TORONTO, March 26, 2014 /PRNewswire/ - Golden Star is pleased to announce the results
of its Feasibility Study on the development of an underground
mining operation ("Wassa Underground") at its currently operating
Wassa open pit mine ("Wassa Open Pit" and, together with Wassa
Underground, the "Wassa Mine") in Ghana. The Feasibility Study estimates the
Wassa Mine will produce an average of 163,000 ounces of gold per
annum over its production life with average cash operating costs of
$780 per ounce.
All references to "$" in this news release are to United States dollars.
Highlights:
- Internal rate of return ("IRR") of 83% estimated for the Wassa
Mine at $1,200 per ounce gold
price
- Net present value, assuming a 5% discount rate
("NPV5%"), of $176 million
estimated for Wassa Mine, at $1,200
per ounce gold price
- Total Proven and Probable Mineral Reserves for Wassa Mine as of
December 31, 2014 are 24.1 million
tonnes at 2.04 grams per tonne of gold ("g/t Au") for 1.6 million
ounces of gold
- Total Measured and Indicated Mineral Resources as of
December 31, 2014 are 49.5 million
tonnes at 2.21 g/t Au for 3.5 million ounces of gold, inclusive of
Mineral Reserves
- Wassa Underground Mineral Reserves as of December 31, 2014 are 5.4 million tonnes at 4.26
g/t Au for 745,000 ounces of gold
- Wassa Open Pit Mineral Reserves, including stockpiles, as of
December 31, 2014 are 18.7 million
tonnes at 1.39 g/t Au for 834,000 ounces of gold
- Inferred Mineral Resources as of December 31, 2014 are 11.6 million tonnes at 3.79
g/t Au for 1.4 million ounces of gold
- Pre-production incremental capital expenditure for Wassa
Underground estimated at $39
million
- First production from Wassa Underground expected early 2016 and
estimated to continue into 2024
- LOM cash operating cost of $780
per ounce and all-in sustaining costs of $938 per ounce estimated for combined Wassa
operation
- Payback at $1,200 per ounce gold
price of 3.25 years
Sam Coetzer, President and CEO
of Golden Star commented:
"We are excited to announce this positive Feasibility Study on
the combined existing Wassa Open Pit operation and the Wassa
Underground extension. The strong rate of return on investment
suggested by the study validates the Preliminary Economic
Assessment of Wassa Underground we published in 2014 and is a
confirmation of the decisions made for the expenditures on drilling
and these studies of the last few years.
The Wassa Underground project has been underway since
December 2014 when we purchased
certain underground mining equipment and received the exploration
decline permit. The Wassa Underground deposit remains open down
plunge and has great potential to grow and the Company plans to
extend development. The Wassa Mine will help transform Golden Star into a lower cost gold producer
going forward."
Introduction
The Wassa Mine is in the Western Region of Ghana. It has a
carbon-in-leach processing plant with a rated capacity of 2.7
million tonnes per annum ("Mtpa"). Golden Star has been mining the Wassa open pits
since commissioning the plant in 2005. Mining is currently at
the Wassa Open Pit, which is within 500 meters of the
plant.
Drilling below the Wassa Open Pit has been ongoing since late
2011. This drilling has been successful in increasing the
Wassa Mineral Resource.
In November 2014, SRK Consulting
(UK) Ltd. ("SRK") was awarded the contract to prepare a Feasibility
Study to determine the economic viability of an underground mine
beneath the Wassa Open Pit. An underground mine is envisioned
in the Feasibility Study that will operate in conjunction with the
existing open pit mine into 2024.
The Feasibility Study assumes owner mining in the Wassa Open Pit
and Wassa Underground. A gold price of $1,200 per ounce was used in the economic
modeling as well as the base case for the open pit and underground
optimizations.
Mineral Reserve Estimate
The Feasibility Study is based on an updated mineral resource
model completed in August 2014 which
has incorporated all of the recent drilling, including infill
drilling at depth, in addition to step out fences over 600 meters
to the south of the Wassa Open Pit.
