Semafo Posts Record Financial, Operational Results

It may have been a year many companies would prefer to forget, but 2008 was one of the best years in Semafo’s (SMF-T, SEMFF-O) history.

The Montreal-headquartered company posted record net earnings of US$39.5 million; record operating cash flow of US$56.3 million (more than five times that of the previous year); and record gold production of 195,400 oz., an 84% increase over 2007.

Semafo posted average cash operating costs of US$461 per oz. gold (a year-on-year decrease of 7%) and record gold sales of US$169.9 million (a 129% year-on-year increase) at an average selling price of US$858 per oz.

It ended the year with an equity financing of US$18.7 million and at Dec. 31, 2008, had cash and equivalents of US$28.7 million.

Among other milestones, the company successfully started up and commissioned its Mana mine in Burkina Faso and recorded a return to profitability at its Kiniero mine in Guinea.

Mana is Semafo’s newest mine and construction was completed in 14 months. It began commercial production in the second quarter of 2008, During its first three months of operations (April, May and June), Mana produced 17,200 oz. gold using a 2,000-tonne-per-day ball mill. The company successfully commissioned a new 4,000-tonne-per-day ball mill during the third quarter and the design throughput was reached at the beginning of September.

Reserves and resources at the company’s three mines increased by 17% overall at the end of 2008. As of Dec. 31, Semafo’s reserves had dropped slightly to 22.7 million tonnes grading 2.49 grams gold per tonne, for nearly 1.78 million oz., down from 1.97 million oz. at the end of 2007.

Measured and indicated resources rose 30% to 58.7 million tonnes grading 1.58 grams gold for 2.98 million oz. gold.

The Mana mine saw an insignificant drop in reserves, which totalled 908,600 oz. gold at the end of 2008 after having produced 74,000 oz. over the year.

But a successful deep-drilling program at the Wona pit at Mana drove measured and indicated resources up 221% to 12.9 million tonnes grading 2.46 grams gold for 1.02 million oz.

As a result, the company has decided to spend an initial $4 million on follow-up drilling to further evaluate the zone’s underground potential.

Like Mana, the Samira Hill mine in Niger finished off 2008 with a nominal drop in reserves to 631,100 oz. gold, with measured and indicated resources of 1.29 million oz. gold compared with 1.23 million oz. at the end of 2007.

Finally, at the company’s Kiniero mine in Guinea, reserves dropped 16,000 oz. to 1.99 million tonnes grading 3.69 grams gold for 236,400 oz. gold.

The decrease was a result of infill and validation drilling over the year, which resulted in an adjustment in tonnage and grade.

Measured and indicated resources at Kiniero were also lower, totalling 669,100 oz. compared with 735,900 oz. at the end of 2007.

Semafo shares recently traded at $1.93 per share in a 52-week trading range of 75¢-$2.13. The company has 232.7 million shares outstanding.