Semafo - 10 Kilometer Goldvererzung!

MONTREAL - Semafo Inc. (TSX:SMF.TO - News) shares slid 22 per cent as analysts downgraded the company after the gold miner announced disappointing results at its key mining operation.

The company has lost more than one-third of its value over the past two trading sessions after it released reserve estimates Wednesday that appeared to be below what the market was expecting in the update that was delayed by a month.

The Montreal-based miner's shares closed 96 cents lower at $3.39 Thursday after losing about 17 per cent of their value on Wednesday.

Semafo said total mineral reserves and resources increased by 1.3 million ounces to 7.3 million ounces in 2011.

But at its largest mine, Mana in Burkina Faso, the average grade of gold produced slipped along with reserves of gold. In 2011, the company had two million gold ounces, compared to 2.2 million in 2010.

It also said it would take a $17-million write-off in the second quarter related to the decision to go ahead with the Wona-Kona super pit project at its Mana mine in Burkina Faso —transforming the mine from a combined open pit and underground mine from a more costly underground operation.

The company further revealed that preliminary metallurgical tests at its southern mines suggest low recovery rates of sulphide, which reduces the likelihood of gold recovery.

Analysts at Desjardins Securities, Scotiabank (TSX:BNS.TO - News), TD Securities (TSX:TD.TO - News) and BMO Capital Markets (TSX:BM.TO - News) significantly reduced their current price targets for the company.

Scotiabank analyst Leily Omoumi cut the bank's price target on the stock to $6.50 from $8.25 on the news, but remained positive on the company.