GOLDEN Star has extended its hedging adding another 84,375 ounces of gold to its programme in order to support the conversion of a fixed loan to a three-year revolving credit facility (RCF).
Andrew Wray, president and CEO of Golden Star, said in an announcement today that agreeing on the RCF with lenders was a sign of the group’s growing financial stability.
“The RCF structure removes the capital repayment amortization profile of the credit facility and better aligns the facility with the investment in the growth of the Wassa gold mine outlined in the recent updated technical report,” he said.
In March, Golden Star forecast average annual gold production of 294,000 oz for 11 years from Wassa, its Ghana gold mine after completing a preliminary study of the mine’s underground potential.
In terms of the debt restructuring, the facility has been upgraded $20m to $90m. This creates $30m in immediate liquidity over and above the current drawn balance of $60m. In order to draw down the incremental debt capacity, Golden Star must meet a $35m forecast minimum cash covenant net of repaying convertible debentures that mature in August this year, it said.
As for Golden Star’s hedging strategy, it will have a total of 160,938 oz sold forward with 10,938 oz maturing on June 30. The remainder of the hedge matures at a rate of 12,500 oz a quarter from September 30 to end-June in 2024.
The hedging program now covers 25% to 30% of the company’s forecast production during the current term of the RCF. All hedges have a floor of $1,600 per oz and an average ceiling of $2,171/oz in 2021 and $2,179/oz in 2022 and a flat ceiling of $2,115/oz in 2023 and 2024, said Golden Star.
“Following the repayment of the higher cost convertible debentures in August 2021, overall indebtedness is expected to be at a conservative level and forecast net debt:EBITDA ratios should see us achieve the lower end of the interest cost range,” said Wray.
“We expect to achieve an improvement in our cost of capital, equating to an annual saving of up to $2.7m.”
Wray said earlier this year that Golden Star had undergone “a transformational year” in 2020 in which it moved its head office to London from Toronto, installed new management, refinanced its balance sheet, and sold Prestea, a loss-making mine.