SEMAFO Inc.
TSX : SMF
OMX : SMF

SEMAFO Inc.

November 09, 2016 07:00 ET

SEMAFO Delivers Cash Flow of $39.3 Million in Third Quarter 2016

Adjusted Net Income Attributable to Equity Shareholders of $14.9 Million

MONTREAL, QUEBEC--(Marketwired - Nov. 9, 2016) - SEMAFO Inc. (TSX:SMF)(OMX:SMF) today reported its financial and operational results for the three-month period ended September 30, 2016. All amounts are in US dollars unless otherwise stated.

Third Quarter 2016 - in Review

  • Gold production of 62,500 ounces compared to 67,200 ounces for the same period in 2015
  • Gold sales of $80.2 million compared to $72.5 million for the same period in 2015
  • Total cash cost1 of $574 per ounce sold and all-in-sustaining cost1 of $751 per ounce sold compared to $485 and $616, respectively, for the same period in 2015
  • Adjusted operating income1 of $21.5 million compared to $17.8 million for the same period in 2015
  • Adjusted net income attributable to equity shareholders1 of $14.9 million or $0.05 per share1 compared to $12.2 million or $0.04 per share1 for the same period in 2015
  • Cash flows from operating activities2 of $39.3 million or $0.12 per share1 compared to $34.8 million or $0.12 per share1 for the same period in 2015
  • Resumed development of Wona North pit

Natougou Development:

  • Permitting anticipated by year-end 2016
  • Hiring of key personnel for the construction of Natougou
  • Suppliers selected for earthworks and contract mining
  • Development progressing on time and on budget, with $7.7 million spent as at September 30, 2016
  • Detailed design and engineering 37% 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 18.
2. Cash flows from operating activities exclude changes in non-cash working capital items.

Mana, Burkina Faso

Mining Operations

Three-month period Nine-month period
ended September 30, ended September 30,
2016 2015 Variation 2016 2015 Variation
Operating Data
Ore mined (tonnes) 555,200 541,200 3 % 1,620,000 1,831,100 (12 %)
Ore processed (tonnes) 751,700 618,300 22 % 2,039,100 1,756,500 16 %
Waste mined (tonnes) 3,155,800 4,375,000 (28 %) 11,424,900 16,089,700 (29 %)
Operational stripping ratio 5.7 8.1 (30 %) 7.1 8.8 (19 %)
Head grade (g/t) 2.71 3.67 (26 %) 3.01 3.81 (21 %)
Recovery (%) 95 92 3 % 94 92 2 %
Gold ounces produced 62,500 67,200 (7 %) 185,100 198,400 (7 %)
Gold ounces sold 60,000 64,800 (7 %) 183,500 193,100 (5 %)
Statistics (in dollars)
Average realized selling price (per ounce). 1,337 1,119 19 % 1,261 1,179 7 %
Cash operating cost (per tonne processed)1 41 47 (13 %) 44 49 (10 %)
Total cash cost (per ounce sold)1 574 485 18 % 542 494 10 %
All-in sustaining cost (per ounce sold)1 751 616 22 % 730 621 18 %
Depreciation (per ounce sold)² 330 296 11 % 312 339 (8 %)
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 18.
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.

2016 Third Quarter Results

SEMAFO's third quarter 2016 gold production was 62,500 ounces compared to 67,200 ounces in the prior-year quarter. During the third quarter of 2016, the ore processed increased and the head grade decreased compared to the same period in 2015. This results from a decision to take advantage of higher gold prices and available milling capacity in order to generate additional cash flow. We achieved this by adding 127,400 tonnes of low-grade material to the mix in the third quarter of 2016. Absent the impact of this decision, the head grade would have been 3.1 g/t in the third quarter of 2016. The decrease in cash operating cost per tonne processed to $41 relative to the third quarter of 2015 was expected and is attributable to the lower operational stripping ratio and the positive volume effect of the higher throughput.

