Macro Tsimmis

intelligently hedged investment

Golden Star Resources (GSS) update #3

Posted by intelledgement on Wed, 07 Nov 07

Golden Star Resources (GSS) announced their 3Q07 results yesterday, and in light of the preannouncement disappointment discussed here last month, they were’t too shabby. The company did lose $12.7MM in the quarter, spending $707 to produce each ounce of gold (which they then sold for $681…see the problem? LOL). The good news is that [a] the losses were a tad less than recently projected, [b] the number of ounces produced was an all-time high record 70M ounces, indicating good progress towards our expectation of 400M+ ounces of production in 2008 (although were one in a mood to be nitpicky, one might consider ramped up production when losing $26 on every ounce to be less than stellar news LOL), and [c] as the BIOX® plant gets up to speed in the fourth quarter and beyond, it is reasonable to expect higher production at a lower per/ounce cost.

In another good news/bad news development, heavy rains have continued in Ghana during the last three months. The good news is strategic: the back of the drought appears to have been broken and the government have lifted hydropower rationing restrictions, which means that going forward electricity to run GSS’s operations should be more readily accessible and cheaper. The bad news is that tactically, the rains slowed down production in the third quarter and thus contributed to increased costs. On balance, a good deal for the company.

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