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Executives

Robert LaValliere - SVP, IR

Benoit Desormeaux - President and CEO

Analysts

Kerry Smith - Haywood Securities

Paolo Lostritto – National Bank Financial

Michael Scoon - Stifel Nicolaus

Don Blyth - Paradigm Capital

Andrew Mikitchook - GMP Securities

Pierre Vaillancourt - Macquarie

Anthony Hoffer - RBC

Semafo (OTCPK:SEMFF) Q1 2013 Earnings Call May 14, 2013 10:00 AM ET

Operator

Good morning ladies and gentlemen and thank you for standing by. Welcome to Semafo’s 2013 first quarter financial results and operations review conference call.

At this time all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time to queue up for questions. (Operator Instructions).

I will now turn the conference call over to Mr. Robert LaValliere, Semafo’s Vice President, Investor Relations. You may go ahead sir.

Robert LaValliere

Thank you France. Good morning everyone and thank you for joining us today for our first quarter financial results and operation review conference call.

Members of the senior management team joining me for the call today are Benoit Desormeaux, President and Chief Executive Officer, Martin Milette, CFO, Michel Crevier, Vice President, Exploration and Mine Geology; Patrick Moryoussef, Vice-President, Mining Operations and Sylvain Duchesne general manager metallurgy engineering and construction.

Today’s call is being webcast live on our website at Semafo.com and will be available for rebroadcast for a period of 30 days following the completion of this call. Semafo first quarter MD&A and audited financial statements are available on our website or on SEDAR at sedar.com.

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 resources and reserves 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 will differ materially. Accordingly you should not place undue reliance on forward-looking statements.

For additional information with respect to forward-looking statements, risk and assumptions, please consult our 2012 annual MD&A as updated in our first quarter MD&A and other filling made with the Canadian Securities Regulatory Authorities and available on our website.

Except as you may be required by applicable law, we do not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise. I make this cautionary statement on behalf of all Semafo's spoke person who may address you during this call.

With that said, I would like to turn the call over to Benoit Desormeaux.

Benoit Desormeaux

Thank you Robert. On the operation side Semafo had a good start to the year. In the first quarter, we generated cash flow from operating activities of $38.8 million or $0.14 per share compared to $40.2 million or $0.15 per share in the first quarter of 2012.

We produced almost 60,000 ounces of gold during the first three months of this year while maintaining the total cash cost per ounce below our 2013 guidance. First quarter 2013 adjusted operated income totaled $33.4 million compared to $38 million in 2012.

Adjusted net income attributable to equity shareholders totaled $19.7 million or $0.07 per share, compared to $28.1 million or $0.10 per share in Q1 of 2012 and we have a solid financial position with $137 million in cash and no debt.

Our flagship Mana property produced 42,700 ounces of gold, representing over 70% of our total production. Mana’s total cash cost was $709 per ounce, a six percent decrease compared to $746 in the fourth quarter of 2012.

We achieved slightly higher gold recovery increased throughputs during the quarter, however production decreased 11% year over year due to the processing of work coming 100% from super-pit as oppose to a mix of (inaudible) in 2012.

In our quest to focus on quality ounces our top priority is to fast track the Siou Sector in order to commence stripping during the fourth quarter of 2014 at the latest. The recent volatility in the price of gold reinforces our decision to accelerate the development of the high-grade Siou Sector, which has low sensitivity to gold price fluctuations.

To date results from the 2013 ongoing infield drilling program confirmed good continuity and predictability as well as the extended mineralization when compared to the 2012 yearend results. We are on track to bring Siou 2 reserve in the third quarter of 2013, we are currently completing the infield drilling and have commenced the environmental impact assessment in order to accelerate the permitting process.

Our Mana property is very promising in term of its exploration potential which will enable us to continue to build on our already solid foundation in the years to come. We believe that bringing Siou 2 reserves in the third quarter of this year will provide more clarity to the market. It will also serve to highlight the role that Siou will play in our short term value creation strategy.

