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Edited Transcript of GSC.TO earnings conference call or presentation 31-Oct-19 2:00pm GMT

Q3 2019 Golden Star Resources Ltd Earnings Call

Toronto Nov 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Golden Star Resources Ltd earnings conference call or presentation Thursday, October 31, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Wray

Golden Star Resources Ltd. - CEO & Director

* Graham Crew

Golden Star Resources Ltd. - Executive VP & COO

* Pieter André van Niekerk

Golden Star Resources Ltd. - Executive VP & CFO

* Tania Shaw

Golden Star Resources Ltd. - VP of IR & Corporate Affairs

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Conference Call Participants

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* Bryce Adams

CIBC Capital Markets, Research Division - Analyst

* Heiko Felix Ihle

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst

* Justin Chan

Numis Securities Limited, Research Division - Analyst

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Presentation

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Tania Shaw, Golden Star Resources Ltd. - VP of IR & Corporate Affairs [1]

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Good morning, and welcome to Golden Star's Third Quarter Earnings Conference Call. I'm Tania Shaw, VP of Investor Relations. On the call today, we've got Andrew Wray, CEO; Graham Crew, COO; and André van Niekerk, CFO. Andrew?

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [2]

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Hi, Tania. Thank you very much and good morning, good afternoon everybody. We'll go through the presentation, which is on the website and run you through the key points of the results this quarter and then Graham, Andre, and I are around for any questions anyone has after that.

So starting on Slide 5. As a reminder, the 2 operating mines that we have are Wassa and Prestea and the satellite deposit, Father Brown. You can see the guidance on there that we have for 2019 and as we have confirmed in the results released today, we're on track to meet that and maintaining guidance for the year.

Turning to the quarter itself, Slide 6. So overall positive quarter for Golden Star. We faced, as we communicated last quarter, some headwinds at Wassa as we've worked our way through a particularly low-grade path of the oil body. And have successfully done that and at the same time, working through the ongoing turnaround at Prestea, which I'm pleased to say is starting to gain momentum and traction. And as you can see in the results, starting to show through in performance.

In terms of production for the quarter, we produced just over 49,000 ounces, which as back in line with our expectations. Very similar to the second quarter with Wassa a little bit lower than the previous quarter, Prestea a bit higher but overall at the level that we expected.

We, through the quarter, saw an increasing profile, going back to the point I made around Wassa and the grade and stabilizing at the end of the quarter into the fourth quarter, which is encouraging. We've also seen a step up in the mine operating margin at both sites and Wassa particularly continuing to generate free cash flow even with the significant incremental volume that they moved through the quarter.

And our costs came in line, again, with the second quarter of the year. As we expected, and as I said, despite moving those extra volumes at Wassa, some very good cost control and unit costs at Wassa particularly meant that we were able to hold the cost base. And we ended the quarter with $57 million of cash.

As we mentioned previously, we've hedged around 50,000 ounces for the next year, equating approximately to production from Prestea to give ourselves a floor price during that period of $1,400 with a ceiling of $1,750. The first month of that 12-month period, if the contracts expired today, still comfortably in that range, about $1,500 spot price.

We've also completed the facility -- the credit facility with Macquarie Bank for $60 million. That’s all gone through and as a result of refinanced certain of the existing facilities we had, and used the remaining funds for general corporate purposes. And then finally, we continued to reshape the team at Golden Star. At the same time that we've announced that we're going to consolidate the headquarter office in London over the next few months. So we'll be transitioning across.

So with that, we'll go into the detail around the 2 sites and I'll hand over to Graham Crew who is on the line.

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [3]

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Thanks, Andrew. Just jumping over onto Slide 8. Andrew mentioned some of the challenges through the quarter. So all in all, pretty positive especially with the site team facing some real challenges with the grade around the first 2 months of the quarter and responded as you would want them to respond, with being able to push the volumes and really increase the production rate out of Wassa.

