TORONTO, Aug. 1, 2018 /PRNewswire/ – Golden Star Resources Ltd. (NYSE American: GSS; TSX: GSC; GSE: GSR) ("Golden Star" or the "Company") reports its financial and operational results for the quarter ended June 30, 2018.
HIGHLIGHTS:
- Gold production of 61,209 ounces in the second quarter of 2018
- Strong production from the Wassa Complex ("Wassa") in the second quarter of 2018, continuing to exceed expectations
- 20% increase in gold production from Wassa in the second quarter of 2018 compared to the second quarter of 2017, including a 167% increase in production from the Wassa Underground Gold Mine ("Wassa Underground")
- 65% increase in grade processed at Wassa Underground to 4.99 grams per tonne ("g/t") of gold ("Au") in the second quarter of 2018 compared to the second quarter of 2017
- Significant improvements delivered at the Prestea Underground Gold Mine ("Prestea Underground") in the second quarter of 2018 compared to the first quarter of 2018, when the mine achieved commercial production
- 67% increase in gold production to 12,463 ounces in the second quarter of 2018 compared to the first quarter of 2018
- 65% increase in grade processed from Prestea Underground to 13.56 g/t Au in the second quarter of 2018 compared to the first quarter of 2018
- Targeted production rate of 650 tonnes per day ("tpd") is expected to be achieved at Prestea Underground during the fourth quarter of 2018
- Cash operating cost per ounce1 of $809 and All-In Sustaining Cost ("AISC") per ounce1 of $1,104 in the second quarter of 2018
- Higher than expected costs due to the slower than anticipated ramp up at Prestea Underground, partially offset by the stronger than expected performance at Wassa Underground
- 38% decrease in cash operating cost per ounce1 at Wassa in the second quarter of 2018 to $610 compared to the second quarter of 2017
- Capital expenditures of $10.2 million in the second quarter of 2018
- Cash provided by operations before changes in working capital of $10.3 million or $0.03 per share in the second quarter of 2018 and mine operating margin of $10.2 million
- Consolidated cash balance of $21.9 million at June 30, 2018
- Post period end, the creation of a long term, strategic relationship was agreed with La Mancha Holding S.à r.l. ("La Mancha"), including a $125.7 million investment, which will support Golden Star's growth as a leading African gold producer2
- Golden Star is on track to achieve its consolidated full year ("FY") 2018 guidance in terms of gold production, cash operating cost per ounce1 and AISC per ounce1
- The Company expects to be at the top end of the cost ranges in FY 2018
- The Company intends to review its FY 2018 capital spend in light of the proposed investment from La Mancha
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Notes: |
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1. See "Non-GAAP Financial Measures". |
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2. For more information, please see the press release entitled, 'Golden Star announces long term, strategic investment by La Mancha', dated August 1, 2018. |
Sam Coetzer, President and Chief Executive Officer of Golden Star, commented:
"During the second quarter of 2018, Prestea Underground delivered more ounces than the Prestea Open Pits, which is testament to the hard work and disciplined approach of our underground team. We expect to see further improvements during the coming months and we anticipate that Prestea Underground will achieve its nameplate production rate during the fourth quarter of 2018. We will also continue to right size this operation with the aim of reducing operating costs and generating a stronger cash margin. Wassa Underground delivered another impressive quarter, with both grades and tonnages exceeding our expectations. I am looking forward to releasing the Preliminary Economic Assessment for Wassa's Inferred Mineral Resources to gain a more thorough understanding of the full potential of this substantial deposit. After two quarters, we are on track to achieve our consolidated full year 2018 production and cost guidance and with our strategic relationship with La Mancha agreed, we are well-positioned to deliver significant value for our shareholders."
La Mancha Transaction and Second Quarter 2018 Conference Call Details
Golden Star will conduct a conference call and webcast to discuss the La Mancha transaction and the results of the second quarter of 2018 on Thursday, August 2, 2018 at 10:00am ET. The Chief Executive Officer of La Mancha, Andrew Wray, will join the Golden Star management team on the call.
The call can be accessed by telephone or by webcast as follows:
Toll Free (North America): +1 866 393 4306
Toronto Local and International: +1 734 385 2616
Conference ID: 3081459
Webcast: www.gsr.com
A recording and webcast replay of the call will be available at www.gsr.com following the call.
