Golden Star Resources Ltd. (GSS) is a Canadian-based international gold mining and exploration company with operations primarily in Ghana, West Africa. The company has two producing gold mines, Wassa and Bogoso/Prestea, and is also engaged in gold exploration activities in Ghana and other parts of West Africa, as well as in South America.
Financials
In the fiscal year 2022, Golden Star reported annual net income of $38,153,000, annual revenue of $272,481,000, annual operating cash flow of $60,089,000, and annual free cash flow of $14,865,000. These financial results demonstrate the company's ability to generate solid profitability and cash flow, despite the challenges faced by the gold mining industry in recent years.
For the first quarter of 2023, Golden Star reported gold sales of 81,361 ounces, up 4.7% from the 77,725 ounces sold in the same period of 2022. However, the average realized gold price decreased by 3% to $1,634 per ounce in the first quarter of 2023, compared to $1,686 per ounce in the first quarter of 2022. This decline in gold prices was more than offset by the increase in ounces sold, resulting in first-quarter 2023 revenues of $132,910,000, up from $131,020,000 in the same period of 2022.
The company's cost of sales for the first quarter of 2023 totaled $128,672,000, up from $117,145,000 in the first quarter of 2022, primarily due to an increase in mine operating expenses and changes to metals inventory levels. Specifically, mine operating expenses increased by $5,781,000, from $94,284,000 during the first quarter of 2022 to $100,065,000 in the first quarter of 2023, mainly due to the push backs at the Chujah and Bogoso North open mines at the Bogoso/Prestea operation.
Despite the increase in costs, Golden Star's first-quarter 2023 mine operating margin was $4,238,000, compared to $13,875,000 in the same period of 2022. The decrease in mine operating margin was primarily attributable to the lower average realized gold price and higher operating costs at the Bogoso/Prestea operation.
Wassa/HBB Operation Performance
The company's Wassa/HBB operation, which includes the Wassa open-pit gold mine and the Hwini-Butre and Benso concessions, performed well in the first quarter of 2023. Wassa/HBB's gold sales increased by 25.6% to 45,866 ounces, up from 36,483 ounces in the first quarter of 2022. The increase in gold sales was primarily due to a 36% improvement in the ore grade processed, as the operation focused on mining higher-grade ore from the Father Brown open-pit. As a result, Wassa/HBB's cash operating cost per ounce decreased by 19% to $809 per ounce in the first quarter of 2023, compared to $999 per ounce in the same period of 2022.
Bogoso/Prestea Operation Challenges
In contrast, the Bogoso/Prestea operation experienced challenges during the first quarter of 2023. Gold sales from Bogoso/Prestea decreased by 13.9% to 35,495 ounces, down from 41,242 ounces in the first quarter of 2022. The lower gold production was primarily due to a decrease in refractory ore processed, lower refractory ore grade, and lower gold recovery from both the refractory and non-refractory processing plants. Additionally, the Chujah and Bogoso North pits experienced pit wall failures during the first quarter, limiting the ore supply to the refractory plant and necessitating the use of supplemental stockpiles.
As a result of the operational challenges at Bogoso/Prestea, the cash operating cost per ounce for this operation increased by 25% to $1,531 per ounce in the first quarter of 2023, up from $1,222 per ounce in the same period of 2022. The higher costs, combined with the lower gold sales, contributed to the overall decrease in Golden Star's consolidated mine operating margin.
Recent Developments
In response to the recent decline in gold prices, Golden Star has initiated a number of cost-reduction measures, such as deferring capital spending, reducing the use of contractors, and implementing staff optimization strategies. The company is also currently re-optimizing its pits, reviewing operating and mine plans, and evaluating the viability of the Bogoso/Prestea operation. As a result of these actions, Golden Star expects to issue revised production and cost guidance for 2023, as well as updated capital spending estimates.
Despite the challenges faced in the first quarter of 2023, Golden Star remains focused on improving operating efficiencies at both the Wassa/HBB and Bogoso/Prestea operations. The company is also continuing its efforts to complete a feasibility study for the Prestea Underground project and to further explore the expansion potential of the Wassa/HBB operation through its ongoing drilling program.
Liquidity
In terms of liquidity, Golden Star held $61,020,000 in cash and cash equivalents as of March 31, 2023, down from $78,884,000 at the end of 2022. The company's cash flow from operations before working capital changes was $4,495,000 in the first quarter of 2023, compared to $20,926,000 in the same period of 2022. The decrease in operating cash flow was primarily due to the higher mine operating costs and an income tax payment of $8,300,000 related to the Wassa/HBB operation's 2022 taxable income.
Outlook
Looking ahead, Golden Star's key objectives for the remainder of 2023 include completing the Prestea Underground feasibility study, continuing exploration drilling at the Wassa mining lease, permitting and planning for the Dumasi and Mampon pits, and further reducing operating costs throughout the organization. The company's ability to execute on these initiatives will be crucial in navigating the challenges posed by the volatile gold market and positioning Golden Star for long-term success.
Conclusion
Overall, Golden Star's financial and operational performance in the first quarter of 2023 reflects the company's ability to adapt to changing market conditions. While the Bogoso/Prestea operation faced challenges, the Wassa/HBB operation continued to deliver strong results. By focusing on cost-reduction measures, optimizing its operations, and advancing its development projects, Golden Star is positioning itself to weather the current market environment and capitalize on future opportunities in the gold mining industry.