Open pit optimization is conducted using Whittle Optimization
software with historic operating cost data for the mining,
processing, and general and administration ("G&A") costs;
suitable dilution and recovery factors; stable pit slope estimates;
and a gold price of $1,200 per
ounce.
Open pit design is based on the $1,200 per ounce Whittle shell with modifications
for the current pit mining and access strategy. Mineral Reserves
are reported in the open pit design using a cut-off grade of 0.77
g/t Au.
Underground stope optimization has been carried out using a
cut-off grade of 2.5 g/t Au estimated based on zero-based
underground mining costs and historic processing and G&A costs.
The Deswick Stope Optimizer software was used incorporating cut-off
grade and various mineable stope parameters such as stope height,
width, footwall and hangingwall angles, and minimum distance
between parallel stopes.
The underground mine design process utilized Surpac software and
included stope design based on the optimization results, stope
access development, mine access development, and supporting
infrastructure development.
A mining schedule was developed using MineSched software and
includes realistic development and stoping productivity rates based
on manpower and mining equipment proposed, stope sequencing taking
into account geotechnical considerations, backfill requirements,
ventilation requirements, and emergency egress.
Economic modeling confirmed the viability of the Mineral Reserve
estimate presented in the table below.
The Feasibility Study Mineral Reserve has been estimated by SRK
Consulting (UK) Ltd. in accordance with guidelines set out in the
Definition Standards for Mineral Resources and Mineral Reserves
published by the Canadian Institute of Mining, Metallurgy, and
Petroleum and as required by Canada's National Instrument 43-101 ("NI
43-101").
The following table provides a breakdown of the Proven Mineral
Reserves and Probable Mineral Reserves at the Wassa Mine as at
December 31, 2014.
Mineral
Reserves
|
Dec 31, 2014
Proven
Mineral Reserve
|
Dec 31, 2014
Probable
Mineral Reserve
|
Dec 31, 2014
Proven and
Probable Mineral
Reserve
|
|
|
tonnes
|
grade
|
ounces
|
tonnes
|
grade
|
ounces
|
tonnes
|
grade
|
ounces
|
|
(000)
|
g/t Au
|
(000)
|
(000)
|
g/t Au
|
(000)
|
(000)
|
g/t Au
|
(000)
|
|
Wassa Open
Pit
|
-
|
-
|
-
|
17,831
|
1.42
|
812
|
17,831
|
1.42
|
812
|
|
Wassa
Underground
|
-
|
-
|
-
|
5,437
|
4.27
|
746
|
5,437
|
4.27
|
746
|
|
Stockpiles
|
820
|
0.73
|
19
|
-
|
-
|
-
|
820
|
0.73
|
19
|
|
Subtotal
Wassa
|
820
|
0.73
|
19
|
23,268
|
2.08
|
1,558
|
24,089
|
2.04
|
1,578
|
|
Notes to the Mineral Reserve statement:
(1)
|
The stated Mineral
Reserves have been prepared in accordance with the requirements of
NI 43-101 and are classified in accordance with the Canadian
Institute of Mining, Metallurgy and Petroleum's "CIM Definition
Standards – For Mineral Resources and Mineral Reserves". 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.
|
(2)
|
The 2014 Mineral
Reserves were prepared under the supervision of Mr. Mike Beare,
CEng BEng ACSM MIMMM, SRK Corporate Consultant (Mining
Engineering). Mr. Beare is a "Qualified Person" as defined by
Canada's NI 43-101 and is independent of the Company.
|
(3)
|
The Mineral Reserves
were estimated using a gold price assumption of $1,200 per
ounce.
|
(4)
|
The slope angles of
all pit designs are based on geotechnical criteria as established
by external consultants. The size and shape of the pit
designs are guided by consideration of the results from a pit
optimization program.
|
(5)
|
Cut off grades have
been estimated based on operating cost projections, mining dilution
and recovery, royalty payment requirements and applicable
metallurgical recovery estimates as follows: Wassa Open Pit 0.77
g/t Au and Wassa Underground 2.50 g/t Au.
|
(6)
|
Numbers may not add
due to rounding.
|
Open Pit Mining
Golden Star has been mining the
Wassa open pits since 2005. Prior to 2013, mining was in a
number of smaller satellite pits which were combined into a single
large Wassa Open Pit in late 2013 allowing for operational
efficiencies and cost savings.
