Serabi Gold : Financial Results for Third Quarter 2016 and Management’s Discussion and Analysis

Unaudited Interim Financial Results for the three and nine month periods to 30 September 2016 and Management's Discussion and Analysis

Serabi Gold (AIM:SRB, TSX:SBI), the Brazilian focused gold mining and development company has reported record gold production for the third quarter of 2016 and Cash Costs of production for the year to date of US$772 per ounce. Today, the Company releases its unaudited interim financial results for the three and nine month periods ending 30 September 2016 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 NINE MONTHS ENDING 30 SEPTEMBER 2016

3 months to 30 Sept 2016 US$	9 months to 30 Sept 2016 US$	3 months to 30 Sept 2015(1) US$	9 months to 30 Sept 2015(1) US$
Revenue	16,209,753	42,120,928	8,365,289	27,043,682
Cost of Sales	(10,216,119)	(25,828,941)	(6,302,006)	(19,350,056)
Depreciation and amortisation charges		(2,907,161)	(6,552,101)	(871,576)	(3,603,810)
Gross profit		3,086,473	9,739,886	1,191,707	4,089,816
Profit before tax		743,503	2,305,731	114,176	191,073
Profit after tax		465,480	1,471,662	114,176	191,073
Earnings per ordinary share (basic)		0.11c	0.35c	0.02c	0.03c
Average gold price received	US$1,256	US$1,156
As at 30 Sept 2016	As at 31 Dec 2015
Cash and cash equivalents	3,116,123	2,191,759
Net assets	60,741,839	46,783,645
Cash Cost and All-In Sustaining Cost ("AISC")	9 months to	9 months to
30 Sept 2016	30 Sept 2015
Gold production for cash cost and AISC purposes	29,900(3)	22,720(2)(3)
Total Cash Cost of production (per ounce)	US$772	US$702
Total AISC of production (per ounce)	US$951	US$894

1. The Sao Chico Mine was only declared to be in Commercial Production with effect from 1 January 2016 and all costs and revenues relating to this mine were capitalised prio this date. The Income Statements for 2015 therefore only reflect the revenues and costs arising from the gold produced from the Palito Mine and the Cash Cost and AISC for 2015 comparative period therefore also only reflect the activities from the Palito Mine.

2. Excludes gold production of 1,984 ounces from the Sao Chico Mine which was not in commercial production during 2015.

3. 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.

   Key Operational Information

   SUMMARY PRODUCTION STATISTICS FOR THE THREE QUARTERS ENDING 30 SEPTEMBER 2016 (PALITO AND SAO CHICO)

   Quarter 1 2016	Quarter 2 2016	Quarter 3 2016	9 months 2016	9 months 2015
   Horizontal development	Metres	2,925	2,941	2,649	8,515	6,911
   Mined ore	Tonnes	37,546	33,606	43,133	114,285	101,888
   Gold grade (g/t)	11.02	9.56	9.61	10.06	10.07
   Milled ore	Tonnes	36,615	39,402	42,464	118,481	96,480
   Gold grade (g/t)	8.58	8.17	8.08	8.27	8.75
   Gold production (1)(2)	Ounces	9,771	9,896	10,233	29,900(1)	24,704

4. 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.

5. Gold production totals for 2016 include treatment of 13,227 tonnes of flotation tails

   Financial Highlights

   • Cash Cost for the year to date of US$772 per ounce.

   • All-In Sustaining Cost for the year to date of US$951 per ounce.

   • Gross profit from operations of US$9.74 million for the first nine months of 2016 which represents an improvement of 138 per cent compared to the same period in 2015.

   • Post tax profit of US$1.47 million compared with US$0.19 million for the same nine month period in 2015.

   • Earnings per share of 0.35 cents for the first nine months of 2016.

   • Cash holdings of US$3.12 million at 30 September 2016.

   • Average gold price of US$1,256 received on gold sales in the first nine months of 2016.

   • Negligible borrowings with secured debt facilities outstanding at 30 September of only US$1.4 million (30 June 2016: US$4.7 million)

     2016 Guidance

   • Forecast gold production for 2016 expected to be approximately 39,000 ounces.

   • The Company maintains its cost guidance for the full year of an All-In Sustaining Cost of US$950 to US$985 per ounce reflecting the continued strength of the Brazilian Real with has appreciated by 19 per cent since March 2016.

     Operational Highlights

   • Record quarterly gold production of 10,233 ounces for the third quarter of 2016 (Q2 2016 - 9,896 ounces).

   • Mine production totalled 43,133 tonnes, a 28 per cent increase over the preceding quarter. o 31,916 tonnes at a grade of 9.52 grammes per tonne ("g/t") of gold from Palito. o 11,217 tonnes at 9.88 g/t of gold from Sao Chico.

   • 42,464 tonnes of ore processed through the plant for the combined mining operations at an average grade of 8.27 g/t including the processing of low grade stockpiles.

   • 2,649 metres of horizontal mine development completed in the quarter with 1,607 metres completed at Palito and 1,042 metres at Sao Chico.

   • With the third ball mill operational from the end of the second quarter, along with a second flotation line and enhancements in the carbon in pulp ("CIP"),

• These plant enhancements have increased plant capacity from 380-400 tonnes per day ("tpd") to over 500 tpd. This additional capacity of approximately 100 tpd is being used to consume the surface stockpile as much as practicably possible.

