TORONTO, Feb. 24, 2021 /CNW/ - Golden Star
Resources Ltd. (NYSE American: GSS) (TSX: GSC) (GSE:
GSR) ("Golden Star" or the "Company") reports its financial
and operational results for the fourth quarter and full year ended
December 31, 2020. All references
herein to "$" are to United States
dollars.
Q4 2020 AND FY 2020 HIGHLIGHTS:
- FY 2020 was a transformational year as a result of the delivery
of a number of significant milestones, including: the transition of
the corporate office to London,
the implementation of a new management team, the sale of
Bogoso-Prestea, refinancing of the Macquarie Bank credit facility
(the "Macquarie Credit Facility"), delivery of increased production
guidance at Wassa and completion of key infrastructure projects
that are expected to support increased production rates in the
future, all achieved while managing challenges posed by
COVID-19.
- FY 2020 production totaled 167.6 thousand ounces ("koz") from
continuing operations (Wassa), 7% higher than in FY 2019,
delivering on the increased guidance range of 165-170koz and
exceeding the original guidance of 155-165koz. The $1,003/oz all-in sustaining cost ("AISC") for the
period was slightly above the $930-990/oz guidance range following the decision
to process low grade stockpiles and higher royalties as a result of
the increase in the gold price.
- Q4 2020 production totaled 40.9koz from continuing operations,
2% lower than Q3 2020. The $1,069/oz
AISC for the period was 4% higher than the $1,023/oz achieved in Q3 2020 due to the
increased investment in capitalized development in the period.
- Free cash flow from continuing operations totaled $5.9 million ("m") in Q4 2020 and $36.8m for FY 2020, representing a $43.1m increase on FY 2019 performance.
- Cash increased by $12.5m in Q4
2020 to $60.8m at December 31, 2020, net debt reduced by
$5.1m to $45m.
- Drilling conducted towards the end of Q4 2020 delivered
positive drilling results adjacent to the B-Shoot structure, which
is the current focus of the Wassa underground operation ("Wassa
Underground"). These intercepts demonstrate the potential to
increase the size of the Wassa ore body with extensions to the main
B-Shoot, the hanging wall zone and a new foot wall target.
Table 1 – Continuing Operations Performance
Summary – Three and twelve months ended December 31, 2020
1. See "Non-GAAP
Financial Measures"
|
|
Q4
2020
|
Q4
2019
|
%
change
|
FY
2020
|
FY
2019
|
%
change
|
|
|
|
|
|
|
|
|
Production -
Wassa
|
Koz
|
40.9
|
41.3
|
(1)%
|
167.6
|
156.2
|
7%
|
Total gold
sold
|
Koz
|
43.6
|
41.9
|
4%
|
167.5
|
156.5
|
7%
|
Average realized gold
price
|
$/oz
|
1,579
|
1,278
|
24%
|
1,626
|
1,302
|
25%
|
|
|
|
|
|
|
|
|
Cash operating cost
per ounce - Wassa1
|
$/oz
|
680
|
615
|
11%
|
653
|
633
|
3%
|
All-in sustaining
cost per ounce - Wassa1
|
$/oz
|
1,069
|
968
|
10%
|
1,003
|
938
|
7%
|
|
|
|
|
|
|
|
|
Gold
revenues
|
$m
|
68.8
|
53.6
|
28%
|
272.5
|
203.8
|
34%
|
Adj.
EBITDA1
|
$m
|
36.5
|
26.0
|
40%
|
131.6
|
78.3
|
68%
|
Adj. income/share
attributable to shareholders - basic1
|
$/share
|
0.11
|
0.07
|
57%
|
0.40
|
0.16
|
150%
|
|
|
|
|
|
|
|
|
Cash provided by
continuing operations before working capital changes and tax
paid
|
$m
|
30.9
|
19.9
|
55%
|
113.5
|
58.5
|
94%
|
Changes in working
capital and tax paid
|
$m
|
(11.5)
|
(0.7)
|
(1543)%
|
(29.5)
|
(8.4)
|
(251)%
|
Cash outflow from
investing activities
|
$m
|
(13.5)
|
(22.9)
|
41%
|
(47.2)
|
(56.5)
|
16%
|
Free cash
flow1
|
$m
|
5.9
|
(3.7)
|
259%
|
36.8
|
(6.4)
|
675%
|
Net cash provided by
financing activities
|
$m
|
8.6
|
8.0
|
8%
|
2.1
|
1.5
|
40%
|
|
|
|
|
|
|
|
|
Cash
|
$m
|
60.8
|
53.4
|
14%
|
60.8
|
53.4
|
14%
|
Net Debt
|
$m
|
45.0
|
53.4
|
(16)%
|
45.0
|
53.4
|
(16)%
|
Table 2 – Consolidated Performance Summary –
Three and twelve months ended December 31,
2020
1. See "Non-GAAP
Financial Measures"
|
|
Q4
2020
|
Q4
2019
|
%
change
|
FY
2020
|
FY
2019
|
%
change
|
|
|
|
|
|
|
|
|
Production -
Wassa
|
Koz
|
40.9
|
41.3
|
(1)%
|
167.6
|
156.2
|
7%
|
Production -
Prestea
|
Koz
|
-
|
11.4
|
(100)%
|
22.4
|
47.6
|
(53)%
|
Total gold
produced
|
Koz
|
40.9
|
52.7
|
(22)%
|
190.0
|
203.8
|
(7)%
|
Total gold
sold
|
Koz
|
43.6
|
53.4
|
(18)%
|
189.5
|
204.2
|
(7)%
|
Average realized gold
price
|
$/oz
|
1,579
|
1,237
|
28%
|
1,627
|
1,297
|
25%
|
|
|
|
|
|
|
|
|
Cash operating cost
per ounce - Wassa1
|
$/oz
|
680
|
615
|
11%
|
653
|
633
|
3%
|
Cash operating cost
per ounce - Prestea1
|
$/oz
|
-
|
1,616
|
(100)%
|
2,033
|
1,484
|
37%
|
Cash operating
cost per ounce - Consolidated1
|
$/oz
|
680
|
831
|
(18)%
|
813
|
832
|
(2)%
|
All-in sustaining cost
per ounce - Wassa1
|
$/oz
|
1,069
|
968
|
10%
|
1,003
|
938
|
7%
|
All-in sustaining cost
per ounce - Prestea1
|
$/oz
|
-
|
2,167
|
(100)%
|
2,477
|
1,885
|
31%
|
All-in sustaining
cost per ounce - Consolidated1
|
$/oz
|
1,069
|
1,227
|
(13)%
|
1,174
|
1,159
|
1%
|
|
|
|
|
|
|
|
|
Gold
revenues
|
$m
|
68.8
|
53.6
|
28%
|
272.5
|
203.8
|
34%
|
Adj. EBITDA from
continuing and discontinued operations1
|
$m
|
36.5
|
21.4
|
71%
|
121.7
|
65.4
|
86%
|
Adj.
income/(loss)/share attributable to shareholders -
basic1
|
$/share
|
0.09
|
(0.03)
|
400%
|
(0.07)
|
(0.04)
|
(75)%
|
|
|
|
|
|
|
|
|
Cash provided by
operations before working capital changes and tax paid
|
$m
|
28.9
|
10.5
|
175%
|
98.8
|
36.8
|
168%
|
Changes in working
capital
|
$m
|
(11.5)
|
2.6
|
(542)%
|
(38.7)
|
(14.0)
|
(176)%
|
Cash outflow from
investing activities
|
$m
|
(13.5)
|
(25.1)
|
46%
|
(54.7)
|
(67.4)
|
19%
|
Free cash
flow1
|
$m
|
4.0
|
(12.0)
|
133%
|
5.4
|
(44.6)
|
112%
|
Net cash provided by
financing activity
|
$m
|
8.6
|
8.6
|
-
|
2.1
|
1.4
|
50%
|
|
|
|
|
|
|
|
|
Cash
|
$m
|
60.8
|
53.4
|
14%
|
60.8
|
53.4
|
14%
|
Net Debt
|
$m
|
45.0
|
53.4
|
(16)%
|
45.0
|
53.4
|
(16)%
|
Andrew Wray, Chief Executive
Officer of Golden Star,
commented:
"As these results demonstrate, 2020 saw a number of important
achievements for our business which underpin our confidence in
delivering on our longer term growth plans. The $36.8m of cash flow generation from Wassa,
combined with the sale of Bogoso-Prestea and the refinancing of the
Macquarie loan facility, delivered a significant improvement in our
financial position. In turn, this enabled us to invest in key
infrastructure necessary for the continuing growth of Wassa,
including electrical upgrades, new dewatering infrastructure and a
state-of-the-art paste fill plant, that positions Golden Star to realize the longer term growth
potential for the Wassa operation.
