Golden Star Resources Ltd.
TSX : GSC
NYSE Amex : GSS

Golden Star Resources Ltd.

February 23, 2011 21:52 ET

Golden Star Reports Fourth Quarter and Year-End 2010 Financial Results

DENVER, COLORADO--(Marketwire - Feb. 23, 2011) - Golden Star Resources Ltd. (TSX:GSC)(NYSE Amex:GSS)(GSE:GSR) ("Golden Star" or the "Company") today announced its audited year-end results for 2010 and unaudited fourth quarter 2010 results. All currency in this news release is expressed in U.S. dollars. The Company will host a live webcast and conference call to discuss its quarterly results on Thursday, February 24, 2011 at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time). To access the webcast and conference call, go to the home page of the Company's website, www.gsr.com.

Tom Mair, President and CEO, said, "Production at Bogoso during the second half of the year was adversely constrained by the need to process transitional ores with lower recoveries. As mining progresses through the transition ore to access the fresh sulfide ores with higher recovery rates, we anticipate increased production and lower cash operating costs. We also expect to commission the Bogoso tailings retreatment facility during 2011 as a source of low-cost incremental gold production." 

2010 RESULTS

  • Gold sales of 354,904 ounces from Bogoso/Prestea and Wassa/HBB mines for 2010;
  • Average realized gold price of $1,219 per ounce during 2010;
  • Gold revenues of $432.7 million, up 8% over gold revenues for 2009;
  • Cash operating costs of $766 per ounce;
  • Year-end cash and cash equivalents balance of $178. 0 million versus $154.1 million at the end of 2009;
  • Net loss of $8.3 million or $0.032 per share; and
  • Net cash provided by operating activities of $115.2 million for 2010 or $0.447 per share, compared to $104.6 million or $0.441 per share for 2009;

FINANCIAL SUMMARY

SUMMARY OF CONSOLIDATED For the three months ended   For the twelve months ended
FINANCIAL RESULTS December 31,   December 31,
  2010     2009   2010     2009
Bogoso/Prestea gold sold (oz) 28,021     46,679   170,973     186,054
Wassa/HBB gold sold (oz) 48,895     59,807   183,931     223,848
  Total gold sold (oz) 76,916     106,486   354,904     409,902
Average realized gold price ($/oz) 1,371     1,103   1,219     978
Cash operating cost - combined ($/oz) 1,056     542   766     564
Gold revenues ($000's) 105,471     117,422   432,693     400,739
Cash flow provided by operations ($000's) 20,343     62,673   115,204     104,615
Cash flow provided by operations per share ($) 0.079     0.160   0.447     0.441
Net income/(loss) ($000's) (17,970 )   19,627   (8,281 )   16,519
Net income/(loss) per share - basic ($) (0.070 )   0.083   (0.032 )   0.070

BOGOSO/PRESTEA

Gold sales from Bogoso/Prestea totaled 170,973 ounces during 2010. Fourth quarter gold sales from Bogoso/Prestea were 28,021 ounces of gold. Factors that affected gold production during the second half of 2010 included lower recovery rates due to the mix of transitional ore being supplied to the sulfide processing plant and poor weather conditions. A limited volume of oxide ore was provided to the oxide processing plant during the fourth quarter of 2010. During 2011, we expect to commission the tailings retreatment facility and increase the utilization of the oxide processing plant.

As mining progresses deeper into Chujah and the Bogoso North pits, we anticipate increasing amounts of fresh sulfide ore, higher recovery rates and, consequently, higher gold production. 

