SEMAFO: Cash Flow from Operating Activities before Changes in non-Cash Working Capital of $60 Million and Transaction Update

2020-05-13 / @newswire

This is information that SEMAFO Inc. is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 9 p.m. Eastern time on May 12, 2020.

MONTREAL, May 12, 2020 /CNW Telbec/ - SEMAFO Inc. (TSX: SMF) (OMX: SMF) is pleased to announce results of operations for the three-month period ended March 31, 2020. All amounts are in US dollars unless otherwise stated.

Highlights
The following 2020 highlights include a 4-week suspension of operations at the Boungou Mine.

Signing of definitive agreement with Endeavour
Consolidated gold production of 81,900 ounces
Gold sales of $123.2 million
All-in sustaining cost¹ of $888 per ounce sold
Operating income of $33.2 million
Net income attributable to shareholders of the Corporation of $14.1 million or $0.04 per share
Adjusted net income attributable to shareholders of the Corporation¹ of $20.8 million or $0.06 per share¹
Cash flow from operating activities before changes in non-cash working capital¹ of $60.0 million or $0.18 per share¹
Full production rate of 2,000 tpd reached at Siou underground (UG)
SEMAFO provides Endeavour transaction update, including update on timing, mailing of meeting materials for May 28 Special Meeting and Board resolutions passed to apply for delisting from the TSX and Nasdaq Stockholm pending closing of transaction

Benoit Desormeaux, President and Chief Executive Officer of SEMAFO, stated: "Despite a four-week shutdown at Boungou and the implementation of preventive measures against the COVID-19 virus, we delivered a solid first quarter that included a smooth ramp-up of Siou underground to full production. During the quarter, we announced a strategic transaction with Endeavour that continues to receive strong stakeholder support. We remind our shareholders to vote in favour of the transaction at the special shareholder meeting that will be held virtually on May 28. Details on how to attend and vote are provided in the joint circular that has been mailed to shareholders, filed on SEDAR and is available on our website."

_____________________________
¹	All-in sustaining cost, adjusted net income attributable to shareholders of the Corporation and per share, cash flow from operating activities before changes in non-cash working capital and per share are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS Financial Performance Measures" section of the 2020 First Quarter MD&A, note 18.

Consolidated Results and Mining Operations

	Three-month period
	ended March 31,
	2020	2019	Variation
Gold ounces produced	81,900	102,400	(20%)
Gold ounces sold	76,800	106,100	(28%)

(in thousands of dollars, except amounts per ounce and per share)
Revenues – Gold sales	123,211	138,541	(11%)
Operating income	33,217	40,359	(18%)

Net income attributable to shareholders of the Corporation	14,066	17,666	(20%)
Basic earnings per share	0.04	0.05	(20%)
Diluted earnings per share	0.04	0.05	(20%)

Adjusted net income attributable to shareholders of the Corporation¹	20,793	22,632	(8%)
Per share¹	0.06	0.07	(14%)

Cash flow from operating activities before changes in non-cash working capital¹	59,985	78,980	(24%)
Per share¹	0.18	0.24	(25%)

Average realized selling price (per ounce)	1,604	1,306	23%
Total cash cost (per ounce sold)¹	661	484	37%
All-in sustaining cost (per ounce sold)¹	888	745	19%

Consolidated Operational Overview

Financial results for Boungou and Mana are provided at the end of this press release. In early February 2020, the Boungou plant restarted and processing of the stockpile began.

The year-over-year decrease in gold sales and gold ounces produced and sold is mainly due to the four-week suspension of operations at the Boungou Mine, which was partially offset by the increase in the average realized selling gold price.

The decrease in cash flow from operating activities before changes in non-cash working capital¹ in the first quarter of 2020 compared to the same period in 2019 mainly reflects the four-week suspension of operations at the Boungou Mine.

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Adjusted net income attributable to shareholders of the Corporation, adjusted basic earnings per share, cash flow from operating activities before changes in non-cash working capital and per share, total cash cost and all-in sustaining cost are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS Financial Performance Measures" section of the 2020 First Quarter MD&A, note 18.

Update on COVID-19

Over the past months, SEMAFO has implemented a series of protocols to help prevent the spread of the COVID-19 virus among its employees, contractors, suppliers and surrounding communities. At the site-level, these involve sensitising employees, mandatory quarantine for expatriates entering Burkina Faso, temperature screening of new arrivals at travel and site access points, cancelling non-essential travel, increasing sanitation measures and heightening its medical response capacity. Personnel with elevated temperatures or other symptoms are immediately placed in preventive isolation, together with co-workers with whom they may have been in contact.

