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SEMAFO Announces Positive Feasibility Study and Funding for Natougou

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SEMAFO Announces Positive Feasibility Study and Funding for Natougou

 

 

 

 

 

SEMAFO Inc. (TSX:SMF) (OMX:SMF) announces the results of a positive feasibility study for its Natougou gold project, located 320 kilometers east of Ouagadougou in Burkina Faso. The Corporation also announces it has entered into a commitment letter with Macquarie Bank Limited to amend its existing credit facility. All amounts are in US dollars unless otherwise stated. All figures are on a 100% ownership basis.

 

 

Natougou Feasibility Study Highlights

 

  • During the first three years
    • Average annual production of more than 226,000 ounces
    • Average total cash cost1 of $283/oz and all-in sustaining cost2 of $374/oz
    • Average head grade of 5.72 g/t at a gold recovery rate of 93.8%
  • Production of some 1.2 million ounces at total cash cost of $408/oz and a gold recovery rate of 92.9% over a projected mine life (“LOM”) in excess of 7 years
  • LOM all-in sustaining cost of $518/oz including capitalized stripping and sustaining capital expenditures
  • Maiden open pit mineral reserves of 9.6 million tonnes at a grade of 4.15 g/t Au for 1,276,000 ounces of contained gold
  • Initial capital expenditures: $219 million, which includes $42 million in pre-stripping expenditures and an $18-million contingency
  • Project economics (base case at $1,100/oz):
    • After-tax 5% NPV: $262 million
    • After-tax IRR: 48%
    • Payback period: 1.5 years
  • Targeted construction start-up: year-end 2016
  • Expected first gold pour: second half of 2018 with first year of full production in 2019

1Total cash cost is a non-IFRS financial performance measure with no standard definition under IFRS and represents the mining operation expenses and government royalties per ounce sold.

2 All-in sustaining cost is a non-IFRS financial performance measure with no standard definition under IFRS and represents the total cash cost, plus sustainable capital expenditures and stripping costs per ounce.

 

 

Gold Price Sensitivity Analysis

 

 

The Natougou project sensitivity analysis was performed using a $100 variation from the base case gold price as illustrated in the following table:

 

 

$1,000 oz gold

Base Case
$1,100 oz gold

$1,200 oz gold

After-tax 5% NPV ($M)

$199

$262

$334

After-tax IRR (%)

38

48

58

Payback period (years)

1.7

1.5

1.3

 

 

Financing – Commitment Letter with Macquarie

 

 

SEMAFO has entered into a commitment letter with Macquarie Bank Limited to amend its Facility. When combined with its cash position ($167 million as at December 31, 2015) and anticipated cash flow from ongoing operations, the Corporation estimates it has sufficient financial resources to bring Natougou into production.

 

 

Amendments to the existing Facility include

 

  • Facility increased from $90 million to $120 million
  • Incremental $60 million to be drawn down by June 30, 2017 ($30 million repayment due March 3, 2016)
  • LIBOR + 4.75% per annum
  • Quarterly repayments of $15 million, from first quarter of 2019 to fourth quarter of 2020

 

 

Closing of the amended Facility is anticipated on or about March 31, 2016 and drawdown of the incremental $60 million is subject to conditions precedent customary in a transaction of this nature.

 

 

Project Milestones

 

  • Complete permitting by year-end 2016
  • Complete detailed engineering in fourth quarter of 2016
  • Construction start-up by year-end 2016
  • Ongoing exploration with the aim of increasing reserves and resources and enhancing economics as of the fourth year of the mine life

 

 

Mineralization

 

 

The mineralization at the Natougou deposit is hosted within a flat lying shear zone that has a subtle anticlinal geometry. The host lithology consists of mafic to intermediate volcanic/intrusive stratigraphy. The mineralization is predominately hosted in a silicified shear zone, and a significant quantity of the gold occurs as visible gold. Sulphide minerals comprise pyrrhotite, pyrite, and minor arsenopyrite and chalcopyrite. A significant component of the gold is amenable to gravity recovery. Ninety-nine percent of the mineralization is contained in the fresh rock of the Natougou open pit deposit.

