Niamey, Niger — It doesn’t happen all that often, and until now it had never happened in Niger, but partners
The opening ceremony for Samira Hill, Niger’s first commercial gold producer, situated 90 km west of this capital city, was attended by shareholders, community members and politicians, including the country’s president, Mamadou Tandja.
Samira poured its first, 444-oz. gold dor bar in late September during mill commissioning. Since then, more than 2,200 oz. have been produced from the mill, which is already exceeding its throughput capacity. So far, Samira’s dor has averaged 92-95% gold.
“Samira’s coming on-stream as a producer is a milestone for Etruscan,” CEO Gerald McConnell told The Northern Miner, which attended the opening ceremony. “We have moved from explorer to producer, and in the mining industry that’s a major accomplishment.”
Semafo CEO Benot La Salle said that while Samira is not a big mine, it does elevate his company into another league: “It shows the world that Semafo can build mid-sized mines on time and on budget in Africa, and few people can say that.”
Samira Hill is expected to produce around 135,000 oz. gold at a cash cost of US$177 per oz. during its initial year of operation. Over the subsequent five years, annual output is slated to average 100,000 oz. at US$203 per oz. In all, the mine is expected to run for 6.3 years and produce some 618,036 oz. gold for an average projected recovery rate of 86%.
As part of the mine’s US$27-million debt-financing deal arranged by Semafo, some 300,000 oz. gold have been hedged at an average of US$375 per oz. Delivery of the committed ounces is flexible. The project is also subject to a 5.5% government royalty.
Samira’s 6,000-tonne-per-day carbon-in-leach plant is processing oxide ore from the main open pit. Stripping is ongoing at the Samira East deposit, but it will be several months before ore is derived from that pit. Ore from the Libiri pit, about 3 km to the southeast, will be introduced in the second year of operation. Samira’s plant is designed to handle 4,000 tonnes of transitional ore per day from the two deposits.
In 2000, Australian-based Resource Service Group pegged proven and probable reserves in the Samira and Libiri deposits at 10.1 million tonnes grading 2.2 grams gold per tonne, with 618,000 recoverable ounces. An additional 15 million tonnes grading 1.6 grams gold are measured and indicated. The estimates employ a cutoff grade of 0.6 gram gold and a gold price of US$325 per oz. Both deposits remain open at depth.
McConnell described the journey to production as long and arduous.
“It took us almost ten years of hard work in Niger,” he said. “We’re the first mining company to obtain a permit in that country, and the first to negotiate a reduction of a permit, establish a mining company, and set up offshore accounts for the purpose of bringing the mine into production and selling gold off shore.
“We helped educate the Nigerans about the business aspects of taking a discovery through to production; in many ways, we were a tutor to Niger’s Ministry of Mines. That made it difficult at times, owing to the lack of understanding by the Nigerans as to what the mining industry is all about, and what has to be done to obtain financing.”
McConnell said the mine opening is also significant for Niger, since Samira Hill will create jobs, economic spinoffs, and a source of foreign currency, all of which are in short supply in the world’s second-poorest country.
“We have already helped build schools and medical clinics, and we want to assist in agricultural and irrigation programs to ensure that a solid agricultural infrastructure remains after the mine eventually closes,” he told The Miner.
“We take a great deal of satisfaction in knowing that we are doing not only what’s right for our shareholders, in bringing the mine to production, but also what’s right for the Nigeran people.”
Said La Salle: “Samira represents Niger’s entry in the gold-producers’ club, and that has already created a lot of activity. Companies have begun applying for permits and exploration spending is growing. All of that had died in 1998 and 1999, but because of this mine, people have begun to spend money again.”
Both men are also pleased the project survived through a period when gold prices were in the low US$250s per ounce, plus the 1999 political crisis of a coup d’tat and presidential assassination.
Managem, the mining subsidiary of Moroccan industrial conglomerate Groupe ONA, controls Semafo and is the operator at Samira Hill. The project 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. Semafo and Etruscan each have a 50% participating interest in AGMD. Semafo also holds preference shares in AGMD; the shares represent a US$20-million debt owed by AGMD to Semafo and carry an 8% dividend rate.
Semafo acquired its half-stake in AGMD in early 2000 in return for US$2.5 million in cash; it also picked up half of the US$30 million owed by AGMD to Etruscan for an additional US$2.5 million. Semafo agreed to provide additional financing via the subscription to the AGMD preferred shares.
Once Samira’s US$25-million bank debt is repaid, 60% of AGMD’s share of cash flow from the mine will go toward paying interest on Semafo’s AGMD preference shares, and then the principal on those shares, with the rest split equally between Semafo and Etruscan. Once that debt is retired, AGMD’s cash flow will be split equally between the two partners.
In the end, Semafo’s share of cash flow from the mine comes to around 88%, until its capital expenditures are recouped, said La Salle. That payback is expected to take 4-6 years, based on current gold prices.
In 2000, a revised feasibility study pegged Samira’s internal rate of return at 62%, the net present value at US$26.8 million (based on an 8% discount), and net cash flow (after payback) at US$42 million. All are significantly better than original projections (the previous study considered the milling of ore from the Samira Hill deposit only). Capital costs are estimated to be US$26 million, compared with the original US$23 million. Mining contractor BCM International is handling the mining duties at an estimated life-of-mine cost of US$44 million.
Samira Hill and Libiri are just the beginning of what the partners see as an emerging gold belt known as the “Samira Horizon.” Accordingly, Samira’s processing facility has been given a central location, which would allow for the eventual trucking of ore from any nearby satellite gold deposits defined along the 50-km-long gold-bearing horizon. AGMD holds 1,600 sq. km in this belt under the Tiawa, Saoura and Datambi permits.
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