Exposure To Country Risk: The SEMAFO Edition

| About: SEMAFO Inc. (SEMFF)

SEMAFO (OTCPK:SEMFF) is a Canada-based mining company with gold production and exploration activities in West Africa. The company currently operates three gold mines: the flagship Mana Mine in Burkina Faso, the Samira Hill Mine in Niger and the Kiniero Mine in Guinea producing 236,000 ounces of gold in 2012. SEMAFO has a market capitalization of $389M and according to Morningstar.com the forward P/E is 6.4. From the heights of $13 at the start of 2011 the share price has dropped to $1.60 at the time of writing. The table below gives the 2012 numbers for attributable production, reserves and resources at SEMAFO's mines.

Factors such as political risk, exchange rate risk, economic risk, sovereign risk, transfer risk, socio-economic risk and others are included in most definitions of country risk. In a series of recent articles we collated country risk ratings for numerous countries from eight different sources and averaged these ratings into compounded country risk scores. Our compounded country risk rating ranges from 0 to 100 with low numbers indicating low risk and high numbers indicating high risk. The most recent results from this work can be found in this article. Depending on the source, various contributing factors of country risk are weighted differently. Readers interested in the specific definitions are encouraged to follow the links to our sources given in this article. Consolidating the production and reserve data showing summations for each country of exposure results in the table below. The data is already calculated in percentages of gold-equivalent ounces. Country risk ratings as documented here are also shown in the central column of the table. The right side of the table shows the weighted risk contributions for each country separately for production, reserves and resources with summarized scores in the bottom line.


SEMAFO operates in some high-risk jurisdictions which is reflected in our computed country risk ratings. The four ratings computed as shown in the table above show constant readings between 75.47 and 75.95 indicating very high country risk very similar to the ratings computed for Randgold (NASDAQ:GOLD), another gold miner with a focus on West Africa.

The Mana mine in Burkina Faso is the flagship operation and also drives the level of exposure to country risk. Unfortunately Burkina Faso has experienced a rise in the risk perception by most analysts mostly due to the issues in the Sahel zone and neighboring Mali. More recently SEMAFO have "…announced a review of the strategic alternatives for the Kiniero and Samira Hill mines, two non-core assets." which would further emphasize their exposure to Burkina Faso. SEMAFO thus represents a bet on the future of Burkina Faso.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.