SEMAFO Inc.
TSX : SMF
OMX : SMF

SEMAFO Inc.

May 11, 2016 07:00 ET

SEMAFO: Cash Flow From Operations of $35.2 Million in First Quarter 2016

Net Income Attributable to Equity Shareholders of $16.2 Million

MONTREAL, QUEBEC--(Marketwired - May 11, 2016) - SEMAFO Inc. (TSX:SMF)(OMX:SMF) today reported its financial and operational results for the three-month period ended March 31, 2016. All amounts are in US dollars unless otherwise stated.

First Quarter 2016 - in Review

  • Gold production of 61,300 ounces compared to 65,200 ounces for the same period in 2015
  • Gold sales of $74.6 million compared to $74.0 million for the same period in 2015
  • Total cash cost1 of $505 per ounce sold and all-in-sustaining cost1 of $695 per ounce sold compared to $528 and $646, respectively, for the same period in 2015
  • Operating income of $17.8 million compared to $11.2 million for the same period in 2015
  • Net income attributable to equity shareholders of $16.2 million or $0.05 per share compared to a loss of $8.1 million or $0.03 per share for the same period in 2015
  • Adjusted net income attributable to equity shareholders1 of 8.7 million or $0.03 per share1 compared to $8.2 million or $0.03 per share1 for the same period in 2015
  • Cash flows from operating activities2 of $35.2 million or $0.12 per share1 compared to $32.6 million or $0.12 per share1 for the same period in 2015
  • Amendment to long-term debt consisting of an incremental $60.0 million to be drawn by June 30, 2017
  • Completion of a bought deal offering of common shares for aggregate gross proceeds of $90.8 million (C$115.1 million)
  • Total exploration budget increased to $18.0 million following positive results at Mana and Natougou

Natougou Development:

  • Completion of feasibility study with a strong 48% IRR at $1,100/oz gold
  • Lycopodium selected for the Engineering, Procurement and Construction Management (EPCM) contract
1 Adjusted net income attributable to equity shareholders, adjusted basic earnings per share, operating cash flows per share, cash operating cost, total cash cost and all-in sustaining cost are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS financial performance measures" section of the Corporation's MD&A, note 16.
2 Cash flows from operating activities exclude changes in non-cash working capital items.

Mana, Burkina Faso

Mining Operations


Three-month period
ended March 31,

2016 2015 Variation
Operating Data
Ore mined (tonnes) 500,300 749,800 (33 %)
Ore processed (tonnes) 682,900 537,300 27 %
Waste mined (tonnes) 3,459,400 6,562,800 (47 %)
Operational stripping ratio 6.9 8.8 (22 %)
Head grade (g/t) 3.04 4.09 (26 %)
Recovery (%) 92 92 -
Gold ounces produced 61,300 65,200 (6 %)
Gold ounces sold 62,800 60,600 4 %
Statistics (in dollars)
Average realized selling price (per ounce) 1,187 1,221 (3 %)
Cash operating cost (per tonne processed)1 42 54 (22 %)
Total cash cost (per ounce sold)1 505 528 (4 %)
All-in sustaining cost (per ounce sold)1 695 646 8 %
Depreciation (per ounce sold)2 275 396 (31 %)
1 Cash operating cost, total cash cost and all-in sustaining cost are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS financial performance measures" section of the Corporation's MD&A, note 16.
2 Depreciation per ounce sold is a non-IFRS financial performance measure with no standard definition under IFRS and represents the depreciation expense per ounce sold.

In the first quarter of 2016, the total cash cost reached $505 per ounce sold compared to $528 for the same period in 2015. The decrease is due to a lower cash operating cost per tonne, partially offset by a lower head grade. The 8% increase in all-in sustaining cost is mainly due to an increase in the stripping expenditure.

