Higher production, earnings for Golden Star

Better-than-expected gold production and a higher realized price for that production led Golden Star Resources (GSC-T) to record earnings during the three months ended June 30.

During the quarter, Golden Star posted net income of US$1.6 million (or 2.4 per share), compared with a year-ago net loss of US$1.4 million (4 per share). Revenue between the two periods climbed to US$9.5 million from US$6.6 million. For the first six months of 2002, net income came to US$3 million (5 per share) on revenue of US$18.7 million, compared to the year-ago net loss of US$3.3 million (8 per share) on US$11.2 million.

The recent quarter’s gold production piled up to 30,419 oz. at a total cash cost of US$195 per oz., better than the 24,695 oz. at US$288 per oz. during the year-ago period. The company realized US$213 per oz. for its quarterly production, an improvement of US$44 per oz. from the previous year. For the first half of 2002, gold production topped out at 62,064 oz. at US$195 apiece, up from 42,506 oz. at US$282 per oz. During the period, the company realized US$265 for each ounce produced.

The increase in production is attributed to improved recoveries. So far this year, the Bogoso mill at the company’s 90% owned Bogoso-Prestea open-pit gold mine in Ghana ran through ore from the Prestea surface concession, whereas production in the first six months of 2001 came from difficult to process transition ores encountered on the Bogoso concession.

Production and cash costs came in below expectations owing to changes to the Bogoso-Prestea mine plan in response to the identification of additional reserves at the northern end of the Prestea property.

Looking ahead, Golden Star expects lower production and higher costs in the third quarter to be offset by an improved fourth quarter that will see initial mining of higher-grade ore from the Plant-North deposit. Third-quarter production is pegged at 30,000 oz. at US$190 per oz., followed by an estimated 42,000 oz. at US$155 per oz. in the fourth, based on a gold price of US$312 per oz. The company pegs full-year earnings at US10 per share.

In addition to its stake in the Bogoso-Prestea open-pit operation, Golden Star has a 45% managing equity interest in the Prestea underground mine. The company is also in the process of acquiring a stake in the Wassa open-pit gold project in Ghana.

In June, Golden Star boosted proven and probable reserves at Bogoso-Prestea to 20.6 million tonnes averaging 3.15 grams gold per tonne for about 2.1 million oz. of contained gold, an increase of 263,467 oz. from the end of 2001. Sixty-nine percent of the reserve is classified as proven, up from 56%. The increase in ounces is thanks to drilling on the Buesichem, Brumase-Beposo and Plant-North deposits. Further drilling is planned for Plant-North, which remains open to the south.

Of the reserve, 5.5 million tonnes grading 2.22 grams gold per tonne are in oxide material, 1.5 million tonnes running 3.18 grams are classified as transitional oxide-sulphide. Another 4.1 million tonnes are primary ore averaging 3.77 grams, and the gold in another 7.7 million tonnes grading 3.49 grams is associated with refractory sulphides. Refractory transitional ores make up 1.8 million tonnes averaging 3.1 grams gold.

Likewise, measured and indicated resources (including reserves) climbed to 30.4 million tonnes grading 3.25 grams for about 3.2 million oz., a 6% increase since the end of December. Of the total, 8.6 million tonnes of 3.21 grams gold is primary ore.

In other news, Golden Star’s 73%-owned subsidiary Guyanor has agreed to sell its 100% stake in Societe des Mines de St-Elie (SMSE), which holds the mining rights to the St. Elie gold property in French Guiana.

Under the deal, Compagnie Miniere Esperance (CME) can pick up the operation for US$500,000 on closing and by relinquishing a gold royalty totalling about 3,000 oz. of gold owed by Guyanor.

The deal also calls for Guyanor to retain a 2.5% royalty on all future production from St. Elie, plus an additional 2.5% royalty at gold prices above US$350 per oz., capped at US$7.5 million.

The deal requires the approval of the French Industry Ministry.

CME intends to target known gold resources at St. Elie in early 2003.

Guyanor plans to apply the cash proceeds from the sale to its US$11-million debt owed to Golden Star.