At Fofina as previously announced oxide and (inaudible) material from Fofina located approximately 18 kilometers southwest of the Mana processing plant, show excellent results including 92% gold recovery using carbon and leach processing. Plans are to ore and process the ore at the current Mana plant capacity in 2014. The permitting process for Fofina is currently underway.

As part of our disciplined capital allocation strategy and resolution to maintain our exploration program, Semafo's entire 2013 exploration budget of 22 million will be invested at Mana within the 20 kilometer radius to the processing plant. The main focus is on infield drilling at Siou and step out drilling on the Kokoi Trend, which offer the best potential for quality ounces and rapid cash flow generation.

As communicated in our 2012 annual report, we are determined to optimize our operations at all levels and to reduce cost in order to maximize cash flow, this is even more important in today's extremely volatile economic environment. We will be disciplined in our capital allocation and cash management in order to effectively cope with any realistic gold price scenario. In March 2013 we announced a review of the strategic alternatives for the Kiniero and Samira mines to non-core assets. In light of the recent drop in the price of gold these two projects became even more sensitive to further downturns in the gold price or in any technical parameters.

Accordingly investments are here after limited to those having a short term payback period, the decision has been made to wind down operations to an eventual care and maintenance status at Samira Hill in 2013, this resulted in an attrition of $6 million decrease in capital expenditures at Samira Hill, following the initial 10 million reduction announced earlier in the year. Samira Hill's capital expenditures are now forecasted at 11 million, down from the original 2013 budget of 27 million. This led to an additional $35.1 million impairment charge in the first quarter of 2013.

At Samira Hill in Niger we produced a total of 12,200 ounces of gold during the quarter compared to 12,900 ounces in the first quarter of 2012. Gold sales totaled $24.6 million in the first quarter of 2013 compared to 21.2 million in 2012 an increase up 16%, total cash cost per ounce increased to $990 compared to $924 in the first quarter of 2012. At Kiniero in Guinea we produced 4,800 ounces of gold during the quarter at a total cash cost of $907 per ounce, so first quarter 2013 gold sales totaled 8.8 million for the property.

The processing plant resume operation in April 2012 while mining operations gradually and partially resumed in the third quarter of 2012, for comparison purposes in the fourth quarter of 2012, the Kiniero mine produced 4,600 ounces of gold at a total cash cost of $739. Semafo's Board of Directors approved the cash dividend of CAD0.02 per common shares payable on July 15 2013 to shareholders of recurred at the close of business on June 30th of 2013.

In this period of economic turbulence with a volatile gold price and lacking full clarity about the timing and the potential of huge flow, we wish to reassure shareholders that we will be disciplined and prudent while continuing to build for the future. Our focus is creating value through the generation of future cash flow. We have identified our best way to move forward and are determined to avoid distractions while concentrating on our priorities.

Semafo is maintaining its annual production and total cash cost guidance of between 133,000 to 168,000 ounces at $805 - $855 per ounce at Mana; between 16,000 and 20,000 ounces at $975 and $1055 per ounce at Kiniero.

For Samira given the mine sensitivity, the corporation has decided to maintain guidance for the first six months of 2013 with production forecasted at between 23,000 and 26,000 ounces at total cash cost of $985 to a $1035 per ounce. This concludes our presentation portion of this conference call. I would now like to open up the lines for question and answer session. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from the line of Andrew Breichmanas from BMO Capital Markets

Andrew Breichmanas - BMO Capital Markets

I was just wondering if, maybe you could provide a little bit more detail on the assessment of the Yaho heap-leach and the determination that it isn’t cost effective.

Benoit Desormeaux

Okay, we did slow the recovery, the Yaho zone was very low grade. It was about 1 gm per ton. We made calculation using a gold price up 1300, and even today if you want to calculate, the reserves would probably yield lower figure than that. We use 40 million CapEx for calculation and we have a very limited internal rate of return. Because of that we are just saying that it’s not a priority for now. We said we will be focusing on quality and to have a heap-leach operation that would be running at a pretty high cash cost it's not a priority for now.

