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Edited Transcript of SMF.TO earnings conference call or presentation 7-Aug-19 2:00pm GMT

Q2 2019 Semafo Inc Earnings Call

Saint-Laurent Sep 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Semafo Inc earnings conference call or presentation Wednesday, August 7, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Benoit Desormeaux

SEMAFO Inc. - President, CEO & Director

* Patrick Moryoussef

SEMAFO Inc. - VP of Mining Operations

* Richard Roy

SEMAFO Inc. - VP of Exploration

* Ruth Hanna

SEMAFO Inc. - IR Analyst

* Sylvain Duchesne

SEMAFO Inc. - VP of Construction & Engineering

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Conference Call Participants

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* Andy Gboka

Bellevue Asset Management AG - Analyst and Portfolio Manager

* Brock Salier

Sprott Capital Partners, Research Division - Analyst

* Kerry Smith

Haywood Securities Inc., Research Division - VP & Senior Mining Analyst

* Lawson Winder

BofA Merrill Lynch, Research Division - VP & Research Analyst

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Presentation

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Operator [1]

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Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to SEMAFO's Q2 2019 Results Conference Call. (Operator Instructions)

Ruth Hanna, you may now begin your conference.

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Ruth Hanna, SEMAFO Inc. - IR Analyst [2]

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Thank you, operator. Good morning, everyone. Members of SEMAFO's senior management team joining me for the call today are: Benoit Desormeaux, President and CEO; Martin Milette, CFO; Sylvain Duchesne, Vice President, Engineering and Construction; John Jentz, Vice President, Corporate Development and Investor Relations; Patrick Moryoussef, Vice President, Mining Operations; and Richard Roy, Vice President Exploration.

I would like to remind listeners that some of the matters to be discussed during today's call may contain forward-looking statements. Forward-looking statements include, but are not limited to, items such as our expectations regarding the market price of gold, timetables, mining operation expenses, capital expenditures, guidance, and reserve and resource estimates. Such statements are given as of the date of this conference call and involve risks and uncertainties. A number of factors and assumptions were made in preparing such statements, and actual results could differ materially. Accordingly, you should not place undue reliance on forward-looking statements.

For additional information with respect to forward-looking statements, risks and assumptions, please consult our 2018 annual MD&A as updated and other filings made with the Canadian securities regulatory authorities and available on SEMAFO's website at semafo.com. SEMAFO's disclaims any obligation to update or revise any forward-looking statements, except as required by law.

I make this cautionary statement on behalf of all SEMAFO's spokespersons who may address you during this conference call today. All dollar amounts refer to U.S. dollars unless otherwise stated.

With that said, I will now like to turn the call over to Benoit Desormeaux for the presentation part of the call, followed by a Q&A session. Benoit?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [3]

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Thank you, Ruth, and good morning, everyone. Thank you for joining SEMAFO's Second Quarter 2019 Results Conference call. Before covering the second quarter results, I'd like to briefly touch on the recently announced pit wall failure in the Wona pit. Just before the call, we uploaded some slides on the Operations page of our website to help you understand the event. I will be talking about these slides at the end of the call. We are very disappointed as this has then forced us to lower our guidance and it will affect our results for the year.

The second quarter was another strong quarter. On the operational side, we produced 99,800 ounces of gold, which helped deliver operating cash flow of $74 million or $0.22 per share and an EPS of $0.05 per share. The strong operational performance resulted in more than doubling our net cash position to $45.6 million in Q2 from $21.1 million in Q1. Our balance sheet remains clean and continues to provide our shareholders 100% exposure to the rising gold price.

The highlight of the quarter was clearly Boungou, with production of 63,000 ounces in the quarter at an all-in sustaining cost of $476 per ounce. Grade for the quarter was 7.2 grams per tonne. On the exploration side, we discovered a new zone that we call the Bantou Nord Zone. It is 1.5 kilometers northeast of the Bantou Zone that boasts the existing resource of 361,000 ounces of gold. Given the success to date, we increased the exploration budget at Bantou from $3 million to $11 million and increased the number of rigs from 1 to 3.

As we always do, we will publish an updated resource at the end of the year, including Bantou. We will also publish an updated resource for the current cash flow portion of Bantou given that we closed the acquisition of Savary during the quarter.

