TORONTO, Aug. 1, 2018 /CNW/ - Golden Star Resources Ltd.
(NYSE American: GSS; TSX: GSC; GSE: GSR) ("Golden Star" or the
"Company") reports its financial and operational results for the
quarter ended June 30, 2018.
HIGHLIGHTS:
- Gold production of 61,209 ounces in the second quarter of
2018
- Strong production from the Wassa Complex ("Wassa") in the
second quarter of 2018, continuing to exceed expectations
-
- 20% increase in gold production from Wassa in the second
quarter of 2018 compared to the second quarter of 2017, including a
167% increase in production from the Wassa Underground Gold Mine
("Wassa Underground")
- 65% increase in grade processed at Wassa Underground to 4.99
grams per tonne ("g/t") of gold ("Au") in the second quarter of
2018 compared to the second quarter of 2017
- Significant improvements delivered at the Prestea Underground
Gold Mine ("Prestea Underground") in the second quarter of 2018
compared to the first quarter of 2018, when the mine achieved
commercial production
-
- 67% increase in gold production to 12,463 ounces in the second
quarter of 2018 compared to the first quarter of 2018
- 65% increase in grade processed from Prestea Underground to
13.56 g/t Au in the second quarter of 2018 compared to the first
quarter of 2018
- Targeted production rate of 650 tonnes per day ("tpd") is
expected to be achieved at Prestea Underground during the fourth
quarter of 2018
- Cash operating cost per ounce1 of $809 and All-In Sustaining Cost ("AISC") per
ounce1 of $1,104 in the
second quarter of 2018
-
- Higher than expected costs due to the slower than anticipated
ramp up at Prestea Underground, partially offset by the stronger
than expected performance at Wassa Underground
- 38% decrease in cash operating cost per ounce1 at
Wassa in the second quarter of 2018 to $610 compared to the second quarter of 2017
- Capital expenditures of $10.2
million in the second quarter of 2018
- Cash provided by operations before changes in working capital
of $10.3 million or $0.03 per share in the second quarter of 2018 and
mine operating margin of $10.2
million
- Consolidated cash balance of $21.9
million at June 30, 2018
- Post period end, the creation of a long term, strategic
relationship was agreed with La Mancha Holding S.à r.l. ("La
Mancha"), including a $125.7 million
investment, which will support Golden Star's growth as a leading
African gold producer2
- Golden Star is on track to achieve its consolidated full year
("FY") 2018 guidance in terms of gold production, cash operating
cost per ounce1 and AISC per ounce1
-
- The Company expects to be at the top end of the cost ranges in
FY 2018
- The Company intends to review its FY 2018 capital spend in
light of the proposed investment from La Mancha
Notes:
|
1. See "Non-GAAP
Financial Measures".
|
2. For more
information, please see the press release entitled, 'Golden Star
announces long term, strategic investment by La Mancha', dated
August 1, 2018.
|
Sam Coetzer, President and
Chief Executive Officer of Golden Star, commented:
"During the second quarter of 2018, Prestea Underground
delivered more ounces than the Prestea Open Pits, which is
testament to the hard work and disciplined approach of our
underground team. We expect to see further improvements
during the coming months and we anticipate that Prestea Underground
will achieve its nameplate production rate during the fourth
quarter of 2018. We will also continue to right size this
operation with the aim of reducing operating costs and generating a
stronger cash margin. Wassa Underground delivered another
impressive quarter, with both grades and tonnages exceeding our
expectations. I am looking forward to releasing the
Preliminary Economic Assessment for Wassa's Inferred Mineral
Resources to gain a more thorough understanding of the full
potential of this substantial deposit. After two quarters, we
are on track to achieve our consolidated full year 2018 production
and cost guidance and with our strategic relationship with La
Mancha agreed, we are well-positioned to deliver significant value
for our shareholders."
La Mancha Transaction and Second Quarter 2018 Conference Call
Details
Golden Star will conduct a conference call and webcast to
discuss the La Mancha transaction and the results of the second
quarter of 2018 on Thursday, August 2,
2018 at 10:00am ET. The
Chief Executive Officer of La Mancha, Andrew Wray, will join the Golden Star
management team on the call.
The call can be accessed by telephone or by webcast as
follows:
Toll Free (North America): +1 866 393 4306
Toronto Local and International: +1 734 385 2616
Conference ID: 3081459
Webcast:
www.gsr.com
A recording and webcast replay of the call will be available at
www.gsr.com following the call.
SUMMARY OF CONSOLIDATED OPERATIONAL AND FINANCIAL
RESULTS
|
|
Three Months
Ended
|
|
|
June
30,
|
OPERATING
SUMMARY
|
|
2018
|
2017
|
Wassa gold
sold
|
oz
|
38,249
|
31,985
|
Prestea gold
sold
|
oz
|
22,310
|
31,619
|
Total gold
sold
|
oz
|
60,559
|
63,604
|
Wassa gold
produced
|
oz
|
38,532
|
32,161
|
Prestea gold
produced
|
oz
|
22,677
|
32,014
|
Total gold
produced
|
oz
|
61,209
|
64,175
|
Average realized gold
price1
|
$/oz
|
1,273
|
1,222
|
|
|
|
|
Cost of sales per
ounce – Consolidated2
|
$/oz
|
1,106
|
1,012
|
Cost of sales per
ounce – Wassa2
|
$/oz
|
944
|
1,235
|
Cost of sales per
ounce – Prestea2
|
$/oz
|
1,383
|
785
|
Cash operating cost
per ounce – Consolidated2
|
$/oz
|
809
|
785
|
Cash operating cost
per ounce – Wassa2
|
$/oz
|
610
|
980
|
Cash operating cost
per ounce – Prestea2
|
$/oz
|
1,149
|
585
|
All-In Sustaining
cost per ounce – Consolidated2
|
$/oz
|
1,104
|
960
|
Notes:
|
1.
|
Average realized gold
price per ounce excludes pre-commercial production ounces sold at
Prestea Underground in 2018 and 2017.
|
2.
|
See "Non-GAAP
Financial Measures".
