Managem trims its Semafo stake

Moroccan mining group Managem has agreed to sell a large portion of its 52% stake in Montreal-based gold miner Semafo (SMF-T) to British Virgin Islands-based Georesources Exploration.

The proposed off-market transaction involves 40 million shares, and would leave Managem with less than a 10% stake in Semafo. The deal is valued at $72 million, based on Semfao’s closing price of $1.80 on Nov. 25, the day before the proposed deal’s announcement.

The deal is contingent on Georesources arranging adequate financing from substitute purchasers by the end of business on Dec. 10. Georesources anticipates the transaction will result in a wide distribution of Managem’s block.

Once the dust settles, Managem’s nominees to Semafo’s board of directors will resign; Semafo plans to fill the vacancies with experienced independent directors. The existing gold hedge arrangements between the two will remain unchanged.

As part of the deal, Semafo also plans a $36.1-million private placement to retire certain debts guaranteed by Managem, partially reduce its hedge book, and fund exploration. The plan requires regulatory approval.

Managem is the mining subsidiary of Moroccan industrial conglomerate Groupe ONA. The company also provided project management during development of two gold mines in West Africa, the Kiniero mine in Guinea and Samira Hill mine in Niger both operated by Semafo.

During the third quarter, Samira Hill squeezed 307,062 oz. of gold out of 410,526 tonnes of ore running 2.62 grams gold per tonne. Throughput increased by 34% mostly owing to improved mill availability.

During the third quarter, Samira produced 31,272 oz. of gold at a cash cost of US$197 per oz., up from the 20,030 oz. produced at US$204 apiece during the second quarter. The increase is attributed to higher throughput and head grades.

Semafo has trimmed its 2005 gold output forecast by 20,000 oz. to 100,000; cash cost had previously been pegged at US$225 per oz. The decrease reflects availability problems at the plant.

Samira Hill is owned by Nigerien-based La Socit des Mines du Liptako, which, in turn, is held 80%-20% by African GeoMin Mining Development (AGMD) and the government of Niger, respectively. Semafo and Etruscan Resources (EET-T) each have a 50% interest in AGMD.

At Kiniero, third quarter production amounted to 16,291 oz. at US$253 per oz., compared with the 13,190 oz. poured at US$301 each a year earlier. The improved performance comes compliments of a 25 % increase in ore grades.

Kiniero is expected to churn out some 65,000 oz. of gold in all of 2005, up from an initial estimate of 60,000 oz. at US$250 apiece.

Kiniero is owned 85% by Semafo and 15% by the Republic of Guinea.

Semafo shot into the black during the third quarter, earning US$1.1 million (or 1 per share), compared with a year-ago net loss of US$3.6 million (4 per share). The turnaround is owing to a US$941,000 gain on disposal of some short-term investments and the commencement of production at Samira Hill in October of 2004.

Shares in Semafo fell 20, or 11%, to $1.60 in Toronto following the announcement on Nov. 28. The shares slid another 2 to $1.58 on Nov. 29.