TORONTO, Feb. 18, 2020 /PRNewswire/ - Golden Star
Resources Ltd. (NYSE American: GSS; TSX: GSC; GSE:
GSR) ("Golden Star" or the "Company") reports its
financial and operational results for the fourth quarter ended
December 31, 2019 and the Full Year
("FY") 2019 results.
HIGHLIGHTS
- Q4 2019 production totaled 52.7koz, 8% higher than Q4 2018 and
7% higher than Q3 2019 production. In Q4 2019 the $1,227/oz All-In Sustaining Cost ("AISC") was in
line with the $1,233/oz achieved in
Q3 2019.
- FY 2019 production totaled 203.8koz, in line with the upper end
of the 190-205koz revised production guidance range. The
$1,159/oz AISC is also in line with
the $1,100-1,200/oz revised guidance
for FY 2019.
- FY 2019 cash flow from operations totaled $22.8m, significantly higher than the
$7.6m of cash used in operations in
2018.
- The FY 2019 capex of $73.4m was
19% above the $61.7m guidance. This
is due to the acceleration of underground development and
exploration spend. The underground development improves the
operational flexibility across the mines and the additional
exploration expenditure at Wassa focused on infill drilling and
some expansionary step-out drilling of the southern extension of
the Wassa orebody.
- Cash position of $53.4m at
December 31, 2019 and total debt of
$106.8m for net debt of $53.4m.
- Following a review of the operation, the value of Prestea is
being impaired by $56.8m based on a
conservative valuation approach given recent performance and the
execution risk in delivering the revised mine plan. The residual
asset value is balanced by liabilities and working capital
resulting in a zero net asset value.
Andrew Wray, Chief Executive
Officer of Golden Star,
commented:
"The fourth quarter operational performance was
in line with our expectations with Wassa continuing to deliver
strong mining rates and an increase in underground grades, while
ongoing improvements in the Prestea underground performance were
offset by the planned reduction in open pit contribution. As a
result, we delivered on the upper end of the revised production
range and the mid-point of the AISC guidance for 2019. The effort
of our management and mine site teams in 2019, alongside the
significant capital investment, has started to deliver improved
operational performance and enhanced geological understanding at
both of our mines. In 2020 we plan to continue to invest in our
asset base with the completion of the paste plant project at Wassa
which is expected to provide more flexibility in the mine plan, a
new mining method and mining area at Prestea, and acceleration of
the development and maintenance spend across both sites.
These initiatives are expected to deliver improved production
rates and margins as we progress through the year. They will also
help us to further define the long-term growth at Wassa. We remain
excited by the potential to continue to increase the mining rates
at Wassa, with the aim of improving the scale and margins at the
operation. At Prestea, the investment is aimed at improving the
sustainability and flexibility of the operation with the
introduction of a second mining level in order to enable it to
return to positive cash generation once fully ramped up through
2020. This is expected to also improve the options available for us
to realize value from the asset having carried out the operational
review, redesigned the mine plan and invested in the equipment for
Long Hole Open Stoping (LHOS).
Following the update of the life of mine plans at each operation
we have undertaken a carrying value review of the assets. As a
result, the decision was made to reduce the carrying value of
Prestea to reflect anticipated changes to future cash flow
resulting from shifts in the unit costs, working capital and capex
assumptions. We have taken a conservative approach given recent
performance as well as the inherent execution risk in the new plan,
resulting in an impairment charge of $56.8m."
Q4 2019 & FY 2019 PERFORMANCE SUMMARY:
|
|
Q4
2019
|
Q4
2018
|
YoY %
change
|
FY
2019
|
FY
2018
|
YoY %
change
|
Production and
cost highlights
|
|
|
|
|
|
|
|
Total gold
produced
|
koz
|
52.7
|
48.8
|
8%
|
203.8
|
224.8
|
(9%)
|
Total gold
sold
|
koz
|
53.4
|
48.4
|
10%
|
204.2
|
225.0
|
(9%)
|
Average realized gold
price
|
$/oz
|
1,410
|
1,185
|
19%
|
1,342
|
1,225
|
10%
|
|
|
|
|
|
|
|
|
Cash operating
cost per ounce - Consolidated1
|
$/oz
|
831
|
905
|
(8%)
|
832
|
847
|
(2%)
|
All-In Sustaining
cost per ounce - Consolidated1
|
$/oz
|
1,227
|
1,218
|
1%
|
1,159
|
1,107
|
5%
|
|
|
|
|
|
|
|
|
Profitability
highlights
|
|
|
|
|
|
|
|
Gold
revenues
|
$m
|
66.1
|
57.3
|
15%
|
264.7
|
273.0
|
(3%)
|
Adj.
income/(loss)/share attributable to Golden Star shareholders -
basic1
|
$/share
|
0.05
|
(0.05)
|
214%
|
0.16
|
(0.02)
|
823%
|
|
|
|
|
|
|
|
|
Cash flow
highlights
|
|
|
|
|
|
|
|
Cash provided by
operations before working capital changes
|
$m
|
9.4
|
(9.4)
|
200%
|
36.8
|
9.6
|
283%
|
Changes in working
capital
|
$m
|
3.7
|
(15.3)
|
124%
|
(14.0)
|
(17.2)
|
19%
|
Capital
expenditures
|
$m
|
26.3
|
15.3
|
72%
|
73.4
|
44.9
|
63%
|
|
|
|
|
|
|
|
|
Cash
|
$m
|
53.4
|
96.5
|
(45%)
|
53.4
|
96.5
|
(45%)
|
|
Notes:
|
1. See "Non-GAAP
Financial Measures".
|
Q4 2019 & FY 2019 RESULTS CONFERENCE CALL DETAILS
The Company will host a conference call and webcast on
Wednesday, February 19, 2020 at
10:00 am ET.
Toll Free (North America):
+1 833 231 8263
Toronto Local and International: +1
647 689 4108
Toll Free (UK): 0800 051
7107
Conference ID: 7897747
Webcast:
https://event.on24.com/wcc/r/2151422/6B38EC7D5988C8FD57C818D1DDCD2EF8 and
on the home page of the Company's website: www.gsr.com.
A recording and webcast replay of the call will be available on
the Company's website: www.gsr.com following the call.
2019 KEY ACHIEVEMENTS
Management changes - In order to drive the
operational and organizational changes in the business a completely
new executive leadership team was put in place following the
appointment mid-year of Andrew Wray
as CEO. This is being accompanied by a transition of our corporate
head office from Toronto to
London to be more accessible to
our operations in West Africa and
enhance the executive team's support of the operations through a
greater on the ground presence. The severance costs relating
to the closure of the Toronto
office and duplication of head office costs had an impact on the
corporate costs (other expenses) in 2019, and this will continue
into H1 2020 after which time the cost base is expected to
normalize.
Wassa mining rates - Wassa delivered improved mining
rates in 2019 while maintaining low per tonne unit costs. Mining
rates exceeded 4,000tpd (tonnes per day) through H2 2019. Wassa is
expected to continue to deliver at this level throughout 2020.
Prestea optimization - The independent review of the
underground operation and improvement project, which commenced in
2019, positions the mine for a transformational year in 2020. The
current Alimak mining areas on 24 Level are being optimized to
improve orebody definition, reduce stope cycle time, and reduce
dilution. Development has commenced on 17 Level for the
introduction of LHOS in the 17-21 Level area. These changes are
expected to be ongoing through 2020 and are aimed at improving the
flexibility in the operation and are planned to result in an
improved mining rate in excess of 500tpd on a consistent basis.
Sustainability - Philipa
Varris was promoted to the Executive Committee in Q4 2019 to
prioritize Golden Star's
sustainability and safety initiatives. Implementation of our
Safety and Health Strategy throughout 2019 saw increased alignment
to our values and enhanced achievement of our principle that All
Incidents Are Reported, which led to an expected increase in our
Near Miss and All Injury Frequency Rates. Continued optimization of
our malaria prevention program, in support of Sustainable
Development Goal 3 (SDG), achieved the lowest per capita malaria
case rate in the history of the business. These successes were
recognized in the year by the Global Compact Network Canada in
their SDGs Emerging Practice Guide case studies. To strengthen our
relationship with our host communities, the Wassa mine signed a
milestone Memorandum of Understanding with its local
communities.
Financing - On October 17,
2019, the Company closed the $60
million senior secured credit facility with Macquarie Bank
Limited. The proceeds were used to refinance the Ecobank Loan III,
Ecobank Loan IV, and the long-term payable under the Vendor
Agreement with Volta River Authority.
