TORONTO, Jan. 20, 2021 /CNW/ - Golden Star
Resources Ltd. (NYSE American: GSS) (TSX: GSC) (GSE:
GSR) ("Golden Star" or the "Company") is pleased to announce
its preliminary production performance for the fourth quarter of
2020 ("Q4 2020") and full year 2020 ("FY 2020"), and its
guidance for 2021 ("FY 2021"). The Company anticipates
releasing its audited 2020 financial results on February 24, 2021, after market close. All
references herein to "$" are to United
States dollars.
HIGHLIGHTS:
- Q4 2020 production from continuing operations totalled 41
thousand ounces ("koz"). FY 2020 production from continuing
operations totalled 168koz, representing a 7% increase on 2019
performance.
- Delivered on the 165-170koz revised guidance range for Wassa,
and successfully exceeded the original FY 2020 guidance for Wassa
of 155-165koz.
- Underground mined grades improved to 3.4 grams per tonne
("g/t") during Q4 2020, up 20% on the 2.8g/t realized in the third
quarter of 2020 ("Q3 2020").
- The mining rate decreased slightly to 4,175 tonnes per day
("tpd") during Q4 2020 (4,960tpd in Q3 2020), which was offset by
the higher realized mined grades. The focus of the mining
activities shifted to an acceleration of underground development
following the return of the expatriate jumbo operators to
site.
- During FY 2020, mining rates averaged 4,469tpd and processing
rates exceeded 5,500tpd with the additional processing of
incremental low-grade stockpile material.
- Golden Star ended FY 2020 with
$61 million ("m") of cash. Net debt
decreased by $5m during the quarter
to total $45m.
- FY 2021 production guidance of 165-175koz builds on the
progress achieved in 2020 and reflects the focus on investment in
future production growth.
- The all-in sustaining costs ("AISC") guidance of $1,000-1,075 per ounce ("/oz") reflects an
increase in sustaining capital associated with the planned step up
in drilling and development. Overall capital expenditure is
expected to total $45-50m.
- The FY 2021 exploration budget is being increased to
$15m with a view to accelerating the
systematic testing of the numerous in-mine, near mine and regional
exploration targets.
- Work on the preliminary economic assessment ("PEA") on the
expansion of the Wassa mine into the southern extensions is nearing
completion; the study is expected to be released in conjunction
with the updated mineral reserve and resource estimate for Wassa
around the time of the FY 2020 financial results.
Table 1: Preliminary Q4 2020 and FY 2020 Production
Data
(koz)
|
Quarterly
Production
|
Full Year
Production
|
|
Q4 2020
|
Q3 2020
|
%
change QoQ
|
Q4 2019
|
%
change YoY
|
FY 2020
|
FY 2019
|
%
change YoY
|
Production –
Wassa
|
41
|
42
|
(2%)
|
41
|
-
|
168
|
156
|
7%
|
Production –
Consolidated1
|
41
|
48
|
(15%)
|
53
|
(23%)
|
190
|
204
|
(7%)
|
Gold sales –
Wassa
|
44
|
41
|
7%
|
42
|
4%
|
168
|
156
|
7%
|
Gold Sales –
Consolidated1
|
44
|
48
|
(8%)
|
53
|
(18%)
|
189
|
204
|
(7%)
|
|
Notes:
|
1.
|
Includes Prestea
operation for the nine months to the sale completion on September
30, 2020; now classified as a discontinued operation.
|
Andrew Wray, President and
Chief Executive Officer of Golden
Star, commented:
"In what was a transformational year
for Golden Star, the operational
performance of Wassa stood out with the delivery of our improved
production guidance range despite the numerous challenges that have
arisen as a result of the pandemic. The strong cash flow generation
from the asset, combined with the sale of Bogoso-Prestea and the
refinancing of the Macquarie loan facility, marked a significant
improvement in our financial position. In turn, this enabled us to
invest in key infrastructure necessary for the long-term growth of
Wassa, including electrical upgrades, an upgraded pump station and
the paste fill plant. The latter was delivered below budget and is
expected to be operational during Q1 2021, following a slight delay
due to the re-engineering of a component during the commissioning
phase.
During FY 2021, we expect to see similar grades at Wassa as
in 2020 with a small increase in mining rates and plan to continue
to process low grade stockpiles throughout the year. On that basis,
production guidance is set at 165-175koz with costs expected to
remain in line with recent performance, meaning that the
consolidated costs have decreased following the sale of
Bogoso-Prestea.
