SEMAFO: Record Quarterly Production and Cash Flow from Operations

Development Pipeline Significantly Strengthened with Savary Acquisition

Montreal, Quebec, May 7, 2019 /CNW/ – SEMAFO Inc. (TSX, OMX: SMF) is pleased to announce record production of 102,400 ounces of gold and cash flow from operating activities[1] of $79 million or $0.24 per share[2] for the quarter ended March 31, 2019. All amounts are in US dollars unless otherwise stated.

Highlight of Q1 2019

  • Consolidated gold production of 102,400 ounces
  • Cash flows from operating activities[1] of $79 million or $0.24 per share[2]
  • Net income attributable to shareholders of $17.7 million or $0.05 per share
  • Acquisition of Savary Gold announced in Q1 and closed April 30, 2019
  • Three rigs drilling at Bantou with results expected early June
  • Balance sheet remains conservative with net cash and 100% exposure to upside in gold price

Benoit Desormeaux, President and Chief Executive Officer of SEMAFO, states: "My congratulations to the entire team for a record first quarter of 2019. Both assets performed well and the strong quarterly contribution from Boungou helped to achieve record production and financial performance on a gross and per share basis. Our team has managed this accomplishment while minimizing dilution, maintaining a net cash position and retaining 100% upside to the price of gold. With the Savary acquisition closed, we have greatly strengthened our development asset base and growth profile. Combining Savary with our Bantou property produced a 1,250 km² district scale land package on the prolific Houndé greenstone belt in a country where we have a 20-year history. With our robust cash flow profile, clean balance sheet, and strong development pipeline we have solidified our position as a leading intermediate gold producer and are well positioned to deliver long term shareholder value."

[1]   Cash flows from operating activities exclude changes in non-cash working capital items and is a non-IFRS performance measure
[2]   Operating cash flows per share is a non-IFRS financial performance measure with no standard definition under IFRS. See the "Non-IFRS Financial Performance Measures" section of the MD&A, note 19.


Consolidated Results and Mining Operations 

Three-month periods     
ended March 31,     
2019  2018  Variation 
Gold ounces produced  102,400  45,500    125 % 
Gold ounces sold  106,100  46,900    126 % 
(in thousands of dollars, except amounts per ounce, per tonne and per share) 
Revenues – Gold sales  138,541  62,698 121 % 
Operating income  40,359  (8,065 )     
Net income attributable to shareholders of the Corporation 17,666  (4,710 )     
   Basic earnings per share  0.05  (0.01 )     
   Diluted earnings per share  0.05  (0.01 )     
Cash flow from operating activities[2]  78,980  18,391 329 % 
   Per share[1] 0.24  0.06     300 % 
Average realized selling price (per ounce)  1,306  1,336 (2 %) 
Total cash cost (per ounce sold)[1]  484  848 (43 %) 
All-in sustaining cost (per ounce sold)[1] 745  1,083 (31 %) 

2019 Guidance Reiterated

Our 2019 guidance provided on February 8 remains unchanged. Operations are tracking according to plan and in line with annual and longer-term targets. The one area that may require additional explanation is the all-in sustaining cost (AISC). The quarterly AISC for Boungou and Mana are slightly above the top end of the 2019 AISC guidance range. This was expected and over the course of the remainder of the year, the AISC for both operations will track back into the 2019 guidance range, albeit for different reasons. At Boungou, the mine plan calls for the strip ratio to decrease over the year with a corresponding reduction in AISC. At Mana, the mine plan calls for ore in the first half of the year to be sourced exclusively from Wona. Higher grade ore from the Siou North pit will only be available in the second half of 2019. As the average head grade increases at Mana, the AISC will correspondingly decrease.