During the third quarter, we resumed development of the Wona North pit. As a result, 891,100 tonnes of waste material were extracted from the Wona North pit during this pre-stripping phase.

The Corporation's third quarter gold sales increased relative to 2015 as an increase in the average realized selling price partially offset the lower gold ounces sold. Relative to the third quarter of 2015, the average realized selling price increased by $218 per ounce of gold or 19%.

Mining operating expenses increased during the third quarter of 2016 compared to the third quarter of 2015 mainly as a result of the higher throughput. Third quarter adjusted operating income increased by 21% compared to the same period in 2015, primarily as a result of higher revenues.

In the third quarter of 2016, the Corporation's cash flow generated by operating activities increased by 13% to $39.3 million on the back of higher sales.

Year-to-Date Operational Results and 2016 Guidance

In the first nine months of 2016, SEMAFO produced 185,100 ounces of gold, in line with its full-year production guidance of 225,000 to 245,000 ounces. For the nine-month period ended September 30, 2016, SEMAFO's all-in sustaining cost of $730 per ounce and total cash cost of $542 per ounce were higher than those in the prior year and within our 2016 cost guidance ranges. The increase in our total cash cost to $542 per ounce was anticipated and is due to lower head grade, partially offset by a lower cash cost operating cost per tonne. The increase in all-in sustaining cost is mainly attributable to an increase in the capitalized stripping expenditure and to the higher total cash cost.

Debt Amendment

In March 2016, the Corporation entered into an amendment of its Original Credit Facility with Macquarie Bank Limited that increased the available credit facility to $120 million. We have already drawn down $60 million and have the option of drawing down the incremental $60 million by June 30, 2017. The interest rate was reduced to LIBOR plus 4.75% per annum, with the principal repayable in eight equal quarterly installments of $15 million, starting on March 31, 2019.

A second amendment occurred in September 2016 under which the principal will be repayable in eight quarterly installments of $7.5 million as of March 31, 2019, provided no drawdown of the incremental $60 million has taken place.

Development Resumed at Wona North

As announced in September, in light of the commencement of stripping at Wona, the annual mining capacity at Mana will increase to 40 million tonnes for the next three years in order to produce over 200,000 ounces of gold per year. As a result, in order to reach this mining capacity in 2017, we will purchase mining equipment at a cost of $10 million and we have established development capital expenditures at Mana of $2.7 million.

In 2017, the Mana Mine should process ore from the Fofina, Siou and Wona North pits with the Fofina deposit expected to be depleted in the first half of 2017. As of December 31, 2015, mineral reserves at Wona totalled 12.7 million tonnes at an average grade of 2.30 g/t Au for 935,100 ounces of gold contained.

The table below presents the 2016 production guidance in addition to consolidated production targets for the coming three years:

Target 3
Guidance 20161, 3 2017 2018 2019
Mana ('000 ounces) 225-245 225-245 200+ 200+
Natougou 2 ('000 ounces) 100 226
Total ('000 ounces) 225-245 225-245 300+ 426+
1. See press release of January 20, 2016.
2. Contingent on receipt of permits and construction start-up by year-end 2016; for more details, refer to press release of February 25, 2016 or the NI 43-101 technical report for Natougou, which is filed on http://www.sedar.com/ and available at http://www.semafo.com/.
3. Assumption: Mineral reserves were estimated using a gold price of $1,100 per ounce.

Natougou Development

In the third quarter, the Corporation made steady progress with regard to the Natougou Project and continues to target construction start-up by year-end 2016. To date, the following milestones have been achieved:

  • Development on time and budget, with $7.7 million spent as at September 30, 2016
  • Detailed design and engineering 37% complete
  • Procurement:
    • Suppliers selected for earthworks and contract mining
    • Issue of purchase orders for comminution equipment and seven other packages
    • Award of contracts for the resettlement action plan follow-up
  • Hiring of key personnel for the construction team has commenced
  • Permitting is in line for receipt by year-end 2016

Exploration

Mana Project, Burkina Faso

In the quarter, the RC drill program on the Mana Project was primarily carried out within trucking distance of the Mana Mill such as to the northeast of Wona-Kona, on strike. Year to date, a total of 29,620 meters of RC drilling has been effected on the Mana Project, mostly on the Fobiri II and Kona Blé permits.

