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Casimir Capital keeps "buy" rating on Semafo as Q3 results in line with estimates

Last updated: 14:24 07 Nov 2012 EST, First published: 15:24 07 Nov 2012 EST

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In an intra-day update, Casimir Capital said West African-focused gold producer Semafo's (TSE:SMF) third quarter results were in line with expectations, reporting adjusted earnings of 3 cents, and operating cash flow per share of 9 cents - in line with expectations. 

Consensus estimates were looking for adjusted earnings of 5 cents, and cash flow per share, of 11 cents. 

Consolidated production of 52,300 ounces was pre-released in early October, but cash costs nevertheless came in better than expected, at $836 per ounce, versus $916 per ounce, "reflecting a greater reliance on cheaper, albeit lower-grading stockpiles", Casimir analyst Stuart McDougall notes. 

Stripping ratios at the company's Mana mine in Burkina Faso were also lower than anticipated, with both benefits helping to offset lower-than-expected sales volumes.

Semafo noted that third quarter production at Mana was negatively impacted by the necessity of mining lower-grading areas of the pits, owing to stripping delays, and an associated emphasis on low-grade stockpiles to feed the now expanded plant.

Semafo reiterated its full year guidance for 235,000 to 265,000 ounces, at a cash cost of $700 to $750 an ounce. 

McDougall says the company's balance sheet is still in good shape - with cash and equivalents increasing to $154.5 million, whereas working capital decreased to $192.8 million. 

Looking forward, Semafo said in its release that the anticipated metallurgical results from the Mana South sector are still anticipated in the first quarter of next year, at the same time as the year-end reserve and resource update. 

The company purchased $25.0 millon worth of new mobile equipment for Mana, and expects delivery in the first quarter of 2013. 

As a result, pre-stripping unit costs are expected to decline by 15 per cent, lending a favorable impact on the cash flow statement.

Casimir maintained its "buy" rating on Semafo, with a target price of C$6.50 a share. 

The gold miner operates three gold mines: the Mana Mine in Burkina Faso, the Samira Hill Mine in Niger and the Kiniero Mine in Guinea. The Mana property is located 200 kilometers west of Ouagadougou, the capital city of Burkina Faso.

Shares of the company edged up by one penny to $3.95 on Wednesday afternoon.

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