Prefeasibility released on underground operation at Semafo’s Mana mine

A proposed underground mine that would complement Semafo‘s (SMF-T, SEMF-O) existing open-pit Mana operation in Burkina Faso would have pre-tax operating cash flow of US$273 million yielding a 23% internal rate of return and a payback period of just 3.5 years, at a base case gold price of US$950 per oz., a prefeasibility study has concluded.

At a base case price of US$1,100 per oz. gold, the IRR would rise to 35% and operating cash flow to US$373 million, while at a base case of US$1,200 per oz. gold, the IRR would jump to 42% and operating cash flow to US$440 million.

Total proven and probable reserves of the proposed underground mine would be 9.24 million tonnes grading 2.9 grams gold per tonne for 850,000 oz. gold.

Average production each year would work out to 76,500 oz. gold at a cash operating cost of US$554 per oz., the study stated. And at a processing rate of 3,000 tonnes per day, the mine would have a lifespan of more than nine years.

The Wona underground project is particularly attractive owing to Mana’s existing 6,000-tonne-per-day processing plant. In order to utilize the plant’s capacity, 3,000 tonnes per day would be sourced from the open pits.

Initial capital expenditures would run to US$93 million with ongoing capital expenditures of about US$24.4 million.

Over the life of the mine, gold production would reach 688,000 recoverable ounces. The parameters of the study included a 2 gram gold cut-off grade, a processing plant recovery rate of 81% and energy costs of 13¢ per kilowatt hour.

The prefeasibility study excluded inferred resources and exploration work conducted to date.

The underground potential is still open at depth and the company says it has yet to include results from exploration in the current Wona southwest zone, which are expected to be released in early July.

In addition to the prefeasibility study, Wona’s open-pit reserves were revised upwards to 111,000 oz. gold.

Apart from the Mana gold mine in Burkina Faso, Semafo operates the Samira Hill mine in Niger and the Kiniero mine in Guinea.

Apparently the prefeasibility study failed to impress the markets. In Toronto Semafo closed down 3.1% or 27¢ at $8.46 per share with 1.96 million shares changing hands.

Over the last year the company has traded in a range of $1.97-$9.13 per share and has 268.6 million shares outstanding.