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Message to Shareholders

2015 First Quarter Financial and Operational Results

Following a planned five-week shutdown of the SAG mill, we reported first quarter 2015 production of 65,200 ounces at a total cash cost of $528 per ounce sold and all-in sustaining cost of $646 per ounce sold at our Mana Mine. These costs per ounce represent year-over-year decreases of 51% and 54%, respectively, which are mainly attributable to the contribution of high-grade ore from the Siou and Fofina deposits.

  • Gold production of 65,200 ounces, an 86% increase compared to the same period in 2014
  • Gold sales of $74.0 million, a 92% increase compared to the same quarter in 2014
  • A 51% decrease in total cash cost1 to $528 per ounce compared to the same period in 2014 and a 54% decrease in all-in sustaining cost to $646 per ounce
  • Operating income of $11.2 million, compared to an operating loss of $14.7 million for the same period in 2014
  • Net loss attributable to equity shareholders of $8.1 million or $0.03 per share compared to net loss from continuing operations of $12.9 million or $0.04 per share for the same period in 2014
  • Adjusted net income from continuing operations attributable to equity shareholders1 of $8.2 million or $0.03 per share1 compared to net loss of $12.8 million
  • Cash flows from operating activities2 of $32.6 million or $0.12 per share1 compared to $2.1 million or $0.01 per share for the same period in 2014
  • Successful replacement of the new SAG mill shell on time at Mana
  • Acquisition of Orbis Gold Limited
  • Indicated resources of 1.1 million ounces of gold at Natougou advanced deposit
    Completion of a bought deal private placement of common shares for aggregate gross proceeds of $46.5 million
  • New long-term debt for aggregate gross proceeds of $90 million

1 Adjusted net income attributable to equity shareholders, adjusted basic earnings per share, operating cash flows per share, 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 from continuing operations" section of the Corporation's MD&A, note 16.
2 Cash flows from operating activities from continuing operations exclude changes in non-cash working capital items.

Mana, Burkina Faso
Mining Operations

 
Three-month period ended March 31,
2015 2014 Variation
Operating Data
Ore mined (tonnes) 749,800 467,200 60%
Ore processed (tonnes) 537,300 642,000 (16%)
Waste mined (tonnes) 6,562,800 3,449,300 90%
Operational stripping ratio 8.8 7.4 19%
Head grade (g/t) 4.09 1.93 112%
Recovery (%) 92 88 5%
Gold ounces produced 65,200 35,100 86%
Gold ounces sold 60,600 29,400 106%
Statistics (in dollars)
Average realized selling price (per ounce) 1,221 1,309 (7%)
Cash operating cost (per tonne processed)1 54 52 4% 
Total cash cost (per ounce sold)1 528 1,088 (51%)
All-in sustaining cost (per ounce sold)1 646 1,410 (54%)
Depreciation (per ounce sold)2 396 441 (10%)

1Cash operating cost, total cash cost, all-in sustaining cost and adjusted net income are a non-IFRS financial performance measure with no standard definition under IFRS. See the "Non-IFRS financial performance measures from continuing operations" section of the Corporation's MD&A, note 16.
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.

The increase in head grade in the first quarter of 2015 reflects higher grade ore processed from the Fofina and Siou pits, compared to ore sourced mainly from Wona-Kona in the same period in 2014. The increase in gold ounces produced and sold is a direct result of the 112% higher head grade. The decrease in ore processed is due to the processing of ore through the secondary ball mill during the five-week shutdown of the SAG mill.
Considering the solid quarter, SEMAFO maintains its 2015 production guidance of between 245,000 and 275,000 ounces at a total cash cost1 of between $575 and $605 per ounce and an all-in sustaining cost1 of between $715 and $750 per ounce.

During the three-month period ended March 31, 2015, the US dollar was stronger relative to the Euro when compared to the same period in 2014. Therefore, in the first quarter of 2015, the foreign exchange fluctuation positively impacted our total cash cost1 and our general and administrative cost, but created an unrealized foreign exchange loss on our net monetary assets as at March 31, 2015.

The Corporation reported a net loss attributable to equity shareholders of $8.1 million ($0.03 per share) for the first quarter of 2015 compared to a net loss of $12.9 million ($0.04 per share) for the same period in 2014. The adjusted net income1 from continuing operations attributable to equity shareholders of $8.2 million ($0.03 per share) for the first quarter of 2015 excludes an unrealized foreign exchange loss of $6.3 million, a deferred tax effect on currency translation on the tax base of $7.5 million and a financing fee write-off of $2.5 million.

