Macro Tsimmis

intelligently hedged investment

Golden Star Resources (GSS) update #11

Posted by intelledgement on Wed, 06 May 09

Our gold mining spec play, Golden Star Resources (GSS), released 1Q09 results today and although the bottom line was more red ink—the ninth consecutive losing quarter—things are definitely looking up. The company lost $1.1 million (half-a-cent per share) on record sales of 96,971 ounces of gold, at an average price of $904/oz. It was the narrowest loss the company has had since the progression of consecutive red-ink quarters began 1Q07. The record production amounted to a 69% year-over-year improvement, and was up 13% from 4Q08. Even better, production costs were $571/oz, which was the second lowest quarterly cost performance since commercial-scale BIOX® processing began at the Bogoso mine in early 2007, and a healthy improvement over last quarter (-10%) and a year ago (-12%). The 1Q09 decrease in production costs was also the second consecutive…one more data point and we will have us a bona fide trendline!

It still ain’t all roses. Bogoso continues to lag expectations. Production this quarter was lower than projected, principally due to a two-week hiatus “due to electrical issues including an electrical fire in the liquid resistance starter and continuing poor quality power from the VRA,” according to the press release (click here and on “Golden Star Reports Record Quarterly Gold Sales of 96,971 Ounces”). And costs are still high, running $813/oz for the quarter, which was not even an improvement over last quarter’s $799. (Fortunately, costs at Wassa came in quite low at $397/oz.) Management expect the Genser power plant being constructed cooperatively by several mining companies to come online during 2Q09, which should improve the power reliability problems.

Still, it is hard to see how the company will meet their target cash cost of $650/oz for all of 2009 at Bogoso. FWIW, management are still projecting production of 400,000 ounces for the year. Be that as it may, the prospects of increased production at a profitable cost has the stock up 46% YTD as of today’s close, and with these improved 1Q09 results (announced after the market closed), tomorrow should see further gains. For now, we are staying on this train; it’s running way late and the amenities are considerably poorer than advertised, but at least it is now headed in the right direction, and appears to be picking up steam.

Previous GSS-related posts:

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