Golden Star reports 5% gold production increase in Q2 2020; Adjusted EBITDA jumped 283%

Golden Star Resources Ltd. (NYSE American: GSS) (TSX: GSC) (GSE: GSR) (“Golden Star” or the “Company”) reports its financial and operational results for the second quarter ended June 30, 2020. All references herein to “$” are to United States dollars.

Q2 2020 AND H1 2020 HIGHLIGHTS:

  • Q2 2020 production totaled 50.6 thousand ounces (“koz”), versus 48.4koz in Q2 2019.
  • Q2 2020 production at the Wassa Gold Mine (“Wassa”) totaled 44.8koz. The underground grade increased to 3.5 grams per tonne (“g/t”) (18% higher than Q1 2020) and the underground mining rate averaged 4,420 tonnes per day (“tpd”).
  • Production of 5.9koz at the Bogoso-Prestea Gold Mine (“Prestea”) was impacted by personnel shortages resulting from the COVID-19 pandemic as well as dilution issues and ore loss. The development of the new mining areas on 17 Level was prioritized.
  • Gold sales totaled 52.7koz in Q2 2020 and 98.3koz in H1 2020 (2.3koz lower than production in H1 2020).
  • All-in sustaining cost (“AISC”) averaged $1,186 per ounce (“/oz”) during Q2 2020 and $1,193/oz for H1 2020.
  • Q2 2020 cash flow from operations (before working capital changes) totaled $27.1m, more than double the $13.4m achieved in Q1 2020.
  • Cash totaled $45.1m as at June 30, 2020, a $3.1m increase during the quarter. Debt reduced by $4.7m during the quarter to $102.6m. Net debt reduced by $7.8m to $57.5m as at June 30, 2020.
  • As we go into the second half of 2020 the top end of the production guidance range has been tightened to 195-205koz, together with the bottom end of the AISC guidance range being tightened to $1,100-1,180/oz.
  • On July 27, 2020 the Company announced the signing of a binding agreement for the sale of the Bogoso-Prestea Mine to Future Global Resources (“FGR”) for an aggregate purchase price of $55m (on a cash free, debt free and working capital free basis) with an additional contingent consideration of up to a further $40m conditional upon the occurrence of certain milestones (as described in the binding sale agreement).

Table 1 – Q2 2020 and H1 2020 Performance Summary

Production – Wassakoz44.837.420%85.180.36%
Production – Presteakoz5.911.1(47)%15.521.4(28)%
Total gold producedkoz50.648.45%100.6101.7(1)%
Total gold soldkoz52.748.78%98.3102.2(4)%
Average realized gold price$/oz1,6261,27028%1,5571,26323%
Cash operating cost per ounce – Wassa1$/oz633655(3)%6326005%
Cash operating cost per ounce – Prestea1$/oz2,2921,67737%1,9861,57326%
Cash operating cost per ounce – Consolidated1$/oz827886(7)%8428055%
All-in sustaining cost per ounce – Wassa1$/oz9609412%95284413%
All-in sustaining cost per ounce – Prestea1$/oz2,8902,14035%2,5082,00625%
All-in sustaining cost per ounce – Consolidated1$/oz1,1861,212(2)%1,1931,08910%
Gold revenues$m85.661.938%153.0129.218%
Adj. EBITDA$m33.78.8283%50.927.386%
Adj. income/(loss)/share attributable to shareholders – basic1$/share0.09(0.05)280%0.08(0.03)367%
Cash provided by operations before working capital changes$m27.10.64486%40.515.5161%
Changes in working capital$m(6.9)1.6(534)%(16.7)(13.9)(20)%
Cash outflow from investing activities$m(11.5)(15.6)16%(26.6)(26.9)1%
Free cash flow$m8.7(13.5)164%(2.9)(25.3)89%
Net Debt$m57.531.085%57.531.085%

Andrew Wray, Chief Executive Officer of Golden Star, commented:

“The overall performance of the business during the second quarter remained in line with our expectations, despite the challenges faced from the ongoing COVID-19 pandemic. This was principally due to the strong performance delivered by Wassa where we saw an 18% improvement in underground grades compared to the previous quarter and mining rates were maintained well in excess of 4,000tpd. Costs remained well managed and cash generation was strong over the quarter, with incremental cash flow from the lower grade stockpiles processed albeit they added around $15/oz to the reported AISC at the site.

The COVID-19 challenges I mentioned were felt more directly at Prestea, and impacted on production and costs during the quarter. As we announced on July 27, 2020, we have reached agreement to dispose of our Prestea operation for a total consideration of up to $95m and anticipate that the transaction will close by September 30, 2020. This will enable us to focus our attention and resources fully on delivering the significant growth potential of Wassa while allowing the high quality incoming team at Prestea to invest in building the scale and performance of that asset.

This operational performance led to a group cash position of $45.1m at the end of the quarter, an increase of $3.1m over the period. It is important to note that this was following a scheduled $5.0m principal repayment in June 2020 of the $60 million senior secured credit facility with Macquarie Bank Limited (the “Macquarie Credit Facility”), as well as a further $8.1m reduction in our accounts payable balance during the quarter.

Looking ahead to the second half of 2020, I expect a similar level of consolidated production as we have delivered in the first half of the year which is within the guidance range that we communicated for the full year. This implies that Wassa will be at or above the top of our original guided range while we now expect Prestea to produce in the order of 30koz to 35koz for the year given the impact of COVID-19 on production, as well as the increased lead times for some of the new fleet for 17 Level and other challenges. We have therefore slightly tightened the group production guidance range to 195koz to 205koz and consolidated all-in sustaining cost range to $1,100/oz to $1,180/oz. The updated guidance remains within the original ranges, albeit with a shift in composition. We will provide a further guidance update upon the closing of the sale of Prestea.

Finally, I would like to take a moment to recognize the ongoing commitment and dedication of all our employees through what has been a uniquely challenging period. Despite the personal concerns that the epidemic brings for all of us, they have remained highly professional and committed throughout and enabled us as a business to meet targets set prior to any of the obstacles we have faced. Likewise, we have enjoyed strong support from the authorities at all levels in Ghana who have continued to work closely with us. The health and well-being of our employees and all our stakeholders remain of paramount importance. The threat of the COVID-19 virus has not diminished, and we will not reduce our response to it as we work to deliver our plans for the remainder of the year.”

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