  For the three months ended   For the twelve months ended
BOGOSO/PRESTEA OPERATING RESULTS December 31,   December 31,
  2010   2009   2010   2009
Mining              
Ore mined (000s t) - Refractory 591   810   2,734   2,941
Ore mined (000s t) - Non-refractory 85   -   115   -
Total ore mined (000s t) 676   810   2,849   2,941
Waste mined (000s t) 4,826   3,732   17,839   14,929
Bogoso Sulfide Plant Results              
Refractory ore processed (000s t) 628   749   2,776   2,887
Refractory grade - (g/t) 2.07   2.77   2.81   2.78
Recovery - Refractory (%) 56.2   70.2   65.7   70.7
Bogoso Oxide Plant Results              
Non-refractory ore processed (000s t) 146   -   146   -
Non-refractory grade - (g/t) 2.91   -   2.91   -
Recovery - non-refractory (%) 43.5   -   43.5   -
Cash operating cost ($/oz) 1,521   693   863   705
Gold sold (oz) 28,021   46,679   170,973   186,054

WASSA/HBB

Wassa performed as expected in 2010 with fourth quarter gold sales of 48,895 ounces and 183,931 ounces for the full year. In 2011, we anticipate production of 170,000 – 180,000 ounces of gold at a cash operating cost range of $650 - $700 per ounce.

  For the three months ended   For the twelve months ended
WASSA/HBB OPERATING RESULTS  December 31,   December 31,
  2010   2009   2010   2009
Ore mined (000s t) 750   477   2,561   2,223
Waste mined (000s t) 4,364   4,494   19,172   16,708
Ore processed (000s t) 779   657   2,648   2,653
Grade processed (g/t) 2.12   2.74   2.29   2.76
Recovery (%) 94.2   95.0   94.7   95.3
Cash operating cost ($/oz) 789   424   677   447
Gold sold (oz) 48,895   59,807   183,931   223,848

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents at year-end 2010 were $178.0 million, up $23.9 million over the prior year. The increase in cash was related to $115.2 million of cash from operating activities offset by $83.8 million of capital investments and net reduction of $12.4 million of debt. 

Capital spending amounted to $83.8 million for 2010. This included $20.9 million for mine development projects, $30.9 million for capital equipment purchases, $15.1 million for deferred stripping, and $16.9 million for mine site and exploration drilling.

Along with our cash position, we hold a $40.5 million revolving credit facility and have an additional $19 million of borrowing capacity under our equipment financing credit facility. We expect to use approximately $100 million for capital projects in 2011. This total includes $42 million for new equipment and facilities upgrades, $20 million for mine-site drilling, and $38 million for mine property development.

DEVELOPMENT PROJECTS

The Bogoso Tailings Retreatment project is on track to be operational, subject to permitting, in the second half of 2011. The engineering has been completed and permitting and equipment procurement commenced in the fourth quarter of 2010 to build a hydraulic tailings recovery system to pump tailings to the oxide processing plant. This will be a low-cost incremental source of gold production for Bogoso/Prestea.

During 2011, we will continue working on permitting the Mampon and Prestea South deposits and will proceed with the Pampe pit layback. These deposits will provide additional sources of ore for the Bogoso oxide processing plant.

We are also completing our evaluation of the Prestea Underground Project. We have been refurbishing the Central and Bondaye shafts at Prestea, have dewatered the mine to 30 Level and have drilled more than 64,000 m of diamond core resulting in an Indicated Mineral resource of 1.1 million tonnes grading 15.80 g/t, with significant potential to expand along strike and at depth.

EXPLORATION

In 2010, a total of $20 million was spent on exploration projects of which 80% was spent on mine site drilling. This resulted in a 24% increase in Mineral Reserves and a 63% increase in Mineral Resources. These results are discussed in more detail in a separate press release dated February 23, 2011.

The exploration budget for 2011 is $30 million and these funds will also be focused on resource definition drilling surrounding our operating areas in Ghana as well as very selective exploration and drilling at our other West African projects, and an increased level of exploration activity in Brazil.

In Brazil, we signed a joint venture agreement with Votorantim Metais, a subsidiary of Votorantim Group, a large Brazilian conglomerate. The joint venture covers a 3,400 square kilometer land package in northern Mato Grosso state, Brazil. We will also be exploring on our other Brazilian projects in Mato Grosso, Goias and Minas Gerais states.

