SEMAFO: Cash Flow from Operating Activities before Changes in non-Cash Working Capital of $247 Million

Montreal, Quebec, March 3, 2020 /CNW/ – SEMAFO Inc. (TSX, OMX: SMF) is pleased to announce results of operations, development and exploration activities for the year-ended December 31, 2019. All amounts are in US dollars unless otherwise stated.

2019 - THE YEAR IN REVIEW 

• Production increased by 39% to 340,900 ounces at an all-in sustaining cost (AISC) of $724 per ounce [1], representing a 24% decrease 
• Cash flow from operating activities before changes in non-cash working capital increased to $247 million or $0.75 per share [1]
• First production from Siou underground
• Successful acquisition and integration of Savary Gold's Karankasso properties to the Bantou Project
• Inferred mineral resources at the Bantou Project increased to 2.2 million ounces
• Completion of a positive preliminary economic assessment (“PEA”) for Nabanga with after-tax NPV of $100 million at a $1,300 gold price

2020 GUIDANCE 

• Restart of the Boungou plant and initial three-month production of 42,000 - 46,000 ounces expected from processing of stockpiles at an AISC of between $530 and $560 per ounce 
• Phase two of the Boungou plan includes a Q4 2020 mining restart for production of between 88,000 and 104,000 ounces at AISC of between $745 and $795 per ounce
• Mana is expected to produce between 185,000-205,000 ounces of gold from Siou underground and the Siou and Wona open pits

[1]     All-in sustaining cost, cash flow from operating activities before changes in non-cash working capital and per share are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS Financial Performance Measures" defined at the end of this press release.

Benoit Desormeaux, President and Chief Executive Officer of SEMAFO, stated: " Despite a challenging year, we achieved a solid operational performance at Boungou in 2019 while concurrently producing at Mana and progressing development of Siou underground on time and on budget.   We have had a positive start to 2020 with the restart of the Boungou plant to process the stockpiles. Mana is expected to deliver another strong year and to increase cash flow with the successful ramp-up of Siou underground. The Bantou Project inferred resource positions us well for reaching this year’s resource goal of 2.5M and 3.0M ounces and demonstrates the potential of the district scale land package. We remain deeply grateful to our employees, contractors and suppliers whose resilience and engagement have contributed to these achievements.”

2019 - ANNUAL FINANCIAL & OPERATIONAL HIGHLIGHTS 

The following highlights include a 10-week shutdown at the Mana Mine and a 7-week suspension at the Boungou Mine. As commercial production at the Boungou Mine commenced on September 1, 2018, the comparative figures include the Mana Mine and only four months of operations from the Boungou Mine.

• Cash flow from operating activities before changes in non-cash working capital of $247.4 million or $0.75 per share [1] compared to $110.2 million or $0.34 per share [1] for the same period in 2018 
• Consolidated annual gold production of 340,900 ounces, compared to 244,600 ounces for the same period in 2018, a 39% increase
• Gold sales of $475.8 million compared to $296.7 million for the same period in 2018
• All-in sustaining cost [1] of $724 per ounce sold compared to $951 for the same period in 2018, a 24% decrease 
• Adjusted operating income [1] of $133.4 million compared to $8.5 million for the same period in 2018
• Adjusted net income attributable to shareholders of the Corporation [1] of 73.7 million or $0.22 per share [1] compared to adjusted net loss of $4.5 million or $0.01 loss per share [1] for the same period in 2018 

FOURTH QUARTER 2019 FINANCIAL & OPERATIONAL HIGHLIGHTS 

The following fourth quarter 2019 highlights include a 4-week shutdown at Mana and a 7-week suspension at Boungou.

• Cash flow from operating activities before changes in non-cash working capital of $44.6 million or $0.13 per share [1] compared to $54.9 million or $0.17 per share [1] for the same period in 2018 
• Consolidated gold production of 69,900 ounces compared to 95,200 ounces for the same period in 2018 
• Gold sales of $101.9 million compared to $114.7 million for the same period in 2018 
• All-in sustaining cost [1] of $698 per ounce sold compared to $782 for the same period in 2018 
• Adjusted operating income [1] of $26.1 million compared to $21.0 million for the same period in 2018 
• Adjusted net income attributable to equity shareholders of $16.3 million or $0.05 per share compared to $7.8 million or $0.02 per share for the same period in 2018 

2020 Exploration 

An initial exploration budget of $7 million has been set for 2020 on our three priority properties - Bantou ($4 million), Mana ($2 million) and Boungou ($1 million).

Bantou

At Bantou, the initial $4-million exploration program will involve a 19,300-meter drill program that is a continuation of last year’s program on the properties and designed to test prospective areas outside of the existing inferred resources. We remain committed to our resource goal of 2.5 - 3.0 million ounces by the end of 2020.

