Operational Delivery Continues as Prestea Sale
Unlocks Investment Capacity
TORONTO, Oct. 28, 2020 /CNW/ - Golden Star
Resources Ltd. (NYSE American: GSS) (TSX: GSC) (GSE:
GSR) ("Golden Star" or the "Company") reports its financial
and operational results for the third quarter ended September 30, 2020. All references herein to "$"
are to United States dollars.
Q3 2020 AND YEAR TO DATE HIGHLIGHTS:
- On September 30, 2020 the Company
completed the previously announced sale of the Bogoso-Prestea gold
mine to Future Global Resources ("FGR"). As a result Prestea
performance is now reported as a discontinued operation.
- The Bogoso-Prestea disposal removed $24m of negative working capital and the
$53m rehabilitation provision from
the Company's balance sheet, transitioning the group to a positive
net asset position.
- Q3 2020 production totaled 41.6 thousand ounces ("koz") from
continuing operations (Wassa). The underground mining rate was
successfully increased to a record quarterly average of 4,960
tonnes per day ("tpd"). The Wassa plant processed in excess of
6,000tpd, demonstrating the significant available capacity and
flexibility.
- The all-in sustaining cost per ounce sold ("AISC") from
continuing operations averaged $1,023
per ounce ("/oz") during Q3 2020 and $979/oz for the year to date.
- Q3 2020 free cash flow from continuing operations totaled
$14.4m.
- Cash totaled $48.3m at
September 30, 2020, with a reduction
in net debt of $7.4m during the
quarter.
- On October 9, 2020, the Company
announced the extension and restructuring of the Macquarie credit
facility to $70m, further
strengthening its balance sheet by creating $35m of incremental liquidity including the
deferral of the principal repayments to September 2021.
- On October 28, 2020, the Company
entered into a sales agreement relating to an "at the market"
equity program of up to $50
million.
Table 1 –Continuing Operations Performance
Summary – Three and nine months ended September 30, 2020
1. See "Non-GAAP
Financial Measures"
|
|
Q3
2020
|
Q3
2019
|
%
change
|
9
Months
2020
|
9
Months
2019
|
%
change
|
|
|
|
|
|
|
|
|
Production -
Wassa
|
Koz
|
41.6
|
34.6
|
20%
|
126.7
|
114.8
|
10%
|
Total gold
sold
|
Koz
|
40.9
|
33.9
|
21%
|
124.0
|
114.6
|
8%
|
Average realized gold
price
|
$/oz
|
1,813
|
1,428
|
27%
|
1,643
|
1,311
|
25%
|
|
|
|
|
|
|
|
|
Cash operating cost
per ounce - Wassa1
|
$/oz
|
664
|
732
|
(9)%
|
643
|
639
|
1%
|
All-in sustaining
cost per ounce - Wassa1
|
$/oz
|
1,023
|
1,093
|
(6)%
|
979
|
927
|
6%
|
|
|
|
|
|
|
|
|
Gold
revenues
|
$m
|
74.2
|
48.4
|
53%
|
203.7
|
150.3
|
36%
|
Adj.
EBITDA1
|
$m
|
37.5
|
15.3
|
146%
|
95.2
|
52.3
|
82%
|
Adj.
income/(loss)/share attributable to shareholders -
basic1
|
$/share
|
0.17
|
0.02
|
750%
|
0.29
|
0.09
|
222%
|
|
|
|
|
|
|
|
|
Cash provided by
continuing operations before working capital changes
|
$m
|
30.5
|
12.2
|
150%
|
82.6
|
39.7
|
108%
|
Changes in working
capital
|
$m
|
(4.4)
|
2.5
|
279%
|
(18.0)
|
(8.8)
|
(105)%
|
Cash outflow from
investing activities
|
$m
|
(11.7)
|
(12.2)
|
(4)%
|
(33.7)
|
(33.6)
|
0%
|
Free cash
flow
|
$m
|
14.4
|
2.5
|
476%
|
30.9
|
(2.7)
|
(1244)%
|
Cash
|
$m
|
48.3
|
56.8
|
(15)%
|
48.3
|
56.8
|
(15)%
|
Net Debt
|
$m
|
50.1
|
38.6
|
30%
|
50.1
|
38.6
|
30%
|
Table 2 – Consolidated Performance Summary –
Three and nine months ended September 30,
2020
1. See "Non-GAAP
Financial Measures"
|
|
Q3
2020
|
Q3
2019
|
%
change
|
9
Months
2020
|
9
Months
2019
|
%
change
|
|
|
|
|
|
|
|
|
Production -
Wassa
|
Koz
|
41.6
|
34.6
|
20%
|
126.7
|
114.8
|
10%
|
Production -
Prestea
|
Koz
|
6.8
|
14.8
|
(54)%
|
22.3
|
36.3
|
(38)%
|
Total gold
produced
|
Koz
|
48.4
|
49.4
|
(2)%
|
149.0
|
151.1
|
(1)%
|
Total gold
sold
|
Koz
|
47.7
|
48.5
|
(2)%
|
145.9
|
150.8
|
(3)%
|
Average realized gold
price
|
$/oz
|
1,813
|
1,432
|
27%
|
1,641
|
1,318
|
24%
|
|
|
|
|
|
|
|
|
Cash operating cost
per ounce - Wassa1
|
$/oz
|
664
|
732
|
(9)%
|
643
|
639
|
1%
|
Cash operating cost
per ounce - Prestea1
|
$/oz
|
2,141
|
1,249
|
71%
|
2,033
|
1,442
|
41%
|
Cash operating
cost per ounce - Consolidated1
|
$/oz
|
872
|
888
|
(2)%
|
852
|
832
|
2%
|
All-in sustaining cost
per ounce - Wassa1
|
$/oz
|
1,023
|
1,093
|
(6)%
|
979
|
927
|
6%
|
All-in sustaining cost
per ounce - Prestea1
|
$/oz
|
2,491
|
1,630
|
53%
|
2,477
|
1,852
|
34%
|
All-in sustaining
cost per ounce - Consolidated1
|
$/oz
|
1,230
|
1,233
|
0%
|
1,205
|
1,135
|
6%
|
|
|
|
|
|
|
|
|
Gold
revenues
|
$m
|
86.4
|
69.5
|
24%
|
239.4
|
198.7
|
321%
|
Adj. EBITDA from
continuing and discontinued operations1
|
$m
|
32.0
|
16.7
|
91%
|
82.9
|
44.0
|
89%
|
|
|
|
|
|
|
|
|
Cash provided by
operations before working capital changes
|
$m
|
25.5
|
11.9
|
114%
|
69.8
|
27.4
|
155%
|
Changes in working
capital
|
$m
|
(6.6)
|
(3.8)
|
74%
|
(27.2)
|
(17.7)
|
54%
|
Cash outflow from
investing activities
|
$m
|
(14.6)
|
(15.4)
|
(5)%
|
(41.2)
|
(42.3)
|
(3)%
|
Free cash
flow
|
$m
|
4.3
|
(7.2)
|
(160)%
|
1.4
|
(32.6)
|
(104)%
|
Cash
|
$m
|
48.3
|
56.8
|
(15)%
|
48.3
|
56.8
|
(15)%
|
Net Debt
|
$m
|
50.1
|
38.6
|
30%
|
50.1
|
38.6
|
30%
|
Andrew Wray, Chief Executive
Officer of Golden Star,
commented:
"Q3 2020 was a transformational quarter for the
Company. The completion of the Bogoso-Prestea sale to FGR had a
dramatic impact on the profitability and cash generation of our
business. There has also been a normalization of the Company's
balance sheet with the liabilities being transferred to FGR
allowing us to now report a positive net asset position. This will
now enable us to focus fully on delivering the significant growth
potential of Wassa, through an acceleration of infill drilling and
exploration in 2021.