The delivery of our improved production guidance range, despite
the numerous challenges that arose as a result of the COVID-19
pandemic, highlights the strength of operational performance at
Wassa. The AISC performance at Wassa was a little higher than
guidance due to an acceleration of investment in underground
development during Q4 2020, in addition to the impact of the higher
than budgeted gold price and the processing of low-grade stockpiles
which added $20/oz and $10/oz, respectively. This operational
performance led to a Group cash position of $60.8m at the end of the quarter, an increase of
$7.4m over the year, despite
$31.4m of cash consumption at
Bogoso-Prestea during the year.
Our 2021 production guidance is set at 165-175koz with costs
expected to remain in line with recent performance. We will also
maintain the level of capital spend in 2021, with a focus to
increasing development and drilling activities, to support further
volume increases for production growth and enhanced cash flow
generation. We will share more detail on this growth opportunity in
the PEA which we expect to publish as part of an updated technical
report including our annual reserve and resource update on
March 1, 2021.
I am particularly pleased that, as a result of our achievements
during 2020, we are able to increase our exploration budget in 2021
to $15.0m. With numerous underground
and surface targets, including the potential for stand-alone
targets along the 90km mineralized trend to the south of Wassa, it
is exciting to report that the drilling program we started in Q4
2020 is already indicating potential for extensions of the Wassa
ore body around existing and planned underground
infrastructure."
FY 2020 RESULTS WEBCAST AND CONFERENCE CALL
Following the release of our FY 2020 financial statements
on February 24, 2020, the Company
will conduct a conference call and webcast on Thursday, February 25, 2020 at 10:00 am ET.
Toll Free (North America): +1 888 390
0546
Toronto Local and International: +1 416 764
8688
Toll Free (UK): 0800 652 2435
Conference ID:
34205106
Webcast:
https://produceredition.webcasts.com/starthere.jsp?ei=1421060&tp_key=082312cdc3
Following the conference call, a recording will be available on the
Company's website at: www.gsr.com
KEY EVENTS – FY 2020
Wassa Operational Performance and Infrastructure
Investment
- Through FY 2020, the mining rate averaged 4,469 tonnes per day
("tpd"), representing a 15% increase on the 3,895tpd achieved in FY
2019. The underground mining rate has now exceeded 4,000tpd for six
consecutive quarters.
- The underground mined grade increased to 3.4 grams per tonne
("g/t"), 21% higher than the 2.8g/t realized in Q3 2020. This is
attributable to the normalization of the blend of the higher and
lower grade mining areas. During 2020 the mined grade averaged
3.1g/t.
- Late in Q1 2020, we took the decision to selectively process
some low-grade stockpiles, given the strength of the gold price.
This initiative utilizes latent capacity in our process plant
without compromising gold recovery rates, which contributes
additional cash flow, albeit at a slightly higher AISC than
achieved by the underground mine. This initiative contributed 7koz
of production during FY 2020 and added approximately $10/oz to the reported AISC at site. The
initiative also served to demonstrate the available capacity of the
processing plant. Throughput rates averaged 5,509tpd through FY
2020, and exceeded 6,000tpd during Q3 2020.
- Investment in the infrastructure required to provide additional
mining flexibility and support the ambition to increase mining
rates continued throughout FY 2020. Capital expenditure totaled
$45.2m during FY 2020; this included
$12.1m on the paste fill plant
project which reached construction completion at the end of
December. The project is expected to commission during Q1 2021 and
is tracking to a total cost of $19m,
approximately 10% below budget.
Wassa Preliminary Economic Assessment
- Work on a preliminary economic assessment ("PEA") on the
development of the Southern Extension of the Wassa ore body
commenced during Q3 2020. The study is intended to lay out a
roadmap for the infrastructure and investment required for the
potential expansion of the mining operation into the inferred
resource areas. The PEA will be included in an updated technical
report with the updated mineral reserve and resource estimate for
Wassa, prepared in accordance with NI 43-101.
- The technical report is expected to be released on the morning
of Monday, March 1, 2021 and
immediately following the release of the report, the Company will
conduct a conference call and webcast at 09.00 am ET on the same day:
Toll Free (North America): +1
888 390 0546
Toronto Local and International: +1 416 764
8688
Toll Free (UK): 0800 652 2435
Conference ID:
07861267
Webcast:
https://produceredition.webcasts.com/starthere.jsp?ei=1433535&tp_key=0dc82839cc
Following the conference call, a recording will be available on the
Company's website at: www.gsr.com.
COVID-19 PANDEMIC
- During 2020, our operations in Ghana experienced 320 personnel that presented
with symptoms or volunteered for COVID-19 testing with 63 confirmed
cases including Bogoso-Prestea employees until the time of
completion of the sale of the Bogoso-Prestea operations to Future
Global Resources. The Company's in-house Polymerase Chain Reaction
("PCR") testing capability allows for rapid diagnosis and
management response. This significantly reduced the number of
people required to isolate as a result of contact tracing,
supporting business continuity throughout the pandemic. As a major
employer and therefore catalyst for rural economic stimulus in the
host communities, we understand that our continuing operations are
critical to the health and well-being of our workforce and the
thousands of people that they support, both directly and
indirectly. Given the relatively low number of confirmed and
suspected COVID-19 cases, the operational impact during 2020 was
limited. As at December 31, 2020,
there were zero suspected or confirmed COVID-19 cases in our
workforce, which had been the status for the entire month of
December 2020. During the course of
the year, six personnel from the Wassa operations were admitted to
hospital for COVID-19 case management and all have recovered. More
information on our COVID-19 management controls can be found at
www.gsr.com/responsibility/COVID-19
- Supply chain - Supply chains for the key consumables, including
cyanide, lime, grinding media, fuel and lubricants, have remained
intact throughout the pandemic. All supply chains are being
continually monitored and alternative suppliers have been
identified for essential supply chains.
- Gold sales - The cessation of commercial flights resulting from
the pandemic in March 2020 created a
need to implement alternative logistics for transporting doré to
refining facilities in South
Africa. The alternative arrangements were in place from the
end of Q1 2020 to Q3 2020, enabling exports to continue throughout
FY 2020. Limited commercial flights resumed during Q3 2020 and
continued throughout Q4 2020. During Q4 2020 sales were able to
align with production, therefore catching up on the delayed sales
caused by the cessation of commercial flights earlier in the
year.
Safety and Health
- For continuing operations, the all-injury frequency rate (AIFR)
as at December 31, 2020 was 2.57 and
the total recordable injury frequency rate (TRIFR) was 0.34, based
on a 12-month rolling average per million hours worked. This
compares favorably to the continuing operations AIFR of 4.23 and
TRIFR of 0.53 at December 31,
2019.
- The improved safety performance at Wassa also compares
favorably to the historical data including discontinued operations
given the improvement over the December 31,
2019 AIFR of 8.75 and TRIFR of 1.79, reflecting the change
in risk profile for the Company following the sale of the
Bogoso-Prestea operation.
- Despite the improvement in injury frequency rates, 2020 was
marred by a fatal incident at Prestea in March 2020, when an employee was tragically
killed in a derailment incident. Corrective actions to prevent a
recurrence were implemented at the operations and incorporated
findings of the investigation by the Ghanaian Inspectorate Division
of the Minerals Commission. This tragic incident reinforced our
deeply held belief that everyone must go home safely every day and
with this intent, the Company continued the implementation of its
safety strategy, with a focus on critical risk controls, throughout
the year.