In parallel, the Corporation instigated early preventive measures to mitigate impact on the supply chain. These include increasing stock levels from suppliers from certain regions and stock levels of key supplies in addition to alternate sourcing of key spare parts and reagents.

Endeavour Transaction Update

As previously announced by the Corporation, in connection with the transaction with Endeavour, a Special Meeting of SEMAFO's shareholders will be held virtually through live audio webcast on Thursday, May 28, 2020 at 09:30 EST. The purpose of the Special Meeting is to seek approval for the acquisition by Endeavour of all the issued and outstanding securities of SEMAFO by way of a Plan of Arrangement under the Business Corporations Act (Québec). Shareholders who wish to attend the virtual Special Meeting must follow the procedures set out in the joint circular which has already been mailed and is available on SEDAR and our website at www.semafo.com.

In addition, SEMAFO was advised today by Endeavour that it has received a notice from the Director of Investments under the Investment Canada Act (the "ICA") pursuant to section 25.2(1) of the ICA indicating that the Minister of Innovation, Science and Economic Development is considering whether to order a national security review of the Transaction under section 25.3(1) of the ICA. Endeavour has advised SEMAFO that it will work with the Director to address any outstanding questions or concerns, although neither Endeavour nor SEMAFO is aware of any reasons for the notice. In particular, while SEMAFO's head office is located in Quebec, it has no operating assets in Canada and its operations are confined to gold production and exploration in Burkina Faso. The Minister has until June 25, 2020 to consider whether to order a review under section 25.3(1) of the ICA. If the Minister issues a notice indicating that no such order for a national security review will be made, and assuming all of the conditions to the Transaction are satisfied or waived, the closing of the Transaction is expected to occur before the end of June 2020.

Finally, in response to the COVID-19 pandemic, the Corporation intends to rely on the exemption provided by AMF Decision No. 2020-PDG-0034 (the "Blanket Relief Order") from the requirement to file its executive compensation disclosure within 140 days following the end of its most recently completed financial year. The Corporation will file its executive compensation disclosure in due course in accordance with the requirements set forth in the Blanket Relief Order, and will hold its annual general meeting of shareholders at the appropriate time.

Delisting from Nasdaq Stockholm

In conjunction with the anticipated closing of the Endeavour transaction, SEMAFO has resolved to apply for delisting of the SEMAFO shares from Nasdaq Stockholm, subject to the satisfaction or waiver of the conditions to the transaction. The last day of trading of the SEMAFO shares on Nasdaq Stockholm will be announced as soon as SEMAFO has been informed thereof by Nasdaq Stockholm.

About SEMAFO

SEMAFO is a Canadian-based intermediate gold producer with over twenty years' experience building and operating mines in West Africa. The Corporation operates two mines, the Boungou and Mana Mines in Burkina Faso. SEMAFO is committed to building value through responsible mining of its quality assets and leveraging its development pipeline.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. All statements other than statements of present or historical facts are forward-looking. Forward-looking statements involve known and unknown risks, uncertainties and assumptions and accordingly, actual results and future events could differ materially from those expressed or implied in such statements. You are hence cautioned not to place undue reliance on forward-looking statements. Forward-looking statements include words or expressions such as "expected", "pending", "continues", "will", "seek", "committed", "building", "leveraging", "pipeline" and other similar words or expressions. Factors that could cause future results or events to differ materially from current expectations expressed or implied by the forward-looking statements include: the ability to complete the transaction with Endeavour Mining Corporation on the terms and timing proposed; the impact on the closing and timing of the proposed transaction with Endeavour Mining Corporation as a result of any review ordered by the Minister of Innovation, Science and Development pursuant to the ICA; the ability to prevent and manage the COVID-19 virus, the ability to execute on our strategic focus; fluctuation in the price of currencies; gold or operating costs; mining industry risks; uncertainty as to calculation of mineral reserves and resources; delays, political and social stability in Africa (including our ability to maintain or renew licenses and permits); the security of our operations; and other risks described in SEMAFO's documents filed with Canadian securities regulatory authorities. You can find further information with respect to these and other risks in SEMAFO's 2019 Annual MD&A as updated in the 2020 First Quarter MD&A and other filings made with Canadian securities regulatory authorities, including the joint circular relating to the Endeavour transaction, which are available on SEDAR at www.sedar.com or the SEMAFO website at www.semafo.com. SEMAFO disclaims any obligation to update or revise these forward-looking statements, except as required by applicable law.