Further, we will provide an updated exploration budget for current cash flow late in the third quarter. We believe that investors are starting to better appreciate the district-scale nature of the 1,250 square kilometer combined plant package. We have set the resource goal of 2.5 million to 3 million ounces by the end of 2020 for the combined Bantou area. This goal is very achievable given the prospectivity of the area and the success we have experienced to date.

Underground development at Siou continued to advance on time and on budget with 4,400 meters completed at the end of July. The pace of development continues in line with our goal of reaching full production in the first quarter of 2020. At quarter end, development was continuing on budget with $31.2 million of the total $51.7 million budget incurred.

At Nabanga, we remain on track to deliver a PEA in the third quarter.

In summary, we delivered another solid quarter, Boungou continues to operate the plant, delivering solid production, low cost and strong cash flow, all in a rising of gold price environment.

Mana delivered an in-line quarter. Although we recently experienced an operational challenge at Mana that resulted in revision of our guidance, we remain confident in our team's capacity to successfully reschedule mining at Wona while retaining our stringent safety control. We maintain a solid financial position, quality development pipeline and a good track record.

In sum, our growth story is intact. As previously mentioned, at Wona, as a result of the wall failure, we've had to defer mining of some 45,000 ounces of gold from Wona North to the first quarter of 2020. This will result in the temporary stoppage of the processing plant for a 10-week period starting late August. And as far as the pushback, we will bring forward the mining of 6 million tonnes previously scheduled for 2021 in our life of mine plan.

In light of the incident, we revised down our 2019 production guidance to between 350,000 ounces and 380,000 ounces of gold. While this was very disappointing, we are very pleased with the effectiveness of our safety precautions as no injuries were sustained and no equipment was damaged.

During the Mana facility shutdown, the mining costs of approximately $22 million for Siou and Wona will be capitalized in development. In addition, there will be a nonrecurring charge of approximately $7 million mostly representing fixed cost for the period.

Before we open up the lines for Q&A, I want to provide some additional information on the Wona pit. Again, for those that haven't already downloaded the slides, they are located on the Operations page of our website.

So if we look on the first page, what we're showing is, of course, the Wona pit which is 2.2 kilometers long. What I was saying is 5 kilometer long in total is on the northern part. What you don't see is where we've mined Wona northeast as well as Kona. So the total land is 5 kilometers long. But what you see is 2.2.

On the left-hand side is the northern part. You see in red where we've got the failure. You see in yellow, that's the reserve pit shelf. So when we're saying that we will move 6 million tonnes, it is well within the reserve pit shelf. You see as well where we were working and the road we use. So there is no road that we're using which are on the East side where we had the failure. So nothing was damaged in that area.

I will go on the next page. What you see on this one is the whole road that we would have used mining this area. Today, of course, we're using only part of this road. But you can see on the smaller picture on the right side that there's no damage to that road. So it's only the place we were expecting to mine that we don't have access because of the pit wall failure. So all of these roads that we're using are in good shape.

So you have -- on the next page, you see the main ramp we're using, you see where the failure was. So you can appreciate that the whole road is in very good shape. No damage at all. So not a problem on that side.

If you look on Page 5, you see the pit wall failure from -- in front. So you can see the size, it's approximately 130 meters wide, 60 meters of height. It's 3 -- almost 3 benches up, 20 meters. So we cannot just go and remove what fell down. We have to go back and mine from the top and change the slope.

If you go on Page 6, what you see in purple -- blue and purple it is where we were at the end of June. So as you can see, we were just sitting on the ore body. We're looking to mine these 45,000 ounces. What you see in yellow is the Phase 3 -- Wona Phase 3 pit design. This is what we were looking to mine till the end of 2020. Now what we have to do is we have to do what you see in green. So we will use a pit slope of 43 degrees.

So on the right side, you see that is what we will be mining and representing 6 million tonnes of weight. What you see in red, of course, is the reserve pit shelf. Pit slope is at 40 -- 54. So you can really appreciate that the 6 million tonnes we're mining are well within the pit shelf. It is tonnes we would have moved in 2021, so these tonnes are brought forward. But we won't have to move them later. So this is how we see things for now. It's an unfortunate event, but as I said, it's good that we have no equipment and no people working in the area.

So it's postponing some 45,000 ounces to next year, so we'll focus hard in the remaining of the year to make sure we can meet the planning we've established. And we are confident we will meet the revised guidance we have announced. So that completes what I have to say on those slides. Of course, we can answer any questions.

