Semafo sees lower grades at the Mana mine

West African gold miner Semafo (SMF-T) has unveiled a more modest guidance for 2013, primarily reflecting the lower anticipated grades at its flagship Mana mine in Burkina Faso as it wrestles higher costs.

For the year Semafo is guiding production of 215,000–240,000 oz., about 8% below last year’s forecast, noting the grade at Mana is scheduled to drop as it carries out pre-stripping activities at the Wona-Kona super pit.

“Right now we are doing a lot of push back on the super pit and also stripping. We don’t have access to the average grade of the deposit which is 2.31 grams per tonne,” says Robert LaVallière, the company’s vice-president of investor relations.

During the year Mana should churn out 8,500 tonnes per day at a head grade of 2.13 grams. However, that grade should move closer to the deposit’s average in 2014 and 2015, when the miner starts processing ore from the higher-grade zones.

The lower grade ore at Mana combined with the higher prices for consumables have hiked up the anticipated operating costs in 2013 by roughly 8% to US$760–US$810 per oz. Total cash costs are estimated at US$855–US$905 per oz.  

Haywood Securities analyst Kerry Smith said while Semafo had a strong finish in 2012, the dipping grades at Mana and climbing costs have led him to trim his $5.50-target to $5. He maintains a “sector outperform” rating on the stock.  

In the last quarter of 2012, Semafo generated 62,400 oz., bringing its full-year gold count to 236,100 oz., within its annual target of 235,000–260,000 oz., marking the fifth consecutive year that Semafo has met its guidance.

Operating costs for 2012 are expected to come near the lower end of its US$700–US$750 per oz. target. The full financial results for the past quarter and year should be out in March.

For 2013, the Mana mine is responsible for delivering 70% of the company’s production, similar to last year, while 22% should come from the Samira Hill mine in Niger and the rest from the Kiniero mine in Guinea.

Semafo plans to spend US$114.6 million on capital expenditures this year, including US$49.5 million and U$17.4 million on pre-stripping at Mana and Samira respectively as well as a total of US$26.4 million on sustaining the three operations.

For exploration the producer has budgeted US$22 million, compared to US$46 million last year. About 90% of this year’s amount will be spent at Mana, where Semafo plans to complete more than 107,000 metres of reverse circulation and diamond drilling, along with metallurgical tests and advanced fieldwork.

LaVallière says while the exploration budget has been reduced it’s confined to the 15-km radius around the Mana mill, where it will focus on fast-tracking the high-grade Siou zone discovered last year towards production. He adds the budget is preliminary and could be expanded.  

“As part of our objective to focus exploration on organic growth at Mana in the vicinity of the mill, we intend to add the Siou zone to the 2012 resource estimate and to reserves in 2013,” explained Benoit Desormeaux, the company’s president and CEO, in a release.

Semafo estimates it could potentially start trucking ore from Siou to the Mana mill by the end of 2014 or early 2015. If it does, this could likely improve Mana’s overall grade and reduce its operating costs.

But for this year, Semafo intends to concentrate on permitting and defining the zone, and has two drills turning at Siou.

It notes preliminary results from the sulphides at Yaho and Fofina in Mana’s south sector should be published in mid-March, the same time the miner intends to update its reserves and resources.

Semafo closed Jan. 25 at $3.13, near its year low of $2.92. It reached a 52-week high of $8.30 in July 2012.

The company ended 2012 with about US$140 million in cash and equivalents.