At the Bogoso-Prestea open-pit mines in Ghana,
In doing so, Golden Star delivered 2.75 million of its shares to Barnex. The shares are valued at around US$12 million in all. Golden Star now has around 84 million shares outstanding.
“The acquisition of the Barnex royalty will result in an immediate cash saving to Golden Star and a reduction in our production costs at Bogoso-Prestea,” says Golden Star CEO Allan Marter.
The royalty began at US$6 per oz. at gold prices below US$260 per oz., topping out at US$16.80 per oz. at prices exceeding US$340 per oz. In recent times, the royalty represented about US$4 million in annual cash flow.
Golden Star now has an unencumbered 90% ownership of the Prestea-Bogoso operation, with the government of Ghana owning the remainder.
With ore sourced only from Prestea’s Plant North pit, Golden Star produced a record 50,871 oz. gold in the third quarter at a total cash cost of US$182 per oz. — nearly double the 27,681 oz. produced at US$222 per oz. a year earlier. Likewise, the first nine months of the year saw a record 129,269 oz. produced at US$196 per oz., compared with 89,745 oz. at US$203 per oz. a year earlier.
The lower costs and higher production are attributed to higher grades and improved recoveries. During the quarter, average grades climbed 70% to 3.7 grams gold per tonne, whereas during the 9-month period grades rose 46% to 3.44 grams gold. Gold recovery at the Bogoso mill averaged 87.9% in the quarter (up from 74.2% a year earlier), and 79.8% during the nine months (up from 72.2% a year earlier).
The company realized an average of US$363 for each ounce produced during the quarter and US$356 apiece for the first nine months of the year. Both prices represent improvements of about 16% over the corresponding periods of 2002.
The company’s solid operational performance translated into record third-quarter income of US$6.2 million (or 5.4 per share) on revenue of US$18.8 million, compared with year-earlier earnings of US$800,000 (1 per share) on US$8.4 million in sales. Nine-month earnings totalled US$14.7 million (13.8 per share) on US$46.6 million in revenue, up from earnings of US$3.8 million (5.5 per share) on $27.4 million in the year-earlier period.
Third-quarter cash flow from operations (before working capital changes) amounted to US$8.4 million (up from US$1.4 million in the 2002 quarter), whereas 9-month cash flow was US$20.5 million (up from $5.8 million).
Looking ahead, GSC expects fourth-quarter production to slip slightly on lower grades and recoveries, and output in 2004 is expected to be lower as plans call for the mining of mostly transitional and fresh ore at the Plant North pit.
The company hopes to offset the decline by relocating a 4,500-tonne-per-day carbon-in-leach (CIL) plant, acquired for US$4.3 million in July. Golden Star intends to add a bio-oxidation circuit to Bogoso’s existing 6,000-tonne-per-day CIL plant to allow for the processing of refractory ores.
In all, the plan, which also includes beefing up the mining fleet, carries an estimated price tag of US$60 million. Financing will likely come from a combination of cash flow, debt, and equity financings. When the dust settles, production from Bogoso-Prestea is expected to increase to about 175,000 oz. in 2004.
Underground exploration drilling and sampling of the Prestea deposit began in the third quarter with the goal of evaluating the potential for underground mining.
Meanwhile, GSC expects to obtain a mining permit for the nearby Wassa gold project by year-end. An independent feasibility study envisages an open-pit, CIL operation capable of producing more than 140,000 oz. gold annually at an average cash cost of US$200 per oz. over four years.
The operation would target 3.4 million tonnes of oxide ore grading 1.15 grams gold per tonne plus 6.9 million tonnes of sulphides averaging 1.7 grams gold. Also, past operators left behind some 4.4 million tonnes grading 0.7 gram gold on the heap-leach pads.
Projected construction and development costs at Wassa have grown to US$25.5 million, with an additional US$14.2 million from a mining fleet to be acquired in 2004 and 2005. Development will be funded with cash on hand and operational cash flow.
Wassa’s first gold pour is slated for early 2004, resulting from the milling of remnant heap-leach material. Once the open-pit ramps up, annual production is expected to reach 140,000 oz. at an average cash operating cost of US$200 per oz.
In October, GSC bought back Wassa’s associated debt and royalties from a banking syndicate led by Standard Bank London for US$11.5 million. Golden Star has a 90% interest in the project; the government of Ghana is carried at 10%.
Also during the third quarter, GSC acquired
At quarter’s end, the company had US$57.3 million in cash and equivalents, up from US$20 million at the end of 2002. The company also had 121.2 million shares outstanding.
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