Natougou Feasibility Study Update

A complete review of all preliminary results on the ongoing Definitive Feasibility Study ("DFS") has been completed. The following mandates were awarded for completion of the DFS:

  • Lypocodium Minerals – Definitive Feasibility Study including processing design, leach and elution circuits, power supply options, metallurgical work programs, project scheduling and reporting
  • Golder Associates – ground water exploration program and geotechnical assessment of open pit wall stability
  • Knight Piésold Consulting – geotechnical infrastructure, geochemical soil testing, water balance, trade-off study and tailings site facility optimization
  • WSP Canada – Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan (RAP)
  • Snowden Mining Industry – resource model
  • AMC Consultants – NI 43-101 reserve model, pit optimization and life of mine (LOM) sequencing

The DFS is scheduled for completion early in the second quarter of 2016 and envisages a base case scenario of a 4,000-tonne-per-day processing plant. A budget estimate of $12.5 million has been established in order to complete the DFS that includes:

  • 6,000 meters of condemnation drilling, which will be completed in the second quarter of 2015
    22,000 meters of in-fill drilling to convert in-pit inferred resources to indicated category, scheduled for completion in the second quarter of 2015
  • 17,000-meter in-fill drill program, designed to convert a portion of the indicated resources to the measured category, that will be completed in the third quarter of 2015
  • 10,000 meters of drilling on proximal related structures, with expected completion in the third quarter of 2015

Exploration – Mana Project

An initial exploration program of $12 million is ongoing on the Mana properties, mainly in the vicinity of the Mana processing plant, the Siou sector, Pompoi, and in the north, on the Saoura and Massala properties.

To date, the RC program at Mana has tested targets located near the Fofina and Nyafé deposits (45 holes), and along the Siou Shear Zone (34 holes). In addition, a 30hole (4,524-meter) program was completed on target B4, located on the Bombouela permit. Target B4 is characterized by a relatively weak auger drilling anomaly interpreted to sit along a potential splay off the Wona Deformation Corridor, which affects the western limit of the Houndé Greenstone Belt. The splay within the B4 area appears to follow a north-striking unit of volcanic rocks hosted in a thick sequence of clastic sedimentary rocks. Three short sections were drilled to test the stronger auger anomalies obtained. Assay results for the RC holes remain pending.

Banfora Reveals a 30-Kilometer Geochemical Anomaly Trend

We have assigned an initial exploration budget of $6 million to pursue exploration activities on the Banfora properties in 2015. Four auger drills are currently in operation on the Yeya I permit and in the north on the Kapogouan, Kongoroba and Dabokuy permits on the Mouro Shear trend.

The 2015 RC drilling program is designed to follow up on gold anomalies identified in the 2014 auger drill program on five permits. In the first quarter, a total of 9,487 meters of RC drilling was completed in 63 holes on the Tondura permit in the south west and on the Kapogouan permit on the Mouro Shear trend. One RC drill rig remains active on the Kapogouan permit. Assay results for the RC holes remain pending.

Exploration work conducted at Banfora in the first quarter of 2015 was mainly carried out on a property under farm-in agreement with AusQuest Limited and primarily focused on the northeast (NE) group of permits that track the eastern edge of the Banfora Greenstone Belt. Auger sampling results have identified a major NE-trending anomaly over a strike length of more than 30 kilometers. The trend, dubbed the Mouro Trend, appears to follow the eastern edge of the belt at the contact with various felsic to intermediate intrusive rocks, and related east-northeast trending splays appear to occur along the main trend. Towards the south, a north-south trending anomalous trend is observed, which also corresponds to a change in the direction of the contact between the granitic intrusive and the sediments. A regional scale deformation zone associated with this contact has also been mapped.

RC drilling along the Mouro Trend commenced on March 1, 2015. To date, 30 holes along two sections (200 meters apart) have been drilled immediately below the artisanal mining area with all assays pending. We plan to continue drilling along the corridor and its associated splays in order to better understand the controls of the mineralization and identify the most promising areas for follow up.

SEMAFO's Consolidated Financial Statements and Management's Discussion and Analysis and other relevant 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 the website maintained by the Canadian Securities regulators at www.sedar.com.