With the ongoing production delivery at Wassa we intend to
maintain our level of capital spend in 2021, with the focus turning
to increasing development and drilling activities in order to
support further volume increases which are anticipated in turn to
provide production growth and enhanced cash flow generation. We
will share more detail on this growth opportunity in the PEA which
we expect to complete in parallel with our reserve and resource
update during Q1 2021.
With our improved financial position, I am also pleased that we
are able to increase our exploration budget to $15m; the plan is to test both the underground
and surface targets that could add supplemental ore feed and the
potential for stand-alone targets along the 90km mineralized trend
to the south of Wassa."
FY 2020 RESULTS AND CONFERENCE CALL
Following the release of our FY 2020 financial statements
on February 24, 2020, the Company
will conduct a conference call and webcast on Thursday, February 25, 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: 34205106
Webcast:
https://produceredition.webcasts.com/starthere.jsp?ei=1421060&tp_key=082312cdc3
Following the conference call, a recording will be available on the
Company's website at: www.gsr.com
WASSA PRELIMINARY ECONOMIC ASSESSMENT
A preliminary economic assessment ("PEA") on the opportunity to
expand the Wassa operation to fully utilize the latent plant
capacity is nearing completion. This is expected to be released in
conjunction with the updated mineral reserve and resource estimate
in Q1 2021, around the time of our FY 2020 financial results. This
will provide a single, comprehensive, technical report that
describes the reserve mine plan and the potential expansion into
the southern extensions of the Wassa ore body.
2020 OPERATIONAL PERFORMANCE - WASSA MINE
Table 2: Wassa - Preliminary Q4 2020 and FY 2020 Operational
Data
|
Q4 2020
|
Q3 2020
|
QoQ %
change
|
Q4 2019
|
YoY %
change
|
FY 2020
|
FY 2019
|
YoY %
change
|
Tonnes mined
(kt)
|
384
|
456
|
(16%)
|
376
|
2%
|
1,636
|
1,422
|
15%
|
Underground mining
rate (tpd)
|
4,175
|
4,960
|
(16%)
|
4,087
|
2%
|
4,469
|
3,895
|
15%
|
Underground grade
(g/t)
|
3.4
|
2.8
|
21%
|
3.8
|
(11%)
|
3.1
|
3.6
|
(12%)
|
Tonnes milled
(kt)
|
494
|
554
|
(11%)
|
389
|
27%
|
2,011
|
1,548
|
30%
|
Head grade
(g/t)
|
2.8
|
2.4
|
16%
|
3.5
|
(20%)
|
2.7
|
3.3
|
(17%)
|
Recovery rate
(%)
|
95%
|
95%
|
-
|
95%
|
-
|
95%
|
96%
|
(1%)
|
Production
(koz)
|
41
|
42
|
(2%)
|
41
|
-
|
168
|
156
|
7%
|
Grade. The underground mine delivered grades of
3.4g/t in Q4 2020, 21% higher than achieved in Q3 2020 as the full
complement of jumbo operators were able to return to site during
the quarter and the resulting increase in the development rates
enabled a normalization of the blend of higher and lower ore grade
mining areas.
Mining rates. As mining transitioned into higher
grade areas, mining rates were reduced to allow for a
prioritization of development. As a result, the Wassa underground
mining rate reduced to 4,175tpd during Q4 2020, from a record
4,960tpd in Q3 2020. During FY 2020, the mining rate
averaged 4,469tpd. The flexibility of mining operations allowed for
the adjustment of mining rates during FY 2020 which enabled
the operation to deliver consistent quarterly production volumes,
despite operational challenges caused by the COVID-19 pandemic as
well as power supply fluctuations during the second half of
2020.
Recoveries. The performance of the processing plant
remained stable with recoveries at 95% during Q4 2020. This was the
case throughout FY 2020 despite the introduction of the
processing of low-grade stockpiles and accompanying increase in the
throughput rate to an average of 5,500tpd.
Production. Wassa produced 41koz of gold in Q4 2020,
with 38koz produced by the underground operation and 3koz from the
processing of low-grade stockpiles. Production totalled 168koz in
FY 2020, comprising of 160koz from the underground operation
and 7koz from low grade stockpiles.
EXPLORATION UPDATE
Exploration field activities were ramped up during Q4 2020
following the reduction that occurred earlier in the year as a
consequence of the measures to preserve cash adopted by the Company
in response to the COVID-19 pandemic. Work during the period
included further soil sampling on regional targets and surface
drilling at Wassa testing up-dip and down-dip extensions of
mineralization.
