Analysts Confident On Golden Star's Progress

| About: Golden Star (GSS)

Golden Star Resources Ltd. (NYSEMKT:GSS), which has two operating mines in Ghana, West Africa, on Tuesday announced that its new Bogoso sulfide processing plant achieved commercial production at the end of the second quarter.

Additional capacity will allow the miner to produce more gold from its Wassa mine and another nearby area. However, permitting delays led to lower-than-expected second quarter production of only 42,282 ounces of gold. As a result, Bogoso said cash operating costs for the quarter will be higher than previous guidance.

Blackmont Capital analyst Richard Gray expects average costs will be US$520 per ounce, compared with US$430 previously. He maintained a “buy” rating on Golden Star shares, but lowered his price target to C$5.50 per share from C$6 as a result.

The company is expected to report second quarter results on August 7, 2007.

A delay for commissioning the Denver-based gold producer’s expansion project led to concerns about the company’s prospects and put pressure on its shares. New equipment related to design changes is expected to be installed in August, but with the processing plant now running consistently, Wellington West analyst Catherine Gignac expects steady output by the end of the year.

Golden Star should also have access to new lower-cost sources of power by then, she told clients in a note. Ghana has been facing serious power supply disruptions, so four miners operating there (AngloGold Ashanti (NYSE:AU), GoldFields (NYSEMKT:GV), Newmont Mining (NYSE:NEM) and Golden Star) are building a new power station that could be up and running by the end of month.

Use of another power station for the Bogoso mine should also help lower Golden Star’s costs.

Ms. Gignac continues to rate Golden Star a “buy” with a C$5.25 price target. She expects trading multiples for its shares will climb toward those of its peers as sustainable throughput, grades and recoveries are demonstrated.

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