Golden Star hoping for Prestea turnaround after cutting staff numbers in Q4

Bogoso-Prestea gold mine. Pic courtesy of Golden Star Resources

GOLDEN Star anticipated an improved performance from its Prestea mine in Ghana during 2018 after cutting the mine’s workforce in the fourth quarter.

Production from the operation for this year has been put at 50,000 to 60,000 ounces (2018:75,164 oz) which will contribute towards total expected output for Golden start in 2019 of 220,000 to 240,000 oz including output from the firm’s other Ghana mine, Wassa. Production in 2018 totalled 224,861 oz, a shade below the low end of guidance.

Both mines have been converted to underground operations which Golden Star CEO, Sam Coetzer, said would bring the curtain down on low grade, high cost production. “Going forward the company is focused on developing its high-grade underground production profile, rather than the higher cost, lower grade, open pit supply that was mined in the past,” said Coetzer in Golden Star’s fourth quarter update.

Consolidated all-in sustaining costs (AISC) are expected to come in at $875/oz to $955/oz which is about 15% lower than the mid-point range of the 2018 guidance range.

Commenting on ‘right-sizing’ at Prestea in the fourth quarter, Coetzer said the company has reduced the workforce and established “a lower direct operating cost base” by going for less volume at a higher grade. He said: “During the fourth quarter of 2018 the plant was converted to a low tonnage, high grade configuration allowing it to efficiently treat the underground production. At the end of 2018, significant improvements were being recorded in Prestea’s lead production indicators”.

In August, Egyptian entrepreneur Naguib Sawiris’ newly created La Mancha investment vehicle injected $125.7m into the Toronto-listed gold producer in return for 30% of the company and three board seats. Coezter made no further mention of the likely impact of the investment other than the balance sheet was improved.

“With a strong balance sheet, I am confident that all of the elements are in place for the company to successfully deliver on its target of increased production at a lower cost, driving value for its shareholders,” he said.

Sawiris launched La Mancha in November 2017 and appointed Andrew Wray, the former CFO of Acacia Mining, as its CEO. Sawiris’ best known African gold development is his backing of Endeavour Mining which has grown from a West African minnow into a company with ambitions to produce some 800,000 oz to 900,000 ounces a year.

“We are delighted to welcome La Mancha as a long term, strategic investor,” said Coetzer at the time of the La Mancha investment. “We share the vision of building a leading, Africa-focused gold producer and this transformative deal clearly endorses the potential of Golden Star’s assets,” he said.