2012 ANNUAL FINANCIAL INFORMATION Management’s Discussion and Analysis SEMAFO (the “Corporation”) is a Canadian-based mining company with gold production and exploration activities in West Africa. The Corporation and its subsidiaries currently operate three gold mines: the Mana Mine in Burkina Faso, the Samira Hill Mine in Niger and the Kiniero Mine in Guinea. SEMAFO is committed to evolve in a conscientious manner to become a major player in its geographical areas of interest. SEMAFO’s strategic focus is to maximize shareholder value by effectively managing its existing assets as well as pursuing organic and strategic growth opportunities. This Management’s Discussion and Analysis (“MD&A”) provides an analysis to enable readers to assess material changes in financial condition and results of operations for the year ended December 31, 2012 compared to the previous year. This MD&A, prepared as of March 20, 2013, is intended to complement and supplement our Audited Consolidated Financial Statements (the “financial statements”) as at December 31, 2012. Our financial statements and this MD&A are intended to provide investors with a reasonable basis for assessing our results of operation and our financial performance. Our financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”). All dollar amounts contained in this MD&A are expressed in US dollars, unless otherwise specified. This MD&A contains forward-looking statements. Particular attention should be given to the risk factors described in the “Risks and Uncertainties” section and to the “Forward-Looking Statements” section of this document. Where we say “we”, “us”, “our”, the “Corporation” or “SEMAFO”, we mean SEMAFO Inc. or SEMAFO Inc. and/or one or more or all of its subsidiaries, as it may apply. 1. Financial and Operating Highlights 2012 2011 2010 Gold ounces produced ................................................................ ................................ 236,100 ................................ 250,100 ................................ 261,100 ........................................ Gold ounces sold ................................................................................................ 231,500................................ 249,600................................ 260,800................................ ................. (in thousands of dollars, except amounts per ounce, per tonne and per share) Revenues – Gold sales ................................................................ ................................ 388,501 ................................ 395,916 ................................ 323,275 ....................................... Operating income ................................................................................................ 34,626................................ 154,164................................ 124,750................................ ................ Net (loss) income attributable to equity shareholders ................................ ................................ (6,604) 111,759................................ 100,459................................ .......................... Basic (loss) earnings per share ................................................................ ................................ (0.02) ................................ 0.41 ................................ 0.38 ........................... Diluted (loss) earnings per share ................................................................ ................................ (0.02) ................................ 0.40 ................................ 0.37 ......................... 1 Adjusted operating income ................................................................ ................................ 111,624 ................................ 154,164 ................................ 124,750 ................................. 1 Adjusted net income attributable to equity shareholders ................................ 77,809................................ 111,759................................ 100,459................................ .................... 1 Adjusted basic earnings per share ................................................................ 0.28................................ 0.41................................ 0.38................................ ..................... 2 Cash flow from operating activities ................................................................ 155,406................................ 171,875................................ 147,498................................ ..................... 3 Operating cash flow per share ................................................................ ................................ 0.57 ................................ 0.63 ................................ 0.56 ........................... Average realized selling price (per ounce) ................................ ................................ 1,678 ................................ 1,586 ................................ 1,240 .......................................... 4 Cash operating cost (per ounce produced) ................................ ................................ 704 ................................ 591 ................................ 466 ........................................ 4 Cash operating cost (per tonne processed) ................................ ................................ 35 ................................ 35 ................................ 33 ....................................... 5 Total cash cost (per ounce sold) ................................................................ ................................ 793 ................................ 677 ................................ 517 ........................ 6 Total cash margin (per ounce sold) ................................................................ 885................................ 909................................ 723................................ .................... Total assets ................................................................................................ 702,660................................ 724,011................................ 591,870................................ ......................... Cash dividends declared per share ................................................................ 0.04................................ 0.02................................ ................................ – ..................... 1 Adjusted operating income, adjusted net income attributable to equity shareholders and adjusted basic earnings per share are non-IFRS financial performance measures with no standard definition under IFRS. In 2012, the adjusted operating income excludes the write-off of property, plant and equipment of $16,998,000 related to the underground project and $60,000,000 related to the impairment of non-financial assets of the Samira Hill Mine, while the adjusted net income attributable to equity shareholders and the adjusted basic earnings per share also exclude the loss on the sale of a current investment totalling $24,297,000, as well as the income tax expense and the non-controlling interest impact totalling $16,882,000 related to these non-recurring transactions. 2 Cash flow from operating activities excludes changes in non-cash working capital items. 3 Operating cash flow per share is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS financial performance measures” section of this MD&A. 4 Cash operating cost is a non-IFRS financial performance measure with no standard definition under IFRS and is calculated using ounces produced and tonnes processed. See the “Non-IFRS financial performance measures” section of this MD&A. 5 Total cash cost is a non-IFRS financial performance measure with no standard definition under IFRS and represents the mining operation expenses and government royalties per ounce sold. 6 Total cash margin is a non-IFRS financial performance measure with no standard definition under IFRS and is calculated using the average realized selling price and the total cash cost. 1 Management’s Discussion and Analysis 1. Financial and Operating Highlights (continued) Fourth Quarter Financial and Operating Highlights Three-month period ended December 31, 2012 2011 Variation Gold ounces produced ................................................................................................ 62,400................................ 64,800................................ (4%) ........................................ Gold ounces sold ................................................................................................ ................................ 64,200 67,200................................ (4%)................................ ................ ................................ ................................................................................................................................................................................................................................ ................................................................ ................................................................ .......................................................................................... (in thousands of dollars, except amounts per ounce, per tonne and per share) Revenues – Gold sales ................................................................................................ 110,305...............................