Gold mining and exploration in Africa
The most valuable Africa-specific gold developer
One of the few stand-alone survivors in the West African gold space Semafo, is attracting attention as it's ten-bagger Mana discovery lights up African gold.
Author: Barry Sergeant
Posted: Wednesday , 30 Mar 2011
JOHANNESBURG -
A few months back, transnational gold miner Kinross acquired Red Back for USD 7.1bn, for its gold mining interests in Ghana and Mauritania. The shareholder resolution for the deal was approved by 70% of Kinross's shareholders. Roughly 99% of Red Back's shareholders approved the deal, strongly indicating the high-powered nature of the game at play.
The deal once again threw a light on the considerable bounty of gold assets rising, many recycled, in Africa. At the same time, the deal showed up just how keen bigger gold names are to further burnish internal inventories, and also the kind of prices that are voluntarily disgorged. If all is well that ends well, Kinross's stock price has underperformed for months, possibly as a target of some kind of obscure cerebral punishment.
Meanwhile, the spotlight remains on African gold assets; demand for information on broad and specific stories expands apace. At least 100 listed companies are now involved, exclusively or otherwise, in gold activity on the continent. In a report initiating coverage, RBC Capital Markets has taken a very close look at Canada-listed Semafo, which already ranks as an enviable "ten bagger".
Semafo's success has been a long time in the making; it was one of the early starters - and ranks as one of the few stand-alone survivors - in West Africa, more than 15 years ago. Until recently, Semafo's history was lackluster, but stamina and resolve have proved handy qualities.
In just three years, Semafo's stock price has expanded more than ten times. Most of this has come on the back of the commencement of production in 2008 at the Mana gold mine in Burkina Faso. Mana, according to RBCCM, could amount to something more akin to a province than a mine.
RBCCM anticipates that while production from Mana could amount to around 180,000 ounces of gold in 2011, at an average cash cost of USD 550/oz, group production could grow to more than half a million ounces during 2015, with around 500,000 ounces, alone, coming from Mana, in which Semafo holds 90%. This would be a special class: few stand-alone gold mines can produce that kind of output.
Mana's output would be augmented by production from two other Semafo mines, one in Niger and the other in Guinea. Of these jurisdictions, Burkina Faso has historically been the most at peace with itself. With a capital named Ouagadougou, where there may be more bicycles than people, how could it be otherwise?
Mana is found about 200 kilometers to the west of the capital. The mine there has been built at relatively modest cost, and Semafo's standing debt is modest seen in the context of cash generation by Mana. RBCCM believes there is a clear expectation from the market that the current programme at Mana should increase the reserve at the mine to at least 3.5m ounces from 2.16m at present.
RBCCM is clear in its view: "the existing discoveries at Mana represent the tip of the iceberg within the context of the whole 115 km mineralised trend that includes the highly prospective northern licence areas, Saoura and Massala". Semafo holds nearly two thousand square kilometers of exploration licences in the region.
Semafo has set an exploration budget of USD 30m for Mana in 2011, for a formidable 69,000 meters of diamond drilling (including 6,000 meters over deep targets), 130,000 meters of reverse-circulation drilling (including 57,000 meters over the Kona and Fofina-Fobiri areas), and 50,000 meters of air core drilling. The company is also scheduled to complete a 302 square kilometer HELITEM Lite electromagnetic survey over the central portion of the licence area.
The expectations are clearly reflected in Semafo's market value, currently around USD 2.5bn, the highest of any gold explorer or developer on the African continent. Investors, and no doubt the odd speculator, have long marked the stock out as a potential takeover target.
