SEMAFO Inc.
TSX : SMF
OMX : SMF

SEMAFO Inc.

March 12, 2015 07:30 ET

SEMAFO Reports Net Income for the Year of $17.7 Million

Cash Flow from Operations of $120.7 Million

MONTREAL, QUEBEC--(Marketwired - March 12, 2015) - SEMAFO Inc. (TSX:SMF)(OMX:SMF) today reported its financial and operational results for the fourth quarter and year ended December 31, 2014. All amounts are in US dollars unless otherwise stated.

2014 - The Year in Review

  • Gold production at Mana of 234,300 ounces, a 48% increase compared to 2013
  • Achieved production guidance for the seventh consecutive year
  • Gold sales of $289.3 million, a 28% increase compared to 2013
  • Operating income of $46.4 million compared to $18.9 million in 2013
  • Net income of $17.7 million or $0.02 per share compared to net loss of $83.9 million or a loss of $0.31 per share in 2013
  • Cash flows from operating activities from continuing activities1 of $120.7 million or $0.44 per share2 compared to $77.6 million or $0.28 per share for the same period in 2013
  • Siou added 210,700 ounces to Mana's gold reserves, net of depletion
  • Acquired and signed farm-in agreements for an additional 2,110 km2 of exploration property

Fourth Quarter 2014 - in Review

  • Gold production of 61,800 ounces at a total cash cost3 of $596 per ounce compared to 35,700 ounces at $935 per ounce for the same period in 2013
  • Gold sales of $78.6 million, a 55% increase year over year
  • Operating income of $14.9 million, compared to an operating loss of $8.4 million for the same period in 2013
  • Net income attributable to equity shareholders of $4.6 million or $0.02 per share compared to net loss from continuing operations of $7.1 million for the same period in 2013
  • Cash flows from operating activities1 of $40.4 million or $0.15 per share2 compared to $12.2 million or $0.04 per share for the same period in 2013
  • Significant drilling results obtained at depth along the Siou Zone
1 Cash flows from operating activities from continuing operations exclude changes in non-cash working capital items.
2 Operating cash flows per share from continuing operations are a non-IFRS financial performance measure with no standard definition under IFRS.
3 Total cash cost is a non-IFRS financial performance measure with no standard definition under IFRS and represents the mining operation expenses and government royalties per ounce sold.

Driven by our mine plan and accelerated production schedule, the high-grade Siou and Fofina deposits helped deliver a 48% increase in year-over-year production to 234,300 ounces - Mana's highest-ever production - in 2014 and a 16% decrease in year-over-year total cash cost to $649 per ounce. The Corporation has therefore met its production guidance for a seventh consecutive year. Despite an uninspiring year for gold, SEMAFO pulled off this production increase on budget and well ahead of time, generating $121 million in cash flow from operating activities and achieving an all-in sustaining cost of $805 per ounce during the year.

During the first quarter of 2015, replacement of the shell of the SAG mill was successfully completed on time. The SAG mill is now running at its design capacity. The Corporation therefore maintains its 2015 production guidance of between 245,000 and 275,000 ounces and its 2015 total cash cost guidance of between $575 and $605 per ounce.

2014 Reserves and Resources

As at December 31, 2014, total proven and probable mineral reserves at Mana stood at 2,240,300 ounces of gold. Measured and indicated resources totalled 2,756,900 ounces, representing a 13% increase over 2013. Reserves and measured and indicated resources increased to 5.0 million ounces of gold.

The changes in reserves are net of 2014 depletion due to production. All mineral resources reported are exclusive of mineral reserves. Reserves and resources were estimated using a gold price of $1,100 and $1,400 per ounce, respectively.

Orbis Transaction

Highlight of the first quarter of 2015 is unquestionably our acquisition of ASX-listed Orbis Gold Limited, which comprises a strong portfolio of mining projects in Burkina Faso led by the advanced gold project of Natougou. With historical indicated resources of 7.1 million tonnes at 5.1 g/t Au for 1.2 million ounces, Natougou represents one of the highest grade open-pittable projects in West Africa. Nabanga, the second most-important project in Orbis' portfolio, contains very high grade historical inferred resources. The Orbis acquisition offers SEMAFO multiple benefits, including an additional 13 permits covering more than 3,000 square kilometers and one of the largest land packages in Burkina Faso. The Natougou and Nabanga gold projects enrich SEMAFO's mid-stage pipeline, offering a perfect strategic complement to its grassroots exploration properties and high-grade satellite deposits in production. As of March 11, 2015, the Corporation holds 98% of Orbis' outstanding shares, representing a purchase price of $134.9 million. The transaction will trigger additional disbursements of approximately $14.8 million including, among others, transaction costs incurred by the Corporation and Orbis' liabilities assumed by the Corporation.