Wassa Drilling and Surface
Exploration
During Q4 2020, two surface drill rigs tested the up and
down-dip extensions of the known gold mineralization. One rig
focused on testing a 500 meter up-dip gap in the drilling between
shallow surface and deeper holes that intersected the high grade
shoots we are planning on mining from the existing underground
mine. The second rig tested the potential extensions of gold
mineralization below the current reserve stopes where
mineralization remains open. As of the end of FY 2020, there
were three holes drilled to test the up-dip extension of the gold
mineralization – these holes intersected extensions of the known
gold mineralization up-dip as well as in the footwall. One hole was
drilled to test the extensions of the mineralization below the
planned stoping areas and was successful in extending the
mineralization.
The drill testing of the extensions of the known mineralization
will continue into FY 2021 and further success in this program
will likely result in an infill drilling program being
proposed.
Geological interpretations that were conducted in late 2019 and
revised in FY 2020 generated another structural target to the
east of the main Wassa deposit. The Wassa deposit is controlled by
folding and the closures of these folds are known to host the
higher-grade mineralization which is being exploited via
underground mining. Re-interpretation of the airborne geophysical
data has identified what appears to be another fold closure to the
east of the Wassa mine. To follow up on this target, a soil
sampling program was conducted over the fold closure and results
have shown gold anomalism coincidental with the interpreted fold
closure. The FY 2021 exploration programs and budgets include
first pass air core drilling over this target.
HBB Regional programs
The Company's implementation of strict COVID 19 protocols and
procedures enabled exploration field work to recommence during the
latter part of Q3 2020, with five targets (referred to as the HBB
targets) being prioritized and sampled. Results received from all
five targets tested have confirmed the gold in soil anomalies and
helped to better define these targets. During Q4 2020, the targets
were visited by Golden Star
geologists and initial mapping and prospecting was conducted over
the gold in soil anomalies. The mapping and infill soil sampling
has been used to budget and plan the follow-up ground geophysics
and air core drilling that will be conducted in FY 2021.
2020 PERFORMANCE VS. GUIDANCE
Production
- Wassa. The guidance for Wassa was increased from
155-165koz to 165-170koz during the year. Following consistent
performance from the underground mine and the additional production
generated by the processing of low-grade stockpiles, the operation
was able to deliver on the increased guidance range.
- Consolidated. Group production, including discontinued
operations, totaled 190koz, in line with the 187-192koz guidance
range.
Cash operating costs
- Wassa. FY 2020 cash operating cost performance is
expected to fall in the upper half of the $620-660/oz guidance range for Wassa, mainly due
to the processing of low-grade stockpiles, higher gold transport
costs following the use of private charters due to the disruption
of commercial flights caused by the COVID-19 pandemic and higher
processing volumes. The low-grade stockpile initiative successfully
generated incremental production and cash while adding to the unit
costs given the lower grade of the material processed.
- Consolidated. The consolidated cash operating costs are
expected to sit within the $810-850/oz guidance range.
AISC
- Wassa. Throughout FY 2020, the AISC performance tracked
towards the upper end of the $930-990/oz guidance range as a result of the
impact of higher gold prices driving higher royalty payments to the
Government of Ghana and the
restatement of the AISC performance to fully allocate the general
and administrative ("G&A") expense to Wassa following the sale
of Bogoso-Prestea. Following an acceleration of sustaining capital
in Q4 2020 (as discussed below), the FY 2020 AISC performance is
expected to exceed the upper end of the guidance range by
approximately 2%.
- Consolidated. The consolidated AISC performance
(including discontinued operations) is expected to fall within the
$1,100-1,180/oz guidance range.
Capital expenditure
- Wassa. The improved financial position of the business
and the sustained increase in the gold price allowed the Company to
increase its investment in capital during Q4 2020. As a result,
Wassa is expected to exceed the revised capital guidance of
$38-42m. The preliminary unaudited results show total
capital expenditure of approximately $46m during FY 2020, in line with our initial
guidance.
- Consolidated. As a result of the increase in capital
investment at Wassa during Q4 2020, we expect to slightly exceed
the consolidated capital guidance range of $47.5-51.5m.
BALANCE SHEET – FY 2020 CLOSING FINANCIAL POSITION
The Company ended FY 2020 with $61
million of cash and gross debt of $106 million, for net debt of $45 million. The cash position increased by
$7m during FY 2020,
notwithstanding the significant investment in infrastructure made
during the year at Wassa and $31m of
negative free cash flow at the Bogoso-Prestea mine and related
transaction costs up until the completion of its sale on
September 30, 2020.