During Q3 2020 we continued to invest in infrastructure capable
of supporting Wassa's future. The paste plant construction reached
98% completion at the end of the quarter and the wet commissioning
is now expected to take place in November with the first test stope
later that month. The 11kV surface substation and underground
distribution project was completed during the quarter utilizing
local expertise and contractors.
The management of COVID-19 continued to be a significant focus
for the site and corporate teams with enhanced screening protocols,
on site PCR testing, increased social distancing and hygiene
protocols allowing us to continue to manage the operational risk.
There were shortages of some specific skills and technical
assistance due to international travel restrictions, impacting on
development rates and the commissioning of the paste plant. With
our expatriate operators being mobilized to site during October we
expect development rates to increase in Q4 2020.
Wassa continued to deliver production and cost performance that
is in line with our expectations, leaving us on track to deliver on
our guidance for 2020. The underground achieved 4,960 ore tonnes
per day for the quarter demonstrating the production capacity of
the decline system albeit in part due to bringing lower grade
material into the short range plan. The plant achieved processing
rates in excess of 6,000 tonnes per day with additional low grade
stockpile material. This demonstrates the available capacity in the
underground infrastructure and plant which are expected to support
elevated future production rates.
This operational performance led to a Group cash position of
$48.3m at the end of the quarter, an
increase of $3.2m over the quarter.
It is important to note that this was following a scheduled
$5m principal repayment of the
Macquarie term loan in September
2020, a further $4.4m cash
outflow to working capital during the quarter and cash consumption
of $10m at Prestea."
Third Quarter 2020 Conference Call Details
The Company
will conduct a conference call and webcast on Thursday, October 29, 2020 at 10.00 am ET.
Toll Free (North America): +1
888 390 0546
Toronto Local and International: +1 416 764
8688
Toll Free (UK): 0800 652 2435
Conference ID:
30634237
Webcast:
https://produceredition.webcasts.com/starthere.jsp?ei=1386797&tp_key=6773a668d6
A replay of the webcast will be available on the Company's website:
www.gsr.com following the call.
KEY EVENTS – Q3 2020
Bogoso-Prestea sale to Future Global Resources
- The full detail on the completion of the sale of the Company's
90% interest in the Bogoso-Prestea gold mine in Ghana to FGR can be found in the press release
dated October 1, 2020. Following the
completion of the transfer of Bogoso Holdings to FGR on
September 30, 2020, Bogoso-Prestea
have been classified as discontinued operations in the Q3 2020
financial reporting and prior periods have been restated.
- The cash consideration payable by FGR for the asset is 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 of
Ghana, or (ii) March 30, 2021;
- $10 million of cash is payable on
July 31, 2021;
- Approximately $4 million of cash
for the net working capital adjusted balancing payment is payable
on July 31, 2021; and
- $15 million of cash is payable on
July 31, 2023.
- The sale immediately improves the financial position of the
Company, as reflected by the strength of the financial performance
when reported on a continuing operations basis in the Q3 2020
financial statements:
-
- Balance sheet - The Bogoso-Prestea disposal removed
$24m of negative working capital and
a $53m rehabilitation provision from
the Company's balance sheet. The normalization of the balance sheet
and transition to a positive net asset position enabled the
amendments to the Macquarie facility announced on October 9, 2020. It is anticipated this
additional liquidity, combined with the payments from FGR that are
expected to be received in March and July
2021, will properly position the Company for the repayment
of the convertible debentures maturing in August 2021.
- Cash generation - In the first nine months of 2020 the
group generated free cash flow of $1.4m on a consolidated basis. After stripping
out the negative contribution from Prestea, the free cash flow from
continuing operations totaled $30.9m.
- Strategic Focus – Golden
Star management now has greater capacity to focus on the
significant growth opportunity at Wassa and exploration across the
regional Wassa license areas. With the cash generation from Wassa
no longer encumbered by losses at Bogoso-Prestea, the infill
drilling of the Wassa underground ore body and exploration of the
wider license areas are expected to be accelerated in 2021.
Wassa Operational Performance and Infrastructure
Investment
- Mining rates averaged a record 4,960tpd through Q3 2020, 12%
higher than the previous record 4,420tpd achieved in Q2 2020 and Q3
2019. The underground mining rate has now exceeded 4,000tpd for
five consecutive quarters. The strengthening of the mining rate
countered the impact of reduced underground grade (2.8g/t) allowing
the underground gold production to total 39.7koz. The mining rate
is expected to continue to exceed 4,000tpd through Q4 2020.
- Late in Q1 2020 we took the decision to selectively process
some low-grade stockpiles, given the strength of the gold price.
This initiative utilizes latent capacity in our process plant
without compromising gold recovery rates, thus contributing
additional cash flow, albeit at a slightly higher AISC than
achieved by the underground mine. This initiative contributed
1.9koz of production during the quarter and added approximately
$10/oz to the reported AISC at
site.