Some stocks active in Africa gold
Stock
From
From
Value
price
high*
low*
USD bn
South Africa & beyond
USD 46.21
-12.6%
24.0%
17.615
ZAR 115.63
-10.2%
28.5%
12.152
South Africa focus
ZAR 98.29
-0.5%
44.2%
6.158
ZAR 0.73
-47.1%
2.8%
0.133
CAD 0.86
-42.3%
22.9%
0.208
ZAR 3.32
-18.2%
18.6%
0.186
ZAR 53.00
-20.9%
26.8%
0.267
AUD 0.38
-9.5%
85.4%
0.314
ZAR 0.19
-80.0%
11.8%
0.044
GBP 0.10
-18.0%
78.3%
0.237
AUD 0.08
-74.4%
3.8%
0.010
AUD 0.06
-43.0%
39.0%
0.007
Global & Africa
USD 50.59
-9.2%
35.5%
50.517
USD 52.78
-19.4%
6.7%
25.681
USD 21.88
-6.4%
66.1%
8.196
USD 15.32
-23.0%
7.3%
17.363
AUD 38.52
-11.9%
29.6%
30.174
USD 19.66
0.0%
103.8%
19.816
West Africa
GBP 0.07
-30.2%
167.3%
0.025
AUD 0.81
-18.7%
814.8%
0.156
AUD 0.32
-37.6%
728.9%
0.082
CAD 0.52
-13.3%
225.0%
0.089
CAD 2.00
-30.8%
36.1%
0.291
CAD 4.67
-5.3%
483.8%
0.413
AUD 0.13
-60.1%
19.0%
0.030
CAD 0.88
-17.0%
245.1%
0.096
CAD 9.05
-37.3%
81.0%
2.524
AUD 0.34
-28.0%
219.0%
0.016
USD 2.92
-51.4%
8.6%
0.773
AUD 1.19
-22.5%
65.3%
0.569
CAD 5.35
-29.1%
94.5%
1.077
AUD 3.06
-13.8%
83.2%
1.328
CAD 2.64
-15.7%
28.2%
0.307
GBP 1.03
-20.2%
58.9%
0.215
AUD 6.57
-12.4%
158.8%
0.409
USD 8.59
-6.6%
82.8%
0.244
CAD 0.05
-23.1%
233.3%
0.008
AUD 0.55
-20.9%
120.0%
0.056
AUD 1.85
-6.6%
255.8%
0.567
AUD 0.75
-16.8%
92.7%
0.342
CAD 4.53
-8.5%
586.4%
0.385
CAD 0.13
-45.7%
78.6%
0.080
AUD 0.50
-12.3%
150.0%
0.076
USD 2.00
-20.3%
106.2%
0.073
CAD 0.68
-37.6%
209.1%
0.129
AUD 0.59
-29.1%
108.9%
0.163
CAD 0.69
-47.3%
360.0%
0.086
AUD 2.89
-15.5%
142.9%
0.601
AUD 0.37
-43.0%
25.9%
0.037
CAD 2.02
-23.8%
83.6%
0.277
AUD 0.55
-20.9%
120.0%
0.056
CAD 1.63
-21.6%
288.1%
0.645
AUD 0.03
-33.8%
92.3%
0.066
CAD 0.21
-52.8%
281.8%
0.019
CAD 0.77
-23.8%
71.1%
0.078
CAD 0.17
-44.3%
126.7%
0.020
Pan African
USD 73.73
-30.7%
5.1%
6.716
GBP 0.10
-18.0%
78.3%
0.237
GBP 0.10
-33.6%
22.7%
0.018
CAD 0.35
-53.3%
32.1%
0.017
CAD 0.13
-25.7%
136.4%
0.067
GBP 0.08
-44.6%
13.2%
0.067
CAD 0.24
-31.4%
77.8%
0.025
GBP 0.03
-27.0%
42.1%
0.032
Africa, other
GBP 5.28
-23.0%
8.5%
3.459
GBP 0.31
-12.9%
106.8%
0.088
CAD 2.49
-43.5%
55.6%
0.442
GBP 0.04
-36.4%
133.3%
0.014
CAD 0.29
-50.8%
75.8%