|
|
|
Three Months
Ended
|
|
|
June
30,
|
FINANCIAL
SUMMARY
|
|
2018
|
2017
|
Gold
revenues
|
$'000
|
77,121
|
77,335
|
Cost of sales
excluding depreciation and amortization
|
$'000
|
57,717
|
55,173
|
Depreciation and
amortization
|
$'000
|
9,235
|
8,893
|
Mine operating
margin
|
$'000
|
10,169
|
13,269
|
General and
administrative expense
|
$'000
|
6,909
|
1,953
|
Loss/(gain) on fair
value of financial instruments, net
|
$'000
|
1,301
|
(4,907)
|
Net (loss)/income
attributable to Golden Star shareholders
|
$'000
|
(6,642)
|
13,883
|
Adjusted net income
attributable to Golden Star shareholders1
|
$'000
|
2,408
|
7,703
|
(Loss)/income per
share attributable to Golden Star shareholders - basic
|
$/share
|
(0.02)
|
0.04
|
(Loss)/income per
share attributable to Golden Star shareholders - diluted
|
$/share
|
(0.02)
|
0.02
|
Adjusted income per
share attributable to Golden Star shareholders –
basic1
|
$/share
|
0.01
|
0.02
|
Cash provided by
operations
|
$'000
|
10,321
|
11,082
|
Cash provided by
operations before working capital changes1
|
$'000
|
10,276
|
14,198
|
Cash provided by
operations per share - basic
|
$/share
|
0.03
|
0.03
|
Cash provided by
operations before working capital changes per share –
basic1
|
$/share
|
0.03
|
0.04
|
Capital
expenditures
|
$'000
|
10,186
|
18,307
|
Notes:
|
1. See "Non
GAAP Financial Measures".
|
OPERATIONAL PERFORMANCE
Overview
In the second quarter of 2018 Golden Star produced 61,209 ounces
of gold. This quarter was the Company's second quarter as a
primarily underground-focused gold producer, following the
cessation of production from the Wassa Main Pit in January
2018. Production from the Prestea Open Pits is ongoing and
ore supply from this operation is expected to continue into the
middle of the third quarter of 2018. However once production
from the Prestea Open Pits concludes, Golden Star intends to focus
on high margin, underground ore with the objective of strengthening
its financial position and creating a robust platform to deliver
shareholder value.
The Wassa Complex delivered another strong quarter. Gold
production increased by 20% in the second quarter of 2018 to 38,532
ounces compared to the second quarter of 2017 and it increased by
9% compared to the first quarter of 2018. 92% of Wassa's production
was attributable to Wassa Underground, which delivered higher
grades and higher tonnages than expected. Consequently, Wassa
delivered its lowest cash operating cost per
ounce1 in over seven years of $610.
Gold production from the Prestea Complex ("Prestea") was 22,677
ounces in the second quarter of 2018. The second quarter of 2018
was the first quarter that Prestea Underground delivered more
ounces than the Prestea Open Pits (55% of the Prestea Complex's
total production), which is a result of the ramp up of production
from the underground operation and the Prestea Open Pits
approaching the end of their mine life. The grade of the ore
processed from Prestea Underground increased by 65% in the second
quarter of 2018 compared to the first quarter of 2018 and Golden
Star expects the targeted production rate of 650 tpd to be achieved
at Prestea Underground during the fourth quarter of 2018.
Golden Star's consolidated cash operating cost per
ounce1 was $809 in
the second quarter of 2018, which represents a 3% increase compared
to the second quarter of 2017. Although Wassa reported a 38%
decrease in cash operating cost per ounce1 to
$610, this was offset by a 96%
increase at Prestea to $1,149.
The AISC per ounce1 in the second quarter of
2018 was $1,104, an increase of 15%
compared to the second quarter of 2017, primarily as a result of
the slower than expected ramp up at Prestea Underground. The
cost of sales per ounce1 was $1,106. Golden Star expects its operating
costs to decrease in the second half of 2018 as production at both
underground operations continues to ramp up.
At the end of the first half of 2018, $14.2 million of severance expenses had been paid
in total. The severance payments relating to the Wassa Main
Pit workforce are now complete and Golden Star expects to pay the
severance expenses relating to the Prestea Open Pits workforce
during the remainder of 2018.
At the end of the second quarter of 2018, Golden Star is on
track to achieve its consolidated FY 2018 guidance in terms of gold
production, cash operating cost per ounce1 and AISC per
ounce1 and expects to be at the top end of the
cost guidance ranges. As stated in the press release dated
January 11, 2018, Golden Star expects
production to be weighted to the second half of 2018 and
consequently, cash operating cost per ounce1 and
AISC per ounce1 are anticipated to be lower in the
second half of 2018.
Following the completion of the proposed strategic investment by
La Mancha, Golden Star intends to review its planned capital
spend. It is expected that some of the proceeds of the
transaction will be used for exploration, Mineral Resource
delineation and expansion programs at Wassa Underground, Prestea
Underground and the Father Brown deposit.
Notes:
|
1. See "Non-GAAP
Financial Measures".
