SEMAFO Inc.
TSX : SMF

SEMAFO Inc.

March 16, 2011 17:15 ET

SEMAFO Reports Record 2010 Cash Flow From Operations of $147.5 Million

Record Production - Revenues - Net Income - Cash Margins

MONTREAL, QUEBEC--(Marketwire - March 16, 2011) - SEMAFO (TSX:SMF) today announced its financial and operational results for the fourth quarter and year ended December 31, 2010. All amounts are in US dollars unless otherwise stated.

2010 Highlights

In 2010 SEMAFO had its best year ever with production totaling 261,100 ounces of gold for sales of $323.3 million, compared to gold production of 242,400 ounces and sales of $240.8 million in 2009. Cash flow from operating activities increased to a record $147.5 million, compared to $92.1 million in 2009. Highlights for the year ended December 31, 2010 include:

  • Record gold production of 261,100 ounces, a 8% increase over the same period last year

  • Record gold sales of $323.3 million, an increase of 34% compared to last year

  • Cash operating cost of $466 per ounce produced compared to $463 for the same period in 2009

  • Record operating income of $128.9 million, an increase of 112% compared to 2009

  • Record total cash margin of $723 per ounce

  • Record net income of $103.2 million or $0.39 per share, an improvement of 137% over the same period last year

  • Record cash flow from operating activities of $147.5 million or $0.56 per share, an increase of 60% over last year

  • Increase of 180% in proven and probable reserves at Mana

  •  Continued exploration success at Mana

  •  Successful completion of Phases I, II and III of the Mana plant expansion

  •  Encouraging exploration results at Samira Hill

Fourth Quarter Highlights

  •  Gold production of 61,500 ounces, a 6% increase over the same period last year

  •  Gold sales of $86.4 million, an increase of 18% compared to last year

  •  Cash operating cost of $533 per ounce produced compared to $506 for the fourth quarter 2009

  • Cash operating cost of $ $408 per ounce produced at Mana compared to $399 for the same period in 2009

  •  Operating income of $33.2 million, an increase of 90% compared to 2009

  • Record total cash margin of $795 per ounce

  •  Net income of $27.0 million or $0.09 per share, an improvement of 157% over the same period last year

  •  Cash flow from operating activities of $38.7 million or $0.14 per share, an increase of 62% over last year

  •  Successful completion of Phase III of the Mana plant expansion

A Word from the CEO

SEMAFO has grown from a grassroots exploration company to a three-mine gold producer. Our operations have evolved, essentially owing to our unique savoir-faire, and today provide our Corporation with a solid platform for sustainable growth. In 2010, we achieved record production, revenues, net income, cash flow from operating activities and operating cash flow per share, while our cash operating cost remained comparable to the previous year.

Over the past five years our cash margin rose from $45 to $723 per ounce, outpacing the average gold price increase. Our cash flow from operating activities totaled $147.5 million in 2010 compared to negative cash flow of $ 4 million in 2006, and our basic net income per share increased from a $0.11 basic net loss per share to a $0.39 basic net income per share for the same period.

In 2010, we celebrated the production of our one-millionth ounce of gold, an accomplishment unmatched by the majority of companies in our industry.

Energized by a 180% increase in reserves and 195% in inferred resources at Mana, our team continues to focus on this property as a flagship asset in our value creation model. Recognizing that the structures identified thus far represents less than 10% of the property, in 2010 we invested $18 million in accelerated exploration programs. We are motivated by the excellent 2010 exploration results and hence have established an initial $30-million exploration budget for the Mana property in 2011.

We are pleased with the successful completion of our Mana plant expansion, which increased plant capacity from 4,000 tonnes per day to 6,000 tonnes per day in hard rock. The construction and commissioning of all three phases of the plant expansion were efficiently scheduled and executed on time and on budget with little or no impact on our operations.

The next few years promise to be an exciting time for SEMAFO, as our expanded Mana property continues to strengthen our production profile. As part of this initiative, we will continue to maximize Mana's on-surface and at-depth exploration programs to ultimately increase shareholder value.

In the past five years we have proven that our growth is sustainable and that our unique savoir-faire is present at all levels of our operations. We are now considered a significant player in our industry and remain committed to continue to grow responsibly to create value for our shareholders.

