Golden Star backs up Bogosu power (August 27, 2007)

Golden Star Resources (GSC-T, GSS-X) has contracted for a 20-megawatt power station to be built at its Bogosu-Prestea gold mine complex in central Ghana, and will buy at least half of the plant’s capacity.

The agreement is with a local power provider and is Golden Star’s reaction to a hydroelectric power shortage in Ghana during the 2006 dry season, when the Volta River Authority, the national power utility, instituted a program of load management and power cuts to the country’s large gold mines. Golden star, AngloGold Ashanti (AU-N, AGD-L) and Gold Fields (GFI-N, GOF-L) all were forced to cut back production or use diesel generators, which provided power at a higher cost than the national hydroelectric grid.

The 20-megawatt station, along with a 25% share in a 100-megawatt power plant the mining industry is building, will allow Bogosu to operate entirely independent of the national grid when necessary.

Golden Star lost US$2.3 million (US1 per share) on revenues of US$28.1 million in the second quarter of 2007, down from a profit of US$13.1 million on US$28.7 million in revenue in the second quarter of 2006. For the first six months of the year it lost US$5.9 million (US3 per share) on US$58 million in revenues, against a US$32.4-million profit on revenues of US$53.6 million in the first half of 2006.

Production in the first six months was down about 2,000 oz. year-on-year, to 88,000 oz., and although realized prices were up to US$658 per oz. from US$594 a year ago, cash operating costs rose to US$552 per oz. from US$494.

Increased production from the Wassa gold mine offset decreased production from Bogosu-Prestea during the first half. While Wassa improved its cost performance, with a cash cost of US$470 per oz. against US$486 in the corresponding period of 2006, costs at Bogosu-Prestea rose to US$699 per oz. from US$501.

Commercial production from Bogosu’s sulphide plant started at the beginning of the third quarter. The company expects the plant to be producing at design capacity by the end of the year. Peter Bradford, president of Golden Star, also announced that he would be retiring from the company at the end of 2007.