|
Wassa Complex
|
|
Three Months
Ended
|
|
|
June
30,
|
|
|
2018
|
2017
|
WASSA FINANCIAL
RESULTS
|
|
|
|
|
Revenue
|
$'000
|
$
|
48,588
|
$
|
38,942
|
|
|
|
|
|
Mine operating
expenses
|
$'000
|
21,952
|
28,408
|
|
Severance
charges
|
$'000
|
1,576
|
-
|
|
Royalties
|
$'000
|
2,517
|
2,024
|
|
Operating costs from
metals inventory
|
$'000
|
1,374
|
2,948
|
|
Inventory net
realizable value adjustment and
write-off
|
$'000
|
3,103
|
1,299
|
|
Cost of sales
excluding depreciation and
amortization
|
$'000
|
30,522
|
34,679
|
|
Depreciation and
amortization
|
$'000
|
5,581
|
4,827
|
|
Mine operating
margin/(loss)
|
$'000
|
$
|
12,485
|
$
|
(564)
|
|
|
|
|
|
Capital
expenditures
|
$'000
|
7,881
|
3,611
|
|
|
|
|
WASSA OPERATING
RESULTS
|
|
|
|
|
Ore mined - Main
Pit
|
t
|
-
|
322,705
|
|
Ore mined -
Underground
|
t
|
238,953
|
143,702
|
|
Ore mined -
Total
|
t
|
238,953
|
466,407
|
|
Waste mined - Main
Pit
|
t
|
-
|
1,647,798
|
|
Waste mined -
Underground
|
t
|
73,122
|
28,826
|
|
Waste mined -
Total
|
t
|
73,122
|
1,676,624
|
|
Ore processed - Main
Pit
|
t
|
140,517
|
490,159
|
|
Ore processed -
Underground
|
t
|
235,415
|
145,016
|
|
Ore processed -
Total
|
t
|
375,932
|
635,175
|
|
Grade processed -
Main Pit
|
g/t
|
0.72
|
1.23
|
|
Grade processed -
Underground
|
g/t
|
4.99
|
3.02
|
|
Recovery
|
%
|
96.1
|
94.6
|
|
Gold produced - Main
Pit
|
oz
|
3,013
|
18,873
|
|
Gold produced -
Underground
|
oz
|
35,519
|
13,288
|
|
Gold produced -
Total
|
oz
|
38,532
|
32,161
|
|
Gold sold - Main
Pit
|
oz
|
2,730
|
18,697
|
|
Gold sold -
Underground
|
oz
|
35,519
|
13,288
|
|
Gold sold -
Total
|
oz
|
38,249
|
31,985
|
|
|
|
|
|
Cost of sales per
ounce1
|
$/oz
|
944
|
1,235
|
|
Cash operating cost
per ounce1
|
$/oz
|
610
|
980
|
Notes
|
1. See "Non-GAAP
Financial Measures".
|
Wassa Operational Overview
Gold production from the Wassa Complex increased by 20% in the
second quarter of 2018 to 38,532 ounces compared to the second
quarter of 2017. Wassa became a primarily underground
operation in the first quarter of 2018 and consequently, in the
second quarter of 2018, 92% of Wassa's production was attributable
to Wassa Underground. Stockpiled ore from Wassa Main Pit is
expected to continue to be fed to the processing plant into the
fourth quarter of 2018.
The grade of the ore from Wassa Underground in the second
quarter of 2018 increased by 65% to 4.99 g/t Au compared to the
second quarter of 2017 and by 10% compared to the first quarter of
2018. Mining rates at Wassa Underground also continued to
exceed expectations, at approximately 2,655 tpd on average in the
second quarter of 2018. This represents a 66% increase
compared to the second quarter of 2017 and an 11% increase compared
to the first quarter of 2018.
The targeted average mining rate for Wassa Underground in FY
2018 is 2,700-3,000 tpd, but the Company expected to achieve an
average of 2,300 tpd during the first half of 2018. The
mining team is well-positioned to continue to increase the tonnage
profile in 2018 and beyond, with the mining sequence working well
and an increasing number of stopes prepared and
developed.
The Wassa Complex reported a 38% decrease in cash operating cost
per ounce1 for the second quarter of 2018 to
$610 compared to the second quarter
of 2017. This represents Wassa's lowest cash operating cost
per ounce1 since the first quarter of
2010. This strong performance was due primarily to the
increase in both grade and tonnage from the Wassa Underground ore
being fed to the processing plant and the subsequent increase in
gold sold. The cost of sales per ounce1 for
Wassa in the second quarter of 2018 was $944.
$1.6 million of severance expenses
were paid during the second quarter of 2018 as a result of the
cessation of production from Wassa Main Pit in the first quarter of
2018. The severance payments relating to the Wassa Main Pit
workforce are now complete.
Post period end, Wassa's First Aid Team was awarded first place
in the 2018 Zone 1 Mine Safety and First Aid Competition,
underlining Golden Star's strong commitment to safe working
practice. The team will go on to compete in the national
competition in October 2018.
Notes
|
1. See "Non-GAAP Financial
Measures".
|
Prestea Complex
|
|
Three Months
Ended
|
|
|
June
30,
|
|
|
2018
|
2017
|
PRESTEA FINANCIAL
RESULTS
|
|
|
|
|
Revenue
|
$'000
|
$
|
28,533
|
$
|
38,393
|
|
|
|
|
|
Mine operating
expenses
|
$'000
|
23,504
|
20,860
|
|
Royalties
|
$'000
|
1,483
|
2,194
|
|
Operating costs
from/(to) metals inventory
|
$'000
|
2,134
|
(2,560)
|
|
Inventory net
realizable value adjustment and
write-off
|
$'000
|
74
|
-
|
|
Cost of sales
excluding depreciation and amortization
|
$'000
|
27,195
|
20,494
|
|
Depreciation and
amortization
|
$'000
|
3,654
|
4,066
|
|
Mine operating
(loss)/margin
|
$'000
|
$
|
(2,316)
|
$
|
13,833
|
|
|
|
|
|
Capital
expenditures
|
$'000
|
2,305
|
14,696
|
|
|
|
|
PRESTEA OPERATING
RESULTS
|
|
|
|
|
Ore mined – Open
Pits
|
t
|
45,547
|
351,860
|
|
Ore mined -
Underground
|
t
|
31,373
|
6,134
|
|
Ore mined -
Total
|
t
|
76,920
|
357,994
|
|
Waste mined – Open
Pits
|
t
|
146,316
|
955,691
|
|
Waste mined -
Underground
|
t
|
-
|
5,637
|
|
Waste mined -
Total
|
t
|
146,316
|
961,328
|
|
Ore
processed
|
t
|
373,599
|
370,928
|
|
Grade processed –
Open Pits
|
g/t
|
2.33
|
3.15
|
|
Grade processed –
Underground
|
g/t
|
13.56
|
3.67
|
|
Recovery
|
%
|
88.0
|
88.4
|
|
Gold produced – Open
Pits
|
oz
|
10,214
|
31,689
|
|
Gold produced –
Underground
|
oz
|
12,463
|
325
|
|
Gold produced –
Total
|
oz
|
22,677
|
32,014
|
|
Gold sold - Open
Pits
|
oz
|
9,847
|
31,294
|
|
Gold sold -
Underground
|
oz
|
12,463
|
325
|
|
Gold sold -
Total
|
oz
|
22,310
|
31,619
|
|
|
|
|
|
Cost of sales per
ounce1
|
$/oz
|
1,383
|
785
|
|
Cash operating cost
per ounce1
|
$/oz
|
1,149
|
585
|
Notes
|
1. See "Non-GAAP
Financial Measures".
|
Prestea Operational Overview
Gold production from the Prestea Complex in the second quarter
of 2018 was 22,677 ounces. The second quarter of 2018 was the
first quarter that Prestea Underground delivered more ounces than
the Prestea Open Pits (55% of the Prestea Complex's total
production). This is a result of the ramp up of production
from the underground operation and the Prestea Open Pits
approaching the end of their mine life.
