Mana

SEMAFO's Mana property is located approximately 200 kilometers west of Ouagadougou, the capital city of Burkina Faso. Mana's permitted properties cover in excess of 1,995 km2 over the resource-rich Hounde belt. The Mana property is host to SEMAFO's newest operation. The Mana Mine is an open-pit mining operation inaugurated in mid-2008.

Exploration

SEMAFO’s 2011 exploration program with a budget of $48.5 million, including $38.5 million for our Mana property in Burkina Faso, is well underway on our more than 4,500 square kilometers of permitted land.

From the ongoing exploration and in-fill drilling program on the Wona SW zone, located immediately southwest and parallel to the Wona Deep zone, core drilling results added underground depth potential revealing wide and high-grade mineralization. Results with values including WDC319, which returned 4.07 g/t Au (4.33 g/t Au uncut) over 43 meters, extend the mineralization at-depth and suggest a mineralized plunge similar to the central portion of the Wona Main zone.

Results from Wona’s Parallel zones show interesting values and thickness that suggest important swelling as confirmed by hole WDC322, which returned 4.43 g/t Au (8.63 g/t Au uncut) over 25 meters (refer to Longitudinal Wona – SW and Main zones).

Parallel Zones
The parallel zones, located 10 to 30 meters east of the Wona structure, continue to be increasingly significant towards the southwest showing areas of swelling with above-average grades as confirmed by hole WDC322 which returned 4.43 g/t Au (8.63 g/t Au uncut) across 25 meters and hole WDC297 with 3.12 g/t Au (7.03 g/t Au uncut) over 13 meters.

Results from the reverse circulation (“RC”) infill drilling over the Kona open pit area confirmed the distribution of the mineralization. Results also outline zones of higher grade mineralization as revealed by holes MRC11-367, which returned 6.18 g/t Au (6.61 g/t Au uncut) over 18 meters, MRC11-360 with 3.46 g/t Au over 29 meters and hole MRC11-373 returning 4.0 g/t Au (4.65 g/t Au uncut) over 14 meters.

Kona RC drill result highlights are listed in the following table and illustrated on the Kona Zone map.

Production

SEMAFO's Mana Mine is located approximately 200 kilometers west of Ouagadougou, the capital city of Burkina Faso. It is our newest mine, where operations commenced in April 2008. Gold is currently mined from two open pits, Wona and Nyafé.

Third Quarter 2011 v. Third Quarter 2010

During the three-month period ended September 30, 2011, gold production at the Mana mine totaled 45,100 ounces of gold at an average cash operating cost of $563 per ounce produced.

For the three-month period ended September 30, 2011, a total of 539,000 tonnes of ore and 2,487,500 tonnes of waste material were extracted from the Wona and Nyafé pits, resulting in a stripping ratio of 4.6:1. In addition, 1,994,200 tonnes of waste material were extracted from the Wona pit during the pre-stripping phase. This compares to 482,200 tonnes of ore and 3,115,100 tonnes of waste material for the same period in 2010, which resulted in a stripping ratio of 6.5:1. The increase in total material mined year over year is mainly due to additional mining equipment.

During the third quarter of 2011, we processed 583,100 tonnes of ore. The 16% increase in ore processed, compared to the same period last year, is a direct result of higher throughput following the completion of the plant expansions in 2010.

The decrease in head grade in the third quarter of 2011, compared to the third quarter of 2010, is a direct result of the incremental throughput of ore sourced in higher percentages from the Wona pit, which has lower grade ore compared to the ore sourced from Nyafé.

The slight decrease in ounces produced in the third quarter of 2011, compared to the third quarter of 2010, is the result of the lower head grade, partially compensated by the higher throughput.

Our cash operating cost per tonne processed increased to $43 in the third quarter of 2011 compared to $34 in the third quarter of 2010. This variation is mainly due to the increased cost of fuel and reagents, and the need for supplementary drilling and blasting in 2011 compared to 2010. Our cash operating cost per ounce produced increased as a result of higher cash operating cost per tonne processed and lower head grade.

During the third quarter of 2011, costs related to fuel represented $11 per tonne processed compared to $7 per tonne processed during the same period in 2010 as a result of ongoing fuel price increases in Burkina Faso.

Higher royalties were the result of graduated royalty rates in effect as of January 1, 2011 and the increase in the average realized selling price. As the price of gold was above $1,300 per ounce during the entire three-month period ended September 30, 2011, government royalties of 5% were paid compared to royalties of 3% for the corresponding period in 2010.