- During Q3 2020, the increased underground mining rate, combined
with the processing of stockpiles, resulted in an ore processing
rate in excess of 6,000tpd, 6% higher than achieved in Q2 2020.
This demonstrates the significant available plant capacity and the
flexibility it offers the operation.
- Investment in the infrastructure required to provide additional
mining flexibility and support the ambition to increase mining
rates continued throughout Q3 2020. The 11kV surface substation was
completed during the quarter and the paste fill plant project at
Wassa continued to progress, reaching 98% project completion at
September 30, 2020.
Wassa Preliminary Economic Assessment
- Work on a preliminary economic assessment ("PEA") on the
development of the Southern Extension of the Wassa ore body
commenced during Q3 2020. The study is intended to lay out a
roadmap for the infrastructure and investment required for the
potential expansion of the mining operation into the inferred
resource areas. The study is expected to be completed later this
year for announcement to the market in early 2021.
COVID-19
- COVID-19 impact - During Q3 2020 178 personnel from our
operations (including discontinued) in Ghana were tested for COVID-19 (suspected and
voluntary) with 38 confirmed cases. The new in-house Polymerase
Chain Reaction ("PCR") testing capability allows for more rapid
diagnosis and management response. This significantly reduced the
number of people required to isolate as a result of contact
tracing, and with Ghana border
re-opening and other Company internal controls, has enhanced our
screening protocols enabling the return of expatriate staff to the
operation. At October 14, 2020, there
were zero suspected or confirmed COVID-19 cases in our workforce,
which has been the status for the previous five weeks. To reduce
risk to vulnerable people, the Company has implemented a parallel
major program of workforce medical surveillance for potentially
at-risk personnel, with individual management plans developed to
reduce risk to those individuals. As a major employer and therefore
catalyst for rural economic stimulus in the host communities, we
share the dual responsibility of knowing that our continued
operations are critical to the health and well-being of our
workforce and the thousands of people that they support both
directly and indirectly. More information on our COVID-19
management controls can be found at:
www.gsr.com/responsibility/COVID-19
- Supply chain - Supply chains for key consumables, including
cyanide, lime, grinding media, fuel and lubricants, have remained
intact throughout the pandemic. All supply chains are being
continually monitored and alternative suppliers have been
identified for essential supply chains.
- Gold sales - The cessation of commercial flights resulting from
the pandemic in March 2020 created a
need to implement alternative logistics for transporting doré to
refining facilities in South
Africa. Such alternative arrangements have been in place
since the end of Q1 2020 and exports were able to continue
throughout Q3 2020. Limited commercial flights resumed during the
quarter, however due to the timing of gold pours sales slightly
lagged production during Q3 2020.
Safety and Health
- The all injury frequency rate ("AIFR") at the end of Q3 2020
was 5.19 and the total recordable injury frequency rate ("TRIFR")
was 1.00, both an improvement on Q2 2020 and on the 2019 full year.
There were no fatal incidents in Q3 2020 and the Company pursued
the implementation of its safety strategy with a focus in the
period on critical risk controls and business continuity amidst the
global pandemic.
2019 Corporate Responsibility Report
- During Q3 2020, the Company published its 2019 Corporate
Responsibility Report with enhanced disclosure including SASB
Metals and Mining standards, Mining Local Procurement Reporting
Mechanism, and Investor Mining and Tailings Safety Initiative
disclosures. The full report and an ESG investor presentation are
available on the Company's website at:
www.gsr.com/responsibility.
- The new disclosure standards that have been adopted reflect
Golden Star's commitment to improved
Environmental, Social and Governance ("ESG") disclosure.
- In 2019, the Company achieved 100% compliance with water, air,
noise and vibration requirements and continued to invest in its
alternative livelihood programs which help to minimize illegal
mining activities and create sustainable industries that can endure
beyond the life of our mining activities. Our flagship ESG project,
Golden Star Oil Palm Plantation ("GSOPP"), delivered record crop
yields across plantations in 10 communities to directly support the
livelihoods of over 2,000 people. This initiative has been
developed on subsistence farms and rehabilitated mining areas to
establish an alternative land use, while ensuring that there is no
deforestation.
Class Action Complaint
- On April 1, 2020, the Company
received notification of a federal securities class action
complaint (the "Complaint") filed against Golden Star before the US District Court in the
State of California, USA, alleging
that the Company published false and misleading statements to
artificially inflate the price of its common shares in violation of
the US Securities Exchange Act of 1934. The Complaint was
voluntarily dismissed by the lead plaintiff during Q3 2020.
Severance Claim
- On September 15, 2020, certain
Bogoso-Prestea employees initiated proceedings before the courts in
Ghana, claiming that the
completion of the transaction for the sale by Golden Star of its 90% interest in
Bogoso-Prestea would trigger the termination of their existing
employments, entitling them to severance payments. Bogoso-Prestea
has retained defense counsel and is vigorously defending the claim
given no employments were severed, amended or modified upon the
completion of the sale transaction on September 30, 2020.
RECENT EVENTS - Post Q3 2020 period end
Upsizing of Senior Secured Credit Facility - October 8, 2020
- A key strategic objective for the Company in 2020 was to
reposition the balance sheet to improve liquidity and provide the
platform for future investment in growth. On October 8, 2020, the Company delivered a
significant milestone in this regard with the completion of the
amendment and upsizing of the credit facility (the "Macquarie
Credit Facility") with Macquarie Bank Limited ("Macquarie"). The
full detail on the amendment of the facility can be found in the
Company's press release dated October 9,
2020.
- The Macquarie Credit Facility has been increased to
$70 million, allowing the Company to
re-draw the two $5 million repayments
that were made in June and September
2020 and an additional $10
million of new capacity which will be made available in
conjunction with the redemption of the convertible debentures
maturing in August 2021. This
represents a $20 million increase on
the $50 million outstanding balance
on the facility at September 30,
2020.
- The Macquarie Credit Facility has been amortizing at a rate of
$5 million per quarter with two
principal repayments having been made so far in 2020. The
restructuring of the facility includes a rescheduled amortization
profile which defers the next quarterly repayments to commence in
September 2021. These quarterly
repayments will then continue to December
2023 when the remaining balance of the facility will be
settled by a $25 million bullet
payment.
