SEMAFO Inc.
TSX : SMF
OMX : SMF

SEMAFO Inc.

August 10, 2016 07:00 ET

SEMAFO: Cash Flow From Operations of $37.4 Million in Second Quarter 2016

Adjusted Net Income Attributable to Equity Shareholders of $15.0 Million

MONTREAL, QUEBEC--(Marketwired - Aug. 10, 2016) - SEMAFO Inc. (TSX:SMF)(OMX:SMF) today reported its financial and operational results for the three-month period ended June 30, 2016. All amounts are in US dollars unless otherwise stated.

Second Quarter 2016 - in Review

  • Gold production of 61,300 ounces compared to 66,000 ounces for the same period in 2015
  • Gold sales of $76.6 million compared to $81.1 million for the same period in 2015
  • Total cash cost1 of $547 per ounce sold and all-in-sustaining cost1 of $742 per ounce sold compared to $471 and $604, respectively, for the same period in 2015
  • Adjusted operating income1 of $19.6 million compared to $23.4 million for the same period in 2015
  • Adjusted net income attributable to equity shareholders1 of $15.0 million or $0.05 per share1 compared to $16.1 million or $0.05 per share1 for the same period in 2015
  • Cash flows from operating activities2 of $37.4 million or $0.12 per share1 compared to $40.7 million or $0.14 per share1 for the same period in 2015
  • Completion of a bought deal offering of common shares for aggregate gross proceeds of $90.8 million (C$115.1 million)
  • Recipient of grand prize for Corporate Social Responsibility of Mining Companies in Burkina Faso (RSE 2016)

Natougou Development:

  • Permitting in line for receipt by year-end 2016
  • Procurement of long-lead comminution equipment secured for site delivery in H2 2017
  • Development on time and on budget
  • Detailed design and engineering 17% complete
1 Total cash cost, all-in sustaining cost, adjusted operating income, 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 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 Six-month period
ended June 30, ended June 30,
2016 2015 Variation 2016 2015 Variation
Operating Data
Ore mined (tonnes) 564,500 540,100 5 % 1,064,800 1,289,900 (17 %)
Ore processed (tonnes) 604,500 600,900 1 % 1,287,400 1,138,200 13 %
Waste mined (tonnes) 4,809,700 5,151,900 (7 %) 8,269,100 11,714,700 (29 %)
Operational stripping ratio 8.5 9.5 (11 %) 7.8 9.1 (14 %)
Head grade (g/t) 3.33 3.71 (10 %) 3.18 3.89 (18 %)
Recovery (%) 95 92 3 % 93 92 1 %
Gold ounces produced 61,300 66,000 (7 %) 122,600 131,200 (7 %)
Gold ounces sold 60,700 67,700 (10 %) 123,500 128,300 (4 %)
Statistics (in dollars)
Average realized selling price (per ounce) 1,262 1,198 5 % 1,224 1,209 1 %
Cash operating cost (per tonne processed)1 49 46 7 % 46 50 (8 %)
Total cash cost (per ounce sold)1 547 471 16 % 526 498 6 %
All-in sustaining cost (per ounce sold)1 742 604 23 % 719 624 15 %
Depreciation (per ounce sold)2 331 328 1 % 303 360 (16 %)
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.

During the second quarter of 2016, the decrease in head grade compared to the same period in 2015, is due to the mine plan. The decrease in gold ounces produced is a direct result of the lower head grade. The year-over-year decrease in head grade in the first six months of 2016 is due to the mine plan and increased throughput from low-grade stockpiles. The increase in throughput in the first six months of 2016 compared to the same period in 2015 is due to the processing of ore through the secondary ball mill during the five-week shutdown of the SAG mill at the beginning of 2015.

In the second quarter in 2016, the 6% decrease in gold sales is caused by lower gold ounces sold, partially offset by an increase in the average realized selling price. The decrease in operating income compared to the same period in 2015 is mainly due to higher share-based compensation expense as a result of the increase in the fair value of our share price and lower revenue.

As expected, our cash operating cost per tonne reached $49 in the second quarter of 2016 compared to $46 in the second quarter of 2015. The cost difference mainly reflects higher transportation costs due to mining solely from the Siou and Fofina pits, higher fleet maintenance costs and the negative impact of exchange rates. The 23% increase in all-in sustaining cost in the quarter was anticipated and was mainly driven by an increase in the capitalized stripping expenditure, lower ounces sold and higher total cash cost.

