Golden Star Resources, Ltd (GSS)

GSS 
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Golden Star Resources (GSS)

Q3 2013 Earnings Call

November 04, 2013 10:00 am ET

Executives

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

Martin Raffield - Senior Vice President of Technical Services

Analysts

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

Doug Dyer

Cosmos Chiu - CIBC World Markets Inc., Research Division

Andrew Breichmanas - BMO Capital Markets Canada

Trevor Turnbull - Scotiabank Global Banking and Markets, Research Division

Anita Soni - Crédit Suisse AG, Research Division

William Richard Nasgovitz - Heartland Advisors, Inc.

Presentation

Operator

Greetings, and welcome to the Golden Star Third Quarter 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call 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.

Golden Star Resources' financial statements were filed this morning, and these are available on the company's website at www.gsr.com.

On the call today is Sam Coetzer, President and CEO; Jeff Swinoga, Executive Vice President and Chief Financial Officer; Daniel Owiredu, Executive Vice President, Operations; Angela Parr, Director, Investor Relations and Corporate Affairs; and Martin Raffield, Senior Vice President, Technical Services.

Sam, Jeff and Dan will discuss the financial results for the third quarter 2013 and will provide an update on operations. Please note for those using webcast, the forward-looking information and legal disclaimer on the webcast presentation.

Mr. Coetzer, you may begin.

Samuel T. Coetzer

Thank you. Good morning, everyone, and thank you for joining us on the call today. Just before I begin, I want to highlight Dan, Executive VP of Operations, will be taking this call from Accra in Ghana.

Samuel T. Coetzer

Great, thanks. Firstly, I would like to take this opportunity to thank the Golden Star team for delivering on our goal to reduce costs and stabilize our operations. With the achievement of both of these, we now have clear sight of where production will come from over the next 2 years. At Bogoso, we will continue to process ore from Bogo North and Chujah pits until the fourth quarter of 2015. This production will be supplemented by recoveries from the Tailings Retreatment Program (sic) [Project].

At Wassa, mining will continue from the Wassa Main and for the ground pits, with pushback will [ph] secure continue access to ore. In addition, we have a strong pipeline of development projects ahead, and we continue to evaluate based on capital efficiency and rate of return. We have an effective and highly committed team that has accomplished a tremendous amount of work in this year of transition. I thank my team listening today for their efforts.

Before we begin to discuss our quarterly results, I want to remind you of what we set out to do in June. Our focus was and remains on cost reduction, mine optimization and appropriate capital reallocation. We have a can-do attitude. On June 17, we announced our action plan to deliver on critical components in this new gold price environment. As a reminder, here is what we set out to do. Cost cutting initiatives were expected to provide savings of $45 million. To date, we have achieved half of these, and we expect to see continued cost savings in the next quarter. Mine sequencing and cash flow generation models were updated, with new pit shell assumptions of $1,100 per ounce gold price at Wassa and $1,200 an ounce at Dumasi and Mampon. This is now complete.

Development capital commitments, excluding betterment stripping were reduced from $81 million to $37 million and sustaining capital was reduced by $24 million to $36 million. On the same basis, we have spent $57 million year-to-date. This spending is in line with the revised $73 million of capital expenditure expected for the fiscal year. Jeff will speak in more detail on our spending this quarter.

We are now operating at a much higher level of efficiency as a result of these changes. Meaning, we are focused on cost reduction, capital conservation, as we are nearing the end of our investment in the Bogoso North and the Chujah pushbacks. We are well-positioned for increased operating cash flow in 2014. I believe that Golden Star is better-prepared for downsize movements in gold price as a result of our action plan and extremely well-leveraged for any outside change.

I will start by reviewing the progress we made this quarter in our financial results. Revenue over the period was $119 million. This reflects the lower realized gold price, which was down 6.3% quarter-on-quarter to $1,329 per ounce. On a consolidated basis, cash operating cost per ounce declined $119 to $960 an ounce, compared to $1,070 -- $1,078 an ounce during the last quarter. This result is directly attributable to our focus on lowering cost production and marks the third consecutive quarter of reduced mine operating expenses.

Cash generated by operations before working capital changes totaled $12.8 million. This is significantly better than last quarter results of just over $300,000. Our consolidated cash position at the end was about $67 million, with a further $40 million available in existing financing agreements, and Jeff will talk more to this shortly.

Our net income attributable to shareholders amounted to $3.5 million or an earnings of $0.01 per share.

In the quarter, gold sold increased 5% to nearly 89,000 ounces. This is our highest production quarter since the second quarter 2010, as we had a strong performance at both our Wassa and Bogoso mines. Year-to-date gold sold was just over 255,000 ounces on the 30th of September, and you will have seen that we've announced today an upward revision of our 2013 production guidance from 325,000 to 330,000 ounces. This increase is largely due to our Tailings facility, providing an incremental and stable source of production at a greater rate than expected, and to improve productivity at Bogoso, which Dan will provide some detail on.

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