Call Start: 13:15
Call End: 13:31
Golden Star Resources Ltd. (GSS)
Denver Gold Forum
September 25, 2013 01:15 pm ET
Sam Coetzer - President and Chief Executive Officer
Unidentified Company Representative
From (Inaudible) to a couple of producers, gold producers now, first is Golden Star, producing from. This is in Prestea and Wassa mines in Ghana, around about 3,000 ounces a year.
To present, we have President and CEO, Sam Coetzer.
Thank you. You might walked really [fast], because I want to use every second to tell you about the transformation that we are seeing in Golden Star.
Good morning, ladies and gentlemen. Thank you for joining me here today and what I would like to do just before I start the presentation is to remind you of our overall strategy and that is to transform Golden Start to a low gold cost producer. Also going forward, we want to increase the resilience of this company.
What I do know and I continue to be excited by the resilience of the company and I am encouraged extremely a lot by its future potential. What I want to do today is, highlight to you how we are tracking against the strategy.
Just take note of our disclaimer. Golden Star has two operating mines, Bogoso and Wassa in the established mining jurisdiction of Ghana. The combined processing capacity of the mines is 7 million tonnes per annum.
In 2012, we produced 337,000 or 336,000 ounces. In 2013, we are forecasting to produce between 290,000 and 330,000 ounces and today I am happy to announce that we are turning to the top side of that guidance number.
Looking to the future, we are well capitalized with $100 million in available funds, which provides us with a financial flexibility to continue project development.
As the gold price has declined over the last, since April, we have also seen us squeezing real margins. Management responded by getting $45 million as well as adjusting our capital streaming going forward. We re-optimized our pits and we are now fully funded for the remainder of 2013.
As most of you know, I joined the company as a Chief Operating Officer about 18 months ago and what I realize, what was very clear to me at that point in time, is that we had some major operational issues that we needed to tackle and that our planning ability in this company needed to be adjusted.
I would like to report back on how we progressed on these issues over that time period. We are more than halfway through our investment in betterment stripping at Bogoso, which will have a positive impact starting next year and reduce Bogoso's cost going forward.
We have commenced reprocessing of their tailings of the TSF1 at Bogoso with very good early results, and I will be talking about this a bit later. Early in the fourth quarter, we will be updating our resource results at Wassa, with an additional 84,000 meters of drilling that was not included in our previous statements. We are excited about how that is shaping up.
Finally, we have secured a $50 million term loan facility in country that allows us the flexibility to further projects at Wassa. When I next present to you, I would refer back to the slide we report on the transformation of this company.
Investments in infrastructure over the last few years, even before I joined, have resulted in Golden Star having significant processing capacity of 7 million tonnes per annum across three plants within a 40-kilimeter radius. That to me was the inherent opportunity that this company has. These plants enable to process any type of ore on Ashanti Trend. We recently restarted the Bogoso oxide plant with the capacity of 14.5 million tonnes.
Our current mine plan focus on various supply sources to full the plants going forward. The key element of our immediate strategy is to consistently operate at capacity in our existing processing plants which could collectively have as I said previously 7 million per annum.
Over the last 18 months, we have invested in both, in our plants as well as our ore resources to allow us to fully achieve this. This graph is what I do believe is where we are going to be continuing to add value to Golden Star.
If you see the tracking of this graph and it's very telling over the period from 2011 to 2013, we have closed the gap of supplying throughput to three plants, and not only was that important to close that gap, but the component of the non-refractory ore to refractory ore is how we will skew our cost to a lower cost producer.
You would note that just recently in the last quarter, we are now tracking at full capacity. This will be the first lean quarter that we have going forward at full capacity for Bogoso. That to me is very telling.
Looking at this map Wassa operation, you could see there are multiple ore sources all the way down the Wassa trend. In the first half of this year, we produced 97,000 ounces at $770 per ounce, well below our cash cost guidance.
For 2013, which was $900 to $1,000 per ounce, this is mainly due as a result of the good performance that we had from your Father Brown pit, but what it demonstrates is the flexibility that we have to source ore from multiple sources at a time, so the challenges for us was to invest in the plant, make sure that we are good plants and we did that.
We invested in CIL section at Wassa a year [back] $2 million and in that we would have been able to make take more threshold in different ore bodies on that trend and that has allowed the Wassa mine to continue to produce as well as it does. It continues to deliver. It continues to increase its gold production throughput and the cost structure is coming down.
For this period, we are now seeing the final quarter being as low as $736 an ounce. That's a good story and this story will continue to move forward on.
I would like to talk about Wassa and the great potential and how this has been evolving over the last 18 months and how this is going to be transforming Golden Star to a large extent. Over the course of the last two years, we have completed certain various drilling below this pit, and as I indicated earlier, we have an outstanding amount of drilling that wasn't in our previous results of about 83,000 meters.
Last is resource estimate indicated, but we considered a large pit at Wassa, and we even considered in thinking of an expansion. However, the inclusion was the recent results are evolving what we see and how this quickly has changed in front of our eyes has changed the thinking moving forward.
