SEMAFO Reports Cash Flow from Operations of $107 Million in 2017 

March 06, 2018

Net Income Attributable to Equity Shareholders of $20.0 Million

MONTREAL, March 06, 2018 (GLOBE NEWSWIRE) -- SEMAFO Inc. (TSX:OMX) (TSX:SMF) today reported its financial and operational results for the fourth quarter and year ended December 31, 2017.  All amounts are in US dollars unless otherwise stated.

2017 - The Year in Review

  • Gold production of 206,400 ounces compared to 2016 production of 240,200 ounces
  • Total cash cost1 of $655 per ounce sold and all-in-sustaining cost1 of $942 per ounce sold
  • Gold sales of $259.0 million compared to $300.5 million in 2016
  • Net income attributable to equity shareholders of $20.0 million compared to $34.2 million in 2016
  • Cash flows from operating activities2 of $107.0 million compared to $142.2 million for the same period in 2016
  • Drawdown of incremental $60.0 million from Credit Facility with Macquarie Bank Limited in June 2017

Fourth Quarter 2017 - in Review

  • Gold production of 49,500 ounces compared to 55,100 ounces for the same period in 2016
  • Gold sales of $63.0 million compared to $69.1 million for the same period in 2016
  • Total cash cost1 of $667 per ounce sold and all-in-sustaining cost1 of $982 per ounce sold
  • Net income attributable to equity shareholders of $1.6 million compared to net loss of $4.9 million for the same period in 2016
  • Cash flows from operating activities2 of $25.4 million compared to $30.4 million for the same period in 2016  

1        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" defined at the end of this press release.
2        Cash flows from operating activities exclude changes in non-cash working capital items.

Mana, Burkina Faso    
Mining Operations      
     
 20172016Variation 
Operating Data    
Mining    
Waste mined (tonnes)16,913,10016,686,8001%
Ore mined (tonnes)2,268,1002,175,7004%
Operational stripping ratio7.57.7(3%)
Capitalized Stripping Activity    
Waste material – Siou (tonnes)12,607,30012,263,2003%
Waste material – Fofina (tonnes)2,820,300(100%)
Waste material – Wona (tonnes)9,189,9003,252,400183%
 21,797,20018,335,90019%
Total strip ratio17.116.16%
     
Processing    
Ore processed (tonnes)2,136,1002,329,500(8%)
Low grade material (tonnes)603,800423,80042%
Tonnes processed (tonnes)2,739,9002,753,300%
Head grade (g/t)2.462.88(15%)
Recovery (%)95941%
Gold ounces produced206,400240,200(14%)
Gold ounces sold205,300240,600(15%)
    
    
Statistics (in dollars)   
Average realized selling price (per ounce)1,2611,2491%
Cash operating cost (per tonne processed)¹46437%
Total cash cost (per ounce sold)¹65554820%
All-in sustaining cost (per ounce sold)¹94272031%
Depreciation (per ounce sold)²46032442%

 

The total cash cost1 of $655 per ounce sold and all-in sustaining cost1 of $942 per ounce were anticipated and are both due to a lower head grade and higher cash operating cost per tonne1,  the latter being mainly caused by negative foreign exchange fluctuations.

The year-over-year variation in head grade in 2017 resulted from geological issues in the upper portion of Zone 9 early in the year. In addition, the variation is due to the processing of 603,800 tonnes of low-grade material not included in our reserves. This results from the decision to take advantage of higher gold prices and available milling capacity in order to generate additional cash flow. Without this, the head grade would have been 2.96 g/t Au.

The 2017 increase in depreciation in property, plant and equipment and depreciation per ounce sold mainly reflects a higher capitalized stripping ratio from Siou at depth compared to the same period in 2016.

1     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" defined at the end of this press release.
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.

2017 Reserves and Resources

As at December 31, 2017, total proven and probable mineral reserves stood at 29.4 million tonnes averaging 3.37 g/t Au for 3.2 million ounces as compared to 28.2 million tonnes at 3.31 g/t Au for 3.0 million ounces at the end of 2016. The increase in reserves is due to additions at Boungou and Mana, with the latter offset by SEMAFO production of 206,400 ounces of gold in 2017.

Measured and indicated mineral resources remained constant at 48.4 million tonnes averaging 2.00 g/t Au for 3.1 million ounces.