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 Company's website at www.semafo.com. These and other Company reports are also available on the website maintained by the Canadian Securities regulators at www.sedar.com.

2010 Fourth Quarter and Year-End Conference Call

SEMAFO will host a conference call to discuss the results, as well as to provide an update on operations.

Date: Thursday, March 17, 2011
Time: 10:00 AM (ET)
Tel. local & overseas: 416 641-6699
Tel. North America: 1 888 223-4512

The conference call will feature Benoit La Salle, President and Chief Executive Officer, Benoit Desormeaux, Executive Vice-President and Chief Operating Officer, Martin Milette, Chief Financial Officer, Michel Crevier, SEMAFO's Geology Manager and Qualified Person, and Patrick Moryoussef, Mining Operations Manager.

The conference call will be archived for replay until April 7, 2011. To access the archived conference call, please dial 1 800 558-5253 and enter pass code 21512810.

A live audio webcast of the conference can be accessed through SEMAFO's website at www.semafo.com. The webcast will be available for replay for a period of 90 days.

Annual and Special Shareholders Meeting

SEMAFO's Annual Meeting of Shareholders will be held on Tuesday, May 10, 2011 at 4:00 p.m. at Hotel Reine-Élizabeth, Salle Duluth, 900 René-Lévesque Boulevard West, in Montreal, Quebec. Attendees will have the opportunity to ask questions and meet the management team and Board of Directors.

Consolidated Results and Mining Operations

  2010 2009 Variation  
Operating Highlights        
Gold ounces produced 261,100 242,400 8 %
Gold ounces sold 260,800 243,800 7 %
(In thousands of dollars, except amounts per ounce
and per tonne)
   
Revenues – Gold sales 323,275 240,788 34 %
Mining operating costs 122,144 114,795 6 %
Government royalties 12,712 9,470 34 %
Operating income 128,873 60,905 112 %
Income tax expense 20,204 10,875 86 %
Non-controlling interest 1,752 - -  
Net income 103,246 43,505 137 %
Adjusted net income 1 103,246 39,968 158 %
Cash flow from operating activities 2 147,451 92,147 60 %
Basic net income per share 0.39 0.18 117 %
Diluted net income per share 0.38 0.18 111 %
Operating cash flow per share 3 0.56 0.38 47 %
         
Average realized price (per ounce) 1,240 988 26 %
Cash operating cost (per ounce produced) 4 466 463 1 %
Cash operating cost (per tonne processed) 4 33 33 -  
Total cash cost (per ounce sold) 5 517 510 1 %
Total cash margin (per ounce sold) 6 723 478 51 %
         
   
 1 Adjusted net income is a non-GAAP measure. For 2009, the adjusted net income represents the net income excluding a gain on settlement of advances payable totaling $3,537,000.
 2  Cash flow from operating activities excludes changes in non-cash working capital items and settlement of liabilities related to asset retirement obligations.
 3  Operating cash flow per share is a non-GAAP measure. See the "Non-GAAP Measures" section of the Corporation's MD&A.
 4 Cash operating cost is a non-GAAP measure and is calculated using ounces produced and tonnes processed. See the "Non-GAAP Measures" section of the Corporation's MD&A.
 5 Total cash cost is a non-GAAP measure and represents the mining operating costs and government royalties per ounce sold.
 6  Total cash margin is a non-GAAP measure and is calculated using the average realized price and the total cash cost.
       
       
       
Consolidated Balance Sheets    
As at December 31, 2010 and 2009    
(Expressed in thousands of US dollars)     
  2010
$
2009
$
 
Assets      
Current assets      
Cash on hand 220,439 62,481  
Restricted cash (note 8) 3,750 -  
Accounts receivable 6,021 9,894  
Inventories (note 4) 68,952 60,300  
Other short-term assets (note 5) 5,238 4,556  
  304,400 137,231  
Restricted cash 657 4,407  
Property, plant and equipment (note 6) 257,413 200,375  
Investment and other assets (note 7) 19,600 19,743  
  582,070 361,756  
Liabilities      
Current liabilities      
Accounts payable and accrued liabilities 36,789 33,658  
Income tax payable 21,231 5,019  
Current portion of long-term debt (note 8) 14,824 18,808  
  72,844 57,485  
Long-term debt (note 8) - 15,612  
Advance payable (note 9) 3,007 3,007  
Asset retirement obligations (note 10) 7,008 5,879  
Future income taxes (note 14) 3,023 7,110  
  85,882 89,093  
       
