Semafo huntsfor second Siou

Soil sampling at Semafo’s (TSX: SMF; US-OTC: SEMFF) Mana property in Burkina Faso has pinpointed a north-trending corridor measuring more than 14 km long and up to 4 km wide, 8 km north of the Siou deposit.

The Siou deposit — discovered by soil sampling and followed by auger and reverse-circulation (RC) drilling less than two years ago — is slated to start production in the second quarter of 2014, and the company is hoping that exploration in the vicinity will turn up other equally exciting targets on its property.

“It’s the way we discovered Siou,” Robert LaVallière, Semafo’s vice-president of investor relations, says of the recent soil-sample results. “We are following the same pattern. We go to soil, and after that we go to auger, and then we go to RC. It’s really systematic. We need to go step-by-step here because we don’t have any outcrops.” 

Semafo has budgeted $3.5 million for exploration in the fourth quarter of 2013, which will mainly consist of 120,000 metres of auger drilling, geochemical surveys and field proofing, and 8,500 more soil samples that will be taken in the Siou area to define targets for next year.

Andrew Breichmanas of BMO Capital Markets commented in a research note after the company released its latest results that “exploration programs appear to be refining the company’s geological model to improve the probability of further discoveries.”  

The north-trending corridor identified by soil sampling was found within the Kokoi shear zone (part of the Siou zone), and individual samples from the anomalous area returned promising values, with some of the highest holding more than 10,000 parts per billion gold, or 10 grams gold per tonne, LaVallière says. 

The 7,100 soil-sample program was undertaken in terrain where auger drilling would have been difficult, and samples were taken primarily from Mana West, the Kokoi Southwest Block and the Bouna East Block, at line spacing of 400 metres with sample points every 25 metres.

Semafo points out that the majority of the higher-grade soil samples were taken at the contact between the Siou massive grandiorite intrusive and volcano-sedimentary rocks.

“Considering the general north–south schistosity, the prospective north part of the intrusive, called the North Apex, is believed to be located within a pressure-shadow area, hence potentially generating favourable multi-directional tension structures and shear zones permeable to hydrothermal fluids,” Semafo explained in a Dec. 9 press release.

The Siou deposit — 15 km east of the company’s flagship Mana mine and processing plant — remains open laterally and at depth, and once it reaches full production, should account for 30% of the ore mix at the Mana processing plant. (The Mana mine entered production in mid-2008.)

In the meantime, Semafo is making headway on the permitting front. It reported in early December that the government has granted the company exploration rights to the new Pompoi North permit, which lies east of the Mana East permit.

Pompoi North spans 61 sq. km and includes the Siou intrusive’s east contact. The company believes it “should be prospective for gold mineralization, given its similar geology and structural similarities with the Siou deposit environment.”

Breichmanas of BMO Capital Markets says the soil samples and the addition of the Pompoi North permit “appear to be defining a number of targets for follow-up work, offering potential for further news flow from drilling programs in the coming months, which combine with anticipated operational improvements to support BMO’s ‘outperform’ rating.”

The analyst has a $3.50 target price on the stock, up from its $2.48 share price.  

The Mana property, 200 km west of Ouagadougou, covers 2,119 sq. km in the Hounde belt.

In the third quarter, the Mana mine produced 38,700 oz. gold at a total cash cost of less than US$800 per oz., and for the first nine months of the year, production 122,900 oz. at a total cash cost of US$725 per oz.  Semafo’s 2013 guidance remains unchanged at between 153,000 oz. and 168,000 oz. gold, with total cash costs of between US$805 and US$855 per oz.