What you are looking at here is a 1,000-meter long section of the Wassa mine deposit and it goes 500 meters down. With the recent inclusion of the 84,000 meters of drill results, we are now seeing a greater potential in the deposited depths and we are looking at the possibility of mining this deposit from both, surface and also from underground.
If you remember our previous thinking of holding a large low-grade pit and in expansion, I want to stress at this stage, this plan is conceptual in nature and we need to do a lot of work before we can make that decision, but it is encouraging to note the results of the drilling in this high widths below the pit. I will be providing resource estimate in the fourth quarter once we are done with our thinking on this.
Turning to our Bogoso operations, you can see on the map the various mines sites achieved the Bogoso refractory and non-refractory with a total capacity and I keep on stressing the capacity, the total capacity of 4.1 million tonnes per annum.
Bogoso North and the Chujah pit are the current ore sources to the processing plant. However, we are currently developing the Dumasi pit with a production expected in 2015 as well as the high grade Mampon deposit with production expected in 2016.
Furthermore, as you may be aware, we completed the public hearing at the Prestea South in early September and we can now enter now into the final stages of permitting for the Prestea South pit. We are targeting production from this site late 2014.
What you are looking at here is the strip ratio on the tonnes mine at Chujah and Bogoso North. When the gold price fell this year, we had to do a viability test in terms of whether Bogoso will continue to operate under the current conditions.
You will note that the strip ratio has now already peaked in 2013 as we are in the process of investing $38 million in push backs and the majority of that which is now complete. We have now started moving down that curve. This investment into these push backs will ensure that we have access to the remaining ore in these two pits of high grade and recovery is expected.
Due to the lower strip ratio, the operating cost will reduce from the first half in 2014. With our increased focus on reducing our throughput and our planning in 2013 and 2012, we mined additional 500,000 tonnes of stockpile and that stockpile we put into that plant to continue with a throughput at the end of 2013. As we enter into 2014, we will see the benefits of this moving forward.
This is the exciting part. As discussed at the time of our last results, we started treating the tailings of Bogoso maintaining specifically in late of the second quarter. We set an initial target of 4,000 tonnes a day, about 1 gram a tonne and a recovery of 40% and we are exceeding those results. This very simple, low cost operation is generating between $800,000 and the $1 million of free cash with no capital required going forward.
You would note that it is my mining pit is doing 4,000-plus tonnes a day and we decided to increase that by 1%, because of the ability that we see from the outside plant and we will be increasing the throughput. Very exciting and that's a very easy project for us to move forward.
In response to the changing market conditions, we reduced our original CapEx budget by over $70 million. It's not only reducing, but we also are seeing different opportunities going forward and how we will invest in this company as we see more and more opportunities coming up.
This year we will spend $40 million of sustaining capital between our two operations. In addition, we have allocated $36 million in development capital. Furthermore, as discussed, we are capitalizing $38 million in better betterment stripping at Bogoso since we converted from the U.S. GAAP to IFRS.
Our current share price is, I think this morning it's lower than $0.47 as the market capitalization of $122 million. Taking our outstanding debt and cash on hand 30, June into account, our enterprise value is $161 million. As you could see from our share register that we are well supported by large institutional shareholders including (Inaudible) and Heartland Advisors.
Highlights. In conclusion, I want to recap on the following points which gave me good reason to feel optimistic about Golden Star and optimistic about this transformation is occurring at the right pace. We have an installed capacity of $7 million per annum that require minimal CapEx going forward.
Wassa operations continue to improve and the underground potential of this deposit is now very promising. Bogoso operation is trending well and the push backs are on schedule. We recently relocated our operations office to Toronto, where we successfully integrated the new management team and we would be aiming to engage more actively with the financial markers.
Lastly, we have rationalized our capital spending and with (Inaudible) we are adequately capitalized to move forward into 2014.
Almost out of the time. Thank you, ladies and gentlemen.
Unidentified Company Representative
Why don't you, Sam.
Any questions from the audience? We have one very quick question there please?
Okay. There we go. Can you give us an update on Prestea South permitting process there and how that ties into the underground development?
Although as you know the company has struggled to get the public hearing for the Prestea over the last five, six years and with our strong focus on community involvement having the done the feasibility at the Prestea South having this puts on top of it at Prestea South. We have been able to do a successful public hearing, which is the first step in completing the permit.
The standard is 90 days after that you generally receive the permit. In Ghana, it could be a few days longer or the short, so for the first time, we are now very optimistic, because we got the community on our side, we have the chiefs on our side and we have been, we are getting back into those pits and we are looking at repairing and doing maybe some great underground drilling for 2014, so it is a big change. We didn't put that in our Wassa mine plan until we had the public hearing, now it's starting to come back in, which is what we were reporting in terms of funding the capacity.
Although I have enough capacity for the oxide plant through the 4 million tonnes of [there] and once we take the catch of that it will be an addition in term of grade, so in terms of the local planned PSP will do from [capsule] and oxide plant.
Unidentified Company Representative
All right. Thank you, Sam.
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