And probably the other important piece of work that they were doing throughout the quarter is really investigating what was causing the grade variance and where it was coming from, and what we can do to work that into the plan. As Andrew said, slightly lower ounces from Wassa from the previous quarter based on those lower grades but good volumes.

And into September, we started to see the grades normalize more to what we would expect and into October as well. So that’s pretty positive for quarter 4, although we'll probably, we won't push those volumes quite at the same rate. We had a new loader arrive in July and that helped us push some of those volumes and we've had to retire an older machine since then. So we'll see those volumes back off a little bit but the grade normalized more close to expectations.

Moving onto the next slide, one of the things we talked about last quarter is really trying to push the definition drilling. Some of the areas where we ran into some grade issues, especially in the new areas in Panel 2, in the upper areas of the [bay chute] and the hanging wall stopes. Certainly, the team has put a lot of work into understanding a lot better what's going on there.

So we've struggled with that over the second and third quarter and trying to get our definition drilling in front of the plan. So the real focus now will be on increasing our development, particularly in the ramp decline, access production areas, and those drill platforms. You can see on that slide there that 20,000 meters -- 30,000 meters of definition drilling completed in the first half and then another 20,000 completed over quarter 3. So trying to make sure that we're able to use that information for the plan for next year.

Just moving over to Slide 10, I guess the key thing for me on this slide. There's a lot of target to drill at Wassa. Getting a better understanding of that hanging wall mineralization and the [fall] closures, those upper areas that I talked about on the previous slide. So that’s an important investment for us that we're going to continue to push through Q4 and obviously into 2020.

And then some of the other investments that we're making. We're progressing on the paste plant. That’s a very important investment for us in 2020 that will help us improve that flexibility again with the plan. So we're into final engineering and design, and running haz-op studies, et cetera, on site. And commit some of our ground works, including drilling the paste holes for that plant to go in over the next a bit less than 12 months.

So that’s exciting for us to be moving forward on that project. And then as we talked about last quarter, still continuing to invest in the fleet with another new jumbo about to hit site very soon. And change out some of the older loader fleet and then look to change out the trucking fleet as those current trucks come to end of life, increasing the capacity there, as we get further down the mine.

The unit costs, Andrew touched on this, but I think what we saw over the quarter was a positive response from the team, managing to push the volumes to compensate for the lower grade that we saw and maintaining pretty tight cost control, sort of $32 a tonne, as we progress deeper and deeper is pretty impressive sort of mining unit cost there.

So I guess it was a demonstration that as we push the volumes, we can manage that fixed cost base and see that benefit. And then looking ahead into quarter 4, much lower proportion of the stopes where we had problems and looking at our 2020 plan as we go through that budget process. Looking at how we reach that plan further. One, with the increased drilling but also with the understanding that we've developed over the last 2 quarters. So as Andrew mentioned, we continue on target to meet that guidance for Wassa.

Moving onto Prestea, we -- some real challenges there and the thing we talked about last quarter was the operational review that has been underway. So a lot of work has gone into that and again, a positive for me out of this is really seeing the sites team stepping up. Improved production over the quarter is driven by a couple of things.

One is we're still -- the oxide pits are still delivering for us and slightly better grade than initially modeled. So that’s definitely a positive for us at the moment but it's a limited one. And in fact, we approved during the quarter some extension of the current oxide pits that we're mining. So that will help continue to supplement the underground for the next little while, over the next quarter anyway.

The important thing, Prestea underground starting to see that grade improvement. Again, we're challenged at the start of the quarter, mining through some of the areas that we talked about with the pinch out zones and having to reslot stopes, et cetera, and seeing a lot of dilution and a lot of oversize coming down through the drill points, which was, in a smaller mine, having a real impact.

So what we saw towards the end of the quarter and into quarter 4 is much better control of that as we've moved out of those areas into some of the newer areas. And we're seeing the grade improve slightly on the back of that as well.

