Quarterly Investor Update

Serabi Mining plc
23 October 2006

SERABI MINING QUARTERLY INVESTOR UPDATE



Serabi Mining plc ('Serabi' or 'the Company') advises that it has today
despatched to shareholders its investor newsletter for the Third Quarter to
September 30, 2006.



The company has highlighted in its newsletter the following matters. The full
text version of the quarterly update is available from Serabi's offices or from
the Company's website www.serabimining.com.



•  Palito Gold Mine achieves commercial production

•  Quarterly production of 9,768 oz gold equivalent

•  Cash operating costs of US$300 per ounce achieved

•  Mining production continues to show improvements, with long-hole mine
   production expected to commence very soon

•  Production improvements anticipated for the fourth quarter with
   commissioning of additional milling capacity now underway

•  Benefiting from mine and process improvements, provisional target for
   2007 production at Palito of approximately 50,000 oz gold equivalent, at an
   operating cash cost of between US$200 to US$225 per ounce

•  Early drilling results and new geochemistry at Jardim do Ouro
   highlights further potential close to Palito operation

  • Regional exploration indicates a new poly-metallic project along strike
    from Palito




                                 Palito - Operating Results (1)
                                                     2006                              2005
                                  Q1           Q2           Q3           YTD            YTD
Total Mined                     32,820       34,055       42,357       109,232        36,034
(per day)                        (365)       (374)        (460)         (400)          (132)

Mined Ore              t        31,555       31,864       34,598       98,017         36,034
(per day)                        (351)       (350)        (376)         (359)          (132)

Milled                 t        25,514       29,851       29,492       84,859         36,543
(per day)                        (283)       (328)        (321)         (311)          (134)

Head Grade             g/t        9.3         9.7          9.2           9.4           10.1

Recovery               %         91.9         91.3         91.4         91.5           88.3

Gold                   oz        7,017       8,527        7,974        23,518         10,509

Copper                 t         98.0        107.1        139.2         344.4          141.5

Gold                   oz        7,927       9,815        9,768        27,510         11,733

Equivalent (2)



PALITO MINE


Mining



Mining rates continued to improve noticeably during the quarter, with total
daily mining rates routinely exceeding 500 tonnes during September, reflecting
the impact of the introduction of trackless mining on the deeper levels. Phase-2
extension of the decline has now started in order to access deeper ore,
accounting for the increase in waste tonnage over the period.



Meanwhile, following an extended period of pre-production development since
completion of Phase-1 of the decline in February, we expect the first ore
production from long-hole stopes to start in November. As a result of similar
ongoing developments from the decline, there will be a noticeable shift of
production over the next six months from the upper levels under Palito Hill
using a shrinkage mining technique, to the more productive long-hole stopes at
deeper levels that will now be mainly used for ore production. To further
support this increased level of mechanised mining and improve production
scheduling, additional equipment is currently being purchased.



Plant



Problems with the mills reported at the end of Q2 continued during the last
quarter, resulting in similar daily process rates for both periods. In addition
to planned relining of Mill-2, Mill-3 suffered a serious breakdown of its
bearing, resulting in only 67% availability. Although this has now been
repaired, given the ongoing need for routine maintenance, combined with
increasing levels of ore production now being achieved, plans are underway to
improve and increase the size of the mill circuit. As a result a new, larger
mill has already been sourced, purchased and transported to site. In combination
with one of the established mills, the new primary mill circuit will comfortably
achieve a daily process capacity of 450 tonnes, with an additional mill on
standby providing back-up.



On-going beneficiation test-work is being conducted to confirm the optimal
flow-sheet to upgrade the lower grade ore material. In addition to an option
using coarse milling and spirals separation, preliminary results using screening
and a Dense Media Separation circuit have been encouraging. With these items
already well advanced, such a combination is set to provide a wide range of
benefits to future production:

  • Improved reliability
  • Expanded capacity
  • Greater flexibility
  • Improved recoveries



General



As a result of the lower than anticipated mill availability, quarter-on-quarter
production remained broadly flat for the September period, which will result in
production of less than the original target of 45,000 oz gold equivalent this
year. However, with the new primary mill circuit expected to be commissioned by
the end of November, production levels should show a marked improvement from the
latter part of the fourth quarter, leading to annualised production levels in
excess of 45,000 oz gold equivalent by year-end.





EXPLORATION



During 2005 geological activities were focussed mainly on the Palito Main Zone
and accompanied by a strengthening of the company's exploration capacity. This
expansion culminated last quarter in the first progress report for projects
outside of Palito mine (see Press Release dated September 13), which
highlighted:



  • Improved exploration facilities, equipment and increased budget providing
    a strong basis for expanded exploration programme;
  • Expanded geochemical survey highlighting additional targets at Jardim do
    Ouro which are expected to form the basis for new drill targets;
  • Geological survey and geochemistry results indicate new targets at Rio
    Novo South, directly along strike of the Palito Main Zone mineralisation;
  • Drilling of a major coincident geochemical and geophysical anomaly at the
    Bill's Pipe project, situated near to the Palito Mine, intersecting massive
    sulphides, with anomalous gold and copper grades;
  • Initial drill results at Ruari's Ridge returning attractive gold and
    copper grades;
  • Drilling results from the recently discovered Sucuba project, located 10km
    west of Palito, indicate the occurrence of a poly-metallic deposit;
  • Drilling at Pombo confirming the presence of a wide mineralised structure,
    with indications of porphyry associated alteration at depth.



Serabi now owns and operates four surface exploration drilling rigs, which in
conjunction with extensive geological and laboratory facilities, provides a
major advantage to the company for rapid in-house assessment of projects.
Against this background the company is planning to expand its programme of
exploration and evaluation and in this regard expects to increase the annual
exploration budget from approximately US$3 million in 2006, to between US$4 to
US$5 million in 2007.





GENERAL



The highlight of the September quarter was the attainment of commercial
production at the Palito mine, which took effect from October 1. This
achievement is the culmination of a period of intense development and investment
that has taken place over more than two years, such that the operation has now
reached a point of sustainable commercial production. This reflects that amongst
other criteria which have now been achieved, the mine is generating positive
operating cash flow, providing a strong basis for further developments at Palito
and throughout the Company.



The unique status that Serabi has now established in Brazil, places the company
in a strong competitive position to assess and potentially acquire new projects.
It remains the goal to build-up the resources and production of Serabi and in
this regard we now plan to expand the new business development activities of the
company.



Building on this success and with preparations for the coming year, it is
expected that the full potential of Serabi will become more evident during 2007,
with the following goals:



  • Increase Palito annual mine production to at least 50,000 ounces gold
    equivalent with a cash cost of US$200 - US$225 per ounce
  • Further increase of the mineral resource base on Palito Main Zone
  • Review expansion potential for the Palito mine
  • Establish mineral resources on other Jardim do Ouro projects
  • Expand exploration across the Tapajos project portfolio
  • Increase project portfolio



Enquiries



Serabi Mining plc                           Numis Securities Limited
Graham Roberts   Tel: [phone]         John Harrison     Tel: [phone]
Chairman                                    James Black       Tel: [phone]


Clive Line       Tel: [phone]         Parkgreen Communications
Finance Director Mobile: [phone]      Simon Robinson    Tel: [phone]




E-mail: [e-mail]             Ana Ribeiro      Tel: [phone]
Website: www.serabimining.com                [e-mail]




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