Table 3: Preliminary Unaudited Net Debt Position
(US$m)
|
Q4-20203
|
Q3-2020
|
Q4-2019
|
Cash
|
61
|
48
|
53
|
Debt1
|
106
|
98
|
107
|
Net
debt
|
45
|
50
|
53
|
|
Notes:
|
1.
|
The debt balances for
Q4 2020 are preliminary and are subject to change resulting from
adjustments to the amortization of arrangement fees or the present
value of the debenture.
|
FY 2021 PRODUCTION AND COST GUIDANCE
Table 4: FY 2021 Production and Cost Guidance
|
2021
Guidance
|
2020
Guidance
|
Gold Production
(koz) – Wassa
|
165-175
|
165-170
|
Cash Operating
cost1 ($/oz) – Wassa
|
660-700
|
620-660
|
AISC1
($/oz) – Wassa
|
1,000-1,075
|
930-990
|
|
Notes:
|
1.
|
See "Non-GAAP
Financial Measures".
|
FY 2021 Production Guidance
Wassa is expected to
produce between 165-175koz in FY 2021, in line with the
FY 2020 production performance which benefitted from an
increase in the underground mining rates and 7koz of production
from the processing of low-grade stockpiles. The incremental
contribution from stockpiles is expected to continue throughout
2021 with a little under 1,000tpd of stockpiled material at a grade
of approximately 0.6g/t expected to be processed. This initiative
remains subject to gold prices sustaining near current levels.
Mining rates. We expect the FY 2021 mining rates to
exceed 4,500tpd, marginally ahead of the 4,469tpd achieved in
FY 2020. It is anticipated that the planned investment in 2021
in drilling and development will help unlock further increases in
the mining rates in the future.
Grades. Underground mined grades are expected to remain
in line with the average grade achieved in FY 2020. The infill
drilling program continued to progress during FY 2020 and, as
a result, approximately 80% of the FY 2021 mine plan is
expected to be comprised of ounces from the measured resource
category. We are currently finalising our reserve and resource
calculations for FY 2021 and the PEA. As part of this process,
we will be reviewing the mine plan and future grade profile at
Wassa. This work includes an update of the modifying factors in
mine plans for recent stope performance and an optimized cut-off
grade.
Cost Guidance
Cash operating costs. The $660-700/oz cash cost guidance for FY 2021
shows an increase over recent performance due to the planned
commissioning of the paste fill plant in Q1 2021. This will add
$5-7/t to the mining unit cost for
each tonne of paste fill delivered, and the overall impact on
mining unit costs in FY 2021 will be $3-4/t as the plant ramps up to full
capacity.
AISC. The FY 2021 AISC guidance at Wassa is expected
to be higher than the recent performance, due to the costs from the
paste fill as well as the step up in sustaining capital associated
with the planned investment in underground development and
drilling. The continuation of the processing of low-grade
stockpiles in FY 2021 will include the material from the Skyway
stockpile during the second half of 2021 which is held in inventory
and will result in a non-cash cost as the material is drawn down,
adding $15/oz (non-cash) to the
overall AISC. This is in addition to the incremental processing
costs associated with the low-grade stockpile, as seen in FY 2020.
The low-grade stockpiles processed during FY 2020 were not held
with an inventory value and therefore had a more limited impact on
the AISC.
Right-to-use asset. As a result of the IFRS 16 -
Leases accounting standard, the completion of the construction of
the GENSER power plant will result in the inclusion in the
financial statements of a non-cash $33.5m right-to-use asset addition to PPE and the
recognition of a corresponding lease liability during Q1 2021. An
element of the cost of power supplied by the GENSER plant will be
accounted for as depreciation of the capital asset and as a finance
cost. Approximately $20/oz of the
power cost will therefore not be allocated to cash operating costs
or AISC.