As a result of the rainy season, the auger drill program slowed down in the third quarter, completing 5,580 meters in 622 holes. Year to date, a total of 38,250 meters of auger drilling has been conducted on the Fobiri II, Bombouéla Nord, Wona Nyafé and Mana Ouest permits. One RC drill rig is currently active on the Mana Ouest permit.

Natougou Project

In the quarter, we completed a total of 8,360 meters in 86 RC holes across the Tapoa Permit Group. In addition, 1,210 meters of drilling, including 3 core holes, were conducted. Two RC drill rigs are currently in operation on the Tapoa proximal area.

During the third quarter of 2016, we completed an airborne magnetic radiometry survey totalling 4,430 line kilometers over the Tapoa Permit Group. Data from all previously conducted surveys were subsequently compiled in order to produce a full coverage mapping. The Natougou deposit is located to the northwest of a plus 45-degree oriented regional structure. The structure, dubbed Trend 045, is an important deep-seated deformation zone that may have played a role in the formation of the deposit. A series of lineaments are observed across the entire property within a two- to four-kilometer wide corridor.

The lineaments were combined with mapping, soil geochemistry, auger drilling and trenching, which enabled us to identify targets and commence an RC drill program in the fourth quarter of 2016.

West Sector and Boungou Shear Zone

A portion of the RC drilling in the quarter focused on defining the limits of the footwall zone below the Boungou Shear Zone within the pit area and extending the west flank mineralized zone of the Boungou Shear Zone. In addition, three core holes were drilled within the hangingwall zone. At this stage, our objective with regard to the hangingwall zone is to better understand the style of the mineralization, which seems to be different from the Boungou Shear Zone.
In the fourth quarter, we intend to complete a drill program at 80-meter spacing in order to bring the west flank mineralized zone into the inferred resources category by year-end.

Korhogo (Côte d'Ivoire)

An airborne geophysical survey was completed (1,290 line kilometers of magnetic radiometry) over the northern half of the Korhogo Ouest permit in the quarter. Data from this survey are currently being processed. Supplementing the survey, an infill soil sampling program commenced in early October that will better delineate the newly identified gold-in-soil anomalies.

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.

Third Quarter Conference Call

A conference call will be held today, Wednesday, November 9, 2016 at 10:00 EST 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: 5375098
Replay expiration: November 30, 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 "anticipated", "guidance", "expects", "in order to", "should", "expected", "will", "targets", "in line for", "objective", "intend", "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 achieve permitting at Natougou by year-end 2016, the ability to start construction by year-end 2016, the ability to meet our 2016 production guidance of 225,000 to 245,000 ounces, the ability to meet our 2016 total cash cost and all-in sustaining cost guidance, the ability to increase the annual mining capacity at Mana to 40 million tonnes for the next three years, the ability to produce over 200,000 ounces through 2019 at Mana, the ability to meet our consolidated production targets for the coming three years, the ability to better understand the style of mineralization at the hangingwall zone, the ability to bring the west flank mineralized zone into the inferred resources category by year-end, the accuracy of our assumption, the ability to execute on our strategic focus, fluctuation in the price of currencies, gold prices and 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, 2016 Second Quarter MD&A, 2016 Third 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 November 9, 2016 at 7:00 a.m., Eastern Standard Time.