- The restructuring of the Macquaire Credit Facility creates
$35 million of incremental liquidity
which, combined with the $15 million
of proceeds from the sale of the Bogoso-Prestea operations due to
be received by July 2021, is expected
to result in $50 million of
additional liquidity. Should it be required, we believe this will
provide us with the solution to satisfy the repayment of the
convertible debentures maturing in August
2021.
At the Market Equity Program
- On October 28, 2020, the Company
entered into a sales agreement relating to a U.S.$50 million "at the market" equity program. The
use of proceeds from the "at the market" equity program are for
discretionary growth capital at Wassa, exploration, general
corporate purposes and working capital.
2020 PRODUCTION, COST AND CAPITAL EXPENDITURE
GUIDANCE
Following the sale of Bogoso-Prestea, the full year guidance has
been revised to reflect the operation's exclusion as from Q4 2020.
Our priority remains on the delivery of a range of operational
initiatives aimed at improving the consistency of Wassa performance
and visibility of its longer-term potential. The updated guidance
for 2020 is as follows:
- Production - The guidance for Wassa remains unchanged
with the annualized production rate year to date ("YTD") continuing
to align with the revised annual guidance of 165-170koz. We have
therefore amended our consolidated guidance to 187-192koz.
- Cash operating costs - We expect Wassa to continue to
track towards the upper half of its $620-660/oz guidance range given the costs
associated with the processing of low grade stockpiles at Wassa
adversely impacted on costs by $12/oz
during the nine months to September 30,
2020.
- AISC - Wassa continues to track towards its $930-990/oz AISC guidance range. We expect full
year performance to be in the upper half of the range due to the
following factors:
-
- The impact of higher gold prices driving higher royalty
payments to the Government of Ghana. This equates to a $17/oz increase in the AISC in YTD 2020 over
budgeted levels;
- The restatement of the AISC performance for the year to date to
fully allocate the general and administrative ("G&A") expense
to continuing operations, reallocating the G&A that was
previously ascribed to Prestea to Wassa.
- Capital expenditure - The consolidated guidance has been
reduced to $47.5-51.5m after taking into account the following
considerations:
-
- The sale of Bogoso-Prestea removes $2-3.5m of spending
that was previously forecast for Q4 2020.
- Capitalized exploration guidance reduces by $1m, resulting from field work restrictions
relating to COVID-19.
- Development capital at Wassa has been reduced by $1m due to savings achieved on the 2020 capital
projects.
- Sustaining capital at Wassa has been reduced by $3m primarily due to Q3 2020 development rates
being impacted by the limited availability of expatriate jumbo
operators as a result of the COVID-19 pandemic. These personnel are
being mobilized through Q4 2020 and the development rates are
expected to increase during the quarter.
Table 3 – Q3 2020 and Year To Date Performance Versus
Guidance
|
|
Q3
2020
|
Q2
2020
|
|
9
Months
2020
|
|
Updated
Guidance
|
Previous
Guidance
|
Production and
cost highlights
|
|
|
|
|
|
|
|
|
Production -
Wassa
|
koz
|
41.6
|
44.8
|
|
126.7
|
|
165-170
|
165-170
|
Production -
Prestea
|
koz
|
6.8
|
5.9
|
|
22.3
|
|
22.3
|
30-35
|
Total gold
produced
|
koz
|
48.4
|
50.6
|
|
149.0
|
|
187-192
|
195-205
|
|
|
|
|
|
|
|
|
|
Cash operating cost
per ounce - Wassa1
|
$/oz
|
664
|
633
|
|
643
|
|
620-660
|
620-660
|
Cash operating cost
per ounce - Prestea1
|
$/oz
|
2,141
|
2,292
|
|
2,033
|
|
2,033
|
1,800-2,000
|
Cash operating
cost per ounce - Consolidated1
|
$/oz
|
872
|
827
|
|
852
|
|
852
|
810-850
|
|
|
|
|
|
|
|
|
|
All-In Sustaining cost
per ounce - Wassa1
|
$/oz
|
1,023
|
957
|
|
979
|
|
979
|
930-990
|
All-In Sustaining cost
per ounce - Prestea1
|
$/oz
|
2,491
|
2,910
|
|
2,477
|
|
2,477
|
2,200-2,600
|
All-In Sustaining
cost per ounce - Consolidated1
|
$/oz
|
1,230
|
1,186
|
|
1,205
|
|
1,100-1,180
|
1,100-1,180
|
|
|
|
|
|
|
|
|
|
Capital
Expenditure
|
|
|
|
|
|
|
|
|
Sustaining Capital –
Wassa
|
$m
|
6.0
|
6.5
|
|
16.0
|
|
20-22
|
23-25
|
Sustaining Capital –
Prestea
|
$m
|
1.3
|
1.9
|
|
5.4
|
|
5.4
|
6.5-7.5
|
Sustaining Capital –
Corporate
|
$m
|
-
|
0.1
|
|
0.4
|
|
-
|
-
|
Sustaining Capital
– Consolidated
|
$m
|
7.3
|
8.5
|
|
21.8
|
|
25.4-27.4
|
29.5-32.5
|
|
|
|
|
|
|
|
|
|
Development Capital –
Wassa2
|
$m
|
2.6
|
5.2
|
|
13.6
|
|
18-20
|
19-21
|
Development Capital –
Prestea2
|
$m
|
0.9
|
0.3
|
|
1.6
|
|
1.6
|
2.5-3
|
Development Capital –
Capitalized Exploration2
|
$m
|
0.1
|
0.1
|
|
0.4
|
|
2.5
|
3.5
|
Development
Capital - Consolidated2
|
$m
|
3.6
|
5.6
|
|
15.6
|
|
22.1-24.1
|
25-27.5
|
|
|
|
|
|
|
|
|
|
Total Capital –
Wassa3
|
$m
|
8.6
|
11.7
|
|
29.6
|
|
38-42
|
42-46
|
Total Capital -
Prestea3
|
$m
|
2.2
|
2.2
|
|
7.0
|
|
7.0
|
9-10.5
|
Total Capital -
Capitalized Exploration3
|
$m
|
0.1
|
0.1
|
|
0.4
|
|
2.5
|
3.5
|
Total Capital -
Corporate3
|
$m
|
-
|
0.1
|
|
0.4
|
|
-
|
-
|
Total Capital -
Consolidated 3
|
$m
|
10.9
|
14.1
|
|
37.4
|
|
47.5-51.5
|
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 are expected to materially increase production. All other
costs relating to existing operations are considered sustaining
capital.
|
3. Excludes all
non-cash capital additions, including right-to-use assets under
financial leases
|
SUMMARY OF CONSOLIDATED OPERATIONAL RESULTS – Q3 2020
(including discontinued operations)
Group production from the two operations was 48.4koz in Q3 2020,
compared to 49.4koz in Q3 2019. Wassa produced 41.6koz and Prestea
produced 6.8koz. On a consolidated basis, the ore grade processed
was 10% lower than the corresponding period in 2019 while total
tonnes processed were 38% higher due primarily to Wassa's increased
mining productivity, in part offset by the closure of the Prestea
open pit activities in May 2020.