Exploration

Mana Project, Burkina Faso

Year to date, 24,400 meters of RC drilling have been carried out on the Mana Project, of which 16,000 meters on Yama, 5,400 meters on BN2 and 3,000 meters on Kona Blé. More than half of the budgeted 60,000-meter auger program has now been effected, primarily on the BN2, Bissa, Wona Southwest, Yama and Mouni areas.

Yama Mineral Reserves Estimate

As at June 30, 2016, the open pit probable mineral reserves estimate for the Yama deposit totals 662,300 tonnes averaging 1.81 g/t Au for 38,500 ounces of contained gold. The mineral reserves were estimated based on a gold price of $1,100 per ounce. The Yama deposit will have a total strip ratio of 11:1 and an average mill recovery rate of 93%. The Corporation will begin the process for an extension of the Mana mining permit in the second half of 2016.

The mineral reserves statement has been completed by Michel Crevier, P.Geo MScA, Vice-President Exploration and Mine Geology, who is SEMAFO's Qualified Person and has reviewed this press release for accuracy and compliance with National Instrument 43-101.

Natougou Project

Geological mapping of the Tapoa permit is progressing well, and our understanding of the property will be further enhanced by a recently conducted Phase II airborne magnetic survey that completed coverage of the property.

The 2016 auger program planned for the Natougou (Tapoa) Project is now complete, with a total of 62,000 meters drilled to date. Results from the program, coupled with those from the geophysical survey, will allow us to identify follow-up RC drill targets for the second half of the year.

About half of the auger drill campaign was realised on Trend 045, a regional structure that crosses the property to the south of the Natougou deposit along a northeast direction. Mapping, trenching, soil sampling, and auger drilling have been ongoing throughout the year, and results to date confirm the presence of key favourable features such as wide hydrothermal alterations along a strong deformation corridor associated with significant results such as 1.40 g/t Au over 7 meters in trenching. Soil sampling anomalies have also been noted locally along the corridor over a distance of more than 40 kilometers.

To maximise our understanding of the geological structure of Trend 045, the geological mapping campaign was prioritised over a follow-up RC program in the second quarter. The 5-000 meter RC program will now be conducted on the trend after the rainy season with results expected in the fourth quarter of 2016.

West Sector

An RC drill program is ongoing on the footwall zone of the Boungou Shear Zone and on the sector west of the deposit. Significant results are included below and in Figure 1: http://media3.marketwire.com/docs/PDRA.pdf.

Highlights West Zone

Drill hole* From (meters) To (meters) Length (meters) Au g/t
TPA0670 152.00 158.30 6.30 1.80
TPA0674 163.50 167.00 3.50 2.62
TPA0675 154.60 159.00 4.40 18.90
TPA0676 172.10 175.70 3.60 7.49
TPA0680 162.30 168.00 5.70 3.56
*Drilling was realised at an almost vertical dip.

Holes TPA0670, TPA0674 and TPA0675 represent in-fill results from the known portion of the zone, whereas TPA0676 extends a little to the west and the TPA0680 offers a northern extension. The latter two merit additional drilling.

Highlights Boungou Footwall Zone

In the quarter, RC drilling was carried out on the Boungou Footwall Zone as shown in Figure 1: http://media3.marketwire.com/docs/PDRA.pdf.

Drill hole* From (meters) To (meters) Length (meters) Au g/t
TPA0480 31.00 31.50 0.50 14.60
BODD438 32.50 33.90 1.40 4.20
TPA0550 36.00 37.70 1.70 2.78
BODD078 84.50 85.00 0.50 8.69
*Drilling was realised at an almost vertical dip.

The RC program was designed to investigate potential footwall-type mineralization outside the one known area. While drilling on the eastern portion of the future open pit was unsuccessful, some good results such as BODD438, TPA0550 and BODD078 will be further investigated.