Consolidated Results and Mining Operations

Financial and Operating Highlights

Three-month period Nine-month period
ended September 30, ended September 30,
2016 2015 Variation 2016 2015 Variation
Gold ounces produced 62,500 67,200 (7 %) 185,100 198,400 (7 %)
Gold ounces sold 60,000 64,800 (7 %) 183,500 193,100 (5 %)
(in thousands of dollars, except amounts per share)
Revenues - Gold sales 80,200 72,523 11 % 231,346 227,654 2 %
Mining operation expenses 30,410 28,469 7 % 89,203 86,170 4 %
Government royalties 4,028 2,950 37 % 10,185 9,142 11 %
Depreciation of property, plant and equipment 19,880 19,290 3 % 57,384 65,688 (13 %)
Share-based compensation (576 ) (988 ) (42 %) 8,229 2,309 256 %
Other 3,442 3,316 4 % 11,065 10,828 2 %
Operating income 23,016 19,486 18 % 55,280 53,517 3 %
Finance costs 314 347 (10 %) 1,678 3,557 (53 %)
Foreign exchange loss (gain) (191 ) 1,110 - (2,386 ) 5,705 -
Income tax expense 3,853 3,762 2 % 12,125 16,011 (24 %)
Other (519 ) (224 ) 132 % (1,465 ) (513 ) 186 %
Net income 19,559 14,491 35 % 45,328 28,757 58 %
Attributable to equity shareholders
Net income 17,680 12,829 38 % 39,168 24,434 60 %
Basic earnings per share 0.05 0.04 25 % 0.13 0.08 63 %
Diluted earnings per share 0.05 0.04 25 % 0.13 0.08 63 %
Adjusted amounts
Adjusted operating income1 21,451 17,775 21 % 60,435 52,503 15 %
Adjusted net income attributable to equity shareholders1 14,855 12,186 22 % 40,210 36,672 10 %
Per share1 0.05 0.04 25 % 0.13 0.13 -
Cash flows
Cash flows from operating activities2 39,266 34,830 13 % 111,860 108,131 3 %
Per share1 0.12 0.12 - 0.36 0.37 (3 %)
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 18.
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
September 30, December 31,
2016 2015
$ $
Assets
Current assets
Cash and cash equivalents 282,239 167,166
Trade and other receivables 17,512 17,028
Income tax receivable - 1,634
Inventories 48,602 53,200
Other current assets 2,986 2,622
351,339 241,650
Non-current assets
Advance receivable 3,395 4,532
Restricted cash 4,342 4,388
Property, plant and equipment 533,866 529,087
Intangible asset 1,655 1,856
Other non-current assets 4,025 -
547,283 539,863
Total assets 898,622 781,513
Liabilities
Current liabilities
Trade payables and accrued liabilities 41,263 35,869
Current portion of long-term debt 310 29,052
Share unit plans liabilities 8,186 1,360
Provisions 2,726 6,346
Income tax payable 6,284 -
58,769 72,627
Non-current liabilities
Long-term debt 56,502 59,379
Share unit plans liabilities 5,282 4,485
Provisions 7,847 7,313
Deferred income tax liabilities 30,627 31,846
100,258 103,023
Total liabilities 159,027 175,650
Equity
Equity Shareholders
Share capital 621,902 516,070
Contributed surplus 7,357 10,685
Accumulated other comprehensive income 1,046 -
Retained earnings 82,623 48,242
712,928 574,997
Non-controlling interest 26,667 30,866
Total equity 739,595 605,863
Total liabilities and equity 898,622 781,513
Interim Consolidated Statement of Income
(Expressed in thousands of US dollars, except per share amounts - unaudited)
Three-month period Nine-month period
ended September 30, ended September 30,
2016 2015 2016 2015
$ $ $ $
Revenue - Gold sales 80,200 72,523 231,346 227,654
Costs of operations
Mining operation expenses 34,438 31,419 99,388 95,312
Depreciation of property, plant and equipment 19,880 19,290 57,384 65,688
General and administrative 3,195 3,087 10,503 10,139
