Golden Star Resources Swings to a Profit in Q4 and Pens Resettlement Agreement in Ghana

Golden Star Resources Swings to a Profit in Q4 and Pens Resettlement Agreement in Ghana

By: Dylan Sikes - AllPennyStocks.com News

Tuesday, March 5, 2013

Gold miners face many challenges in extracting the precious yellow metal from the ground. There’s not only the challenges of delineating the resources through drill programs and the physical challenges of mining, but regulatory issues, political hurdles, employees and even, sometimes, people in the way. People are an issue that Toronto-based Golden Star Resources Ltd. (TSX:GSC) (NYSE MKT:GSS) has been dealing with at its Bogoso gold project in Ghana. Golden Star, a pure-gold play primarily focused in Ghana, acquired surface rights to the property about 25 years ago. The company has been exploring and producing in the area for decades, but more recently dealing with a resettlement project for the small community of Dumasi for over five years, which could unlock a great deal of value for Golden Star shareholders upon execution of a successful relocation of the community.


Golden Star holds a 90 percent 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. Golden Star also has an 81 percent interest in the currently inactive Prestea Underground mine in Ghana, and other interests in the country as well as interests in West Africa and South America.

The Dumasi community is located on the Dumasi deposit, which is the largest deposit in Golden Star’s Bogoso Mine. NI 43-101 compliant reports show 15.3 million tonnes grading 2.19 g/t gold for 1.08 million ounces of gold proven and probable. At today’s prices, that’s about $1.7 billion in gold residing in the Dumasi deposit.

According to a corporate statement on Tuesday, Golden Star has taken a major step towards mining the gold with the announcement of a signed resettlement agreement for the relocation of the Dumasi community. The ground is already being cleared for the new community and construction is slated to commence this quarter.

“The signing of this agreement is a testament to the dedication and hard work on the part of our employees and the community, combined with the people of Dumasi's goodwill and belief in development for the benefit of the community at large and the cooperation and assistance of the Environmental Protection Agency of the Government of Ghana,” said Sam Coetzer, President and CEO of Golden Star.

Coetzer added that production is projected to begin in 2015 with the Dumasi Pit expected to provide both refractory and non-refractory ore for at least six years.

The gold production will feed a growing balance sheet for Golden Star. The company reported on Monday that its net cash from operations during 2012 were $94.3 million, up from $70.6 million in 2011. Revenue for the year rose 17 percent to $550.5 million and Q4 revenue increased 26 percent to $149.7 million. Golden Star swung to a net profit of $9.1 million, or 4 cents per share, in the fourth quarter, versus a net loss of $9.5 million in the same quarter of 2011. The year ended with Golden Star having about $79 million in cash and equivalents on hand.

Further, the company recently received mining and environmental permits for its Prestea Underground project.

Shares of GSC are trading flat so far this week even with the decent earnings news and resettlement announcement. Shares have slinked away from 52-week highs at $2.10 hit late in October, currently trading at $1.56, but then again, miners in general have not receiving much appreciation with gold prices on the slide. As the metal industry recovers and if this junior can continue to unearth sizeable amounts of gold the upside potential could easily outweigh the downside. Proper due diligence is, as always, encouraged.

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