Open pit mining is expected to continue in the Wassa Open Pit
area at a total material mined rate of approximately 1.2 million
tonnes per month until 2021 when the strip ratio is expected to
start to decrease. On average, we anticipate that the Wassa Open
Pit will produce approximately 2.0 Mtpa of ore feed, with the
balance of the total plant capacity of 2.7 Mtpa being supplied by
Wassa Underground.
Underground Mining
Access development to the underground stoping areas will be via
a twin decline system from the north east wall of the current Wassa
Open Pit. The twin decline system will enable efficient ventilation
during the early stages of the underground life and will remove the
requirement for a raisebore ventilation raise and escape way close
to the start of the decline. The main decline will be 5.8 meters
high and 5.2 meters wide and developed using standard trackless
mechanized mining methods.
The upper stopes will be mined using longitudinal longhole open
stoping with waste rock fill. This will enable efficient
early production before a cemented rock fill preparation and
delivery system is installed. The Wassa Open Pit will eventually
mine down to the top of these upper stopes, but only towards the
end of the life of mine.
In the deeper, wider areas of the deposit a transverse longhole
open stoping method will be used. A primary-secondary mining
sequence will be implemented with the primary stopes filled with
cemented rock fill and the secondary stopes with waste rock fill.
The overall stoping sequence will be bottom-up to reduce the
incidence of sill pillar development.
New surface infrastructure to support the underground mining
will be constructed including electrical power supply from the grid
with backup genset support, surface mechanical and electrical
workshops.
At steady state production, the Wassa Underground is expected to
produce an average of approximately 2000 tonnes per day across the
life of mine.
Mineral Processing
The Wassa processing plant was constructed in 2005 and is
currently operating at its rated capacity of 2.7 Mtpa. The
plant is 500 meters from the current Wassa Open Pit mining
operations. Processing currently includes a four stage
crushing circuit, grinding, gravity recovery, carbon in leach
circuits and a thickener. A final recovery circuit using
electrowinning is also in place along with associated secure gold
room facilities. Average metallurgical recovery in fresh ore
is currently 93% and future recovery from combined Wassa Open Pit
and Wassa Underground operations is estimated to be the same.
Capital Expenditure
A summary of the estimated capital costs and timing thereof from
the Feasibility Study is presented below in $ millions:
Capital
|
Total
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020-2024
|
Underground Project
Capital
|
38.5
|
20.5
|
13.0
|
5.0
|
-
|
-
|
-
|
Underground
Sustaining Capital
|
36.5
|
-
|
-
|
5.3
|
8.1
|
10.8
|
12.3
|
Plant & Open Pit
Project Capital
|
5.7
|
5.5
|
0.2
|
-
|
-
|
-
|
-
|
Plant & Open Pit
Sustaining Capital
|
89.8
|
8.7
|
18.9
|
18.4
|
14.0
|
9.5
|
20.3
|
Closure
|
18.9
|
-
|
-
|
-
|
-
|
-
|
18.9
|
Total
Capital
|
189.4
|
34.7
|
32.2
|
28.7
|
22.1
|
20.3
|
51.4
|
Pre-production incremental capital costs for the underground
mine are estimated to total $39
million, primarily comprised of equipment purchase,
infrastructure construction and underground development.
The construction of the new tailings impoundment and open pit
mobile equipment replacement make up the bulk of the plant and open
pit sustaining capital.