Total gold sold amounted to 47.7koz for Q3 2020, 0.9koz or 2% lower
than gold sales in Q3 2019.
The AISC per ounce including discontinued operations from
Prestea amounted to $1,230/oz for Q3
2020 which was in line with Q3 2019 and $1,205/oz for YTD 2020 which was 6% higher than
$1,135/oz for YTD 2019. The increase
in YTD 2020 has primarily been driven by lower production volumes
from Prestea, increased royalties and higher corporate general and
administrative costs.
Wassa Operational Overview
The Wassa underground mine continues to operate through the
challenges posed by the COVID-19 pandemic. In Q3 2020 the pandemic
impacted on development rates as a result of the expatriate jumbo
operators being unable to enter the country. These operators are
now being mobilized and development rates are expected to
accelerate in Q4 2020. Completion of the Genser gas turbine power
station was further impacted by delays related to the COVID-19
pandemic. The strategic importance of this project was demonstrated
during the quarter as the operation suffered instability of the
grid power supply. The Genser power project is expected to be
completed in Q4 2020, which will remove the reliance on grid power
and provide the operation with a stable supply at an attractive
power cost.
Gold production from Wassa was 41.6koz in Q3 2020, a 20%
increase from the 34.6koz produced during the same period in 2019.
The increase is predominantly attributable to ore throughput
increasing to 554,030 tonnes in Q3 2020 (6,022tpd), 30% higher than
the 427,380 tonnes achieved in Q3 2019 (4,645tpd), due to increased
underground mining volumes and the processing of low-grade
stockpile material. The low-grade stockpile material had an adverse
impact on overall feed grade which decreased from 2.70g/t in Q3
2019 to 2.43g/t in Q3 2020.
Recovery
The recovery was 94.8% for Q3 2020, which was slightly down
compared to the 95.4% recovery achieved for the same period in
2019, despite the 10% reduction in the processed ore grade.
Wassa Underground
Wassa Underground produced 39.7koz of gold (or approximately 95%
of Wassa's total production) in Q3 2020, compared to 34.1koz in the
same period in 2019 (or approximately 99% of Wassa's total
production). The 17% increase in production was primarily due to an
increase in ore tonnes processed to 457,725 tonnes compared to
399,910 tonnes in Q3 2019, driven by higher underground mining
productivity. The Wassa Underground mining rates have now exceeded
4,000tpd for five consecutive quarters, averaging 4,960tpd in Q3
2020, 12% higher than the 4,420tpd achieved in the same period in
2019. The underground feed grade averaged 2.81g/t in Q3 2020, in
line with the 2.84g/t achieved in Q3 2019. The 19% reduction in
underground grades relative to Q2 2020 resulted from operational
decisions to bring in additional material around planned mining
areas due to development delays and lower grades encountered in
hanging wall zones. This quarter demonstrates that the decline is
capable of operating at 5,000tpd which unlocks lower unit costs.
This mining performance will be one of the factors we consider when
reviewing our cut-off strategy for the year end reserve and
resource update.
Wassa Main
Pit/Stockpiles
Low-grade stockpiles from the historical Wassa Main Pit were blended with the Wassa
Underground ore during Q3 2020, with a total of 96,305 tonnes at an
average grade of 0.64g/t which yielded 1.9koz of gold, compared to
0.5koz in the same period in 2019. Given the current gold price
environment, the Wassa management team has identified the cash
generation opportunity to process low-grade stockpiles without
materially impacting the recovery. The processing of these
stockpiles will continue into the first half of 2021 should the
current gold price environment sustain.
Unit costs
The unit cost performance remained robust during Q3 2020. The
mining unit cost of $30.4/t of ore
mined was 1% lower than in Q3 2019 as a result of higher ore
volumes. This also benefitted processing costs which totalled
$17.8/t of ore processed, 7% lower
than the $19.1/t achieved in Q3
2019.
Costs per ounce
Cost of sales per ounce decreased 3% to $899/oz due to higher sales volumes, offset by a
combination of higher mine operating expenses, royalties and
depreciation costs.
Cash operating cost per ounce decreased 9% to $664/oz mainly due to increased sales volumes on
the back of increased underground mining productivity, offset by
additional processing costs and increased mine site G&A
costs.
The AISC decreased 6% to $1,023/oz
in Q3 2020 compared to Q3 2019 due to the decrease in cash
operating costs resulting from higher sales volumes as well as a
reduction in sustaining capital expenditure. Following the sale of
Bogoso-Prestea and the introduction of the discontinued operations
accounting treatment, in Q3 2020 Wassa is now carrying the full
allocation of corporate general and administrative costs and prior
periods have been restated on the same basis.
Projects update
In order to equip the mine for its future as a long life
operation, a number of projects are being progressed in 2020. These
projects included the following initiatives:
- Electrical upgrade - The 11kV surface substation was completed
during the quarter as was the single point suspension cable
delivering 11kV power to the 620 level underground. This work was
originally expected to be supervised by electrical engineers coming
from Australia, however it was
completed by local contractors due to COVID-19 related travel
restrictions. This is a significant infrastructure project which is
intended to support the mine plan for the next five years.
- Paste fill plant project update - The paste fill plant project
at Wassa continued to progress in Q3 2020 reaching 98% project
completion at September 30, 2020.