Mana Pre-feasibility Study
In the first quarter of 2018, we announced a positive pre-feasibility study (PFS) for Mana that added 188,000 ounces of mineral reserves before depletion, primarily at Siou underground.

The Mana PFS, which investigated the potential for extracting the deeper zone of the Siou deposit through underground operations, envisages pre-production capital of $51.7 million and development start-up in the third quarter of 2018. With mineral reserves of 18.2 million tonnes at 2.92 g/t Au for 1.7 million ounces, Mana annual production should average over 200,000 ounces between 2019 and 2023 at an all-in sustaining cost of $810 per ounce at a gold price of $1,200 per ounce. Access to the 2,000-tpd contract mining operation will be through a single portal and a 5.5- by 5.5-meter ramp at a 14-gradient slope. Given our $222 million cash and restricted cash position at year-end 2017 and anticipated cash flow from operations, pre-production capital expenditure will be financed with existing cash.

2018 Milestones for Development of Siou Underground

  • Filing of NI 43-101 technical report on SEDAR in first quarter
  • Negotiation and signing of contract with underground contractor in second quarter
  • Completion of detailed engineering in second quarter
  • Commencement of infrastructures work in second quarter
  • Completion of environmental and social impact assessment and mining permit in third quarter
  • Mobilization of contractor on site in third quarter
  • Commencement of portal preparation and underground development in third quarter

Boungou
Total proven and probable reserves at Boungou Mine amounted to 11.2 million tonnes averaging 4.11 g/t Au for 1,5 million ounces of gold, an increase of 16% compared to year-end 2016. The increase in mineral reserves is mainly attributable to the expansion of probable reserves located on the West Flank Sector adjacent to known reserves. An internal trade-off study conducted on the West Flank Sector in 2017 concluded that open-pit mining was a mining approach superior to an underground operation as it provided better financial returns.

All mineral resources reported are exclusive of mineral reserves. Gold price assumptions for mineral reserves and resources at Mana and Tapoa (Boungou Mine) were $1,200 and $1,400 per ounce, respectively. For further details, refer to our press release of February 15, 2018.

2018 Exploration

Exploration expenditure for 2018 has been set at $26 million, $9 million of which will be spent at Tapoa (Boungou), $7 million at Mana, $4 million at Nabanga, $3 million at Bantou and the remaining $3 million at Korhogo.

The 2018 exploration at Mana includes 10,000 meters of core, 25,000 meters of reverse-circulation (“RC”) and 60,000 meters of auger drilling. The core drill program will primarily target the Siou area with the aim of assessing the north part of Siou at depth. The Bara Trend located some 20 kilometers from the Mana mill will see extensive drilling in the first quarter, including follow-up work on significant RC results and untested auger anomalies.

At Boungou, the 2018 exploration program comprises 42,000 meters of RC and 60,000 meters of auger drilling. The bulk of the RC drill work will test regional gold anomalies on the Boungou proximal, Dangou, Pambourou and 045 Trend Sectors.

The 2018 core drill program at the Nabanga deposit, which will be carried out in the first half of the year, will test lateral and at-depth extension of the mineralization. Furthermore, the Corporation will carry out core and RC drill programs on the Korhogo and Bantou areas following a series of prospective results in 2017.

Update on Boungou Mine Construction

Construction of the Boungou Mine continues to advance on time and on budget. As at January 31, 2018, the following achievements had been made:

  • Addition of 203,000 ounces of reserves
  • Development on budget with $171 million of the $231 million capital expenditure incurred
  • Construction 83% completed
  • Cash and restricted cash of $222 million as at December 31, 2017
  • Completion of about 90% of structural steel, 85% of mechanical and 22% of piping installation
  • Installation of the liner on the water storage facility
  • Tailings storage facility 72% completed
  • Completion of 81% of the fuel depot and 83% of the power plant
  • Pre-stripping 62% completed with 11.2 million of the projected 18 million tonnes extracted
  • Installation of the SAG mill completed
  • 4.1 million man-hours have been worked without lost-time injury
  • 2,027 personnel including contractors were employed on site, 86% of which are Burkinabe

SEMAFO’s Management’s Discussion and Analysis, Consolidated Financial Statements and related 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 www.sedar.com.

Fourth Quarter and Year-End 2017 Conference Call

In view of the pre-announced 2017 results and the February 16, 2018 conference call on the Mana PFS and multi-plan targets, no conference call has been scheduled for tomorrow. Parties with questions are invited to call the IR department.