0.034
CAD 2.95
-21.3%
353.8%
0.143
CAD 0.94
-40.5%
176.5%
0.112
CAD 0.12
-62.5%
60.0%
0.014
CAD 0.45
-40.7%
48.3%
0.048
CAD 6.02
-22.7%
46.5%
0.580
CAD 2.16
-34.1%
15.5%
2.394
GBP 0.49
-6.9%
74.3%
0.186
GBP 0.02
-72.1%
42.9%
0.014
CAD 2.95
-21.3%
353.8%
0.143
CAD 1.20
-47.6%
26.3%
0.052
AUD 0.27
-38.6%
328.6%
0.101
GBP 0.07
-51.6%
5.4%
0.043
USD 0.22
-65.6%
22.2%
0.006
GBP 0.13
-35.4%
672.7%
0.140
Also in Africa
CAD 5.10
-20.9%
1207.7%
0.885
CAD 0.40
-28.6%
25.0%
0.040
USD 0.57
-28.8%
533.3%
0.148
CAD 2.47
-25.8%
47.9%
1.144
AUD 0.65
-13.3%
195.5%
0.254
CAD 1.09
-27.3%
65.2%
0.938
CAD 1.23
-17.4%
108.5%
0.170
GBP 1.30
-46.2%
57.9%
0.173
CAD 1.97
-35.4%
34.0%
0.287
GBP 2.35
-7.8%
113.6%
0.742
AUD 2.89
-18.1%
43.1%
0.986
CAD 0.14
-25.0%
35.0%
0.007
AUD 0.48
-38.5%
31.7%
0.107
CAD 1.88
-1.6%
276.0%
0.283
GBP 0.39
-50.0%
124.3%
0.030
GBP 0.17
-47.2%
46.7%
0.068
CAD 35.91
-2.6%
33.8%
4.882
Mainly copper
CAD 119.95
-13.2%
148.9%
10.590
GBP 0.13
-22.4%
271.4%
0.085
* 12 month
Source: market & company data, crunched by Barry Sergeant
Some stocks active in Africa gold
Stock
From
From
Value
price
high*
low*
USD bn
South Africa & beyond
USD 46.21
-12.6%
24.0%
17.615
ZAR 115.63
-10.2%
28.5%
12.152
South Africa focus
ZAR 98.29
-0.5%
44.2%
6.158
ZAR 0.73
-47.1%
2.8%
0.133
CAD 0.86
-42.3%
22.9%
0.208
ZAR 3.32
-18.2%
18.6%
0.186
ZAR 53.00
-20.9%
26.8%
0.267
AUD 0.38
-9.5%
85.4%
0.314
ZAR 0.19
-80.0%
11.8%
0.044
GBP 0.10
-18.0%
78.3%
0.237
AUD 0.08
-74.4%
3.8%
0.010
AUD 0.06
-43.0%
39.0%
0.007
Global & Africa
USD 50.59
-9.2%
35.5%
50.517
USD 52.78
-19.4%
6.7%
25.681
USD 21.88
-6.4%
66.1%
8.196
USD 15.32
-23.0%
7.3%
17.363
AUD 38.52
-11.9%
29.6%
30.174
USD 19.66
0.0%
103.8%
19.816
West Africa
GBP 0.07
-30.2%
167.3%
0.025
AUD 0.81
-18.7%
814.8%
0.156
AUD 0.32
-37.6%
728.9%
0.082
CAD 0.52
-13.3%
225.0%
0.089
CAD 2.00
-30.8%
36.1%
0.291
CAD 4.67
-5.3%
483.8%
0.413
AUD 0.13
-60.1%
19.0%
0.030
CAD 0.88
-17.0%
245.1%
0.096
CAD 9.05
-37.3%
81.0%
2.524
AUD 0.34
-28.0%
219.0%
0.016
USD 2.92
-51.4%
8.6%
0.773
AUD 1.19
-22.5%
65.3%
0.569
CAD 5.35
-29.1%
94.5%
1.077
AUD 3.06
-13.8%
83.2%
1.328
CAD 2.64
-15.7%
28.2%
0.307
GBP 1.03
