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Edited Transcript of SMF.TO earnings conference call or presentation 8-May-19 2:00pm GMT

Q1 2019 Semafo Inc Earnings Call

Saint-Laurent May 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Semafo Inc earnings conference call or presentation Wednesday, May 8, 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

* John W. Jentz

SEMAFO Inc. - VP of Corporate Development & IR

* Martin Milette

SEMAFO Inc. - CFO

* Patrick Moryoussef

SEMAFO Inc. - VP of Mining Operations

* Richard Roy

SEMAFO Inc. - VP of Exploration

* Sylvain Duchesne

SEMAFO Inc. - VP of Construction & Engineering

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Conference Call Participants

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* Bryce Adams

CIBC Capital Markets, Research Division - Analyst

* Don DeMarco

National Bank Financial, Inc., Research Division - Associate

* Felix Waechter

Sprott Capital Partners, Research Division - Associate

* 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 Q1 2019 Results Conference Call. (Operator Instructions) Mr. John Jentz, you may now begin your conference.

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John W. Jentz, SEMAFO Inc. - VP of Corporate Development & IR [2]

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Thank you, operator. Good morning. Members of SEMAFO's senior management team joining me today for the call are Benoit Desormeaux, President and Chief Executive Officer; Martin Milette, Chief Financial Officer; Sylvain Duchesne, Vice President, Engineering and Construction; Patrick Moryoussef, Vice President, Mining Operations; and Richard Roy, Vice President, Exploration.

I'd 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 expectations regarding the market price of gold, timetables, mining operation expenses, capital expenditures, guidance and reserves and resources 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 our website at semafo.com.

SEMAFO 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 spokespeople who may address you today during this conference call. All dollars are referred as U.S. dollars unless otherwise stated.

With that said, I will now turn the call over to Benoit Desormeaux for the presentation portion 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, John, and good morning, everyone. Thank you for joining SEMAFO's First Quarter 2019 Results Conference Call.

The first quarter of 2019 was a record for SEMAFO in 3 important ways. First, we achieved a record production of 102,000 ounces, our first quarter over 100,000 ounces of production in the company's history. Our flagship asset, Boungou, made a strong contribution in the quarter and we look forward to see many more as we look to achieve our 2019 guidance and longer-term targets.

Second, we started the acquisition of Savary in the quarter and closed it on April 30. Savary represents a low-cost, accretive addition to our development pipeline and when combined with our Bantou property, results in a property package that is approximately 25 kilometers east west and approximately 50 kilometers north south, that's 1,250 square kilometers on the Houndé Belt. The Houndé Belt is a prolific gold belt that hosts Mana, where we have mined over 2 million ounces of gold over the past 10 years. We see this combined property package as a district scale mining area that is going to be part of our future for many years to come.

Third, we achieved record financial performance in the quarter. Cash flow from operating activities was $79 million or $0.24 per share, the highest in the company's history. Net income was $17.7 million or $0.05 per share, and this include a $15 million noncash deferred tax charge. Had we excluded this charge, net income would have come in at $32.7 million or $0.10 per share. All-in sustaining cost fell by over 30% on a quarter-over-quarter basis to a record $745 per ounce, in line with our expectation.

Gold revenues in the quarter were also a company record at $138 million based on an average realized price of $1,306 per ounce.

What is equally impressive is that our team has managed all of these records and accomplishments while maintaining a conservative capital structure and clean balance sheet that remains 100% exposed to the upside in gold price. Net cash continues to increase. We repaid $15 million of debt in the quarter and the remainder will be repaid no later than 2020 and potentially earlier.

Exploration-wise, we were active in the first quarter. As we indicated on April 30, we have now 3 drills turning at Bantou. We look forward to providing an update in early June when the assay compilation and geological interpretation are completed. Our team is excited to have recently started exploring Bantou and to have discovered a new zone just north of the Bantou Zone. Recall the Bantou Zone is where we announced the maiden inferred resource of 361,000 ounces at 5.35 gram per tonne.

Now that the Savary acquisition is closed, our team is busy combining the geological information and database from Karankasso with Bantou. We expect this exercise will be completed in the third quarter and we'll update everyone when it is complete.

We would expect the existing $3 million budget at Bantou to increase.

Development at Siou Underground is now almost halfway through and progressing as expected, on time and on budget. The mining permit for Siou Underground is expected imminently following a successful hearing with the National Mines Commission in the quarter. We continue to expect first production at Siou Underground in early 2020.

At Nabanga, the PEA remains on track for the third quarter. All areas of the business, including operations, development and exploration, performed well in the first quarter and we are continuing that momentum into Q2 and beyond.