This initial budget is likely to increase as the exploration program moves outside the existing zones and follows up interesting intersections like 14.6 g/t Au over 21 meters at Tiébi. Highlights of best results obtained in the fourth quarter are shown in Table 1.

[1]     Cash flow from operating activities before changes in non-cash working capital and per share, all-in sustaining cost, adjusted operating income, adjusted net income (loss) attributable to shareholders of the Corporation and adjusted basic earnings (loss) per share are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS Financial Performance Measures" defined at the end of this press release. During the fourth quarter of 2019, adjusted operating income and adjusted net income attributable to equity shareholders exclude the non-cash impairment of property, plant and equipment of $9,259,000 mainly related to the exploration and evaluation assets of the Korhogo property, a gain of $3,782,000 in share-based compensation related to the change in fair value of the share price and $7,085,000 of fixed expenses incurred during shutdown and suspension period. The adjusted net income attributable to equity shareholders also excludes a foreign exchange gain of $16,000 and a recovery of deferred tax effect of currency translation on tax base of $4,171,000.

Table 1 - Highlights from Bantou Q4 2019 Exploration*

*All assays are uncut. Lengths are core lengths. True widths remain undetermined.

Boungou

The $1-million exploration program at Boungou for 2020 comprises 3,000 meters of RC drilling and has the objective of identifying new near-mine resources. Expansion of the program is contingent on an improvement in regional security. Starting in the second quarter, the RC program will follow up last year’s suspended work.

Mana

At Mana, a $2-million budget has been established to follow up targets identified by the geologic review carried out by an external consulting firm last year. The bulk of the 3,800-meter RC drill campaign will be carried out on three different areas around Siou. We will also be conducting an underground drill program to test if the mineralization extends at depth below the existing underground reserves.

Boungou, Burkina Faso 

Mining Operations
Commercial production at Boungou was declared on September 1, 2018.

[1]     Gold ounces produced exclude pre-commercial production of 12,000 ounces.
[2]     Gold sales exclude those resulting from pre-production activities that were offset against capitalized construction costs and amounted to $14,994,000.
[3]     Cash operating cost, cash operating cost including stripping, 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" defined at the end of this press release.
[4]     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.

Boungou, Burkina Faso 

Mining Operations

The following includes a 7-week suspension at Boungou in 2019. As commercial production commenced on September 1, 2018, the comparative figures for Boungou Mine only include four months of operations at the Boungou Mine in 2018.

Grade in 2019 increased, compared to 2018, to average 6.65 g/t Au, as the mine plan reached higher-grade zones. Due to the higher grade, the all-in sustaining cost [1] was $497 per ounce sold compared to $596 per ounce sold in 2018. Recoveries also improved during 2019 to reach 96%, a 2% improvement compared to 2018. As at December 31, 2019, the stockpile holds 1.1 million tonnes at an average grade of 3.4 g/t Au, representing approximately ten months of mill feed.

Mana, Burkina Faso 
Mining Operations

[1]     Cash operating cost, cash operating cost including stripping, 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" defined at the end of this press release.
[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.

Mana, Burkina Faso 
Mining Operations

Following a pit wall failure in the Wona pit in August 2019, processing of ore at Mana was suspended for a 10-week period. Subsequently, mining operations focused on stripping activities at the Siou and Wona open pits and on development of Siou underground.

In 2019, the ore mined from the open pit decreased and the strip ratio was higher compared to 2018, given our focus on development activities due to the pit wall failure at Mana. The ore processed and gold ounces produced and sold decreased compared to 2018, following the suspension of processing activities at the Mana Mine. Extraction of ore from Siou underground commenced in the fourth quarter 2019 providing 99,600 tonnes of ore at 4.6 g/t Au. In 2019, gold sales amounted to $179,992,000 compared to $229,713,000 in 2018. The variation between gold ounces sold and gold ounces produced is due to the timing of delivery. The lower mining operations expenses are mainly due to the focus on stripping activities. The decrease in depreciation of property, plant and equipment is due to the lower gold ounces sold compared to 2018.

Siou Underground Development 

In the fourth quarter of 2019, underground development prior to production continued on time and on budget. First production occurred in December in line with reaching full production of 2,000-tpd in the first quarter of 2020.

In 2019, we decided to take advantage of available equipment and our mining contractor’s productivity to get ahead of 2020 grade control drilling and mine development plans. As a result, by the end of 2019, we had grade-control drilled 50% of the orebody and developed up to 1,200 meters over our 2019 plan.

2019 Reserves and Resources - as at December 31, 2019 

As at December 31, 2019, total proven and probable mineral reserves stood at 2,640,100 ounces of gold. Measured and indicated mineral resources increased by 9% to 3,302,500 ounces. Inferred mineral resources increased by 86% to 3,977,800 ounces compared to year-end 2018 mainly due to an increase at the Bantou Project.