SUMMARY OF CONSOLIDATED OPERATIONAL AND FINANCIAL RESULTS
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Three Months Ended |
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June 30, |
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OPERATING SUMMARY |
2018 |
2017 |
|
|
Wassa gold sold |
oz |
38,249 |
31,985 |
|
Prestea gold sold |
oz |
22,310 |
31,619 |
|
Total gold sold |
oz |
60,559 |
63,604 |
|
Wassa gold produced |
oz |
38,532 |
32,161 |
|
Prestea gold produced |
oz |
22,677 |
32,014 |
|
Total gold produced |
oz |
61,209 |
64,175 |
|
Average realized gold price1 |
$/oz |
1,273 |
1,222 |
|
Cost of sales per ounce – Consolidated2 |
$/oz |
1,106 |
1,012 |
|
Cost of sales per ounce – Wassa2 |
$/oz |
944 |
1,235 |
|
Cost of sales per ounce – Prestea2 |
$/oz |
1,383 |
785 |
|
Cash operating cost per ounce – Consolidated2 |
$/oz |
809 |
785 |
|
Cash operating cost per ounce – Wassa2 |
$/oz |
610 |
980 |
|
Cash operating cost per ounce – Prestea2 |
$/oz |
1,149 |
585 |
|
All-In Sustaining cost per ounce – Consolidated2 |
$/oz |
1,104 |
960 |
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Notes: |
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1. |
Average realized gold price per ounce excludes pre-commercial production ounces sold at Prestea Underground in 2018 and 2017. |
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2. |
See "Non-GAAP Financial Measures". |
|
Three Months Ended |
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June 30, |
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FINANCIAL SUMMARY |
2018 |
2017 |
||
|
Gold revenues |
$'000 |
77,121 |
77,335 |
|
|
Cost of sales excluding depreciation and amortization |
$'000 |
57,717 |
55,173 |
|
|
Depreciation and amortization |
$'000 |
9,235 |
8,893 |
|
|
Mine operating margin |
$'000 |
10,169 |
13,269 |
|
|
General and administrative expense |
$'000 |
6,909 |
1,953 |
|
|
Loss/(gain) on fair value of financial instruments, net |
$'000 |
1,301 |
(4,907) |
|
|
Net (loss)/income attributable to Golden Star shareholders |
$'000 |
(6,642) |
13,883 |
|
|
Adjusted net income attributable to Golden Star shareholders1 |
$'000 |
2,408 |
7,703 |
|
|
(Loss)/income per share attributable to Golden Star shareholders – basic |
$/share |
(0.02) |
0.04 |
|
|
(Loss)/income per share attributable to Golden Star shareholders – diluted |
$/share |
(0.02) |
0.02 |
|
|
Adjusted income per share attributable to Golden Star shareholders – basic1 |
$/share |
0.01 |
0.02 |
|
|
Cash provided by operations |
$'000 |
10,321 |
11,082 |
|
|
Cash provided by operations before working capital changes1 |
$'000 |
10,276 |
14,198 |
|
|
Cash provided by operations per share – basic |
$/share |
0.03 |
0.03 |
|
|
Cash provided by operations before working capital changes per share – basic1 |
$/share |
0.03 |
0.04 |
|
|
Capital expenditures |
$'000 |
10,186 |
18,307 |
|
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Notes: |
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1. See "Non GAAP Financial Measures". |
OPERATIONAL PERFORMANCE
Overview
In the second quarter of 2018 Golden Star produced 61,209 ounces of gold. This quarter was the Company's second quarter as a primarily underground-focused gold producer, following the cessation of production from the Wassa Main Pit in January 2018. Production from the Prestea Open Pits is ongoing and ore supply from this operation is expected to continue into the middle of the third quarter of 2018. However once production from the Prestea Open Pits concludes, Golden Star intends to focus on high margin, underground ore with the objective of strengthening its financial position and creating a robust platform to deliver shareholder value.
The Wassa Complex delivered another strong quarter. Gold production increased by 20% in the second quarter of 2018 to 38,532 ounces compared to the second quarter of 2017 and it increased by 9% compared to the first quarter of 2018. 92% of Wassa's production was attributable to Wassa Underground, which delivered higher grades and higher tonnages than expected. Consequently, Wassa delivered its lowest cash operating cost per ounce1 in over seven years of $610.