Siou Underground Continues on Time, on Budget

Underground development at Siou continued to advance well with 2,750 meters completed at quarter-end. The pace of development continues in line with our goal of reaching full production in the first quarter of 2020. At quarter-end, the development continued on budget, with $19.8 million of the total $51.7 million budget incurred. Further, we started grade control drilling with results consistent with the block model. In April 2019, Siou underground was approved by the National Mines Commission and the permit is expected shortly.

[1]   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 MD&A, note 19.
[2]   Cash flows from operating activities exclude changes in non-cash working capital items and are a non-IFRS performance measure

Exploration and Development

Bantou

The focus of the exploration in the first quarter was at Bantou where a total of 58 RC (9,188 meters) and 5 core holes (821 meters) were drilled. The Bantou Zone hosts a maiden inferred resource estimate of 361,000 ounces at 5.35 g/t Au. Initially, one drill was active on the Bantou property testing a variety of prospective target areas. During the quarter, we encountered an interesting area approximately two kilometers north of the Bantou Zone. The area was sufficiently interesting to warrant further drilling, and a second drill was mobilized to continue testing the other target areas. Consequently, much of the drilling in the quarter was carried out on this new area. Assays are being compiled and we expect results, along with a geological interpretation, to be released in early June.

A third drill was added at Bantou in the quarter. The focus of the third drill is to test the extensions of the Bantou Zone along strike and at depth. With three active drills at Bantou, we will be increasing the exploration budget and will provide further details in early June.

Boungou

A total of 7,517 meters of reverse-circulation (RC) drilling was completed in the first quarter on the Dangou NE and Dangou Centre targets. The 7,517 meters represent approximately 30% of the total 25,000-meter program, which is designed to test and establish continuity. Although there have been some encouraging intercepts (1 meter at 22.9 g/t Au, 9 meters at 1.36 g/t Au, 4 meters at 3.67 g/t Au, 1 meter at 6.66 g/t Au, and 3 meters at 5.69 g/t Au), an interpretation can only be provided when the full program has been completed towards the end of the year.

Mana

An RC drill program commenced late March on the satellite targets located just north of Siou. Although some results have been returned so far (3 meters at 3.31g/t Au and 5 meters at 2.16 g/t Au), only 1,064 meters have been completed out of a total of 10,400 meters. The overall 2019 Mana exploration program includes 18,600 meters of RC drilling, including 7,600 meters at Pompoi.

Nabanga

A preliminary economic assessment (PEA) study has been initiated following the release of the updated inferred resource estimation at Nabanga (840,000 oz at 7.7 g/t Au). The study remains in progress and, as scheduled, will be released in the third quarter.

Summary

All areas of the business performed well in the first quarter. We look forward to carrying forward the momentum into the second quarter and beyond.

First Quarter Conference Call

A conference call will be held tomorrow, May 8, 2019 at 10:00 EDT, to discuss the first 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: 629024#
Expiration: May 15, 2019

Annual General Meeting of Shareholders

SEMAFO's Annual General Meeting of Shareholders will be held on Thursday, May 9, 2019 at 10:00 EDT at Club Saint-James, Salon Midway, 1145 avenue Union, in Montreal. 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 “expected”, "upside", " growth", “development pipeline”, “deliver”, “long term”, “guidance”, “targets”, “will”, “continues”, “on-time, on-budget”, “in line with”, “goal”, “shortly”, “prospective”, “focus”, “increasing”, “initiated”, “in progress”, “scheduled”, “committed”, “building”, “leveraging” 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) obtain exploration results from Bantou in early June, (ii) deliver long term shareholder value, (iii) meet our 2019 guidance, (iv) deliver the Siou Underground on-time and on-budget, (v) achieve full production from Siou Underground in the first quarter of 2020, (vi) obtain the permit for the Siou Underground shortly, (vii) complete the Nabanga PEA by the third quarter, (viii) 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 2018 Annual MD&A, as updated in SEMAFO’s 2019 First 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.