2019 PERFORMANCE VERSUS THE REVISED GUIDANCE:
|
|
Revised
guidance range
|
FY 2019
results
|
Variance
versus
guidance
midpoint
|
Group
Production
|
koz
|
190-205
|
203.8
|
3%
|
Group Cash Operating
Costs
|
$/oz
|
800-850
|
832
|
(1%)
|
Group AISC
|
$/oz
|
1,100-1,200
|
1,159
|
(1%)
|
|
|
|
|
|
Wassa
Production
|
koz
|
150-160
|
156.2
|
1%
|
Wassa Cash Operating
Costs
|
$/oz
|
600-650
|
633
|
(1%)
|
Wassa AISC
|
$/oz
|
880-940
|
922
|
(1%)
|
|
|
|
|
|
Prestea
Production
|
koz
|
40-45
|
47.6
|
12%
|
Prestea Cash
Operating Costs
|
$/oz
|
1,450-1,650
|
1,484
|
4%
|
Prestea
AISC
|
$/oz
|
1,900-2,150
|
1,937
|
4%
|
|
|
|
|
|
Group
Capex
|
$m
|
61.7
|
73.4
|
(19%)
|
- 2019 production delivered on the upper end of the revised
guidance range. Wassa production was in line with the midpoint of
its guidance range and Prestea production was 6% above the upper
end of its guidance range.
- With both of the operations delivering cash operating cost and
AISC performance within the respective guidance ranges, the Company
achieved a consolidated cost performance broadly in line with the
midpoint of the cash operating cost and AISC guidance ranges.
- In 2019 the capital spend exceeded guidance by 19%. This is
attributable to the acceleration of underground development and
exploration spend. During H2 2019 the decision was made to allocate
an additional $5m of budget to the
Wassa definition drilling and extension drilling programs in order
improve the confidence levels in planning mining areas, as well as
furthering the understanding of the orebody in the current mining
areas and the extensions to the south.
2020 OUTLOOK: (As announced January
22, 2020)
2020 Production, Cost and Capex Guidance:
Asset
|
Gold
Production
(koz)
|
Cash
Operating Cost1
($/oz)
|
AISC1
($/oz)
|
Sustaining
Capital2
($
millions)
|
Development
Capital2
($
millions)
|
Total
Capital
Expenditures
($
millions)
|
Wassa
Complex
|
155-165
|
620-660
|
930-990
|
23-25
|
19-21
|
42-46
|
Prestea
Complex
|
40-45
|
1,400-1,550
|
1,650-1,850
|
6.5-7.5
|
2.5-3
|
9-10.5
|
Capitalised
exploration
|
-
|
-
|
-
|
-
|
3.5
|
3.5
|
Consolidated
|
195-210
|
790-850
|
1,080-1,180
|
29.5-32.5
|
25-27.5
|
55-60
|
|
Notes: 1.
See "Non-GAAP Financial Measures".
|
2. Development
capital are those costs incurred at new operations and costs
related to major projects at existing operations where these
projects will materially increase production. All other costs
relating to existing operations are considered sustaining
capital.
|
2020 Guidance
FY 2020 production guidance of 195-210koz is in line with 2019
performance. The AISC1 guidance of $1,080-1,180/oz delivers improvement on the 2019
performance. Underlying the 2020 guidance is a range of operational
initiatives aimed at improving the consistency of the operations
and visibility of the longer-term potential of the operations.
2020 Capex
The FY 2020 capex guidance totals $55-60m. While the
2020 budget shows a lower level of investment than seen in 2019,
the capex budget remains at elevated levels to fund the
introduction of a new mining level and method at Prestea, the Wassa
paste plant construction and accelerated maintenance and
development at both mines.
2020 Exploration
The 2020 exploration budget is lower than in 2019 as the surface
drilling of the deeper zones of the southern extensions to the
Wassa orebody is now complete. Although the orebody remains open to
the South, the future drilling is now expected to be carried out
from underground drill positions in order to lower the cost of the
infill drilling programs and to allow tighter infill drill spacing
to be achieved more efficiently. In 2020, the greenfield and
brownfield exploration programs will focus on near mine targets
in-and-around Wassa and Prestea, as well as on regional exploration
targets within 60km of the Wassa operation. A total of $6.2m ($3.5 m
capitalized and $2.7m expensed) has
been allocated for exploration activities during 2020.
Wassa operating expectations
The mid-point of the 155-165koz production guidance for the year
is 2% ahead of the 2019 performance. In 2020 the mining rate is
expected to continue at the higher rates in excess of 4,000tpd, as
achieved in H2 2019. The paste plant project is due to be completed
in late Q3 2020, enabling the operation to better sequence and mine
primary and secondary stopes, as well as recovering pillars and
secondary stopes in some previously mined areas. This is expected
to make a small contribution in 2020 with a greater impact expected
in 2021 as the paste fill system becomes fully
operational. This timeline may be subject to change, as we
have been notified by the project engineering consultant that there
is potential for a delay to the delivery of materials and
components being sourced from China. The situation is being closely
monitored and we will provide further updates as soon as we are
informed of any change.
Prestea operating expectations
The 40-45koz production guidance for 2020 is broadly in line
with 2019 performance, with significant changes at the operation
underway. Production from the underground is expected to improve in
2020 with reduced open pit contribution. At Prestea underground,
the investment in a new mining area and the introduction of LHOS is
expected to improve overall mining rates and reduce the operational
risk with improved flexibility in the schedule. The improvements
being implemented are expected to reduce the AISC by around
$200/oz as per the 2020 guidance when
compared to the 2019 AISC of $1,937/oz.
SUMMARY OF CONSOLIDATED OPERATIONAL RESULTS
|
|
Q4
2019
|
Q4
2018
|
YoY %
change
|
FY
2019
|
FY
2018
|
YoY %
change
|
OPERATING
SUMMARY
|
|
|
|
|
|
|
|
Wassa
gold sold
|
koz
|
41.9
|
37.2
|
13%
|
156.5
|
149.6
|
5%
|
Prestea
gold sold
|
koz
|
11.5
|
11.2
|
3%
|
47.7
|
75.4
|
(37%)
|
Total gold
sold
|
koz
|
53.4
|
48.4
|
10%
|
204.2
|
225.0
|
(9%)
|
Wassa
gold produced
|
koz
|
41.3
|
37.6
|
10%
|
156.2
|
149.7
|
4%
|
Prestea
gold produced
|
koz
|
11.3
|
11.3
|
-%
|
47.6
|
75.1
|
(37%)
|
Total gold
produced
|
koz
|
52.7
|
48.8
|
8%
|
203.8
|
224.8
|
(9%)
|
Average realized gold
price
|
$/oz
|
1,410
|
1,185
|
19%
|
1,342
|
1,225
|
10%
|
|
|
|
|
|
|
|
|
Cost of sales per
ounce - Consolidated1
|
$/oz
|
1,080
|
1,351
|
(20%)
|
1,055
|
1,156
|
(9%)
|
Cost of
sales per ounce - Wassa1
|
$/oz
|
799
|
836
|
(4%)
|
813
|
898
|
(9%)
|
Cost of
sales per ounce - Prestea1
|
$/oz
|
2,101
|
3,054
|
(31%)
|
1,848
|
1,681
|
10%
|
Cash operating
cost per ounce - Consolidated1
|
$/oz
|
831
|
905
|
(8%)
|
832
|
847
|
(2%)
|
Cash
operating cost per ounce - Wassa1
|
$/oz
|
615
|
614
|
-%
|
633
|
629
|
1%
|
Cash
operating cost per ounce - Prestea1
|
$/oz
|
1,616
|
1,867
|
(13%)
|
1,484
|
1,292
|
15%
|
All-In Sustaining
cost per ounce - Consolidated1
|
$/oz
|
1,227
|
1,218
|
1%
|
1,159
|
1,107
|
5%
|
All-In
Sustaining cost per ounce - Wassa1
|
$/oz
|
959
|
933
|
3%
|
922
|
886
|
4%
|
All-In
Sustaining cost per ounce - Prestea1
|
$/oz
|
2,202
|
2,164
|
2%
|
1,937
|
1,558
|
24%
|
|
Notes:
|
1. See
"Non-GAAP Financial Measures".
|
OPERATIONAL PERFORMANCE - Production and costs in-line with
FY 2019 guidance
Production
- In Q4 2019, Golden Star produced
52.7koz of gold, 8% higher than the same period in 2018 and 7%
higher than in Q3 2019. This consists of 41.3koz of production from
Wassa, up 20% from Q3 2019 due to a 33% increase in the underground
grade. Prestea produced 11.3koz, 24% lower than in Q3 2019 due to
reduced mined and milled tonnes. This is attributed to a lower open
pit contribution, underground stope availability and sequencing,
partially offset by an increase in grades.