Operator, I would now like to open up the lines for Q&A session.

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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 Kerry Smith at Haywood Securities.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [2]

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Benoit or maybe Patrick, just on the block model at Boungou, you had -- the grade was 6.5 grams in the quarter. What sort of grade was the model predicting for Q1 relative to the 6.5 grams achieved?

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [3]

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Kerry, I don't have the exact numbers of what was it predicting, but I know that the reconciliation with the grade model and the RC control are very close and we're within 5% of variation. A lot of it has to do in the sequencing, but to date, in Q1 and as a matter of fact, when we reached the high-grade zones in the West pit at the end of October in 2018, we've been very consistent in reproducing the grade from the block model.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [4]

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Okay. Okay. So I guess, the grade is going to tail off over the rest of the year just based on the guidance you've given, but it's not going to be a lot, I guess?

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [5]

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It's going to be close to around 6 grams per tonne.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [6]

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Yes.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [7]

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For the year...

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [8]

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So it's not a surprise. The grade we had in Q1 is not a surprise, it was as expected. And the guidance we gave is pretty close to 6 grams, so it will remain in the same vicinity.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [9]

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Okay. Okay. Great. And the $25 million on the balance sheet of restricted cash, just remind me what that's for? I guess some of that's for the debt repayment, but can you remind me what the total is for?

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Martin Milette, SEMAFO Inc. - CFO [10]

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Kerry, it's related to the debt, so it's an amount that we have to keep separately in the account until the loan reach an amount of $90 million, which will happen at the end of June of this year. So it will be released at the end of June.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [11]

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So all of it will be released at the end of June, Martin?

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Martin Milette, SEMAFO Inc. - CFO [12]

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Yes.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [13]

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Okay. So that will happen in June, then. Okay. And then the cash cost on a per tonne basis at Mana dropped quite a bit in Q1 versus last quarter. It was $41 versus $49 a tonne. Was there any particular reason for that or was that -- I don't know if it was currency-related or what exactly that was caused by?

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

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On our side, it was fairly consistent with the budget we had. There might be a question of stripping because if I remember well, we were mining more Siou. Of course, there was no Siou ore that came in the budget this year. But of course, last year, it was a big part of it. And then Siou is a bit higher strip, so on a cash operating cost, it has an effect. All-in cost, of course, it doesn't have much an effect as we're stripping Siou for the second half of the year. But those are probably the main items. Apart from that, everything is fairly consistent.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [15]

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Okay. Okay. And then maybe just one last question, if I can. You talked about this interesting area that you were drilling 2 kilometers north of Bantou that you'll have some results in June. Is that area interesting because it's potentially better-grade material that you could push through the plant earlier or it's just -- it looks like it could have some economic intercepts but not necessarily have a grade that would supplant or exchange for the current ore in the current pit? So I'm just curious what interesting means.

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

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Yes, we will have -- today, we have some intercepts that are interesting. It's difficult to say for now this morning what will be the economics of it, but it was interesting enough for us to add another drill and maintain a drill that was still working on the Bantou itself. But the combination of Bantou, Karankasso and what we're seeing on our property so far, it looks like -- I'm not talking about geology, and Richard, maybe talk a bit about that later. But I'm not referring to geology, but the potential of these different areas looks -- look like Mana. So you could have some zone at higher grade, you could have some zone at lower grade. And we have 1 type of deposit as well on the same ground. So all depending on the grade and strip ratio and all that, it will make it a very good group of properties based on that. So that means we're not only looking at 1 type of ore and 1 type of geology, which open a totally different potential and this is what we saw after a couple of years of exploration at Mana. And looking at Karankasso and Bantou and what we've -- the target we've just identified recently, yes, it looks similar in terms of potential. Richard? I don't -- do you want to comment on geology?

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Richard Roy, SEMAFO Inc. - VP of Exploration [17]

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I just would like to add, Kerry, that for us, the excitement is the fact that we're just starting exploration, it's the first quarter really to do grassroots exploration on the project. And we're looking at really good looking rocks and it's the variety of the styles of mineralization that is very exciting. So as Ben was saying, similar to Mana, there's different style of mineralization and, of course, you're going to get different grades accordingly. But that's the level of excitement that we're at right now.

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Operator [18]

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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 [19]

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Just first off on the throughput at Bantou -- or sorry, Boungou. Would you expect that to ramp up fairly materially through the back half of 2019?