Annual General Meeting of Shareholders

SEMAFO's Annual General Meeting of Shareholders will be held on Thursday, May 10, 2018 at 10:00 EDT at Club Saint-James, Salon Midway, 1145 avenue Union, in Montreal Quebec. Attendees will have the opportunity to ask questions and meet the management team and members of the board of directors.

About SEMAFO

SEMAFO is a Canadian-based mining company with gold production and exploration activities in West Africa.  The Corporation operates the Mana Mine in Burkina Faso, which includes the high-grade satellite deposit of Siou, and is targeting production start-up of the Boungou Mine in the third quarter of 2018. SEMAFO’s strategic focus is to maximize shareholder value by effectively managing its existing assets as well as pursuing organic and strategic growth opportunities.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and assumptions and accordingly, actual results and future events could differ materially from those expressed or implied in such statements. You are hence cautioned not to place undue reliance on forward-looking statements. Forward-looking statements include words or expressions such as “envisages”, “development start-up”, "will", “should”, “milestones”, “aim of”, “prospective”, “continues”, “pursuing”, “growth”, “opportunities” and other similar words or expressions. Factors that could cause future results or events to differ materially from current expectations expressed or implied by the forward-looking statements include the ability to develop the Siou underground operation with $51.7 million of pre-production capital, the ability to start the development of the Siou underground operation in the third quarter of 2018, the ability to meet our targets at Mana between 2019 and 2023 with respect to annual production and all-in sustaining cost, the ability meet the 2018 milestones for the development of the Siou underground, the accuracy of our assumptions, the ability to execute a $26 million exploration budget in 2018 at the contemplated properties, the ability to complete the construction of the Boungou mine on time and on budget, the ability to execute on our strategic focus, fluctuation in the price of currencies, gold or operating costs, mining industry risks, uncertainty as to calculation of mineral reserves and resources, delays, political and social stability in Africa (including our ability to maintain or renew licenses and permits) and other risks described in SEMAFO’s documents filed with Canadian securities regulatory authorities. You can find further information with respect to these and other risks in SEMAFO’s 2017 Annual MD&A, and other filings made with Canadian securities regulatory authorities and available at www.sedar.com. These documents are also available on our website at www.semafo.com. SEMAFO disclaims any obligation to update or revise these forward-looking statements, except as required by applicable law.

The information in this release is subject to the disclosure requirements of SEMAFO under the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. This information was publicly communicated on March 6, 2018 at 5:00 p.m., Eastern Standard Time.

For more information, contact

SEMAFO
John Jentz
Vice-President, Corporate Development & Investor Relations
Email: John.Jentz@semafo.com

Ruth Hanna
Analyst, Investor Relations
Email: Ruth.Hanna@semafo.com

Tel. local & overseas: +1 (514) 744 4408
North America Toll-Free: 1 (888) 744 4408
Website: www.semafo.com 

Financial and Operating Highlights   
 201720162015
Gold ounces produced206,400240,200255,900
Gold ounces sold205,300240,600258,600
    
(in thousands of dollars, except amounts per ounce, per tonne and per share)   
Revenues – Gold sales258,993300,483300,129
Operating income11,49460,08666,066
    
Net income attributable to equity shareholders20,03634,21924,910
 Basic earnings per share0.060.110.09
 Diluted earnings per share0.060.110.09
    
Adjusted operating income¹10,65970,98965,973
Adjusted net income attributable to equity shareholders¹86448,10940,863
 Per share¹0.150.14
    
Cash flows from operating activities2107,023142,222147,561
 Per share10.330.450.51
    
Average realized selling price (per ounce)1,2611,2491,161
Cash operating cost (per tonne processed)¹464347
Total cash cost (per ounce sold)¹655548493
All-in sustaining cost (per ounce sold)¹942720645
    
    
Total assets1,028,363895,276781,513
Non-current liabilities180,595102,091103,023

 

1Adjusted operating income, 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 measures" defined at the end of this press release.
2 Cash flows from operating activities exclude changes in non-cash working capital items.

