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Golden Star Resources (GSS)
Q3 2012 Earnings Call
November 08, 2012 11:00 am ET
Thomas G. Mair - Chief Executive Officer, President and Director
Samuel T. Coetzer - Chief Operating Officer and Executive Vice President
Jason Schacht - Heartland Advisors, Inc.
Paolo Lostritto - National Bank Financial, Inc., Research Division
Lawson Winder - BofA Merrill Lynch, Research Division
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Thomas G. Mair
Thank you. Good morning, ladies and gentlemen. I'm Tom Mair, President and CEO of Golden Star Resources. Welcome to our third quarter 2012 conference call. Joining me on the call today are Sam Coetzer, our Chief Operating Officer; Bruce Higson-Smith, Senior Vice President, Finance and Corporate Development; and Roger Palmer, Chief Financial Officer.
During the course of our presentation today, we will be making forward-looking statements based on current expectations, estimates and projections that are subject to risk. There are many factors that could cause actual results to differ materially from these forward-looking statements. So I encourage you to review the Safe Harbor language and to remain as current as possible with our activities by reviewing our news releases, website and our SEC filings on EDGAR and/or SEDAR, including Forms 10-K and 10-Q. As always, unless otherwise stated, all references to currency amounts will be in U.S. dollars.
Today, we'll be reviewing our financial and operational results for the third quarter and 9-month period ended September 30. We'll also be commenting on operating and development activities, exploration activities, the outlook for the balance of 2012, and then I'll provide some closing remarks. Following the presentation, I will open the call to questions from analysts.
Golden Star sold nearly 81,000 ounces of gold in the third quarter, up 9% over roughly 74,000 ounces in the same quarter last year. We poured an additional 2,461 ounces during the -- during Q3, bringing our grand total production to about 83,500 ounces. Average realized gold price in Q3 was $1,653, down slightly from the same period last year, but up from $1,600 in Q2. Higher gold production for the comparative third quarters offset lower gold prices to push revenue up 6% year-over-year to $133.5 million for the quarter.
We're again pleased to report improvement in consolidated cash operating costs, which declined to $992 an ounce from $1,108 per ounce a year ago. Both Wassa and Bogoso achieved lower cash operating costs year-over-year.
Operating cash flow before changes in working capital in Q3 totaled $29.8 million or $0.12 per share. This is a significant improvement over the same quarter last year when we reported $7.2 million or $0.03 per share. We have now achieved 5 consecutive quarters of positive cash flow from operations.
We closed the third quarter with approximately $106 million in cash and cash equivalents. CapEx in Q3 was about $19 million, and we used $5.5 million in working capital. Inventories, mainly finished gold inventory, were up $3.3 million, and we reduced payables by $2.7 million.
Also, in the third quarter, we redeemed approximately $6 million of our 4% convertible debentures due November 30 of this year. As previously stated, we expect to pay the balance of just over $44 million in cash.
Turning to 9-month results. Golden Star produced almost 244,000 ounces of gold year-to-date, up 6% over the same period last year. Our average realized gold price in the first 9 months of 2012 was up 8% to $1,645 per ounce from $1,529 in the same period of 2011. Higher gold prices, combined with more ounces produced, led to a 14% revenue increase to nearly $401 million through the first 9 months, and this is up from $352 million in the same period a year ago.
Consolidated cash operating cost declined slightly year-over-year to $1,007 per ounce from $1,054 per ounce last year. Cash flow before working capital changes was almost $84 million year-to-date or about $0.32 per share. That's more than triple the $25 million or $0.10 per share in the same period last year.
I'm going to hand it over to Sam Coetzer, our Chief Operating Officer, who'll provide some color on our third quarter operations and future plans at both Bogoso and Wassa. Sam?
Samuel T. Coetzer
Good morning, everyone. Today, I want to start by giving you a sense of our main focus areas in and around our operations. I'm happy to state that during the third quarter, progress was made on various aspects of the operations that will allow us to operate better going forward.
To mention a few highlights, the Bogoso refractory plant operated at a higher level of throughput, achieving in excess of 680,000 tonnes for the quarter. Various improvements, including an additional surge tank allowing for downstream feed to the BIOX section to continue when upstream work on the circuit is done. A third-party review was conducted, which identified bottlenecks existing in our plant. Additionally, we made progress on our new water treatment facility at Bogoso, setting the stage for water discharge to commence in the new year.
At the Bogoso oxide plant, a gravity circuit was introduced during the quarter, which allows for gravity gold to be drawn off early and has improved recoveries. At our Wassa mine, we made improvements to the crushing circuit and continue to upgrade the CIL circuit.