Golden Star Resources, which owns and operates the Wassa and Prestea mines situated on the prolific Ashanti Gold Belt in western Ghana, said it sold, in 2015, 221,653 ounces of gold compared to 260,788 sold in 2014.
At Bogoso/Prestea, 113,902 ounces of gold were sold, a decrease from 147,957 ounces the prior year as a result of the suspension of the refractory operations at Bogoso in the third quarter of 2015.
At Wassa, 107,751 ounces of gold were sold, a slight decrease from 112,831 ounces sold in 2014, which included production from the Father Brown pit. Fourth quarter 2015 gold sold remained in line with the third quarter of 51,378 ounces.
In its fourth quarter and full-year 2015 report, GSR said consolidated cash operating costs for the fourth quarter were $715 per ounce, reduced by approximately 28% from the third quarter. Cash operating costs at Wassa and Bogoso/Prestea reached five-year record lows of $625 and $849 per ounce, respectively.
The decline in costs was mainly driven by lower mining and processing costs and the suspension of the high-cost, energy-intensive, refractory operation in the third quarter of 2015. Consolidated cash operating costs per ounce for the year totalled $976 per ounce in 2015, down 10% from $1,090 per ounce in 2014.
Revenue for the full-year 2015 was $255.2 million, lower than $328.9 million of revenue in 2014, driven in part, by the continued decline in average realised gold prices and fewer ounces sold. The average realised gold price in 2015 of $1,151 per ounce, was 9% below the average realised price of $1,261 in 2014.
Corporate general and administrative expenditures of $14.3 million in 2015 were reduced by approximately 13% from the 2014 level of $16.4 million. The reductions were driven by lower legal fees and lower share-based compensation during the year.
Cash provided by operations before changes in working capital for the year was $53.4 million, or $0.21 per share, up significantly from the prior year as a result of the proceeds received from the Royal Gold Streaming Agreement.
Capital expenditures for the fourth quarter totalled $13.7 million, taking full-year capital expenditures to $57.1 million. The consolidated cash balance was $35.1 million at December 31, 2015 with an additional $70 million available under the streaming agreement and $3 million available under the Ecobank II facility.
Gold stream agreement and $20 million term loan
On July 28, 2015, the Company successfully closed a $130 million gold stream agreement and $20 million loan financing with Royal Gold, Inc. (RGI) and its wholly-owned subsidiary RGLD Gold AG. The Streaming Agreement was subsequently amended on December 30, 2015 to provide an additional $15 million of streaming advance payment with an option, subject to Golden Star satisfying certain conditions, to access a further $5 million.
The Streaming percentages were adjusted as follows to reflect the $15 million additional advance payment: from January 1, 2016, the Company was to deliver 9.25% of the Mines’ production to RGLD at a cash purchase price of 20% of spot gold. From January 1, 2018 or commercial production of the underground mines, Golden Star will deliver 10.5% of production at a cash purchase price of 20% of spot gold until 240,000 ounces have been delivered. If Golden Star exercises its option on the additional $5 million stream advance, the stream percentage from the earlier of January 1, 2018 or commercial production of the underground mines would be increased to 10.9% at a cash purchase price of 20% spot gold until 250,000 ounces have been delivered; thereafter, 5.5% of production at a cash purchase price of 30% of spot gold will be delivered.
The Streaming Agreement is a contract for the future delivery of gold ounces at the contracted cash purchase price. During the year ended December 31, 2015, the Company delivered 12,701 ounces of gold to RGLD. Revenue of $12.5 million was recognised for the year ended December 31, 2015, consisting of $2.9 million cash proceeds and $9.6 million of deferred revenue realised.
Gold sold in the fourth quarter of 2015 of 30,880 ounces was a 7% increase from the third quarter driven by higher grades and recoveries. The higher grades and resulting recoveries were a result of mining from the lower elevation of the pit. Full-year gold sold in 2015 was slightly lower as a result of slightly fewer tonnes processed offset by higher grades and recoveries.
Cash operating costs in the fourth quarter declined by over 18% from the third quarter to $625 per ounce. The reduced cost structure is the result of cost saving measures implemented including a reduction in personnel, a review and renegotiation of contracts and lower fuel and cyanide costs. Cash operating costs for the year in 2015 of $838 per ounce also showed significant improvement, declining by 14% from the 2014 level of $971 per ounce.
Capital expenditures for the fourth quarter totalled $8.0 million, of which $1.1 million was sustaining capital expenditures and $6.9 million was development capital, including $4.8million for Wassa Underground Mine development. For the full-year, capital spending was $34 million of which $6.5 million was sustaining capital. Total capital also includes $20.1 million on the development of the Wassa Underground Mine, $5.4 million for the improvement of the tailings storage facility and $1.9 million on development drilling at Wassa.