LOOKING AHEAD

Our objectives for 2011 include:

  • Continued reserve and resource definition drilling at Bogoso/Prestea and Wassa/HBB;
  • Optimize and stabilize ore feed at Bogoso/Prestea to improve metallurgical recoveries;
  • Permitting, development and operation of the Bogoso Tailings Retreatment Project;
  • Reopening the Pampe pit to provide oxide ore to the Bogoso oxide processing plant;
  • Finalization of permits and development for the Prestea South project; and
  • Advance the development of the Prestea Underground project.

Our 2011 guidance is:

  2010
Guidance Gold Production (oz)   Cash Operating Cost ($/oz)
Bogoso/Prestea 160,000 - 180,000   $950 - $1,050
Wassa/HBB 170,000 - 180,000   $650 - $700
Total 330,000 - 360,000   $800 - $870

FINANCIAL STATEMENTS: The following information is derived from the Company's audited consolidated financial statements contained in our Form 10-K, which we filed with the SEC. It is also available on our website at www.gsr.com.

GOLDEN STAR RESOURCES LTD.  
CONSOLIDATED BALANCE SHEETS  
(Stated in thousands of US dollars except shares issued and outstanding)  
   
  As of     As of  
  December 31,     December 31,  
ASSETS 2010     2009  
CURRENT ASSETS          
  Cash and cash equivalents $ 178,018     $ 154,088  
  Accounts receivable 11,885     7,021  
  Inventories 65,141     52,198  
  Deposits 5,865     4,774  
  Prepaids and other 1,522     1,415  
    Total Current Assets 262,431     219,496  
RESTRICTED CASH 1,205     3,804  
DEFERRED EXPLORATION AND DEVELOPMENT COSTS 14,487     12,949  
PROPERTY, PLANT AND EQUIPMENT 229,081     231,855  
INTANGIBLE ASSETS 7,373     9,480  
MINING PROPERTIES 283,711     276,114  
OTHER ASSETS 3,167     181  
    Total Assets $ 801,455     $ 753,879  
LIABILITIES          
CURRENT LIABILITIES          
  Accounts payable $ 34,522     $ 28,234  
  Accrued liabilities 53,935     34,178  
  Asset retirement obligations 23,485     1,938  
  Current tax liability 1,128     616  
  Current debt 10,014     9,970  
    Total Current Liabilities 123,084     74,936  
LONG TERM DEBT 117,289     114,595  
ASSET RETIREMENT OBLIGATIONS 21,467     30,031  
FUTURE TAX LIABILITY 20,456     13,997  
  Total Liabilities $ 282,296     $ 233,559  
           
MINORITY INTEREST 1,278     -  
COMMITMENTS AND CONTINGENCIES          
SHAREHOLDERS' EQUITY          
SHARE CAPITAL          
  First preferred shares, without par value, unlimited shares authorized. No shares issued and outstanding -     -  
  Common shares, without par value, unlimited shares authorized. Shares issued and outstanding: 258,511,236 at December 31, 2010; 257,362,561 at December 31, 2009 693,853     690,423  
CONTRIBUTED SURPLUS 17,552     15,759  
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES 34,542     34,542  
ACCUMULATED OTHER COMPREHENSIVE INCOME 643     24  
DEFICIT (228,709 )   (220,428 )
    Total Shareholders' Equity 517,881     520,320  
    Total Liabilities and Shareholders' Equity $ 801,455     $ 753,879  
   
   
GOLDEN STAR RESOURCES LTD.  
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)  
(Stated in thousands of US dollars except share and per share data)  
   
