SEMAFO Reports Cash Flow from Operations of $110 Million in 2018

2019 Forecasts Record Production, Cash Flow and Development Activity

Montreal, Quebec, March 5, 2019 /CNW/ – SEMAFO Inc. (TSX, OMX: SMF) today reported its financial and operational results for the fourth quarter and year ended December 31, 2018. All amounts are in US dollars unless otherwise stated.

2018 - THE YEAR IN REVIEW 

• Boungou constructed on time, on budget
• Maiden inferred mineral resource for the Bantou Zone of 361,000 ounces at 5.35 g/t Au
• Nabanga mineral inferred resource increased by 42% to 840,000 oz at 7.7 g/t Au; PEA in Q3 2019
• 2018 exploration, development, construction and operational achievements at Boungou, Mana, Bantou and Nabanga laid the groundwork for 2019

2019 - THE YEAR SO FAR & OUTLOOK 

• Combination of Bantou-Savary properties underway to produce a 1,250 km[2] district scale land package on the prolific Houndé Greenstone Belt
• Production of 390,000-430,000 ounces at an all-in sustaining cost (AISC) of $685-$735 per ounce expected to be the best in SEMAFO’s history

Benoit Desormeaux, President and CEO of SEMAFO, stated, "Congratulations to the entire SEMAFO team for their hard work in 2018. All areas including exploration, development, construction and operations made 2018 a solid year and set the stage for a successful 2019. SEMAFO is set to achieve many milestones in 2019 including record production of 390,000-430,000 ounces of gold at an AISC of $685-$735 per ounce. The combination of Bantou-Savary is in progress and when complete, will result in a 1,250 km[2] district scale land package on the prolific Houndé Greenstone Belt in a country we know well. Strategic goals for 2019 include increasing and improving mine life at Boungou and Mana and advancing our two development projects, Bantou-Savary and Nabanga.”

[1]   All-in sustaining cost, adjusted operating income, adjusted net income attributable to shareholders of the Corporation, adjusted basic earnings per share and operating cash flows 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.
[2]   Cash flows from operating activities exclude changes in non-cash working capital items and are a non-IFRS performance measure.

2018 ANNUAL FINANCIAL & OPERATIONAL HIGHLIGHTS 

The following highlights exclude pre-commercial production of 12,000 ounces at the Boungou Mine:

• Cash flows from operating activities[2] of $110.2 million or $0.34 per share[1] compared to $107.0 million or $0.33 per share[1] for the same period in 2017
• Consolidated annual gold production of 244,600 ounces, compared to 206,400 ounces for the same period in 2017, in line with 2018 guidance of 235,000 to 265,000 ounces
• Gold sales of $296.7 million compared to $259.0 million for the same period in 2017
• All-in sustaining cost[1] of $951 per ounce sold compared to $942 for the same period in 2017.

FOURTH QUARTER 2018 FINANCIAL & OPERATIONAL HIGHLIGHTS 

• Cash flows from operating activities[2] of $54.9 million or $0.17 per share[1] compared to $25.4 million or $0.08 per share[1] for the same period in 2017
• Consolidated gold production of 95,200 ounces, compared to 49,500 ounces for the same period in 2017 due to the first full quarter of production at Boungou
• Gold sales of $114.7 million compared to $63.0 million for the same period in 2017
• Production at Boungou totalled 53,100 ounces of gold in the quarter, reflecting average head grade of 6.34 g/t Au
• All-in sustaining cost[1] of $782 per ounce sold compared to $982 for the same period in 2017

2019 Exploration 

Initial exploration expenditure for 2019 has been set at $19 million, $9 million of which will be spent at Boungou, $4 million at Mana, $3 million at Bantou, $2 million at Nabanga and the remaining $1 million at Korhogo.

Boungou
At Boungou, the main objective of the 2019 exploration program is to identify new resources within trucking distance of the mill. To this end, this year’s program comprises 41,000 meters of reverse-circulation (RC), 1,000 meters of diamond and 100,000 meters of auger drilling. The bulk of the RC drill work will follow up on recent discoveries at Dangou and Tawori and test regional gold anomalies on the Pambourou and 045 Trend Sectors. The auger program will provide a complete coverage of the property and identify future exploration targets.

Mana
The 2019 exploration program at Mana includes 18,600 meters of RC and 58,000 meters of auger drilling. The RC program will be dedicated to identifying satellite deposits near existing operations with a particular emphasis on the Pompoi area, located ~3 kilometers east of the Yaramoko Mine. The Pompoi program will focus on previous results of up to 7.40 g/t Au over 2 meters coincident with auger anomalies identified in 2018, with the objective of finding intrusive-hosted, high-grade mineralization.

