Higher mining and processing costs associated with transitional ore at the Bogoso-Prestea mine in Ghana cut into Golden Star Resources‘ (GSC-T) earnings during the second quarter.
During the three months ended June 30, Golden Star earned US$1.1 million (or US0.8 per share), that’s off 72% from the US$ 4 million (US4 per share) it earned a year earlier. Sales between the two periods rose by US$3.8 million to US$16.5 million.
For the first half of 2004, Golden Star’s earnings were off 21% at US$6.3 million (US5 per share); revenues rose 30% to US$36.4 million.
The company’s first-quarter gold production from Bogoso-Prestea amounted to 38,805 oz., with a realized price of US$399 per oz., compared with the year-ago 36,042 oz. sold at US$347 per oz. For the half-year, production increased by about 10% to 86,007 oz.; the company’s realized price jumped by US$53 per oz. to US$404 per oz.
On a gloomier note, the quarter’s cash operating costs increased by 32% cent to US$251 per oz., and by about 18% to US$213 for the first half. The company says the increases were forecast, and result from the mining and processing of harder, more metallurgically complex transitional ore. Costs are expected to fall by about 10% during the second half of the year, as commissioning costs for the new flotation circuit at the Bogoso plant are completed.
The Bogoso plant’s new flotation circuit is designed to improve gold recovery from sulphide and transition ores; the circuit was up to design capacity by quarter’s end. In all, the operation milled 421,289 tonnes of ore running 3.5 grams gold, and averaged a recovery rate of 63.8%.
Meanwhile, expansion plans at Bogoso-Prestea continue with submission of an environmental impact statement for the 1.5-million-tonne-per-year Bondaye carbon-in-leach plant. Initial permits are expected during the third quarter, with construction beginning immediately thereafter. Construction is expected to wrap up in mid-2005. The company is currently refurbishing a used plant acquired in 2003.
The US$17 million plant will process ore from the Beta Boundary pits, and the deeper sulphide ore from the Plant-North pit. Proven and probable reserves at the Plant-North pit total 9.9 million tonnes grading 3.1 grams gold per tonne. Plans also call for upgrading Bondaye with a bio-oxidation circuit in 2008 to handle deeper sulphides from the Beta Boundary pits. Bondaye is expected to annually produce about 120,000 oz. of gold at an average cash cost of around US$200 per oz.; recoveries are pegged around 82%.
The additional capacity will see the mining rate at Bogoso-Prestea doubled, and requires an upgrade to 95-tonne trucks and larger loading equipment at an estimated price of US$27.5 million.
Golden Star also plans to convert the Bogoso Plant to bio-oxidation to process refractory sulphides on the Bogoso concession. Engineering design and environmental work will begin later this year; construction is slated for early next year, and completion is expected by the end of 2005. The project carries a US$25 million price tag, and is expected to generate recoveries of 82-88%.
On the takeover front, Golden Star’s CEO Peter Bradford said he expects a successful conclusion to its tender offer for all of the shares of Iamgold (IMG-T), despite the fact that it is currently below Iamgold’s share price. Iamgold says it plans to unveil its preferred suitor next week. The company says it has up to four candidates currently completing due diligence.
At quarter’s end, Golden Star had US$85.8 million in cash and equivalents; debt stood at US$1.4 million.
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