Prestea deal will make Golden Star “an attractive counter party”, says CEO Wray

GOLDEN Star would become “an attractive counter party” in the African gold sector after selling its Prestea gold mine in Ghana, said CEO Andrew Wray.

“We will have a clean balance sheet and a good asset,” said Wray in reference to another Ghana asset, Wassa, which the company would continue to operate.

Wray’s comments, made in response to questions during the firm’s second quarter results presentation, follow an announcement on Monday that it would sell Prestea to mining junior, Future Global Resources (FGR) for $55m, potentially increasing to $90m. Golden Star wrote down Prestea for $56.8m in February following a restructuring.

There were no immediate plans to embark on an expansion strategy but Golden Star is the latest vehicle for Naguib Sawiris, the Egyptian telecoms mogul-turned-gold bull, who has established a reputation for aggressive deal-making in the gold sector. Sawiris’ investment company, La Mancha, owns 35% of Golden Star and has a similar-sized stake in Endeavour Mining.

“The first thing is to close the transaction with FGR and then focus on Wassa,” Wray said. Selling Prestea had been part of the firm’s broader strategy – talks with FGR began three months ago following ‘in-bound’ interest – but the company was not “from day to day” focusing on buying assets, he added.

Golden Star posted solid second quarter numbers. As with other gold mining firms, the pressures of Covid-19 were largely offset by the rapid rise in the dollar gold price. Golden Star’s realised gold price was $1,626 per ounce compared to $1,270/oz in the second quarter of last year – an increase year-on-year of 28%.

The company reported production of 50,600 oz compared to 48,400 oz in the second quarter of in 2019. The all-in sustaining cost per oz fell 7% resulting in a significant kick up in adjusted earnings before interest, tax, depreciation and amortisation of $33.7m compared to $8.8m year-on-year.

Golden Star’s group cash position increased just over $3m to $45.1m at the end of the quarter, after paying $5m of some $60m in a senior secured credit facility with Macquarie Bank as well as a further $8.1m reduction in accounts payable balance during the quarter. Net debt stood at $57.5m, 85% higher year-on-year.

In terms of the agreement to sell Prestea, FGR will pay $5m in cash and assume $25m in negative working capital as per Prestea’s end-quarter accounts. The balance of $25m is payable in two tranches of $10m by July 31, 2021 and $15m by July 31, 2023. Golden Star said it hoped to complete the transaction in September.

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