SEMAFO: Record Quarterly Production and Cash Flow from Operations

Tue, May 07, 2019 23:00 CET

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	%)

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.

SEMAFO: Record Quarterly Production and Cash Flow from Operations

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