FY 2021 CAPITAL EXPENDITURE AND EXPLORATION GUIDANCE
Table 5: FY 2021 Capital Expenditure and Exploration Guidance
Summary
($m)
|
2021 Guidance -
Wassa
|
2020 Guidance –
Wassa3
|
Capital
Expenditure
|
|
|
|
Sustaining Capital2
|
26-28
|
20-22
|
|
Expansion Capital2
|
19-22
|
18-20
|
|
|
Total Capital
Expenditure
|
45-50
|
38-42
|
|
|
|
Exploration
|
|
|
|
|
Total Exploration
spend
|
15
|
6
|
|
Notes:
|
1.
|
See "Non-GAAP
Financial Measures".
|
2.
|
Expansion capital are
those costs incurred at new operations and costs related to major
projects at existing operations where these projects will
materially increase production. All other costs relating to
existing operations are considered sustaining capital.
|
3.
|
The revised 2020
guidance was announced on October 28, 2020.
|
Capital Expenditure Guidance
Capital programs at Wassa
are expected to total $45-50 million
in FY 2021. This represents an increase on the c.$46m invested in Wassa in FY 2020, with a
particular focus on major infrastructure projects. These projects
have now been completed and it is our expectation that investment
in FY 2021 will focus on drilling and development. In order to
ensure a robust balance sheet through the repayment of the 7%
convertible debentures maturing in August
2021, and to allow for a ramp up in drilling and development
activities, 40% of the total spend is budgeted for the first half
of 2021 and the remaining 60% during the second half of 2021.
Sustaining capital is expected to total $26-28m, of which
$10m is allocated to capitalized
development and $4-5m to the expansion of the tailings storage
facilities.
Expansion capital is expected to total $19-22m, of which
$7-8m
is allocated to capitalized drilling, $7m to ventilation infrastructure and
$5m to capitalized development.
Right-to-Use Asset
As a result of the IFRS 16 - Leases
accounting standard, the completion of the construction of the
GENSER power plant will result in the inclusion in the financial
statements of a non-cash $33.5m
right-to-use asset addition to PPE and the recognition of a
corresponding lease liability during Q1 2021. The capital
expenditure guidance detailed above excludes this non-cash
accounting asset addition.
Exploration Budget and programs
A $15m exploration budget has been approved for
FY 2021. Of this, $7m will be
invested in and around the Wassa mine. This work will include the
continued wide spaced drilling up and down dip of the current
resources and reserves as well as drill testing of seven targets to
the south and east of the main Wassa deposit. Approximately 28,000
meters of combined diamond and reverse circulation drilling has
been planned. In addition, 9,000 meters of air core drilling has
been planned to test the coincidental geophysical and geochemical
anomaly over the eastern fold closure target.
A total of $6m has been allocated
to further testing of the five HBB targets followed up in
FY 2020 as well as five additional targets along the HBB
corridor. Approximately 50,000 meters of air core drilling will be
conducted over the soil geochemical anomalies defined last year and
in past programs. Several of these targets will be further
delineated with ground geophysics prior to drilling. Pending
positive results from the air core drilling, approximately 15,000
meters of deeper reverse circulation with diamond core tails has
been planned for initial follow up. Several of the historical open
pits on Golden Star's Benso mining
lease have never had any drilling beneath them and these deposits
have higher grade cores that could potentially form underground
targets. In light of this, a further 12,000 meters of reverse
circulation and diamond core tails drilling has been budgeted to
test below these pits on wide spacing.
The Abura project operates under an earn-in agreement between
the Company and a Ghanaian concession owner. This project is
located to the South West of the Huini-Butre and Benso concessions
and has been drilled with shallow rotary air blast holes, which
returned interesting results that require follow-up with deeper
reverse circulation and diamond drilling. The FY 2021 budget
provides for 5,000 meters of drilling with approximately
$0.7m being allocated to this
program.
These regional exploration programs have been designed to move
the various prospects up the exploration pipeline, and to assess
whether further work, in 2022 and beyond, is justified.
The remaining portion of the FY 2021 budget allocation is
for exploration equipment and supplies.
Company Profile:
Golden Star is an established
gold mining company that owns and operates the Wassa underground
mine in the Western Region of 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 2021; the
ability to achieve the 2021 guidance; the sources of gold
production at Wassa during 2021; expected grades and mining rates
for 2021; increasing development and drilling activities at Wassa;
the ability to increase production and improve cash flow
generation; the expected allocation of the Company's capital
expenditure; completion of the PEA and timing thereof; completion
of the reserve and resource update, and timing thereof; the
Company's ability to repay the 7% convertible debentures maturing
in August 2021; 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 processing of low grade stockpiles at Wassa for FY 2021;
implementation of the Company's exploration programs for the FY
2021 and the timing thereof; and the potential impact of the
COVID-19 pandemic on the Company's operations and the ability to
mitigate such impact. 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 September 30,
2020, which are available at www.sedar.com.
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SOURCE Golden Star Resources Ltd.