Semafo takes Mana to the bank

A proposed 92,000-oz.-per-year gold operation at the Mana gold project in Burkina Faso should be profitable, according to a bankable feasibility study commissioned by Montreal-based Semafo (SMF-T).

The study concludes that the project has reserves of 7.2 million tonnes averaging 2.82 grams gold per tonne, for 652,000 contained ounces of gold, based on a gold price of US$380 per oz. At a more current gold price of US$425 per oz., reserves climb to 8 million tonnes running 2.75 grams gold, for 706,000 oz.

A feasibility study completed late last year had reserves at 7 million tonnes averaging 2.75 grams gold per tonne, for around 620,000 contained ounces, based on a gold price of US$380 per oz.

Overall, the project’s Wona and Nyaf deposits contain measured and indicated resources totalling 11.8million tonnes of 2.74 grams gold, or just more than 1 million contained ounces. Another 7.5 million tonnes of inferred material runs 2.31 grams gold.

Plans call for production to average 105,000 oz. per year during the first three years, slipping to 79,000 oz. during the subsequent three years. Average mine operating cost are pegged at US$254 per oz.

The Wona deposit will provide 92% of the tonnage and 82% of the gold produced; 80% of the tonnage milled will comprise oxide ore. The average overall strip ratio will be of 3.6 to 1.

Processing via a carbon-in-leach circuit is expected to recovery some 85% of the gold to produce a total of 552,800 oz. of gold.

The US$48.5-million project generates an internal rate of return (IRR) of 20.7% and a net present value (NPV) of US$21.5 million at a base case price of gold of US$400 per oz. The project would pay for itself in 2 years. The IRR climbs to 33.3%, and the NPV US39.9 million, at a more optimistic gold price of US$440 per oz.

Semafo is currently seeking permits for the wholly owned project. Once a mining permit is granted, the government of Burkina Faso is entitled to a 10% interest in the project.

Semafo earned US$32,000 (or a penny a share) during the recent second quarter, off from year-ago net earnings of US$1.2 million (1 a share), which benefited from US$1.9 million worth of gains associated with the disposal of investment in subsidiaries.

Gold sales amounted to US$15.8 million during the quarter, with 41,646 oz. realizing an average price of US$380 apiece. The company sold 12,798 oz. at US$316 per oz. for total sales of $4.1 million during the corresponding period of 2004. The improved sales reflect the start-up of production at the Samira Hill mine in Niger in October 2004, and increased production from the Kiniero mine in Guinea.

Kiniero produced a record 18,155 oz. of gold at a cash operating cost of US$231 per oz. during the second quarter, an improvement on the 12,682 oz. poured at US$261 apiece a year earlier. The improvement in production and costs come thanks to increased grades, and mill availability and capacity.

The addition of a second ball mill at Kiniero allowed for a 36 % increase in mill throughput to 163,851 tonnes averaging 3.74 grams gold per tonne.

At Samira Hill, second-quarter production amounted to 20,030 oz. at US$204 per oz., compared with the 23,137 oz. poured at US$210 apiece in the first quarter of 2005. Tonnes milled during the second quarter slipped by 15% to 307,062 tonnes containing 2.37 grams gold, as the mill was tied up during the replacements of ball mill components. Cash costs improved thanks to slightly higher grades.

In all, production hit a record 38,185 oz. at US$217 per oz.

Looking ahead, Semafo has revised upwards its production estimate for Kiniero in 20005. The mine is now expected to process 638,000 tonnes of ore running 3.4 grams gold to produce 65,000 oz. at US$250 per oz. Recovery rates are expected to average 93%.

During July, the operation processed 53,942 tonnes averaging 3.6 grams to produce 6,020 oz., for a recovery rate of 94%.

At Samira, production estimates have been trimmed to 115,000 oz.(from 120,000 oz.) via the processing of 1.6million tonnes grading 2.5 grams gold, with recovery pegged at 90%.

The Samira Hill mine is owned 40% by Semafo, 40% by Nova Scotia-based Etruscan Resources (EET-T), and 20% by the government of Niger. Semafo owns 85% of Kiniero, with the balance held by the Republic of Guinea.