640)	(178,032)	(148,756)
Gain on disposal of assets	115,975	24,401	115,975	26,969
Operating profit	(592,781)	1,467,198	(639,326)	3,987,306
Foreign exchange loss	(167,236)	(31,609)	(120,399)	(72,408)
Finance expense	(34,194)	(1,374,699)	(68,011)	(2,352,739)
Finance income	35	34	69	69
(Loss) / profit before taxation	(794,176)	60,924	(827,667)	1,562,228
Income tax expense	(97,461)	(402,407)	(178,013)	(556,046)
(Loss) / profit for the period from continuing operations (1) (2)	(891,637)	(341,483)	(1,005,680)	1,006,182

Other comprehensive income (net of tax) Items that may be reclassified subsequently to profit or loss

(2,124,542)	5,349,439	(656,695)	9,629,568
(3,016,179)	5,017,956	(1,662,375)	10,635,750

Exchange differences on translating foreign operations

Total comprehensive income/(loss) for the period (2)

(Loss) / profit per ordinary share (basic) (1)	3	(0.13c)	(0.05c)	(0.15c)	0.15c
(Loss) / profit per ordinary share (diluted) (1)	3	(0.13c)	(0.05c)	(0.15c)	0.14c

(1) All revenue and expenses arise from continuing operations.