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Golden Star Resources: A Look At The Southern Extension PEA

Mar. 08, 2021 12:49 PM ETGolden Star Resources Ltd. (GSS)1 Comment
Taylor Dart profile picture
Taylor Dart


  • Golden Star Resources reported its updated mineral reserves for FY2020, with a 22% drop in reserves to 1.09 million ounces at a gold price of $1,300/oz.
  • This translates to a 6-year mine life at 177,000 ounces per year, which is slightly above FY2020 production levels.
  • The good news is that the company has released a PEA for inferred material at Wassa, that should allow the mine to continue production into the mid 2030s.
  • This is a positive development for the company and it's a major step-up from current production levels, even if it is very preliminary in nature at this time.

The FY2021 Resource & Reserve updates for the Gold Miners Index (GDX) have begun to pour in, and one of the first names to report an update is Golden Star Resources (NYSE:GSS). While the company's reserve update has outlined a sub-10-year mine life, which pales relative to peers, Golden Star concurrently announced a Preliminary Economic Assessment [PEA], outlining a growth strategy and significant mine life extension if confirmed by definition drilling. This PEA suggests the potential for a more than 65% increase in annual gold production by FY2027, with Golden Star utilizing its mill's full capacity. Overall, this is a very positive development for the company, though it's important to note it's preliminary in nature.

(Source: Company Presentation)

Golden Star Resources released an updated Reserve & Resource update last week and reported an updated reserve of ~1.09 million ounces at an average grade of 2.94 grams per tonne gold. This was a sharp decrease from the ~1.41 million ounce reserve the company entered 2020 with, translating to a 23% drop in reserves year-over-year. However, it's worth noting that the updated reserve is higher-quality given the grade lift we've seen, and the company stuck to its relatively conservative $1,300/oz gold (GLD) price to measure reserves. Let's take a closer look below:

Reserves & Resources Update

(Source: Company Filings, Author's Chart)

As shown in the chart above, we've seen mineral reserves decline for the past two years at Wassa, from ~1.47 million ounces to ~1.09 million ounces. The silver lining is that grades have increased in the period from 2.86 grams per tonne gold to 2.94 grams per tonne gold, and the company has continued to maintain its gold price used to calculate reserves of $1,300/oz. Based on the current reserve base, Golden Star expects to produce ~1.02 million ounces over the next 6 years at average all-in sustaining costs of $881/oz. This is

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Analyst’s Disclosure: I am/we are long GLD, KL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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Comments (1)

Brian Cellars profile picture
Thanks for the article. I've had this on my watch list but haven't bought. As you say, too many other good companies on sale.
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