Natougou Development

In the second quarter, the Corporation continued to advance the Natougou Project towards construction start-up by year-end 2016. The Natougou Project has progressed as follows:

  • Development on time and budget, with $4.3 million spent as at June 30, 2016

  • Detailed design and engineering 17% complete

  • Procurement of long-lead comminution equipment secured for site delivery in H2 2017

    • Package comprises SAG mill, tower mill, jaw crusher, cone crusher, vibrating screen and apron feeders

    • Tower mill is already in stock

  • Issue of requests for quotation for the power plant, fuel depot, mining contractor and 14 other packages

  • Hiring of key personnel for the construction phase is ongoing

Natougou Permitting

  • Permitting is in line for receipt by year-end 2016

  • Two out of the three steps completed: public hearings and meetings with the Technical Committee on Environmental Evaluations "COTEVE"

  • Final milestone involves review of the application by the National Mining Commission, followed by grant of a permit

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.

Second Quarter Conference Call

A conference call will be held today, Wednesday, August 10, 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: http://www.semafo.com/
Replay number: 1 (800) 585 8367 or +1 (416) 621 4642
Replay pass code: 56308431
Replay expiration: August 31, 2016

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 "in line", "will", "further", "expected", "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 receive the Natougou permit by year-end 2016, the ability to obtain site delivery of long-lead comminution equipment in H2 2017, the ability to achieve Yama's total strip ratio of 11:1 and average mill recovery rate of 93%, the ability of the Phase II airborne magnetic survey to further enhance our understanding of the Tapoa permit, the ability to release Trend 045 exploration results in the fourth quarter of 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 2016 Second 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 August 10, 2016 at 7:00 a.m., Eastern Daylight Time.

