October 21, 2008 12:51 pm
Semafo is a profitable junior operating in West Africa. Semafo produces from three smaller mines in Guinea, Niger and Burkina Faso. The company is guiding for production of 185,000 to 195,000 oz in 2008. The last production update reported 20,000+ oz per month production. Guidance is for 230-250,000 oz in 2009. 300K oz in 2010.
The three mines have Total Mineral Reserves and Resources of 4.252 million oz and Inferred Resources of 2.565 million oz for a total of 6.8million oz.
Semafo indirectly owns 90% of the Mana mine, 85% of the Kiniero Mine and 40% of the Samira Hill mine.
In addition to the mine sites, Semafo owns 5,000 sq km of prospective ground around the three mines.
Semafo has built these three mines and put them into operation over the past 6 years. They have experienced management in all phases of mining and were on target and budget for the first two. The Mana Mine is the biggest and last mine to be started. It began production in 2008 and was 6 months and 30% over budget.
In addition to the three gold mines, Semafo has a uranium investment in private company GoviEx with a book value of 20million. GoviEx is a private company but Cameco recently bought 11% of GoviEx for C$28million, with options to buy more after certain conditions are met. GoviEx has 4,700 sq km of land in Niger.
In Q2 2008, Semafo grossed 44.8 million and had net income of 11,681,000 and .05eps. Cashflow was 19 million. Current share price is C$.89 so forward annualized p/e is less than 5. Cash operating costs are declining from over $500 to C$394 for Q2 due to the lower cost Mana mine contribution.
At 6/30/08, Semafo had 213 million shares outstanding and 224 million fully diluted.
Based on metrics like Market Cap over Reserves/Resources or Market Cap per Produced Oz, Semafo is undervalued by a factor of 1 to 2 times.
Production Capacity Increases:http://www.semafo.com/press_releases_details.php?id=208