Andrew Breichmanas - BMO Capital Markets

Okay then looking at few, have you made any further progress with sort of determining what the optimal blend for processing that ore at Mana might be.

Benoit Desormeaux

No, it’s not done yet. We are working on that. We are working in the best scenario to mix what we have in the super pit, as well as with Siou and with the Fofina pit. So we are in the process of calculating all that and finding the best mix accounting for of course the alleged distance from these pits and higher grades of the Siou and Fofina versus the super pit. So we are in the process of doing that. So we don’t add any figures.

Andrew Breichmanas - BMO Capital Markets

And then just on your last point, with the sort of tradeoff between Siou and Fofina versus the super pit, with the gold trades volatility, has it been any sort of changing sequencing to some of the waste mining that you’ve planned at super pit.

Benoit Desormeaux

We are in the process as well to do that. We have announced that we would be publishing new reserves for Mana in the third quarter because we are including Siou. And of course it will bring a new reserve calculation for the super pit of course it will have an effect. The gold price stays where it is. We will have to use a lower gold price for our reserve and it will have an impact. For now where we are mining these days, we are even within what would be the smaller pit so it doesn’t change what we were mining in actual.

Operator

Our next question from the line of Kerry Smith from Haywood Securities, you may begin.

Kerry Smith - Haywood Securities

Then why the tons milled at Mana was down a little bit in the quarter, could you just talk a little bit about why if that was the case?

Benoit Desormeaux

You know the throughput of the plant is really function of the hardness of the ore and the mix we have. And it may come down a bit, it may come back up depending on the mix if we have more oxide or more bedrock. But I would say well that can figure at 700,000; it’s pretty good. It’s a bit lower because at the end of – in the fourth quarter last year we were processing mostly the (inaudible) oxide, that’s the reason why we had very high figure. And now we are mixing oxide from a (inaudible) to more harder rock from the other place in the super pit.

And the throughput is really in line with what we have announced in terms of budget. We announced that we would be at 2.8 million for the year. So it is all in line with what we have announced and with our budget.

Kerry Smith - Haywood Securities

And this strip ratio at Mana was lower in Q1 as well. Can you just remind me what the strip ratio expectation is for the rest of the year or what your budget was for the year?

Benoit Desormeaux

Yes the expected strip ratio was five to one to be accounted for in the cash cost. We are in this quarter at 3.2 yes so we are a bit behind in terms of stripping but we have moved more tones in the stripping or pre-stripping.

Kerry Smith - Haywood Securities

Okay.

Benoit Desormeaux

All-in-all over the year we are expecting five to one to be accounted for in our cash cost and seven to one to be accounted for in the CapEx. So it is just varying from one quarter to another but if you look on a yearly basis this is what it should look like.

Kerry Smith - Haywood Securities

Okay so you are going to be at five to one expensed for the year on average though?

Benoit Desormeaux

Exactly.

Kerry Smith - Haywood Securities

Okay and then just on Samira.

Benoit Desormeaux

Yes.

Kerry Smith - Haywood Securities

In the quarter if you look at the cash generated at the operating level net of capital that you spent it still generated about 4.9 million of cash let’s say and I am just curious what is going to happen in the back half of the year? Are you going to be processing more sulfides and consequently the recoveries are going to drop off in that? Because this seems to me that $5 million a quarter of cash it is probably worse operating but then so there must be something happening as you go forward here in terms of the great mix or something.

Benoit Desormeaux

Yes we had a very good quarter and we have generated almost 5 million like you said and it is very good if we were to produce or to generate that kind of cash flow of course this project would stay open. But you have to keep in mind that we achieved that in the first quarter with a gold price of $1,643 and because of course we sold 15,000 ounces over a production of 12,000 so because we have sold more ounces at the higher gold price of course we had very good cash flow generation. As you would make the same calculation that let’s say $1,430 it would be different. And what we just want to people to really understand is our operation as long as they are generating cash flow they will stay open but we do not want to lose money with any of our project. So if the gold price stays where it is and because no one knows where it is going to go if we are not to generate cash flow in the coming quarter we just want the market to understand that that we won’t keep it open.

