TORONTO, Sept. 20, 2018 /PRNewswire/ - Golden Star
Resources Ltd. (NYSE American: GSS; TSX: GSC; GSE: GSR) ("Golden
Star" or the "Company") provides an update on operations at its
Prestea Complex ("Prestea") in Ghana and the Company's full year ("FY") 2018
guidance.
HIGHLIGHTS
Operations at Prestea Complex
- Wassa Underground Gold Mine ("Wassa Underground") continues to
deliver a strong performance and Prestea improvement plan
formulated with the aim of ensuring Prestea begins 2019 from a
similarly robust position as an underground-only operation
- Annual cash operating costs1 at Prestea expected to
be reduced by 31%2 through closure of the open pit
operation during the fourth quarter of 2018, including downsizing
of the processing plant, rightsizing of the workforce and
optimization of on-site management structure
- Focus remains on increasing the production rate at the Prestea
Underground Gold Mine ("Prestea Underground") to a targeted rate of
650 tonnes per day ("tpd") on a consistent basis in FY 2019
-
- Alimak mining training program brought in-house during the
third quarter of 2018 to increase accountability and accelerate the
mining sequence
- Since the handover to in-house training there have been
significant improvements in the key lead indicators of raise
development and longhole drilling, however FY 2018 production from
Prestea is still expected to be impacted
Updated FY 2018 Guidance
- FY 2018 consolidated gold production is expected to be
225,000-235,000 ounces as a result of the slower than expected ramp
up at Prestea Underground – a 5% decrease from the midpoint of the
previous guidance range
- FY 2018 consolidated cash operating cost per ounce1
is expected to be $790 to
$830 – a 17% increase from the
midpoint of the previous guidance range
-
- Stronger than expected performance at Wassa Underground during
the year-to-date only partially offset the weaker than expected
performance at Prestea Underground
- FY 2018 consolidated All-In Sustaining Cost ("AISC") per
ounce1 guidance is expected to be $1,050 to $1,100 –
a 19% increase from the midpoint of the previous guidance
range
Notes:
|
1.
|
See "Non-GAAP
Financial Measures"
|
2.
|
This percentage is
the difference between Prestea's 2018 estimated cash operating
costs and 2019's estimated cash operating costs
|
Sam Coetzer, President and
Chief Executive Officer of Golden
Star, commented:
"We are taking decisive action at Prestea to ensure that the
operation begins 2019 on a robust footing. We are focused on
increasing Prestea's production rate through continuing to optimize
the mining sequence and once we receive the proceeds from the La
Mancha investment, we will begin the process of rightsizing the
Prestea workforce and streamlining the on-site management to allow
us to move forward with a leaner cost structure. Golden Star is committed to delivering high
margin production from both of our operations and we will continue
to optimize both our operational delivery as well as our operating
costs."
Update on Operations at the Prestea Complex
Golden Star has conducted a
review of its operations and consequently has formulated an
improvement plan for Prestea. The plan has the objective of
ensuring that production and operating cost targets are met by the
end of FY 2018 so that Prestea can begin FY 2019 from a strong
position.
The Prestea Open Pits have generated robust cash flow for
Golden Star during the past three
years, but the operations are now reaching the end of their mine
life, with reduced grades and tonnages being sent to the processing
plant, which has resulted in increased unit costs and hence a
higher cash operating cost per ounce1.
The Company had delayed undertaking the closure of the open pit
operation, which includes downsizing the processing plant from a
capacity of 4,000 tpd to 700 tpd, right-sizing the open pit
workforce at Prestea and optimizing the management and supervisory
structure, due to the associated costs. However, with the
proceeds of the investment from La Mancha Holding S.à r.l. ("La
Mancha"), Golden Star will have
sufficient funds to implement these actions and ensure the
operation has a leaner cost structure going forward. This
work is expected to be done during the fourth quarter of 2018, and
consequently, the Company expects annual cash operating costs for
Prestea to be reduced by 31%.
Golden Star commenced commercial
production at Prestea Underground on February 1, 2018 and since then, the ramp up to
the targeted production rate has been slower than
anticipated. In the third quarter of 2018 Golden Star made
the decision to bring its Alimak mining training program at Prestea
Underground in-house. The decision was made with the
objective of better integrating the Alimak mining team with the
rest of the Prestea Underground operations and to improve the
efficiency of the management of personnel, equipment and materials.
This plan received the full support and assistance of Manroc
Developments Inc, who held the training contract from the start of
mining. The handover took place in July and August 2018 and resulted in reduced production as
personnel were reorganized.
Since the handover there have been significant improvements in
the key lead indicators of raise development and longhole drilling,
with the operation making progress towards the planned rates of 7
metres per day of raising and 180 metres per day of drilling
outlined in the Feasibility Study2. Raise
development has increased from an average of 3.2 metres per day to
between 5 and 6 metres per day and drilling has increased from 90
metres per day to 150 metres per day. Although the production
rate for the third quarter of 2018 is expected to remain between
350 to 400 tpd, the Company is targeting 650 tpd on a consistent
basis during FY 2019.