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

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Yes, that's our plan and that's the way the budget has been built. So the throughput we have achieved in Q1 is as per our budget, so it's maybe just a bit better. Keep in mind, we said, we -- one of -- the bottleneck we had at the plant was the liners in the SAG mill that was limiting the throughput. So the liners have been changed at the end of April. So we are expecting to see an increase in throughput in Q2. There's other things that we're doing at the plant, so from 1 quarter to another, it's supposed to increase and we're expecting in our budget to achieve more than 4,000 tonnes per day in the fourth quarter of the year. So that's the way that our budget has been built, and with all the actions -- the action plan we have in place, this is what we continue to believe will happen.

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

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And in terms of ore hardness at Boungou, is that lining up with what you'd expected?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [22]

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Yes, it's fairly consistent. I will ask Sylvain to comment on it, but in average, I think it's fairly consistent.

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Sylvain Duchesne, SEMAFO Inc. - VP of Construction & Engineering [23]

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Yes, Lawson, it's essentially what we had in mind. Like we said, it's more about the SAG liners that we have to work a little bit. As you know, bringing liners in Africa, it's a little bit -- it takes a long time, so as soon as we -- we should see good results very shortly based on that. But the hardness is fairly consistent with the study we have. And that was one of the reasons why we've chosen a vertimill, which is operating with that kind of hard ore savings on energy. So it was 30% savings.

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

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Got it. Okay. And then just on the security situation in Burkina Faso. So I mean, you talked last quarter about the increased spending with respect to security. And I'm just curious, in terms of what you're spending through operating cost on security, has that been enough? Or is there a chance that, that could increase going forward?

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

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On the operational cost, I think what we have in place is what is required at this point. The expenses -- or the expenditures were more on the CapEx side, including, of course, the airstrip and a couple of other items that we had to improve to adjust to the situation. But on the operational side, it's -- we have security people already in place. I don't think it will change much, unless the situation would go in another direction. But so far, what we're seeing in the region, in the type of security we have on-sites. People feel secure on-site and that's not a worry. And for us, security, of course, is our priority to make sure that our employees feel safe. And I think we're doing all the steps that are needed for that.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [26]

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Okay. And then just on the depreciation, the current level of depreciation on a per ounce sold basis. Is the Q1 level a fair run rate for what we might expect for remaining 9 months of 2019?

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

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Yes, that's correct.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [28]

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Okay. Great. And then just in terms of capital allocation, you -- in your prepared remarks, you talked a little bit about exploration likely to increase. You talked about potentially paying down the debt sooner. What you didn't mention was potential capital being allocated to additional acquisitions and also the dividends. So those sort of 4 big buckets, how do you think about those in terms of priority?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [29]

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If I think in terms of priority, of course, exploration is always #1 because we -- we're the ones that have strongly believed, even in the past and today, that the best value creation always comes from exploration. Finding your own ounces will be, by far, the cheapest way. And this is where you will be successful creating shareholder value. So that's first. Second, of course, we have to repay the debt. We always said that we are developing Siou Underground and we are keeping a conservative approach so as we're progressing with the underground. And we have the flexibility to repay the debt earlier, so we could decide to do it. Acquisition, yes, we are -- today, we've just started Boungou. We started having good results at Bantou. We're going to keep an eye open, but it's not like we're desperate doing -- to do something. And so we'll see where we'll go with that, but this is not -- it's not like top of our list. And then comes dividends so, of course, we always said that probably starting 2020, this is maybe where we will start more thinking about that after we've made our decision on the debt and after we have started the underground.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [30]

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And then so if I'm hearing you right, I mean, the plan is just to pay the debt down to 0 as opposed to potentially refinance any of that. Is that correct?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [31]

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That's correct.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [32]

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Okay. That's great. And then just one more, if I might. Sorry, if I'm hogging the questions. Just on acquisitions, I mean, you mentioned that you would take a look, I'm just curious, like what -- maybe if you could just update us on what the criteria kind of is for potential acquisition, size, location, sort of like position in the -- or where it is along the development cycle, that sort of thing? And that will be it for me.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [33]

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In terms of size, of course, we're looking at something that is similar to what we're producing with an asset today, so that would be between 150,000, 200,000 ounces at least to have that potential. In terms of areas of -- so we're looking everywhere, we're looking for the best project. But at the same time, it has to make sense for us. We recognize we have the strong knowledge and [somewhat fair] to operate in Africa, so in West Africa first. But that doesn't mean we will stick with West Africa. If the best project that makes more sense for us is elsewhere, we will -- we're ready to go, especially if there is something of the size we're looking somewhere in Canada that, that would be interesting for us in terms of diversification. But as I said, we're comfortable in Africa and we've been there for many, many years, so we know how to operate. So in terms of stage of -- yes, we have always said during all those years that our best spot is, of course, the type of acquisition we did with Orbis. But at the same time, when we look today, there's not that many quality assets that would fit our criteria. So that's the reason why we're not in a hurry to do something like that. And we're keeping our mind that we have as well, Bantou and Karankasso, that may offer our -- the next mines for us depending on if we can go on that. So we will keep that in mind as well. So it's not like a big focus on our side.