So operator, I will now open up the lines for Q&A, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question will be from Brock Salier at Sprott.

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Brock Salier, Sprott Capital Partners, Research Division - Analyst [2]

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A quick question, not so much on Mana, but Boungou. If you could give us a bit more color on those grades. I think we had a reserve with 4-something and a mining plan of size. I think, there was excellent grades just reported to date. How long do you expect that to be sustained, first of all? And secondly, is that going through a high-grade part of the mine? Or is that some possibly -- some positive reconciliation there at Boungou?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [3]

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Okay. Brock, the good grade is -- we have a small positive reconciliation, but that will not explain that big gap in grade. I just want to remind you that we're mining the starter pit where we have very high grade in some areas. Depending where we're mining in the month, it has big effect.

One thing that explains that grade is, of course, the lower throughput. In the quarter, there was some shutdown at the plant. We as well advanced the shutdown that was planned for July that has been completed in June. So adding a lower throughput, we're always going for the best times we have available. So that would explain why in that quarter -- so where we were mining in the pit and the lower throughput, focusing on our best grades, this is what would explain that grade.

We won't sustain that 7 grams per tonne because it's not the average grade of the area as well as because we're expecting the throughput will increase in Q3 and Q4. But we will still be probably a bit higher than the guidance we gave at the end of -- the beginning of the year.

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Brock Salier, Sprott Capital Partners, Research Division - Analyst [4]

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Understood. And flipping back to Mana, could you give us a bit of a breakdown? It looks like you've got a great fall where presumably as you were mining at more at the Wona pit than Siou. What does that look like for the second half? And can you give us a bit of a breakdown between the Siou and the Wona grades there?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [5]

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Yes, no worries. In the first half, as we said, there was no Siou at all. Siou was always forecast for the end of the year because we're developing what -- the test as well as developing the underground.

So what you saw in the first 6 months is only Wona. As well, we were mining in some parts of Wona South. And the grade in Wona South is probably more like 1.7, 1.8. Wona North is where we had the best grades. So of course, we were looking to mine these 44,000 -- 45,000 ounces at the better grade going deeper.

So what you could expect in the next 2 quarters? Of course, we will have a way lower throughput than we should have had. But the first part, let's say, the third quarter will be still Wona South, so you may expect something more like 1.7, 1.8. At the end of the year, it is 100% Siou. So we're more talking about 4 grams in the latter part of the year. And of course, cost will go with the grade. So with the grade of 4, of course, all-in cost will be way lower.

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Brock Salier, Sprott Capital Partners, Research Division - Analyst [6]

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Understood. And just finally then, now that we've got 100% Wona, the recoveries were in the mid-80s. Is that something we should expect from Wona going forward? It's a lot higher than the original 81% guidance, I believe.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [7]

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Yes. It is what you should expect probably, yes, this year and probably next year. We have always kept in our reserve the 81% we had in the feasibility study. We have never updated those figures in our reserves, but in reality, we see that we can achieve a bit more. So 86%, 85%, this is what we would be using.

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Operator [8]

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Next question will be from Lawson Winder at Bank of America Merrill Lynch.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [9]

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Just on the shutdown in Q2 at Mana -- or at Boungou, rather, how long did that shutdown last for?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [10]

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We had 2 shutdown in Boungou, one in April or May -- beginning of May. You remember that we said that we would change the liners in the SAG mill? So that was part of the shutdown in April as well as we changed the liners on the shaft in the vertimill. And there was another shutdown in June that was scheduled initially for July, but we decided on purpose to advance the shutdown and try to increase throughput in the third quarter. So I think it was like a 5-day shutdown.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [11]

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Between the 2 of them, it was about 5 days?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [12]

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Each of them.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [13]

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Okay. Each. Okay. That makes more sense. And of course, it would make sense to move the second shutdown into June, when you had those grades. So just in that vein, I mean, what kind of ramp-up are you expecting in Q3 then to Q4 in terms of -- in the throughput, just on an average tonne per day basis?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [14]

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Just to give you a bit more color on the throughput and to just give you some information of where we were and where we are now. So in April, because we've been working on different aspects of the throughput. So we always said that the liners in the SAG is one bottleneck. As well, we said to everyone that we would put a pre-crushing. That was installed in May. So in April, we were at 147 tonnes per hour. In May, we were at 157. And then June, we were at 167.

