TORONTO, Oct. 1, 2020 /PRNewswire/ - Golden Star
Resources Ltd. (NYSE American: GSS) (TSX: GSC) GSE: GSR)
("Golden Star" or the "Company") is pleased to
announce that it has completed the sale of its 90% interest in the
Bogoso-Prestea Gold Mine ("Bogoso-Prestea") in Ghana to Future Global Resources Limited
("FGR"). All references herein to "$" are to United States dollars.
Highlights
- Golden Star has completed the
sale of Bogoso-Prestea to FGR
- The Bogoso-Prestea subsidiaries have now been transferred to
FGR
- The initial $5 million cash
consideration due at closing has been deferred by up to six months
to March 30, 2021 pending
finalization of FGR's reclamation bonding process, as described
below.
- The subsequent staged payments, totaling $25 million, and contingent payments of
$20 to $40
million ensure that FGR is able to focus its investment
capacity on the business whilst providing Golden Star with exposure to Bogoso-Prestea's
long-term growth potential
- The sale strengthens Golden
Star's balance sheet and allows the Company to accelerate
the growth and development of the large resource base at the Wassa
mine, and increase exploration activities in the wider Wassa-HBB
project area
Andrew Wray, President and
Chief Executive Officer of Golden
Star, commented:
"We are pleased to complete the
previously announced sale of Bogoso-Prestea. This transaction is
transformational for Golden Star's
balance sheet and allows us to focus fully on further developing
Wassa and realizing its potential. We are now able to concentrate
our financial and technical resources on accelerating the delivery
of value from Wassa as it continues to develop into a large-scale,
long-life and cash generative underground mine. We now look forward
to completing a Preliminary Economic Assessment on the development
options for the ore body by the end of the year. In doing so we can
subsequently provide the market with greater clarity around the
potential path and timing for future growth at the asset.
The sale strengthens our balance sheet by providing a cash
inflow of $30 million by 2023 and
removing negative working capital and liabilities from our balance
sheet. Given the resulting improvement in the financial position of
the Company, we expect to now be able to accelerate our investment
at Wassa and within our existing exploration pipeline and look for
other opportunities to further expand our business.
Bogoso-Prestea will also benefit from having an owner solely
focused on delivering the turnaround of the underground operation
and assessing the significant potential of the sulfide resources.
As a result, we see this transaction as positive for both FGR and
Golden Star, our respective
employees, Ghana, the host
communities and all of our other stakeholders."
Financial terms
Following further commercial
discussions, Golden Star and FGR
agreed to amend the commercial terms of the sale of Bogoso-Prestea.
The consideration remains unchanged with FGR taking on all the
assets and liabilities of the Bogoso-Prestea subsidiaries at
closing. The cash consideration is now all deferred and will be
paid as follows:
- $5 million of cash is payable on
the earlier of (i) the date at which FGR puts in place a new
reclamation bond with the Environmental Protection Agency, or (ii)
March 30, 2021;
- $10 million of cash is payable on
July 31, 2021; and
- $15 million of cash is payable on
July 31, 2023.
In addition to the consideration payable at closing and the
deferred payments, a contingent payment of up to $40 million conditional upon the occurrence of
the milestones described hereinafter in respect of the development
of the Bogoso Sulfide Project (the "Contingent Payment") may
become payable by FGR to Golden
Star. The trigger point for the Contingent Payment is
either (i) FGR's formal decision to proceed ("Decision to Proceed")
with the Bogoso Sulfide Project, or (ii) the extraction of an
aggregate of 5% of the sulfide resources as stated at the end of
2019, being 1.76 million ounces of measured and indicated resources
and 0.07 million ounces of inferred resource. The quantum of the
Contingent Payment is determined by reference to the average spot
gold price for the 90 day period preceding the date of the Decision
to Proceed:
- $20 million, if the average spot
gold price is less than or equal to $1,400/oz;
- $30 million, if the average spot
gold price is greater than $1,400/oz
but less than or equal to $1,700/oz;
or
- $40 million, if the average spot
gold price is greater than $1,700/oz
- The Contingent Payment is payable in two tranches:
- 50% at the time of (i) the Decision to Proceed, or (ii)
declaration that 5% of the sulfide mineral resources have been
extracted; and
- 50% at the time of the first anniversary of (i) achieving
commercial production following the Decision to Proceed, or (ii)
the first anniversary of the declaration that 5% of the sulfide
mineral resources have been extracted.
Restructuring of RGLD Gold AG streaming agreement
Caystar Finance Co. (a wholly-owned subsidiary of Golden Star) and RGLD Gold AG (an affiliate of
Royal Gold, Inc.) have restructured
the streaming agreement covering the Wassa mine and
Bogoso-Prestea. The stream has been restructured to separate
Bogoso-Prestea from the current arrangement. Wassa now retains the
remaining Tier One streaming obligation, which relates to the
delivery of gold at a rate of 10.5% of production for a 20%
delivery payment. As at June 30,
2020, there were c.129.5koz Tier One ounces remaining to
deliver. Following the delivery of the remaining Tier One
obligation, the streaming obligation at Wassa will transition into
the Tier Two structure, which delivers 5.5% of gold production for
a 30% delivery payment.