Consolidated Results and Mining Operations

Financial and Operating Highlights

Three-month period Six-month period
ended June 30, ended June 30,
2016 2015 Variation 2016 2015 Variation
Gold ounces produced 61,300 66,000 (7 %) 122,600 131,200 (7 %)
Gold ounces sold 60,700 67,700 (10 %) 123,500 128,300 (4 %)
(in thousands of dollars, except amounts per share)
Revenues - Gold sales 76,590 81,115 (6 %) 151,146 155,131 (3 %)
Mining operation expenses 30,071 28,638 5 % 58,793 57,701 2 %
Government royalties 3,139 3,259 (4 %) 6,157 6,192 (1 %)
Depreciation of property, plant and equipment 20,164 22,288 (10 %) 37,504 46,398 (19 %)
Share-based compensation 5,127 535 858 % 8,805 3,297 167 %
Other 3,661 3,571 3 % 7,623 7,512 1 %
Operating income 14,428 22,824 (37 %) 32,264 34,031 (5 %)
Finance costs 1,062 171 521 % 1,364 3,210 (58 %)
Foreign exchange loss (gain) 2,714 (1,686 ) - (2,195 ) 4,595 -
Income tax expense 4,147 2,382 74 % 8,272 12,249 (32 %)
Other (573 ) (158 ) (263 %) (946 ) (289 ) (227 %)
Net income 7,078 22,115 (68 %) 25,769 14,266 81 %
Attributable to equity shareholders
Net income 5,304 19,719 (73 %) 21,488 11,605 85 %
Basic earnings per share 0.02 0.07 (71 %) 0.07 0.04 75 %
Diluted earnings per share 0.02 0.07 (71 %) 0.07 0.04 75 %
Adjusted amounts
Adjusted operating income1 19,555 23,359 (16 %) 41,069 37,328 10 %
Adjusted net income attributable to equity shareholders1 15,038 16,114 (7 %) 27,440 27,086 1 %
Per share1 0.05 0.05 - 0.09 0.09 -
Cash flows
Cash flows from operating activities2 37,390 40,748 (8 %) 72,594 73,301 (1 %)
Per share1 0.12 0.14 (14 %) 0.24 0.26 (8 %)
1 Adjusted operating income, 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 As at
June 30, December 31,
2016 2015
$ $
Assets
Current assets
Cash and cash equivalents 254,070 167,166
Trade and other receivables 18,066 17,028
Income tax receivable - 1,634
Inventories 48,816 53,200
Other current assets 3,736 2,622
324,688 241,650
Non-current assets
Advance receivable 3,439 4,532
Restricted cash 4,499 4,388
Property, plant and equipment 533,731 529,087
Intangible asset 1,723 1,856
Other non-current assets 5,959 -
549,351 539,863
Total assets 874,039 781,513
Liabilities
Current liabilities
Trade payables and accrued liabilities 39,398 35,869
Current portion of long-term debt 284 29,052
Share unit plan liabilities 8,979 1,360
Provisions 2,728 6,346
Income tax payable 4,980 -
56,369 72,627
Non-current liabilities
Long-term debt 59,466 59,379
Share unit plan liabilities 5,066 4,485
Provisions 7,690 7,313
Deferred income tax liabilities 29,832 31,846
102,054 103,023
Total liabilities 158,423 175,650
Equity
Equity Shareholders
Share capital 616,533 516,070
Contributed surplus 9,352 10,685
Retained earnings 64,943 48,242
690,828 574,997
Non-controlling interest 24,788 30,866
Total equity 715,616 605,863
Total liabilities and equity 874,039 781,513
Interim Consolidated Statement of Comprehensive Income
(Expressed in thousands of US dollars, except per share amounts - unaudited)
Three-month period Six-month period
ended June 30, ended June 30,
2016 2015 2016 2015
$ $ $ $
Revenue - Gold sales 76,590 81,115 151,146 155,131
Costs of operations
Mining operation expenses 33,210 31,897 64,950 63,893
Depreciation of property, plant and equipment 20,164 22,288 37,504 46,398
General and administrative 3,481 3,437 7,308 7,052
Corporate social responsibility expenses 180 134 315 460
Share-based compensation 5,127 535 8,805 3,297
Operating income 14,428 22,824 32,264 34,031
Other expenses (income)
Finance income (573 ) (158 ) (946 ) (289 )
Finance costs 1,062 171 1,364 3,210
Foreign exchange loss (gain) 2,714 (1,686 ) (2,195 ) 4,595
Income before income taxes 11,225 24,497 34,041 26,515
Income tax expense
Current 6,611 5,268 10,565 8,872
Deferred (2,464 ) (2,886 ) (2,293 ) 3,377
4,147 2,382 8,272 12,249
Net income and comprehensive income for the period 7,078 22,115 25,769 14,266
Attributable to:
Equity shareholders 5,304 19,719 21,488 11,605
Non-controlling interests 1,774 2,396 4,281 2,661
7,078 22,115 25,769 14,266
Earnings per share
Basic 0.02 0.07 0.07 0.04
Diluted 0.02 0.07 0.07 0.04
Interim Consolidated Statement of Cash Flows
(Expressed in thousands of US dollars - unaudited)
Three-month period Six-month period
ended June 30, ended June 30,
2016 2015 2016 2015
$ $ $ $
Cash flows from (used in):
Operating activities
Net income for the period 7,078 22,115 25,769 14,266
Adjustments for:
Depreciation of property, plant and equipment 20,164 22,288 37,504 46,398
Share-based compensation 5,127 535 8,805 3,297
Write-off of other non-current assets related to financing fees - - - 2,520
Unrealized foreign exchange loss (gain) 1,862 (1,268 ) (2,928 ) 3,413
Deferred income taxes expense (2,464 ) (2,886 ) (2,293 ) 3,377
Adjustment for withholding taxes 5,827 - 5,827 -
Other (204 ) (36 ) (90 ) 30
37,390 40,748 72,594 73,301
Changes in non-cash working capital items (3,578 ) (8,672 ) 3,187 (8,476 )
Net cash provided by operating activities 33,812 32,076 75,781 64,825
Financing activities
Drawdown (repayment) of long-term debt - - (30,000 ) 90,000
Long-term debt transaction costs (259 ) - (259 ) (1,200 )
Proceeds on issuance of share capital, net of expenses 87,238 - 88,643 43,925
Dividends paid to non-controlling interest (10,359 ) - (10,359 ) -
Net cash provided by financing activities 76,620 - 48,025 132,725
Investing activities
Acquisition of Orbis Gold Limited - - - (154,550 )
Acquisitions of property, plant and equipment (20,397 ) (17,484 ) (39,940 ) (35,371 )
Advance made to Sonabel - (566 ) - (566 )
Net cash used in investing activities (20,397 ) (18,050 ) (39,940 ) (190,487 )
Effect of exchange rate changes on cash and cash equivalents (2,632 ) 1,992 3,038 (4,120 )
Change in cash and cash equivalents during the period 87,403 16,018 86,904 2,943
Cash and cash equivalents - beginning of period 166,667 114,853 167,166 127,928
Cash and cash equivalents - end of period 254,070 130,871 254,070 130,871
Interest paid 910 1,517 2,492 1,517
Interest received 493 158 854 289
Income tax paid 6,088 - 6,173 -

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