Interim Consolidated Statements of Financial Position
(Expressed in thousands of US dollars - unaudited)

	As at	As at
	March 31,	December 31,
	2020	2019
	$	$

Assets

Current assets
Cash and cash equivalents	96,681	98,297
Trade and other receivables	39,684	44,645
Income tax receivable	1,545	4,434
Inventories	99,900	98,072
Other current assets	5,073	5,380
	242,883	250,828
Non-current assets
Advance receivable	1,227	1,421
Restricted cash	9,736	9,964
Property, plant and equipment	828,114	843,123
Intangible asset	1,034	1,079
Other non-current financial assets	1,532	3,698
	841,643	859,285
Total assets	1,084,526	1,110,113

Liabilities

Current liabilities
Trade payables and accrued liabilities	51,720	67,819
Debt	29,565	59,275
Current portion of lease liabilities	12,125	13,073
Current portion of share unit plan liabilities	4,036	3,269
Provisions	2,788	2,843
	100,234	146,279
Non-current liabilities
Lease liabilities	14,276	15,244
Share unit plan liabilities	1,882	2,755
Provisions	26,111	25,617
Deferred income tax liabilities	79,786	72,478
	122,055	116,094
Total liabilities	222,289	262,373

Equity

Shareholders of the Corporation
Share capital	647,251	647,251
Contributed surplus	6,105	6,105
Accumulated other comprehensive loss	(19,517)	(17,351)
Retained earnings	176,193	162,127
	810,032	798,132
Non-controlling interests	52,205	49,608

Total equity	862,237	847,740
Total liabilities and equity	1,084,526	1,110,113

Interim Consolidated Statements of Income
For the three-month ending March 31, 2020 and 2019
(Expressed in thousands of US dollars, except per share amounts - unaudited)

	Three-month period
	ended March 31,
	2020	2019
	$	$
Revenue – Gold sales	123,211	138,541

Costs of operations
Mining operation expenses	52,165	51,405
Depreciation of property, plant and equipment	31,532	39,628
General and administrative	4,461	3,960
Corporate social responsibility expenses	262	357
Share-based compensation	1,574	2,832

Operating income	33,217	40,359

Other expenses (income)
Finance income	(452)	(548)
Finance costs	2,796	3,556
Foreign exchange loss	588	496
Transaction costs	1,578	—

Income before income taxes	28,707	36,855

Income tax expense
Current	3,341	734
Deferred	8,703	14,999
	12,044	15,733

Net income for the period	16,663	21,122

Attributable to:
Shareholders of the Corporation	14,066	17,666
Non-controlling interests	2,597	3,456
	16,663	21,122

Earnings per share
Basic	0.04	0.05
Diluted	0.04	0.05

Interim Consolidated Statements of Cash Flows
For the three-month period ended March 31, 2020 and 2019
(Expressed in thousands of US dollars - unaudited)

	Three-month period
	ended March 31,
	2020	2019
	$	$
Cash flows from (used in):

Operating activities
Net income for the period	16,663	21,122
Adjustments for:
Depreciation of property, plant and equipment	31,532	39,628
Share-based compensation	1,574	2,832
Amortization of deferred financing costs	290	—
Unrealized foreign exchange loss	839	116
Deferred income tax expense	8,703	14,999
Other	384	283
Cash flow from operating activities before changes in non-cash working capital	59,985	78,980
Changes in non-cash working capital items	874	(15,736)
Net cash provided by operating activities	60,859	63,244

Financing activities
Repayment of debt	(30,000)	(15,000)
Repayment of equipment financing	—	(77)
Payments of lease liabilities	(3,532)	(2,125)
Proceeds on issuance of share capital, net of expenses	—	430
Net cash used in financing activities	(33,532)	(16,772)

Investing activities
Acquisition of property, plant and equipment	(26,810)	(43,179)
Net cash used in investing activities	(26,810)	(43,179)

Effect of exchange rate changes on cash and cash equivalents	(2,133)	(827)
Change in cash and cash equivalents during the period	(1,616)	2,466
Cash and cash equivalents – Beginning of period	98,297	96,519
Cash and cash equivalents – End of period	96,681	98,985
Interest paid	1,500	2,775
Interest received	452	548
Income tax paid	275	851

