The CIM Montreal branch welcomed its latest speaker, John Jentz, to the city with a packed house, during its most recent networking and education event.
Fifty people showed up at the Bier Markt restaurant to listen to Jentz, who is vice-president corporate development and investor relations at Semafo Inc., speak about the company’s gold mining operations in Burkina Faso and Côte d'Ivoire.
Semafo’s flagship mine is the Mana Project in western half of Burkina Faso which had its first gold pour in 2008, and still has a strong five-year outlook with reserves of 1.5 million ounces based on 16 million tonnes at a grade of 2.96 g/t Au . The mine, which started production at 4,000 tonnes per day is now up to 8,000 tonnes per day, “mostly in sulfides—almost exclusively, all the oxides are gone,” said Jentz.
There are two pits at Mana, Wona and Siou. Siou is being mined as an open pit, but the company is currently working to develop a 200m-deep underground mine, with the first extraction expected to begin later this year.
On the opposite side of the country, Semafo also developed the open pit Boungou Project, which is seeing its first full year of production this year (after opening in September 2018 following 18 months of construction) and has reserves of 1.4 million ounces based on 11 million tonnes at 3.9 g/t Au. Currently, it is producing 4,000 tonnes per day, although the company is expecting to increase the output in the future.
“It would be difficult not to make money at four grams in an open pit, even in Africa,” he told the audience.
From those two properties alone, Semafo projects a 2019-2023 target of 404,000 ounces at $708 AISC. (To see the sites, visit www.semafo360.com for virtual tours of the operations.)
Semafo is also developing Bantou Karankasso, which is south of Mana, and the company has a resource goal of 2.5 to 3 million ounces projected by the end of 2020, with the first gold pour planned for 2024. In particular, in the Bantou nord zone, which Jentz describes as “the exciting discovery” the deposit is “all oxide—or 95 per cent oxide—it’s down to 100 metres at least, it’s pretty continuous, 90 per cent of the assays are above half-a-gram and almost all the assays are below 10 grams. Fairly homogenous, fairly easy, low strip, very economic. So that’s very exciting to the team, both from a geology and a from a mining standpoint.”
There is another project in Nabanga in the southeast of Burkina Faso the company is currently exploring and considering for future development. It also has a very small development site, Korhogo, in Côte d'Ivoire. In total, the company budgeted $32 million for exploration in 2019.
While Semafo is not against new exploration or acquisition, Jentz said the preference is always to do life of mine extension at its existing sites.
As for growth, “where we see the value today is investing in small exploration companies,” says Jentz. “Companies with market caps of $10 million, $20 million. For a few million dollars, we get 10 per cent, or something of that order of magnitude, and hopefully those companies, in a three- to seven-year time period become our next internal project behind Nabanga or behind Bantou.
“In today’s market with gold at $1,500, a lot of the valuations have moved. We’ve moved. We’re decently valued, but a lot of the small companies still find it very difficult to get value and to raise money. It’s not an easy world in the small-cap space.”
Based in Montreal for over 30 years, Jentz said that having French-speaking employees, including Quebecois ex-pats working in Burkina Faso, is beneficial to working in the French-speaking country, but it’s also a challenge, Quebec has a relatively small talent pool compared to the rest of the country.
Still, Jentz believes the success of the company is due to having the people on staff who have the core competencies to handle most aspects of the development construction and production aspects of the business, without resorting to too many external hires or consultants.
He also talked about the challenges of mining in Burkina Faso, mentioning the lack of roads, the landlocked nature of the country (which means all shipments must come in through ports located in other countries), an unskilled local labour force, and an electrical grid that can’t really support commercial operations. “We put our own generator sets in. We don’t use the grid. We do that with heavy fuel oil and diesel. That costs you 20 to 30 cents a kilowatt hour. Power for us probably 30 to 35 per cent of our total cost,” explained Jentz.
Additionally, he said that “security is always an issue. It’s manageable, but it has a cost to it.”
On the positive side, he said, “as a mining country, [Burkina Faso] has been relatively stable,” with only one change to the mining code that affected Semafo’s operations. Royalties and corporate tax rates are also relatively unchanging. And since gold is the country’s major export, Jentz said the country values gold mining operations.
Jentz said Semafo also values the country and its people. The company invests two per cent of the net profits into an the Semafo Foundation, which invests in local businesses including shea butter soap production, sesame farming, chicken farming, beekeeping and a sewing centre. It also builds and funds infrastructure projects such as schools (including meal programs for the students).
“We hope it never happens, but eventually the mines will shut down and we want projects around the mines to be there when we’re not there.”
Despite the costs and the challenges, however, Jentz said that the company expects to have a long future in Africa.
“Semafo has been around for a while and we anticipate it being around for quite a while.”