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TABLE OF CONTENTS Dec 24 - 30, 2012 Volume 98 Number 45 - 0 comments

Semafo back on track after soggy summer

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Semafo (SMF-T) is bouncing back from a tough third quarter, which saw production dip at its key mine in West Africa.

The company released results from October and November, after getting through what it admitted was a “challenging” third quarter.

Semafo turned out 43,600 oz. gold over the last two months, which shows it’s trending in the right direction, after producing 52,300 oz. gold in the third quarter.

The past period’s disappointing results were chalked up to delays caused by weather and operational issues at two of the project’s pits.

A heavier-than-usual rainy season meant Semafo couldn’t access higher-grade zones at its flagship Mana project in Burkina Faso, which forced it to process lower-grade ore.

Accessing lower-grade ore came at a bad time, as the company had just commissioned the fourth phase of a plant expansion designed to take higher throughput. This higher capacity met with lower-grade stockpiles, totalling 200,000 tonnes.

There were also operational issues at the project’s Wona pit, while pre-stripping activities temporarily held up production from the Kona pit. 

Over two months, Mana contributed 33,300 oz. gold, or 76% of total production. In the previous quarter, the mine churned out 36,600 oz. gold.  

With the rainy season over and access regained to higher-grade zones, the  increased mill capacity should help make for a solid recovery when the fourth-quarter results are tallied.

Haywood Securities analyst Kerry Smith expects that the company will reach 60,000 oz. production in its final quarter.

“These levels are, however, lower than those achieved in 2011, as the company sources most of its Mana mill feed from the lower-grade Wona pit, compared to a larger percentage of higher-grade ore from the Nyafe pit in 2011,” he writes in a research note.  

Smith adds that grades would likely improve, as the company reaches higher-grade ore within Wona.

Semafo expects annual production in the lower end of its guidance of 235,000 to 260,000 oz. gold for 2012.

As for the future, total production at Mana could climb, thanks to the recent discovery of the high-grade Siou zone, which is 15 km east of the mill at Mana.

Smith says that the potential at Siou is 500,000 oz. to a 200-metre depth, at indicated grades from 6 to 8 grams per tonne.
This positive upside to the find led Semafo to increase its 2012 exploration budget by $1 million to accommodate more drilling over the area.

It says that two diamond drill rigs are drilling 8,000 metres of core, with the aim of adding the zone to its resource calculation by year-end. Reserves are expected to be calculated by the end of 2013.

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Facilities at Semafo's flagship Mana gold project in Burkina Faso. Source: Semafo
Facilities at Semafo's flagship Mana gold project in Bu...

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