In the first quarter of 2015, we obtained long-term debt of $90 million in order to fund the Orbis acquisition and closed a bought deal private placement for $46.5 million to partly fund the purchase of Orbis, as well as for working capital and general corporate purposes. The long-term debt replaces the short-term facility announced November 30, 2014, which has been cancelled.

The Corporation has established the following milestones with regard to the Natougou and Nabanga projects:

  • We intend to convert the JORC historical resources on the Natougou and Nabanga gold projects to NI-43-101 compliant resources in the second quarter of 2015.
  • A total budget of $2.5 million has been established for an infill and exploration program on Natougou. Before the end of March, we will launch the in-fill drilling campaign consisting of approximately 22,000 meters of reverse-circulation "RC" drilling in order to convert Natougou's historical inferred resources to indicated resources using a 40-meter by 40-meter grid spacing. At the same time, we will commence a 10,000 meter RC drill program on Natougou's related structures, with the aim of increasing resources in close proximity.
  • In the second half of the year, as part of the feasibility study, we will initiate an in-fill drilling program on Natougou that is designed to convert a portion of the indicated resources to the measured category.
  • In addition, we plan to carry out a regional exploration program on the Natougou advanced gold project with the objective of increasing the resources base.

SEMAFO's Consolidated Financial Statements and Management's Discussion and Analysis and other relevant 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 the website maintained by the Canadian Securities regulators at www.sedar.com.

2014 Fourth Quarter and Year-End Conference Call

SEMAFO will host a conference call today, Thursday, March 12, 2015 at 10:00 EDT at to discuss this press release. Investors 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

The conference call will be archived for replay until April 2, 2015. To access the archived conference call, please dial 1 (800) 585 8367 and enter pass code 69022587.

A live audio webcast of the conference will be accessible through SEMAFO's website at www.semafo.com. The webcast will be available for replay for a period of 30 days.

Annual General Meeting of Shareholders

SEMAFO's Annual General Meeting of Shareholders will be held on Thursday, May 14, 2015 at 10:00 EDT at Le Centre Sheraton Montréal, Salon Hémon, 1201 René-Lévesque Boulevard West, 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. SEMAFO is committed to evolve in a conscientious manner to become a major player in its geographical area of interest. 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 "guidance", "will", "intend", "in order to", "commence", "with the aim of", "designed to", "plan", "anticipate", "committed", "evolve", "become", "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 maintain the 2015 production guidance of 245,000 and 275,000 ounces at total cash cost of between $575 and $605 per ounce, the ability to convert the JORC historical resources on the Natougou and Nabanga gold projects to NI 43-101 compliant resources, the ability to convert Natougou's historical inferred resources to indicated resources, the ability to increase resources in close proximity to Natougou's related structures, the ability to convert a portion of the indicated resources at Natougou to the measured category and to increase our resources base, the ability to maintain our initial exploration budget of $18 million, 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 2014 Annual 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 above information has been made public in accordance with the Swedish Securities Market Act and/or the Financial Instruments Trading Act.

Year-End Financial and Operating Highlights

2014 2013 2012
Gold ounces produced 234,300 158,600 172,700
Gold ounces sold 230,200 161,300 170,800
(in thousands of dollars, except amounts per ounce, per tonne and per share)
From Continuing Operations
Revenues - Gold sales 289,349 226,618 287,209
Operating income 46,359 18,942 66,471
Net income (loss) from continuing operations attributable to equity shareholders 15,812 (9,227 ) 14,927
Basic earnings (loss) per share from continuing operations 0.06 (0.03 ) 0.06
Diluted earnings (loss) per share from continuing operations 0.06 (0.03 ) 0.05
Cash flows from operating activities from continuing operations1 120,730 77,562 113,944
Operating cash flows per share from continuing operations2 0.44 0.28 0.42
Average realized selling price (per ounce) 1,257 1,405 1,682
Cash operating cost (per ounce produced)3 580 707 662
Cash operating cost (per tonne processed)3 49 40 42
Total cash cost (per ounce sold)4 649 777 750
From Discontinued Operations
Net loss from discontinued operations attributable to equity shareholders5 (11,339 ) (75,995 ) (29,722 )
Total
Net income (loss) attributable to equity shareholders 4,473 (85,222 ) (14,795 )
Basic earnings (loss) per share 0.02 (0.31 ) (0.05 )
Diluted earnings (loss) per share 0.02 (0.31 ) (0.05 )
Total assets 618,302 567,546 691,714
Cash dividends declared per share - 0.02 0.04
1 Cash flows from operating activities from continuing operations exclude changes in non-cash working capital items.
2 Operating cash flows per share from continuing operations are a non-IFRS financial performance measure with no standard definition under IFRS. See the "Non-IFRS financial performance measures from continuing operations" section of the Corporation's MD&A, note 23.
3 Cash operating cost is a non-IFRS financial performance measure with no standard definition under IFRS and is calculated using ounces produced and tonnes processed. See the "Non-IFRS financial performance measures from continuing operations" section of the Corporation's MD&A, note 23.
4 Total cash cost is a non-IFRS financial performance measure with no standard definition under IFRS and represents the mining operation expenses and government royalties per ounce sold.
5 The year ended December 31, 2014 includes a non-cash amount of $9,691,000 regarding the reversal of the non-controlling interest as a result of the sale of the Kiniero Mine.