 

 

Mineral Reserves and Resources Estimates

 

 

The mineral reserves and resources estimates have been generated in accordance with the CIM Definition Standards for National Instrument 43-101 reporting. The resources estimate has been completed by Snowden Mining Industry Consultants and the mineral reserves estimates by AMC Mining Consultants (Canada) Ltd.

 

 

SEMAFO’s drilling, in conjunction with previous drilling, comprise a drill database of 174 diamond, 625 multi-purpose (RC pre-collar and core tail) and 550 reverse-circulation drill holes totalling 115,250 meters that supported the mineral reserves statement and the remaining mineral resources.

 

 

The open pit proven and probable mineral reserves estimate for the Natougou deposit totals 9,567,000 tonnes averaging 4.15 g/t Au for 1,276,000 ounces of contained gold. The mineral reserves were estimated based on a gold price of $1,100 per ounce and a corresponding cut-off grade of 1.07 g/t.

 

 

As at December 31, 2015, total proven and probable reserves for the Natougou deposit were as follows:

 

 

Ore

Reserves classification

Tonnage

Grade

Contained Gold

 

tonnes

Au (g/t)

ounces

Proven

1,583,000

6.46

329,000

Probable

7,984,000

3.69

947,000

 

Total Proven + Probable

9,567,000

4.15

1,276,000

 

For further details, see the reserves and resources in Table 1 in the appendix.

 

 

Exploration Potential at Natougou

 

 

Prior to the acquisition of Orbis Gold Limited in 2015, the Natougou project had seen little near-pit or regional exploration. Following the acquisition, SEMAFO’s priority was to conduct in-fill drilling with the view of delivering the feasibility study. Regional and proximal exploration only commenced a few months ago.

 

 

Significant upside potential therefore exists within and surrounding the Natougou mineralized system, which remains open in all directions and at depth. The Corporation’s overall objective is to expand reserves and resources and to enhance economics of the project from year 4 onwards. In the short term, its aim is to expand resources at depth within the footwall zone of the Boungou Shear Zone in addition to the sector west of the deposit.

 

 

Following completion of an airborne geophysical survey in 2015 within the framework of its regional program, SEMAFO’s team is continuing to explore areas within trucking distance of the Natougou deposit. An initial budget of $6 million has been assigned to the 2016 exploration program, which will consist of 20,000 meters of reverse-circulation, 60,000 meters of auger and 6,000 meters of core drilling. The auger campaign is principally planned for the regional drill programs. Results are expected during the second quarter of 2016.

 

 

Mining Operations, Processing and Metallurgy

 

 

The Natougou deposit is projected to be mined utilizing contract-operated conventional open pit methods. Approximately 139 million tonnes of material will be mined from the open pit during the more than seven-year projected LOM. This will deliver 9.6 million tonnes of ore to the milling facility with an average head-grade of 4.15 g/t Au and 130 million tonnes of waste material (13.6:1 stripping ratio). Process grades for the initial three years average 5.72 g/t Au for an average annual production of more than 226,000 ounces of gold at low total cash and all-in-sustaining cost (see table below). The majority of the material from the deposit will be fresh rock, which will be drilled and blasted prior to loading.

 

 

Processing and Metallurgy

 

 

The Natougou process plant is designed to process 4,000 tonnes per day or 1.34 million tonnes of ore per year. The process plant will be based on a conventional crushing and grinding circuit, with the crushing circuit composed of a primary crusher and a coarse ore storage bin. Crushed ore will be conveyed to the grinding circuit using a SAG mill in closed circuit with a pebble crusher and a tower mill. The target grind is planned at 63 um in order to achieve optimal gold recovery. A gravity circuit will be incorporated in the grinding circuit as about 30-50% of the gold is recoverable by gravity. The tailings storage facility located 1.5 kilometers east of the process plant will be fully lined with high-density polyethylene (HDPE). Recycled water will be optimised throughout the process to minimise the addition of fresh water to the process. LOM head grades for the process plant are expected to average 4.15 g/t with a gold recovery of 92.9%. The main reagents used in the plant are hydrated lime, cyanide, lead nitrate and oxygen. A power plant with an installed capacity of 15.4 MW is envisaged using HFO/LFO generators. The milling facility will require some 6.4 MW, and the SAG/tower mill/crusher grinding circuit approximately 4.9 MW.