During the first quarter of 2016, the lower ore mined compared to the same period in 2015, is due to the mine plan sequence. The decrease in gold ounces produced is a direct result of the 26% lower head grade, partially offset by higher throughput. The year-over-year decrease in head grade in the first quarter of 2016 is due to the mine plan and increased throughput from low-grade stockpiles. The year-over-year increase in throughput in the first quarter of 2016 is due to the processing of ore through the secondary ball mill during the five-week shutdown of the SAG mill in the first quarter of 2015.

Exploration

The initial 2016 exploration budget of $11 million has been expanded to $18 million. Accordingly, the budget for Mana has increased from $4.5 million to $6.5 million, with the Natougou budget rising from $6 million to $9 million. Provisions of $1.5 million and $1 million of the new budget have been allocated to Nabanga and other properties, respectively.

Mana Project, Burkina Faso

In the first quarter, a total of 18,260 meters of auger, 10,230 meters of RC and 280 meters of core drilling were carried out on the Mana Project, principally on the Bombouéla Nord and Yama areas. Currently, three auger and one RC rig are in operation on the Mana permits.

In the quarter, drilling continued at 50-meter x 50-meter spacing on Yama located 23 kilometers south of the Mana plant. Significant results were obtained associated with a 200-meter long and steeply plunging series of sheared quartz veins. Best results include 5 g/t Au over 5 meters and 2.14 g/t Au over 13 meters. In the second quarter, a 2,750-meter infill drill program will bring the spacing to 25 meters x 50 meters in order to bring Yama into reserves by year-end. In addition, 2,500 meters of RC drilling will be carried out on the Yama area on targets identified by auger drilling.

Auger drilling was realized on a target area on the Bombouéla Nord permit located 30 kilometers north of the Mana mill. Two strong subparallel auger anomalies were identified over a strike length up of 2 kilometers that are similar to the regional structure hosting the Wona deposit. Both trends are scheduled for a 6,500-meter follow-up RC program in the second quarter of 2016 while an additional auger drill program will investigate the South extension. Results are expected in the third quarter of 2016.

Natougou

A regional auger drilling program is currently in progress along a NE-trending regional structure that crosses the entire property to the south of the Natougou deposit. Significant anomalies were identified along the trend. A 5,000-meter follow-up RC drilling program is planned, with results expected in the third quarter of 2016.

Currently, one RC drill rig is active on the footwall zone of the Boungou Shear Zone and on the sector west of the deposit.
In the second quarter of 2016, a regional airborne geophysical survey campaign involving magnetic and radiometric surveys, will be effected over the remaining portion of the Tapoa Permit Group with results anticipated in the third quarter of 2016.

Nabanga (Yactibo Permit Group)

A 2,000-meter RC drilling program is ongoing on the Nabanga extension. The revised budget of $1.5 million also includes a 14,000-meter drill campaign on the Kamsongo and Yacti mineralized zones, which are located in close proximity to the Nabanga deposit. Results are expected in the third quarter of 2016.

Natougou Development

Following announcement of a positive feasibility study in February, we continue to target construction start-up by year-end 2016. A $10 million capital expenditure budget has been established for Natougou in 2016. As at May 10, 2016, the following milestones have been achieved:

  • NI 43-101 technical report for the Natougou project filed on SEDAR
  • Lycopodium selected as the EPCM contractor
  • Launch of detailed engineering
  • Filing of the environmental study impact assessment and resettlement action plan with the government of Burkina Faso

SEMAFO's Management's Discussion and Analysis, Consolidated Financial Statements and related financial materials are available in the "Investor Relations" section of the Corporation's website at www.semafo.com. These and other corporate reports are also available on www.sedar.com.