Fourth Quarter Financial and Operating Highlights

Three-month period
ended December 31,
2014 2013 Variation
Gold ounces produced 61,800 35,700 73 %
Gold ounces sold 65,500 40,100 63 %
(in thousands of dollars, except amounts per ounce, per tonne and per share)
From continuing operations
Revenues - Gold sales 78,591 50,771 55 %
Operating income (loss) 14,873 (8,407 ) -
Net income (loss) from continuing operations attributable to equity shareholders 4,609 (7,098 ) -
Basic earnings (loss) per share from continuing operations 0.02 (0.03 ) -
Diluted earnings (loss) per share from continuing operations 0.02 (0.03 ) -
Cash flows from operating activities from continuing operations1 40,416 12,172 232 %
Operating cash flows per share from continuing operations2 0.15 0.04 275 %
Average realized selling price (per ounce) 1,200 1,266 (5 %)
Cash operating cost (per ounce produced)3 522 890 (41 %)
Cash operating cost (per tonne processed)3 51 45 13 %
Total cash cost (per ounce sold)4 596 935 (36 %)
From discontinued operations
Net loss from discontinued operations attributable to equity shareholders - (11,700 ) -
Total
Net income (loss) attributable to equity shareholders 4,609 (18,798 ) -
Basic earnings (loss) per share 0.02 (0.07 ) -
Diluted earnings (loss) per share 0.02 (0.07 ) -
1 Cash flows from operating activities from continuing operations exclude changes in non-cash working capital items.
2 Operating cash flows per share from continuing operations are a non-IFRS financial performance measure with no standard definition under IFRS. See the "Non-IFRS financial performance measures from continuing operations" section of the Corporation's MD&A, note 23.
3 Cash operating cost is a non-IFRS financial performance measure with no standard definition under IFRS and is calculated using ounces produced and tonnes processed. See the "Non-IFRS financial performance measures from continuing operations" section of the Corporation's MD&A, note 23.
4 Total cash cost is a non-IFRS financial performance measure with no standard definition under IFRS and represents the mining operation expenses and government royalties per ounce sold.

Consolidated Statement of Financial Position

(Expressed in thousands of US dollars)

As at As at
December 31, December 31,
2014 2013
$ $
Assets
Current assets
Cash and cash equivalents 127,928 82,159
Trade and other receivables 21,470 23,657
Income tax receivable 12,086 9,198
Inventories 59,729 55,140
Other current assets 2,311 2,885
223,524 173,039
Assets held for sale - 4,140
223,524 177,179
Non-current assets
Advance receivable 4,229 3,029
Restricted cash 3,726 3,516
Property, plant and equipment 382,388 382,534
Intangible asset 1,915 1,288
Other non-current assets 2,520 -
394,778 390,367
Total assets 618,302 567,546
Liabilities
Current liabilities
Trade payables and accrued liabilities 49,530 38,820
Restricted share unit liabilities 1,938 1,302
Provisions 6,579 5,359
Income tax payable - 715
58,047 46,196
Liabilities held for sale - 4,386
58,047 50,582
Non-current liabilities
Restricted share unit liabilities 3,967 2,995
Provisions 6,917 7,079
Deferred income tax liabilities 18,766 1,062
Total liabilities 87,697 61,718
Equity
Equity Shareholders
Share capital 466,861 458,033
Contributed surplus 10,889 12,687
Retained earnings 25,932 21,459
503,682 492,179
Non-controlling interests 26,923 13,649
Total equity 530,605 505,828
Total liabilities and equity 618,302 567,546

Consolidated Statement of Income (Loss)

For the years ended December 31, 2014 and 2013

(Expressed in thousands of US dollars, except per share amounts)