Commissioning and set up of underground infrastructure,
reticulation system, dump valve and shotcreting equipment
(including batch plant) have been delayed due to the unavailability
of technical personnel as a result of the COVID-19 pandemic. Wet
commissioning is now expected to take place in November 2020 with the first test stope. Once
complete, this project is expected to provide additional
flexibility in the mine plan and assist with our intention to
increase mining rates in order to further improve the scale and
margins at the operation.
Capital expenditures
Capital expenditures for Q3 2020 totaled $8.7m compared to $13.8m during the same period in 2019. The Wassa
management team continued to focus efforts on critical development
spend in order to support the medium-term development of the
underground operation including:
- $1.2m on the paste fill plant
project which is earmarked for commissioning during Q4 2020
- $4m on capitalized underground
development activities
- $0.7m on mobile equipment
- $1.1m on the mobile equipment
capital spares
Prestea Operational Overview – Discontinued
operations
Gold production from Prestea was 6.8koz in Q3 2020, compared
with 14.8koz produced during the same period in 2019. Plant
throughput of 36,527 tonnes in Q3 2020 is 84% below the Q3 2019
throughput of 221,414 mainly due to the cessation of open pit
operations in May 2020.
Prestea Underground
Prestea Underground produced 6.8koz in Q3 2020 compared to
6.4koz in the same period in 2019 due to a 28% increase in grade to
6.38g/t, partly offset by a 13% decrease in ore tonnes mined to
36,527 tonnes. Q3 2020 performance was marked by short-term
operational challenges, including personnel shortages due to
COVID-19 with the development of the new mining areas on 17 Level
being prioritized, and continued dilution from 24 Level, and ore
loss driving lower than expected mining grades.
Costs per ounce
Cost of sales per ounce increased 74% to $2,672/oz, cash operating cost per ounce
increased 71% to $2,141/oz and the
AISC per ounce increased 53% to $2,491/oz for Q3 2020 compared with the same
period in 2019. The elevated cost performance is attributable to
the lower gold sales as a consequence of the cessation of open pit
mining. The increase in the cash operating cost was partially
offset in the AISC by reduced sustaining capital costs.
Capital expenditures
Capital expenditure for Q3 2020 was $2.1m compared to $3.2m during the same period in 2019.
Spending during Q3 2020 focused on lateral and decline development
at Prestea Underground ($1.1m) and
drilling and mining equipment ($0.7m)
relating to the introduction of LHOS on 17 Level.
EXPLORATION
Exploration field work resumed in the third quarter with a focus
on soil sampling programs across six regional targets, resulting in
the collection of approximately 2,600 samples. Of the six
targets tested, one was within the Wassa concession and the other
five are located within the HBB concessions to the south. These
targets were selected on favorable geology, structure and as a
follow-up to gold anomalies delineated by previous wide spaced
regional soil sampling. Exploration expenditure in Q3 2020 totaled
$0.5 million of which $0.4m was expensed and $0.1m was capitalized.
Wassa – HBB Properties
The initial results have confirmed the previous gold in soil
anomalism as well as higher gold values associated with interpreted
structures and geological contacts that have been identified using
the airborne geophysical surveys. Several of these gold
anomalies have strike extents of several kilometers and will be
followed up in Q4 2020. Next, phases of work are expected to
include field visits by geologists to map and prospect the areas to
determine the source of the gold-in-soil anomalism. Soil samples
will also undergo portable X-Ray Fluorescence ("pXRF") analysis to
assist with the geological understanding, alteration associations
and anomalous pathfinder geochemistry. Air Core drilling in
2021 will be used to test the best gold-in-soil anomalies.
During the quarter, the exploration group reassessed the 2020
budgeted Wassa diamond drilling and HBB Air Core drilling
programs. With the delayed completion of the 2020 soil
programs discussed above, as a result of the suspension of programs
due to COVID-19, it was decided to defer the follow up Air Core
drilling programs in order to fully assess the results of the soil
programs. As mentioned above, we currently anticipate these
Air Core Programs to be executed in 2021, and, in light of this,
2020 budgeted funds have become free for further drill testing at
Wassa.
A new surface diamond core drilling program commenced at the end
of Q3 2020 to test the up-dip projection of B-Shoot mineralization
south of the current mining areas on the Wassa underground
extensions. Currently one drill rig is testing a 500 metre
gap in the drilling between shallow surface holes and deeper holes
on section 19375N. A total of nine holes for c.6,000 metres,
testing 800 metres of strike on 200 metre spaced drill fences, is
planned for completion by the end of 2020 with a second rig to be
mobilized to site in November 2020.
During Q2 and Q3 2020, the Company focused on reviewing and
compiling historical data across its highly prospective Ghanaian
exploration properties in order to better understand the near-mine
and regional opportunities at Wassa. Golden Star controls over 352 square kilometers
("km2") of exploration and mining properties on the
eastern Ashanti Belt, covering over
90km of prospective geology from Wassa mine to the southern coast
of Ghana. This process is ongoing and has involved the
systematic and rigorous review of geological data, re-processing of
surface geochemical data, collection of selected multi-element
geochemical samples, and the review and re-interpretation of
drilling and geophysical datasets.
The review and compilation process has to-date identified
approximately 100 targets, and work is ongoing to rank, filter and
prioritize these targets. The Company is currently preparing the
2021 exploration programs and will look to ensure that the improved
corporate investment capacity enables a proper systematic and
consistent exploration program through an increased exploration
budget in 2021.
FINANCIAL PERFORMANCE SUMMARY
Please see the separate financial statements and management's
discussion and analysis for a detailed discussion on the Company's
financial results for the three and nine months ended
September 30, 2020. The following summary focuses on Q3 2020
performance.
Financial Performance – Continuing operations
Gold revenue totaled $74.2m
in Q3 2020, $25.9m higher than the
$48.4m achieved in the same period in
2019. Relative to Q3 2019, Q3 2020 benefited from a 21% increase in
gold ounces sold and an average realized gold price of $1,813/oz (27% higher than $1,428/oz in Q2 2019). The Q3 2020 realized gold
price per ounce for spot sales averaged $1,915 (Q3 2019 - $1,477), in part offset by the lower average
realized gold price of $881 per ounce
relating to the streaming arrangement with RGLD Gold AG following
the prior year variable component adjustment for deferred revenue
resulting from the Wassa mineral resource update.