Changes in reserves are net of 2019 depletion due to production. All mineral resources reported are exclusive of mineral reserves. Mineral reserves and resources reported at Mana and at Boungou were estimated using a gold price of $1,200 and $1,400 per ounce, respectively. Mineral resources at the Bantou and Nabanga Projects were estimated using a gold price of $1,500 per ounce.

Boungou Mine

Total proven and probable reserves at Boungou were 10.3 million tonnes averaging 3.72 g/t Au for 1.2 million ounces of gold in 2019, compared to 10.9 million tonnes at 3.94 g/t Au for 1.4 million ounces in 2018. The decrease is due to depletion as Boungou Mine produced a total of 205,200 ounces in 2019. Total measured and indicated (“M&I”) resources increased by 60% to 5.8 million tonnes at 3.25 g/t Au for 0.6 million ounces. The updated 2019 M&I resource is in-pit constrained and now incorporates remaining ounces at a cut-off grade of 2.0 g/t Au.

Mana

At year-end 2019, Mana’s mineral reserves totalled 15 million tonnes at an average grade of 2.91 g/t Au for 1.4 million ounces, compared to 16 million tonnes averaging 2.96 g/t Au for 1.5 million ounces in 2018. Mana’s mineral resources remained constant at 43.6 million tonnes at an average grade of 1.92 g/t Au for 2.7 million ounces.

Bantou Project

At the end of 2019, the Bantou Project hosted an inferred mineral resource estimate of 51 million tonnes at 1.37 g/t Au for 2.2 million ounces of gold. The Bantou Project, which is located approximately 170 kilometers south of the Mana Mine in Burkina Faso, comprises three groups of deposits: Bantou, Bantou Nord and Karankasso.

The mineral resources at Bantou Project were estimated using a gold price of $1,500 per ounce. For further details, refer to the February 24, 2020 press release.

Yactibo (Nabanga Deposit)

Inferred resources at the Nabanga deposit remain unchanged at 3.4 million tonnes at 7.69 g/t Au for 841,000 ounces of contained gold.

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.

Fourth Quarter Conference Call
A conference call will be held tomorrow, March 4, 2020 at 10:00 EST, to discuss the fourth quarter results. Interested parties are invited to call the following telephone numbers to participate in the call. A live audio webcast of the conference call will be accessible for a period of 90 days through SEMAFO’s website at www.semafo.com.

Tel. local & overseas: +1 (514) 225 7341
Tel. North America: 1 (888) 390 0605
Webcast: www.semafo.com
Replay overseas: +1 (416) 764 8677
Replay N. America: 1 (888) 390 0541
Replay pass code: 086322#
Expiration: April 4, 2020

Annual General Meeting of Shareholders 
SEMAFO's Annual General Meeting of Shareholders will be held on Tuesday, May 14, 2020 at 15:00 EDT at SEMAFO's office, 100 boul. Alexis-Nihon, 7th floor, Saint-Laurent (Quebec). Attendees will have the opportunity to ask questions and meet the management team and members of the board of directors.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. All statements other than statements of present or historical facts are forward-looking. 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", "expected”, "plan", “increase”, "ramp-up", "positions us well", "potential", "initial", "priority", "likely", "objective", "estimated", "committed", "building", "leveraging", “pipeline” 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 (i) produce 42,000 - 46,000 ounces during the initial three-month phase at Boungou at an AISC of between $530 and $560 per ounce,(ii) restart mining at Boungou in Q4 2020, (iii) produce between 88,000 and 104,000 ounces at Boungou at an AISC of between $745 and $795 per ounce during Phase two of our Boungou plan, (iv) produce between 185,000 - 205,000 ounces of gold from Siou underground and the Siou and Mana open pits, (v) increase cash flow from Mana with the successful ramp-up of Siou underground, (vi) reach the resource goal of 2.5 - 3.0M ounces at Bantou by the end of 2020 and demonstrate the potential of the district land package,, (vii) meet our initial exploration budget of $7 million, (viii) identify new near-mine resources at Boungou, (ix) reach full production of 2,000 tpd at Siou Underground in the first quarter of 2020, the ability to increase reserves and resources, 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), the security of our operations 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 2019 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.

Consolidated Results and Mining Operations 

[1]     Gold ounces produced exclude pre-commercial production of 12,000 ounces from Boungou in 2018.
[2]     Gold sales exclude those resulting from pre-production activities that were offset against capitalized construction costs and amounted to $14,994,000 from Boungou in 2018.
[3]     Adjusted operating income, adjusted net income (loss) attributable to shareholders of the Corporation, adjusted basic earnings (loss) per share, cash flow from operating activities before changes in non-cash working capital and per share, 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" defined at the end of this press release.

