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Golden Star Down Nearly 2% as Credit Suisse Analyzes Its Q1

Credit Suisse had a Neutral rating and US$5.50 target price on Golden Star (GSC.TO) after a first read of its Q1, which it described as "poor".

Event: "GSC adj EPS of ($0.03), vs. CS est. of $0.00 and consensus at $0.04 (range $0.01-$0.09). GSC reported headline EPS of $0.02, after adjusting for one time financial vehicle losses of $13M ($0.03/sh) we arrive at adj EPS of $(0.03). The variance is largely the result of higher operating costs than forecast."

Q1 operating highlights - weak production leads to higher costs: "Gold sales of 84kozs were above our est. of 80kozs. Total cash costs including royalties (TCC) of $1,022/oz were well above CS est. of $934/oz."

2011FY production revised to the low-end of, and costs now above prior guidance: "GSC indicated it expects to come in at 339kozs vs. prior guidance of 330-360kozs at revised cash op. costs (COC) of $900/oz (up ~$65/oz from $800-$870/oz previously). We are currently forecasting 2011 gold production of 350kozs at COC of $814/oz."

Wassa: Q1 strongest quarter of 2011: "Q1/11 gold production was 53.3kozs at TCC of $799/oz vs. CS estimates of 44kozs and $814/oz. Despite a 3% decline in grades, GSC had better than expected gold production in Q1/11, largely the result of an increased mining rate with contract mining coming on-line in late 2010. Management is maintaining 2010 production guidance at Wassa at 170-180koz but revised cash costs upward to $735/oz (from $650-700/oz). Production is also expected to decline averaging 42kozs per quarter in Q2/11 to Q4/11."

Bogoso/Prestea still experiencing issues from Q3/Q4 rains: "Gold production of 31kozs at cash costs of $1,412/oz was worse than CS est. of 36kozs and $1,080/oz. BP experienced lower production and higher costs due to a combination of lower throughput, grades and recoveries, largely the result of continued issues from the Q3/Q4 2010 rains. GSC is now guiding to the low end of 2011FY guidance at Bogoso/Prestea of 160kozs (previously 160-180kos) but revised COC upward to $1,085/oz (from $950-1,050/oz.)"

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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