Serabi Gold plc : Unaudited Interim Financial Results and MD&A to 30 June 2017

For immediate release
14 August 2017

Serabi Gold plc
("Serabi" or the "Company")
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

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 dor?(C) that is delivered to the 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

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

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 2016 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 but did contain an Emphasis of Matter with respect to the Company and the Group regarding Going Concern.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$2,337,639 (31 December 2016: merger reserve of US$361,461 and a taxation reserve of US$2,690,401)

SERABI GOLD PLC
Condensed Consolidated Cash Flow Statements

Notes

1. General Information
The financial information set out above 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. A copy of the statutory accounts for 2016 has been filed with the Registrar of Companies following their adoption by shareholders at the last Annual General Meeting. The full audited financial statements, for the year end 31 December 2016, do comply with IFRS.

2. Basis of Preparation
These interim condensed consolidated financial statements are for the three and six month periods ended 30 June 2017. Comparative information has been provided for the unaudited three and six month periods ended 30 June 2016 and, where applicable, the audited twelve month period from 1 January 2016 to 31 December 2016. 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 2016 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 2016 and those envisaged for the financial statements for the year ending 31 December 2017. The Group has not adopted any standards or interpretation in advance of the required implementation dates.It is not anticipated that the adoption in the future of the new or revised standards or interpretations that have been issued by the International Accounting Standards Board will have a material impact on the Group's earnings or shareholders' funds.
These financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

1. Going concern

On 1 February 2016, the Group announced that, with effect from 1 January 2016, the Sao Chico Mine had achieved Commercial Production.The Palito Mine has been in Commercial Production since 1 July 2014.
The Directors anticipate the Group now has access to sufficient funding for its immediate projected needs.The Group expects to have sufficient cash flow from its forecast production to finance its on-going operational requirements, to repay its secured loan facilities and to, at least in part, fund exploration and development activity on its other gold properties. The secured loan facility was repayable by 31 August 2017 and at 31 June 2017, the amount outstanding under this facility was US$1.37 million (31 December 2016: US$1.37 million).On 30 June the Group completed a re-negotiation of an increased secured loan facility of US$5 million (including the existing loan to US$1.37 million).The new facility is repayable by 31 December 2019 and the incremental funds were received by the Company on 5 July 2017.
The Directors consider that the Group's operations are performing at the levels that they anticipate, but the Group remains a small scale gold producer with limited cash resources to support any unplanned interruption or reduction in gold production, unforeseen reductions in the gold price, or appreciation of the Brazilian currency, all of which could adversely affect the level of free cash flow that the Group can generate on a monthly basis.In the event that the Group is unable to generate sufficient free cash flow to meet its financial obligations as they fall due, or to allow it to finance exploration and development activity on its other gold properties, additional sources of finance may be required. Should additional working capital be required the Directors consider that further sources of finance could be secured within the required timescale.
On this basis, the Directors have therefore concluded that it is appropriate to prepare the financial statements on a going concern basis. However, there is no certainty that such additional funds either for working capital or for future development will be forthcoming and these conditions indicate the existence of a material uncertainty, which may cast significant doubt over the Group's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.The condensed consolidated financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

(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 2016 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.

3. Earnings per share

1. Assumes the exercise of 49,910,000 share options that were in issue but not necessarily vested as at 31 March 2017.
2. As the effect of dilution is to reduce the loss per share, the diluted loss per share is considered to be the same as the basic loss per share

4. Post balance sheet events

On 30 June 2017 the Company entered into a new secured loan agreement with Sprott Resource Lending Partnership for US$5.0 million (to include the amount of US$1.37 million outstanding as at that date), repayable on or before 31 December 2019.Whilst the documentation was signed on 30 June 2017, the additional funds were not send or received until 5 July 2017 and accordingly no liability for the increased level of the loan was recognized in these financial statements.
Other than as set out above between the end of the financial period and the date of this management discussion and analysis, there has been no item, transaction or event of a material or unusual nature likely, in the opinion of the Directors of the Group, to affect significantly the continuing operations of the entity, the results of these operations, or the state of affairs of the entity in future financial periods.

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 2017 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 2016 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.

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 toestablish access to the mineralised rock and other workings.
"dor?(C) - 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 Produ????o Mineral.
"grade" is the concentration of mineral within the host rock typically quoted as grams per tonne (g/t), parts per million (ppm) or parts per billion (ppb).
"g/t" means grams 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