The Prestea Open Pits produced 10,214 ounces of gold in the
second quarter of 2018. This 68% decrease in production
compared to the second quarter of 2017 was anticipated, as the
Prestea Open Pits had been expected to complete gold production at
the end of 2017. However additional ore was sourced during the
first half of 2018 so production is now expected to complete during
the third quarter of 2018. The grade of the ore processed
from the Prestea Open Pits in the second quarter of 2018 was 2.33
g/t Au. This was higher than expected at the start of the year as
Golden Star has accessed the Maafio pit, which has a grade of
approximately 2.33 g/t Au. However the grade processed in the
second quarter of 2018 represents a 26% decrease compared to the
second quarter of 2017, as during the second and third quarters of
2017 Golden Star was mining the Mampon deposit, which had a grade
of 4.64 g/t Au.
Gold production from Prestea Underground was 12,463 ounces in
the second quarter of 2018, compared to 325 ounces in the second
quarter of 2017. The grade of the ore processed from Prestea
Underground increased by 65% in the second quarter of 2018 to 13.56
g/t Au compared to the first quarter of 2018, exceeding the average
ore reserve grade of 12.35 g/t Au.
The average production rate from Prestea Underground was 345 tpd
in the second quarter of 2018. This average daily tonnage rate was
similar to the first quarter of 2018, however, more ore was sourced
from stope production during the second quarter of 2018 and the
dilution control in the stopes was significantly improved,
resulting in higher grades processed. Golden Star continued to
improve the longhole drilling and blasting productivities during
the period and expects the targeted production rate of 650 tpd to
be achieved consistently at Prestea Underground during the fourth
quarter of 2018.
Prestea reported a cash operating cost per
ounce1 of $1,149 in
the second quarter of 2018, which represents a 96% increase
compared to the same period in 2017. The increase in cash
operating cost per ounce1 was due primarily to the
increase in operating costs from metals inventory and mine
operating expenses in the period and the decrease in ounces sold in
the second quarter of 2018 compared to the same period in 2017. The
cost of sales per ounce1 at Prestea in the second
quarter of 2018 was $1,383.
Notes
|
1. See "Non-GAAP
Financial Measures".
|
Exploration
Updated Wassa Underground Inferred Mineral Resource
Estimate
On April 12, 2018, the Company
released an updated Inferred Mineral Resource estimate for Wassa
Underground. The updated estimate delivered a 147% increase in
Wassa Underground's Inferred Mineral Resources to 5.2 million
ounces of gold, in the B Shoot South and F Shoot South areas. The
grade of the Inferred Mineral Resources also increased by 9% to 3.6
g/t Au compared to 3.3 g/t Au in the December 31, 2017 estimate.
Further drilling of the Wassa South extensions is underway and
the Company expects that Wassa Underground's Inferred Mineral
Resources will continue to grow with further step out drilling
towards the south. A total of 5,500 metres of drilling was
conducted during the second quarter of 2018. Golden Star expects to
release the results of this drilling towards the end of the third
quarter of 2018.
Golden Star has commenced work on a Preliminary Economic
Assessment ("PEA") on the Inferred Mineral Resources of the Wassa
Underground deposit. The objective of the PEA is to demonstrate the
viability of the Inferred Mineral Resources, potentially including
a new access shaft and new ventilation infrastructure. As Golden
Star has significant under-utilized capacity in the Wassa
processing plant, this additional material could be processed
without the need for Golden Star to build any additional processing
capacity. Golden Star anticipates that the PEA will be completed in
the second half of 2018.
Drilling at Prestea
Golden Star drilled on surface and from underground on the
Prestea licence area during the second quarter of 2018, completing
a total of 1,870 metres.
Drilling at Prestea Underground continued to test the Inferred
Mineral Resources along the edges of the West Reef ore body with
the objective of Mineral Resource expansion. The Company is
planning to begin step out drilling to the north of the West Reef
in the second half of 2018 to test the potential down plunge
extension of the deposit, once drilling chambers have been
established.
Drilling at the South Gap target, between the two historic
underground shafts (Bondaye and Tuapim), was completed during the
second quarter of 2018. The South Gap is one of the five new
potential underground targets that Golden Star outlined in its 2018
exploration strategy. The Company expects to release the
results of the drilling at Prestea Underground and the South Gap
during the third quarter of 2018.
FINANCIAL PERFORMANCE
Capital Expenditures
Having largely completed the development of both Wassa
Underground and Prestea Underground, capital expenditures for the
second quarter of 2018 totaled $10.2
million compared to $18.3
million in the second quarter of 2017, representing a 44%
decrease. 77% of capital expenditures were attributable to
Wassa ($7.9 million), which included
$3.2 million on Wassa Underground
capitalized development, $1.9 million
on Wassa Underground heavy equipment and replacement components and
$1.9 million on exploration drilling.
Prestea capital expenditures totaled $2.3
million, which included $1.0
million on the development of Prestea Underground and
$0.7 million on exploration
drilling.