So in our budget, and of course, in our guidance for the year, we were seeing an increasing throughput every quarter. This is not what you saw in second quarter. But for the reason, as you know, it's our first year of operations. So I would say the shutdowns are planned, but they are not exactly in the timing we planned. But in total, it will remain the same.

So in the next 2 quarters, we're expecting throughput increase, and we were expecting as well just in Q4 to reach 4,200. That's what we had in our budget.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [15]

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4,000 -- sorry, what was it for Q4?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [16]

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4,200 tonnes per day. I don't know exactly per hour what's the...

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Unidentified Company Representative [17]

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That's 170, 171.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [18]

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170, 171.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [19]

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Okay. That's really, really helpful. And then just one more question. Thank you for providing those slides on Wona north wall pit failure. Those are very helpful. And just looking at Slide 6, so I mean, basically the implication of that slide is the overall life of mine pit slope is actually not going to change. It's just going to be that cutback that you'll be doing in Q3 and into Q4 where you'll have the higher strip ratio. Is that correct?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [20]

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Yes. Yes, that's correct. That's what we're seeing as well. It's unfortunate. We have to move it quicker. It's affected 2019, but those tonnes won't have to be moved in 2020. So it's more tough this year, probably less tough in another year.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [21]

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Now what was it that caused that pit slide? Was there a fault there that you didn't realize was there?

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [22]

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There is -- yes, it's -- just for your information, Golder were on site last week and were starting to see some preliminary comments on their part. That was really not water in the walls. That was like a circular structural failure that is mainly caused by the contact of what we feel is a calcite fault dike. And in the back, there was also a sericite band as well at the junction in which the wall of the Phase 3 would cross the fault itself.

So obviously, we got Golder working on the modelization. They're going to be doing some empirical analysis and coming back on the recommendation. But more importantly, the walls were depressurized, so it wasn't associated with the rainy season or any water inflow into the wall. It was mainly geological structures.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [23]

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And just to give you a bit more background, if you look on Page 2, you look at the old Wona pit. So you see on the right side of the failure, you see where -- you see even some greens. These walls have been mined, and they're holding very, very tight.

So in Wona -- in the Wona, you see we have like 12 different zones that may have 12 different slopes because they are worked differently. So it's not because we had a failure here that there's failure on the East wall all along 2.2 kilometer long. You see that the walls are holding fairly tight.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [24]

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Now I mean, I guess, the obvious question then is Golder's been on site, they've done some work. Now some of the work they've done, is that what gives you confidence that ultimately the life of mine strip ratio will remain at what's been planned?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [25]

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They will provide us with some recommendation and things to do. We will probably in the area where we had the pit wall failure, we will do some geo tech drilling in the coming weeks just to see the sericite zone that Pat talked about; what size and where it is because maybe in the first -- in the Phase 3, it would have been all mined out. So we might not have that continuing, but we just want to make sure just to avoid that kind of thing in the future.

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [26]

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Yes. And just to add a bit to what Benoit was mentioning is when you do an overall simulation on the ultimate pit -- previously, our reserves were above 130 million tonnes of waste. In terms of ore, it doesn't change the quantity of ore that's going to be extracted in the current Phase 4.

Recall, Phase 4, our pit designs are done 1,100. We used cutoffs of 1,200. Today gold is sitting at 1,500. Now if we were to run a simulation at 1,300 with adjusted pit walls, probably there would be very little significant impact in that. We'd probably be able to increase a bit the ore by pushing back some of the walls as well with certain parallel zones and bringing the pit at depth.

So we're working right now with Golder on the long-term analysis as well to see what's our life of mine plans and future designs to be able to bring Wona North to its full reserves and beyond and see what the impact will be.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [27]

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Yes. Like Patrick, I think we've been conservative. And even if we announced our reserves are at 1,250, they are within an $1,100 pit shelf.

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Operator [28]

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Next question will be from Kerry Smith at Haywood Securities.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [29]

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Ben or Patrick, did Golder give you the original geotechnical assessments for the walls, for the angles?

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [30]

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Yes. Well, Golder's been working with us for the last 10 years, and they've been continuously auditing our pit walls from Mana to Siou to Fofina. And we work with them...

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Unidentified Company Representative [31]

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With Boungou.

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [32]

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Same with Boungou as well, so...