And you know we have announced that in the second quarter that we are maintaining the guidance for the first half of the year it is because in the second quarter we think it is still going to be positive. We just want to issue any guidance for the remaining of the year because we are just trying to figure out what will be the best way to still create cash flow if it is feasible and to see where the gold price will be in the coming months. But at that point it is difficult that that kind of gold price to see a long future at Samira it is the reserves are at 1.25 grams per ton and recovery average recovery is 77%. It is not generating much at today’s gold price. Yes go ahead.

Kerry Smith - Haywood Securities

Do you have any commitments to the government that you would need to give employees like more than say three months' notice or is it something that you could make this decision every quarter and as long as you are still making cash you can make the commitment to run it for another quarter and then reassess another quarter out. Is that kind of the way to work them?

Benoit Desormeaux

Yes exact we can operate as long as we generate cash we can go from one quarter to another and the government will be very happy that we can keep this operation introduction as long as we can. They recognize that if at some stage we are losing money, no investors will accept that we are losing money so they accept that if it comes to that situation we will have to put this in their amendments, but they accept that we can run the operation with one month to another and one quarter to another.

Kerry Smith - Haywood Securities

Right. And if you put Samira on care and maintenance at some point, what would it cost you on an annual basis, just to keep it on care and maintenance.

Benoit Desormeaux

This is something that is under revaluation at the moment. We were not planning to do this in May and in the coming couple of months. So, we’re seeing that we can still generate cash flow in the coming few months but is something that we will be working more in details in the coming weeks.

Kerry Smith - Haywood Securities

How long do you think it would take to permit Fofina and how many times a day conceptually would you be planning to track from there over to the mill.

Benoit Desormeaux

The permitting, you know we’re working that the EI is almost finished, almost completed. So, we’re almost ready to submit our documents to the authorities. I would say we will probably need 9 to 12 months.

Kerry Smith - Haywood Securities

So is that 9 to 12 months from today or 9 to 12 months from when you submit the EIA?

Benoit Desormeaux

From when we submit all the recommendation, let's say somewhere in July.

Kerry Smith - Haywood Securities

So you think you’ll submit EIA in July, let's say and then 9 to 12 months.

Benoit Desormeaux

Yes. Something like that. And in terms of size that we’re looking at maybe being able to process a 1,500 tons per day from Fofina.

Operator

Our next question is from the line of Paolo Lostritto from National Bank Financial. You may begin.

Paolo Lostritto – National Bank Financial

Most of my questions have been asked. But I’ll follow up on earlier statement that you guys made because you’re currently in the process of reviewing budgets and what not. What gold price are you using to kind of determine thresholds?

Benoit Desormeaux

It depends on what purpose. Of course if let's say if we are on rising project like (inaudible) we’re using a gold price let's say at 1,100 to 1,200 at the moment knowing that the gold price today is that 1403.

But we haven’t changed our mind plan so far, let's say in the super-pit because you know it’s only the gold price is down only from what – mid April. So, we just don’t what to be reacting on any change in the gold price today. But we will have to calculate the reserves in the third quarter for our Mana property and this is really based on what the gold price will be at that time, we will make a decision but today it would probably be between 1,150 and 1,200.

Operator

Our next question is from the line of Leily Omoumi from Scotia Bank. You many begin.

Leily Omoumi – Scotia Bank

Just a follow up question with the regards to the gold price, at Kiniero what gold price would you be thinking the same kind of anything else you have for Samira Hill what would be the threshold there?

Benoit Desormeaux

I think, when we would be close to 1100 to 1200 we would really starting with the same way as with Samira Hill. But it’s again in the kind of operations because they are very sensitive and we’re going from one quarter to another. We’re not investing much we are trying to keep those operations running and generating cash flow. So, we are when the gold price is going down on that kind of operation, we’re changing the mine plan much quicker than what we’re doing then.