 

Fourth Quarter Financial and Operating Highlights    
  Three-month period
   
  ended December 31,
   
  2017 2016 Variation 
Gold ounces produced 49,500 55,100 (10%)
Gold ounces sold 49,200 57,100 (14%)
       
(in thousands of dollars, except amounts per ounce, per tonne and per share)    
Revenues – Gold sales 62,960 69,137 (9%)
Operating income 2,215 4,806 (54%)
      
Net income (loss) attributable to equity shareholders 1,649 (4,949) 
 Basic earnings (loss) per share 0.01 (0.02) 
 Diluted earnings (loss) per share3 0.01 (0.02) 
       
Adjusted operating income1 2,405 10,554 (77%)
Adjusted net income (loss) attributable to equity shareholders1 (315)7,899  
 Per share1  0.02 (100%)
      
Cash flow from operating activities2 25,409 30,362 (16%)
 Per share1 0.08 0.09 (11%)
        
Average realized selling price (per ounce) 1,278 1,211 6%
Cash operating cost (per tonne processed)¹ 47 40 18%
Total cash cost (per ounce sold)¹ 667 571 17%
All-in sustaining cost (per ounce sold)¹ 982 694 41%
        

 

1Adjusted operating income, 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.
2Cash flows from operating activities exclude changes in non-cash working capital items. See the “Non-IFRS financial performance measures defined at the end of this press release.
3 When there is a net loss attributable to equity shareholders, diluted loss per share is calculated from the basic weighted average number of outstanding common shares because the effect of options is anti-dilutive.

 

Non-IFRS Financial Performance Measures

Some of the indicators used by us to analyze and evaluate our results represent non-IFRS financial measures. We provide non-IFRS financial performance measures as they may be used by some investors to evaluate our financial performance. Since the non-IFRS performance measures do not have any standardized definition prescribed by IFRS, they may not be comparable to similar measures presented by other companies. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. For the non-IFRS financial performance measures not already reconciled within the document, we have defined the IFRS financial performance measures below and reconciled them to reported IFRS measures.

Cash Operating Cost
A reconciliation of cash operating cost calculated in accordance with the Gold Institute Standard to the operating costs is included in the following table:

 2017 2016 
Per tonne processed  
Tonnes of ore processed2,739,900 2,753,300 
   
(in thousands of dollars except per tonne)  
Mining operation expenses (relating to ounces sold)134,385 131,953 
Government royalties and selling expenses(11,364)(13,627)
Effects of inventory adjustments (doré bars and gold in circuit)3,184 (67)
   
Operating costs (relating to tonnes processed)126,205 118,259 
   
Cash operating cost (per tonne processed)46 43 

 

Total Cash Cost  
 2017
2016
Per ounce sold 
 
Gold ounce sold205,300 240,600 
  
 
(in thousands of dollars except per ounce)  
Mining operation expenses134,385 131,953 
   
Total cash cost (per ounce sold)655 548 

 

All-in Sustaining Cost
All-in sustaining cost represents the total cash cost plus sustainable capital expenditures and stripping costs per ounce.

 20172016
Per ounce sold  
Gold ounce sold205,300 240,600 
   
(in thousands of dollars except per ounce)  
Sustaining capital expenditure58,907 41,462 
   
Sustaining capital expenditure (per ounce sold)287 
  172
   
Total cash cost (per ounce sold)655 548 
   
All-in sustaining cost (per ounce sold)942 720 

 

Operating Cash Flows per Share  
 2017
2016
(in thousands except per share)  
Cash flows from operating activities1107,023
142,222
Weighted average number of outstanding common shares - basic324,894
315,290
   
Operating cash flows per share0.33
0.45

 

1Cash flows from operating activities exclude changes in non-cash working capital items.

 

Adjusted Accounting Measures

 2017 2016 
(in thousands of dollars except per share)   
Net income attributable to equity shareholders as per IFRS20,036 34,219 
   
Foreign exchange (gain) loss(9,528)1,144 
Tax effect of currency translation on tax base(8,809)1,843 
Share-based compensation (recovery) expense related to change in the fair value of the share price(835)1,990 
Impairment of property, plant and equipment 8,913 
   
Adjusted net income attributable to equity shareholders864 48,109 
   
Weighted average number of outstanding shares324,894 315,290 
   
Adjusted basic earnings per share 0.15 

 

 2017 2016
(in thousands)$ $
Operating income as per IFRS11,494 60,086
   
Share-based compensation (recovery) expense related to change in the fair value of the share price(835)1,990
Impairment of property, plant and equipment 8,913
   
Adjusted operating income10,659 70,989

 

Consolidated Statements of Financial Position   
(Expressed in thousands of US dollars)   
 As at As at
 December 31, December 31,
 2017 2016
 $ $
Assets   
    