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [33]

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Okay. Okay. So they've been involved for a while. So I mean, obviously, the issue is if it's a localized structure that you just happened to hit it with the wrong orientation in the wall and it failed...

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [34]

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Exactly. That's what it looks like for now, but we just want to confirm the size of it. And is it all going to be mined out when we will be mining the Phase 4, therefore, we can adjust the timing of pushback and make sure that we don't have any temporary road in that area.

But as I was pointing out on Page 2, you see on the southern part, you see the wall there has been mined way further than where we were mining in the north and there's no problem. So it's not because you have one sector that has a weak zone that it's going to be larger than that.

And you see on the -- even on the pit wall failures, you see on the right side and left side, it's holding pretty well.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [35]

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Right. It looks like there was a small failure on that wall just to the -- just under the word "failure." It kind of looks like there was a small one there as well, in the picture.

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [36]

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Yes. And we've had previous small slips here and there. And we've been able to adjust them accordingly, and most the time mine them from the bottom, get a bit of scaling in there and do a slight pushback and keep on with the productivity.

We've never seen a failure over 3 benches of 60 meter height, yet we do apply best practices in terms of a geotechnical work. We follow a lot of the groundwater seepage from surface. We have a lot of piezometers to drain inflow water from the water tables. We use crack propagation on-site to measure any cracks that may occur along the walls. We conduct pre-shearing, pre-split blasting. You could see some of those walls have half-moons on them, similar to what we see on the highways. We also do a lot of surveying, radar spotters. So there's a lot of practices that are being applied within them.

And the Wona's pit has been mined for 10 years. We're at 120 meter deep, and we're just right now adjusting accordingly with the different areas in the pillar because unfortunately this fault couldn't be seen from surface.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [37]

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Right. And I don't want to kind of delve it too much because I think -- I don't think it's an issue, obviously. But can you map the structure that contributed to this slip -- this circular failure? Can you map it at all along just to see what the orientation of it is, which would help you then to determine that it isn't going to be a longer-term issue as it relates to the final pit wall?

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [38]

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That is a very good question, and that's part of the ongoing work right now within the -- next week that's going to be done in conjunction with Golder.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [39]

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Okay, okay, okay, great. And then just on the SAG mills that you changed out at Boungou, you changed them out pretty early, obviously. What have you learned from that? Like you should be a little longer than 12 months with sideliners, obviously. But I presume you're kind of playing with the right steel -- steel combinations to give you the best wearability. But how do you think the SAG liners will run longer term there? Will you get more than 12 months?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [40]

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I will ask Sylvain to answer you, Kerry.

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Sylvain Duchesne, SEMAFO Inc. - VP of Construction & Engineering [41]

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Yes, Kerry, first of all, just to correct that, usually, SAG liners, they -- what we're planning is about 6 months of life. And obviously, we're working with 2 suppliers right now, so there's some adjustments to be done on the configuration. And also, we have a shutdown in September, where we're going to try the second supplier.

So it's really a matter of configurations, wear rate that needs to be adjusted, and hardness of the ore as well, which is -- we have ore which is very hard. So this is all sort of parameters that we have to adjust.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [42]

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And Kerry, keep in mind, you remember when we had some bottleneck, it was at the SAG. I was explaining, it's the form of the liners. To get new liners, it takes about 6 months. So the first change of liners in April was as well just to make -- to try another set of liner in a different format. And the one that comes in September as well is another improvement over what we have.

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Sylvain Duchesne, SEMAFO Inc. - VP of Construction & Engineering [43]

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Kerry, just -- yes, just to -- another comment I want do on the -- for example, the VTM, what we found over the last couple of months is the wear rates from the bottom liners to the top liners are not the same. And that's not what we had in the budget. So we -- obviously, we have to adjust the configurations. We're working with the suppliers on that. But that's based on -- we've done the bunch in December. We didn't have a lot of historical data. Now we're adjusting based on number of hours. And as the time goes along, we're making some adjustments.

So we have to adapt to that, and that's why we ended up that sometimes we're doing a shutdown, which is not planned just like we had in the budget. So it's a part of learning experience as we're pushing through tonnage and going through the mines.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [44]

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Every projects are different.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [45]

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Of course. And then just on the exploration side on Bantou North, just remind me how many holes you have into Bantou North now. And how many holes Richard is planning by the end of the year into Bantou North.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [46]

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Richard, can you answer?

