Semafo banks on Mana gold mine

Semafo (SMF-T) president and CEO Benoit La Salle made his entry into West Africa’s mining scene in the mid-1990s — before there was a scene to speak of.

With few companies venturing into the territory, which was coming out of a politically volatile period, Semafo was one of the first in line in Burkina Faso, with the first exploration permit it received — No. 3 – attesting to its early bird status.

“And today, there is no ground available,” La Salle says of West Africa. “Everything is occupied.”

About to open the company’s third and largest open-pit gold mine in West Africa this month – the Mana mine in Burkina Faso – La Salle’s early recognition of the area’s potential has started to pay off. Semafo holds 5,000 sq. km of concessions in mineralized belts in Burkina, Guinea, and Niger, with a mine in each.

Although the company started production in 2002 at its Kiniero project, in Guinea, and then two years later at the Samira Hill project, in Niger, La Salle says it is Mana that will finally move the company from red to black — predicting it will make a profit in 2008.

Mana, originally slated for startup at the end of 2007, is now on track to start production in mid-February. Proven and probable reserves at the project, located on the Hounde greenstone belt, stand at 10.6 million tonnes grading 2.92 grams per tonne at a US$525 per oz. gold price, containing 997,400 oz.

Mana also holds measured and indicated resources of 4.7 million tonnes grading 2.01 grams gold for 301,700 oz. gold, plus 6.7 million inferred tonnes averaging 2.07 grams gold for 444,800 oz.

With a mine life of eight years, Mana is expected to produce 60,000-70,000 oz. in 2008, then 125,000 oz. annually for the three years before production declines slightly to 90,000 oz. annually.

That will go a long way towards the 250,000-280,000 oz. Semafo expects to produce next year. This year, the company expects to churn out a total of 165,000-195,000 oz. gold.

And to ensure it keeps growing, much of the company’s $8- to $10-million exploration budget for the year will be reserved for Mana, where Semafo will look for potential satellite pits, and try to prove up its “serious” underground potential, La Salle says.

“This is really the beginning of a long-term project,” he explains.

The carbon-in-leach operation will exploit two deposits, Wona and Nyafe; Wona will provide about 92% of the tonnage and 82% of the gold produced at Mana.

Year-end financials for 2007, out in March, will provide an update of capital and operating costs at Mana – last pegged at US$58 million and US$279 per oz., respectively — as well as revised resource figures for all three projects.

A chartered accountant by trade, La Salle made his first trip to West Africa in 1993 as a director of charity Plan Canada – an international child sponsorship program.

Now, La Salle, who worked on the accounting side of the mining industry for years before starting Semafo, is proud that the company is creating employment and helping people directly.

“In West Africa, we’re one of the largest employers right now outside of government agencies,” he says.

The company played a part in the discovery of the Hounde greenstone belt in 1997, only two years after starting exploration work there based on French data from the 1940s and ’50s.

“From work that was done at the time, and the fact that we were able to stake a lot of ground at that time, we built Semafo from two people to 2,000 employees today and three mines.”

The company now controls 1,700 sq. km of ground along the Hounde belt.

At its other operations, Kiniero, in Guinea, and Samira Hill, in Niger, Semafo is also focused on continued growth.

At Kiniero, the company is bouncing back from problems last year that forced it to revise its 2007 production forecast for the mine downward, from 52,000-58,000 oz. gold to 28,000-30,000 oz.

“In 2007, we were using a selective mining technique to mine some very erratic structures, and that created grade issues,” La Salle says.

But the grade problem is now solved, he says, since mining shifted out of the lower-grade pits and into the 1.6-km-long West Balan deposit in January.

West Balan, which is still open to the southwest, is now expected to provide most of the ore at the project.

And with the higher gold price, La Salle says the company will be able to bulk mine the other structures in future.

The most recent extension of West Balan, announced in January, added 700 metres to the deposit’s length.

Highlights of the reverse-circulation drilling include: 40 metres of 4.66 grams gold per tonne; 39 metres of 1.34 grams gold; and 7 metres of 2.4 grams gold (from 16 metres), followed by 18 metres of 1.95 grams (at 64 metres). The intersections do not represent true widths.

The Guinean government holds 15% of the project.

In January, the company announced the discovery of two new gold zones at Samira Hill, which has a current mine life of around seven years and was expected to produce around 80,000 oz. gold in 2007.

Recent reverse-circulation drilling at Sikia 1, a 1-km-long structure, was highlighted by 2 metres of 7.07 grams gold per tonne, starting at 81 metres depth, and 11 metres of 2.23 grams gold at 25 metres.

Drilling at the Libiri Plateau target, currently 500 metres long and open at both ends, intersected up to 13 metres of 2.82 grams gold at 53 metres, and 12 metres of 3.59 grams at 47 metres, followed by 8 metres of 2.84 grams gold at 67 metres.

The intersections do not represent true widths.

The new zones are both located on the eastern end of the 10-km-long gold-bearing conductive horizon that runs through the Samira and Libiri deposits currently being mined.

Further drilling is planned for the new targets this year.

An induced-polarization survey completed late last year has also identified additional potential gold zones on the eastern extension, as well as to the north, at the Boulonjounga gold prospect.

Semafo owns 40% of the project and is project operator, while Etruscan Resources (EET-T) holds another 40% and the government of Niger, 20%.

The company also has five early stage uranium and coal concessions in Niger that will see drilling this year.