Current assets   
Cash and cash equivalents198,950 273,772
Trade and other receivables 22,649 16,945
Income tax receivable 3,186 
Inventories 66,409 51,391
Other current assets 4,094 2,513
 295,288 344,621
Non-current assets   
Advance receivable 2,867 3,060
Restricted cash 23,237 5,689
Property, plant and equipment 703,341 536,237
Intangible asset 1,374 1,595
Other non-current assets 2,256 4,074
 733,075 550,655
Total assets 1,028,363 895,276
    
Liabilities   
    
Current liabilities   
Trade payables and accrued liabilities 72,720 41,964
Current portion of long-term debt 310 310
Current portion of finance lease 4,703 
Share unit plans liabilities 6,404 6,635
Provisions 3,069 3,271
Income tax payable  5,422
 87,206 57,602
Non-current liabilities   
Long-term debt 115,247 56,726
Finance Lease 19,008 
Share unit plans liabilities 3,138 4,899
Provisions 12,258 8,137
Deferred income tax liabilities 30,944 32,329
 180,595 102,091
Total liabilities267,801 159,693
    
Equity   
    
Equity Shareholders   
Share capital 622,294 621,902
Contributed surplus 7,220 7,357
Accumulated other comprehensive income 2,256 1,095
Retained earnings97,710 77,674
 729,480 708,028
Non-controlling interests31,082 27,555
    
Total equity 760,562 735,583
Total liabilities and equity 1,028,363 895,276

 

Consolidated Statements of Income    
For the years ended December 31, 2017 and 2016    
(Expressed in thousands of US dollars, except per share amounts)    
 2017 2016 
 $ $ 
     
Revenue – Gold sales258,993 300,483 
   
Costs of operations  
Mining operation expenses134,385 131,953 
Depreciation of property, plant and equipment94,722 78,323 
General and administrative14,069 13,953 
Corporate social responsibility expenses1,097 960 
Share-based compensation3,226 6,295 
Impairment of property, plant and equipment 8,913 
   
Operating income11,494 60,086 
   
Other expenses (income)  
Finance income(3,294)(2,171)
Finance costs1,309 1,938 
Foreign exchange (gain) loss(9,528)1,144 
   
Income before income taxes23,007 59,175 
   
Income tax expense (recovery)  
Current 4,181 16,408 
Deferred(4,737)1,500 
 (556)17,908 
   
Net income for the year 23,563 41,267 
    
Attributable to:   
Equity shareholders 20,036 34,219 
Non-controlling interests 3,527 7,048 
 23,563 41,267 
   
Earnings per share  
Basic 0.06 0.11 
Diluted 0.06 0.11 

 

Consolidated Statements of Cash Flows    
For the years ended December 31, 2017 and 2016    
(Expressed in thousands of US dollars)    
 2017 2016 
 $ $ 
     
Cash flows from (used in):    
     
Operating activities    
Net income for the year 23,563 41,267 
Adjustments for:  
Depreciation of property, plant and equipment 94,722 78,323 
Share-based compensation 3,226 6,295 
Unrealized foreign exchange loss (gain) (9,480)358 
Impairment of property, plant and equipment  8,913 
Deferred income tax expense (recovery) (4,737)1,500 
Adjustment for withholding taxes  5,827 
Other (271)(261)
 107,023 142,222 
Changes in non-cash working capital items (30,115)6,558 
Net cash provided by operating activities 76,908 148,780 
   
Financing activities  
Drawdown (repayment) of long-term debt 60,000 (30,000)
Long-term debt transaction costs  (259)
Repayment of equipment financing (310)(129)
Payments of finance lease (5,128) 
Proceeds on issuance of share capital, net of expenses255 92,017 
Dividend paid by a subsidiary to non-controlling interest (10,359)
   
Net cash provided by financing activities 54,817 51,270 
   
Investing activities  
Acquisition of property, plant and equipment (201,346)(90,890)
Increase in restricted cash (16,808)(1,390)
   
Net cash used in investing activities (218,154)(92,280)
   
Effect of exchange rate changes on cash and cash equivalents 11,607 (1,164)
Change in cash and cash equivalents during the year (74,822)106,606 
Cash and cash equivalents – beginning of year 273,772 167,166 
Cash and cash equivalents – end of year 198,950 273,772 
Interest paid 6,576 4,150 
Interest received 3,360 1,608 
Income tax paid 12,109 10,816 

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Source: SEMAFO Inc.