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Richard Roy, SEMAFO Inc. - VP of Exploration [47]

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Sure. I'm not sure exactly how many holes we have to date. We have 3 lines oriented southeast, and we have north-south lines. We have -- 1, 2, 3 -- we have 5 of those. And we are currently -- we just recently finished deepening some of the holes that ended in mineralization. And the program has stopped right now for the rainy season. And all these results for all these lines are still at the lab. We should get them within the end of the month.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [48]

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Okay. Okay. And then you'll get some drilling done when the rains end in October, November, I guess, Richard, is that right?

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Richard Roy, SEMAFO Inc. - VP of Exploration [49]

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Yes, we'll see what we want to do. It depends on -- like I said, some of these holes that we drilled ended in mineralization and we wanted to extend them and see the end of the ore. And then we're going to run some tests to see if it becomes geologically constrained as opposed to economically constrained and then decide what we want to do next.

And there's also -- there is a core of 1-plus gram per tonne within the zone that we're starting to see the geometry, and we may be adding more holes to better define that geometry. But otherwise, we feel that the spacing we have and the cross-holes that we have gives us enough information to come up with a decent number for Bantou North by the end of the year.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [50]

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Okay. Okay. And maybe just one last quick question. Can you just give us an update on the security and the airstrip construction, Ben, just how all that's going?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [51]

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Yes, security, I would say, situation is fairly stable. I would say it's -- we cannot say there is improvement. Neither there is deterioration. There's a lot of activity. Integrated forces are working hard to try to bring security back where it was before. As I've always said, it's not going to change overnight, but we have to adjust. And our security measures have been increased over time. So we are confident on what we have.

On the air strip, we had like some delays in getting all the authorization we needed. Now that's all been completed. We're expecting the 2 airstrips to be ready beginning of October.

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Operator [52]

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(Operator Instructions) And your next question will be from Andy Gboka at Bellevue.

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Andy Gboka, Bellevue Asset Management AG - Analyst and Portfolio Manager [53]

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I had very -- one very quick question, still on the pit wall failure. You mentioned that the ore quantity that you had planned for the second half of this year will be moved on to 2020. So I don't know if you can comment on that, but I was wondering whether this is likely that your guidance for the gold production in 2020 could be increased based on that or not really -- there will not be any material change.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [54]

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Okay. So first, yes, because we have displaced some tonnes in Wona North, of course, there is those 45,000 ounces that will be available that would not have been available otherwise. But where we will be mining -- where we would start mining in the beginning of 2020, it is where we would have been starting mining somewhere end of August. So it's going to be a couple of months delay as opposed to what we initially had in 2020.

So what we have to do is look at the mine plan that we had in 2020. Can we reach the bottom of what we were expecting initially. And what's the difference in grade between, let's say, month of December -- November, December of 2020 compared to what we had at the top of Wona where we will be mining.

For now, it's too early to comment. But our focus is we have -- next year, we have 100,000 ounces that is planned from the underground. So we have to find the best mine plan for another 100,000 ounces, and we'll see what fits best in terms of cash flow as well.

So we may not follow exactly the same -- or it's sure that we will not follow exactly the same mine plan in 2020, but it's early to say is it going to be better, is it going to be slightly lower. Difficult to comment. It's going to be a question of grade. And because we were going in very good grade in Wona North.

I have said when I was showing the slide that Phase 3 of Wona was supposed to end at the end of 2020. So part of this, of course, will be mined. Can we go quicker? This is all type of options. If we can bring more equipment to adjust, mine more tonnes in some -- for a period of time and get back on the original 2020 plan, again, we'll do so. So those options are going to be looked at in the next months.

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Operator [55]

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(Operator Instructions) At this time, Mr. Desormeaux, we have no other questions registered, sir.

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Ruth Hanna, SEMAFO Inc. - IR Analyst [56]

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I would like to remind listeners that we've added the slides related to the Wona wall incident to the Operations page of our website. In addition, our second quarter 2019 MD&A and financial statements are available on our website or on SEDAR at sedar.com.

The audio webcast of this conference call will also be available for replay on our website for a period of 30 days.

I would also like to mention that currently, our 2019 third quarter financial and operating results are scheduled for publication on/or around November 5, 2019.

Thank you, and have a good day.

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Operator [57]

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Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.