conix
5 years ago
Gold investors see M&A, cost cuts unlocking $13bn
NEW YORK – A group of investors including the hedge fund founded by-billionaire John Paulson said “significantly mismanaged” gold companies could unlock $13-billion in value through mergers and cost cuts.
The Shareholders’ Gold Council of 18 investors including Egyptian-billionaire Naguib Sawiris’s La Mancha found that the median spending of senior gold producers is double that of mining companies that produce other metals, including Vale, the world’s largest iron-ore producer.
“The inescapable conclusion of our analysis is that gold producers are significantly mismanaged from a G&A perspective and that gold company boards need to do a better job holding management teams to account,” the council said. The potential to create more value is highest among midtier miners which were found to be “most inefficient” in managing costs.
The investors are looking to boost shareholder value in gold mining companies to capture the benefits from the precious metal’s meteoric rise to a six-year high. In the three years through Wednesday, the VanEck Vectors Gold Miners ETF has risen less than 5%, trailing the 13% rally in bullion.
About $2.5-billion of the combined profits of 47 gold companies the council tracked were spent on salaries and costs of head office management and boards, amounting to more than 10% of their aggregate market value, the council said in a report released Thursday.
NO-PREMIUM MERGERS
The potential for cuts is greater among so-called mid-tier gold producers, the report said. Their general and administrative spending amount to almost 13% of their earnings, according to the median of 23 miners reviewed in the report.
SGC urged the mid-tier companies to pursue no-premium mergers to cut duplicate corporate structures and achieve economies of scale. If the number of mid-tier companies were reduced by half, the council estimated that about $2.4-billion to $3.2-billion of value could potentially be unlocked.
Of the 12 senior gold producers it cited, Polymetal International and Kinross Gold Corp had the highest spending – 17.5% and 11% of their earnings before interest, taxes, depreciation and amortisation, respectively, the council said. In the case of mid-tier companies, the biggest expenditure was posted by Golden Star Resources at 33%, it said.
“Kinross regularly undertakes cost reviews, and earlier this year, we streamlined our leadership structure, which the simple analysis fails to take into account,” a Kinross spokesman said in an emailed statement. “It is also worth highlighting that it is not an apples-to-apples comparison, as the report’s simple analysis notes itself that different companies calculate G&A differently.”
A spokesperson for Polymetal said the miner didn’t immediately have enough information to be able to comment. Golden Star didn’t immediately respond to an email.
“Gold mining is simpler than other types of mining, including because of the fact that gold doré bars can be transported at very low costs by plane,” the council said. “Copper and iron ore producers have complex selling arrangements for different concentrates and blends as well as heavy trucking and rail needs to deliver final products in bulk size, necessitating higher G&A expenses.”
Other members of the council include John Hathaway, the general partner at Tocqueville Asset Management, and activist fund manager Livermore Partners.
EDITED BY: Bloomberg
https://m.miningweekly.com/article/gold-investors-see-ma-cost-cuts-unlocking-13bn-2019-09-13/rep_id:3861
DD
6 years ago
Golden Star Reports Second Quarter 2018 Results
PR Newswire PR NewswireAugust 1, 2018
TORONTO, Aug. 1, 2018 /PRNewswire/ - Golden Star Resources Ltd. (NYSE American: GSS; TSX: GSC; GSE: GSR) ("Golden Star" or the "Company") reports its financial and operational results for the quarter ended June 30, 2018.
HIGHLIGHTS:
Gold production of 61,209 ounces in the second quarter of 2018
Strong production from the Wassa Complex ("Wassa") in the second quarter of 2018, continuing to exceed expectations
Significant improvements delivered at the Prestea Underground Gold Mine ("Prestea Underground") in the second quarter of 2018 compared to the first quarter of 2018, when the mine achieved commercial production
Cash operating cost per ounce1 of $809 and All-In Sustaining Cost ("AISC") per ounce1 of $1,104 in the second quarter of 2018
Capital expenditures of $10.2 million in the second quarter of 2018
Cash provided by operations before changes in working capital of $10.3 million or $0.03 per share in the second quarter of 2018 and mine operating margin of $10.2 million
Consolidated cash balance of $21.9 million at June 30, 2018
Post period end, the creation of a long term, strategic relationship was agreed with La Mancha Holding S.à r.l. ("La Mancha"), including a $125.7 million investment, which will support Golden Star's growth as a leading African gold producer2
Golden Star is on track to achieve its consolidated full year ("FY") 2018 guidance in terms of gold production, cash operating cost per ounce1 and AISC per ounce1
Notes:
1. See "Non-GAAP Financial Measures".
2. For more information, please see the press release entitled, 'Golden Star announces long term, strategic investment by La Mancha', dated August 1, 2018.
Sam Coetzer, President and Chief Executive Officer of Golden Star, commented:
"During the second quarter of 2018, Prestea Underground delivered more ounces than the Prestea Open Pits, which is testament to the hard work and disciplined approach of our underground team. We expect to see further improvements during the coming months and we anticipate that Prestea Underground will achieve its nameplate production rate during the fourth quarter of 2018. We will also continue to right size this operation with the aim of reducing operating costs and generating a stronger cash margin. Wassa Underground delivered another impressive quarter, with both grades and tonnages exceeding our expectations. I am looking forward to releasing the Preliminary Economic Assessment for Wassa's Inferred Mineral Resources to gain a more thorough understanding of the full potential of this substantial deposit. After two quarters, we are on track to achieve our consolidated full year 2018 production and cost guidance and with our strategic relationship with La Mancha agreed, we are well-positioned to deliver significant value for our shareholders."
