Golden signs Prestea deal with Barnex

Denver — Golden Star Resources (GSC-T) has cleared another hurdle in its acquisition of the Prestea gold mine in southwestern Ghana.

The Denver-based company has agreed to acquire former operator Barnato Exploration’s (Barnex) stake in Prestea in exchange for a package that’s worth at least US$10 million.

The package consists of US$2 million in stock (3.3 million shares valued at US60 each), 1.3 million warrants exercisable at US70 per share and a sliding royalty on the first 1 million oz. from Prestea and the nearby Bogoso gold mine.

The royalty will be paid quarterly. It will vary from US$6 per oz. (at a gold price less than US$260 per oz.) to US$16.80 per oz. (at a gold price of more than US$340 per oz.).

In a side deal with Barnex, Golden Star has also agreed to purchase the rights to a 60% interest in the Obuom gold property, which lies northeast of the giant Obuasi mine on the Ashanti gold trend. The company hopes to amass a significant land position in the region.

The Prestea deal is critical because it complements an early June agreement with the worker-owned Prestea Gold Resources concerning the surface rights on the property.

The Ghana government has already given approval in principle for the Prestea Gold Resources transaction. This is important as the government blocked Barnex’s previous attempt to sell the mine to Golden Star, when in October 2000, it nullified Barnex’s rights to the mine and granted Prestea Gold a 15-year mining license.

Barnex disputed the government’s actions, but Golden Star has been careful to complete deals with both parties to secure the property.

Under Golden Star’s deal with Prestea Gold, Prestea will surrender its mining license for the property, paving the way for the government to issue two new mining leases. The surface mining lease will go to Golden Star, allowing the company to mine ore to a depth of 200 metres.

The underground mining lease (valid below 200 metres) would go to Prestea Gold. Golden Star has agreed to pay US$2.1 million for the right to manage the underground mine and to acquire a 35% interest in Prestea Gold by paying a further US$1.9 million.

The board of directors of Prestea Gold have ratified the deal and Golden Star expects to wrap up the acquisition by August. The transactions are still subject to formal assent from the Ghana government, the South African Reserve Bank, Barnex shareholders and the Toronto Stock Exchange.

Golden Star expects to extend the life of its 70%-held Bogoso mine by trucking oxide feed to the mill there from Prestea, which 12 km distant. The company is in the process of acquiring another 20% from its Australian partner, Anvil Mining. The Ghana government holds the remainder.

Golden Star recently raised US$1.3 million from 1.5 million warrants exercised at US42.5 per share and 1.24 million warrants and broker warrants exercised at US52 per share.

The company has 41 million shares outstanding.