- FY 2019 production of 203.8koz was 9% lower than the 224.8koz
achieved in 2018. FY 2019 production performance is, however,
in-line with the upper end of the 190-205koz production guidance
range for the year. The production comprised 156.2koz from Wassa,
4% higher year on year (YoY), and 47.6koz from Prestea, 37% lower
than in 2018.
Costs
- The consolidated cash operating cost per ounce was $831 in Q4 2019, 8% lower than $905 in the same period in 2018. Performance at
Wassa of $615/oz is consistent with
the $614/oz achieved in the same
period in 2018. The cash operating cost per ounce at Prestea
decreased 13% from $1,867/oz in Q4
2018 to $1,616/oz in the Q4 2019.
- FY 2019 consolidated cash operating cost per ounce of
$832 decreased from $847 per ounce in 2018. This is due to higher
production at the lower cost Wassa operation and a lower proportion
of the production mix coming from the higher cost Prestea operation
as a result of lower production there.
- The consolidated AISC for Q4 2019 of $1,227/oz is 1% higher than in Q4 2018. This
results from small increases in the AISC at both operations with
Wassa 3% higher and Prestea 2% higher. Relative to Q3 2019 the AISC
performance at Wassa improved to $959/oz, from $1,061/oz. This 10% improvement relates to an
improvement in the grade of ore produced from the underground
operation.
- FY 2019 AISC of $1,159/oz is 5%
higher than the $1,107/oz achieved in
2018. This results from a slight increase in the Wassa cost base
and the decline in the performance at Prestea. Prestea has seen a
reduction in the contribution of ore from the open pit operations
which are reaching the end of the mine life, in addition to the
underground mine operating issues that were highlighted earlier in
2019. The Prestea AISC of $1,937/oz
represents a 24% increase relative to FY 2018 performance. At Wassa
the AISC of $922/oz was 4% higher
than in 2018.
FINANCIAL PERFORMANCE
Consolidated Statement of Operations and Comprehensive Loss
|
|
Q4
2019
|
Q4
2018
|
|
FY
2019
|
FY
2018
|
Gold
revenues
|
$m
|
66.1
|
57.3
|
|
264.7
|
273.0
|
Cost of
sales excluding depreciation and amortization
|
$m
|
49.2
|
57.6
|
|
186.3
|
223.7
|
Depreciation and amortization
|
$m
|
8.5
|
7.8
|
|
29.1
|
33.9
|
Mine operating
margin
|
$m
|
8.4
|
(8.1)
|
|
49.3
|
15.3
|
|
|
|
|
|
|
|
Exploration expense
|
$m
|
0.7
|
1.0
|
|
3.2
|
3.0
|
General
and administrative expense
|
$m
|
4.0
|
2.2
|
|
19.1
|
16.4
|
Finance
(income)/expense, net
|
$m
|
(3.4)
|
3.8
|
|
7.6
|
18.1
|
Other
expense/(income)
|
$m
|
7.0
|
(1.5)
|
|
11.6
|
(3.6)
|
Impairment
|
$m
|
56.8
|
-
|
|
56.8
|
-
|
Loss/(gain) on fair value of financial instruments, net
|
$m
|
3.0
|
(3.3)
|
|
1.6
|
(6.8)
|
Loss before
tax
|
$m
|
(59.6)
|
(10.4)
|
|
(50.5)
|
(11.7)
|
|
|
|
|
|
|
|
Income
tax expense
|
$m
|
9.7
|
1.5
|
|
27.4
|
12.4
|
Net loss and
comprehensive loss
|
$m
|
(69.4)
|
(11.9)
|
|
(78.0)
|
(24.1)
|
Net income
attributable to non-controlling interest
|
$m
|
(6.9)
|
(2.6)
|
|
(10.5)
|
(5.9)
|
Net loss
attributable to GSR shareholders
|
$m
|
(62.4)
|
(9.3)
|
|
(67.4)
|
(18.1)
|
|
|
|
|
|
|
|
Loss per share
attributable to Golden Star shareholders - basic and
diluted
|
$/share
|
(0.57)
|
(0.09)
|
|
(0.62)
|
(0.21)
|
|
|
|
|
|
|
|
Adj. net
income/(loss) attributable to GSR
shareholders1
|
$m
|
6.0
|
(5.2)
|
|
17.9
|
(1.9)
|
Adj.
income/(loss)/share attributable to GSR shareholders -
basic1
|
$/share
|
0.05
|
(0.05)
|
|
0.16
|
(0.02)
|
- Gold revenue totaled $75.3m for Q4 2019 before a $9.3m negative non-cash adjustment to deferred
revenue was recognized related to prior periods ($66.1m after the adjustment) in Q4 2019. This
compares to $57.3m in the same period
in 2018. Excluding the revenue adjustment, gold revenue for Q4 2019
was $18.0m or 31% higher than the
same period in 2018, due to a 19% increase in the consolidated
average realized gold price and a 10% increase in gold sold. FY
2019 gold revenue was $274.0m before
the adjustment ($264.7m after the
adjustment), a slight increase compared to $273.0m in 2018 due primarily to increased gold
production from Wassa Underground, offset by a decrease in gold
revenue at Prestea.
- Non-cash adjustment to revenue - The non-cash deferred
revenue adjustment relates to the Company's streaming agreement. As
the Company's streaming agreement contains a variable component,
each time there is a significant change in the underlying total
expected gold production of the Company's mines a cumulative
catch-up adjustment to revenue is required. In 2019, the Company
realized an adjustment to revenue and finance costs due to an
increase in the Company's resource and reserve estimates related
primarily to the Wassa mine. The result of the adjustment was to
reduce revenue by $9.3m, reduce
finance expense by $6.2m and increase
deferred revenue by $3.1m.
- Cost of sales - FY 2019 cost of sales excluding
depreciation and amortization was $186.3m, a 17% decrease compared to $223.7m in 2018. The decrease is mainly due to a
$14.5m decrease in severance charges
which resulted from the Prestea improvement plan in the prior year,
a $13.2m decrease in operating costs
from metal inventory, a $17.7m
decrease in mine operating costs at Prestea as production decreased
compared to the same period in 2018, and a $4.4m decrease in inventory net realizable value
adjustments and write-offs primarily as a result of the materials
and supplies inventories relating to open pit mining being written
off at Wassa in the prior period.
- Depreciation and amortization expense totaled
$8.5m in Q4 2019 compared to
$7.8m in the same period in 2018. For
FY 2019, depreciation and amortization expense was $29.1m, a 14% decrease from the $33.9m in 2018. The decrease in depreciation and
amortization expense for FY 2019 was mainly due to a decrease at
Wassa as a result of an increase in the total recoverable gold
ounces over the life of mine of Wassa Underground.
- General and administrative (G&A) expense totaled
$4.0m in Q4 2019, compared to
$2.2m in the same period in 2018. The
increase in G&A expense for Q4 2019 was primarily due to a
$2.0m increase in share-based
compensation expense compared to the same period in 2018. G&A
excluding share-based compensation totaled $3.5m compared to $3.7m in the same period in 2018. For FY 2019
G&A totaled $19.1m compared to
$16.4m in the same period in 2018.
The increase relates primarily to a $1.8m increase in share-based compensation
expense compared to the same period in 2018. In Q4 2019 there was
some duplication of corporate overheads with both a London and Toronto office in operation. This duplication
of cost is expected to continue for the first four months of H1
2020.
- Other expense totaled $7.0m in Q4 2019, compared to other income of
$1.5m for the same period in 2018.
The $8.4m increase is primarily due
to $3.2m of termination costs related
to the relocation of the corporate office and changes in senior
management in 2019 and $4.7m in
mineral rights fees. The mineral rights fees relate to an
assessment made by the Minerals Commission in Ghana for the years 2012 to 2018 for mineral
rights fees due under the Minerals and Mining Regulations of 2012
not previously assessed. For FY 2019, other expenses totaled
$11.6m compared to income of
$3.6m in 2018. The $15.2m increase is mainly due to $7.2m of termination costs related to the
relocation of the corporate office and changes in senior management
in 2019, $4.7m in mineral rights
fees, and a decrease in non-cash gain on the reduction of asset
retirement obligations which created other income of $3.1m in 2018. The majority of the relocation and
termination costs were accrued during FY 2019, therefore the
Company expects lower charges to be incurred in 2020.