Second Quarter 2018 Capital Expenditures Breakdown (in
millions)
Item
|
Sustaining
|
Development
|
Total
|
|
Wassa
Underground
|
3.2
|
0.0
|
3.2
|
|
Wassa Equipment
Purchases
|
2.2
|
0.8
|
3.0
|
|
Wassa
Exploration
|
0.0
|
1.2
|
1.2
|
|
Other
|
0.3
|
0.2
|
0.5
|
Wassa
Subtotal
|
5.7
|
2.2
|
7.9
|
|
Prestea Open
Pits
|
0.2
|
0.1
|
0.3
|
|
Prestea
Underground
|
1.0
|
0.0
|
1.0
|
|
Prestea
Exploration
|
0.0
|
0.7
|
0.7
|
|
Other
|
0.0
|
0.3
|
0.3
|
Prestea
Subtotal
|
1.2
|
1.1
|
2.3
|
Consolidated
|
6.9
|
3.3
|
10.2
|
Other Financial Highlights
Gold revenues for the second quarter of 2018 totaled
$77.1 million from gold sales of
60,559 ounces, at an average realized gold price of $1,273 per ounce. This figure was
consistent with gold revenues in the second quarter of 2017, as
increased revenue generated by the Wassa Complex (an increase of
25% compared to the second quarter of 2017) was partially offset by
decreased revenue from the Prestea Complex (a decrease of 26%
compared to the second quarter of 2017).
Cost of sales excluding depreciation and amortization for the
second quarter of 2018 totaled $57.7
million, an increase of 5% compared with the same period in
2017. This was due mainly to an increase in operating costs at
Prestea resulting from an increased drawdown of ore stockpiles,
partially offset by a decrease in mine operating expenses at Wassa
resulting from Wassa transitioning into an underground-only
mine.
Depreciation and amortization expenses for the second quarter of
2018 totaled $9.2 million, a 4%
increase compared to the second quarter of 2017. This was due to an
increase in depreciation at Wassa resulting mainly from an increase
in gold production and mining interests, offset partially by a
decrease in depreciation at Prestea resulting mainly from lower
gold production.
As a result, Golden Star reported a mine operating
margin of $10.2 million in the second quarter of 2018,
compared to $13.3 million in the
second quarter of 2017. This 23% decrease was due primarily to the
higher cost of sales in the second quarter of 2018.
General and administrative ("G&A") expenses for the second
quarter of 2018 totaled $6.9 million,
compared to $2.0 million in the same
period in 2017, a 254% increase. The increase in G&A costs for
the second quarter of 2018 was due primarily to a $4.5 million increase in share-based compensation
expense resulting from an increase in the Company's share price
during the quarter, compared to a decrease in the share price
during the same period in 2017.
Golden Star recorded a loss of $1.3
million on fair value of financial instruments in the second
quarter of 2018, compared to a $4.9
million gain in the same period in 2017. The
$1.3 million fair value loss in the
second quarter of 2018 relates to a non-cash revaluation loss on
the embedded derivative liability of the 7% Convertible Debentures.
The $4.9 million fair value gain
recognized in the second quarter of 2017 was comprised of a
$4.0 million non-cash revaluation
gain on the embedded derivative liability of the 7% Convertible
Debentures and a $1.0 million
non-cash revaluation gain on the warrants, which were held by
Royal Gold, Inc., offset by a
$0.1 million non-cash revaluation
loss on the 5% Convertible Debentures.
The net loss attributable to Golden Star shareholders in the
second quarter of 2018 totaled $6.6
million or $0.02 loss per
share (basic), compared to a net income of $13.9 million or $0.04 income per share (basic) in the second
quarter of 2017. The net loss in the second quarter of 2018 was due
primarily to a decrease of $6.2
million in the gain on fair value of financial instruments,
a $5.0 million increase in G&A
expenses, a $3.8 million increase in
deferred tax expense, a $3.1 million
decrease in mine operating margin and a $3.0
million increase in finance expense.
The adjusted net income attributable to Golden Star
shareholders1 in the second quarter of 2018 was
$2.4 million, compared to
$7.7 million in the same period in
2017. The 69% decrease was due primarily to a lower consolidated
mine operating margin and higher net finance, G&A and
exploration expenses.
Cash provided by operations before working capital
changes1 in the second quarter of 2018 was $10.3 million compared to $14.2 million in the same period in 2017. This
28% decrease was due primarily to a decrease in consolidated mine
operating margin and an increase in exploration and reclamation
costs.
The Company's consolidated cash balance was $21.9 million at June 30,
2018. Working capital provided $0.05 million during the three months ended
June 30, 2018, compared to using
$3.1 million in the same period in
2017. The working capital changes in the three months ended
June 30, 2018 included a decrease in
inventory of $2.8 million, offset by
an increase in accounts receivable of $2.1
million, a decrease in accounts payable and accrued
liabilities of $0.5 million and an
increase in prepaids and other of $0.2
million.
For further information about Golden Star's operational and
financial performance, please visit the Financial and Operational
database at
http://apps.indigotools.com/IR/IAC/?Ticker=GSC&Exchange=TSX.
The data relating to the second quarter of 2018 will be available
24 hours after release at the latest.
Notes
|
1. See "Non-GAAP
Financial Measures".
|
Other Corporate Developments
Long term, strategic investment by La Mancha
Earlier today Golden Star announced a long term, strategic
relationship with La Mancha. As part of the transaction, La Mancha
will invest approximately $125.7
million cash into Golden Star through a private placement
and La Mancha will be issued 163,210,500 Golden Star common shares,
representing approximately 30% of the enlarged share
capital. The investment by La Mancha is expected to
strengthen Golden Star's balance sheet and provide the Company with
increased financial capacity to unlock organic growth opportunities
and participate in the consolidation of the African gold
sector.
For more information about the La Mancha transaction, please see
the press release entitled, "Golden Star announces long term,
strategic investment by La Mancha", dated August 1, 2018.
Refinancing of Royal Gold
Loan
On June 28, 2018, Golden Star
(Wassa) Limited ("GWSL"), a subsidiary of Golden Star, closed a
$20.0 million secured loan facility
(the "Facility") with Ecobank Ghana Limited. There are no
prepayment penalties associated with the Facility. The
Facility will be repayable over a term of 60 months. Interest on
amounts drawn under the Facility is payable monthly in arrears
at an interest rate equal to three month LIBOR plus a spread of
7.5% per annum. The Company used the Facility to repay in full
its existing $20.0 million medium
term loan facility with Royal Gold,
Inc, which was due to mature in July
2019.
All monetary amounts refer to United States dollars unless otherwise
indicated.