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Operator [34]

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Next question will be from Felix Waechter at Sprott.

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Felix Waechter, Sprott Capital Partners, Research Division - Associate [35]

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One of our concerns at Boungou initially was that it's nonvisual ore, obviously, and that always creates issues and dilution. Your head grade over the past 2 quarters obviously is impressive, suggests that you've been keeping that very low. Can you just comment on -- with 2 quarters under your belt now, on how you're managing dilution and whether that's an issue you feel like you have under control now for the rest of the numbers?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [36]

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Yes, I'll ask Patrick to answer that.

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [37]

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Yes, so previously, I didn't have the response to the question on the reconciliation. But in terms of grade mine, based on the reserves, we were at 7.7 grams per tonne. And we've -- sorry 7.7 grams per tonne. We've actually mined out 7.9. So we've pulled out a bit higher grade than expected. What went through the mill basically on the mixture of ore from the ROM pad, which is over 470,000 tonnes. We brought in a 6.5 grams per tonne. Obviously, the focus is all on the quality versus quantity. To control the dilution, we've put in place BMM, which is a blast monitoring technology using sensors in 3 dimension to be able to coordinate in 3D the different blasts and direction of the blast. We have pointers on size, we have an excellent geological grasp of the ore body in the block model. We've accounted for in our budgets, we've accounted for 5% loss of mine and 18% total dilution. I think we're coming slightly below those numbers in actual figures. And right now also with the RC grade control that is being done on-site, we have a very good correlation between the RC grade model, the reserve model and the actual geo mine -- mining model.

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Felix Waechter, Sprott Capital Partners, Research Division - Associate [38]

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And then just moving over to the cost of Boungou. It was slightly higher than expected. But from what I've read through from your release, that's due to higher stripping in this part of the year. Just wondering if you expect unit costs kind of where you think they're going to be long-term now or do you think maybe with throughput increasing a little bit and sort of operations betting down that unit costs might also come down over the next 6 months or so?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [39]

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In terms of mining, in total, we've moved the material we had to move and exactly as per our budget. But in the quarter, we've mined less ore compared to the next quarters or -- so it will -- that's the reason why this pressure will come down. In terms of unit cost on the mining side, we're going to be fairly consistent. On the throughput, of course, as the throughput will increase, the cost per tonne will decrease because we have fixed cost, of course, that will be amortized over a bigger tonnage. And so far what we're seeing in the year that was one of our goal, was to decrease reagent consumption because in the first quarter of production last year, so in the first quarter of Boungou production in its history, we were a bit above the design in the feasibility study. What we're seeing now in the first quarter is we are below our budget in terms of reagent consumption. And we will continue working on it, so that will, of course, improve our unit cost. We have always said so far, what you've seen is 2% more on recovery side. We want to optimize reagent consumption but not at the cost of losing, of course, any recovery. So if you have 2% a bit higher reagent consumption, it is quickly paid. But we are, of course, continuing working on it. So you can expect on the unit cost decrease in the coming quarters.

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Operator [40]

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Next question will be from Bryce Adams at CIBC.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [41]

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Just wanted to rehash some of the grade assumptions for Boungou through the rest of the year. Cost was 5.7 grams per tonne. I think from Kerry's question, you're saying that the grade profile should stay above 6 grams for the rest of the year. Is that correct?

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

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No. Not -- I didn't say it would stay above 6 grams, I said it should be fairly in this -- because what we have in the first quarter is higher than what we had in our budget, as Patrick said, the budget for the first quarter was 6, and it's fairly consistent during the year. So you should expect something close to 6. And as we're mining more ore, it will decrease, but we will stockpile the lower grade and yes, it should be close to the 5.9, 6 grams.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [43]

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Okay. Average for the full year or for the last 3 quarters?

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

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For the last 3 quarters.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [45]

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Okay. And then a couple on -- you said you were planning to mine 7.7 for the quarter but you mined 7.9. So that equates to roughly 2% to 3% positive grade reconciliation. Is that the right way to think about that?