- Income tax expense was $9.7m in Q4 2019 compared to $1.5m for the same period in 2018. FY 2019 income
tax totaled $27.4m, compared to
$12.4m in 2018. The increase in
income tax expense for the quarter and FY 2019 relates to the
increase in mine operating margin at Wassa.
- Impairment - In Q4 2019, the Company completed its
annual budgeting and life of mine process. Management observed a
decrease in the Prestea mine's cash flow reflecting adjustments to
key mine planning, cost and working capital assumptions following
the conclusion of the independent review of the underground
operations at Prestea and the revised life of mine plan. This
resulted in a trigger for an impairment test. The book value of
Prestea was determined by a discounted cash flow analysis of the
indicative life of mine model. This life of mine model was
developed solely for impairment testing purposes and it is
management's best, but conservative, estimate of the recoverable
value of Prestea's assets at December 31,
2019. The impairment test concluded that the Prestea value
was lower than its previous carrying value, resulting in an
impairment charge of $56.8m. The
Prestea asset value is now balanced by liabilities and working
capital for a net asset value of zero.
- Net loss attributable to Golden
Star shareholders for Q4 2019 totaled $62.4m or $0.57
loss per share (basic), compared to a net loss of $9.3m or $0.09 loss
per share (basic) in the same period in 2018. The increase was
mainly due to a $56.8m increase in
impairment charges, a $8.2m increase
in income taxes, and a $1.8m increase
in general and administrative expenses, offset by a $16.4m increase in mine operating margin. For FY
2019, net loss attributable to Golden
Star shareholders totaled $67.4m or $0.62
loss per share (basic), compared to a net loss of $18.1m or $0.21
loss per share (basic) in the same period in 2018. The increase in
loss is mainly due to a $56.8m
increase in impairment charges, a $15.1m increase in income tax expense, a
$2.7m increase in G&A expenses, a
$15.2m increase in other expense,
offset by a $34.0m increase in mine
operating margin.
- Adjusted earnings per share (see non GAAP measures) -
The adjusted income per share attributable to Golden Star shareholders (basic) for Q4 2019 was
$0.05/share and $0.16/share for FY 2019. The significant
improvement in adjusted earnings from Q4 2018 results from the
increase in revenue and reduction in the cost of sales as
highlighted above.
Consolidated Statements of Cash Flow
|
|
Q4
2019
|
Q4
2018
|
|
FY
2019
|
FY
2018
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
$m
|
(69.4)
|
(11.9)
|
|
(78.0)
|
(24.1)
|
Depreciation and amortization
|
$m
|
8.6
|
7.8
|
|
29.6
|
34.0
|
Impairment charges
|
$m
|
56.8
|
—
|
|
56.8
|
—
|
Share-based compensation
|
$m
|
0.5
|
(1.5)
|
|
3.1
|
1.3
|
Deferred
income tax expense
|
$m
|
9.7
|
1.5
|
|
27.4
|
12.4
|
Loss/(gain) on fair value of 7% Convertible Debentures embedded
derivative
|
$m
|
2.5
|
(3.3)
|
|
1.4
|
(6.8)
|
Recognition of deferred revenue
|
$m
|
(3.8)
|
(2.4)
|
|
(13.3)
|
(13.7)
|
Reclamation expenditures
|
$m
|
(0.8)
|
(1.1)
|
|
(3.2)
|
(5.3)
|
Other
|
$m
|
5.4
|
1.3
|
|
12.9
|
11.9
|
Changes
in working capital
|
$m
|
3.7
|
(15.3)
|
|
(14.0)
|
(17.2)
|
Net cash provided
by/(used in) operating activities
|
$m
|
13.1
|
(24.7)
|
|
22.8
|
(7.6)
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
Additions to mining interests
|
$m
|
(26.3)
|
(15.3)
|
|
(73.4)
|
(44.9)
|
Change
in accounts payable and deposits on mine equipment and
material
|
$m
|
(3.3)
|
(1.8)
|
|
1.5
|
(3.0)
|
Decrease/(increase) in restricted cash
|
$m
|
4.5
|
—
|
|
4.5
|
—
|
Net cash used in
investing activities
|
$m
|
(25.1)
|
(17.1)
|
|
(67.4)
|
(48.0)
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
Principal payments on debt
|
$m
|
(49.0)
|
(4.9)
|
|
(57.2)
|
(15.6)
|
Proceeds
from debt agreements, net
|
$m
|
57.4
|
—
|
|
57.4
|
35.0
|
Royal
Gold loan repayment
|
$m
|
—
|
—
|
|
—
|
(20.0)
|
Shares
issued, net
|
$m
|
—
|
124.8
|
|
—
|
124.8
|
Exercise
of options
|
$m
|
0.2
|
—
|
|
1.3
|
0.1
|
Net cash provided
by financing activities
|
$m
|
8.6
|
119.9
|
|
1.4
|
124.2
|
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
$m
|
56.8
|
18.4
|
|
96.5
|
27.8
|
(Decrease)/increase in cash and cash equivalents
|
$m
|
(3.4)
|
78.1
|
|
(43.1)
|
68.7
|
Cash and cash
equivalents, end of period
|
$m
|
53.4
|
96.5
|
|
53.4
|
96.5
|
|
|
|
|
|
|
|
OTHER CASH FLOW
METRICS:
|
|
|
|
|
|
|
Cash provided
by/(used in) operations before working capital
changes
|
$m
|
9.4
|
(9.4)
|
|
36.8
|
9.6
|
Cash provided by
operations per share - basic
|
$/share
|
0.12
|
(0.23)
|
|
0.21
|
(0.09)
|
Cash provided by
operations before working capital changes per share -
basic1
|
$/share
|
0.09
|
(0.09)
|
|
0.34
|
0.11
|
- Cash generated by operations before working capital
changes (see "Non-GAAP Financial Measures" section) was
$9.4m for the Q4 2019, compared to
$9.4m of cash used by operations in
the same period in 2018. The increase in cash provided by
operations before working capital changes was due primarily to a
$16.4m increase in the mine operating
margin. For FY 2019 the cash provided by operations before working
capital changes was $36.8m compared
to $9.6m in 2018. The increase was
primarily due to a $34.0m increase in
mine operating margin, partially offset by an increase in
consolidated general and administrative expense (excluding
share-based compensation).
- Working capital movements in Q4 2019 resulted in a cash
inflow of $3.7m, this comprised of a
$0.8m increase in accounts
receivable, a $1.7m increase in
inventories, a $0.1m decrease in
prepaids, offset by a $6.1m increase
in accounts payable. In FY 2019 there was a $14.0m cash outflow to working capital.
- Income taxes - In FY 2019 Wassa paid $7.7m in income tax, compared to zero in 2018.
Given the lack of profitability in the period, and the significant
historical losses, Prestea did not pay any income tax in 2019.
- Capital expenditures for Q4 2019 totaled $26.3m compared to $15.3m in the same period in 2018. Capital
expenditures of $21.7m at Wassa
during Q4 2019 made up 83% of the group capital expenditure. The
significant investments included $5.4m on the paste fill plant, $4.1m on Wassa Underground capitalized
development, $4.4m on mobile
equipment, $2.3m on electrical
upgrades and $1.1m on the pumping
station. Capital expenditures at Prestea during Q4 2019 comprised
17% of total capital expenditures and totaled $4.4m, which included $3.7m on sustaining capital related to Prestea
Underground, and $0.3m on other
equipment and capital expenditures.
2019 Capital Expenditures Breakdown (in millions)
($m)
|
Sustaining
|
Development
|
Total
|
Wassa
Exploration Drilling
|
-
|
16.5
|
16.5
|
Wassa
Main Pit and Processing Plant
|
4.8
|
-
|
4.8
|
Wassa
Tailings Expansion
|
-
|
3.0
|
3.0
|
Wassa
Underground
|
16.4
|
17.7
|
34.1
|
Wassa
Equipment Purchase
|
0.8
|
0.9
|
1.7
|
Wassa
Subtotal
|
22.0
|
38.1
|
60.1
|
Prestea
Exploration Drilling
|
-
|
0.8
|
0.8
|
Prestea
Open Pits and Processing Plant
|
2.3
|
-
|
2.3
|
Prestea
Underground
|
9.7
|
-
|
9.7
|
Prestea
Subtotal
|
12.0
|
0.8
|
12.8
|
Other
|
-
|
-
|
0.5
|
Consolidated
|
34.0
|
38.9
|
73.4
|
- Year-end cash position - The Company held $53.4m in cash and cash equivalents as at
December 31, 2019 compared to
$56.8m at the end of Q3 2019 and
$96.5m at the end of 2018. In Q4 2019
the business used $3.4m as a result
of the $25.1m used in investing
activities exceeding the $13.1m of
operating cash flow (after working capital movements) and the
$8.6m generated by financing
activities. In FY 2019 the business used $43.1m of cash as a result of the $67.4m used in investing activities exceeding the
$22.8m of operating cash flow (after
working capital movements) and the $1.4m generated by financing activities in
2019.