So, we think that Kiniero could last for – is a bit less sensitive than Samira Hill because of the grade.

Leily Omoumi – Scotia Bank

And then just lastly, would you be able to provide us with some dollar per ton cost at Mana. Obviously the cost were better than expect obviously below the guidance for the year and is that some of that was because of the lower than expected strip ratio but could you maybe provide some dollar per ton numbers.

Benoit Desormeaux

Yes. We are more looking at something like $42 a ton. So, we were below because of lower stripping ratio but what we’d be looking at going forward is more than 42.

Leily Omoumi – Scotia Bank

And can you break out the mining versus processing cost?

Benoit Desormeaux

I don’t have the details in front of me, can I call you back later after the call?

Operator

Our next question, from the line of Michael Scoon of Stifel Nicholas. You may begin.

Michael Scoon - Stifel Nicolaus

Did you say what gold price you need specifically to continue running Samira?

Benoit Desormeaux

We haven't set any gold price but it's very sensitive so we will see at that kind of lets add 1,450. We may be able to generate cash flow; the reason while it's still open. but if it goes down we will have to see what kind of reaction we can have in the pits but it's not going to be; it's very sensitive so the gold price doesn't have to go down by much and we will have to take another decision.

Michael Scoon - Stifel Nicolaus

Okay that's helpful and then just secondly on Mena. With regard to the strip ratio 5:1 average for the year; did you say that just given the volatility and the gold price that you'd be reviewing whether you could defer some of that stripping in the near term?

Benoit Desormeaux

No, we haven't said that; we are still mining. Even the super pit that 1,300 with our reserves we are still mining in a pit that is much smaller than the ultimate pit. So, even today what we would be mining we would have to mine this even at lower gold price; reason why we are not changing our mine plan today.

Operator

Our next question from the line of Don Blyth with Paradigm Capital.

Don Blyth - Paradigm Capital

You've indicated in the past that you are looking to sell off your noncore assets with the preference of receiving cash. If Samira Hill particularly if it gets the point that you do make the decision to put it on to care and maintenance, could you be possibly more flexible in terms of considering taking payment and shares of the smallest company?

Benoit Desormeaux

Yes, that's something that we would have to evaluate depending on who the counterpart would be but of course with the gold price today, it's still our intention to try to sell both our assets but we will be more flexible on an operation like Samira both on the price and on the nature of the payment we might be.

Don Blyth - Paradigm Capital

Any comments on the level of activity on one or both?

Benoit Desormeaux

You mean level of activity; you mean on the selling project?

Don Blyth - Paradigm Capital

Expressions of interest, sort of any serious expressions of interest.

Benoit Desormeaux

Yes, we have an expression of interest from different parties. As you can imagine, those are always small companies and the financing is always an issue, so we have different parties interested. We are still evaluating, still running the process so whether we will be successful, time will tell.

Operator

(Operator Instructions) We have our next question is from the line of Andrew Mikitchook from GMP Securities. You may begin.

Andrew Mikitchook - GMP Securities

Just one quick follow-up; you mentioned a 1000, 1500 tons per day for Fofina that you could truck over. But I think you mentioned those are oxide ounces. Does that outright displace the 1000-1500 tons of Mana's pit or because it's softer; it's not actually displacing the full amount.

Benoit Desormeaux

Yes, today at 2.8 million tons it’s a mix so depending we could; if we bring oxide from Fofina I think it will be very similar to the throughput of the plant. As we will get in other ore in the super pit but the ending recipe of course we are trying to maximize as you can imagine see you as it is I higher grade and of course the second one is the Fofina. So at the end we will fold the throughput with what we can from the super pit but we really the focus is see you in Fofina. We will bring as much as we can but you should not expect the throughput to go at higher levels than 2.8 million a year.

Andrew Mikitchook - GMP Securities

And just to make sure and understood the timing, I think you answered that there is a kind of 12 months on the outside permitting process. So you could have material being trucked sometime in the second half or the next year or may be the last quarter of the next year, is that reasonable or did I miss something?