-20.2%
58.9%
0.215
AUD 6.57
-12.4%
158.8%
0.409
USD 8.59
-6.6%
82.8%
0.244
CAD 0.05
-23.1%
233.3%
0.008
AUD 0.55
-20.9%
120.0%
0.056
AUD 1.85
-6.6%
255.8%
0.567
AUD 0.75
-16.8%
92.7%
0.342
CAD 4.53
-8.5%
586.4%
0.385
CAD 0.13
-45.7%
78.6%
0.080
AUD 0.50
-12.3%
150.0%
0.076
USD 2.00
-20.3%
106.2%
0.073
CAD 0.68
-37.6%
209.1%
0.129
AUD 0.59
-29.1%
108.9%
0.163
CAD 0.69
-47.3%
360.0%
0.086
AUD 2.89
-15.5%
142.9%
0.601
AUD 0.37
-43.0%
25.9%
0.037
CAD 2.02
-23.8%
83.6%
0.277
AUD 0.55
-20.9%
120.0%
0.056
CAD 1.63
-21.6%
288.1%
0.645
AUD 0.03
-33.8%
92.3%
0.066
CAD 0.21
-52.8%
281.8%
0.019
CAD 0.77
-23.8%
71.1%
0.078
CAD 0.17
-44.3%
126.7%
0.020
Pan African
USD 73.73
-30.7%
5.1%
6.716
GBP 0.10
-18.0%
78.3%
0.237
GBP 0.10
-33.6%
22.7%
0.018
CAD 0.35
-53.3%
32.1%
0.017
CAD 0.13
-25.7%
136.4%
0.067
GBP 0.08
-44.6%
13.2%
0.067
CAD 0.24
-31.4%
77.8%
0.025
GBP 0.03
-27.0%
42.1%
0.032
Africa, other
GBP 5.28
-23.0%
8.5%
3.459
GBP 0.31
-12.9%
106.8%
0.088
CAD 2.49
-43.5%
55.6%
0.442
GBP 0.04
-36.4%
133.3%
0.014
CAD 0.29
-50.8%
75.8%
0.034
CAD 2.95
-21.3%
353.8%
0.143
CAD 0.94
-40.5%
176.5%
0.112
CAD 0.12
-62.5%
60.0%
0.014
CAD 0.45
-40.7%
48.3%
0.048
CAD 6.02
-22.7%
46.5%
0.580
CAD 2.16
-34.1%
15.5%
2.394
GBP 0.49
-6.9%
74.3%
0.186
GBP 0.02
-72.1%
42.9%
0.014
CAD 2.95
-21.3%
353.8%
0.143
CAD 1.20
-47.6%
26.3%
0.052
AUD 0.27
-38.6%
328.6%
0.101
GBP 0.07
-51.6%
5.4%
0.043
USD 0.22
-65.6%
22.2%
0.006
GBP 0.13
-35.4%
672.7%
0.140
Also in Africa
CAD 5.10
-20.9%
1207.7%
0.885
CAD 0.40
-28.6%
25.0%
0.040
USD 0.57
-28.8%
533.3%
0.148
CAD 2.47
-25.8%
47.9%
1.144
AUD 0.65
-13.3%
195.5%
0.254
CAD 1.09
-27.3%
65.2%
0.938
CAD 1.23
-17.4%
108.5%
0.170
GBP 1.30
-46.2%
57.9%
0.173
CAD 1.97
-35.4%
34.0%
0.287
GBP 2.35
-7.8%
113.6%
0.742
AUD 2.89
-18.1%
43.1%
0.986
CAD 0.14
-25.0%
35.0%
0.007
AUD 0.48
-38.5%
31.7%
0.107
CAD 1.88
-1.6%
276.0%
0.283
GBP 0.39
-50.0%
124.3%
0.030
GBP 0.17
-47.2%
46.7%
0.068
CAD 35.91
-2.6%
33.8%
4.882
Mainly copper
CAD 119.95
-13.2%
148.9%
10.590
GBP 0.13
-22.4%
271.4%
0.085
* 12 month
Source: market & company data, crunched by Barry Sergeant
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