[1]   All-in sustaining cost, adjusted operating income, adjusted net income attributable to shareholders of the Corporation, adjusted basic earnings per share and operating cash flows 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.
[2]   Cash flows from operating activities exclude changes in non-cash working capital items and are a non-IFRS performance measure.

Bantou and Consolidation of South Houndé Belt
In February 2019, SEMAFO and Savary Gold Corp. entered into a non-binding letter of intent (LOI) contemplating the acquisition by SEMAFO of all of the outstanding common shares of Savary not already owned by SEMAFO. Savary’s Karankasso project is contiguous to the Bantou Zone. Both projects are located approximately 170 kilometers south of Mana. Given the prospectivity of the combined Savary-Bantou properties, the Bantou exploration budget of $3 million will be enhanced when the Savary proposed acquisition closes in April 2019.

Nabanga
The 2019 program on Nabanga will test the northern extension, further explore the down-plunge extensions confirmed by recent drilling, and test drill auger geochemical anomalies proximal to the deposit for satellite mineralization. We continue to work on expanding the resource, and we will complete a PEA in the third quarter of 2019. 

Boungou, Burkina Faso 

Mining Operations

Boungou, Burkina Faso 

Mining Operations

Boungou construction was completed on-time and on-budget in 2018. During the pre-commercial period from June to the end of August, Boungou produced 12,000 ounces of gold. Commercial production in the last four months of 2018 delivered 63,600 ounces of gold. Grade in the four months averaged 5.75 g/t Au, increasing in the fourth quarter as the mine plan reached higher grade zones. During the last fourth months of 2018, ramp-up economics were still tracking ahead of schedule with some minor optimizations still to be realized in 2019. The variation between gold ounces sold and gold ounces produced during the year is due to the timing of delivery and the build-up of gold in circuit. As at December 31, 2018, the stockpile held slightly more than 500,000 tonnes of ore with an average grade of 2.0 g/t Au.

[1]     Gold ounces produced exclude pre-commercial production of 12,000 ounces.
[2]     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" defined at the end of this press release.
[3]     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  

Mana, Burkina Faso 

Mining Operations

As expected, in 2018, the tonnes processed decreased by 6% due to the ore hardness. In 2018, gold sales amounted to $229,713,000 compared to $258,993,000 for 2017. The decrease is mainly due to the lower gold ounces produced and sold in line with the mine plan, partially offset by the higher average realized selling price. The variation between gold ounces sold and gold ounces produced in 2018 is due to the timing of delivery. The decrease in depreciation of property, plant and equipment mainly reflects the lower capitalized stripping ratio from Wona in 2018 compared to the higher capitalized stripping ratio from Siou at depth in 2017. As expected, in 2018, the all-in sustaining cost1reached $1,056 per ounce sold compared to $942 per ounce sold in 2017. The result is attributable to an increase in security expenses and a lower recovered head grade.

[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" 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.

Siou Underground Development 

During the fourth quarter of 2018, underground development continued to advance well, in line with our goal of achieving production in the first quarter of 2020. Specifically, the following milestones were completed:

• Development on budget with $10.7 million of the $51.7 million budget incurred 
• 1,050 meters of development completed at year-end
• Construction of permanent contractor surface infrastructure
• Receipt of favorable opinion from Ministry of Environment regarding the Environmental and Social Impact Assessment (ESIA) study - final hearing with Mines Commission is expected shortly 

2018 Reserves and Resources - as at December 31, 2018 

As at December 31, 2018, total proven and probable mineral reserves stood at 2,909,000 ounces of gold. Measured and indicated mineral resources totalled 3,031,300 ounces. Inferred mineral resources increased by 48% to 2,141,100 ounces compared to year-end 2017.

Changes in reserves are net of 2018 depletion due to production. All mineral resources reported are exclusive of mineral reserves. Mineral reserves and resources reported at Mana and at Tapoa (Boungou Project) were estimated using a gold price of $1,200 and $1,400 per ounce, respectively.

Tapoa (Boungou Project)
Total proven and probable reserves at the Boungou Project were 10,939,000 tonnes averaging 3.94 g/t Au for 1,387,000 ounces of gold, compared to 11,195,000 tonnes at 4.11 g/t Au for 1,479,000 ounces. The slight decrease mainly represents depletion of the 75,600 ounces produced in 2018, which includes the pre-commercial production.