- In November 2020, Golden Star Wassa was announced as the Best
Performer in Occupational Health and Safety at the annual Ghana
Mining Industry Awards for the second year in succession and for
the third time in the last four years.
Upsizing of Senior Secured Credit Facility - October 8, 2020
- A key strategic objective for the Company in 2020 was to
reposition the balance sheet to improve liquidity and provide the
platform for future investment in growth. On October 8, 2020, the Company delivered a
significant milestone in this regard with the completion of the
amendment and upsizing of the Macquarie Credit Facility. The full
detail on the amendment of the Credit Facility can be found in the
press release dated October 9,
2020.
- The Macquarie Credit Facility has been increased to
$70 million, allowing the Company to
re-draw the two $5 million principle
repayments that were made in June and September 2020 and an additional $10 million of new capacity which will be made
available in conjunction with the redemption of the convertible
debentures maturing in August 2021.
This represents a $20 million
increase on the $50 million
outstanding balance on the Macquarie Credit Facility at
September 30, 2020.
- The Macquarie Credit Facility had been amortizing at a rate of
$5 million per quarter with two
principal repayments made as at September
30, 2020. The restructuring of the Macquarie Credit Facility
includes a rescheduled amortization profile which defers the next
quarterly principle repayment to September
2021. These quarterly principle repayments will then
continue to December 2023 when the
remaining balance of the facility will be settled by a $25 million bullet payment.
- The restructuring of the Macquarie Credit Facility creates
$35 million of incremental liquidity
which, combined with the $15 million
of proceeds from the sale of the Bogoso-Prestea operations due to
be received by July 2021, results in
$50 million of additional
liquidity.
Corporate Relocation
- During H1 2020, the corporate office moved to London, UK, from Toronto, Canada, following a new management
team being assembled at the start of the year. This brings the
corporate team into the same time zone as the operation and reduces
the travel time to West Africa to
enable more direct support of the mine site management.
At the Market Equity Program
- On October 28, 2020, the Company
entered into a sales agreement relating to a $50 million "at the market" equity program. The
use of proceeds from the "at the market" equity program are for
discretionary growth capital at Wassa, exploration, general
corporate purposes and working capital. As at February 24, 2021, no shares had been sold under
the "at the market" equity program.
RECENT EVENTS - Post FY 2020 period end
Severance Claim
- On September 15, 2020, certain
employees of Golden Star
(Bogoso/Prestea) Limited ("GSBPL") initiated proceedings before the
courts in Ghana, claiming that the
completion of the sale of the Bogoso-Prestea operations would
trigger the termination of their employments, entitling them to
severance payments. GSBPL retained defense legal counsel to defend
the claim given no employment contracts were severed, amended or
modified as a result of the sale transaction which completed on
September 30, 2020, and filed an
application in court for an order striking out the plaintiffs'
statement of claim for lack of standing or capacity and disclosing
no reasonable cause of action. On February
16, 2021, the court ruled in favor of GSBPL. In accordance
with applicable laws, the plaintiffs have three months from the
date of the ruling to file an appeal.
2020 PRODUCTION, COST AND CAPITAL EXPENDITURE
GUIDANCE
Table 3 – Q4 2020 and FY 2020 Performance Versus
Guidance
|
|
Q4
2020
|
|
FY
2020
|
|
Updated
Guidance
|
Original
Guidance
|
Production and
cost highlights
|
|
|
|
|
|
|
|
Production -
Wassa
|
koz
|
40.9
|
|
167.6
|
|
165-170
|
155-165
|
Production -
Prestea
|
koz
|
-
|
|
22.4
|
|
22.3
|
40-45
|
Total gold
produced
|
koz
|
40.9
|
|
190.0
|
|
187-192
|
195-210
|
|
|
|
|
|
|
|
|
Cash operating cost
per ounce - Wassa1
|
$/oz
|
680
|
|
653
|
|
620-660
|
620-660
|
Cash operating cost
per ounce - Prestea1
|
$/oz
|
-
|
|
2,033
|
|
2,033
|
1,400-1,550
|
Cash operating
cost per ounce - Consolidated1
|
$/oz
|
680
|
|
813
|
|
810-850
|
790-850
|
|
|
|
|
|
|
|
|
All-In Sustaining cost
per ounce - Wassa1
|
$/oz
|
1,069
|
|
1,003
|
|
930-990
|
930-990
|
All-In Sustaining cost
per ounce - Prestea1
|
$/oz
|
-
|
|
2,477
|
|
2,477
|
1,650-1,850
|
All-In Sustaining
cost per ounce - Consolidated1
|
$/oz
|
1,069
|
|
1,174
|
|
1,100-1,180
|
1,080-1,180
|
|
|
|
|
|
|
|
|
Capital
Expenditure
|
|
|
|
|
|
|
|
Sustaining Capital –
Wassa
|
$m
|
8.6
|
|
24.7
|
|
20-22
|
23-25
|
Sustaining Capital –
Prestea
|
$m
|
-
|
|
5.4
|
|
5.4
|
6.5-7.5
|
Sustaining Capital –
Corporate
|
$m
|
(0.3)
|
|
0.1
|
|
-
|
-
|
Sustaining Capital
– Consolidated
|
$m
|
8.3
|
|
30.2
|
|
25.4-27.4
|
29.5-32.5
|
|
|
|
|
|
|
|
|
Expansion Capital –
Wassa2
|
$m
|
5.4
|
|
19.0
|
|
18-20
|
19-21
|
Expansion Capital –
Prestea2
|
$m
|
-
|
|
1.6
|
|
1.6
|
2.5-3
|
Expansion Capital –
Capitalized Exploration2
|
$m
|
1.1
|
|
1.5
|
|
2.5
|
3.5
|
Expansion Capital -
Consolidated2
|
$m
|
6.5
|
|
22.1
|
|
22.1-24.1
|
25-27.5
|
|
|
|
|
|
|
|
|
Total Capital –
Wassa3
|
$m
|
14.0
|
|
43.7
|
|
38-42
|
42-46
|
Total Capital -
Prestea3
|
$m
|
-
|
|
7.0
|
|
7.0
|
9-10.5
|
Total Capital -
Capitalized Exploration3
|
$m
|
1.1
|
|
1.5
|
|
2.5
|
3.5
|
Total Capital -
Corporate3
|
$m
|
(0.3)
|
|
0.1
|
|
-
|
-
|
Total Capital -
Consolidated 3
|
$m
|
14.8
|
|
52.2
|
|
47.5-51.5
|
55-60
|
Notes:
|
1. See "Non-GAAP
Financial Measures"
|
2. Expansion capital
are those costs incurred at new operations and costs related to
major projects at existing operations where these projects are
expected to materially increase production. All other costs
relating to existing operations are considered sustaining
capital.
|
3. Excludes all
non-cash capital additions, including right-to-use assets under
financial leases
|
Production
- Wassa. The guidance for Wassa was increased from
155-165koz to 165-170koz during the year. Following consistent
performance from the underground mine and the additional production
generated by the processing of low-grade stockpiles, the operation
was able to deliver on the increased guidance range.
- Consolidated. Group production, including discontinued
operations, totaled 190koz, in line with the 187-192koz guidance
range.
Cash operating costs
- Wassa. Cash operating cost performance fell in the upper
half of the $620-660/oz guidance
range for Wassa, mainly due to the processing of low-grade
stockpiles, higher gold transport costs following the use of
private charters due to the disruption of commercial flights caused
by the COVID-19 pandemic and higher processing volumes. The
low-grade stockpile initiative successfully generated incremental
production and cash while adding $10/oz to the unit costs given the lower grade of
the material processed.
- Consolidated. The group cash operating costs, including
discontinued operations, totaled $813/oz, in line with the lower end of the
$810-850/oz guidance range.
AISC
- Wassa. AISC for Wassa tracked towards the upper end of
the $930-990/oz AISC guidance range
throughout FY 2020 and ended the year slightly exceeding the
guidance range as a result of:
-
- The $10/oz increase in the cash
operating costs resulting from the processing of low grade
stockpiles;
- The impact of higher gold prices driving higher royalty
payments to the Government of Ghana. This equates to a $20/oz increase in the AISC in YTD 2020 over
budgeted levels;
- The restatement of the AISC performance for the year to date to
fully allocate the general and administrative ("G&A") expense
to continuing operations, reallocating the G&A that was
previously ascribed to Prestea to Wassa.