 

 

Mining and Processing

 

 

The first gold pour from Natougou is expected to occur in the second half of 2018. Information on the first three years of production is provided below, and the entire LOM mine plan is presented in Table 2 in the appendix.

 

Production, Years 1-3

 

Year 1

Year 2

Year 3

MINE SCHEDULE

Ore mined (t)

1,714,444

1,712,439

2,120,648

Grade (g/t)

5.01

4.55

4.68

Waste mined (t)

17,020,156

12,508,621

8,614,138

Capitalized stripping activity (t)

3,087,493

7,262,607

10,134,443

Operational stripping ratio

9.9

7.3

4.1

Total stripping ratio

11.7

11.5

8.8

 

PROCESSING SCHEDULE

Ore processed

1,256,010

1,343,200

1,343,200

Head grade (g/t)

5.93

5.59

5.65

Recovery (%)

93.9%

93.7%

93.7%

Gold – recovered (oz)

224,918

226,100

228,502

Total cash cost /oz

319

304

227

All-in sustaining cost /oz

380

406

337

 

 

Project Operating Costs

 

 

The table below details the LOM cash operating cost per tonne processed at Natougou, which is based on the LOM operational stripping ratio of 7.1:1 and excludes the capitalized stripping accounted for in the all-in sustaining cost.

 

 

 

$ per tonne milled

Mining ($/t)

$20.28

Processing ($/t)

$19.51

G&A ($/t)

$4.94

Operating cost ($/t)

$44.73

 

 

Project Capital Expenditures

 

 

The initial estimated cost to bring the Natougou deposit into production is $219 million, inclusive of pre-stripping and contingency costs, as summarized below.

 

 

Initial Capital Expenditures

In millions of $

Indirect construction

13.6

Processing plant

42.3

Reagents and plant services

13.7

Infrastructure

41.8

Owner costs

15.8

EPCM costs

15.9

Resettlement action plan

8.0

Initial supplies inventory

7.2

Plant & infrastructures subtotal

158.3

Pre-stripping

42.4

Contingency

18.7

Grand Total

219.4

 

 

Initial Capital Expenditures Breakdown per Year

 

 

In millions of $

2016

2017

2018

Initial capital expenditures

10.0

46.0

163.4

 

 

Environmental and Social Studies, Permitting and Community Relations

 

 

The permitting process for the Natougou project continues to advance with positive support of the local communities. An environmental study impact assessment and resettlement action plan were carried out for the project, both of which will be filed with the government of Burkina Faso in the second quarter of 2016.

 

 

Under the resettlement action plan, 165 concessions involving 900 inhabitants will be relocated and compensation will be paid for 813 hectares of farmland at total cost of $8 million.

 

 

The Corporation is committed to fostering an open dialogue with communities surrounding our deposits as part of our commitment to sustainable mining. Following a series of visits in 2015, the SEMAFO Foundation has already enhanced access to fresh drinking water and improved sanitary conditions for the Natougou communities. The Foundation’s priority for the area involves reinforcement of its educational capacity through construction and support of schools and the launch and equipping of agricultural projects with which to generate community revenue.

 

 

Assumptions

 

 

  • Gold price of $1,100 per ounce
  • Heavy fuel oil (HFO): $0.69 per liter
  • Light fuel oil (LFO): $1.08 per liter
  • Exchange rate: $0.72 US dollars to the Canadian dollar
  • Exchange rate: $1.09 US dollars to the EURO
  • NPV calculated using a discount rate of 5%
  • Based on the 2015 Burkina Faso mining code

 

 

About SEMAFO

 

 

SEMAFO is a Canadian-based mining company with gold production and exploration activities in West Africa. The Corporation operates the Mana Mine in Burkina Faso, which includes the high-grade satellite deposits of Siou and Fofina, and is developing the advanced gold deposit of Natougou. SEMAFO is committed to evolve in a conscientious manner to become a major player in its geographical area of interest. SEMAFO’s strategic focus is to maximize shareholder value by effectively managing its existing assets as well as pursuing organic and strategic growth opportunities.

 

Posted February 25, 2016

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