TORONTO, July 27, 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 entered into a binding agreement
(the "Agreement") for the sale of its 90% interest in the
Bogoso-Prestea Gold Mine ("Bogoso-Prestea") in Ghana to Future Global Resources Limited
("FGR") for a purchase price of up to $95
million (the "Transaction"). All references herein to "$"
are to United States dollars.
Highlights
- Golden Star has signed a
binding agreement for the sale of Bogoso-Prestea to FGR
- Purchase price of $55 million
with a further contingent component of up to $40 million
- Staged payments to ensure FGR focuses investment capacity on
the asset itself while providing Golden
Star with exposure to its long-term growth
potential
- Operations are planned to continue at the Prestea
underground operation, which includes the use of alimak mining on
24 Level and long hole open stoping mining activities on the newly
developed 17 Level
- Following the acquisition, FGR intends to review the entire
Bogoso-Prestea project portfolio, which includes the significant
refractory sulfide resource, and an extensive tenement package with
exploration 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
- Following the satisfaction of the closing conditions in the
Agreement, including obtaining the required government approvals,
the Transaction is expected to complete by no later than
September 30, 2020
("Closing")
Financial terms
FGR will acquire Bogoso-Prestea for
$55 million on a cash free, debt free
and working capital free basis, which will be paid as follows:
- consideration of $30 million
comprising of $5 million of cash and
the assumption by FGR of approximately $25
million of negative working capital is payable at
Closing;
- $10m of cash is payable on
July 31, 2021; and
- $15m of cash is payable on
July 31, 2023.
FGR will assume Bogoso-Prestea's assets and liabilities. Blue
International Holdings Limited (the major shareholder of FGR) will
act as guarantor for the above payments.
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:
- US$20 million, if the average
spot gold price is less than or equal to US$1,400/oz;
- US$30 million, if the average
spot gold price is greater than US$1,400/oz but less than or equal to
US$1,700/oz; or
- US$40 million, if the average
spot gold price is greater than US$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.
Transaction schedule
The Transaction is anticipated
to close by no later than September 30,
2020 upon satisfaction of the conditions precedent set forth
in the Agreement. These include approval of the relevant
Minister in Ghana and the
restructuring of the Royal Gold Streaming Agreement and Macquarie
loan facility.
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.) are parties to a streaming agreement covering the
Wassa and Bogoso-Prestea mines. Golden Star, FGR and RGLD Gold AG are in
advanced discussions to amend the stream agreement that would see,
subject to the completion of terms, negotiation of definitive
agreements and receipt of board of directors' approvals, a
separation of the obligations under the agreement as between the
Wassa and Bogoso-Prestea mines.
Andrew Wray, President and
Chief Executive Officer of Golden
Star, commented:
"We are pleased to announce the
sale agreement for Bogoso-Prestea as this brings fresh focus and
investment capacity to the asset, while enabling us 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.
The sale strengthens our balance sheet by providing a cash
inflow of $30m by 2023 and
Golden Star will be able to
participate in the upside offered by the Bogoso Sulfide Project
through the Contingent Payment mechanism which could deliver up to
a further $40 million to the
business. 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 employees,
Ghana, the host communities and
all of our other stakeholders."
Glenn Baldwin, Chief Executive
Officer of Future Global Resources,
commented:
"FGR is delighted to acquire 90% of the
Bogoso-Prestea Gold Mine as our first production asset. FGR is
looking forward to engaging with the workforce, communities, and
Government of Ghana, developing
constructive and sustainable partnerships. We have confidence in
the potential for additional discoveries and extensions to the
underground mineral resources, through which we hope to generate
real value by investing in the workforce and our relationships with
local stakeholders."
About FGR
Future Global Resources (FGR) was
established by its shareholders in 2020 to build a globally
diversified mining company that invests in, develops, and operates
long-life mineral resources, to stimulate economic
development. Its initial focus is on Africa, leveraging the credentials of the
board, executive and shareholders on that continent. FGR is
committed to the principles of community and
environmental sustainability. Its principal shareholder is
Blue International Holdings Limited, a UK based private investment
holding company and the largest investor in Joule Africa Limited, a
developer, owner and operator of sustainable power 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 are
now drawing to a close. 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 and could be restarted following a refurbishment of the
refractory processing plant.
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 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 ounce (please
refer to the Non-GAAP Financial Measures disclaimer) of
US$790-US$850. 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 for 2020 of 195,000 to 210,000
ounces; cash operating cost guidance for 2020 of US$790-US$850; the
completion of the Transaction and the timing thereof; 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 ability to satisfy the
conditions to Closing, including the approval of the relevant
Minister in Ghana, the
restructuring of the Royal Gold streaming agreement and Macquarie
loan facility; 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.
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SOURCE Golden Star Resources Ltd.