First Quarter Conference Call

A conference call will be held today, Wednesday, May 11, 2016 at 10:00 EDT to discuss this press release. Interested parties are invited to call the following telephone numbers to participate in the conference:

Tel. local & overseas: +1 (647) 788 4922
Tel. North America: 1 (877) 223 4471
Webcast: www.semafo.com
Replay number: 1 (800) 585 8367 or +1 (416) 621 4642
Replay pass code: 93091950
Replay expiration: June 1, 2016

Annual General Meeting of Shareholders

SEMAFO's Annual General Meeting of Shareholders will be held on Thursday, May 12, 2016 at 10:00 a.m. EDT at Club Saint-James, Salon Midway, 1145 avenue Union, in Montreal, Quebec. Attendees will have the opportunity to ask questions and meet the management team and members of the board of directors.

About SEMAFO

SEMAFO is a Canadian-based mining company with gold production and exploration activities in West Africa. The Corporation operates the Mana Mine in Burkina Faso, which includes the high-grade satellite deposits of Siou and Fofina, and is developing the advanced gold deposit of Natougou. SEMAFO's strategic focus is to maximize shareholder value by effectively managing its existing assets as well as pursuing organic and strategic growth opportunities.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and assumptions and accordingly, actual results and future events could differ materially from those expressed or implied in such statements. You are hence cautioned not to place undue reliance on forward-looking statements. Forward-looking statements include words or expressions such as "will", "in order to", "targets", "scheduled for", "expected", "planned", "anticipated", "ongoing", "continue", "pursuing", "growth", "opportunities" and other similar words or expressions. Factors that could cause future results or events to differ materially from current expectations expressed or implied by the forward-looking statements include the ability to bring Yama into reserves by year-end, the ability to release exploration results in the third quarter of 2016, the ability to start construction at Natougou by year-end 2016, the ability to execute on our strategic focus, fluctuation in the price of currencies, gold or operating costs, mining industry risks, uncertainty as to calculation of mineral reserves and resources, delays, political and social stability in Africa (including our ability to maintain or renew licenses and permits) and other risks described in SEMAFO's documents filed with Canadian securities regulatory authorities. You can find further information with respect to these and other risks in SEMAFO's 2015 Annual MD&A, as updated in SEMAFO's 2016 First Quarter MD&A, and other filings made with Canadian securities regulatory authorities and available at www.sedar.com. These documents are also available on our website at www.semafo.com. SEMAFO disclaims any obligation to update or revise these forward-looking statements, except as required by applicable law.

The information in this release is subject to the disclosure requirements of SEMAFO under the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. This information was publicly communicated on May 11, 2016 at 7:00 a.m., Eastern Daylight Time.

Consolidated Results and Mining Operations

Financial and Operating Highlights

Three-month period
ended March 31,
2016 2015 Variation
Gold ounces produced 61,300 65,200 (6 %)
Gold ounces sold 62,800 60,600 4 %
(in thousands of dollars, except amounts per share)
Revenues - Gold sales 74,556 74,016 1 %
Mining operation expenses 28,722 29,063 (1 %)
Government royalties 3,018 2,933 3 %
Operating income 17,836 11,207 59 %
Finance costs 302 3,039 (90 %)
Foreign exchange loss (gain) (4,909 ) 6,281 -
Income tax expense 4,125 9,867 (58 %)
Net income (loss) attributable to equity shareholders 16,184 (8,114 ) -
Basic earnings (loss) per share 0.05 (0.03 ) -
Diluted earnings (loss) per share 0.05 (0.03 ) -
Adjusted net income attributable to equity shareholders1 8,724 8,210 6 %
Per share1 0.03 0.03 -
Cash flows from operating activities2 35,204 32,553 8 %
Per share1 0.12 0.12 -
1 Adjusted net income attributable to equity shareholders, adjusted basic earnings per share and operating cash flows per share are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS financial measures" section of the Corporation's MD&A, note 16.
2 Cash flows from operating activities exclude changes in non-cash working capital items.
Interim Consolidated Statement of Financial Position
(Expressed in thousands of US dollars - unaudited)


