A Word from the CEO

The constant solid performance of our Mana Mine in Burkina Faso, bolstered by a strong gold price, has allowed SEMAFO to deliver all-time highs in gold revenues, operating income, and margins.

Our 2011 third quarter revenues increased by 19% over the same period last year, to attain $102.3 million. Operating income was $40.8 million for the quarter, an increase of 7% year over year and 15% for the first nine months of the year compared to the same period in 2010. Our net income of $31.3 million for the quarter brings our year-to-date total to $84.6 million, a 13% increase over the first nine-month period of 2010. During the quarter, cash flow from operating activities amounted to $43.1 million or $0.16 per share.

Part of our operations strategy is to maximize cash flow. This was evidenced by the fact that, despite rapidly rising energy costs industry wide, we realized a record total cash margin of $984 per ounce sold for the quarter. Our cash operating cost per tonne increased by only 9% for the quarter compared to the same period last year, demonstrating effective cost management. The nine-month total cash margin was $864 per ounce sold compared to $700 for the same period in 2010, a 23% increase.

On the operations side, as our Mana Mine continues to demonstrate its growth potential, we announced another phase of plant expansion aimed at increasing capacity to 14,000 tonnes per day (“tpd”) and representing as much as an additional 120,000 gold ounces annually. This can potentially bring Mana’s total production to more than 300,000 ounces of gold per annum by 2014. Our decision to further expand the plant is supported by the positive drill results from the Fofina, Fobiri and Yaho zones and currently foresees the construction of a satellite crushing and milling facility, which will prepare the ore for final processing at the main plant. Contingent on the continued success of our exploration programs and resulting augmentation of our reserves and resources, we could justify further production capacity increases that could lead to reaching our annualized production capacity objective of up to 500,000 ounces of gold by the end of 2015.

SEMAFO’s geology team reported consistent values and widths confirming the high-grade mineralization in the Fofina area, with some similarities to the gold-producing Nyafé zone. Also, during the quarter initial drill results from the Massala-Saoura zone, located at the northern tip of our property, provided encouraging results. The team expanded the Wona SW deep zone with drill results including 4.07 g/t Au over 43 meters, while parallel zones showed interesting values and thickness that suggest important swelling, which will be taken in consideration in the underground development. Very recently, Kona open pit area infill drilling confirmed the distribution of the mineralization and outlined higher-grade zones.

We continue to believe that our 115-kilometer long Mana property is one of best gold projects in West Africa, with the potential to become a mining district. Our systematic approach has led us to discover the very important Fofina and Fobiri zones some 18 months ago and the new Yaho zone, which is located in the same general area, early this year. Our drilling campaign continues to provide noteworthy results, identifying potential reserves and resources development opportunities and project expansion possibilities. Taking into consideration our growth strategy and production objectives, during the third quarter we allocated an additional $8.5 million to Mana’s exploration budget, bringing the 2011 total budget for the property to $38.5 million.

We recently entered into an agreement with Burkina Faso’s National Electricity Company, Sonabel for the construction of a 73-kilometer high-voltage transmission line to deliver power to our Mana Mine. The 26-megawatt transmission line will be connected to the national power grid and should provide sufficient energy to power the mine, resulting in potential cash operating cost savings of up to $40 per ounce.

We recently saw the commencement of trading of our common shares through a secondary listing on the NASDAQ OMX Stockholm exchange in Sweden. Via this new listing, we are providing European investors with the opportunity to take advantage of our unique savoir-faire, consistent solid operating results, and to participate in the potential discovery of a new mining district.

With our continued solid performance and significant cash flows, SEMAFO is well-positioned to fund its operations and has the economic capacity to internally finance value-creation activities. It is with this in mind that on November 8, 2011, SEMAFO’s Board of Directors approved an inaugural cash dividend of CA $0.02 per common share. The Board of Directors is of the opinion that this is the right time to provide a dividend return to our shareholders. We believe that the payment of this inaugural dividend is evidence of SEMAFO’s ongoing commitment to maximize shareholder value.

Our dedicated team is devoted to bringing Mana to be ranked among the best gold projects in Africa, thus delivering on our commitment to grow responsibly and create value for our shareholders.

Benoit La Salle, FCA
President and Chief Executive Officer

Back to top