- Consolidated. The group AISC, including discontinued
operations, was $1,174/oz in FY 2020.
In line with the $1,100-1,180/oz
guidance range.
Capital expenditure
- Wassa. The improved financial position of the business
and the sustained increase in the gold price allowed the Company to
increase its investment in capital during Q4 2020. As a result,
Wassa exceeded the revised capital guidance of $38-42m. Capital
expenditure totaled $45.2m during FY
2020, in line with the initial guidance range.
- Consolidated. As a result of the increase in capital
investment at Wassa during Q4 2020, the consolidated capital
expenditure totaled $52.2m, slightly
exceeding the $47.5-51.5m guidance range.
FY 2021 PRODUCTION AND COST GUIDANCE
Table 4: FY 2021 Production and Cost Guidance
|
2021
Guidance
|
2020
Guidance
|
Gold Production
(koz) – Wassa
|
165-175
|
165-170
|
Cash Operating
cost1 ($/oz) – Wassa
|
660-700
|
620-660
|
AISC1
($/oz) – Wassa
|
1,000-1,075
|
930-990
|
Notes:
|
1. See "Non-GAAP
Financial Measures".
|
FY 2021 Production Guidance
Wassa is expected to produce between 165-175koz ounces in 2021.
This is in line with the 2020 production performance, which
benefited from an increase in the underground mining rates and an
estimated 7koz of production from the processing of low-grade
stockpiles. The contribution from stockpiles is expected to
continue throughout 2021 with a little under 1,000tpd of stockpiled
material expected to be processed at a grade of approximately
0.6g/t. This initiative remains subject to gold prices sustaining
near current levels.
We expect mining rates for 2021 to be in excess of 4,500tpd, in
line with the 4,469tpd achieved in 2020. The investment in drilling
and development in 2020 will unlock further increases in the mining
rates in the future. Underground mined grades are expected to
remain in line with the average grade achieved in 2020. The infill
drilling program continued to progress during 2020, and as a result
80% of the 2021 mine plan comprises of ounces from the measured
resource category.
We are currently finalizing our reserve and resource
calculations for year end 2020 and the PEA. As part of this
process, we will be reviewing the mine plan and future grade
profile at Wassa. This work includes an update of the modifying
factors in mine plans for recent stope performance and an optimized
cut-off grade.
Cost Guidance
The $660/oz to $700/oz cash operating cost guidance for 2021
shows a slight increase over 2020 due to the planned commissioning
of the paste fill plant in Q1 2021. The plant will add $5 to $7 per tonne
to the mining cost once operational and this cost will be offset by
the benefits associated with an increase in the recovery of the ore
body.
The 2021 AISC guidance at Wassa increases relative to 2020 due
to the continued investment in underground development which is
reflected in higher sustaining capital partly offset by reduced
power cost from Genser Energy ("Genser") as discussed in table
5.
The continuation of the processing of low-grade stockpiles in FY
2021 will include the material from the Skyway stockpile during the
second half of 2021 which is held in inventory and will result in a
non-cash cost as the material is drawn down, adding $15/oz (non-cash) to the overall AISC. This is in
addition to the incremental processing costs associated with the
low-grade stockpile, as seen in FY 2020. The low-grade stockpiles
processed during FY 2020 were not held with an inventory value and
therefore had a more limited impact on the AISC.
FY 2021 CAPITAL EXPENDITURE AND EXPLORATION GUIDANCE
Table 5: FY 2021 Capital Expenditure and Exploration Guidance
Summary
($m)
|
2021 Guidance -
Wassa
|
2020 Guidance –
Wassa3
|
Capital
Expenditure
|
|
|
Sustaining Capital2
|
26-28
|
20-22
|
Expansion Capital2
|
19-22
|
18-20
|
Total Capital
Expenditure
|
45-50
|
38-42
|
|
|
|
Exploration
|
|
|
Total Exploration
spend
|
15
|
6
|
Notes:
|
1. See "Non-GAAP
Financial Measures".
|
2. Expansion capital
are those costs incurred at new operations and costs related to
major projects at existing operations where these projects will
materially increase production. All other costs relating to
existing operations are considered sustaining capital.
|
3. The revised 2020
guidance was announced on October 28, 2020.
|
Capital Expenditure Guidance
The capital programs at Wassa are expected to total $45m to $50m in
2021. This is in line with the $45.2m
invested in Wassa in 2020 which focussed on major infrastructure
projects. With those now complete, the investment in 2021 will
focus on drilling and development. In order to ensure a robust
balance sheet through the repayment of the convertible debentures
in August 2021, and to allow for a
ramp up in drilling and development activities, 40% of the spend is
budgeted for H1 2021 and the remaining 60% during H2 2021.
Sustaining capital is expected to total $26m to $28m, of
which $16m is allocated to
capitalized development and $4m to
$5m to the expansion of the tailing
storage facilities. Expansion capital is expected to total
$19m to $22m, of which $7m
to $8m is allocated to capitalized
drilling, $7m to ventilation
infrastructure and $4m to capitalized
development.
In accordance with IFRS 16 - Leases accounting standard, the
completion of the construction of the Genser power plant will
result in the inclusion in the consolidated financial statements of
a non-cash $33.5m right-to-use asset
addition to property, plant and equipment and the recognition of a
corresponding lease liability during Q1 2021. An element of the
cost of power supplied by the Genser plant will be accounted for as
depreciation of the capital asset and as a finance cost.
Approximately $20/oz of the power
cost will therefore not be allocated to cash operating costs or
AISC.
Exploration Budget and programs
A $15m exploration budget has been
approved for 2021 of which $7m will
be invested in and around the Wassa mine. This work will include
the continued wide spaced drilling up and down dip of the current
resources and reserves as well as drill testing of seven targets to
the south and east of the Main Wassa deposit. Approximately 28,000
metres of combined diamond and reverse circulation drilling has
been planned. In addition, 9,000 meters of air core drilling has
been planned to test the coincidental geophysical and geochemical
anomaly over the eastern fold closure target.
In addition, $6m has been
allocated for further testing of the five HBB targets followed up
in 2020 as well as five additional targets along the Hwini
Butre-Benso ("HBB") corridor. Approximately 50,000 meters of air
core drilling will be conducted over the soil geochem anomalies
defined last year and in past programs. Several of these targets
will be further delineated with ground geophysics prior to
drilling. Pending positive results from the air core drilling,
approximately 15,000 meters of deeper reverse circulation with
diamond core tails has been planned for initial follow up. Several
of the historical open pits on the Benso mining lease have never
had any drilling beneath them and these deposits have higher grade
cores that could potentially form underground targets. In light of
this 12,000 meters of reverse circulation and diamond core tails
has been budgeted to test below these pits on wide
spacing.
The Abura project operates under an earn-in agreement between
the Company and a Ghanaian concession owner. This project is
located to the South West of the HBB concessions and has been
drilled with shallow rotary air blast holes which returned some
positive results which require follow-up with deeper reverse
circulation and diamond drilling. The 2021 budget has 5,000 metres
of drilling planned with approximately $0.7m being allocated to this program.
These "regional" exploration programs have been designed to move
the various prospects up the exploration pipeline, with positive
results justifying further work in 2022 and beyond. Prospects
which do not generate positive results will be divested or
dropped.
SUMMARY OF CONSOLIDATED OPERATIONAL RESULTS – FY 2020
(including discontinued operations)
Group production totaled 40.9koz in Q4 2020, the first quarter
where production was sourced entirely from Wassa following the
completion of the sale of the Bogoso-Prestea operation at the end
of Q3 2020. Total gold sold amounted to 43.6koz for Q4 2020. The
AISC amounted to $1,069/oz for Q4
2020 which was a little higher than realized in Q3 2020 due to the
acceleration in investment in capitalized development.