Non-controlling interest 1,752 -  
       
Shareholders' Equity      
Share capital (note 11) 452,542 329,759  
Contributed surplus (note 12) 8,053 5,998  
Retained earnings (Deficit) 33,841 (63,094 )
  494,436 272,663  
  582,070 361,756  
         
         
         
Consolidated Statement of Operations     
For the Years Ended December 31, 2010 and 2009     
(Expressed in thousands of US dollars)     
  2010
$
  2009
$
 
         
Revenue – Gold sales 323,275   240,788  
         
Expenses        
Mining operations 122,144   114,795  
Government royalties 12,712   9,470  
Amortization of property, plant and equipment 41,931   40,863  
Administration 17,145   14,367  
Accretion expense of asset retirement obligations 470   388  
         
  194,402   179,883  
         
Operating income 128,873   60,905  
         
Charitable donations – Fondation SEMAFO 1,068   722  
Interest, banking fees and other income 128   355  
Interest on long-term debt 2,728   4,947  
Stock-based compensation 3,525   1,337  
Change to the fair value of derivative financial instruments (note 13) 145   2,383  
Write-down of exploration property – Datambi project (note 6 b) -   827  
Gain on settlement of advances payable (note 9) -   (3,537 )
Foreign exchange gain (3,923 ) (509 )
         
         
Net income before income taxes and non-controlling interest 125,202   54,380  
         
Income tax expense (recovery) (note 14)        
Current 23,776   5,019  
Future (3,572 ) 5,856  
  20,204   10,875  
Non-controlling interest 1,752   -  
Net income for the year 103,246   43,505  
         
Basic net income per share (note 15) 0.39   0.18  
Diluted net income per share (note 15) 0.38   0.18  
         
         
         
Consolidated Statements of Cash Flows    
As at December 31, 2010 and 2009    
(Expressed in thousands of US dollars)    
  2010
$
  2009
$
 
Cash flows from :        
         
Operating activities        
Net income for the year 103,246   43,505  
Adjustment for :        
    Change to fair value of derivative financial instruments 145   2,383  
    Amortization of property, plant and equipment 41,931   40,863  
    Stock-based compensation 3,525   1,337  
    Accretion expense of asset retirement obligations 470   388  
    Amortization of deferred transaction costs 503   871  
    Gain on settlement of advances payable -   (3,537 )
    Write-down of exploration property -   827  
    Unrealized foreign exchange gain (549 ) (346 )
    Non-controlling interest 1,752   -  
    Future income taxes (recovery) expense (3,572 ) 5,856  
  147,451   92,147  
  Changes in non-cash working capital items and settlement of liabilities related to asset retirement obligations (note 17 a) 12,311   (6,984 )
  159,762   85,163  
Financing activities        
Reimbursement of long-term debt (20,065 ) (26,951 )
Settlement of advances payable -   (3,000 )
Issuance of share capital 121,313   35,713  
Share issue expenses (6,311 ) (2,212 )
  94,937   3,550  
Investing activities        
Additions to property, plant and equipment (96,741 ) (35,084 )
Financial instruments settled -   (15,483 )
Decrease in restricted cash -   893  
  (96,741 ) (49,674 )

Change in cash on hand during the year
157,958   39,039  
         
Cash on hand – beginning of year 62,481   23,442  
         
Cash on hand – end of year 220,439   62,481  

About SEMAFO

SEMAFO is a Canadian-based mining company with gold production and exploration activities in West Africa. The Company currently operates three gold mines: the Mana Mine in Burkina Faso, the Samira Hill Mine in Niger and the Kiniero Mine in Guinea. 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 "continues", "will", "growth", "create", "evolve", "become", "focus", "maximize", "pursuing" 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 complete our $30 million exploration program for the Mana property in 2011, the ability to continue to maximize Mana's on-surface and at-depth exploration programs to ultimately increase shareholder value, the ability to continue to grow responsibly to create value for our shareholders, 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 2010 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.

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