  For the years ended December 31,  
REVENUE 2010     2009     2008  
Gold revenues $ 432,693     $ 400,739     $ 257,355  
Cost of sales 388,391     363,030     298,930  
  Mine operating margin 44,302     37,709     (41,575 )
OTHER EXPENSES, (GAINS) AND LOSSES                
Exploration expense 1,860     834     1,954  
General and administrative expense 17,065     14,156     15,221  
Abandonment and impairment -     3,079     68,380  
Derivative mark-to-market losses 850     3,538     980  
Property holding costs 5,299     4,196     -  
Foreign exchange (gain)/loss 872     (2,995 )   (2,587 )
Interest expense 16,946     15,647     14,591  
Interest and other income (362 )   (197 )   (805 )
Loss on sale of assets 829     304     575  
Gain on sale of investments -     -     (5,402 )
  Income/(loss) before minority interest 943     (853 )   (134,482 )
Minority interest (1,278 )   -     6,150  
  Loss before income tax (355 )   (853 )   (128,332 )
Income tax (expense)/benefit (7,946 )   17,372     9,029  
Net income/(loss) $ (8,281 )   $ 16,519     $ (119,303 )
                 
OTHER COMPREHENSIVE INCOME/(LOSS)                
Unrealized (gain)/loss on available-for-sale investments 619     113     (3,280 )
Comprehensive income/(loss) $ (7,662 )   $ 16,632     $ (122,583 )
                 
                 
Net income/(loss) per common share - basic $ (0.032 )   $ 0.070     $ (0.506 )
Net income/(loss) per common share - diluted $ (0.032 )   $ 0.069     $ (0.506 )
Weighted average shares outstanding (millions) 258.0     237.2     235.7  
Weighted average number of diluted shares (millions) 258.0     238.4     235.7  
   
   
GOLDEN STAR RESOURCES LTD.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Stated in thousands of US dollars)  
     
  For the years ended December 31,  
OPERATING ACTIVITIES: 2010     2009     2008  
Net income/(loss) $ (8,281 )   $ 16,519     $ (119,303 )
Reconciliation of net income/loss to net cash provided by operating activities:                
  Depreciation, depletion and amortization 100,762     113,977     60,583  
  Amortization of loan acquisition cost 1,888     1,201     732  
  Abandonment and impairment -     3,079     68,380  
  Gain on sale of equity investments -     -     (5,402 )
  Loss on sale of assets 829     304     575  
  Non cash employee compensation 2,975     2,033     2,088  
  Future income tax expense/(benefit) 6,459     (19,127 )   (9,029 )
  Fair value of derivatives mark-to-market (gain/loss) (216 )   (1,838 )   2,076  
  Accretion of convertible debt 7,079     6,624     6,198  
  Accretion of asset retirement obligations 2,802     2,165     778  
  Minority interests 1,279     -     (6,150 )
  Reclamation expenditures (9,704 )   (1,985 )   (1,163 )
  105,872     122,952     363  
Changes in non-cash working capital:                
  Accounts receivable (4,010 )   (2,702 )   4,060  
  Inventories (14,351 )   (4,327 )   3,229  
  Deposits 235     (845 )   -  
  Accounts payable and accrued liabilities 26,978     (10,848 )   24,618  
  Other 480     385     (2,226 )
    Net cash provided by operating activities 115,204     104,615     30,044  
INVESTING ACTIVITIES:                
  Expenditures on deferred exploration and development (3,538 )   (3,460 )   (6,937 )
  Expenditures on mining properties (49,390 )   (32,839 )   (42,830 )
  Expenditures on property, plant and equipment (30,849 )   (12,468 )   (24,660 )
  Proceeds from sale of equity investment 1,467     -     7,104  
  Proceeds from the sale of assets -     2     1,351  
  Change in payable on capital expenditures 901     (962 )   (5,235 )
  Change in deposits on mine equipment & material (1,326 )   (54 )   2,881  
  Other 2,598     445     (2,740 )
    Net cash used in investing activities (80,137 )   (49,336 )   (71,066 )
FINANCING ACTIVITIES:                
  Issuance of share capital, net of issue costs 2,248     73,489     6,238  
  Principal payments on debt (38,049 )   (28,856 )   (17,816 )
  Proceeds from equipment financing facility & revolving debt facility 25,674     22,837     11,456  
  Other (1,010 )   (2,219 )   (1,051 )
    Net cash provided by/(used in) financing activities (11,137 )   65,251     (1,173 )
Increase (decrease) in cash and cash equivalents 23,930     120,530     (42,196 )
Cash and cash equivalents, beginning of period 154,088     33,558     75,754  
Cash and cash equivalents end of period $ 178,018     $ 154,088     $ 33,558  