La Mancha Transaction and Second Quarter 2018 Conference Call Details
Golden Star will conduct a conference call and webcast to discuss the La Mancha transaction and the results of the second quarter of 2018 on Thursday, August 2, 2018 at 10:00am ET. The Chief Executive Officer of La Mancha, Andrew Wray, will join the Golden Star management team on the call.
The call can be accessed by telephone or by webcast as follows:
Toll Free (North America): +1 866 393 4306
Toronto Local and International: +1 734 385 2616
Conference ID: 3081459
Webcast: www.gsr.com
A recording and webcast replay of the call will be available at www.gsr.com following the call.
SUMMARY OF CONSOLIDATED OPERATIONAL AND FINANCIAL RESULTS
Three Months Ended
June 30,
OPERATING SUMMARY
2018
2017
Wassa gold sold
oz
38,249
31,985
Prestea gold sold
oz
22,310
31,619
Total gold sold
oz
60,559
63,604
Wassa gold produced
oz
38,532
32,161
Prestea gold produced
oz
22,677
32,014
Total gold produced
oz
61,209
64,175
Average realized gold price1
$/oz
1,273
1,222
Cost of sales per ounce – Consolidated2
$/oz
1,106
1,012
Cost of sales per ounce – Wassa2
$/oz
944
1,235
Cost of sales per ounce – Prestea2
$/oz
1,383
785
Cash operating cost per ounce – Consolidated2
$/oz
809
785
Cash operating cost per ounce – Wassa2
$/oz
610
980
Cash operating cost per ounce – Prestea2
$/oz
1,149
585
All-In Sustaining cost per ounce – Consolidated2
$/oz
1,104
960
Notes:
1.
Average realized gold price per ounce excludes pre-commercial production ounces sold at Prestea Underground in 2018 and 2017.
2.
See "Non-GAAP Financial Measures".
Three Months Ended
June 30,
FINANCIAL SUMMARY
2018
2017
Gold revenues
$'000
77,121
77,335
Cost of sales excluding depreciation and amortization
$'000
57,717
55,173
Depreciation and amortization
$'000
9,235
8,893
Mine operating margin
$'000
10,169
13,269
General and administrative expense
$'000
6,909
1,953
Loss/(gain) on fair value of financial instruments, net
$'000
1,301
(4,907)
Net (loss)/income attributable to Golden Star shareholders
$'000
(6,642)
13,883
Adjusted net income attributable to Golden Star shareholders1
$'000
2,408
7,703
(Loss)/income per share attributable to Golden Star shareholders - basic
$/share
(0.02)
0.04
(Loss)/income per share attributable to Golden Star shareholders - diluted
$/share
(0.02)
0.02
Adjusted income per share attributable to Golden Star shareholders – basic1
$/share
0.01
0.02
Cash provided by operations
$'000
10,321
11,082
Cash provided by operations before working capital changes1
$'000
10,276
14,198
Cash provided by operations per share - basic
$/share
0.03
0.03
Cash provided by operations before working capital changes per share – basic1
$/share
0.03
0.04
Capital expenditures
$'000
10,186
18,307
Notes:
1. See "Non GAAP Financial Measures".
OPERATIONAL PERFORMANCE
Overview
In the second quarter of 2018 Golden Star produced 61,209 ounces of gold. This quarter was the Company's second quarter as a primarily underground-focused gold producer, following the cessation of production from the Wassa Main Pit in January 2018. Production from the Prestea Open Pits is ongoing and ore supply from this operation is expected to continue into the middle of the third quarter of 2018. However once production from the Prestea Open Pits concludes, Golden Star intends to focus on high margin, underground ore with the objective of strengthening its financial position and creating a robust platform to deliver shareholder value.
The Wassa Complex delivered another strong quarter. Gold production increased by 20% in the second quarter of 2018 to 38,532 ounces compared to the second quarter of 2017 and it increased by 9% compared to the first quarter of 2018. 92% of Wassa's production was attributable to Wassa Underground, which delivered higher grades and higher tonnages than expected. Consequently, Wassa delivered its lowest cash operating cost per ounce1 in over seven years of $610.
Gold production from the Prestea Complex ("Prestea") was 22,677 ounces in the second quarter of 2018. The second quarter of 2018 was the first quarter that Prestea Underground delivered more ounces than the Prestea Open Pits (55% of the Prestea Complex's total production), which is a result of the ramp up of production from the underground operation and the Prestea Open Pits approaching the end of their mine life. The grade of the ore processed from Prestea Underground increased by 65% in the second quarter of 2018 compared to the first quarter of 2018 and Golden Star expects the targeted production rate of 650 tpd to be achieved at Prestea Underground during the fourth quarter of 2018.
Golden Star's consolidated cash operating cost per ounce1 was $809 in the second quarter of 2018, which represents a 3% increase compared to the second quarter of 2017. Although Wassa reported a 38% decrease in cash operating cost per ounce1 to $610, this was offset by a 96% increase at Prestea to $1,149.
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