Boungou, Burkina Faso
Mining Operations

	Three-month period
	ended March 31,
	2020	2019	Variation
Operating Data
Mining
Waste mined (tonnes)	—	2,106,000	(100%)
Ore tonnes mined	—	280,000	(100%)
Operational stripping ratio	—	7.5	(100%)
Capitalized Stripping Activity
Waste material – Boungou (tonnes)	—	5,044,600	(100%)
Total strip ratio	—	25.5	(100%)

Processing
Tonnes processed (tonnes)	199,800	308,700	(35%)
Head grade (g/t)	5.29	6.50	(19%)
Recovery (%)	94	96	(2%)
Gold ounces produced	32,000	61,900	(48%)
Gold ounces sold	25,000	64,700	(61%)

Financial Data (in thousands of dollars)
Revenues – Gold sales	40,793	84,492	(52%)
Mining operation expenses	12,247	17,070	(28%)
Government royalties and development taxes	2,385	4,724	(50%)
Depreciation of property, plant and equipment	10,624	24,948	(57%)
General and administrative	425	217	96%
Corporate social responsibility expenses	8	82	(90%)
Segment operating income	15,104	37,451	(60%)

Statistics (in dollars)
Average realized selling price (per ounce)	1,629	1,306	25%
Cash operating cost (per tonne processed)¹	68	53	28%
Cash operating cost including stripping (per tonne processed)¹	68	88	(23%)
Total cash cost (per ounce sold)¹	530	337	57%
All-in sustaining cost (per ounce sold)¹	550	534	3%
Depreciation (per ounce sold)²	425	386	10%

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¹	Cash operating cost, cash operating cost including stripping, total cash cost and all-in sustaining cost are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS Financial Performance Measures" section of the 2020 First Quarter MD&A, note 18.
²	Depreciation per ounce sold is a non-IFRS financial performance measure with no standard definition under IFRS and represents the depreciation expense per ounce sold.

Mana, Burkina Faso
Mining Operations

	Three-month period
	ended March 31,
	2020	2019	Variation
Operating Data
Mining - Open pit
Waste mined (tonnes)	1,771,500	2,766,300	(36%)
Ore tonnes mined	211,200	408,100	(48%)
Operational stripping ratio	8.4	6.8	24%
Capitalized Stripping Activity
Waste material – Siou (tonnes)	117,600	2,405,900	(95%)
Waste material – Wona (tonnes)	2,486,700	1,825,000	36%
	2,604,300	4,230,900	(38%)
Total strip ratio	20.7	17.1	21%
Mining - Underground (UG)
Ore tonnes mined	163,560	—	—

Processing
Ore processed (tonnes)	407,000	427,900	(5%)
Low grade material (tonnes)	257,700	212,300	21%
Tonnes processed (tonnes)	664,700	640,200	4%
Head grade (g/t)	2.49	2.27	10%
Recovery (%)	94	87	8%
Gold ounces produced	49,900	40,500	23%
Gold ounces sold	51,800	41,400	25%

Financial Data (in thousands of dollars)
Revenues – Gold sales	82,418	54,049	52%
Mining operations expenses	33,414	27,182	23%
Government royalties	4,119	2,429	70%
Depreciation of property, plant and equipment	20,768	14,531	43%
General and administrative	588	543	8%
Corporate social responsibility expenses	254	275	(8%)
Segment operating income	23,275	9,089	156%

Statistics (in dollars)
Average realized selling price (per ounce)	1,592	1,306	22%
Cash operating cost (per tonne processed)¹	56	41	37%
Cash operating cost including stripping and UG development (per tonne processed)¹	79	61	30%
Total cash cost (per ounce sold)¹	725	715	1%
All-in sustaining cost (per ounce sold)¹	1,052	1,075	(2%)
Depreciation (per ounce sold)²	401	351	14%

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¹	Cash operating cost, cash operating cost including stripping and UG development, total cash cost and all-in sustaining cost are non-IFRS financial performance measures with no standard definition under IFRS. See the "Non-IFRS Financial Performance Measures" section of the 2020 First Quarter MD&A, note 18.
²	Depreciation per ounce sold is a non-IFRS financial performance measure with no standard definition under IFRS and represents the depreciation expense per ounce sold.

SOURCE SEMAFO

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