COMPANY PROFILE

Golden Star holds a 90% equity interest in Golden Star (Bogoso/Prestea) Limited and Golden Star (Wassa) Limited, which respectively own the Bogoso/Prestea and Wassa/HBB open-pit gold mines in Ghana. In addition, Golden Star has an 81% interest in the currently inactive Prestea Underground mine in Ghana, as well as gold exploration interests elsewhere in Ghana, in other parts of West Africa and in Brazil in South America. Golden Star has approximately 258 million shares outstanding.

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 other applicable securities laws. Investors are cautioned that forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results to differ materially. Such statements include comments regarding permitting and the mining at Prestea South; our 2011 exploration budget and planned exploration activities and drilling, including exploration at Bogoso/Prestea, and Wassa/HBB, and in West Africa and Brazil; the ability to fund cash needs including capital and operating expenditures; optimization of throughput and recovery rates at the Bogoso sulfide processing plant, including the nature of ore that is expected to be encountered at Bogoso/Prestea and its impact on recovery rates and production levels; our 2011 production and cash operating cost estimates, capital expenditure estimates, our objectives for 2011; the timing of a development decision in respect of Prestea Underground; sources of and adequacy of cash to meet capital and other needs in 2010; and the ability to convert Mineral Resources into Mineral Reserves. Factors that could cause actual results to differ materially include timing of and unexpected events at the Bogoso/Prestea oxide and sulfide processing plant; variations in ore grade, tonnes mined, crushed or milled; variations in relative amounts of refractory, non-refractory and transition ores; delay or failure to receive board or government approvals and permits; the availability and cost of electrical power, timing and availability of external financing on acceptable terms; technical, permitting, mining or processing issues, changes in U.S. and Canadian securities markets, and fluctuations in gold price and costs and general economic conditions. 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 our Form 10-K for 2010. 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 and that actual results will vary from these estimates, possibly by material amounts. While we may elect to update these estimates at any time, we do not undertake to update any estimate at any particular time or in response to any particular event. Investors and others should not assume that any forecasts in this press release represent management's estimate as of any date other than the date of this press release.

Non-GAAP Financial Measures: in this news release, we use the terms "cash operating cost per ounce." Cash operating cost per ounce is equal to total cash costs less production royalties and production taxes, divided by the number of ounces of gold sold during the period. We use cash operating cost per ounce as a key operating indicator. We monitor this measure monthly, comparing each month's values to prior period's values to detect trends that may indicate increases or decreases in operating efficiencies. This measure is also compared against budget to alert management to trends that may cause actual results to deviate from planned operational results. We provide this measure to our investors to allow them to also monitor operational efficiencies of our mines. We calculate this measure for both individual operating units and on a consolidated basis. Cash operating cost per ounce should be considered as Non-GAAP Financial Measures as defined in SEC Regulation S-K Item 10 and other applicable securities laws and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. There are material limitations associated with the use of such non-GAAP measures. Since this measure does not incorporate revenues, changes in working capital and non-operating cash costs, it is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Changes in numerous factors including, but not limited to, mining rates, milling rates, gold grade, gold recovery, and the 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 the same or similar to the measures of other gold mining companies, but may not be comparable to similarly titled measures in every instance.

Contact Information

  • Golden Star Resources Ltd.
    Bruce Higson-Smith
    Vice President Corporate Development
    +1-800-553-8436
    or
    Golden Star Resources Ltd.
    Anne Hite
    Investor Relations Manager
    +1-800-553-8436
    www.gsr.com