Robert LaValliere

I would say probably end of 2014 or last quarter of 2014 as we would probably start doing development as soon as we get the permit. So let’s say we have to extend a bit the road of course it’s going to be part of the road that will be used as that one that was going down to Nyafe but we will have to do a smaller part of it to go to Fofina and then the (inaudible) and then being able to transport to ore. so let`s say later part of 2014.

Operator

Our next question from the line of Pierre Vaillancourt from Macquarie. You may begin.

Pierre Vaillancourt - Macquarie

Just wondered if, what the progress is with respect to an electrical link or hydro link from (inaudible) is that in the future at all or is that still off and not something you can realize on.

Robert LaValliere

Yes, in fact it's a connection to the (inaudible) power grid. It's not connecting directly to (inaudible) it's to be connected to the (inaudible) power grid. The project is starting. We have to advance close to 9 million for that project that will be reimbursed to us when we will be connected. The project started. Engineering is in process. We have a timeline for the project that is showing completion in the second half of 2014 and after the quarter we have advance 30% of our money, meaning that the process is going forward construction will start very shortly.

Pierre Vaillancourt - Macquarie

And so the impact on cost, any estimation there?

Robert LaValliere

We said that at the time we have talked about the power grid it was $40 an ounce saving.

Pierre Vaillancourt - Macquarie

With respect to Siou, could you provide may be broad parameters in terms of what kind of contribution you might be looking for, just the scale of that activity?

Robert LaValliere

It’s very difficult at this point to give and you know it may vary from one year to another. At the beginning of course because we will be at surface, we might be able to bring more horde than at the end so what we said we will maximize everything we can from Siou because its high grade. The limiting factor will be technical. It’s difficult to give you any figure at this point but I would say if we can move 2,500 ton a day that would be very good.

Pierre Vaillancourt - Macquarie

So the idea is that you get 2500 tons a day from Siou you get another 1500 tons a day from Fofina, is that right?

Robert LaValliere

Exactly and then the rest coming from the super-pit.

Pierre Vaillancourt - Macquarie

And the reserves that you are going to be talking about in Q3, it’s really just confirming the resources that you have talked about.

Robert LaValliere

Exactly, so we are working in priority on the first 150 meter deep because those are the fastest cash flow and then we have some extension on the south of Siou that we will be drilling in the fourth quarter of this year, those will not be accounted for in reserves this year. We are trying at the year to have that zone in the inferred if we have good results. But that could expand the pit at the end. Because if we can have a surface extension on the south Siou and it could fall within the same (inaudible) it could increase the reserves there; that we will announce in the third quarter.

Pierre Vaillancourt - Macquarie

Just to reiterate on the Kiniero, so there's no plans to write that down, I mean you're happy so far at the production level and the profitability there.

Benoit Desormeaux

Yes, we've always said it's a non-core asset, it's a very small asset, we will be producing between 16,000-18,000-20,000 ounces a year. As long as it's producing cash flow we're happy with it. It's a non-core asset so if we can do something else with it we will. But the decision, it's not a decision to do impairment. Even if you would make calculation today with Kiniero you would see that the value is much higher than what we have in the book value. So because Samira Hill was very sensitive and Kiniero was a bit less sensitive, if the gold price goes down, of course it may at some stage trigger an impairment but not at this point.

Pierre Vaillancourt - Macquarie

Okay, what are you carrying?

Benoit Desormeaux

What's the value on the books? Kiniero, we have 27 million.

Robert LaValliere

27.

Operator

Our next question is a follow up from Kerry Smith from Hayward Securities.

Kerry Smith - Hayward Securities

Ben, just starting Siou, when would you expect, you said you're doing the baseline work now for the IS, when do you think you'd actually file that and would that be kind of a similar 9-12 months permitting cycle as you're expecting at Fofina.

Benoit Desormeaux

Yes, that's the same 9-12 months we're expecting to be able to submit the documents in the fourth quarter of this year.

Kerry Smith - Hayward Securities

Okay, okay.