Gold production from the Prestea Complex ("Prestea") was 22,677 ounces in the second quarter of 2018. The second quarter of 2018 was the first quarter that Prestea Underground delivered more ounces than the Prestea Open Pits (55% of the Prestea Complex's total production), which is a result of the ramp up of production from the underground operation and the Prestea Open Pits approaching the end of their mine life. The grade of the ore processed from Prestea Underground increased by 65% in the second quarter of 2018 compared to the first quarter of 2018 and Golden Star expects the targeted production rate of 650 tpd to be achieved at Prestea Underground during the fourth quarter of 2018.
Golden Star's consolidated cash operating cost per ounce1 was $809 in the second quarter of 2018, which represents a 3% increase compared to the second quarter of 2017. Although Wassa reported a 38% decrease in cash operating cost per ounce1 to $610, this was offset by a 96% increase at Prestea to $1,149.
The AISC per ounce1 in the second quarter of 2018 was $1,104, an increase of 15% compared to the second quarter of 2017, primarily as a result of the slower than expected ramp up at Prestea Underground. The cost of sales per ounce1 was $1,106. Golden Star expects its operating costs to decrease in the second half of 2018 as production at both underground operations continues to ramp up.
At the end of the first half of 2018, $14.2 million of severance expenses had been paid in total. The severance payments relating to the Wassa Main Pit workforce are now complete and Golden Star expects to pay the severance expenses relating to the Prestea Open Pits workforce during the remainder of 2018.
At the end of the second quarter of 2018, Golden Star is on track to achieve its consolidated FY 2018 guidance in terms of gold production, cash operating cost per ounce1 and AISC per ounce1 and expects to be at the top end of the cost guidance ranges. As stated in the press release dated January 11, 2018, Golden Star expects production to be weighted to the second half of 2018 and consequently, cash operating cost per ounce1 and AISC per ounce1 are anticipated to be lower in the second half of 2018.
Following the completion of the proposed strategic investment by La Mancha, Golden Star intends to review its planned capital spend. It is expected that some of the proceeds of the transaction will be used for exploration, Mineral Resource delineation and expansion programs at Wassa Underground, Prestea Underground and the Father Brown deposit.
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Notes: |
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1. See "Non-GAAP Financial Measures". |
Wassa Complex
|
Three Months Ended |
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June 30, |
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2018 |
2017 |
|||||
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WASSA FINANCIAL RESULTS |
||||||
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Revenue |
$'000 |
$ |
48,588 |
$ |
38,942 |
|
|
Mine operating expenses |
$'000 |
21,952 |
28,408 |
|||
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Severance charges |
$'000 |
1,576 |
– |
|||
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Royalties |
$'000 |
2,517 |
2,024 |
|||
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Operating costs from metals inventory |
$'000 |
1,374 |
2,948 |
|||
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Inventory net realizable value adjustment and write-off |
$'000 |
3,103 |
1,299 |
|||
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Cost of sales excluding depreciation and amortization |
$'000 |
30,522 |
34,679 |
|||
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Depreciation and amortization |
$'000 |
5,581 |
4,827 |
|||
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Mine operating margin/(loss) |
$'000 |
$ |
12,485 |
$ |
(564) |
|
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Capital expenditures |
$'000 |
7,881 |
3,611 |
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WASSA OPERATING RESULTS |
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Ore mined – Main Pit |
t |
– |
322,705 |
|||
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Ore mined – Underground |
t |
238,953 |
143,702 |
|||
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Ore mined – Total |
t |
238,953 |
466,407 |
|||
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Waste mined – Main Pit |
t |
– |
1,647,798 |
|||
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Waste mined – Underground |
t |
73,122 |
28,826 |
|||
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Waste mined – Total |
t |
73,122 |
1,676,624 |
|||
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Ore processed – Main Pit |
t |
140,517 |
490,159 |
|||
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Ore processed – Underground |
t |
235,415 |
145,016 |
|||
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Ore processed – Total |
t |
375,932 |
635,175 |
|||
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Grade processed – Main Pit |
g/t |
0.72 |
1.23 |
|||
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Grade processed – Underground |
g/t |
4.99 |
3.02 |
|||
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Recovery |
% |
96.1 |
94.6 |
|||
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Gold produced – Main Pit |
oz |
3,013 |
18,873 |
|||
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Gold produced – Underground |
oz |
35,519 |
13,288 |
|||
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Gold produced – Total |
oz |
38,532 |
32,161 |
|||
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Gold sold – Main Pit |
oz |
2,730 |
18,697 |
|||
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Gold sold – Underground |
oz |
35,519 |
13,288 |
|||
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Gold sold – Total |
oz |
38,249 |
31,985 |
|||
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Cost of sales per ounce1 |
$/oz |
944 |
1,235 |
|||
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Cash operating cost per ounce1 |
$/oz |
610 |
980 |
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Notes |
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1. See "Non-GAAP Financial Measures". |
Wassa Operational Overview
Gold production from the Wassa Complex increased by 20% in the second quarter of 2018 to 38,532 ounces compared to the second quarter of 2017. Wassa became a primarily underground operation in the first quarter of 2018 and consequently, in the second quarter of 2018, 92% of Wassa's production was attributable to Wassa Underground. Stockpiled ore from Wassa Main Pit is expected to continue to be fed to the processing plant into the fourth quarter of 2018.
