Semafo costs approaching $600 all in

Semafo gains into teeth of weak gold price

Shares of Semafo Inc (TSE:SMF) defied a fresh slump in the gold price on Thursday, after announcing better than expected third quarter financial results on the back of a strong operational performance at its Mana Mine in Burkina Faso. 

After a 1% jump on Thursday bringing weekly gains to 8.5% Semafo is now worth $893 million on the Toronto Stock Exchange. The Montreal-based producer is one of only a handful of gold miners still in positive territory for the year.

The company reported cash flow of $34.8 million during the three months to end-September, down from $40 million in the same quarter 2014, but ahead of expectations. That boosted the company’s cash pile to a healthy $137.8 million.

Net income came in at $14.5 million for the quarter, a 14% improvement on the back of production of 67,200 ounces during the quarter at industry leading all-in sustaining cost of $616/oz and $485/oz on a cash basis. Head grades were a mouthwatering 3.7 g/t, a 26% improvement thanks to a greater percentage of high-grade ore processed from the Fofina and Siou pits.

Semafo’s 2015 production guidance is at the midpoint between 245,000 – 275,000 ounces and the firm is targeting further costs reduction with an expected AISC of $630 – $650/oz for the year. Cash costs for 2015 is now predicted at between $485 – $505/oz.

In February the company acquired 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, notably Natougou, located about 600 kilometres east of Semafo’s Mana mine.

On Thursday Semafo said the feasibility study for Natougou is now 70% complete with publication expected early in the second quarter next year.

According to an October  2014 scoping study by Orbis, Natougou has the potential for development of a large-scale low-cost open pit mine producing up to 217,000 of gold per annum (more than 700,000 in year one and two) with a 6.7 year mine life at an all-in cost of $619 an ounce. Capex for the Natougou project was put at $234 million.

Burkina Faso is the continent’s fourth largest gold producer after Mali and has commissioned eight new mines over the past six years. Burkina Faso is due to hold national elections at the end of the month.

Image courtesy of Semafo

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