FY 2020 consolidated performance includes nine months of
contribution from Bogoso-Prestea up to the completion of the sale
of the operation at the end of Q3 2020. Group production totaled
190.0koz, which included 167.6koz from Wassa (7% increase on FY
2019) and 22.3koz from Prestea during the first nine months of the
year. The consolidated AISC totaled $1,174/oz in FY 2020 compared to the $1,159/oz realized in FY 2019.
Wassa Operational Overview – continuing
operations
Wassa Underground continued to operate through the challenges
posed by the COVID-19 pandemic in FY 2020. In Q3 2020, the pandemic
impacted on development rates as a result of the expat jumbo
operators being unable to enter the country. These operators were
able to return to site during Q4 2020; as a result the development
rates were accelerated in order to support future production and
mining flexibility. The underground mined grade improved due to
higher grade stopes becoming available, aided by additional
development capacity.
The instability of the grid power supply weighed on performance
during Q3 2020, and this remained an ongoing issue during Q4 2020,
albeit with a lesser impact than seen in the prior quarter.
Completion of the Genser gas turbine power station was a focus for
the site team during Q4 2020. The construction phase was completed
during Q4 2020 and commissioning was successfully achieved earlier
this quarter, removing the reliance on grid power and providing the
operation with a stable supply at an attractive power cost.
Gold production from Wassa was 40.9koz in Q4 2020, in line with
production in Q3 2020, despite lower mining volumes, as a result of
improved grades from underground mining. FY 2020 production totaled
167.6koz, 7% higher than the 156.2koz realized in FY 2019 as a
result of increased mining rates and the introduction of the
processing of low grade stockpiles.
Recovery
The recovery was 94.6% for Q4 2020. It remained consistent
throughout the year, averaging 94.9% for FY 2020. This is in line
with the performance in FY 2019, despite the 12% reduction in the
processed ore grade as a result of the decision to process the
low-grade stockpiles.
Wassa Underground
Wassa Underground produced 38.4koz of gold (approximately 94% of
Wassa's total production) in the fourth quarter of 2020 and
160.4koz during FY 2020. FY 2020 was characterized by higher mining
volumes, resulting in a 5% increase in production relative to the
152.9koz produced in FY 2019. Wassa Underground mining rates have
now exceeded 4,000tpd for six consecutive quarters, averaging
4,175tpd in Q4 2020, and 4,469tpd for FY 2020, 15% higher than the
3,895tpd achieved in FY 2019. During the year, the underground
mining rate peaked at 4,960tpd during Q3 2020, demonstrating that
the decline is capable of operating at approximately 5,000tpd and
could deliver higher volumes once the trucking fleet is replaced by
60 tonne trucks as the existing 40 tonne trucks reach the end of
their operational life in the coming years.
The mining rate was reduced during Q4 2020 from the record
levels seen in Q3 2020 as the underground grade increased to
3.38g/t, and focus was placed on investment in capitalized
development. The 20% increase in the grade relative to Q3 2020 is
attributable to higher grade stopes becoming available, aided by
the return of the expatriate jumbo operators to site during the
quarter which resulted in an increase in development rates. During
FY 2020, the underground grade averaged 3.13g/t.
Wassa Main
Pit/Stockpiles
Given the prevailing gold price environment, the Wassa
management team identified the opportunity to process low-grade
stockpiles without materially impacting the recovery. Low-grade
stockpiles from the historical Wassa Main
Pit were therefore blended with the Wassa Underground ore
from April 2020. During Q4 2020, a
total of 110,246 tonnes processed at an average grade of 0.67g/t
which yielded 2.6koz of gold. During FY 2020, a total of 348,235
tonnes of stockpiles were processed at an average grade of 0.65g/t
to produce 7.3koz of gold. The processing of these stockpiles
will continue throughout 2021 should the current gold price
environment sustain.
Unit costs
The unit cost performance remained robust during FY 2020. The
mining unit cost of $31/t of ore
mined was 9% lower than in FY 2019 as a result of higher ore
volumes. This also benefited processing costs which totaled
$19/t of ore processed, 11% lower
than the $21/t achieved in FY
2019.
Costs per ounce
Cost of sales per ounce increased 9% to $884/oz in FY 2020 due to higher mine operating
expenses driven by increased mining and processing volumes and
increased labor costs, increased royalties and higher depreciation
cost partly offset by higher ounces of gold sold.
Cash operating cost per ounce increased slightly to $653 in 2020 compared to $633 in 2019 due to increased mine operating
expenses partly offset by the increased ounces sold base as the
benefit of the higher production volumes were offset by increased
mining and processing costs driven by higher run rates at lower
grades and higher general and administrative costs.
AISC per ounce increased 7% to $1,003 in 2020 compared to 2019 due to a
combination of:
- Increased royalties resulting from the higher prevailing gold
price;
- Increased corporate general and administrative costs. Following
the sale of Bogoso-Prestea and the introduction of the discontinued
operations accounting treatment, Wassa is now carrying the full
allocation of corporate general and administrative costs and prior
periods have been restated on the same basis;
- Increased mine operating expenses as a function of higher
mining and processing volumes and higher labor costs;
- Higher sustaining capital expenditure which was in part offset
by higher gold sales.
Projects update
In order to equip the mine for its future as a long life
operation a number of projects were progressed in FY 2020. These
projects included the following initiatives:
- Paste fill plant project update. The paste fill plant
project at Wassa continued to progress in Q4 2020 reaching
construction completion by the end of the quarter. Commissioning
and set up of underground infrastructure, reticulation system, dump
valve and shotcreting equipment (including batch plant) is expected
to occur through Q1 2021, following a slight delay due to the
re-engineering of the filter backwash system during the
commissioning phase. The construction of the facility has been
delivered below budget and once operational, this project will
provide additional flexibility in the mine plan and assist with our
intention to increase mining rates in order to further improve the
scale and margins at the operation.
- Electrical upgrade. The 11kV surface substation was
completed during Q3 2020, as was the single point suspension cable
delivering 11kV power to the 620 level underground. This was
originally expected to be supervised by electrical engineers coming
from Australia, however this work
was completed by local contractors with remote support due to
Covid-19 related travel restrictions. This is a significant
infrastructure project which is intended to support the mine plan
for the next five years.
Capital expenditures
Capital expenditures for FY 2020 totaled $45.2m compared to $60.1m during FY 2019. The Wassa management team
continued to focus efforts on critical development spend in order
to support the medium-term development of the underground operation
including:
- Sustaining capital included $14.1m on capitalized underground development
activities, $3.2 million on mobile
equipment and $3m on capital spare
replacements
- Expansion capital included $12.1m
on the paste fill plant project, $3.5m in relation to long term capitalized
underground development and $1.5m
capitalized exploration drilling
EXPLORATION
Exploration activity during FY 2020 was limited by the impact of
the COVID-19 pandemic. In response to the pandemic, the Company
scaled back field exploration activities from March 2020. Following that decision. the
exploration activities focussed on the delineation and refinement
of exploration targets across the Company's tenement package with
the compilation and continued review of historic surface
geochemical and drilling information, as well as, the updating of
geological and geophysical interpretations, and the design of
future field-based follow-up programs.
Field work resumed in the third quarter and activities were
further ramped up during Q4 2020. Work during the period included
further soil sampling on regional targets and surface drilling at
Wassa testing up-dip and down-dip extensions of mineralization.
Exploration expenditures for Q4 2020 were $2.2 million of which $1.1m was expensed and $1.1m was capitalized. For the year ended
December 31, 2020, exploration
expenditure amounted to $4.2m of
which $2.7m was expensed and
$1.5m was capitalized.
Wassa Drilling – Q4
2020
During Q4 2020 a total of five holes were drilled (totaling
3,417 meters) to test for the extension of mineralization above and
below the existing underground mining areas. Four holes
tested the potential for up-dip extensions of mineralization and
one hole tested for the extension of the Hanging wall ("HW") zone
and the down-dip extension of the B-Shoot.