The grade of the ore from Wassa Underground in the second quarter of 2018 increased by 65% to 4.99 g/t Au compared to the second quarter of 2017 and by 10% compared to the first quarter of 2018. Mining rates at Wassa Underground also continued to exceed expectations, at approximately 2,655 tpd on average in the second quarter of 2018. This represents a 66% increase compared to the second quarter of 2017 and an 11% increase compared to the first quarter of 2018.
The targeted average mining rate for Wassa Underground in FY 2018 is 2,700-3,000 tpd, but the Company expected to achieve an average of 2,300 tpd during the first half of 2018. The mining team is well-positioned to continue to increase the tonnage profile in 2018 and beyond, with the mining sequence working well and an increasing number of stopes prepared and developed.
The Wassa Complex reported a 38% decrease in cash operating cost per ounce1 for the second quarter of 2018 to $610 compared to the second quarter of 2017. This represents Wassa's lowest cash operating cost per ounce1 since the first quarter of 2010. This strong performance was due primarily to the increase in both grade and tonnage from the Wassa Underground ore being fed to the processing plant and the subsequent increase in gold sold. The cost of sales per ounce1 for Wassa in the second quarter of 2018 was $944.
$1.6 million of severance expenses were paid during the second quarter of 2018 as a result of the cessation of production from Wassa Main Pit in the first quarter of 2018. The severance payments relating to the Wassa Main Pit workforce are now complete.
Post period end, Wassa's First Aid Team was awarded first place in the 2018 Zone 1 Mine Safety and First Aid Competition, underlining Golden Star's strong commitment to safe working practice. The team will go on to compete in the national competition in October 2018.
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Notes |
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1. See "Non-GAAP Financial Measures". |
Prestea Complex
|
Three Months Ended |
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|
June 30, |
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2018 |
2017 |
|||||
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PRESTEA FINANCIAL RESULTS |
||||||
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Revenue |
$'000 |
$ |
28,533 |
$ |
38,393 |
|
|
Mine operating expenses |
$'000 |
23,504 |
20,860 |
|||
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Royalties |
$'000 |
1,483 |
2,194 |
|||
|
Operating costs from/(to) metals inventory |
$'000 |
2,134 |
(2,560) |
|||
|
Inventory net realizable value adjustment and write-off |
$'000 |
74 |
– |
|||
|
Cost of sales excluding depreciation and amortization |
$'000 |
27,195 |
20,494 |
|||
|
Depreciation and amortization |
$'000 |
3,654 |
4,066 |
|||
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Mine operating (loss)/margin |
$'000 |
$ |
(2,316) |
$ |
13,833 |
|
|
Capital expenditures |
$'000 |
2,305 |
14,696 |
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PRESTEA OPERATING RESULTS |
||||||
|
Ore mined – Open Pits |
t |
45,547 |
351,860 |
|||
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Ore mined – Underground |
t |
31,373 |
6,134 |
|||
|
Ore mined – Total |
t |
76,920 |
357,994 |
|||
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Waste mined – Open Pits |
t |
146,316 |
955,691 |
|||
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Waste mined – Underground |
t |
– |
5,637 |
|||
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Waste mined – Total |
t |
146,316 |
961,328 |
|||
|
Ore processed |
t |
373,599 |
370,928 |
|||
|
Grade processed – Open Pits |
g/t |
2.33 |
3.15 |
|||
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Grade processed – Underground |
g/t |
13.56 |
3.67 |
|||
|
Recovery |
% |
88.0 |
88.4 |
|||
|
Gold produced – Open Pits |
oz |
10,214 |
31,689 |
|||
|
Gold produced – Underground |
oz |
12,463 |
325 |
|||
|
Gold produced – Total |
oz |
22,677 |
32,014 |
|||
|
Gold sold – Open Pits |
oz |
9,847 |
31,294 |
|||
|
Gold sold – Underground |
oz |
12,463 |
325 |
|||
|
Gold sold – Total |
oz |
22,310 |
31,619 |
|||
|
Cost of sales per ounce1 |
$/oz |
1,383 |
785 |
|||
|
Cash operating cost per ounce1 |
$/oz |
1,149 |
585 |
|||
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Notes |
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1. See "Non-GAAP Financial Measures". |
Prestea Operational Overview
Gold production from the Prestea Complex in the second quarter of 2018 was 22,677 ounces. The second quarter of 2018 was the first quarter that Prestea Underground delivered more ounces than the Prestea Open Pits (55% of the Prestea Complex's total production). This is a result of the ramp up of production from the underground operation and the Prestea Open Pits approaching the end of their mine life.
