During the third quarter of 2009, I am pleased to report that SEMAFO maintained the positive momentum established in 2008. Our disciplined growth strategy resulted in a 13% increase in gold production compared to Q3 2008, and a 33% increase year-over-year for the nine months ended September 30, 2009.
SEMAFO’s flagship Mana mine in Burkina Faso upped production to 41,600 ounces of gold, representing 67% of the Company’s total gold production of 62,300 ounces for the third quarter of 2009. We increased and accelerated exploration activities at the Mana mine with the intention to validate the presence of significant mineralized zones at-depth and to identify new exploration targets on-surface to ultimately increase reserves and resources. In this regard, we are pleased to report that results to date have been very promising:
• An airborne geophysical survey clearly identified the Wona structural corridor, current host to the Wona open-pit mine, and suggests that the Wona corridor may extend over a distance of more than 30 kilometres. Other similar lineaments were also observed over SEMAFO’s 1,695 km2 of permitted land.
• The most recent drilling results at Mana revealed some of the highest-grade intercepts to date, including hole WDC133 with 5.24 g/t over 57.8 m. More importantly, however, the results underscored the significant high-grade lode just below the bottom of the Wona North pit.
• A preliminary economic assessment (“PEA”) confirmed the economic potential of the Wona underground deposit. Based on the positive PEA results and the successful drilling program results at Mana, SEMAFO has decided to proceed with a pre-feasibility study.
As a result of yet another noteworthy production performance, SEMAFO generated more than $59.3 million in revenues. Gold sales revenues increased by 16% over the same period last year, while our average gold selling price per ounce improved by 12%. Cash flow from operating activities totaled $24.3 million, representing a 21% increase over the third quarter last year. For the nine-month period ended September 30, 2009, SEMAFO’s cash flow from operating activities achieved a new precedent of $68.2 million, representing a 50% increase compared to the corresponding period in 2008.
In the third quarter of 2009, SEMAFO successfully acquired Etruscan Resources’ minority interest in the Samira Hill mine. SEMAFO now holds an 80% interest in the Samira Hill mine, with the balance held by the Government of Niger. This transaction positively affected the Company’s balance sheet, reducing long-term debt by $6.5 million, while contributing a $3.5 million non-cash gain to the income statement. In August, the Company received the mining permit for the Boulon Jonga zone at Samira Hill. The Boulon Jounga permit covers 7 km2,
with estimated reserves of 570,300 tonnes at an average grade of 2.38 g/t, or 43,600 ounces of gold.
At the Kiniero mine in Guinea, third quarter performance waned as we faced a significant decrease in head grade. This can be rectified by additional investments. Given the current situation in the country, the Company has decided at this time to suspend any additional cash investment for this property.
SEMAFO’s balance sheet is stronger than ever as our debt to equity ratio now stands at 17%, compared to 38% as at December 31, 2008. Our third quarter 2009 performance is a testimony to our commitment to increase shareholder value through the effective management of our existing assets and as we continue the pursuit of accretive opportunities in West Africa. As SEMAFO is 100% unhedged, the Company will continue to benefit from the market price of gold and improve cash generation moving forward.
We are very pleased with our results to date and believe that SEMAFO is well positioned for the future as we continue our quest to expand our horizons.
Benoit La Salle
President and Chief Executive Officer
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