SEMAFO: Junior Gold Miner Shines

 |  About: SEMAFO Inc. (SEMFF)
by: Jason Hamlin

semafo_logo.gifSEMAFO (OTCPK:SEMFF) is undoubtedly one of my favorite junior gold miners. The company is grossly undervalued with 2.3 million M&I ounces of gold and a market cap under $300 million. Annual production should come in just shy of 200,000 ounces of gold, which is impressive for a company of SEMAFO’s size. But the story gets even better.

On August 12th, the company released stellar Q2 results that support a much higher share price. SEMAFO delivered record results in terms of gold production, gold sales, operating income, net income and operating cash flow. They produced 54,500 ounces of gold during Q2, nearly doubling the previous year and generating $11.7 million in earnings. I pulled a few charts from their website to better illustrate just how impressive results were from the latest quarter.

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Production is up about 100% from previous quarters. SEMAFO successfully brought new mines into production during 2008 and is on track to meet or beat production estimates for 2008.

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Not only did the company substantially increase production, but they managed to lower their costs significantly to under $400.

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This charts speaks for itself, with SEMAFO increasing operating income by 400% from the previous quarter and continuing to trend upwards from the negative income during Q3 of 2007.

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Last but certainly not least is cash flow from operations. SEMAFO again posting record results and generating more cash than the previous five quarters combined.

The recent correction in precious metals provides an excellent opportunity to pick up SEMAFO at bargain prices. A support line exists around $1.22 with resistance at $1.62. Traders can certainly profit within this range, although I view SEMAFO as a long-term investment destined for a share price of $4 or higher during the next year or two.

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Disclosure: I own shares of SEMAFO and recently added to my position.