Economic Summary and Sensitivity to Gold Price and Discount
Rate
The following table is a summary of Wassa Underground's
sensitivity of Net Present Value (NPV) to changes in gold prices
and discount rates, as well as the sensitivity of IRR to gold
prices:
Post – Tax
($M)
|
NPV5%
|
NPV10%
|
IRR
|
Gold
Price
|
$1,000
|
38
|
-5
|
8
|
$1,100
|
99
|
70
|
37
|
$1,200
|
176
|
136
|
83
|
$1,300
|
252
|
201
|
505
|
$1,400
|
327
|
265
|
-
|
Operating Metrics
A summary of the projected production and operating metrics for
the combined Wassa Open Pit and Wassa Underground mines and
resulting operating costs from the Feasibility Study are summarized
below:
FS baseline
metrics
|
Total
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020-2024
|
Average pit Run of
Mine ("ROM") (tpd1)
|
5,603
|
7,444
|
6,854
|
5,896
|
4,274
|
5,518
|
4,945
|
Average underground
ROM (tpd1)
|
1,870
|
N/A
|
1,498
|
1,913
|
2,241
|
2,364
|
1,961
|
Daily tonnes
processed (tonnes)
|
7,448
|
7,465
|
7,485
|
7,465
|
7,465
|
7,465
|
7,465
|
Average mill feed
grade (g/t Au)
|
2.04
|
1.47
|
1.51
|
2.14
|
2.53
|
2.76
|
1.98
|
Average gold
recoveries
|
93%
|
93%
|
93%
|
93%
|
94%
|
94%
|
93%
|
Average annual gold
production (k oz.2)
|
1,470
|
116
|
120
|
170
|
201
|
220
|
159
|
Cost Summary
($/ounce)
|
Total
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020-2024
|
Cash operating
cost
|
780
|
929
|
1,024
|
844
|
747
|
673
|
736
|
All-in sustaining
cost3
|
938
|
1,064
|
1,242
|
1,043
|
916
|
826
|
876
|
All-in
Cost3
|
968
|
1,288
|
1,353
|
1,073
|
916
|
826
|
876
|
(1) |
"tpd" means tonnes
per day.
|
(2)
|
"k oz" means thousand
ounces.
|
(3)
|
See non-GAAP
Measures
|
Near Term Development Plans and Ongoing Exploration
The majority of underground equipment for the development of the
exploration decline was ordered late 2014 and delivery is expected
over the next three months. An owner operated team has been
assembled and the team is currently being formed at Wassa. The
starter-pit mining which will host the two portals has been
completed and the preparations that will form the platform and the
sumps for the declines have been established.
The Wassa Mine has received the necessary permits to commence
with the exploration decline. The Wassa Open Pit mine is now fully
established as a single large pit which will operate separately
from the two declines resulting in little impact of one on the
other.
Management believes that with additional drilling from
underground there is an opportunity to firstly optimize the mine
plan and secondly to potentially add more ounces to the resource
base. However there is no certainty that additional drilling
would result in all or any such ounces being included in a mine
plan.
Technical Information and Quality Control
The technical contents of this press release have been reviewed
and approved by Mike Beare CEng BEng ACSM MIMMM, a Qualified Person
pursuant to National Instrument 43-101. Mr. Beare is a
Corporate Consultant (Mining Engineering) with SRK Consulting (UK)
Ltd. and is independent of the Company.
Company Profile
Golden Star Resources (NYSE MKT: GSS; TSX: GSC; GSE: GSR)
("Golden Star" or the "Company") is an established gold mining
company that holds a 90% interest in the Wassa, Prestea and Bogoso
gold mines in Ghana. In 2014, Golden
Star produced 261,000 ounces of gold and is expected to
produce 250,000 – 275,000 ounces in 2015. The Company is
pursuing brownfield development projects at its Wassa and Prestea
mines that are expected to transform these mines into lower cost
producers from 2016 onwards. As such, Golden Star offers investors leveraged exposure
to the gold price in a stable African mining jurisdiction with
significant development upside potential.
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.