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

As at      As at      
March 31,      December 31,      
2019      2018      
$      $      
Assets
Current assets 
Cash and cash equivalents  98,985 96,519
Trade and other receivables  38,163 29,434
Income tax receivable  6,681 6,390
Inventories 84,602 83,211
Other current assets  5,245 5,378
233,676 220,932
Non-current assets 
Advance receivable  1,916 2,117
Restricted cash 25,163 25,340
Property, plant and equipment 796,554 782,060
Intangible asset 1,167 1,204
Other non-current financial assets 5,137 2,622
829,937 813,343
Total assets 1,063,613 1,034,275
Liabilities
Current liabilities 
Trade payables and accrued liabilities 61,172 63,905
Current portion of long-term debt 60,104 60,181
Current portion of finance leases 11,793 7,820
Current portion of share unit plan liabilities 4,172 3,311
Provisions 2,928 3,051
140,169 138,268
Non-current liabilities 
Long-term debt 42,968 57,388
Finance Leases 23,653 20,144
Share unit plan liabilities 2,092 2,263
Provisions 24,022 23,561
Deferred income tax liabilities 53,705 39,548
146,440 142,904
Total liabilities 286,609 281,172
Equity
Shareholders of the Corporation
Share capital 624,308 623,604
Contributed surplus 6,497 6,771
Accumulated other comprehensive (loss) income (16,560 )  (18,909 ) 
Retained earnings  126,882 109,216
741,127 720,682
Non-controlling interests  35,877 32,421
Total equity 777,004 753,103
Total liabilities and equity 1,063,613 1,034,275


Consolidated Statements of Income (loss) 
For the three-month period ended March 31, 2019 and 2018
(Expressed in thousands of US dollars, except per share amounts - unaudited)

Three-month period      
ended March 31,      
2019       2018       
$       $       
Revenue – Gold sales  138,541 62,698
Costs of operations 
Mining operation expenses  51,405 39,778
Depreciation of property, plant and equipment  39,628 25,428
General and administrative  3,960 3,917
Corporate social responsibility expenses  357 222
Share-based compensation  2,832 1,418
Operating income (loss)  40,359 (8,065 ) 
Other expenses (income) 
Finance income  (548 )  (641 ) 
Finance costs  3,556 313
Foreign exchange loss (gain) 496 (428 ) 
Income (loss) before income taxes  36,855 (7,309 ) 
Income tax expense (recovery) 
Current  734 527
Deferred  14,999 (2,936 ) 
15,733 (2,409 ) 
Net income (loss) for the period  21,122 (4,900 ) 
Attributable to:
Shareholders of the Corporation 17,666 (4,710 ) 
Non-controlling interests  3,456 (190 ) 
21,122 (4,900 ) 
Earnings (loss) per share 
Basic 0.05 (0.01 ) 
Diluted 0.05 (0.01 ) 


Consolidated Statements of Cash Flows 
For the three-month period ended March 31, 2019 and 2018 
(Expressed in thousands of US dollars - unaudited)

Three-month period     
ended March 31,    
2019      2018     
$      $     
Cash flows from (used in): 
Operating activities 
Net income (loss) for the period  21,122 (4,900 ) 
Adjustments for:
Depreciation of property, plant and equipment  39,628 25,428
Share-based compensation  2,832 1,418
Unrealized foreign exchange loss (gain) 116 (552 ) 
Deferred income tax expense (recovery) 14,999 (2,936 ) 
Other 283 (67 ) 
78,980 18,391
Changes in non-cash working capital items  (15,736 )  (15,636 ) 
Net cash provided by operating activities  63,244 2,755
Financing activities 
Drawdown of long-term debt  (15,000 )   
Repayment of equipment financing  (77 )  (77 ) 
Payments of finance lease  (2,125 )  (1,145 ) 
Proceeds on issuance of share capital, net of expenses  430 741
Net cash used in financing activities  (16,772 )  (481 ) 
Investing activities 
Acquisition of property, plant and equipment (43,179 )  (61,156 ) 
Net acquisitions of equity investments    (1,606 ) 
Net cash used in investing activities  (43,179 )  (62,762 ) 
Effect of exchange rate changes on cash and cash equivalents (827 )  958
Change in cash and cash equivalents during the period 2,466 (59,530 ) 
Cash and cash equivalents – Beginning of period 96,519 198,950
Cash and cash equivalents – End of period 98,985 139,420
Interest paid 2,775 2,330
Interest received 548 710
Income tax paid 851 1,356


