Golden Star acquires Prestea concession

Denver-based Golden Star Resources (GSC-T) has reached an agreement with Ghana’s Prestea Gold Resources (PGR), a worker-owned company, to acquire its namesake concession.

Control of the Prestea deposit, formerly operated by JCI subsidiary Barnato Exploration, is important to the future of Golden Star’s 70%-owned Bogoso gold mine, 12 km away. Golden Star covets Prestea as a source of oxide feed for the Bogoso mill, even though the interest in oxides will defer development of sulphide resources at Bogoso. Near-surface resources at Prestea could extend the life of the existing operation at Bogoso for five years.

PGR, was formed in 1998 by unionized miners, who wanted to reopen the Prestea mine after Barnex decided to close it. PGR was granted a 6-month sub-lease subordinate to Barnex’s mining lease. In October 2000, the government nullified Barnex’s rights to Prestea and granted PGR a new, 15-year mining lease. Barnex disputed the decision.

Golden Star had been seeking a deal with Barnex to take over the property, and in August 2000 signed a letter of intent to acquire Prestea from Barnex for US$12 million. When the government of Ghana suspended Barnex’s mining right, negotiations broke off.

The new deal would see Barnex’s current mining lease on Prestea cancelled, subject to Barnex and Golden Star’s reaching a satisfactory agreement to compensate Barnex for the loss of its lease. Then PGR would take out a new lease covering resources below the 200-metre depth, and Golden Star would lease the resources from 200 metres to surface. Any changes to the mining lease arrangements would be subject to the approval of the government of Ghana.

Golden Star also agreed to a US$2.1-million option payment to PGR at closing. The option gives Golden Star the right to manage the underground mine and to acquire a 35% interest in PGR by paying a further US$1.9 million.

Another condition of the deal is that Golden Star be responsible for rehabilitation of the underground infrastructure if there is any impact from Golden Star’s surface operations.

“The acquisition represents a quantum leap for the company,” says Allan Marter, Golden Star’s chief financial officer. “Instead of having 12 months of reserves at Bogoso, it gives us the potential for more than 12 years.”

Historic producer

Prestea is said to have produced more than 7 million oz. gold since the 1880s. Since 1995, Barnato has invested US$22 million in the project in the form of property payments, exploration expenditures and feasibility costs.

Golden Star is also seeking to consolidate its interest in Bogoso, which stands at 70% (equity). The company has agreed to acquire Australian-based Anvil Mining’s 20% interest in Bogoso in return for 3 million shares of Golden Star, a 7.9% stake. Golden Star also assumes the Australian company’s share of project debt and rehabilitation expenses.

Anvil, which is concentrating on developing its Dikulushi copper-silver deposit in the Democratic Republic of Congo, expects the Bogoso sale will give it more flexibility in financing further work at Dikulushi. It would still have an indirect interest in the project through its Golden Star shareholding.

The government of Ghana, which holds the remaining 10% interest in Bogoso, has yet to consent to the transaction, and the deal must also go to a vote of Golden Star’s shareholders at the company’s annual meeting. The issue of shares is subject to the approval of the Toronto Stock Exchange.

Golden Star posted a loss of US$1.9 million (or US6 per share) for the three months ended March 31. Lower realized prices for gold and lower production from Bogoso both cut into revenue, which was down to US$4.7 million from US$8.7 million in the corresponding quarter of 2000. Last year, Golden Star lost US$100,000 in the first quarter.