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Golden Star Resources Issues Several Positive Press Releases
Sep. 29, 2017 5:35 PM ET|11 comments| About: Golden Star Resources Ltd (GSS)
Crunching Numbers
Crunching Numbers
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Summary
Golden Star Resources issues three positive press releases over the past two weeks.
Discloses positive drilling results for both of its underground mines.
Announced commencement of stoping at Prestea.
Golden Star Resources (GSS) is a gold mining company operating in Ghana, one of the more stable African countries. It is a company that has been transitioning from open pit mining to underground mines with greater yield and lower production costs. The first of these two mines, Wassa, began commercial production in the first quarter of this year, and the second, Prestea, is currently scheduled to begin commercial production in Q4.
The most recent projections of production and cost per ounce forecast by the company are shown in the following chart:
(Source: April 2017 Company Presentation)
Meeting these goals is obviously dependent on the company's successfully growing production and, more importantly, for long-term investors, extending the life of these mines. The latest drilling results for Wassa were released earlier this month were positive, and in a September 19th press release, CEO Sam Coetzer issued the following statement:
I am excited to report these initial results from our Wassa Underground surface drilling program, which confirm that the B Shoot is significantly larger than previous estimates suggested. It is the first time we've invested significantly in exploration for several years, having previously been focused on building our two underground developments, and I'm very pleased that it is reaping such encouraging results. The results represent the potential to increase Wassa Underground's Mineral Resources and Mineral Reserves and consequently, its gold production in the short term and the longer term. I look forward to releasing further results during the rest of the year with the expectation of demonstrating Wassa Underground's potential to be a high grade gold producer beyond the current seven year mine life.
In addition, the company's latest presentation at the Denver Gold Forum on September 24th noted that the company was exceeding its planned mining rates at Wassa by 200 tons per day and that the average grams per ton were expected to increase as the mining continued.
Similarly, a press release about recent drilling at the Prestea underground mine was issued on September 21st and confirmed:
...the West Reef ore body extends to the north of the existing Mineral Reserves at Prestea Underground [and that] This represents the potential to add additional ounces to the short term mine plan and increase Prestea Underground's production rate
Coetzer was even more positive in his comments about Prestea than his comments about Wassa:
We believe that Prestea Underground is one of the highest grade gold development projects in West Africa... ...initial results from our extension drilling program indicate that the West Reef extends to the north of the existing Mineral Reserves, representing the potential to increase the annual production rate in the near term.
The third press release mentioned earlier noted that:
The successful blasting of the initial ore from the first stope in the [Prestea] West Reef ore body took place on September 27, 2017.
...It is expected to produce 90,000 ounces of gold per annum at a cash operating cost of $468 per ounce and an All-In Sustaining Cost of $615 per ounce over an initial mine life of 5.5 years.
This is important, as is the Prestea initial commercial production expected in Q4. Note that the cash operating cost ($468) and All-In Sustaining Cost ($615) are both well below the averages in the above chart. Although Wassa will produce more total ounces of gold, its yield is expected to be far less than Prestea (see below):
Source: Golden Star presentation at Denver Gold Forum on 9-24-2017
Whether or not Coetzer's optimistic outlook will be realized remains to be seen. The company plans on more exploratory drilling this year and into 2018. This drilling will be important to confirm the extent of the high grade ore content as well as the direction, depth, and width of these ore bodies.
Regardless, the company - and its investors - remain at the mercy of the price of gold. Earlier this month, it was pushing up towards $1,350 per ounce as Donald Trump and North Korean leader Kim Jong Un made headlines over nuclear weapons and missile tests. The price is now down towards $1,280 per ounce.
Still, if one is interested in a high risk - high reward, small cap, gold stock, Golden Star is one that you should probably consider.
Disclosure: I am/we are long GSS.
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.
Additional disclosure: I may sell covered calls against my positions at any time.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