Table 6: Q4 2020 Exploration Drilling Results Identify
Extensions of the Wassa Underground Mineralization
Hole
ID
|
Azimuth
|
Dip
|
From
(m)
|
To
(m)
|
Drilled Width
(m)
|
Estimated
True Width
(m)
|
Grade Au
(g/t)
|
Drilling
target
|
BSDD20-001
|
87.4
|
-52.8
|
236.1
|
240.1
|
4.0
|
3.6
|
5.7
|
Up-dip
|
BSDD20-002
|
No Significant
Intersections
|
Up-dip
|
BSDD20-003
|
92.8
|
-55.6
|
442.0
|
465.8
|
23.8
|
20.9
|
6.9
|
Up-dip
|
BSDD20-004
|
91.2
|
-50.9
|
369.0
|
376.0
|
7.0
|
6.4
|
5.4
|
Up-dip
|
BSDD20-005M
|
91.8
|
-56.2
|
655.4
|
659.4
|
4.0
|
3.5
|
2.4
|
Down-dip
HW
|
BSDD20-005M
|
91.8
|
-56.2
|
669.0
|
673.8
|
4.8
|
4.2
|
4.7
|
Down-dip
HW
|
BSDD20-005M
|
90.9
|
-57.3
|
781.7
|
802.7
|
21.0
|
18.1
|
3.6
|
Down-dip
|
BSDD20-005M
|
88.7
|
-57.4
|
815.0
|
823.0
|
8.0
|
6.9
|
1.8
|
Down-dip
|
BSDD20-005M
|
85.4
|
-58.6
|
928.0
|
931.0
|
3.0
|
2.6
|
1.7
|
Down-Dip
FW
|
BSDD20-005M
|
81.1
|
-59.5
|
1045.1
|
1054.0
|
8.9
|
7.5
|
3.3
|
Down-dip
FW
|
These gold intercepts demonstrate the potential to increase the
size of the Wassa ore body with extensions to the main B-Shoot, the
HW zone and a new foot wall ("FW") target. These newly identified
zones are all within 200 meters of existing mining infrastructure
and planned development which is positive from both a cost to
access as well as timing perspective:
- BSDD20-001 (up-dip) targeted mineralization below
historical open pits and intersected 3.6m at 5.7g/t. This narrow zone of
mineralization sits approximately 300m up-dip of the known mineralized zones,
within 150m of surface. Further
follow up drilling (shown on the section above) is planned to test
the extents of this mineralization down-dip towards the deeper
B-Shoot horizon which remains open up-dip between these two
intercepts.
- BSDD20-003 (up-dip) intersected 20.9m at 6.9g/t and successfully demonstrated a
potential extension of the B-Shoot structure 125m up-dip of the last hole drilled on this
fence (BSDD19-407 intersected 6.2m at
6.8g/t). This zone was closed off 150m up-dip with hole BSDD20-002 which
intersected altered diorite and no significant mineralization.
- BSDD20-004 (up-dip) intersected 6.4m at 5.4g/t in a newly defined foot wall zone.
Further drilling is required to determine the extent of this new
mineralized zone.
- BSDD20-005 (down-dip) tested two zones of mineralization
by targeting (i) an extension of the hanging wall zone that has
previously been mined and (ii) the down-dip extension of
B-Shoot.
-
- Hanging wall target - This hole intersected 4.2m at 4.7g/t and 3.5m at 2.4g/t in an area that extends the strike
length of this zone by 75m south and
100m down-dip where previous drilling
intersected 13.5m grading 3.4 g/t in
hole BSDD293.
- Down-dip B Shoot extension target - This hole was also
successful in extending the B-Shoot mineralization below the
current planned stoping area, where an 18m zone grading 3.6g/t was intersected
65m below hole BSDD293 which
intersected 35.6m grading 3.1g/t.
This hole also intersected a 7.5m
foot wall zone at depth, grading 3.3g/t. Further work on these
targets is already underway and a wedge has been set with a
daughter hole being drilled to test the zone c.100m down-dip where
it remains open.
FINANCIAL PERFORMANCE SUMMARY
Please see the separate financial statements and management's
discussion and analysis for the detailed discussion on the
financial results for the three and twelve months Ended
December 31, 2020. The following summary focuses on FY 2020
performance.
Financial Performance – Continuing operations
Gold revenue totaled $272.5m in FY 2020, 34% higher than the
$203.8m achieved in FY 2019. Relative
to FY 2019, FY 2020 benefited from a 7% increase in gold ounces
sold and an average realized gold price for spot sales of
$1,770/oz (27% higher than in FY
2019). The 25% increase in the average realized gold price of
$1,626/oz, relative to FY 2019, was
in part offset by the lower average realized price of $393/oz achieved in relation to the RG Streaming
Agreement compared to $552/oz in
2019. The realized price related to the streaming agreement with
Royal Gold (as amended and restated
on September 30, 2020 (the "RG
Stream") was impacted by a negative non-cash adjustment of
$8m (2019 - $5.6m) in relation to the deferred revenue
liability following updates associated with the latest long-term
mine plans.
Non-cash adjustment to revenue. The non-cash deferred
revenue adjustment relates to the RG Stream. As the RG Stream
contains a variable component, each time there is a significant
change to the underlying total expected gold production of Wassa a
cumulative catch-up adjustment to the revenue is required.
Cost of sales from continuing operations (excluding
depreciation and amortization) totaled $124.4m in FY 2020 compared to $110.1m in FY 2019. Mine operating expenses
of $107.4m increased by $8.7m compared to FY 2019 primarily due to:
- Additional reagent, drilling and plant consumables costs in
line with increased mining and processing volumes.
- Increased labor costs.
- Higher maintenance costs as a function of higher production
rates and larger fixed and mobile capital base.
- Increased site general and administrative costs associated with
mining license fees, insurance and gold transportation.
- Royalties increased by $4m in
line with the higher revenue base.
Corporate general and administrative expense in FY 2020
amounted to $18.7m, a 28% increase
compared to $14.7m in FY 2019 due to
costs incurred as part of the relocation of the corporate office,
increased insurance expenditure and increased labor costs.
Hedging - The Company originally established the hedging
program over 50koz with a floor price of $1,400/oz and a ceiling price of $1,750/oz to provide gold price protection for
the forecast production from the Prestea mine over a 12 month
period commencing in August 2019. In
February 2020, the hedging program
was extended to cover the production from Prestea through to the
end of 2020. The Company entered into zero cost collars on an
additional 12.6koz with a floor price of $1,500/oz and a ceiling price of $1,992/oz. These positions matured at a rate of
4.2koz per month from October to December
2020.
During FY 2020, a number of the original hedge contracts matured
with the gold price exceeding the ceiling price at a realized loss
of $2.5m. There were no realized
losses associated with the contracts during Q4 2020, however, the
Company recognized an unrealized loss of $2.1m during the quarter ($2.2m for FY 2020).
As a condition of amending the Macquarie Credit Facility on
October 8, 2020, the Company extended
its gold price protection hedging program into 2021 and 2022 by
entering into zero cost collars with Macquarie Bank Limited on a
total of an additional 87.5koz with a floor price of $1,600/oz and a ceiling price of $2,176/oz in 2021 and a ceiling price of
$2,188/oz in 2022. These additional
positions will mature at a rate of 10.9koz per quarter from
March 2021 to December 2022. These are the only hedge contracts
that are currently in place for 2021 and 2022, with all prior
contracts now expired.