GOLDEN STAR
RESOURCES LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF OPERATIONS AND COMPREHENSIVE (LOSS)/
INCOME (Stated in thousands of U.S. dollars except shares
and per share data)
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2018
|
2017
|
|
|
|
Revenue
|
$
|
77,121
|
$
|
77,335
|
|
Cost of sales
excluding depreciation and amortization
|
57,717
|
55,173
|
|
Depreciation and
amortization
|
9,235
|
8,893
|
Mine operating
margin
|
10,169
|
13,269
|
|
|
|
Other
expenses/(income)
|
|
|
|
Exploration
expense
|
760
|
308
|
|
General and
administrative
|
6,909
|
1,953
|
|
Finance expense,
net
|
5,391
|
2,354
|
|
Other
income
|
(415)
|
(120)
|
|
Loss/(gain) on fair
value of financial instruments, net
|
1,301
|
(4,907)
|
(Loss)/income
before tax
|
$
|
(3,777)
|
$
|
13,681
|
Deferred income tax
expense
|
3,783
|
-
|
Net (loss)/income and
comprehensive (loss)/income
|
$
|
(7,560)
|
$
|
13,681
|
Net loss attributable
to non-controlling interest
|
(918)
|
(202)
|
Net (loss)/income
attributable to Golden Star shareholders
|
$
|
(6,642)
|
$
|
13,883
|
|
|
|
Net (loss)/income
per share attributable to Golden Star shareholders
|
|
|
Basic
|
$
|
(0.02)
|
$
|
0.04
|
Diluted
|
$
|
(0.02)
|
$
|
0.02
|
Weighted average
shares outstanding-basic (millions)
|
380.8
|
376.2
|
Weighted average
shares outstanding-diluted (millions)
|
380.8
|
444.8
|
GOLDEN STAR
RESOURCES LTD. CONDENSED INTERIM CONSOLIDATED BALANCE
SHEETS (Stated in thousands of U.S. dollars)
(Unaudited)
|
|
|
|
As
of
|
|
June
30
|
Dec
31
|
|
2018
|
2017
|
|
|
|
ASSETS
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
21,871
|
$
|
27,787
|
|
Accounts
receivable
|
4,472
|
3,428
|
|
Inventories
|
38,096
|
50,653
|
|
Prepaids and
other
|
4,042
|
5,014
|
|
|
Total Current
Assets
|
68,481
|
86,882
|
RESTRICTED
CASH
|
6,511
|
6,505
|
MINING
INTERESTS
|
257,576
|
254,058
|
DEFERRED TAX
ASSETS
|
6,270
|
12,944
|
|
|
Total
Assets
|
$
|
338,838
|
$
|
360,389
|
|
|
|
LIABILITIES
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
83,762
|
$
|
94,623
|
|
Current portion of
rehabilitation provisions
|
7,664
|
6,566
|
|
Current portion of
deferred revenue
|
14,642
|
17,894
|
|
Current portion of
long term debt
|
25,756
|
15,864
|
|
Current portion of
other liability
|
17,940
|
13,498
|
|
|
Total Current
Liabilities
|
149,764
|
148,445
|
REHABILITATION
PROVISIONS
|
57,924
|
64,146
|
DEFERRED
REVENUE
|
109,471
|
92,062
|
LONG TERM
DEBT
|
82,397
|
79,741
|
LONG TERM DERIVATIVE
LIABILITY
|
6,822
|
10,963
|
LONG TERM OTHER
LIABILITY
|
-
|
6,786
|
|
|
Total
Liabilities
|
406,378
|
402,143
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
SHARE
CAPITAL
|
|
|
|
First preferred
shares, without par value, unlimited shares authorized. No shares issued and
outstanding
|
-
|
-
|
|
Common shares,
without par value, unlimited shares authorized
|
783,230
|
783,167
|
CONTRIBUTED
SURPLUS
|
36,370
|
35,284
|
DEFICIT
|
(818,787)
|
(794,180)
|
|
Shareholder's
Equity attributable to Golden Star shareholders
|
813
|
24,271
|
NON-CONTROLLING
INTEREST
|
(68,353)
|
(66,025)
|
|
Total
Deficit
|
(67,540)
|
(41,754)
|
|
Total Liabilities
and Shareholders' Equity
|
$
|
338,838
|
$
|
360,389
|
GOLDEN STAR
RESOURCES LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF CASH FLOWS (Stated in thousands of U.S.
dollars) (Unaudited)
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
2018
|
2017
|
OPERATING
ACTIVITIES:
|
|
|
Net
(loss)/income
|
$
|
(7,560)
|
$
|
13,681
|
Reconciliation of
net (loss)/income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
9,245
|
8,902
|
|
Share-based
compensation
|
3,220
|
(1,273)
|
|
Deferred income tax
expense
|
3,783
|
-
|
|
Loss/(gain) on fair
value of 7% Convertible Debentures embedded derivative
|
1,301
|
(4,036)
|
|
Recognition of
deferred revenue
|
(3,959)
|
(3,096)
|
|
Reclamation
expenditures
|
(1,934)
|
(1,503)
|
|
Other
|
6,180
|
1,523
|
|
Changes in working
capital
|
45
|
(3,116)
|
|
|
Net cash provided by
operating
activities
|
10,321
|
11,082
|
INVESTING
ACTIVITIES:
|
|
|
|
Additions to mining
properties
|
(73)
|
(237)
|
|
Additions to plant
and equipment
|
-
|
(145)
|
|
Additions to
construction in progress
|
(8,214)
|
(17,925)
|
|
Change in accounts
payable and deposits on mine equipment and material
|
(739)
|
787
|
|
Increase in
restricted cash
|
(6)
|
-
|
|
|
Net cash used in
investing activities
|
(9,032)
|
(17,520)
|
FINANCING
ACTIVITIES:
|
|
|
|
Principal payments on
debt
|
(5,679)
|
(514)
|
|
Proceeds from debt
agreements
|
20,000
|
10,000
|
|
5% Convertible
Debentures repayment
|
-
|
(13,611)
|
|
Royal Gold loan
repayment
|
(20,000)
|
-
|
|
Shares issued,
net
|
-
|
(3)
|
|
Exercise of
options
|
38
|
10
|
|
|
Net cash used in
financing activities
|
(5,641)
|
(4,118)
|
Decrease in cash and
cash equivalents
|
(4,352)
|
(10,556)
|
Cash and cash
equivalents, beginning of period
|
26,224
|
36,455
|
Cash and cash
equivalents, end of period
|
$
|
21,872
|
$
|
25,899
|
Non-GAAP Financial Measures
In this press release, we use the terms "cash operating cost",
"cash operating cost per ounce", "all-in sustaining costs", "all-in
sustaining costs per ounce", "adjusted net income attributable to
Golden Star shareholders", "adjusted income per share attributable
to Golden Star shareholders", "cash provided by operations before
working capital changes", and "cash provided by operations before
working capital changes per share - basic". These should be
considered as non-GAAP financial measures as defined in applicable
Canadian and United States
securities laws and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
GAAP.
