Thursday 27th October 2016

Resource Clips

Mana From Heaven

SEMAFO Expands its Burkina Faso Flagship

By Greg Klein

According to the Book of Exodus, God’s provision of manna sustained the Israelites through their 40-year journey to the Promised Land. But there’s no final word on how long nature’s provision of gold will sustain SEMAFO’s Mana Mine. A $30-million exploration program expands the mine as it produces. That’s the surprising outcome of a charitable mission to Burkina Faso.

In 1994, Benoit La Salle travelled to West Africa on behalf of Plan, a charity dedicated to developing countries. He met Burkina President Blaise Compaore, who invited him to return and study the country’s gold-mining potential. La Salle was a chartered accountant with no mining background. “I knew nothing about it at all,” he told the Financial Post last year. Now he’s CEO of SEMAFO, a mid-tier producer with two other African producers—Samira Hill in Niger and Kiniero in Guinea—besides its flagship Mana. Talk with him, and it’s evident that mining’s gotten well into his blood.

SEMAFO Expands its Burkina Faso Flagship

“The Mana Mine is a very large district, 2,000 square kilometres in Burkina Faso,” La Salle says. “It’s a district that has a very strong magnetic signature and that has been normally a very good indicator of where the sediments are. We have over 200 kilometres of magnetic signatures that are very easy for us to identify with the new tools. So in early 2000 we discovered a structure which we call the Wona structure, which currently hosts over two million ounces [in reserves]. That’s where we built the first [open pit] mine.

“Last year, as we were following a similar signature south of the permit, we discovered the Fofina-Fobiri structures,” La Salle continues. “They were showing about a million ounces inferred. Fofina is more of a high-grade system and not as wide. It will go from a couple of metres up to sometimes 10 metres wide, but the grade will go from 3 grams up to 15 grams per tonne. Fobiri, which is a parallel zone to Fofina, a couple of kilometres to the east, is a longer system. It’s a lower grade but wider, and these are two very nice systems which currently show about one million ounces.”

Fofina assays released July 18 include 19.46 grams per tonne gold over 8 metres, 4.29 g/t over 25 metres, 7.49 g/t over 7 metres, 17.22 g/t over 2 metres and 7.49 g/t over 4 metres.

Assays from Mana’s Yaho Zone, 4.5 kilometers from Fofina and 20 kilometers from the Mana mill, were released June 28. Highlights include 1.56 g/t over 19 metres, 1.9 g/t over 14 metres (including 3.4 g/t over 5 metres), 1.16 g/t over 21 metres (including 1.72 g/t over 10 metres) and 1.19 g/t over 19 metres.
May 12 results from Wona’s SW Zone include 4.17 g/t over 32 metres, 4.45 g/t over 10 metres, 2.27 g/t over 51 metres (including 6.25 g/t over 6 metres), 3.49 g/t over 28 metres (including 3.6 g/t over 25 metres) and 2.41 g/t over 25 metres.

La Salle comments on the July 18 results, “They confirm the geology, the width and the grade. We’re extremely pleased because the original results were strong, and we’re pleased that with systematic and very tight drilling we’re able to see the inferred resource moving up into the category of reserve or measured and indicated, depending on the final work done by our geologists.”

The key thing about Mana is that in the past 10 years it’s never missed a beat. Every quarter it’s got good drill results, every quarter it’s got great production. —Benoit La Salle

SEMAFO currently budgets $30 million for its 15-rig drilling program and plans further expansion in 3Q. At 2010 year-end Mana’s reserve estimate showed 25.47 million tonnes grading 2.64 g/t for 2.16 million ounces proven and probable. Mana’s resource estimate showed 23.66 million tonnes grading 1.5 g/t for 1.13 million ounces measured and indicated. Total reserves and resources came to 49.13 million tonnes grading 2.1 g/t for 3.29 million ounces. The company lists its inferred resource separately: 36.47 million tonnes grading 2.28 g/t for 2.68 million ounces.

Mana’s 2Q figures, released July 6, show record production of 47,800 ounces, a 6% increase over 1Q and 75% of SEMAFO’s total gold production for the second quarter.
A feasibility study announced March 31 predicted an underground mine below Mana’s current open pit would produce 942,600 ounces at a cash operating cost of US$589 per ounce or US$42.25 per tonne processed over a nine-year lifespan. The mine would require initial capital expenditures of $140 million, with a pre-tax operating cash flow of $452 million bringing a 28% internal rate of return and a three-year payback period.

La Salle enthuses about Burkina Faso. “The people, the government really are pro-mining. The workforce is pro-mining; the unions are pro-mining. The ministry of mines and finance is open-minded about anything that needs to be done to accelerate the development of mines and projects.”

Last February, however, economic concerns set off a series of strikes and protests that were accompanied by army mutinies. As the unrest continued, SEMAFO announced April 18 that its operations were unaffected. Nevertheless the company’s stock fell close to its 52-week low of $6.54. At press time SEMAFO had 272.7 million shares outstanding at $8.77 a share, for a market cap of $2.39 billion.

La Salle concludes, “I think the key thing about Mana is that in the past 10 years it’s never missed a beat. Every quarter it’s got good drill results; every quarter it’s got great production. The construction of the plant was done in 14 months, the commissioning in 45 days. It just keeps giving the results we’re looking for.”

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