Semafo banks on Mana

Semafo (SMF-T, SEMFF-O) 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, originallyslated 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 Hound greenstone belt, stand at 10.6 million tonnes grading 2.92 grams gold per tonne for 997,400 oz. mine already at Taparko, holds a 12% stake in Goldrush.

Under an agreement with High River, Goldrush can truck its ore to Bissa, where High River is likely to build a mill within the next several years.

That means Goldrush “can begin mining with much smaller deposits,” Willoughby said, and avoid the roughly US$100 million in capital costs that would be required to build a mill on its own.

Dan Hrushewsky, vice-president of investor relations at High River told The Northern Miner that Burkina Faso is an emerging gold mining country with the same rocks that host the world-class gold mines of Ghana and Mali.

“They’re the same rocks, but there hasn’t been any recent commercial mining until we started producing gold at the Taparko- Bouroum gold mine in August last year,” he said.

In the last two years, Goldrush has raised $8.25 million and holds $2.7 million in cash. It has a market capitalization of about $20 million, with a stock price that has hovered between 20 and 40 over the last year, and is currently trading at about 30 per share.

Like many in his industry, Willoughby argued his company’s stock is undervalued, but said he hopes that once the NI 43-101 resource is released, “people will start doing some arithmetic.”

Goldrush holds the largest land position of any explorer in the country with 33 permits stretching over 5,790 sq. km.

“There are numerous artisanal sites where women are panning deposits at the top of the holes,” he said. “They are excellent pathfinders to gold mineralization. . . We’ve got years of work ahead of us on those thirty-three permits.”

In a country where 85% of the population survives on less than US$2 per day, Willoughby also noted that Burkina Faso is desperate to develop industry other than agriculture and “supports mining exploration in spades.”

Hrushewsky of High River added that the government is so keen to kick-start mining in the country that it is bending over backwards to be helpful.

“They opened a customs office right at our mine’s gates to facilitate bringing machinery right into the mine,” he said.

Under the country’s mining code, the government takes a 10% carried interest in all mining projects, receives a 3% net smelter royalty and has set the corporate tax rate at 25%.

Apart from Tanzania, Goldrush is exploring for opportunities in other nations in West Africa, such as Mali and Morocco.

“All of the easy gold has been found, so it is necessary to go to more remote places and drill deeper,” Willoughby said. “Relative to Canada, there has been very little mineral exploration of any type done in Burkina Faso, let alone sophisticated exploration, and consequently little has been found. So it’s like exploring Canada’s Precambrian shield a century or two ago.”