"Cost of sales excluding depreciation and amortization" as found
in the statements of operations includes all mine-site operating
costs, including the costs of mining, ore processing, maintenance,
work-in-process inventory changes, mine-site overhead as well as
production taxes, royalties, severance charges and by-product
credits, but excludes exploration costs, property holding costs,
corporate office general and administrative expenses, foreign
currency gains and losses, gains and losses on asset sales,
interest expense, gains and losses on derivatives, gains and losses
on investments and income tax expense/benefit.
"Cash operating cost" for a period is equal to "cost of sales
excluding depreciation and amortization" for the period less
royalties, the cash component of metals inventory net realizable
value adjustments, materials and supplies write off and severance
charges, and "cash operating cost per ounce" is that amount divided
by the number of ounces of gold sold (excluding pre-commercial
production ounces sold) during the period. We use cash operating
cost per ounce as a key operating metric. We monitor this measure
monthly, comparing each month's values to prior periods' values to
detect trends that may indicate increases or decreases in operating
efficiencies. We provide this measure to investors to allow them to
also monitor operational efficiencies of the Company's mines. We
calculate this measure for both individual operating units and on a
consolidated basis. Since cash operating costs do not incorporate
revenues, changes in working capital and non-operating cash costs,
they are not necessarily indicative of operating profit or cash
flow from operations as determined under IFRS. Changes in numerous
factors including, but not limited to, mining rates, milling rates,
ore grade, gold recovery, costs of labor, consumables and mine site
general and administrative activities can cause these measures to
increase or decrease. We believe that these measures are similar to
the measures of other gold mining companies, but may not be
comparable to similarly titled measures in every instance.
"All-in sustaining costs" commences with cash operating costs
and then adds the cash component of metals net realizable value
adjustment, royalties, sustaining capital expenditures, corporate
general and administrative costs (excluding share-based
compensation expenses), and accretion of rehabilitation provision.
"All-in sustaining costs per ounce" is that amount divided by the
number of ounces of gold sold (excluding pre-commercial production
ounces sold) during the period. This measure seeks to represent the
total costs of producing gold from current operations, and
therefore it does not include capital expenditures attributable to
projects or mine expansions, exploration and evaluation costs
attributable to growth projects, income tax payments, interest
costs or dividend payments. Consequently, this measure is not
representative of all of the Company's cash expenditures. In
addition, the calculation of all-in sustaining costs does not
include depreciation expense as it does not reflect the impact of
expenditures incurred in prior periods. Therefore, it is not
indicative of the Company's overall profitability. Share-based
compensation expenses are now also excluded from the calculation of
all-in sustaining costs as the Company believes that such expenses
may not be representative of the actual payout on equity and
liability based awards. Share-based compensation expenses were
previously included in the calculation of all-in sustaining costs.
The Company has presented comparative figures to conform with the
computation of all-in sustaining costs as currently calculated by
the Company.
The Company believes that "all-in sustaining costs" will better
meet the needs of analysts, investors and other stakeholders of the
Company in understanding the costs associated with producing gold,
understanding the economics of gold mining, assessing the operating
performance and also the Company's ability to generate free cash
flow from current operations and to generate free cash flow on an
overall Company basis. Due to the capital intensive nature of the
industry and the long useful lives over which these items are
depreciated, there can be a disconnect between net earnings
calculated in accordance with IFRS and the amount of free cash flow
that is being generated by a mine.
"Cash provided by operations before working capital changes" is
calculated by subtracting the "changes in working capital" from
"net cash provided by operating activities" as found in the
statements of cash flows. "Cash provided by operations before
working capital changes per share - basic" is "Cash provided by
operations before working capital changes" divided by the basic
weighted average number of shares outstanding for the
period.
"Adjusted net income attributable to Golden Star shareholders"
is calculated by adjusting Net income/(loss) attributable to Golden
Star shareholders for (gain)/loss on fair value of financial
instruments, share-based compensation expenses, loss on conversion
of 7% Convertible Debentures, severance charges and income tax
recovery on previously unrecognized deferred tax assets. "Adjusted
income per share attributable to Golden Star shareholders" for the
period is "Adjusted net income attributable to Golden Star
shareholders" divided by the weighted average number of shares
outstanding using the basic method of earnings per share.
Changes in numerous factors including, but not limited to, our
share price, risk free interest rates, gold prices, mining rates,
milling rates, ore grade, gold recovery, costs of labor,
consumables and mine site general and administrative activities can
cause these measures to increase or decrease. The Company
believes that these measures are similar to the measures of other
gold mining companies, but may not be comparable to similarly
titled measures in every instance.
In the current market environment for gold mining equities, many
investors and analysts are more focused on the ability of gold
mining companies to generate free cash flow from current
operations, and consequently the Company believes these measures
are useful non-IFRS operating metrics ("non-GAAP measures") and
supplement the IFRS disclosures made by the Company. These measures
are not representative of all of Golden Star's cash expenditures as
they do not include income tax payments or interest costs. Non-GAAP
measures are intended to provide additional information only and do
not have standardized definitions under IFRS and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. These measures are
not necessarily indicative of operating profit or cash flow from
operations as determined under IFRS.
For additional information regarding the Non-GAAP financial
measures used by the Company, please refer to the information under
the heading "Non-GAAP Financial Measures" in the Company's
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the full year ended December 31, 2017, which is available
at www.sedar.com.