2020 production and capital expenditure guidance
The
Company's 2020 production and cost guidance will be updated for the
sale of Bogoso-Prestea as part of the reporting of the Q3 2020
results on October 28, 2020.
About FGR
Future Global Resources ("FGR") was
established by its shareholders in 2020 to build a globally
diversified mining business that invests in, develops, and operates
long-life mineral resources, to stimulate economic
development. Its initial focus is on Africa, leveraging the credentials of its
board, executive and shareholders on the African continent. FGR is
committed to the principles of community and
environmental sustainability. Its principal shareholder is UK
based Blue International Holdings Limited, which is also the
largest investor in Joule Africa Limited, a developer, owner and
operator of renewable energy projects in Sub-Saharan
Africa.
About Bogoso-Prestea
The Bogoso-Prestea operations are
located in south-western Ghana,
approximately 40km from the Wassa gold mine. Recently, production
was delivered from the Bogoso-Prestea open pits and the Prestea
underground gold mine. In the second half of 2018, Prestea became
an underground-focused operation and the open pit operations ceased
production. The Bogoso refractory open pit operation was closed in
2015; it hosts 1.76 million ounces of measured and indicated
mineral resources and 0.07 million ounces of inferred resource.
Advisors
Golden Star's
financial advisor is Bacchus Capital Advisers and its Canadian
legal advisor is Fasken Martineau DuMoulin LLP.
FGR's legal advisor is White & Case LLP.
Company Profile:
Golden
Star is an established gold mining company that owns and
operates the Wassa underground mine 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 the Wassa
mine. As the winner of the Prospectors &
Developers Association of Canada
2018 Environmental and Social Responsibility Award, Golden Star remains 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 and include but are not limited
to, statements and information regarding gold production guidance;
date at which FGR puts in place a new reclamation bond with the
Environmental Protection Agency; the receipt by Golden Star of the Contingent Payment and the
potential amount thereof and other amounts to be received pursuant
to the Transaction; the benefits to be received by Golden Star from the sale of Bogoso-Prestea,
including the strengthening of its balance sheet, financial
position, acceleration of the Company's investment at Wassa and
within the Company's existing exploration pipeline, and the ability
of Golden Star to diversify and grow
its business; the benefits to be realized by stakeholders from the
Transaction; FGR's ability to deliver the turnaround of the Prestea
underground operation and make additional discoveries; FGR's
ability to deliver the Bogoso Sulfide Project. 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
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: gold price volatility; discrepancies between actual and
estimated production; mineral reserves and resources and
metallurgical recoveries; the ability to complete the sale
transaction and realize the anticipated benefits therefrom; the
ability to obtain all necessary consents and approvals for the sale
transaction; mining operational and development risks; liquidity
risks; suppliers suspending or denying delivery of products or
services; regulatory restrictions (including environmental
regulatory restrictions and liability); actions
by governmental authorities; the speculative nature of gold
exploration; ore type; the global economic climate; share price
volatility; foreign exchange rate fluctuations; risks related to
streaming agreements and joint venture operations; the availability
of capital on reasonable terms or at all; 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 including financial and other
risks resulting from the impact of the COVID-19 global pandemic;
actual results of current exploration activities; environmental
risks; future prices of gold; possible variations in mineral
reserves and mineral resources, grade or recovery rates; mine
development and operating risks; an inability to obtain power for
operations on favourable terms or at all; mining plant or equipment
breakdowns or failures; an inability to obtain products or services
for operations or mine development from vendors and suppliers on
reasonable terms, including pricing, or at all; public health
pandemics such as COVID-19, including risks associated with
reliance on suppliers, the cost, scheduling and timing of gold
shipments, uncertainties relating to its ultimate spread, severity
and duration, and related adverse effects on the global economy and
financial markets; 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; litigation risks; 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, 2019 and in our annual
information form for the year ended December
31, 2019 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 news release, we
use the terms "cash operating cost per ounce".
"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 labour,
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.
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 December 31, 2019, which
are available at www.sedar.com
Technical Information
Additional technical information
regarding Bogoso-Prestea is available in the technical report for
the property titled "NI 43-101 Technical Report on Resources and
Reserves, Golden Star Resources, Bogoso/Prestea Gold Mine,
Ghana" effective date December 31, 2017, available at
www.sedar.com.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/golden-star-completes-sale-of-the-bogoso-prestea-gold-mine-to-future-global-resources-301143712.html
SOURCE Golden Star Resources Ltd.