Production at Wassa in 2016 is expected to be 100,000-110,000 ounces of gold at cash operating costs of $800-$900 per ounce.
Wassa Underground Development
In March 2015, the positive results of a Feasibility Study on the economic viability of an underground mine operating in conjunction with the existing open pit mine were announced and the decision to progress with the construction of the underground mine was affirmed.
Decline development commenced in July 2015, approximately 1258 metres of development has been achieved on the Main and Ventilation declines as of February 23, 2016. Decline development advanced at an average of seven metres per day during the fourth quarter and is expected to increase in 2016 as efficiencies improve.
An update to the resource model has been completed which includes additional drilling undertaken between July 2014 (when the Feasibility Study resource model was completed) and March 2015. The mine design and schedule has been updated to reflect the changes to the resource model and the expansion of the “F shoot” area. Stope development of the upper mineralisation is expected to commence in the second quarter of 2016 with first ore production expected in the second half of 2016.
Construction of the surface infrastructure and the transfer from generator power to grid power was completed in the fourth quarter of 2015.
Wassa Underground development capital expenditures totalled $20.1 million during the year and $22.2 million since late 2014 when development began.
The Company expects approximately $51 million of capital expenditures in 2016 at Wassa which includes $34 million on Wassa Underground development, $11 million on tailings and plant upgrades and $6 million in sustaining capital.
Production at Wassa Underground is expected to commence sometime in mid-2016 with pre-commercial production of 20,000-25,000 ounces for 2016.
Gold sold in the fourth quarter of 2015 was 20,498 ounces, a slight decline from the third quarter reflecting the suspension of the refractory operation which occurred during the third quarter. During the fourth quarter 95% of production was sourced from the Prestea South Pits oxide ores, which only commenced production during the third quarter. Production from this area resulted in higher throughput, higher grades and higher recoveries from the non-refractory operation compared to the third quarter. Gold sold for the full-year was 113,902 ounces.
Cash operating costs in the fourth quarter declined by 33% from the third quarter to $849 per ounce. The reduced cost structure is the result of the suspension of the refractory operation in the third quarter. Costs for the full-year showed more modest declines to $1,108 per ounce as they include three-quarters of the higher cost refractory production. Costs are expected to be maintained at the lower levels established in this quarter as the production going forward being sourced from the Prestea Open Pits and beginning in 2017, from the Prestea Underground.
Capital expenditures in the fourth quarter totalled $5.7 million, of which $3.4 million was development capital spending on the development of the Prestea Underground. Capital spending for 2015 totalled $23.1 million, of which $17.1 million were expenditures related to development at Prestea Underground and $4.5 million were related to Prestea open pit mines.
Production in 2016, which will be sourced from the Prestea Open Pit mines, is expected to be 60,000 – 70,000 ounces at cash operating costs of $840-$970 per ounce.
Prestea Underground Development
In December 2015 the positive results of a Feasibility Study for the Prestea Underground Mine were indicated a post-tax internal rate of return of 42% and net present value of $124 million based on a discount rate of 5% and gold price assumption of $1,150 per ounce. Cash operating costs of $462 per ounce and all-in sustaining costs of $603 per ounce were estimated over the life of mine.
All rehabilitation works are on schedule for completion in the first quarter of 2016. Mechanical and electrical rehabilitation work is planned to be completed in the third quarter of 2016 after which development will commence. Pre-development of the resource will take place from the fourth quarter of 2016 to mid-2017. Stoping is expected to start in mid-2017, ramping up to 500 tonnes per day by the end of the 2017.
The Company incurred capital expenditures totalling $17.1 million on the Prestea Underground development in 2015. The Company expects to incur approximately $36 million of capital expenditures in 2016 on the project.
The Prestea Underground is expected to begin production in mid-2017. Life of mine cash operating costs, as per the Feasibility Study, are expected to be approximately $462 per ounce for average annual production of approximately 85,000 ounces over 5.5 years.
GSR said it remains focused on transforming into a low-cost gold producer. During 2015, with the suspension of the refractory operation, the Company’s efforts to lower production costs are being realised. Costs in the fourth quarter were a five-year Company record. With the development of the underground mines at Wassa and Prestea, the average life of mine cash operating costs for the Company are expected to decline further beginning in 2017 when both projects will be in operation.
GSR is listed on the NYSE MKT, the TSX and the GSE. It is strategically focused on increasing operating margins and cash flow through the development of two high-grade, low-cost underground mines, both beneath existing open pit operations.
The Wassa Underground is expected to commence production in 2016 with the Prestea Underground commencing production in 2017. Both projects are fully funded and on track to begin production as expected. Production in 2016 is expected to be between 180,000 and 205,000 ounces of gold with costs of $815-$925 per ounce.