2014 2013
$ $
Revenue - Gold sales 289,349 226,618
Costs of operations
Mining operation expenses 149,305 125,393
Depreciation of property, plant and equipment 72,195 58,110
General and administrative 17,432 19,579
Corporate social responsibility expenses 826 1,310
Share-based compensation 3,232 3,284
Operating income 46,359 18,942
Other expenses (income)
Finance income (343 ) (249 )
Finance costs 1,646 1,238
Foreign exchange loss (gain) 5,251 (1,653 )
Impairment of investment in GoviEx - 19,600
Income before income taxes 39,805 6
Income tax expense
Current 1,382 4,897
Deferred 19,028 812
20,410 5,709
Net income (loss) from continuing operations 19,395 (5,703 )
Net loss from discontinued operations (1,648 ) (78,262 )
Net income (loss) for the year 17,747 (83,965 )
Net income (loss) from continuing operations attributable to:
Equity shareholders 15,812 (9,227 )
Non-controlling interests 3,583 3,524
19,395 (5,703 )
Net loss from discontinued operations attributable to:
Equity shareholders (11,339 ) (75,995 )
Non-controlling interests 9,691 (2,267 )
(1,648 ) (78,262 )
Net income (loss) for the year attributable to:
Equity shareholders 4,473 (85,222 )
Non-controlling interests 13,274 1,257
17,747 (83,965 )
Basic earnings (loss) per share from continuing operations 0.06 (0.03 )
Basic loss per share from discontinued operations (0.04 ) (0.28 )
Basic earnings (loss) per share) 0.02 (0.31 )
Diluted earnings (loss) per share from continuing operations 0.06 (0.03 )
Diluted loss per share from discontinued operations (0.04 ) (0.28 )
Diluted earnings (loss) per share 0.02 (0.31 )

Consolidated Statement of Comprehensive Income (Loss)

For the years ended December 31, 2014 and 2013

(Expressed in thousands of US dollars)

2014 2013
$ $
Net income (loss) for the year 17,747 (83,965 )
Other comprehensive income (loss)
Item that may be classified to net income (loss)
Change in fair value of investments - (19,600 )
Reclassification of accumulated other comprehensive loss to net income (loss) - 19,600
Other comprehensive income for the year - -
Comprehensive income (loss) for the year 17,747 (83,965 )
Attributable to:
Equity shareholders 4,473 (85,222 )
Non-controlling interests 13,274 1,257
17,747 (83,965 )

Consolidated Statement of Cash Flows

For the years ended December 31, 2014 and 2013

(Expressed in thousands of US dollars)

2014 2013
$ $
Cash flows from (used in):
Operating activities
Net income (loss) for the year from continuing operations 19,395 (5,703 )
Adjustments for :
Depreciation of property, plant and equipment 72,195 58,110
Share-based compensation 3,232 3,284
Unrealized foreign exchange loss 6,799 1,057
Impairment of investment in GoviEx - 19,600
Deferred income taxes expense 19,028 812
Other 81 402
120,730 77,562
Changes in non-cash working capital items 1,140 (14,445 )
Net cash provided by operating activities from continuing operations 121,870 63,117
Net cash provided by (used in) operating activities from discontinued operations (2,088 ) 12,636
Net cash provided by operating activities 119,782 75,753
Financing activities
Financing fees (1,020 ) -
Proceeds on issuance of share capital 5,700 2,079
Payment of dividends to non-controlling interest - (897 )
Payment of dividends to equity shareholders - (10,691 )
Net cash provided by (used in) financing activities from continuing operations 4,680 (9,509 )
Net cash provided by financing activities from discontinued operations - -
Net cash provided by (used in) financing activities 4,680 (9,509 )
Investing activities
Advance made to Sonabel (2,068 ) (4,050 )
Increase in restricted cash (641 ) (2,593 )
Acquisitions of property, plant and equipment (68,591 ) (109,119 )
Net cash used in investing activities from continuing operations (71,300 ) (115,762 )
Net cash used in investing activities from discontinued operations - (5,899 )
Net cash used in investing activities (71,300 ) (121,661 )
Effect of exchange rate changes on cash and cash equivalents (7,833 ) (1,435 )
Change in cash and cash equivalents during the year 45,329 (56,852 )
Cash and cash equivalents of continuing operations - beginning of year 82,159 139,451
Cash and cash equivalents of discontinued operations - beginning of year 440 -
Cash and cash equivalents - end of year 127,928 82,599
Less cash and cash equivalents of discontinued operations - end of year - 440
Cash and cash equivalents of continuing operations - end of year 127,928 82,159
Interest received 343 249
Income tax paid 5,276 19,590

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