Consolidated Balance Sheet
|
FY
2019
|
FY
2018
|
ASSETS
|
|
|
CURRENT
ASSETS:
|
|
|
Cash and
cash equivalents
|
53,367
|
96,507
|
Accounts
receivable
|
6,503
|
3,213
|
Inventories
|
38,860
|
35,196
|
Prepaids
and other
|
8,559
|
5,291
|
Total Current
Assets
|
107,289
|
140,207
|
|
|
|
NON-CURRENT
ASSETS:
|
|
|
Restricted cash
|
2,082
|
6,545
|
Mining
interests
|
264,689
|
270,640
|
Deferred
tax assets
|
—
|
595
|
Total non-current
assets
|
266,771
|
277,780
|
Total
Assets
|
374,060
|
417,987
|
|
|
|
LIABILITIES
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts
payable and accrued liabilities
|
90,842
|
78,484
|
Current
portion of rehabilitation provisions
|
5,826
|
7,665
|
Current
portion of deferred revenue
|
11,191
|
14,316
|
Current
portion of long term debt
|
15,987
|
27,482
|
Other
liability
|
—
|
6,410
|
Total Current
Liabilities
|
123,846
|
134,357
|
|
|
|
NON-CURRENT
LIABILITIES:
|
|
|
Rehabilitation provisions
|
62,609
|
58,560
|
Deferred
revenue
|
102,784
|
105,632
|
Long
term debt
|
90,782
|
73,224
|
Derivative liability
|
5,608
|
4,177
|
Deferred
tax liability
|
20,554
|
—
|
Total non-current
liabilities
|
282,337
|
241,593
|
Total
Liabilities
|
406,183
|
375,950
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
Share
capital - Common shares, without par value, unlimited shares
authorized
|
910,205
|
908,035
|
Contributed surplus
|
38,964
|
37,258
|
Deficit
|
(898,779)
|
(831,283)
|
Shareholders'
equity attributable to Golden Star shareholders
|
50,390
|
114,010
|
Non-controlling interest
|
(82,513)
|
(71,973)
|
Total
Equity
|
(32,123)
|
42,037
|
Total Liabilities
and Shareholders' Equity
|
374,060
|
417,987
|
Financial position and liquidity
- The Company held $53.4m in cash
and cash equivalents as at December 31,
2019 compared to $96.5m in
cash and cash equivalents at December 31,
2018.
- At December 31, 2019 the Company
held $106.8m of debt, for net debt of
$53.4m.
- On October 17, 2019, the Company
closed the $60 million senior secured
credit facility with Macquarie Bank Limited (the "Credit Facility")
previously announced in its July 31,
2019 news release. Golden
Star has used the proceeds to refinance the Ecobank Loan
III, Ecobank Loan IV, and the long-term payable under the Vendor
Agreement with Volta River Authority. The remaining balance is
available for general corporate purposes. The Credit Facility is
repayable in $5 million quarterly
installments, commencing on June 30,
2020. The final maturity date is March 31, 2023. The interest rate is 4.5% plus
the applicable USD LIBOR rate. The Credit Facility is subject to
normal financial covenants including a Debt Service Coverage Ratio
of greater than 1.20:1 and a Net Debt to EBITDA ratio of less than
3.00:1.
Current and Long Term Debt Summary:
($m)
|
December 31,
2019
|
Current
debt:
|
|
Macquarie
|
15.0
|
Finance
leases
|
1.0
|
Total current
debt
|
16.0
|
|
|
Long term
debt:
|
|
Macquarie
|
42.4
|
Finance
leases
|
1.4
|
7%
Convertible Debentures
|
47.0
|
Total long term
debt
|
90.8
|
Total
|
106.8
|
- In aggregate, the financing activities provided $1.4m during FY 2019, compared to $124.2m in the same period in 2018. Financing
activities were comprised of the $57.4m Credit Facility proceeds net of fees and
$1.3m received on exercise of
options, offset by $57.2m in
principal repayments of the Ecobank loans and the Vendor
Agreement.
WASSA COMPLEX ("Wassa")
|
|
Q4
2019
|
Q4
2018
|
YoY %
change
|
FY
2019
|
FY
2018
|
YoY %
change
|
WASSA FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
Revenue
|
$m
|
53.6
|
44.1
|
21%
|
203.8
|
183.1
|
11%
|
|
|
|
|
|
|
|
|
Mine operating
expenses
|
$m
|
26.2
|
22.0
|
19%
|
98.7
|
86.9
|
14%
|
Royalties
|
$m
|
3.1
|
2.3
|
32%
|
10.9
|
9.5
|
14%
|
Severance
|
$m
|
-
|
-
|
-
|
0.2
|
5.0
|
(96%)
|
Operating costs
(to)/from metals inventory
|
$m
|
(0.4)
|
0.8
|
(152%)
|
0.3
|
7.2
|
(96%)
|
Inventory net
realizable value adjustment and write-off
|
$m
|
-
|
0.3
|
(100%)
|
-
|
3.7
|
(100%)
|
Cost of sales
excluding depreciation and amortization
|
$m
|
28.8
|
25.5
|
13%
|
110.1
|
112.3
|
(2%)
|
Depreciation and
amortization
|
$m
|
4.7
|
5.6
|
(17%)
|
17.1
|
22.1
|
(22%)
|
Mine operating
margin
|
$m
|
20.1
|
13.0
|
54%
|
76.6
|
48.8
|
57%
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$m
|
21.7
|
13.9
|
56%
|
60.1
|
35.4
|
70%
|
|
|
|
|
|
|
|
|
WASSA OPERATING
RESULTS
|
|
|
|
|
|
|
|
Ore mined -
Underground
|
kt
|
376.0
|
309.5
|
21%
|
1,421.7
|
1,075.2
|
32%
|
Waste mined -
Underground
|
kt
|
121.9
|
89.3
|
36%
|
363.0
|
309.3
|
17%
|
Ore processed - Main
Pit/Stockpiles
|
kt
|
40.3
|
92.2
|
(56%)
|
160.6
|
525.7
|
(69%)
|
Ore processed -
Underground
|
kt
|
349.1
|
309.5
|
13%
|
1,387.9
|
1,075.2
|
29%
|
Ore processed -
Total
|
kt
|
389.4
|
401.7
|
(3%)
|
1,548.5
|
1,600.9
|
(3%)
|
Grade processed -
Main Pit/Stockpiles
|
g/t
|
0.68
|
0.66
|
3%
|
0.65
|
0.76
|
(14%)
|
Grade processed -
Underground
|
g/t
|
3.78
|
3.80
|
(1%)
|
3.57
|
4.18
|
(15%)
|
Recovery
|
%
|
95.4%
|
95.4%
|
-
|
95.6%
|
95.7%
|
(0.10%)
|
Gold produced - Main
Pit/Stockpiles
|
koz
|
0.7
|
1.9
|
(60%)
|
3.3
|
12.4
|
(74%)
|
Gold produced -
Underground
|
koz
|
40.6
|
35.7
|
14%
|
152.9
|
137.3
|
11%
|
Gold produced -
Total
|
koz
|
41.3
|
37.6
|
10%
|
156.2
|
149.7
|
4%
|
Gold sold - Main
Stockpiles
|
koz
|
0.7
|
1.5
|
(49%)
|
3.3
|
12.3
|
(74%)
|
Gold sold -
Underground
|
koz
|
41.2
|
35.7
|
15%
|
153.2
|
137.3
|
12%
|
Gold sold -
Total
|
koz
|
41.9
|
37.2
|
13%
|
156.5
|
149.6
|
5%
|
|
|
|
|
|
|
|
|
Cost of sales per
ounce1
|
$/oz
|
799
|
836
|
(4%)
|
813
|
898
|
(9%)
|
Cash operating cost
per ounce1
|
$/oz
|
615
|
614
|
-
|
633
|
629
|
1%
|
All-In Sustaining
cost per ounce1
|
$/oz
|
959
|
933
|
3%
|
922
|
886
|
4%
|
|
|
Notes:
|
1.
|
See "Non-GAAP
Financial Measures".
|
Wassa Operational Overview
Production
- Gold production totaled 41.3koz in Q4 2019, a 10% increase from
the 37.6koz produced during the same period in 2018 and a 17%
increase on Q3 2019 production. This increase in production was
primarily due to an increase in underground tonnes mined compared
to the same period in 2018. Mining rates at the Wassa Underground
increased to approximately 4,090tpd on average in Q4 2019, compared
to approximately 3,360tpd in the same period in 2018.