Cost of sales (excluding depreciation and amortization)
totaled $31.1m in Q3 2020 compared to
$27.4m in Q3 2019. Mine
operating expenses of $27.3m
increased by $2.3m compared to Q3
2019 primarily due to:
- Higher variable costs resulting from additional mining and
processing volumes relating predominantly to plant reagents,
consumables and power costs.
- Higher maintenance costs.
- Increased labor costs due to increased headcount, inflationary
increases year-on-year and higher performance cost component.
- Higher gold transport costs following the use of charters due
to COVID-19 commercial flight restrictions.
Corporate general and administrative expense totaled
$4.7m in Q3 2020, compared to
$4.3m in the same period in 2019. The
increase is due primarily to higher insurance and labour costs.
Corporate G&A expense for YTD 2020 amounted to $14.2m, a 26% increase compared to $11.2m in the same period in 2019 due primarily
to non-recurring costs incurred as part of the relocation of the
Company's corporate office from Toronto,
Canada to London, United
Kingdom.
Hedging - The Company originally established the hedging
program over 50koz with a floor price of $1,400/oz and a ceiling price of $1,750/oz to provide gold price protection for
the forecast production from the Prestea mine over a 12 month
period commencing in August 2019. In
February 2020, the hedging program
was extended to cover the production from Prestea through to the
end of 2020. The Company entered into zero cost collars on an
additional 12.6koz with a floor price of $1,500/oz and a ceiling price of $1,992/oz. These positions mature at a rate of
4.2koz per month from October to December
2020.
During Q3 2020, a number of the original hedge contracts matured
with the gold price exceeding the ceiling price at a realized loss
of $2.4m.
As a condition of amending the Macquarie Credit Facility on
October 8, 2020, the Company extended
its gold price protection hedging program into 2021 and 2022 by
entering into zero cost collars with Macquarie on a total of an
additional 87,500 ounces with a floor price of $1,600 per ounce and a ceiling of $2,176 per ounce in 2021 and $2,188 per ounce in 2022. These additional
positions will mature at a rate of 10,937.5 ounces per quarter from
January 2021 to December 2022.
Together with the existing zero cost collar structures, the
Company currently has gold price protection in place for 100,100
ounces at an average floor price of $1,587 per ounce and an average ceiling price of
$2,158 per ounce.
Table 4 - Adjusted EBITDA and Earnings Per Share (from
continuing operations):
1. See "Non-GAAP
Financial Measures"
|
|
Q3
2020
|
Q3
2019
|
|
9
Months
2020
|
9
Months
2019
|
|
|
|
|
|
|
|
EBITDA (continuing
operations)1
|
$m
|
31.2
|
19.7
|
|
91.1
|
49.7
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
Loss/(gain) on fair
value of financial instruments
|
$m
|
3.7
|
(4.8)
|
|
1.4
|
(1.3)
|
Other
(income)/expense
|
$m
|
2.6
|
0.3
|
|
2.6
|
4.3
|
Total
Adjustments
|
$m
|
6.3
|
(4.5)
|
|
4.0
|
3.0
|
Adjusted EBITDA
(continuing operations)1
|
$m
|
37.5
|
15.2
|
|
95.1
|
52.7
|
|
|
|
|
|
|
|
Adjusted EBITDA
(discontinued operations)1
|
$m
|
(5.5)
|
1.5
|
|
(12.2)
|
(8.7)
|
Total adjusted
EBITDA (inc. discontinued operations)1
|
$m
|
32.0
|
16.7
|
|
82.9
|
44.0
|
|
|
|
|
|
|
|
Net income
attributable to shareholders (continuing operations)
|
$m
|
14.9
|
6.4
|
|
30.3
|
6.6
|
Net income/(loss)
attributable to shareholders per share
(continuing operations)
|
$/share
|
0.13
|
0.06
|
|
0.28
|
0.06
|
|
|
|
|
|
|
|
Net income
attributable to shareholders (inc. discontinued
operations)
|
$m
|
(67.3)
|
6.0
|
|
(58.7)
|
(5.0)
|
Net income/(loss)
attributable to shareholders per share (inc.
discontinued operations)
|
$/share
|
(0.61)
|
0.05
|
|
(0.53)
|
(0.05)
|
|
|
|
|
|
|
|
Adjusted net income
attributable to shareholders (continuing
operations)1
|
$m
|
18.6
|
1.9
|
|
31.9
|
9.4
|
Adjusted net
income/(loss) attributable to shareholders
per
share1
|
$/share
|
0.17
|
0.02
|
|
0.29
|
0.09
|
EBITDA from continuing operations amounted to
$31.2m for Q3 2020 (Q3 2019 -
$19.7m). Once adjusted for the
loss/gain on fair value of financial instruments and other
expenses, the Company generated an Adjusted EBITDA from continuing
operations of $37.5m for Q3 2020, an
increase of 146% compared to Q3 2019. These increases are due to
the significant improvement in mine operating profits following
from improved realized gold prices. Adjusted EBITDA
margin (see "Non-GAAP Financial Measures") compared favorably
at 51% for Q3 2020 (Q3 2019 - 32%).
Net income from continuing operations attributable to
Golden Star shareholders for Q3
2020 totaled $14.9m or $0.13 income per share (basic), compared to a net
income of $6.4m or $0.06 income per share (basic) in the same period
in 2019. The improved performance reflects the impact of the
higher realized gold price and higher gold sales, in part offset by
the higher tax expense, the loss on fair value of financial
instruments and other expenses.
Adjusted net income attributable to Golden Star shareholders (see "Non-GAAP
Financial Measures" section) was $18.6m or $0.17
basic income per share in Q3 2020, compared to the adjusted net
income attributable to Golden Star
shareholders of $1.9m or $0.02 basic income per share for the same period
in 2019. Adjusted net income attributable to Golden Star shareholders reflects adjustments
for non-recurring and abnormal items which are mostly non-cash in
nature. The increase during Q3 2020 and YTD 2020 compared to the
same periods in 2019 was primarily due to higher mine operating
margin resulting from improved sales volumes and gold prices,
partly offset by increased income tax.
Net Cash Flow and Financial position
Table 5 summarizes the uses of cash in Q3 2020 and the resulting
impact on the financial position of the Company.