Corporate social responsibility expenses 247 229 562 689
Share-based compensation (576 ) (988 ) 8,229 2,309
Operating income 23,016 19,486 55,280 53,517
Other expenses (income)
Finance income (519 ) (224 ) (1,465 ) (513 )
Finance costs 314 347 1,678 3,557
Foreign exchange (gain) loss (191 ) 1,110 (2,386 ) 5,705
Income before income taxes 23,412 18,253 57,453 44,768
Income tax expense (recovery)
Current 3,521 4,605 14,086 13,477
Deferred 332 (843 ) (1,961 ) 2,534
3,853 3,762 12,125 16,011
Net income for the period 19,559 14,491 45,328 28,757
Attributable to:
Equity shareholders 17,680 12,829 39,168 24,434
Non-controlling interests 1,879 1,662 6,160 4,323
19,559 14,491 45,328 28,757
Earnings per share
Basic 0.05 0.04 0.13 0.08
Diluted 0.05 0.04 0.13 0.08
Interim Consolidated Statement of Comprehensive Income
(Expressed in thousands of US dollars - unaudited)
Three-month period Nine-month period
ended September 30, ended September 30,
2016 2015 2016 2015
$ $ $ $
Net income for the period 19,559 14,491 45,328 28,757
Other comprehensive income
Change in fair value of the investment in GoviEx 1,046 - 1,046 -
Total comprehensive income for the period, net of tax 20,605 14,491 46,374 28,757
Attributable to:
Equity shareholders 18,726 12,829 40,214 24,434
Non-controlling interest 1,879 1,662 6,160 4,323
20,605 14,491 46,374 28,757
Interim Consolidated Statement of Cash Flows
(Expressed in thousands of US dollars - unaudited)
Three-month period Nine-month period
ended September 30, ended September 30,
2016 2015 2016 2015
$ $ $ $
Cash flows from (used in):
Operating activities
Net income for the period 19,559 14,491 45,328 28,757
Adjustments for:
Depreciation of property, plant and equipment 19,880 19,290 57,384 65,688
Share-based compensation (576 ) (988 ) 8,229 2,309
Write-off of other non-current assets related to financing fees - - - 2,520
Unrealized foreign exchange loss (gain) 172 1,865 (2,756 ) 5,278
Deferred income taxes expense 332 (843 ) (1,961 ) 2,534
Adjustment for withholding taxes - - 5,827 -
Other (101 ) 1,015 (191 ) 1,045
39,266 34,830 111,860 108,131
Changes in non-cash working capital items 8,052 (2,728 ) 11,239 (11,204 )
Net cash provided by operating activities 47,318 32,102 123,099 96,927
Financing activities
Drawdown (repayment) of long-term debt (52 ) - (30,052 ) 90,000
Long-term debt transaction costs - - (259 ) (1,200 )
Proceeds on issuance of share capital, net of expenses 3,374 304 92,017 44,229
Dividend paid to non-controlling interest - (2,656 ) (10,359 ) (2,656 )
Net cash provided by (used in) financing activities 3,322 (2,352 ) 51,347 130,373
Investing activities
Acquisition of Orbis Gold Limited - - - (154,550 )
Acquisitions of property, plant and equipment (22,840 ) (21,031 ) (62,780 ) (56,402 )
Advance made to Sonabel - - - (566 )
Decrease in restricted cash 210 - 210 -
Net cash used in investing activities (22,630 ) (21,031 ) (62,570 ) (211,518 )
Effect of exchange rate changes on cash and cash equivalents 159 (1,805 ) 3,197 (5,925 )
Change in cash and cash equivalents during the period 28,169 6,914 115,073 9,857
Cash and cash equivalents - beginning of period 254,070 130,871 167,166 127,928
Cash and cash equivalents - end of period 282,239 137,785 282,239 137,785
Interest paid 1,065 1,521 3,557 3,038
Interest received 419 3 1,273 292
Income tax paid 2,237 1,043 8,410 1,043

Contact Information