Table 7 - Adjusted EBITDA and Earnings Per Share (from
continuing operations):
1. See "Non-GAAP
Financial Measures"
|
|
Q4
2020
|
Q4
2019
|
|
FY
2020
|
FY
2019
|
|
|
|
|
|
|
|
EBITDA (continuing
operations)1
|
$m
|
28.5
|
9.5
|
|
119.6
|
59.2
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
(Gain)/loss on fair
value of financial instruments
|
$m
|
(2.2)
|
3.0
|
|
(0.8)
|
1.6
|
Other
expense
|
$m
|
2.2
|
7.9
|
|
4.8
|
11.9
|
Variable component
adjustment on revenue
|
$m
|
8.0
|
5.6
|
|
8.0
|
5.6
|
Total
Adjustments
|
$m
|
8.0
|
16.5
|
|
12.0
|
19.1
|
Adjusted EBITDA
(continuing operations)1
|
$m
|
36.5
|
26.0
|
|
131.6
|
78.3
|
|
|
|
|
|
|
|
Adjusted EBITDA
(discontinued operations)1
|
$m
|
-
|
(4.6)
|
|
(10.0)
|
(13.0)
|
Total adjusted
EBITDA (inc. discontinued operations)1
|
$m
|
36.5
|
21.4
|
|
121.7
|
65.4
|
|
|
|
|
|
|
|
Net income/(loss)
attributable to shareholders (continuing operations)
|
$m
|
8.2
|
(1.2)
|
|
38.5
|
5.3
|
Net income/(loss)
attributable to shareholders per share (continuing
operations)
|
$/share
|
0.07
|
(0.01)
|
|
0.35
|
0.05
|
|
|
|
|
|
|
|
Net income/(loss)
attributable to shareholders (inc. discontinued
operations)
|
$m
|
6.5
|
(62.4)
|
|
(52.1)
|
(67.4)
|
Net income/(loss)
attributable to shareholders per share (inc. discontinued
operations)
|
$/share
|
0.06
|
(0.57)
|
|
(0.47)
|
(0.62)
|
|
|
|
|
|
|
|
Adjusted net income
attributable to shareholders (continuing
operations)1
|
$m
|
12.7
|
8.0
|
|
44.6
|
17.5
|
Adjusted net
income attributable to shareholders (continuing operations) per
share1
|
$/share
|
0.11
|
0.07
|
|
0.40
|
0.16
|
EBITDA from continuing operations amounted to
$119.6m for FY 2020, more than double
the $59.2m achieved in FY 2019. Once
adjusted for the loss/gain on fair value of financial instruments
and other expenses, the Company generated an Adjusted EBITDA from
continuing operations of $131.6m for
FY 2020, an increase of 68% compared to FY 2019. These increases
are due to the significant improvement in mine operating profits
following from higher gold sales and improved realized gold
prices. Adjusted EBITDA margin (see "Non-GAAP Financial
Measures") compared favorably at 48% for FY 2020 (FY 2019 -
38%).
Net income from continuing operations attributable to
Golden Star shareholders for FY
2020 totaled $38.5m or $0.35 income per share (basic), compared to a net
income of $5.3m or $0.05 basic income per share in 2019. The
improved performance reflects the impact of the higher revenues and
lower other expenditure incurred that was in part offset by
resulting increased income taxes, higher corporate general and
administrative expenses and increased finance expenses.
Adjusted net income attributable to Golden Star shareholders (see "Non-GAAP
Financial Measures" section) was $44.6m or $0.40
basic income per share in 2020 compared to $17.5m or $0.16
basic income per share in 2019. Adjusted net income attributable to
Golden Star shareholders reflects
adjustments for non-recurring and abnormal items which are mostly
non-cash in nature. The increase during FY 2020 compared to FY 2019
was primarily due to the higher mine operating profit on the back
of improved sales volumes and gold prices partly offset by the
resulting increased income tax expense.
Net Cash Flow and Financial position
The table below summarizes the uses of cash in Q4 2020 and FY
2020 and the resulting impact on the financial position of the
Company:
Table 8 - Cash Flow and Net Debt Position
|
|
Q4
2020
|
Q4
2019
|
|
FY
2020
|
FY
2019
|
Net cash from
(used in) continuing operations
|
|
|
|
|
|
|
Operating activities
(inc. working capital)
|
$m
|
19.4
|
19.2
|
|
84.0
|
50.1
|
Investing
activities
|
$m
|
(13.5)
|
(22.9)
|
|
(47.2)
|
(56.5)
|
Financing
activities
|
$m
|
8.6
|
8.0
|
|
2.0
|
1.5
|
Increase/(decrease) in cash from continuing
operations
|
$m
|
14.5
|
4.3
|
|
38.8
|
(4.9)
|
|
|
|
|
|
|
|
Net cash from
(used in) discontinued operations
|
|
|
|
|
|
|
Operating activities
(inc. working capital)
|
$m
|
(1.9)
|
(6.0)
|
|
(23.9)
|
(27.3)
|
Investing
activities
|
$m
|
-
|
(2.3)
|
|
(7.5)
|
(10.9)
|
Financing
activities
|
$m
|
-
|
0.6
|
|
-
|
-
|
Decrease in cash
from discontinued operations
|
$m
|
(1.9)
|
(7.7)
|
|
(31.4)
|
(38.2)
|
|
|
|
|
|
|
|
Cash position at
start of period
|
$m
|
48.3
|
56.8
|
|
53.4
|
96.5
|
Cash position at
period end
|
$m
|
60.8
|
53.4
|
|
60.8
|
53.4
|
|
|
|
|
|
|
|
Summary of debt
facilities
|
|
|
|
|
|
|
Macquarie credit
facility
|
$m
|
54.5
|
57.4
|
|
54.5
|
57.4
|
Convertible
debentures
|
$m
|
49.7
|
47.0
|
|
49.7
|
47.0
|
Finance
leases
|
$m
|
1.5
|
2.4
|
|
1.5
|
2.4
|
Gross Debt
Position
|
$m
|
105.7
|
106.8
|
|
105.7
|
106.8
|
Net Debt
Position
|
$m
|
45.0
|
53.4
|
|
45.0
|
53.4
|
Financial position - The Company held $60.8m of cash and cash equivalents and
$105.7m of debt, for net debt of
$44.9m as at December 31, 2020.
The net debt position improved by $8.5m during FY 2020 as a result of the
$7.4m increase in the cash
position.
Free cash flow - During FY 2020 continuing operations
provided cash of $36.8m, a
$43.1m increase from the $6.4m of negative free cash flow from continuing
operations in FY 2019. This is attributable to higher gold
production, an increase in the realized gold price and lower
capital expenditure.
Company Profile:
Golden
Star is an established gold mining company that owns and
operates the Wassa underground mine in Ghana, West Africa. Listed on the NYSE
American, the Toronto Stock Exchange and the Ghanaian Stock
Exchange, Golden Star is focused on
delivering strong margins and free cash flow from the Wassa
mine. As the winner of the Prospectors & Developers
Association of Canada 2018
Environmental and Social Responsibility Award, Golden Star remains committed to leaving a
positive and sustainable legacy in its areas of operation
Statements Regarding Forward-Looking Information
Some
statements contained in this news release are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 and "forward looking information" within the
meaning of Canadian securities laws. Forward looking statements and
information include but are not limited to, statements and
information regarding: present and future business strategies and
the environment in which Golden Star
will operate in the future, including the price of gold,
anticipated costs and ability to achieve goals; gold production,
cash operating costs, AISC and capital expenditure estimates and
guidance for 2021, and the Company's achievement thereof; the
sources of gold production at Wassa during 2021; the processing of
low grade stockpiles at Wassa for the remainder of the year;
expected grade and mining rates for 2021; the ability to improve
recovery; the ability to achieve production growth; the ability to
improve cash generation; the ability to increase the size of the
Wassa ore body; the commissioning of the paste fill plant project
and timing thereof; the improvements to be realized through the
delivery of a range of operational initiatives; the ability to
improve the scale of operations and margin at Wassa; the expected
allocation of the Company's capital expenditures; implementation of
the Company's exploration programs and the timing thereof; the
anticipated exploration activities for 2021; the ability to expand
the Company and its production profile through exploration and
development activities; the potential impact of the COVID-19
pandemic on the Company's operations and the ability to mitigate
such impact; the securing of adequate supply chains for key
consumables; the ability to continue to ship gold across borders
and to refine doré at the South African refinery; the receipt by
Golden Star of the deferred
consideration from the sale of Bogoso-Prestea, and the potential
amount and timing thereof; the anticipated effectiveness of the
hedging program over the next 12 months; and the Company having
sufficient cash available to support its operations and mandatory
expenditures for the next twelve monthsGenerally, forward-looking
information and statements can be identified by the use of
forward-looking terminology such as "plans", "expects", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates", "believes" or variations of such words
and phrases (including negative or grammatical variations) or
statements that certain actions, events or results "may", "could",
"would", "might" or "will be taken", "occur" or "be achieved" or
the negative connotation thereof. Investors are cautioned that
forward-looking statements and information are inherently uncertain
and involve risks, assumptions and uncertainties that could cause
actual facts to differ materially. Such statements and information
are based on numerous assumptions regarding present and future
business strategies and the environment in which Golden Star will operate in the future.