Projects Updates

Plant Expansion - Phase IV

• Plant capacity is expected to attain up to 7,200 tonnes per day ("tpd") in bedrock and up to 8,000 tpd in blended ore.
• Completion of Phase IV will increase throughput by 1,200 tpd, representing an additional 26,000 to 30,000 ounces of gold annually when compared to current plant capacity. Initially scheduled to be completed at year-end 2011, complete commissioning is rescheduled for early in the second quarter of 2012 due to supplier delays.
• Budget for this fourth phase of plant expansion is $25 million, including $18 million for enhancements to the plant and $7 million for additional mining equipment.
• As of September 30, 2011, $6.2 million were still committed for enhancements to the plant, while the $7 million additional mining equipment initially committed has been fully paid and is already on site.
• Payback period is estimated at less than 16 months.

• Addition of a pebble crusher
• Utilization of the third ball mill, previously used as back-up
• Addition of two CIL tanks
• Addition of a thickener
• Additional gensets
• Critical spares
• Some equipment capacity upgrades.

New Facility - Phase V

In September, we announced plans to increase the processing capacity by 6,000 tpd at our Mana project in Burkina Faso. This new facility is aimed at increasing overall processing capacity to 14,000 tpd, representing as much as an additional 120,000 gold ounces annually and potentially bringing Mana’s total production to more than 300,000 ounces per annum.

This phase of expansion is put forward because of the positive drill results received from the Fofina, Fobiri and Yaho zones. Currently, this new facility is planned to be located near the Fofina-Fobiri area in order to prepare the ore for final processing at the Mana plant.

Capital expenditures for this expansion are estimated at $100 to $125 million and are expected to be funded through SEMAFO’s cash flow. The anticipated payback period is less than one year.

As part of the plant expansion, we also plan to build a water pipeline, for which an engineering analysis is underway. The year-round accessibility will safeguard adequate water supply levels at the mill at all times and is scheduled for commissioning in the second quarter of 2012.

This phase of expansion is scheduled to begin in early 2012 and is expected to be completed during the second half of 2013.

Wona Deep Development

At the end of the second quarter of 2011, we green-lighted the development of the underground project following the positive results of the Mana underground feasibility study, indicating a 49% internal rate of return based on a $1,400 gold price. SEMAFO’s underground technical team began engineering and optimization activities in July 2011. Additionally, surface drilling continues in the SW zone, the results of which continue to demonstrate opportunities to further increase underground reserves from those reported in the underground feasibility study.

Recent underground development activities include:

• Appointment of underground technical team
• Signature of an agreement with the mining contractor Dumas Contracting Ltd ("Dumas"). The agreement includes the scope of work to be provided by Dumas in the interim period leading to the execution of a definitive agreement expected to be signed in the coming months. To date approximately $4 million were paid to Dumas including a deposit to secure mining equipment. Equipment for all raise development will be on site by year end to commence work in January 2012. All development and production equipment are expected to be on site in the second quarter of 2012
• Commencement of the recruitment process of national employees by Dumas
• Continued engineering optimization of the underground project especially on the development and general approach to the ore bodies
• Elaboration of long hole drilling plans and combinations for the various types of stopes to estimate quantities, drilling time in order to start block sequencing and mine planning
• Detailed planning of the first two years of development on a monthly basis
• Completion of detailed engineering for elaboration of plans for the mine dry, administration office, mechanical shop and warehouse.
• Commencement of the construction of all surface infrastructures and services to support underground operations. Completion is expected by the end of the first quarter of 2012.
• Completion of the camp expansion to accommodate the underground teams
• Test hole drilling at the portal and ventilation raise to certify rock elevation and quality (RQD)
• Procurement of more than $10 million of general equipment and mining materials to date, including: gensets, compressors, surface ventilators, underground support material, ventilation piping, mine rescue equipment, dewatering pumps, and others.

National Power Grid

In October, we announced an agreement with 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 directly to the national power grid and should provide sufficient energy to power the mine.

Under this new power delivery agreement and considering the actual economy, we would be paying $0.18 per kilowatt-hour. Based on current fuel and consumables costs, and compared to our current cost of $0.31 per kilowatt-hour, this could represent potential savings of approximately $3 per tonne processed and up to $40 per ounce of gold produced.

The total cost of the project is estimated at $19 million for Sonabel. We will advance $9.5 million to this project. This amount is reimbursable to SEMAFO by Sonabel over an eight-year period following commissioning, which is scheduled for the second half of 2013.

Back to top