- FY 2019 gold production was 156.2koz, a 4% increase from the
149.7koz produced in 2018. This increase in production was due to
the increase in tonnes mined and processed at the Wassa Underground
mine compared to 2018. In February
2018, Wassa became an underground-only mining operation,
however, open pit stockpiled ore continued to be processed for much
of 2018 and to a lesser extent in 2019.
Grades
- The underground mining delivered grades of 3.78g/t in Q4 2019,
33% higher than achieved in Q3 2019 and in line with the 3.80g/t
achieved in Q4 2018. The improvement in grades in the quarter is
attributable to mining progressing in the 595 and 620 Levels,
moving out of the areas where lower than expected grades were
experienced in the prior quarter. For FY 2019, the underground
mining grade was 3.57g/t compared to 4.18g/t the previous
year.
Costs
- Cost of sales per ounce decreased 4% to $799 for Q4 2019, from $836 in the same period in 2018. In FY 2019 the
cost of sales per ounce reduced by 9% to $813, down from the $898 achieved in 2018.
- The Q4 2019 cash operating cost per ounce remained consistent
at $615 compared to $614 for the same period in 2018. For the FY 2019
the $633 cash operating cost was in
line with 2018 performance.
- In Q4 2019 the AISC per ounce increased 3% to $959 from $933 for
the same period in 2018 mainly due to an increase in sustaining
capital expenditures. In FY 2019 the AISC of $922/oz was 4% higher than in 2018.
Capital expenditures
- Capital expenditures for Q4 2019 totaled $21.7m compared with $13.9m incurred during the same period in 2018.
The increase in capital expenditures was due primarily to a
$5.4m investment in the paste fill
plant, a $4.2m increase in spend on
mobile equipment, a $2.3m increase in
electrical upgrades, and a $1.1m
investment in the pumping station project, offset by a $4.1m decrease in exploration drilling compared
to the same period in 2018.
Projects update
Infrastructure investment - In order to equip the mine
for its future as a long life, low cost operation, a number of
projects were implemented in 2019 in order to upgrade some of the
infrastructure. These projects included the following
initiatives:
- Ventilation upgrade - The upgrade to the ventilation
infrastructure was completed in Q4 2019. The completion of this
project supports the current production areas and provides the
ventilation capacity for the next few years of mining activities
with further investment expected in 2021 to extend the ventilation
system.
- Electrical upgrade - This is a more significant
infrastructure project which is intended to support the mine plan
for the next five years. The civils work for the installation of
the electrical substation is currently ongoing and is expected to
be completed in conjunction with the completion of the paste fill
project. Work to upgrade the underground electrical infrastructure
is progressing alongside the substation project.
- Upgraded pumping capacity - In order to prepare the mine
for the future transition to operations at greater depth, and in
order to improve the reliability of the pumping systems, the
cascading pump system is being replaced by a modernized pumping
station on 620 Level. The pumping station is nearing completion
with the primary pump already installed and the secondary (back-up)
pump now being installed. The consolidation of the multi-pump
system into a larger, higher capacity system should simplify the
maintenance program for the mine's pumping infrastructure and
reduce operational risk.
- Paste fill plant project update - The paste fill plant
project at Wassa continued to progress in Q4 2019, the project is
currently at 55% completion with long lead items ordered and early
works contracts now awarded. Construction of the project is
expected to be completed in Q3 2020 with commissioning in Q4 2020.
This timeline may be subject to change, as we have been notified by
the project engineering consultant that there is potential for a
delay to the delivery of materials and components being sourced
from China. The situation is being
closely monitored and we will provide further updates as soon as we
are informed of any change. The paste fill process is expected to
add approximately $6/t to the mining
unit costs but results in a higher recovery of the resource with
less ore left in remnant pillars which is expected to support
further optimization of the mining sequence and increases in the
production rate.
PRESTEA COMPLEX ("Prestea")
|
|
Q4
2019
|
Q4
2018
|
YoY %
change
|
FY
2019
|
FY
2018
|
YoY %
change
|
PRESTEA FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
Revenue
|
$m
|
12.5
|
13.2
|
(5%)
|
60.9
|
89.9
|
(32%)
|
|
|
|
|
|
|
|
|
Mine operating
expenses
|
$m
|
18.5
|
21.0
|
(12%)
|
71.4
|
89.1
|
(20%)
|
Severance
charges
|
$m
|
0.0
|
9.9
|
(100%)
|
0.1
|
9.9
|
(99%)
|
Royalties
|
$m
|
1.6
|
0.7
|
129%
|
4.1
|
4.8
|
(15%)
|
Operating costs
from/(to) metals inventory
|
$m
|
0.1
|
(0.01)
|
764%
|
(0.7)
|
5.7
|
(111%)
|
Inventory net
realizable value adjustment and write off
|
$m
|
0.2
|
0.5
|
(68%)
|
1.2
|
2.0
|
(38%)
|
Cost of sales
excluding depreciation and amortization
|
$m
|
20.4
|
32.1
|
(36%)
|
76.2
|
111.5
|
(32%)
|
Depreciation and
amortization
|
$m
|
3.8
|
2.2
|
71%
|
11.9
|
11.9
|
-
|
Mine operating
loss
|
$m
|
(11.7)
|
(21.1)
|
44%
|
(27.2)
|
(33.4)
|
19%
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$m
|
4.4
|
1.4
|
218%
|
13.0
|
11.4
|
14%
|
|
|
|
|
|
|
|
|
PRESTEA OPERATING
RESULTS
|
|
|
|
|
|
|
|
Ore mined Open
Pits
|
kt
|
112.4
|
32.3
|
248%
|
493.9
|
374.2
|
32%
|
Ore mined -
Underground
|
kt
|
34.4
|
29.7
|
16%
|
152.3
|
128.0
|
19%
|
Ore mined -
Total
|
kt
|
146.8
|
61.9
|
137%
|
646.3
|
502.3
|
29%
|
Waste mined - Open
Pits
|
kt
|
207.3
|
89.6
|
131%
|
749.7
|
921.1
|
(19%)
|
Waste mined -
Underground
|
kt
|
9.1
|
3.0
|
203%
|
17.4
|
7.4
|
136%
|
Waste mined -
Total
|
kt
|
216.4
|
92.6
|
134%
|
767.1
|
928.5
|
(17%)
|
Ore processed - Open
Pits
|
kt
|
117.4
|
185.0
|
(37%)
|
567.1
|
1,179.4
|
(52%)
|
Ore processed -
Underground
|
kt
|
34.4
|
24.2
|
42%
|
152.3
|
122.6
|
24%
|
Ore processed -
Total
|
kt
|
151.8
|
209.2
|
(27%)
|
719.4
|
1,302.0
|
(45%)
|
Grade processed -
Open Pits
|
g/t
|
1.45
|
1.01
|
44%
|
1.56
|
1.20
|
30%
|
Grade processed -
Underground
|
g/t
|
6.87
|
8.56
|
(20%)
|
5.58
|
10.12
|
(45%)
|
Recovery
|
%
|
86.0%
|
84.9%
|
1%
|
85.7%
|
86.8%
|
(1%)
|
Gold produced - Open
Pits
|
koz
|
4.8
|
4.6
|
3%
|
23.4
|
37.6
|
(38%)
|
Gold produced -
Underground
|
koz
|
6.6
|
6.7
|
(1%)
|
24.2
|
37.5
|
(35%)
|
Gold produced -
Total
|
koz
|
11.3
|
11.3
|
-
|
47.6
|
75.1
|
(37%)
|
Gold sold - Open
Pits
|
koz
|
4.9
|
4.6
|
6%
|
23.4
|
37.9
|
(38%)
|
Gold sold -
Underground
|
koz
|
6.7
|
6.7
|
-
|
24.3
|
37.5
|
(35%)
|
Gold sold -
Total
|
koz
|
11.5
|
11.2
|
3%
|
47.7
|
75.4
|
(37%)
|
|
|
|
|
|
|
|
|
Cost of sales per
ounce1
|
$/oz
|
2,101
|
3,054
|
(31%)
|
1,848
|
1,681
|
10%
|
Cash operating cost
per ounce1
|
$/oz
|
1,616
|
1,867
|
(13%)
|
1,484
|
1,292
|
15%
|
All-In Sustaining
cost per ounce1
|
$/oz
|
2,202
|
2,164
|
2%
|
1,937
|
1,558
|
24%
|
|
|
Notes:
|
1.
|
See "Non-GAAP
Financial Measures".
|
Prestea Operational Overview
Production
- Gold production from Prestea was 11.3koz in Q4 2019, in line
with the same period in 2018, but 24% lower than in Q3 2019 due to
a lower contribution from the open pits as mining at the Opon area
was impacted by heavy rains due to the constrained nature of the
open pit as it is nearing the end of its design life. Some
relatively small-scale oxide resources close to the Bogoso
processing plant have been evaluated for open pit mining and we
expect it to form a lower proportion of the plan in H1 2020.