Forward-looking information and statements are subject to known and
unknown risks, uncertainties and other important factors that may
cause the actual results, performance or achievements of
Golden Star to be materially
different from those expressed or implied by such forward-looking
information and statements, including but not limited to: gold
price volatility; discrepancies between actual and estimated
production; mineral reserves and resources and metallurgical
recoveries; mining operational and development risks; liquidity
risks; suppliers suspending or denying delivery of products or
services; regulatory restrictions (including environmental
regulatory restrictions and liability); actions
by governmental authorities; the speculative nature of gold
exploration; ore type; the global economic climate; share price
volatility; the availability of capital on reasonable terms or at
all; risks related to international operations, including economic
and political instability in foreign jurisdictions in which
Golden Star operates; risks related
to current global financial conditions; actual results of current
exploration activities; environmental risks; future prices of gold;
possible variations in mineral reserves and mineral resources,
grade or recovery rates; mine development and operating risks; an
inability to obtain power for operations on favourable terms or at
all; mining plant or equipment breakdowns or failures; an inability
to obtain products or services for operations or mine development
from vendors and suppliers on reasonable terms, including pricing,
or at all; public health pandemics such as COVID-19, including
risks associated with reliance on suppliers, the cost, scheduling
and timing of gold shipments, uncertainties relating to its
ultimate spread, severity and duration, and related adverse effects
on the global economy and financial markets; accidents, labor
disputes and other risks of the mining industry; delays in
obtaining governmental approvals or financing or in the completion
of development or construction activities; litigation risks; and
risks related to indebtedness and the service of such indebtedness.
Although Golden Star has attempted
to identify important factors that could cause actual results to
differ materially from those contained in forward-looking
information and statements, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can
be no assurance that future developments affecting the Company will
be those anticipated by management. Please refer to the discussion
of these and other factors in management's discussion and analysis
of financial conditions and results of operations for the year
ended December 31, 2020, and in our
annual information form for the year ended December 31, 2019 as filed on SEDAR
at www.sedar.com. The forecasts contained in this press
release constitute management's current estimates, as of the date
of this press release, with respect to the matters covered thereby.
We expect that these estimates will change as new information is
received. While we may elect to update these estimates at any time,
we do not undertake any estimate at any particular time or in
response to any particular event.
Non-GAAP Financial Measures
In this press release, we use the terms "cash operating cost",
"cash operating cost per ounce", "all-in sustaining costs", "all-in
sustaining costs per ounce", "adjusted net (loss)/income
attributable to Golden Star
shareholders", "adjusted (loss)/income per share attributable to
Golden Star shareholders", "cash
provided by operations before working capital changes", and "cash
provided by operations before working capital changes per share -
basic".
"Cost of sales excluding depreciation and amortization" as found
in the statements of operations includes all mine-site operating
costs, including the costs of mining, ore processing, maintenance,
work-in-process inventory changes, mine-site overhead as well as
production taxes, royalties, severance charges and by-product
credits, but excludes exploration costs, property holding costs,
corporate office general and administrative expenses, foreign
currency gains and losses, gains and losses on asset sales,
interest expense, gains and losses on derivatives, gains and losses
on investments and income tax expense/benefit.
"Cost of sales per ounce" is equal to cost of sales excluding
depreciation and amortization for the period plus depreciation and
amortization for the period divided by the number of ounces of gold
sold (excluding pre-commercial production ounces sold) during the
period.
"Cash operating cost" for a period is equal to "cost of sales
excluding depreciation and amortization" for the period less
royalties, the cash component of metals inventory net realizable
value adjustments, materials and supplies write-off and severance
charges, and "cash operating cost per ounce" is that amount divided
by the number of ounces of gold sold (excluding pre-commercial
production ounces sold) during the period. We use cash operating
cost per ounce as a key operating metric. We monitor this measure
monthly, comparing each month's values to prior periods' values to
detect trends that may indicate increases or decreases in operating
efficiencies. We provide this measure to investors to allow them to
also monitor operational efficiencies of the Company's mines. We
calculate this measure for both individual operating units and on a
consolidated basis. Since cash operating costs do not incorporate
revenues, changes in working capital or non-operating cash costs,
they are not necessarily indicative of operating profit or cash
flow from operations as determined under IFRS. Changes in numerous
factors including, but not limited to, mining rates, milling rates,
ore grade, gold recovery, costs of labor, consumables and mine site
general and administrative activities can cause these measures to
increase or decrease. We believe that these measures are similar to
the measures of other gold mining companies, but may not be
comparable to similarly titled measures in every instance.
"All-in sustaining costs" commences with cash operating costs
and then adds the cash component of metals inventory net realizable
value adjustments, royalties, sustaining capital expenditures,
corporate general and administrative costs (excluding share-based
compensation expenses and severance charges), and accretion of
rehabilitation provision. For mine site all-in sustaining costs,
corporate general and administrative costs (excluding share-based
compensation expenses and severance charges) are allocated based on
gold sold by each operation. "All-in sustaining costs per ounce" is
that amount divided by the number of ounces of gold sold (excluding
pre-commercial production ounces sold) during the period. This
measure seeks to represent the total costs of producing gold from
current operations, and therefore it does not include capital
expenditures attributable to projects or mine expansions,
exploration and evaluation costs attributable to growth projects,
income tax payments, interest costs or dividend payments.
Consequently, this measure is not representative of all of the
Company's cash expenditures. In addition, the calculation of all-in
sustaining costs does not include depreciation expense as it does
not reflect the impact of expenditures incurred in prior periods.
Therefore, it is not indicative of the Company's overall
profitability. Share-based compensation expenses are also excluded
from the calculation of all-in sustaining costs as the Company
believes that such expenses may not be representative of the actual
payout on equity and liability based awards.
The Company believes that "all-in sustaining costs" will better
meet the needs of analysts, investors and other stakeholders of the
Company in understanding the costs associated with producing gold,
understanding the economics of gold mining, assessing the operating
performance and the Company's ability to generate free cash flow
from current operations and to generate free cash flow on an
overall Company basis. Due to the capital intensive nature of the
industry and the long useful lives over which these items are
depreciated, there can be a disconnect between net earnings
calculated in accordance with IFRS and the amount of free cash flow
that is being generated by a mine. In the current market
environment for gold mining equities, many investors and analysts
are more focused on the ability of gold mining companies to
generate free cash flow from current operations, and consequently
the Company believes these measures are useful non-IFRS operating
metrics ("non-GAAP measures") and supplement the IFRS disclosures
made by the Company. These measures are not representative of all
of Golden Star's cash expenditures
as they do not include income tax payments or interest costs.
Non-GAAP measures are intended to provide additional information
only and do not have standardized definitions under IFRS and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. These measures are
not necessarily indicative of operating profit or cash flow from
operations as determined under IFRS.
"Adjusted net (loss)/income attributable to Golden Star shareholders" is calculated by
adjusting net (loss)/income attributable to Golden Star shareholders for (gain)/loss on fair
value of financial instruments, share-based compensation expenses,
severance charges, loss/(gain) on change in asset retirement
obligations, deferred income tax expense, non-cash cumulative
adjustment to revenue and finance costs related to the Streaming
Agreement, and impairment. The Company has excluded the non-cash
cumulative adjustment to revenue from adjusted net income/(loss) as
the amount is non-recurring, the amount is non-cash in nature and
management does not include the amount when reviewing and assessing
the performance of the operations. "Adjusted (loss)/income per
share attributable to Golden Star
shareholders" for the period is "Adjusted net (loss)/income
attributable to Golden Star
shareholders" divided by the weighted average number of shares
outstanding using the basic method of earnings per share.
For additional information regarding the Non-GAAP financial
measures used by the Company, please refer to the heading "Non-GAAP
Financial Measures" in the Company's Management Discussion and
Analysis of Financial Condition and Results of Operations for the
year ended December 31, 2019 and the
three months ended March 31, 2020,
which are available at www.sedar.com.
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SOURCE Golden Star Resources Ltd.