SEMAFO: Junior Gold Miner Shines

SEMAFO (SEMFF.PK) 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.

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.

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

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.

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.

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

Comments

[MarkMedayski:]

Stay away from this and other PinkSheets listed stocks,I am trading bankrupt Chapter 11 stocks of once big established companies and it is high risk trading.About 5% of my portfolio I use for special situations stock trading.
SEMAFO INC. is non existing company where iniders sold most their holdings at 2$ a share,if you buy it,you be the one to hold this empty bag.
Stay away!

2008 Aug 15 06:45 AM

[spartacus 2:]

due diligence? Semafo Inc. (SMF) As of August 14th, 2008
Filing Date Transaction Date Insider Name Ownership Type Securities Nature of transaction # or value acquired or disposed of Unit Price
Aug 01/08 Jul 28/08 Cloutier, Michel Direct Ownership Options 00 - Opening Balance-Initial SEDI Report
Jun 19/08 Jun 18/08 Lamarre, Jean Direct Ownership Options 50 - Grant of options 250,000 $1.350
Jun 19/08 Jun 19/08 Lefebvre, Jean-Pierre Direct Ownership Common Shares 10 - Acquisition in the public market 22,400 $1.290
Jun 18/08 Jun 13/08 Desormeaux, Benoit Direct Ownership Common Shares 51 - Exercise of options 6,000 $0.830
Jun 16/08 Jun 13/08 Desormeaux, Benoit Direct Ownership Options 51 - Exercise of options -6,000 $0.830
Jun 12/08 Jun 12/08 Lefebvre, Jean-Pierre Direct Ownership Common Shares 10 - Acquisition in the public market 11,200 $1.280
Jun 12/08 Jun 12/08 Lefebvre, Jean-Pierre Direct Ownership Common Shares 10 - Acquisition in the public market 18,800 $1.270
Jun 12/08 Jun 11/08 Lefebvre, Jean-Pierre Direct Ownership Common Shares 10 - Acquisition in the public market 15,000 $1.300
Jun 03/08 Jun 03/08 Lefebvre, Jean-Pierre Direct Ownership Options 52 - Expiration of options -25,000 $1.750
Apr 24/08 Apr 24/08 La Salle, Benoit Indirect Ownership Common Shares 10 - Acquisition in the public market 300,000 $1.360
- Amended Filing

2008 Aug 15 08:30 AM

[bold4gold:]

If I had any more dry powder I'd go for the gold. Thanks for the heads-up on this one. I'll keep it in mind for the future.

2008 Aug 15 09:36 AM

[Bobwins:]

Mark Medayski, you are right. You should stay away from stocks trading on the Toronto Stock Exchange. This is the senior Canadian exchange and only bigger, more well established companies can trade there. Better you stick with your low risk bankrupt US stocks!

All kidding aside, Semafo looks like a slam dunk bargain.

Produced 54,000oz of gold in Q2. They just installed a new ball mill at Mana that will double production capacity. Since they produced around 7800 oz in July, it looks like they will ramp up to around 15,000 oz for Mana later this year. So the .05eps they earned in Q2 isn't the peak production.

Annualized the .05 eps turns into .20eps and the stock should be selling for around $4. Although it trades in Canada, SMF.to doesn't appear to have that much of a following in Canada. Maybe the African location scares some away. Seems really cheap and mgmt appears very capable after bringing three mines into production. Most companies nowadays can't bring one to production.

Bobwins

2008 Aug 18 06:25 PM

[Jason Hamlin:]

This "non-existing company" produced 200,000 ounces of gold in 2008 my friend.

"If you buy SEMAFO, you will be holding an empty bag?"

WRONG! SEMAFO's share price more than doubled since I wrote this article 6 months ago. You have no credibility Mark.

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On Aug 15 06:45 AM MarkMedayski wrote:

> Stay away from this and other PinkSheets listed stocks,I am trading
> bankrupt Chapter 11 stocks of once big established companies and
> it is high risk trading.About 5% of my portfolio I use for special
> situations stock trading.
> SEMAFO INC. is non existing company where iniders sold most their
> holdings at 2$ a share,if you buy it,you be the one to hold this
> empty bag.
> Stay away!

Feb 26 03:59 PM