Boungou, Burkina Faso 
Mining Operations

Three-month period  
ended March 31,  
2019  
Operating Data 
Mining
Waste mined (tonnes) 2,106,000 
Ore mined (tonnes) 280,000 
Operational stripping ratio 7.5 
Capitalized Stripping Activity
Waste material – Boungou (tonnes) 5,044,600 
Total strip ratio 25.5 
Processing
Tonnes processed (tonnes) 308,700 
Head grade (g/t) 6.50 
Recovery (%) 96 
Gold ounces produced 61,900 
Gold ounces sold 64,700 
Financial Data (in thousands of dollars) 
Revenues – Gold sales 84,492 
Mining operation expenses 17,070 
Government royalties and development taxes 4,724 
Depreciation of property, plant and equipment 24,948 
General and administrative 217 
Corporate social responsibility expenses 82 
Segment operating income 37,451 
Statistics (in dollars) 
Average realized selling price (per ounce) 1,306 
Cash operating cost (per tonne processed)[1] 53 
Cash operating cost, including stripping (per tonne processed)[1] 88 
Total cash cost (per ounce sold)[1] 337 
All-in sustaining cost (per ounce sold)[1] 534 
Depreciation (per ounce sold)[2] 386 

[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 MD&A, note 19.
[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

Three-month period    
ended March 31,    
2019  2018     Variation
Operating Data 
Mining
Waste mined (tonnes) 2,766,300  5,205,800 (47 %) 
Ore mined (tonnes) 408,100  592,300 (31 %) 
Operational stripping ratio 6.8  8.8 (23 %) 
Capitalized Stripping Activity
Waste material – Siou (tonnes) 2,405,900    —          
Waste material – Wona (tonnes) 1,825,000  3,204,200 (43 %) 
4,230,900  3,204,200 32 % 
Total strip ratio 17.1  14.2 20 % 
Processing
Ore processed (tonnes) 427,900  612,000 (30 %) 
Low grade material (tonnes) 212,300  39,700 435 % 
Tonnes processed (tonnes) 640,200  651,700 (2 %) 
Head grade (g/t) 2.27  2.24 1 % 
Recovery (%) 87  97 (10 %) 
Gold ounces produced 40,500  45,500 (11 %) 
Gold ounces sold 41,400  46,900 (12 %) 
Financial Data (in thousands of dollars) 
Revenues – Gold sales 54,049  62,698 (14 %) 
Mining operations expenses 27,182  36,634 (26 %) 
Government royalties 2,429  3,144 (23 %) 
Depreciation of property, plant and equipment 14,531  25,332 (43 %) 
General and administrative 543  635 (14 %) 
Corporate social responsibility expenses 275  185 49 % 
Segment operating income 9,089  (3,232 )  —          
Statistics (in dollars) 
Average realized selling price (per ounce) 1,306  1,336 (2 %) 
Cash operating cost (per tonne processed)[1] 41  54 (24 %) 
Cash operating cost, including stripping (per tonne processed)[1] 61  67 (9 %) 
Total cash cost (per ounce sold)[1] 715  848 (16 %) 
All-in sustaining cost (per ounce sold)[1] 1,075  1,083 (1 %) 
Depreciation (per ounce sold)[2] 351  540 (35 %) 

[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 MD&A, note 19.
[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.

SemafoInc 0507

For more information, contact

SEMAFO
John Jentz
Vice-President, Corporate Development & 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: http://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.