Serabi shines brighter than the rest

There are plenty of junior gold companies out there, but very few look like Serabi Gold (SRB)…

With production rising, free cash flow building, and high-grade exploration results starting to flow, Serabi feels like a company just getting started.

A focused operator with big ambitions

Serabi is a Brazil-focused gold producer, operating two high-grade underground mines in the Tapajós region – part of the long-standing Palito Complex and the newer Coringa project. Combined, they’re expected to produce up to 47,000 ounces this year, with management aiming for 60,000 ounces by 2026 and a longer-term target of 100,000 ounces by 2028.

What makes Serabi’s strategy work is its tight operational focus. The mines are relatively small-scale, but they’re high margin and underpinned by strong geology. Instead of burning cash on big promises, Serabi is using its own operating cash flow to fund growth. Coringa, for instance, is already delivering ore while the company gradually ramps up development. Exploration is being handled in-house too, with rigs turning across 84,000 hectares of highly prospective land.

There’s a refreshing simplicity to the plan. Produce gold efficiently, reinvest profits to grow output, and explore smartly around known deposits. No grandstanding, no outlandish timelines, just steady, value-driven progress.

A business that prints cash

It’s not just the strategy that makes Serabi interesting, it’s the numbers. Revenue is forecast to grow more than 35% this year. EPS is expected to double, off the back of a near fourfold jump in 2024. Return on capital has reached 30%. Operating margins have climbed to nearly 38%. These are numbers most small caps would dream of.

And yet the stock trades on a forward PE of under 3. The PEG ratio (price-to-earnings growth) is 0.1, which almost seems broken. The business is net cash with over 24 million dollars on hand, and it’s just introduced a shareholder return policy. A 4.4% yield is forecast, covered more than five times by earnings.

What’s even more striking is the free cash flow profile. The price to free cash flow ratio sits around 8, while EV to EBITDA is under 4. It’s rare to find these sorts of cash returns paired with such strong growth. Usually you get one or the other. Serabi, for now at least, offers both.

Latest update confirms the trend

The second quarter of 2025 was the strongest since Serabi restarted operations back in 2013. Output hit 10,532 ounces, pushing year-to-date production to 20,545 ounces which was slightly ahead of internal budgets. Grades improved at both Palito and Coringa, while development metres reached a record high. The company is now on track to meet full-year guidance of 44,000 to 47,000 ounces.

What’s notable is that Coringa is already exceeding expectations. An ore sorter installed earlier this year is allowing Serabi to process low-grade stockpiles profitably, while high-grade ore heads straight to the Palito plant. The mine is now delivering from two separate zones, and the deeper development is uncovering encouraging ground conditions and solid grades.

Exploration is also starting to deliver. Initial results from Palito, Coringa and the São Domingos target include high-grade intercepts of 30 to 80 grams per tonne. With over 30,000 metres of drilling planned this year, there’s real potential to double the resource base across both assets. The goal is to get each project to over one million ounces. If that happens, the long-term production target of 100,000 ounces per year starts to look conservative.

The chart tells the same story

Technically, Serabi’s shares have been in a strong uptrend since the back half of 2023. Momentum indicators remain strong, and the recent pullback from the highs has been shallow and orderly. It’s the kind of pause that lets the market catch its breath, not a sign of exhaustion.

In summary, Serabi’s net cash balance, strong operational delivery, and new shareholder return policy set it apart from the usual ‘jam tomorrow’ crowd. And while the shares have already seen a strong run, the valuation still feels out of step with the fundamentals. We’re pleased to add Serabi to our list of open positions and to deepen our exposure to gold.