Watered-down grades hurt Semafo’s quarter (November 21, 2003)

Montreal-based Semafo (SMF-T) closed out the third quarter of 2003 with a $3-million loss (4 per share), largely as the result of an intense rainy season at its Kiniero mine in Guinea.

Production fell to 9,862 oz. in the quarter, at a cash cost of US$238 per oz. Revenues were $3 million in the quarter, partly because low production forced Semafo to deliver into forward sale contracts. The average realized price for production during the period was US$293 per oz., well below spot.

In the third quarter of 2002, by comparison, Kiniero produced 14,824 oz. at US$169 per oz., and lost a net $870,603 on revenues of $4.3 million.

Heavy rains during the quarter limited access to the Kiniero pit, with the result that only 76,589 tonnes of ore were mined from the pit in the quarter, with a further 18,483 tonnes made up from low-grade stockpiles. Millhead grade consequently fell to 3.7 grams gold per tonne, against 5.5 grams in the third quarter of 2002.

Another component of the large loss in the recent quarter was the writedown of the value of the Mont Kakoulima nickel property in Guinea, for a charge of $849,868. There was also an unrealized loss of $606,464 on deferred forward contracts.

In the first nine months of 2003, Semafo is showing a loss of $4.6 million (6 per share) on revenues of $12.1 million. At the three-quarter marker last year, the company had lost $1.5 million on revenues of $7.7 million.