As at
March 31,
2016
As at
December 31,
2015
$ $
Assets
Current assets
Cash and cash equivalents 166,667 167,166
Trade and other receivables 18,289 17,028
Income tax receivable - 1,634
Inventories 48,879 53,200
Other current assets 2,522 2,622
236,357 241,650
Non-current assets
Advance receivable 3,825 4,532
Restricted cash 4,609 4,388
Property, plant and equipment 531,270 529,087
Intangible asset 1,782 1,856
Other non-current assets 5,959 -
547,445 539,863
Total assets 783,802 781,513
Liabilities
Current liabilities
Trade payables and accrued liabilities 35,981 35,869
Current portion of long-term debt - 29,052
Share unit plans liabilities 5,976 1,360
Provisions 5,702 6,346
Income tax payable 2,244 -
49,903 72,627
Non-current liabilities
Long-term debt 58,725 59,379
Share unit plans liabilities 2,940 4,485
Provisions 7,527 7,313
Deferred income tax liabilities 33,048 31,846
102,240 103,023
Total liabilities 152,143 175,650
Equity
Equity Shareholders
Share capital 523,936 516,070
Contributed surplus 9,924 10,685
Retained earnings 64,426 48,242
598,286 574,997
Non-controlling interest 33,373 30,866
Total equity 631,659 605,863
Total liabilities and equity 783,802 781,513
Interim Consolidated Statement of Income (Loss)
(Expressed in thousands of US dollars, except per share amounts - unaudited)
Three-month period
ended March 31,
2016 2015
$ $
Revenue - Gold sales 74,556 74,016
Costs of operations
Mining operation expenses 31,740 31,996
Depreciation of property, plant and equipment 17,340 24,110
General and administrative 3,827 3,615
Corporate social responsibility expenses 135 326
Share-based compensation 3,678 2,762
Operating income 17,836 11,207
Other expenses (income)
Finance income (373 ) (131 )
Finance costs 302 3,039
Foreign exchange loss (gain) (4,909 ) 6,281
Income before income taxes 22,816 2,018
Income tax expense
Current 3,954 3,604
Deferred 171 6,263
4,125 9,867
Net income (loss) and comprehensive income (loss) for the period 18,691 (7,849 )
Attributable to:
Equity shareholders 16,184 (8,114 )
Non-controlling interests 2,507 265
18,691 (7,849 )
Earnings per share
Basic 0.05 (0.03 )
Diluted 0.05 (0.03 )
Interim Consolidated Statement of Cash Flows
(Expressed in thousands of US dollars - unaudited)

Three-month period
ended March 31,

2016 2015
$ $
Cash flows from (used in):
Operating activities
Net income (loss) for the period 18,691 (7,849 )
Adjustments for:
Depreciation of property, plant and equipment 17,340 24,110
Share-based compensation 3,678 2,762
Write-off of other non-current assets related to financing fees - 2,520
Unrealized foreign exchange loss (gain) (4,790 ) 4,681
Deferred income taxes expense 171 6,263
Other 114 66
35,204 32,553
Changes in non-cash working capital items 6,765 196
Net cash provided by operating activities 41,969 32,749
Financing activities
Drawdown (repayment) of long-term debt (30,000 ) 90,000
Long-term debt transaction costs - (1,200 )
Proceeds on issuance of share capital, net of expenses 1,405 43,925
Net cash (used in) provided by financing activities (28,595 ) 132,725
Investing activities
Acquisition of Orbis Gold Limited - (154,550 )
Acquisitions of property, plant and equipment (19,543 ) (17,887 )
Net cash used in investing activities (19,543 ) (172,437 )
Effect of exchange rate changes on cash and cash equivalents 5,670 (6,112 )
Change in cash and cash equivalents during the period (499 ) (13,075 )
Cash and cash equivalents - beginning of period 167,166 127,928
Cash and cash equivalents - end of period 166,667 114,853
Interest paid 1,582 -
Interest received 361 131
Income tax paid 85 -

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