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 and
uncertainties that could cause actual results to differ
materially. Such statements and information include comments
regarding: operating metrics, including estimated gold production,
tonnes processed, grade, gold recoveries and operating costs;
estimated pre-tax and post-tax internal rate of return and net
present value of Wassa Underground (including assumed discount
rates); the timing for first production from Wassa Underground; the
life of mine at Wassa and Wassa Underground; cash operating costs
per ounce; all-in sustaining costs per ounce; the use of mining
contractors at Wassa Underground; timing for the delivery of
underground exploration and development equipment; mining methods
and estimated recovery at Wassa Underground; capital costs,
including pre-production capital costs, for Wassa Underground and
the timing thereof; metallurgical recovery rates; potential to
extend the Wassa Underground deposit; required investments in
mine infrastructure; the mining sequence and backfilling at Wassa
Underground; the amount and priority of materials to be processed
at the Wassa processing plant; the impact on mining operations at
Wassa Underground and Wassa Open Pit on each other; estimates and
expectations for Mineral Reserves and Mineral Resources; total gold
production in 2015; and the transformation of Golden Star into a lower cost producer and the
timing thereo Factors that could cause actual results to
differ materially include timing of and unexpected events at the
Wassa processing plant; variations in ore grade, tonnes mined,
crushed or milled; variations in relative amounts of refractory,
non-refractory and transition ores; delay or failure to receive
board or government approvals and permits; the availability and
cost of electrical power; timing and availability of external
financing on acceptable terms; technical, permitting, mining or
processing issues, including difficulties in establishing the
infrastructure for Wassa Underground; changes in U.S. and Canadian
securities markets; and fluctuations in gold price and input costs
and general economic conditions. 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 our Annual Information Form for the year ended
December 31, 2013. Our Annual
Information Form for the year ended December
31, 2013 will be superseded by our Annual Information From
for the year ended December 31, 2014,
which will contain similar information and will be made available
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 and that actual results will vary from
these estimates, possibly by material amounts. While we may
elect to update these estimates at any time, we do not undertake to
update any estimate at any particular time or in response to any
particular event. Investors and others should not assume that
any forecasts in this press release represent management's estimate
as of any date other than the date of this press release.
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
National Instrument 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.
Cautionary Note to US Investors concerning estimates of
Inferred Mineral Resources
This press release uses the term "Inferred Mineral
Resources". The Company advises US investors that while this
term is recognized and required by National Instrument 43-101, the
SEC does not recognize it. "Inferred Mineral Resources" have
a great amount of uncertainty as to their existence, and great
uncertainty as to their economic and legal feasibility. It
cannot be assumed that all or any part of Inferred Mineral
Resources will ever be upgraded to a higher category. In
accordance with Canadian rules, estimates of Inferred Mineral
Resources cannot form the basis of feasibility or other economic
studies. US investors are cautioned not to assume that any
part or all of the Inferred Mineral Resource exists, or is
economically or legally mineable.
Non-GAAP Financial Measures
In this press release, we use the terms "cash operating cost per
ounce" and "all-in sustaining costs per ounce". These terms
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 per ounce" for
a period is equal to the cost of sales excluding depreciation and
amortization for the period less royalties and production taxes,
minus the cash component of metals inventory net realizable value
adjustments divided by the number of ounces of gold sold during the
period. "All-in sustaining costs per ounce" commences with
cash operating costs and then adds sustaining capital expenditures,
mine site exploratory drilling and greenfield evaluation costs and
environmental rehabilitation costs. This measure seeks to
represent the total costs of producing gold from operations.
These measures are not representative of all cash expenditures as
they do not include income tax payments or interest costs.
These measures are not necessarily indicative of operating profit
or cash flow from operations as would be determined under
International Financial Reporting Standards. Changes in
numerous factors including, but not limited to, mining rates,
milling rates, gold grade, gold recovery, and the 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 the same or similar to the measures of other
gold mining companies, but may not be comparable to similarly
titled measures in every instance.
SOURCE Golden Star Resources Ltd.