Golden Star is implementing
further changes to its Alimak mining program, which are as
follows:
- Optimization of the training program to ensure that trainers,
experienced personnel and trainees are efficiently allocated to
work areas
- Change of the primary longhole blasting agent from ammonium
nitrate/fuel oil (which is known as Anfo) to emulsion, which is
expected to result in reduced reblasts due to waterlogged holes and
more efficient explosives movement
- Reduction and optimization of hanging wall cable bolting
requirements, with the objective of reducing the overall raise
cycle time by 15%
- Optimization of Alimak setup time and reduction of top-sub
development time
- Installation of a sixth Alimak in the fourth quarter of 2018,
with the seventh Alimak ordered and expected on site in the first
quarter of 2019, with the objective of increasing the flexibility
of the mining sequence
- Implementation of a short interval control system with the
objective of further improving operational efficiency and reducing
cycle times
Notes:
|
1.
|
See "Non-GAAP
Financial Measures"
|
2.
|
See technical report
entitled, 'NI 43-101 Technical Report on Resources and Reserves,
Golden Star Resources, Bogoso/Prestea Gold Mine, Ghana' with an
effective date of December 31, 2017
|
Updated FY 2018 Guidance
As a result of the reorganization at Prestea, Golden Star has provided an update on its
expectations for FY 2018 gold production, cash operating cost per
ounce1 and AISC per ounce1.
The updated FY 2018 guidance is as follows:
Operation
|
Gold
Production
(ounces)
|
Cash
Operating
Cost1
($/ounce)
|
AISC1
($/ounce)
|
Wassa
Complex
|
150,000 -
155,000
|
Unchanged
(600 -
650/oz)
|
-
|
Prestea
Complex
|
75,000 -
80,000
|
1,150 -
1,225
|
-
|
Consolidated
|
225,000 -
235,000
|
790 -
830
|
1,050 –
1,100
|
Golden Star has increased its FY
2018 gold production guidance for the Wassa Complex ("Wassa") by
9%2 as a result of the stronger than expected production
from the operation in the year-to-date. Wassa Underground
delivered higher tonnages and grade than anticipated in the first
half of 2018, as reported in the results for the second quarter of
20183, and the average production rate for the year is
now expected to be approximately 3,000 tpd. However, due to
mine sequencing the grade processed in the second half of the year
is expected to be lower than in the first half of 2018 at
approximately 3.8 grams per tonne of gold.
The Company has maintained its FY 2018 cash operating cost per
ounce1 guidance for Wassa as in the first half of 2018
Wassa delivered a cash operating cost per ounce1 of
$645, which is within the current FY
2018 guidance range.
Golden Star has decreased its FY
2018 gold production guidance for Prestea by 25%2. The
ramp up of Prestea Underground has been slower than expected due to
issues with longhole drilling and blasting productivities and the
handover to in-house Alimak training, as detailed above, and this
resulted in a lower than anticipated production rate during the
year-to-date. As a result of the reduced FY 2018 gold
production guidance, the Company has increased Prestea's FY 2018
cash operating cost per ounce guidance1.
The stronger than expected performance at Wassa during the
year-to-date only partially offset the weaker than anticipated
performance at Prestea and as a result, Golden Star has marginally reduced its FY 2018
consolidated guidance for gold production and increased its
guidance for cash operating cost per ounce1 and AISC per
ounce1.
An update on expected capital expenditures following the receipt
of the $125.7 million cash investment
from La Mancha is anticipated to be released in the fourth quarter
of 2018.
Notes:
|
1.
|
See "Non-GAAP
Financial Measures"
|
2.
|
This number is
calculated from the midpoint of the previous range to the midpoint
of the updated range
|
3.
|
See press release
entitled 'Golden Star Reports Second Quarter 2018 Results', dated
August 1, 2018
|
All monetary amounts refer to United States dollars
unless otherwise indicated.
Company Profile:
Golden Star is an established
gold mining company that owns and operates the Wassa and Prestea
mines in Ghana, West Africa. Listed on the NYSE American, the
Toronto Stock Exchange and the Ghanaian Stock Exchange,
Golden Star is focused on delivering
strong margins and free cash flow from its two high grade, low cost
underground mines. Gold production guidance for 2018 is
225,000-235,000 ounces at a cash operating cost per ounce of
$790-830. As the winner of the
PDAC 2018 Environmental and Social Responsibility Award,
Golden Star is committed to leaving
a positive and sustainable legacy in its areas of operation.
Non-GAAP Financial Measures
In this press release, we use the terms "cash operating costs",
"cash operating cost per ounce" and "all-in sustaining costs per
ounce". 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.
"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.
"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.
"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. 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.
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.
Statements Regarding Forward-Looking Information
Some statements contained in this news release are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and "forward looking
information" within the meaning of Canadian securities laws.
Forward looking statements and information include but are not
limited to, statements and information regarding: the timing of the
commencement of the Prestea improvement plan; the ability to reduce
the annual operating costs at Prestea by 31%; the ability to
increase the production rate at Prestea Underground; the expected
FY 2018 consolidated gold production rate of 225,000-235,000
ounces; the expected FY 2018 consolidated cash operating cost
per ounce of $790 to $830; the expected AISC per ounce of $1,030 to $1,080;
the reduction and optimization of the raise cycle time; the
installation of a sixth and seventh Alimak; the grades processed at
Wassa; and production guidance and cash operating cost guidance for
2018. 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.
Investors are cautioned that forward-looking statements and
information are inherently uncertain and involve risks, assumptions
and uncertainties that could cause actual facts to differ
materially. There can be no assurance that future developments
affecting the Company will be those anticipated by
management. Please refer to the discussion of these and other
factors in Management's Discussion and Analysis of financial
conditions and results of operations for the year ended
December 31, 2017. Additional
and/or updated factors is included in our annual information form
for the year ended December 31, 2017
which is filed on SEDAR at www.sedar.com. The forecasts
contained in this press release constitute management's current
estimates, as of the date of this press release, with respect to
the matters covered thereby. We expect that these estimates
will change as new information is received. While we may elect
to update these estimates at any time, we do not undertake any
estimate at any particular time or in response to any particular
event.
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SOURCE Golden Star Resources Ltd.