Fourth Quarter Consolidated Results and Mining Operations 

[1]     Gold ounces produced exclude pre-commercial production of 12,000 ounces from Boungou in 2018.
[2]     Gold sales exclude those resulting from pre-production activities that were offset against capitalized construction costs and amounted to $14,994,000 from Boungou in 2018.
[3]     Adjusted operating income, adjusted net income (loss) attributable to shareholders of the Corporation, adjusted basic earnings (loss) per share, cash flow from operating activities before changes in non-cash working capital and per share, 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" defined at the end of this press release.

Non-IFRS Financial Performance Measures 

Cash Operating Cost and Cash Operating Cost including Stripping
The Corporation reports cash operating costs and cash operating cost including stripping per tonne processed. The Corporation believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors may find that the cash operating costs and cash operating cost including stripping per tonne processed provided useful information to assist investors with their evaluation of the Corporation's performance and ability to generate cash flow from its operations. A reconciliation of cash operating cost calculated in accordance with the Gold Institute Standard to operating costs is included in the following table, for the years ended December 31, 2019 and 2018:

[1]     Stripping cost excludes mining costs incurred during the shutdown period at the Mana Mine.

Total Cash Cost
The Corporation reports total cash costs based on ounces sold. The Corporation believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors may find that the total cash cost per ounce sold provided useful information to assist investors with their evaluation of the Corporation's performance and ability to generate cash flow from its operations. A reconciliation of total cash cost is included in the following table, for the years ended December 31, 2019 and 2018:

All-in Sustaining Cost
All-in sustaining cost represents the total cash cost plus sustainable capital expenditures and stripping costs presented per ounce sold. The Corporation believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors may find that the all-in sustaining cost per ounce sold better meets their needs by assessing the Corporation's operating performance and its ability to generate free cash flow. The Corporation classified sustaining capital expenditures which are required to maintain existing operations and capitalized stripping. A reconciliation of all-in sustaining cost is included in the following table, for the years ended December 31, 2019 and 2018:

Cash Flow from Operating Activities before Changes in non-Cash Working Capital
The Corporation uses cash flow from operating activities before changes in non-cash working capital to supplement its consolidated financial statements, and calculates it by not including the period to period movement of non-cash working capital items, like trade and other receivables, income tax receivable, inventories, other current assets, trade payables and accrued liabilities, share unit plan liabilities and provisions. The Corporation believes this provides an alternative indication of its cash flow from operating activities and may be meaningful to investors in evaluating our past performance or future prospects. It is not meant to be a substitute for cash flow from operating activities, which is calculated according to IFRS.

[1]     Sustaining capital expenditure excludes sustaining capital expenditure incurred during the shutdown period at the Mana Mine and suspension period at the Boungou Mine.

Cash Flow from Operating Activities before Changes in non-Cash Working Capital per Share
The Corporation presents cash flow from operating activities before changes in non-cash working capital per share as it believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors may find that the cash flow from operating activities before changes in non-cash working capital per share provided useful information to assist investors with their evaluation of the Corporation's performance and ability to generate cash flow from its operations. A reconciliation of cash flow from operating activities before changes in non-cash working capital per share is included in the following table, for the years ended December 31, 2019 and 2018:

Adjusted Accounting Measures
Net income and operating income have been adjusted with items considered temporal and that do not reflect the Corporation core mining operations. The Corporation believes certain investors may find that the adjusted net income (loss) attributable to shareholders of the Corporation, adjusted basic earnings (loss) per share and adjusted operating income (loss) provided useful information to assist investors with their evaluation of the Corporation's performance and ability to generate cash flow from its operations. Reconciliations of adjusted accounting measures is included in the following tables, for the years ended December 31, 2019 and 2018:

Consolidated Statements of Financial Position 
(Expressed in thousands of US dollars - audited) 

Consolidated Statements of Income (Loss) 
For the years ended December 31, 2019 and 2018
(Expressed in thousands of US dollars, except per share amounts - audited)

Consolidated Statements of Cash Flows 
For the years ended December 31, 2019 and 2018
(Expressed in thousands of US dollars - audited)

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For more information, contact:

SEMAFO
John Jentz
Vice-President, Corporate Affairs & Investor Relations
Email: John.Jentz@semafo.com
 
Ruth Hanna                                                                           
Analyst, Investor Relations                                  
Email: Ruth.Hanna@semafo.com                                         

Tel. local & overseas: +1 (514) 744 4408
North America Toll-Free: 1 (888) 744 4408
Website: www.semafo.com 

About SEMAFO

SEMAFO is a Canadian-based intermediate gold producer with over twenty years’ experience building and operating mines in West Africa. The Corporation operates two mines, the Boungou and Mana Mines in Burkina Faso. SEMAFO is committed to building value through responsible mining of its quality assets and leveraging its development pipeline.