The Prestea Open Pits produced 10,214 ounces of gold in the second quarter of 2018. This 68% decrease in production compared to the second quarter of 2017 was anticipated, as the Prestea Open Pits had been expected to complete gold production at the end of 2017. However additional ore was sourced during the first half of 2018 so production is now expected to complete during the third quarter of 2018. The grade of the ore processed from the Prestea Open Pits in the second quarter of 2018 was 2.33 g/t Au. This was higher than expected at the start of the year as Golden Star has accessed the Maafio pit, which has a grade of approximately 2.33 g/t Au. However the grade processed in the second quarter of 2018 represents a 26% decrease compared to the second quarter of 2017, as during the second and third quarters of 2017 Golden Star was mining the Mampon deposit, which had a grade of 4.64 g/t Au.
Gold production from Prestea Underground was 12,463 ounces in the second quarter of 2018, compared to 325 ounces in the second quarter of 2017. The grade of the ore processed from Prestea Underground increased by 65% in the second quarter of 2018 to 13.56 g/t Au compared to the first quarter of 2018, exceeding the average ore reserve grade of 12.35 g/t Au.
The average production rate from Prestea Underground was 345 tpd in the second quarter of 2018. This average daily tonnage rate was similar to the first quarter of 2018, however, more ore was sourced from stope production during the second quarter of 2018 and the dilution control in the stopes was significantly improved, resulting in higher grades processed. Golden Star continued to improve the longhole drilling and blasting productivities during the period and expects the targeted production rate of 650 tpd to be achieved consistently at Prestea Underground during the fourth quarter of 2018.
Prestea reported a cash operating cost per ounce1 of $1,149 in the second quarter of 2018, which represents a 96% increase compared to the same period in 2017. The increase in cash operating cost per ounce1 was due primarily to the increase in operating costs from metals inventory and mine operating expenses in the period and the decrease in ounces sold in the second quarter of 2018 compared to the same period in 2017. The cost of sales per ounce1 at Prestea in the second quarter of 2018 was $1,383.
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Notes |
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1. See "Non-GAAP Financial Measures". |
Exploration
Updated Wassa Underground Inferred Mineral Resource Estimate
On April 12, 2018, the Company released an updated Inferred Mineral Resource estimate for Wassa Underground. The updated estimate delivered a 147% increase in Wassa Underground's Inferred Mineral Resources to 5.2 million ounces of gold, in the B Shoot South and F Shoot South areas. The grade of the Inferred Mineral Resources also increased by 9% to 3.6 g/t Au compared to 3.3 g/t Au in the December 31, 2017 estimate.
Further drilling of the Wassa South extensions is underway and the Company expects that Wassa Underground's Inferred Mineral Resources will continue to grow with further step out drilling towards the south. A total of 5,500 metres of drilling was conducted during the second quarter of 2018. Golden Star expects to release the results of this drilling towards the end of the third quarter of 2018.
Golden Star has commenced work on a Preliminary Economic Assessment ("PEA") on the Inferred Mineral Resources of the Wassa Underground deposit. The objective of the PEA is to demonstrate the viability of the Inferred Mineral Resources, potentially including a new access shaft and new ventilation infrastructure. As Golden Star has significant under-utilized capacity in the Wassa processing plant, this additional material could be processed without the need for Golden Star to build any additional processing capacity. Golden Star anticipates that the PEA will be completed in the second half of 2018.
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