Table 5 - Cash Flow and Net Debt Position
|
|
Q3
2020
|
Q3
2019
|
|
9
Months
2020
|
9
Months
2019
|
Net cash from
(used in) continuing operations
|
|
|
|
|
|
|
Operating activities
(inc. working capital)
|
$m
|
26.1
|
14.7
|
|
64.6
|
30.9
|
Investing
activities
|
$m
|
(11.7)
|
(12.2)
|
|
(33.7)
|
(33.6)
|
Financing
activities
|
$m
|
(1.0)
|
(2.1)
|
|
(6.5)
|
(6.6)
|
Increase/(Decrease) in cash from continuing
operations
|
$m
|
13.4
|
0.4
|
|
24.4
|
(9.3)
|
|
|
|
|
|
|
|
Net cash from
(used in) discontinued operations
|
|
|
|
|
|
|
Operating activities
(inc. working capital)
|
$m
|
(7.2)
|
(6.5)
|
|
(22.0)
|
(21.2)
|
Investing
activities
|
$m
|
(2.9)
|
(3.2)
|
|
(7.5)
|
(8.7)
|
Financing
activities
|
$m
|
-
|
-
|
|
-
|
(0.6)
|
Decrease in cash
from discontinued operations
|
$m
|
(10.1)
|
(9.7)
|
|
(29.5)
|
(30.5)
|
|
|
|
|
|
|
|
Cash position at
start of period
|
$m
|
45.1
|
66.2
|
|
53.4
|
96.5
|
Cash position at
period end
|
$m
|
48.3
|
56.8
|
|
48.3
|
56.8
|
|
|
|
|
|
|
|
Summary of debt
facilities
|
|
|
|
|
|
|
Macquarie credit
facility
|
$m
|
48.0
|
-
|
|
48.0
|
-
|
Convertible
debentures
|
$m
|
49.0
|
46.4
|
|
49.0
|
46.4
|
Finance
leases
|
$m
|
1.4
|
1.1
|
|
1.4
|
1.1
|
Ecobank
facilities
|
$m
|
-
|
30.6
|
|
-
|
30.6
|
Vendor
agreements
|
$m
|
-
|
17.3
|
|
-
|
17.3
|
Gross Debt
Position
|
$m
|
98.4
|
95.4
|
|
98.4
|
95.4
|
Net Debt
Position
|
$m
|
50.1
|
38.6
|
|
50.1
|
38.6
|
Financial position - The Company held $48.3m of cash and cash equivalents and
$98.4m of debt, for net debt of
$50.1m as at September 30, 2020.
The net debt position improved by $7.4m during Q3 2020 as a result of the
$3.2m increase in the cash position
and the reduction of the debt position following the second
$5m quarterly principal repayment of
the Macquarie Credit Facility being made at the end of September 2020.
Free cash flow - During Q3 2020 continuing operations
provided cash of $26.1m, a 78%
increase from the $14.7m generated in
the same period in 2019 due to higher gold production and an
increase in the realized gold price. Q3 2020 free cash flow from
continuing operations totaled $14.4m,
significantly higher than the $2.5m
generated in Q3 2019 and $10m higher
than the $4.3m of consolidated free
cash flow (including discontinued operations) for Q3 2020.
Investing activities - Capital expenditure in Q3 2020 was
$8.7m, compared to $13.8m in the same period in 2019. In Q3 2020 80%
of total capital expenditure was at Wassa with $8.6m being invested in the following projects
aimed at supporting the long term development of the operation:
- $1.2m on the paste fill plant
- $4.0m on Wassa Underground
capitalized development
- $0.7m on mobile equipment
- $1.1m on the mobile equipment
capital spares
Capital expenditures at Prestea during Q3 2020 totaled
$2.2m, $1.3m of which was invested in sustaining capital
related to Prestea Underground and $0.9m was invested in other equipment and capital
expenditure.
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. Forward looking statements and
information include but are not limited to, statements and
information regarding: gold production, cash operating costs, AISC
and capital expenditure estimates and guidance for 2020 on a
consolidated and per mine basis; the Company's achievement of 2020
consolidated guidance; the sources of gold production at Wassa
during 2020; the expected range of consolidated gold production for
2020; 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; the receipt by Golden Star of the deferred consideration from
the sale of Bogoso-Prestea, and the potential amount and timing
thereof; 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 investment at Wassa and within the
Company's existing exploration pipeline, and the ability of
Golden Star to diversify and grow
its business; the expected allocation of the Company's capital
expenditures; the ability to accelerate the growth of Wassa; the
ability to expand the Company and its production profile through
the exploration and development of its existing mines; the intended
expansion of production and reduction of costs; the ability to
improve cash generation; expected grade and mining rates for 2020;
estimated costs and timing of the development of new mineral
deposits and sources of funding for such development; the ability
to continue to ship gold across borders and to refine doré at the
South African refinery; the mining rate and grade from Wassa
Underground; the processing of low grade stockpiles at Wassa for
the remainder of the year; installation of the electrical
substation and upgrade of the underground electrical
infrastructure, and the timing thereof; completion of the paste
fill plant project and timing thereof, and expected resulting
flexibility in the Wassa mine plan and increased mining rates; the
ability to improve the scale of operations and margin at Wassa;
implementation of the Company's exploration programs and the timing
thereof; the anticipated exploration activities for the remainder
of 2020; the anticipated effectiveness of the hedging program over
the next 12 months; the intended reduction of costs for the next
twelve months; the delivery of a range of operational initiatives
that improve the consistency of the operations and visibility of
the longer-term potential of the operations; the securing of
adequate supply chains for key consumables and medical supplies;
the Company having sufficient cash available to support its
operations and mandatory expenditures for the next twelve months;
the Company continuing as a going concern including the ability of
the Company to realize its assets and discharge its liabilities in
the normal course of business; the potential impact of the COVID-19
pandemic on the Company's operations and the ability to mitigate
such impact; and the availability of mineral reserves in 2020 and
2021 based on the accuracy of the Company's updated mineral reserve
and resource models. 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.
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; 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; 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; 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, the three
months ended June 30, 2020 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 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 December 31, 2019 and the
three months ended March 31, 2020,
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"). All mineral
resources are reported inclusive of mineral reserves. Mineral
resources which are not mineral reserves do not have demonstrated
economic viability. 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 2019 and 2018 estimates of mineral
resources were prepared under the supervision of Mr. Wasel. 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 December 31, 2018; (ii) Bogoso/Prestea - "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.
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 NI 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.
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SOURCE Golden Star Resources Ltd.