Semafo bounces on full-year results

Shares of Semafo Inc (TSE:SMF) added nearly 4% on Friday, after announcing better than expected full year financial results on the back of a strong operational performance at its Mana Mine in Burkina Faso.

Semafo, now worth $973 million on the Toronto Stock Exchange after gaining 18% year to date, reported free cash flow of $41 million in 2014 on the back of production of 234,300 ounces at an all-in sustaining cost of $805/oz.

Costs were below estimates thanks to the start of production from its higher grade Siou and Fofina deposits feeding into the Mana mill.

Semafo's 2015 production guidance is 245,000 – 275,000 ounces and the Montreal-based firm is targeting further costs reduction with an expected AISC of $715 – $750/oz.

It's been a busy year for Semafo. Last month the company sealed its takeover of Australia's Orbis Gold (ASX:OBS) in a deal valued at $139 million.

The Orbis acquisition brought with it three gold projects in the West African country.

Orbis' flagship Natougou project is located about 600 kilometres east of Mana and boasts a high grade deposit containing 18 Mt @ 3.4g/t Au for 2 million ounces. Semafo will spend more than $20.5 million on exploration in 2015, including $2.5 million on Natougou for a NI 43-101 compliant report due in the second quarter.

According to an October scoping study Natougou has the potential for development of a large-scale low-cost open pit mine producing up to 213,000 of gold per annum (more than 700,000 in year one and two) at an all-in cost of $619 an ounce.

Capex for the Natougo project is put at $234 million and a definitive feasibility study is scheduled for completion mid-2015 and possible start-up early in 2018. Orbis' Nabanga project is one of the highest grade projects in Burkina Faso in the face of stiff competition in the region: historical inferred resources of 3.2 million tonnes @ 6.5 g/t Au for 660,000 ounces of contained gold.

Semafo in February announced its 2014 reserve and resource statement that upped Mana's total mineral reserves and resources by 250,000 ounces and its reserve grade by 7% to 3.01 g/t Au.

The Siou deposit at Mana proven and probable reserves increased by 27% to 980,000 ounces by year-end 2014, net of 97,200 ounces from mined depletion in the year. As a result of recent definition drilling, the Fofina deposit attained 2,443,200 tonnes at an average grade of 2.62 g/t Au for a total of 205,700 ounces in proven and probable reserves as at December 31, 2014, net of 88,100 ounces from mined depletion in 2014.

Burkina Faso is the continent's fourth largest gold producer after Mali and has commissioned eight new mines over the past six years.