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Martin Milette, SEMAFO Inc. - CFO [46]

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Yes, that's the right way.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [47]

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Or more of a slight -- there. And on the Boungou CapEx and stripping, I think roughly half of annual guidance has been accounted for in Q1, $21 million full year guidance for stripping, done about half of that in Q1. And then for sustaining CapEx, $2 million of about $4 million full year guidance. Do you think that the full year guidance estimates for stripping and sustaining CapEx are still good?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [48]

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Definitely. Yes.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [49]

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Definitely.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [50]

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What -- yes, what you've seen in the quarter is -- I've said that we're mining 7 million tonnes of rock every quarter. What happened in first quarter, it's only the accounting side of it that you saw. So we were stripping more on what we call the capitalized stripping. As opposed to the next quarter, the next quarter will be more operational stripping. And since we will be mining more ore, of course, the stripping ratio will decrease. So our guidance on CapEx and our guidance on all-in and the guidance on the sustaining CapEx are still good.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [51]

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Though we'll see it step down for Q2?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [52]

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Yes, because you will have more operational strip.

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Operator [53]

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(Operator Instructions) And your next question will be from Don DeMarco at National Bank Financial.

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Don DeMarco, National Bank Financial, Inc., Research Division - Associate [54]

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Just a follow-up question on the ore hardness. I was wondering if you could comment on the variability of the hardness over this year and over maybe the first 3 years of the mine life?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [55]

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At Boungou?

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Don DeMarco, National Bank Financial, Inc., Research Division - Associate [56]

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Yes. At Boungou, yes.

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Sylvain Duchesne, SEMAFO Inc. - VP of Construction & Engineering [57]

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Well, it's -- I would say -- Don, it's Sylvain. With the variability steps that we've done in DFS essentially, we had the same kind of recoveries. We don't expect too much variations on that.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [58]

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Correct.

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Sylvain Duchesne, SEMAFO Inc. - VP of Construction & Engineering [59]

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Obviously, it's the beginning of the operation and we'll see how it goes essentially. But no surprises so far in terms of the hardness that we had.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [60]

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And we're not expecting much variability. It was fairly consistent.

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Don DeMarco, National Bank Financial, Inc., Research Division - Associate [61]

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Okay. Great. So it's not as though right now you have the softest ore going through.

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [62]

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No.

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Don DeMarco, National Bank Financial, Inc., Research Division - Associate [63]

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But what you're seeing now is going to be consistent with what you see over the next few years and over the mine life?

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Sylvain Duchesne, SEMAFO Inc. - VP of Construction & Engineering [64]

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Yes.

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [65]

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Yes. After that, just recall that there was 99% of fresh rock material in the project. There's a slight variability or hardness when we are mining in the East pit as opposed to the West pit, but it's in line with what's been presented in the DFS. And right now, focus for the next 3 years and our 5-year mine plan is mainly in the start-up pit, so what you've seen in terms of hardness in the last 6 months is basically the same type of hardness going forward. We're looking at a variability of 18 to 21 in Bond Work Index.

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Don DeMarco, National Bank Financial, Inc., Research Division - Associate [66]

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Okay. And final question then, the liner was changed at the end of April. Is this -- is the liner wearing at the pace that you would expect?

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Benoit Desormeaux, SEMAFO Inc. - President, CEO & Director [67]

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No. It's essentially the design. What we've been having so far is the liner is -- we had some plugging between the liners, so it essentially slowed down the throughput. So we've been designing with Metso a new type of liners to -- in order to avoid that. So essentially, it's been installed at the end of April, so that's why we expect to see that the throughput will improve as we're going, moving forward. But it was not a maintenance decision. It was an optimization decision.

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Patrick Moryoussef, SEMAFO Inc. - VP of Mining Operations [68]

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Yes.

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Operator [69]

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And at this time, we have no other questions. So I would like to turn the call back over to our hosts.

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John W. Jentz, SEMAFO Inc. - VP of Corporate Development & IR [70]

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I'd like to take this opportunity to remind listeners that our first quarter 2019 MD&A and financial statements are available on our website or on SEDAR, sedar.com. And the audio webcast of this conference call will be available for replay on our website for a period of 30 days. I'd also like to mention that our Annual General Meeting for shareholders will be held tomorrow, 10:00 a.m. at Club Saint-James in Montréal. Additionally, we'll be holding 2 investor days, 1 in Toronto on June 6, 1 in London on June 10. Currently, our 2019 second quarter financial and operating results are scheduled for publication on or about August 6, 2019. Thank you, and have a good day.

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Operator [71]

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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.