- The decrease in FY 2019 production relative to 2018 was due to
a 38% decrease in the open pit production and a 35% decrease in
underground production. The lower open pit production results from
a planned decrease in the volume of open pit ore processed, offset
in part by a 30% increase in open pit grades. The reduced
underground production resulted from a 45% decrease in head grades
caused by a combination of higher dilution and ore loss, this
effect was partially offset by a 24% increase in underground ore
tonnes processed.
Grades
- In Q4 the work to address dilution in the underground mine
delivered improvements, particularly in stope S12, which was the
first stope with a reduced raise height. This helped to better
control mining execution and manage dilution. The initiative to
separate ore from waste to further reduce dilution of the mill feed
is also starting to yield benefits with 9kt of waste material
successfully removed from processing in the quarter.
Stope availability
- Underground production was slightly higher in Q4 2019 than the
prior quarter, albeit lower than anticipated due to ore locked up
in stope S13 as a result of oversize material blocking the stope.
As mining activity progresses through the adjacent stope S14 during
Q1 2020 we expect some of this ore to be released.
Open pit mine life exceeding expectations
- The Open Pits produced 4.8koz in Q4 2019, in line with the
4.6koz in the same period in 2018. The Prestea Open Pits were
expected to complete gold production earlier in 2019, however open
pit mining continued into Q4 2019 with additional ore being sourced
from the pits close to Bogoso.
Costs
- Cost of sales excluding depreciation and amortization was
$20.4m for Q4 2019, compared to
$32.1m for the same period in 2018.
The decrease was due primarily to $9.9m of severance payments from the Prestea
improvement plan in Q4 2018 not being repeated in 2019, a
$2.4m decrease in mine operating
expenses related to less ore processed from Prestea Open Pits, and
a $0.4m decrease inventory net
realizable value adjustment and write-off, offset by a $0.1m increase in operating costs from metals
inventory.
- Cash operating cost per ounce of $1,616 decreased 13% from $1,867 for the same period in 2018 and increased
by 30% from $1,249 in the previous
quarter due to lower production.
- AISC per ounce increased 2% to $2,202 from $2,164
for the same period in 2018. In Q4 2019 the AISC rose 35% from the
$1,630/oz AISC achieved in Q3 2019,
again primarily due to the lower ounces produced and a largely
fixed cost base. With production volumes anticipated to rise
through 2020 the unit costs are expected to reduce to an AISC
guidance range of $1,650-1,850/oz.
Prestea operational review
Following the completion of CSA's independent review and phase 2
design, the implementation of a revised mining plan is progressing
at the Prestea underground mine, with several of the independent
review recommendations underway within Project Okode.
Extraction of the 17L - 21L has been redesigned for LHOS and
development has commenced with the new design using conventional
equipment. Orders have been placed to mechanize the LHOS zones
including a development jumbo, long hole drill, an additional
loader (scoop) and a small truck to haul material back to 17L. The
jumbo is expected to be delivered during H1 2020 and is expected to
significantly improve development productivity. An operational
readiness plan for the implementation of the LHOS mining method is
currently underway.
In the Alimak stoping area from 21L - 24L, stopes have been
redesigned to reduce the overall hanging wall span as recommended
by CSA. This is achieved by reducing the height where possible to
improve travel times and stope turnover rates. Where the height
cannot be reduced, due to lack of access, the strike length of the
stopes has been reduced to improve stability. A slightly narrower
Alimak platform is being trialled to reduce overall dilution
levels. Ventilation connections have been completed on 24L
enabling the development focus to move to the set-up of stopes to
the north and south of the current block.
Several other initiatives recommended by CSA and prioritized by
the site team are being managed under Project Okode supported by a
project manager and operations specialist as well as project teams
on site. Some of these initiatives include the increase in drilling
for resource definition, overbreak controls, maintenance
improvements and various productivity improvements such as rail
upgrades, shaft schedule improvements and an upgraded
rock-breaker.
EXPLORATION
In 2019, the Company invested $20.5m in exploration, of which $3.2m was expensed and $17.3m was capitalized. The 2019 exploration
spend therefore exceeded the $15.8m
budget for the year. The increased investment in exploration was
made during H2 2019 with additional budget allocated for infill and
step-out drill holes into the southern extensions of the Wassa
orebody and on 8,000 metres of infill definition drilling budget
into Panel 4. The 12 additional holes drilled in southern extension
zone increased the geological and structural understanding of the
zone, which allows for more detailed planning of the mining of this
area. Finally, additional budget was also allocated to drilling
5,000 metres in the deeper areas of the Father Brown resource
area.
In 2020, the greenfield and brownfield exploration programs will
focus on near mine targets in and around Wassa and Prestea, as well
as on regional exploration targets. A total of $6.2m ($3.5m budget
for capitalized exploration and $2.7m
for expensed exploration) has been allocated for exploration
programs across the project portfolio.
Wassa
In 2019, the Wassa exploration drilling (infill and step-out
extension drilling from surface) was completed with a total of
45,047 metres drilled with assay results released in Q4 (for more
information please see the Company's news release issued on
November 13, 2019). An update of the
resource model has commenced, the results of which we expect to
announce in Q1 2020. In Q4 2019, the exploration team also
completed a detailed review of the exploration portfolio in
Ghana, generating a pipeline of
early stage target delineation and drill testing targets.
With the 2019 surface program at Wassa now complete, the Company
has commenced a complete review of the geological interpretation,
involving external structural geology and geochemistry specialists.
Updated geological interpretations and resource estimations for the
year-end 2019 is expected to be reported during Q1 2020, however,
we expect further refinements to the interpretations and subsequent
resource estimation updates in H2 2020 based on additional detailed
analysis of the geological model. The drilling to date at
Wassa has been targeted at the conversion of inferred resources to
indicated as well as the definition and expansion of current
inferred resources. Results have been successful in
converting portions of the inferred resources to indicated as well
as better defining mineralization on the southern extension of the
orebody, and within the hanging-wall and footwall zones of the main
B-Shoot mineralization. Deeper infill drilling into the wide zones
of mineralization intersected in the southern extension drilling in
late 2018 and early 2019 has shown that the previously interpreted
single high-grade mineralized zone can now be interpreted as
several sub-parallel mineralized zones and this new understanding
will be incorporated into the resource update expected to be
released in Q1 2020. Although the previously interpreted single
broad zone of mineralization is now interpreted as several narrower
(20-70 metre wide) zones of mineralization we do not expect to see
a significant variation in the overall resource volume.
At Wassa, drilling in 2020 is planned to be focused on testing
the footwall to the main mining area (B-Shoot) investigating for
underground plunge extensions of gold mineralization between the
mined out Wassa South East pit and
the recently identified footwall zones in the southern extension
drilling. This programme is expected to commence in Q1-2020 and
consists of an initial 4-6 holes for ~3,000 metres of diamond core
on 200 metre-spaced sections drilled from underground platforms. If
successful, this drilling program may identify a new underground
mining area at Wassa outside the current decline system,
potentially adding incremental tonnes to the currently
under-utilized processing plant.
Father Brown
As stated in the Q3 2019 results, the review of the asset showed
that the project, as it currently stands, does not deliver
sufficient returns to move into a feasibility study. As a result,
the 2020 exploration budget will not see any significant investment
in Father Brown. Resource estimation and evaluation work is being
progressed in conjunction with desktop mine design work. This work
will be used to assess whether future drill programs are
justified.