• Work has commenced on the installation of a new carbon regeneration kiln which should be completed in the early part of the fourth quarter. The kiln will regenerate 'fouled' carbon and enhance gold recoveries.

• Sao Chico has now been deepened to the 86m level, some 150 vertical metres below surface. The ramp is continuing at a slower rate to the 71m level.

• During the third quarter, underground exploration drilling continued at both sites. At Sao Chico the first 17 holes of a 6,000 metre programme were completed. The programme is testing the continuity of the central ore-zone below the current deepest workings at 86m down to level -20m.

• At the end of the third quarter, the combined surface ore stockpiles at Palito and Sao Chico totalled 11,000 tonnes at an average grade of 3.3 g/t of gold.

Clive Line, CFO of Serabi commented,

"The third quarter has produced another satisfying result, both operationally and financially. Gold production of 10,233 ounces was another successive record quarter being a three per cent improvement on the preceding quarter. Record levels of mined and milled tonnages were also achieved in the quarter. Gross profit from operations has improved quarter on quarter and the pre-tax profit of US$743,000 is a significant improvement over the preceding quarter. At the same time, we continue to strengthen the balance sheet and pay down debt reflected in the improvement in the current asset position of the Company.

"During the third quarter we have changed customer for our copper/gold concentrate production. This change has brought with it improved payment terms but under IFRS, it has also accelerated the date on which the sale of a consignment copper/gold concentrate occurs. As a result, the third quarter results have benefitted from the recognition of a one-off additional sale, together with the associated production costs, of 160 tonnes of concentrate being recognised in the quarter. This also reflected in the balance sheet as the production costs of this 160 tonne shipment are no longer carried as inventory (valued at the cost of production) as they would have been in preceding periods, but as a receivable for the sales value of the shipment.

"The balance sheet has also been strengthened by the retirement in the quarter of approximately US$3.33 million of debt. We continue to repay the US$8 million debt facility from Sprott Resource Lending Partnership which as at the end of October 2016 has been reduced to approximately US$1.0 million. In addition, the financial position has been improved through the conversion, by Fratelli Investment Limited, of its US$2 million convertible loan which occurred during August 2016.

"The cash position is slightly lower than at the end of June 2016, but this reflects the settlement for this 160 tonnes shipment of concentrate that left Brazil at the end of September for which payment only occurred in the first few days of the following month. The change in customer has eliminated the need for the US$7.5 million short term trade finance arrangements that the Company has had in place for some three years which financed the concentrate sales for approximately four months prior to any initial settlement being received from the smelter. This change is therefore expected to bring significant savings in finance costs in the future.

"Whilst our costs, in local currency terms, continue to be relatively steady, the Brazilian economy and therefore the Brazilian Real have continued to benefit from high inward investment flows, supplemented by tax inflows from previously undeclared foreign income and investment holdings that have been stimulated by a short-term amnesty. These inward flows have continued to support the currency, though with the amnesty coming to an end, there has been some recent weakening. We continue to evaluate all opportunities to improve our cost base and improve gold recovery to maintain and improve margins."

SERABI GOLD PLC Condensed Consolidated Statements of Comprehensive Income

For the three months ended 30 September

For the nine months ended 30 September

(expressed in US$)	Notes	2016 (unaudited)	2015 (unaudited)	2016 (unaudited)	2015 (unaudited)
CONTINUING OPERATIONS
Revenue	16,209,753	8,365,289	42,120,928	27,043,682
Operating expenses	(10,216,119)	(6,302,006)	(25,828,941)	(19,350,056)
Depreciation of plant and equipment	(2,907,161)	(871,576)	(6,552,101)	(3,603,810)
Gross profit	3,086,473	1,191,707	9,739,886	4,089,816
Administration expenses	(1,267,898)	(871,153)	(3,812,218)	(3,024,671)
Share based payments	(101,072)	(101,019)	(249,828)	(303,056)
Gain on disposal of assets	2,070	-	29,039	-
Operating profit	1,719,573	219,535	5,706,879	762,089
Foreign exchange loss	(28,860)	(364,869)	(101,268)	(171,238)
Finance expense	3	(947,250)	(388,074)	(3,299,989)	(1,206,276)
Investment income	3	40	647,584	109	806,498
Profit before taxation	743,503	114,176	2,305,731	191,073
Income tax expense	(278,023)	-	(834,069)	-
Profit for the period from continuing operations (1) (2)	465,480	114,176	1,471,662	191,073

Other comprehensive income Items that may be reclassified subsequently to profit or loss

Exchange differences on translating foreign

operations
Total comprehensive loss for the period (2)	(122,834)	(11,881,793)	10,512,916	(20,992,229)

(588,314) (11,995,969) 9,041,254 (21,183,302)

Profit / (loss) per ordinary share (basic) (1)	4	0.11c	0.02c	0.35c	0.03c
Profit / (loss) per ordinary share (diluted) (1)	4	0.10c	0.01c	0.32c	0.02c

1. All revenue and expenses arise from continuing operations.

2. The Group has no non-controlling interests and all losses are attributable to the equity holders of the parent company.