Mana
At year-end 2018, Mana’s mineral reserves totalled 15,987,000 tonnes at an average grade of 2.96 g/t Au for 1,522,000 ounces, compared to 18,231,000 million tonnes averaging 2.92 g/t Au for 1,710,300 ounces.

Mana’s mineral resources remained constant at 43,467,000 million tonnes at an average grade of 1.93 g/t Au for 2,695,300 ounces.

Kongolokoro (Bantou Zone)
At the end of 2018, the Bantou Zone hosted a maiden inferred mineral resource estimate of 2,100,000 tonnes at 5.35 g/t Au for 361,000 ounces of gold. The Bantou Zone, which is located approximately 170 kilometers south of the Mana Mine in Burkina Faso, remains open along strike and at depth.

The mineral resources at Kongolokoro Permit Group (Bantou) were estimated using a gold price of $1,500 per ounce.

Yactibo (Nabanga Deposit)
An infill drilling program and a revised interpretation of the mineralization added 250,000 ounces of inferred mineral resources to Nabanga in 2018.

The updated mineral inferred resource estimation for Nabanga was established at 3,402,000 tonnes grading 7.69 g/t Au for 841,000 ounces of contained gold. The resource estimation update is based on 395 drill holes (RC and DD combined) totalling 57,488 meters, including 67 core holes drilled since the latest estimation completed by Snowden in August 2012, and a revised interpretation of the mineralization that suggests a shallower plunge of the higher-grade zones of gold mineralization.

The mineral resource estimate is reported above a cut-off grade of 3,0 g/t Au based on the assumption most of the resource would likely be mined by selective underground mining techniques. For further details, refer to the February 20, 2019 press release.

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 and Year-End 2018 Conference Call 

A conference call will be held tomorrow, Wednesday, March 6, 2019 at 10:00 EST, to discuss this press release. Interested parties are invited to call the following telephone numbers to participate in the call:.

Tel. local & overseas: +1 (647) 788 4922
Tel. North America: 1 (877) 223 4471
Webcast: www.semafo.com/English/investor-relations/news-and-events/events/default.aspx
Replay number: 1 (800) 585 8367 or +1 (416) 621 4642
Replay pass code: 6388407
Replay expiration: April 6, 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. 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 "forecasts”, "development", “laid the groundwork”, “outlook”, “underway”, “expected”, “set the stage”, “set to achieve”, “milestones”, “in progress”, “goals”, “increasing”, “improving”, “advancing”, “initial”, “will”, “objective”, “targets”, “identifying”, “focus”, “contemplating”, “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 achieve record production, cash flow and development activity in 2019, the ability to produce 390,000-430,000 ounces at an AISC of $685-$735 per ounce, the ability to consummate the proposed transaction with Savary Gold Corp., the ability to increase and improve mine life at Boungou and Mana and advance our Bantou-Savary and Nabanga projects, the ability of our 2019 Exploration Program to meet its various objectives, the ability to achieve production from the Siou Underground in the first quarter of 2020, 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 2018 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.

Financial and Operating Highlights  

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

Fourth Quarter Financial and Operating Highlights 

[1]     Adjusted operating income, adjusted net income (loss) attributable to shareholders of the Corporation, adjusted basic earnings per share, operating cash flows 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 Measures" defined at the end of this press release.
[2]     Cash flows from operating activities exclude changes in non-cash working capital items and are a non-IFRS performance measure.

Non-IFRS Financial Performance Measures 

Some of the indicators used by us to analyze and evaluate our results represent non-IFRS financial measures. We provide non-IFRS financial performance measures as they may be used by some investors to evaluate our financial performance. Since the non-IFRS performance measures do not have any standardized definition prescribed by IFRS, they may not be comparable to similar measures presented by other companies. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. For the non-IFRS financial performance measures not already reconciled within the document, we have defined the IFRS financial performance measures below and reconciled them to reported IFRS measures.  

Cash Operating Cost
A reconciliation of cash operating cost calculated in accordance with the Gold Institute Standard to the operating costs is included in the following table:

Cash Operating Cost, including stripping

Total Cash Cost

All-in Sustaining Cost
All-in sustaining cost represents the total cash cost plus sustainable capital expenditures and stripping costs per ounce.

Operating Cash Flows per Share

Adjusted Accounting Measures

[1]     Cash flows from operating activities exclude changes in non-cash working capital items and are a non-IFRS performance measure.

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

Consolidated Statements of (loss) Income 
For the years ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except per share amounts)

Consolidated Statements of Cash Flows 
For the years ended December 31, 2018 and 2017
(Expressed in thousands of US dollars)

SEMAFO 0305

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: 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.