Golden Star to double production

Denver-based Golden Star Resources (GSC-T) expects to be pouring gold from its Wassa project, 150 km west of Accra, Ghana, in the first quarter of 2004.

An independent feasibility study envisages an open-pit, carbon-in-leach (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.

Probable reserves total 14.7 million tonnes grading 1.3 grams gold, based on a gold price of US$300 per oz. Of that amount, 3.4 million tonnes grading 1.15 grams gold are contained in weathered oxide ores, whereas 6.9 million tonnes grading 1.7 grams gold are in sulphide ore. The reserves also include 4.4 million tonnes grading 0.7 gram gold, which are on the previous owner’s heap-leach pads.

Separately, indicated and inferred resources are pegged at 31.9 million tonnes grading 1.17 grams gold, based on a gold price of US$325 per oz. and a cutoff grade of 0.4-0.6 gram gold per tonne.

Golden Star says there is exploration potential both along strike from the pit and south of the pit along twin, 8-km-long, parallel soil anomalies running through the property. The company anticipates spending US$7 million on exploration in the vicinity of its mines in 2003; another US$6 million is budgeted for 2004.

Moydow Mines International (MOY-T) and London-listed Glencar Mining developed Wassa as an open-pit, heap-leach operation in the 1990s at a cost of US$43.3 million. Production began in early 1999 at an annual rate of 95,000 oz. The cash cost was US$161 per oz.; the projected mine life, six years. However, recovery from the heap leach failed to live up to expectations, and in 2001 the project’s secured lenders agreed to sell it to Golden Star.

Under Golden Star’s regime, Wassa’s remaining heap-leach material will be reprocessed at US$211 per oz. during the first year of production, which should result in 75,000 oz. The reprocessing of this material will also free up the leach-pad area for tailings. Open-pit mining would begin in late 2004, once the leach pads have been cleared. Recovery from the material on the heaps is pegged at 90%; the open-pit ore is expected to yield 92% of its gold.

Golden Star now intends to buy additional mining equipment and mine Wassa on its own, though it says it may consider contract mining. The life-of-mine stripping ratio is 2.8 to 1.

Production costs at Wassa are pegged at US$1.06 per tonne mined and US$3.60 per tonne processed. Administrative costs are around US90 per tonne. The costs vary year to year based on the mix of reclaimed material from the heap-leach pads, weathered oxide material, and primary oxide material. In-country overhead costs are estimated to be US$3 million per year.

Based on a gold price of US$325 per oz., the project generates an internal rate of return of 28%. This climbs to 38% at current gold prices.

Construction costs at Wassa have risen to US$18.8 million from an initial estimate of US$14 million, owing mostly to a strengthening rand, the scaling-up of the proposed processing plant, and the use of power from the national grid instead of Gold Fields‘ (GFI-N) Abosso mine as originally planned.

Rebate

GSC expects to recoup more than half of the US$2.8 million cost of building a power supply line from the national grid to Wassa. The company will receive a rebate on future power use, and in return, the power line will become part of the national infrastructure.

The company has also budgeted an additional $6.7 million for infrastructure, mobile equipment, preproduction costs, and a $1-million contingency. The US$25.5 million in overall development costs will be covered with cash on hand.

Those development costs also include $2.5 million paid for two ball mills, plus design and engineering work on the 10,000-tonne-per-day milling and CIL plant. Construction of the plant is to begin early next year.

Golden Star has a 90% interest in the project; the government of Ghana is carried at 10%.

Golden Star acquired Wassa in September 2002 for US$1.6 million in cash, a US$1.8 million, 5-year loan to the vendor, and two royalties. One royalty is fixed at US$8 per oz. on the first 700,000 oz. of production; a second, uncapped royalty varies between US$7 and US$15 per oz., depending on the gold price.

Based on gold prices and reserves outlined in the feasibility study, the total acquisition cost is around US$15.7 million, or US$26 per reserve ounce.

“The main reasons we acquired the Wassa property are its proximity to our Bogoso-Prestea operation, existing infrastructure and equipment, known resources, and excellent exploration potential,” says Golden Star President Peter Bradford.

The Prestea open-pit mine, Golden Star’s sole producer, is 35 km to the west, and should begin producing 140,000 oz. gold at a cash cost of US$185 apiece in 2003.

Obotan

Expansion plans at the operation involve moving the recently acquired Obotan mill (acquired from Resolute Mining for US$4.3 million) and CIL circuit to the Bogoso-Prestea complex to permit milling of non-refractory gold ores. Bogoso’s existing mill will be converted to handle refractory sulphide ore using bio-oxidation. The US$60-million plan also calls for an expansion of the present mining fleet. The company will look for external funding.

Technical studies aimed at confirming the economic viability of the expansion are expected to wrap up by year-end. If approved, the expanded Bogoso-Prestea and Wassa operations would produce a combined 350,000 oz. gold annually by 2005.

Golden Star recently bolstered its land package around Bogoso-Prestea by acquiring Ashanti Goldfields‘ (asl-n) Mampon property, which is home to a probable reserve of 1.5 million tonnes grading 5 grams gold per tonne. In the third quarter, the company hopes to take possession of Birim Goldfields‘ (bgi-t) surrounding Dunkwa land package, which includes the small Opon gold deposit with a probable reserve of 108,000 tonnes grading 2 grams per tonne. That deal requires the approval of the government, which has a 10% interest in the properties (T.N.M., April 28-May 4/03).

The two additions give Golden Star control of 84 km of strike length on the Ashanti trend, centred on its Bogoso-Prestea mine.

Golden Star’s grand plan for Wassa and Bogoso-Prestea would require capital expenditures of between US$80 million and US$95 million over the next 18 months.