Cautionary note regarding forward-looking information
This press release contains "forward looking information" within
the meaning of applicable Canadian securities laws and
"forward-looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995, concerning
the business, operations and financial performance and condition of
Golden Star. Generally, forward-looking information and
statements can be identified by the use of forward-looking
terminology such as "plans", "expects", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates",
"believes" or variations of such words and phrases (including
negative or grammatical variations) or statements that certain
actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved" or the negative
connotation thereof. Forward-looking information and statements in
this press release include, but are not limited to, information or
statements with respect to: production, cash operating costs and
All-In Sustaining Cost per ounce estimates for 2018, on a
consolidated basis and for each of Wassa and Prestea; the sources
of gold production at Wassa during 2018 and the timing thereof;
the sources of gold production at Prestea during 2018 and the
timing thereof; the achievement of the targeted production rate at
Prestea Underground; the commencement and completion in 2018 of the
Preliminary Economic Assessment on the Inferred Mineral Resources
of Wassa Underground; the cessation of production from the Prestea
Open Pits; the weighting of gold production towards the second half
of 2018; planned exploration and drilling at Wassa and Prestea; the
increase in production at Wassa and Prestea, and decrease in cash
operating costs and All-In Sustaining Costs during the second half
of 2018; the mining rate and grade from Wassa; capital
expenditures, including sustaining capital and development capital,
for 2018, on a consolidated basis and for each of Wassa and
Prestea; the nature of development capital expenditures at both
Wassa and Prestea during 2018; the feed of stockpiled lower grade
ore from Wassa Main Pit to the processing plant during 2018; the
timing for completion of mining from the Prestea Open Pits during
2018 and the processing of stockpiled ore therefrom; payment of
severance charges in 2018; the growth of Wassa Underground's
Inferred Mineral Resources with further step out drilling; the use
of proceeds from the La Mancha strategic investment; and the
achievement of full year guidance.
Forward-looking information and statements are made based upon
certain assumptions and other important factors that, if untrue,
could cause the actual results, performances or achievements of
Golden Star to be materially different from future results,
performances or achievements expressed or implied by such
statements. Such statements and information are based on
numerous assumptions regarding present and future business
strategies and the environment in which Golden Star will operate in
the future, including the price of gold, anticipated costs and
ability to achieve goals. Forward-looking information and
statements are subject to known and unknown risks, uncertainties
and other important factors that may cause the actual results,
performance or achievements of Golden Star to be materially
different from those expressed or implied by such forward-looking
information and statements, including but not limited to: risks
related to international operations, including economic and
political instability in foreign jurisdictions in which Golden Star
operates; risks related to current global financial conditions;
risks related to joint venture operations; actual results of
current exploration activities; environmental risks; future prices
of gold; possible variations in Mineral Reserves, grade or recovery
rates; mine development and operating risks; accidents, labor
disputes and other risks of the mining industry; delays in
obtaining governmental approvals or financing or in the completion
of development or construction activities and risks related to
indebtedness and the service of such indebtedness. Although
Golden Star has attempted to identify important factors that could
cause actual results to differ materially from those contained in
forward-looking information and statements, there may be other
factors that cause results not to be as anticipated, estimated or
intended.
There can be no assurance that such statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
information and statements. Forward-looking information and
statements are made as of the date hereof and accordingly are
subject to change after such date. Forward-looking information and
statements are provided for the purpose of providing information
about management's current expectations and plans and allowing
investors and others to get a better understanding of the Company's
operating environment. Golden Star does not undertake to update any
forward-looking information and statements that are included in
this news release except in accordance with applicable securities
laws.
Technical Information and Quality Control
The technical contents of this press release have been reviewed
and approved by Dr. Martin Raffield,
P. Eng., a Qualified Person pursuant to NI 43-101. Dr.
Raffield is Senior Vice President of Project Development and
Technical Services for Golden Star.
Additional scientific and technical information relating to the
mineral properties referenced in this news release are contained in
the following current technical reports for those properties
available at www.sedar.com: (i) Wassa - "NI 43-101 Technical Report
on feasibility study of the Wassa open pit mine and underground
project in Ghana" effective date
December 31, 2014; (ii)
Bogoso/Prestea – "NI 43-101 Technical Report on Resources and
Reserves, Golden Star Resources, Bogoso/Prestea Gold Mine,
Ghana", effective date
December 31, 2017.
Cautionary Note to U.S. Investors
This news release has been prepared in accordance with the
requirements of the securities laws in effect in Canada, which differ materially from the
requirements of United States
securities laws applicable to U.S. companies. The terms "mineral
reserve", "proven mineral reserve" and "probable mineral reserve"
are Canadian mining terms as defined in accordance with NI 43-101.
These definitions differ from the definitions of the Securities and
Exchange Commission (the "SEC") set forth in Industry Guide 7 under
the United States Securities Exchange Act of 1934, as amended.
Under SEC Industry Guide 7 standards, mineralization may not be
classified as a "reserve" unless the determination has been made
that the mineralization could be economically and legally produced
or extracted at the time the reserve determination is made.
In addition, the terms "mineral resource", "measured mineral
resource", "indicated mineral resource" and "inferred mineral
resource" are defined in and required to be disclosed by NI 43-101;
however, these terms are not defined terms under SEC Industry Guide
7 and are normally not permitted to be used in reports and
registration statements filed with the SEC. Investors are cautioned
not to assume that any part or all of mineral deposits in these
categories will ever be converted into reserves. "Inferred mineral
resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher
category. Investors are cautioned not to assume that all or any
part of an inferred mineral resource exists or is economically or
legally mineable. Disclosure of "contained ounces" in a resource is
permitted disclosure under Canadian regulations; however, the SEC
normally only permits issuers to report mineralization that does
not constitute "reserves" by SEC Industry Guide 7 standards as in
place tonnage and grade without reference to unit measures.
For the above reasons, information contained in this news
release or in the documents referenced herein containing
descriptions of our mineral deposits may not be comparable to
similar information made public by U.S. companies subject to the
reporting and disclosure requirements under the United States federal securities laws and
the rules and regulations thereunder.
View original
content:http://www.prnewswire.com/news-releases/golden-star-reports-second-quarter-2018-results-300690547.html
SOURCE Golden Star Resources Ltd.