Prestea Underground
In 2019 drilling at Prestea focused on improving the
understanding of the orebody and waste zones that had been
impacting the productivity of the Alimak mining process earlier in
2019. During 2019 63 holes were drilled totaling 12,424 metres.
Most of this drilling was infill drilling to the north and south of
the existing stopes on 24 Level. The updated resources and reserves
will be disclosed in the year-end Mineral Resource and Reserve
statements, due in Q1 2020.
Notes
|
1.
|
See "Non-GAAP
Financial Measures".
|
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
underground 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
underground mines. Gold production guidance for 2020 is
195,000-210,000 ounces at a cash operating cost per
ounce1 of $790-$850. Since
winning the PDAC 2018 Environmental and Social Responsibility
Award, Golden Star has remained
committed to leaving a positive and sustainable legacy in its areas
of operation.
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: continuing to
invest in the Company's asset base in 2020, including the
completion of the paste plant project at Wassa to provide more
flexibility in the mine plan, a new mining method and mining area
at Prestea, and the acceleration of the development and maintenance
spend across both sites; initiatives expected to deliver improved
production rates and margins in 2020 and helping to further define
the long-term growth at Wassa; the potential to continue to
increase the mining rates at Wassa and improving the scale and
margins at the operation; improving the sustainability and
flexibility of the Prestea operation with the introduction of a
second mining level which will enable it to return to positive cash
generation once fully ramped up through 2020; improving the options
available to realize value from the Prestea asset; anticipated
changes to future cash flow at Prestea resulting from shifts in the
unit costs, working capital and capex assumptions; Wassa continuing
to deliver 4,000tpd (tonnes per day)throughout 2020; Prestea being
positioned for a transformational year in 2020; improved orebody
definition, reduced stope cycle time, and reduce dilution at
Prestea; improved flexibility at Prestea resulting in an improved
mining rate in excess of 500tpd on a consistent basis; severance
costs impacting the G&A into H1 2020; 2020 gold production of
195 to 210koz, cash operating costs of $790-$850 $/oz,
AISC of $1,080-1,180/oz, sustaining
capital of $29.5 to 32.5 million,
development capital of $25 to
$27.5 million and total capital
expenditures of $55 to $60 million; operational initiatives aimed at
improving the consistency of the operations and visibility of the
longer-term potential of the operations; funding the introduction
of a new mining level and method at Prestea, the Wassa paste plant
construction and accelerated maintenance and development at both
mines; future drilling from underground drill positions; focusing
greenfield and brownfield exploration programs on near mine targets
in-and-around Wassa and Prestea, as well as on regional exploration
targets within 60km of the Wassa operation; a mining rate in excess
of 4,000tpd at Wassa; the completion of the paste plant project in
late Q3 2020 but being subject to change; production at Prestea
from the underground improving in 2020; the investment in a new
mining area and the introduction of LHOS at Prestea and the
improvement in overall mining rates and the reduction of
operational risk; the reduction of AISC at Prestea by around
$200/oz; the upgrade to the
ventilation infrastructure providing the ventilation capacity for
the next few years of mining activities with further investment in
2021 to extend the ventilation system; the electrical upgrade
supporting the mine plan for the next five years and being expected
to be completed in conjunction with the completion of the paste
fill project; the replacement of the cascading pump system with a
modernized pumping station on 620 Level to simplify the maintenance
program for the mine's pumping infrastructure and reduce
operational risk; construction of the paste fill plant project
being completed in Q3 2020 and commissioned in Q4 2020 and, while
adding approximately $6/t to the
mining unit costs, resulting a higher recovery of the resource and
increasing the production rate; production volumes at Prestea
rising through 2020 and unit costs being reduced; the delivery of
the jumbo at Prestea in H1 2020 and the significant improvement to
development productivity; the focus of greenfield and brownfield
exploration programs in 2020 focussing on near mine targets in and
around Wassa and Prestea, as well as on regional exploration
targets; the results of the update of Wassa's resource model being
announced in Q1 2020; updated geological interpretations and
resource estimations for the year-end 2019 for Wassa being reported
in Q1 2020 and further refinements to the interpretations and
subsequent resource estimation updates in H2 2020; the anticipated
drilling focus in 2020 at Wass, its commencement in Q1-2020 and the
potential to identify a new mining area within the Wassa
underground system that could provide ore from another area and add
incremental tonnes to the currently under-utilized processing
plant; no significant investment in Father Brown in 2020; assessing
whether future drill programs at Father Brown are justified; and
the updated resources and reserves for Prestea being disclosed in
the year-end Mineral Resource and Reserve statements in Q1 2020.
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. 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 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, 2018 and in our
annual information form for the year ended December 31, 2018 as 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.
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 (loss)/income
attributable to Golden Star
shareholders", "adjusted (loss)/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".
"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.
"Cost of sales per ounce" is equal to cost of sales excluding
depreciation and amortization for the period plus depreciation and
amortization for the period divided by the number of ounces of gold
sold (excluding pre-commercial production ounces sold) during the
period.
"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 or 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 inventory net realizable
value adjustments, royalties, sustaining capital expenditures,
corporate general and administrative costs (excluding share-based
compensation expenses and severance charges), and accretion of
rehabilitation provision. For mine site all-in sustaining costs,
corporate general and administrative costs (excluding share-based
compensation expenses and severance charges) are allocated based on
gold sold by each operation. "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 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 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.
"Adjusted net (loss)/income attributable to Golden Star shareholders" is calculated by
adjusting net (loss)/income attributable to Golden Star shareholders for (gain)/loss on fair
value of financial instruments, share-based compensation expenses,
severance charges, loss/(gain) on change in asset retirement
obligations, deferred income tax expense, non-cash cumulative
adjustment to revenue and finance costs related to the Streaming
Agreement, and impairment. The Company has excluded the non-cash
cumulative adjustment to revenue from adjusted net income/(loss) as
the amount is non-recurring, the amount is non-cash in nature and
management does not include the amount when reviewing and assessing
the performance of the operations. "Adjusted (loss)/income per
share attributable to Golden Star
shareholders" for the period is "Adjusted net (loss)/income
attributable to Golden Star
shareholders" divided by the weighted average number of shares
outstanding using the basic method of earnings per share.
For additional information regarding the Non-GAAP financial
measures used by the Company, please refer to the heading "Non-GAAP
Financial Measures" in the Company's Management Discussion and
Analysis of Financial Condition and Results of Operations for the
year ended ended December 31, 2019,
which are available at www.sedar.com.
Technical Information
The Mineral Reserve and Mineral Resource estimates have been
compiled by the Company's technical personnel in accordance with
definitions and guidelines set out in the Definition Standards for
Mineral Resources and Mineral Reserves adopted by the Canadian
Institute of Mining, Metallurgy, and Petroleum and as required
by Canada's National Instrument 43-101 - Standards of
Disclosure for Mineral Projects ("NI 43-101"). Mineral Reserve
estimates reflect the Company's reasonable expectation that all
necessary permits and approvals will be obtained and maintained.
Mining dilution and mining recovery vary by deposit and have been
applied in estimating the Mineral Reserves.
The Mineral Resource technical contents of this press release
have been reviewed and approved by S. Mitchel Wasel, BSc Geology, a
"Qualified Person" pursuant to NI 43-101. Mr. Wasel is Vice
President Exploration for Golden
Star and an active member of the Australasian Institute
of Mining and Metallurgy. The Mineral Reserve technical contents of
this press release have been reviewed and approved by and were
prepared under the supervision of Matt
Varvari, Vice President, Technical Services for the Company.
Mr. Varvari is a "Qualified Person" as defined by NI 43-101.
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 Resources and Reserves, Golden Star Resources,
Wassa Gold Mine, Ghana" effective date December 31, 2018; and (ii) Prestea Underground -
"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 US Investors Concerning Estimates of
Measured and Indicated Mineral Resources
This press release uses the terms "Measured Mineral Resources"
and "Indicated Mineral Resources". The Company advises US investors
that while these terms are recognized and required by NI 43-101,
the US Securities and Exchange Commission ("SEC") does
not recognize them. Also, disclosure of contained ounces is
permitted under Canadian regulations; however
the SEC generally requires Mineral Resource information
to be reported as in-place tonnage and grade. US Investors are
cautioned not to assume that any part or all of the mineral
deposits in these categories will ever be converted into Mineral
Reserves.
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SOURCE Golden Star Resources Ltd.