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Semafo gets permission to develop two Burkina Faso satellite deposits

14th November 2013

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – West Africa-focused gold miner Semafo this week said it had received permission to develop its high-grade Siou and Fofina deposits, both located near the Montreal-based miner’s flagship Mana mine, in Burkina Faso.

President and CEO Benoit Desormeaux on Wednesday said now that the company had received the authorisation, which represented the second-last step in the mining permit extension process, it could start prestripping and road construction work at Siou in the coming months and start production in the second quarter of 2014.

“This places us at least six months ahead of our most recent schedule, a real accomplishment given Siou’s two-year timeline from discovery to production.

“In addition, the accelerated permitting process allows us to forecast production start-up at Fofina in 2015, instead of in 2016 as originally planned,” Desormeaux said.

Owing to the Siou deposit being located 15 km from the Mana processing plant and ore from Siou being trucked to the plant, bringing the Siou deposit into production would require minimal capital. There would also be no need to relocate villages, invest in new infrastructure or other significant ancillaries.

Semafo had, therefore, halved the capital expenditures needed in 2014 to bring Siou to production, to $12.5-million from the $25-million initial budget.

TSX-listed Semafo said the Siou deposit remained open laterally and at depth, and significant inferred resources were located about 180 m below the surface, which would require additional tighter-spaced drilling in order to convert them to compliant mineral reserves, which was scheduled for 2015/16.

Semafo had allocated the $3.5-million remaining in the 2013 exploration budget for activities in the Siou vicinity during the fourth quarter, to find and define new drill targets for 2014. Exploration would consist mainly of 120 000 m of auger drilling, geochemical surveys and field proofing, as well as 8 500 additional soil samples.

During the quarter, Semafo lifted Mana’s mineral reserves to 769 300 oz and the resources to 795 300 oz of gold.

The proven and probable reserves of 4.84-million tonnes grading 4.94 g/t gold were calculated using a conservative gold price of $1 100/oz, demonstrating the robustness of the deposit. Siou had effectively increased the average reserve grade at Mana by 20%.

Significantly, when Siou begins production, it would bring quality ounces to Mana’s processing plant, ultimately leading to increased production and lower total cash cost per ounce.

“Once full production is attained, we estimate that Siou will account for about 30% of the ore mix at the processing plant. This is a perfect example of the implementation of our strategy to increase shareholder value,” Desormeaux boasted.

In the third quarter ended September 30, Mana produced 38 700 oz of gold at a total cash cost of less than $800/oz.

Year-to-date output totalled 122 900 oz at a total cash cost of $725/oz.

Semafo posted net income from continuing operations attributable to shareholders of $1.7-million, or $0.01 a share, and cash flow from operating activities from continuing operations amounted to $15.6-million, or $0.06 a share.

Early in the year, Semafo started considering strategic alternatives for its two noncore assets - the Kiniero mine, in Guinea, and the Samira Hill mine, in Niger - owing to their extreme sensitivity to downturns in the gold price, and as a result, recorded impairments for the assets.

During the third quarter, Semafo placed the Samira Hill mine on care and maintenance and would wind down operations at the Kiniero mine to an eventual care-and-maintenance status in the coming months. Both properties were available for sale.

Semafo underlined its strategy to bring Siou into production, and continuing exploration, as being the key to value creation, which constituted a priority in light of the uncertainty and ongoing volatility in the gold price, and considering that, the company had decided not to declare a semi-annual dividend at this time.

The company also took additional steps to further reduce capital expenditures and administrative costs. “We should begin to reap the results of the latter in the fourth quarter, with a more significant impact in 2014,” Desormeaux said.

Semafo was maintaining its 2013 production guidance for Mana of between 153 000 oz and 168 000 oz, with the total cash cost expected to be at the lower end of the guidance of between $805/oz and $855/oz.

On Thursday, the company’s TSX-listed stock traded at a high of C$3.05, before giving back C$0.13 to trade at C$2.92 apiece.

Edited by Creamer Media Reporter

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