Golden Star Resources, Ltd (GSS)

GSS 
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Golden Star Resources (GSS)

Q2 2013 Earnings Call

August 12, 2013 10:00 am ET

Executives

Belinda Labatte - Principal

Samuel T. Coetzer - Chief Executive Officer, President and Director

Jeffrey A. Swinoga - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Daniel Monney Akwafo Owiredu - Executive Vice President of Operations

Analysts

Rahul Paul - Canaccord Genuity, Research Division

Andrew Breichmanas - BMO Capital Markets Canada

Doug Dyer

Paolo Lostritto - National Bank Financial, Inc., Research Division

Presentation

Operator

Greetings, and welcome to the Golden Star Q2 2013 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded.

Please note, this call contains forward-looking information. Please refer to the company's statements regarding forward-looking information in the company's Form 10-K, filed March 4, 2013.

The call will begin now. It is now my pleasure to introduce Belinda Labatte, Investor Relations representative for Golden Star Resources. Thank you, Ms. Labatte, you may begin.

Belinda Labatte

Thank you, operator. And good morning, everyone, and thank you for joining us to discuss Golden Star Resources' second quarter 2013 financial results and operational update. Our financial statements were filed this morning and these are available on the company's website at www.gsr.com.

Joining me on the call today is Sam Coetzer, President and Chief Executive Officer; Jeff Swinoga, Executive Vice President and Chief Financial Officer; Daniel Owiredu, Executive Vice President, Operations; and Bruce Higson-Smith, Senior Vice President, Corporate Strategy.

Sam, Jeff and Daniel will discuss the financial results for the second quarter 2013 and will provide an update on operations. For those of you using the webcast presentation, I draw your attention to our forward-looking statement and legal disclaimer on our webcast presentation. Sam?

Samuel T. Coetzer

Good morning, all, and thank you for joining us today. Before we begin, I want to take this opportunity to thank the entire Golden Star team for the tremendous effort they've made over the past months to ensure that Golden Star can move it up forward in this difficult market conditions. The company is endowed with people that are resilient, dedicated and committed to delivering on our goals.

Today, I'm pleased to discuss our financial highlights for the second quarter, along with an update on operation, exploration and planning for 2013. I will then hand the call over to our Executive Vice President and CFO, Jeff, for details on changes in our financial conditions; and then to Dan, our Executive Vice President of Operations, to discuss our operations in further detail.

Let's start by reviewing the progress we've made to -- made this quarter. First, we remained on target to achieve production guidance of 290,000 to 310,000 ounces of gold production in 2013. Year-to-date, as of the end of the second quarter, we have produced 200,166 ounces, with second quarter production of 85,000 ounces sold. Even with the closure of the Pampe facility, production is up as compared to the 81,000 ounces of gold sold during the first quarter of 2013.

With the decline in gold prices, revenues have decreased by approximately 11% to $121 million for the second quarter of 2013, down from the $136 million generated during the second quarter of 2012.

Net cash flow provided by operating cash flows after working capital changes increased to $29.5 million from $24.1 million year-over-year.

Golden Star's net loss attributable to shareholders during this quarter was $129 million or $0.50 per share. The major factor contributing to the loss was a noncash impairment charges net of tax totaling $169.6 million incurred in the write-down of Bogoso and Wassa's carrying value.

We recently announced the $50 million medium-term loan facility which provides us with a much stronger balance sheet positioned to fund our Wassa operations and the drilling program. This was an important milestone for us, and we are pleased to be working with Ecobank, a world-known applicant financial institution with a long history in Ghana.

In July, we commenced reprocessing of the old tailings facility, the TSF1, at Bogoso to the non-refractory plant at an initial rate of 4,000 tonnes per day. Similar to many of our peers in the industry, this quarter, we provided our all-in sustaining costs using evolving guidelines from the World Gold Council. In the future, we do expect this to become an industry standard and have started the transition to providing this comprehensive measure of the full cost of gold production. This quarter, we have provided you with consolidated all-in sustaining costs and all-in costs, along with the breakdown of how this has been calculated. As you can see from the slide on this webcast presentation, the calculations for all-in sustaining costs include cash operating costs, plus sustaining capital expenditures, corporate, general and admin costs, mine site exploratory drilling and greenfield evaluation costs and environmental rehabilitation cost. The new all-in costs immediately start with all-in sustaining costs. It may have additional costs including non-sustaining capital expenditures, capital expenditures at new projects and capital expenditures at existing operations that increase the productive capacity of the mine, extend the mine life beyond the existing pits. Another non-sustaining cost primarily exploration and evaluation cost. Community relations stuff and general administrative costs that are not associated with current operations.

This quarter's metrics indicate that we remain at the high end regarding all-in costs of production, which includes our mine investment in the pushbacks and betterment stripping taking place in Bogoso where operations are not yet normalized. Our decision to continue the 2 pushbacks are based on good economic returns expected on the Bogoso North and the Chujah pit in the current gold price environment.

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