Benoit Desormeaux

Reason why we're expecting to be able to strip it somewhere in the fourth quarter next year.

Kerry Smith - Hayward Securities

Yes, because you would need the EIS before you can start the pre strip obviously, right.

Benoit Desormeaux

Exact.

Kerry Smith - Hayward Securities

Right.

Benoit Desormeaux

If we can do better of course we will but this is the kind of timeline that it could take in Burkina.

Kerry Smith - Hayward Securities

And just before, (inaudible) going back to your comment that you used sort of $1200 gold for the analysis, what kind of IRR did you get for that project that $1200 gold for the heap leach option.

Benoit Desormeaux

You know it's really, Kerry it's an internal study that was made. We just don't want to give too much information. You know to start a project today we would request 25% in the rate of return and we did not have that kind of figure.

Kerry Smith - Hayward Securities

Okay, that's what I was kind of getting at, what your hurdle rate was and you're saying at $1200 gold you'd need kind of 25% for any new, let's call it new project, let’s say.

Operator

Our next question from the line of Anthony Hoffer from RBC, you may begin.

Anthony Hoffer - RBC

What if any price premium or discount do you receive as you sell your gold into market?

Benoit Desormeaux

Can you just repeat, I'm not sure I understand the question?

Anthony Hoffer - RBC

As you produce and see your gold into market are you seeing any premiums for your physical or discounts for your physical, is that changing at all, or are you simply much tied to the spot.

Benoit Desormeaux

Yes, we're selling at the spot price, no premium…

Anthony Hoffer - RBC

You're not getting any premiums.

Operator

We have a follow up from the line of Pierre Vaillancourt from Macquarie, you may begin.

Pierre Vaillancourt - Macquarie

I wanted to ask Michel, maybe if you could give us a little sense of what you're seeing in the rest of the Kokoi Trend, I'm just trying to understand the potential for you and putting it in a context with your drilling program which is obviously very focused there. Is it still very open ended at this point or do you have some strong targets to follow up on, just give me a sense of the nature of Siou within the Kokoi Trend.

Benoit Desormeaux

Okay, broadly the Kokoi Trend, we saw that from the mag and all the other surveys we done it's something like 30 kilometer long and it’s at the edge of the, on the volcanoclastics and the intrusives. And now we have something more intrusive and we have more details. We observe that some (inaudible) may affect the geology and we are looking at that. But we are dealing with a contact between those rocks and sometime you may have substructures that will go inside the intrusive. So there is many kind of target. So the main channel will be the Kokoi Trend this year, and the substructure may go from the parallel to almost perpendicular and there is some east-west structure that we have to track at the same time. So the potential is really huge on many kind of filtration system.

Pierre Vaillancourt - Macquarie

Okay so, is the intrusive the main target, that’s where you get the best grade material?

Benoit Desormeaux

In fact yes, the best grade is inside the intrusive. Some are getting slightly outside but the big thing and mostly the quartz veins I would say are in the intrusive and you may have some veinless systems going in the (inaudible).

Pierre Vaillancourt - Macquarie

But I guess it’s so pretty early to try to quantify what other potential there is, I mean you are just really drilling of CU for the most part at this point.

Benoit Desormeaux

I am still having some rigs on the Kokoi Trend. Presently I am on the north part with the RC and we have (inaudible) to the south. So it’s still active even if the focus, the main focus is on the infield.

Operator

Mr. LaValliere we have no further questions sir. I will be turning the call back to you.

Robert LaValliere

Okay thank you (inaudible). And Once again I would like to take this opportunity to remind listeners that our consolidated first quarter financial statements together with the MD&A are available on our website. The audio webcast of this conference call will also be available for replay on our website for a period of 90 days. Our 2013 second quarter financial and operating result are currently scheduled for publication are on around August 7, 2013. And in the meantime we invite you to visit our website regularly at www.semafo.com for up-to-date informations on our operation. Thank you and have a good day.

Operator

Ladies and gentlemen, this does conclude the conference call for today. We thank you all for your participation. Have a great day everyone.

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