Golden Star writes down Prestea for $56.8m ahead of assessing options

Prestea gold mine. Pic courtesy of Golden Star Resources

GOLDEN Star Resources impaired the value of its loss-making Prestea mine in Ghana $56.8m following a restructuring of the operation which is aimed at returning it to positive cash generation.

Andrew Wray, CEO of Golden Star, said in the firm’s fourth quarter and full year results announcement today that his company would have a clearer view of options for Prestea once it had completed its restructuring and was making money again.

In the meantime, the write-down resulted in a net loss of $78m for Golden Star’s 2019 financial year, deepening the $24.1m loss the firm recorded in the previous year. The company has some $53.4m in cash and after taking into account total debt of $106.3m, net debt of $53.4m.

In addition to Prestea, Golden Star operates the nearby Wassa mine which made up the majority of the 203,800 ounces in total company gold production (Wassa: 156,200 oz). This was at the upper end of revised production guidance as previously announced. All-in sustaining costs (AISC) came in at $1,159/oz in line with the guided $1,100 to $1,200/oz.

Guidance for the 2020 financial year is for gold production of 195,000 to 210,000 oz at an AISC of between $1,080 to 1,180/oz. Of this, Wassa would provide 155,000 to 165,000 oz in gold production at an AISC of $930 to $990/oz.

Set against this, Prestea would produce its gold at between $1,650 to $1,850/oz. Wray said the group intended to consider its operations once the mine had been developed to a second level which would help it into cash positive territory.

Said Wray: “At Prestea, the investment is aimed at improving the sustainability and flexibility of the operation with the introduction of a second mining level in order to enable it to return to positive cash generation once fully ramped up through 2020.

“This is expected to also improve the options available for us to realise value from the asset having carried out the operational review, redesigned the mine plan and invested in the equipment for Long Hole Open Stoping (LHOS).”

Wray said the move of the firm’s corporate office to London from Toronto in order to make access to the firm’s Ghana mines easier was complete. The cost of the move would still be present in the firm’s numbers owing to the temporary duplication of functions, however.

Wray replaced Sam Coetzer as CEO in 2019 several months after La Mancha, of which Wray was CEO, took a $125.7m stake in Golden Star. La Mancha is owned by telecoms entrepreneur and gold bull, Naguib Sawiris, who is renowned for merger and acquisition activity having previously bought and developed Australia’s Evolution Mining and Endeavour Mining.