Moving onto Slide 14. Again, looking very closely at the cost at Prestea. Probably the best quarter over the year in terms of mining costs and really getting a handle on the costs on site, and decreasing the all-in sustaining costs overall. And we'll look to keep improving that as we go forward.

So good cost control from the team at Prestea over the quarter. Obviously, it's a place that’s under a fair bit of pressure and has been over the full year.

On the projects, probably just moving onto Slide 15 and talking about Project Okode. Okode means eagle in the local language and what we've tried to do there with the local team is really put some structure and a project team around the initiative. So you'll remember, we talked about a couple of times we had CSA come in and partner with us in doing an operational review and that made some pretty important conclusions from that.

And what we've tried to do is sort of take the short-term recommendations. We put some project teams together on site, put a project manager in charge of that, a project scheduler, and really try to capture the quick wins through that. And then at the same time, we've been doing some longer-term work around looking at the conceptual mine plan, how we can improve the Alimak stoping and look at some complementary stoping methods. We're looking very closely now at a sub-level open stoping method and seen how we can better separate ore and wastes within the ore handling system, and some of the geotech improvements.

But some good short-term improvements just over as the quarter progressed, looking at some narrower Alimak platforms to help with the dilution and looking at ways we can improve the productivity. The rail improvements, we touched on that last quarter but focusing on that. It's about 80% complete now and moving into a kind of scheduled maintenance regime.

And then looking at the leadership accountability and culture. And some of the pleasing things. What has been a high-pressure environment is that real -- keeping that focus on safety and moving to a more mature culture, I guess, with improved near miss and hazard reporting. Starting to work on a leadership framework so that we can give our supervisors and leaders the right skills and tools to be able to drive that performance day in and day out. And some improvements in maintenance around work order and plan maintenance compliance.

So all in all, some real positives with Project Okode and Prestea starting to show some fruit, and then working hard on the plan for next year, how we can set up for it development wise, how we can improve the Alimak stoping, especially on the geotechnical front and improve the dilution coming out of those. The increased infill drilling is really important for that. And then some of the projects to enable us to increase the production rate over time.

So still pretty aware that’s a big system, a lot of gold. We want to be able to do some of the extensional drilling next year as well. So some very real challenges but some positives coming out of Prestea. And with that, I'll probably hand over to Andrew to talk about how that all lands in the financials.

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Pieter André van Niekerk, Golden Star Resources Ltd. - Executive VP & CFO [4]

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Thank you, Graham. I'll quickly take you through the financial performance for the quarter and a few highlights there as well as the cash flow for the quarter.

Golden Star's overall financial performance for Q3 improved substantially from Q3 2018 and Q2 2019. Higher gold prices and a relatively stable cost structure were the main factors for the improved results.

Gold revenues for Q3 2019 totaled approximately $70 million from gold sales of approximately 48,500 ounces at an average realized gold price of $1,432 per ounce. This represents a 3% increase in revenues compared to the third quarter of 2018 and this is as a result of a 22% increase in the average realized gold price, partially offset by a 16% drop in gold sales.

The consolidated mine operating margin was $15.7 million for the third quarter of 2019 compared to $10.2 million in Q3 2018. Both operations saw significant increase in mine operating margin. Wassa's margin increased by 25% while Prestea's margin improved by 60%. To further protect margin, as Andrew mentioned earlier, we entered into a discretionary hedge program with Macquarie for 50,000 ounces of gold over a 12-month period.

The (inaudible) consists of (inaudible) to the floor price of $1,400 an ounce and a ceiling price of $1,750. The purpose of the hedge is to provide price protection for the Prestea gold production as operational improvements are being implemented.

In context, our income before tax was $10.2 million for Q3 of 2019 compared to a $71,000 loss in Q3 of 2018. At Wassa, income before tax increased to $15.2 million resulting in income tax expense of $5.2 million for the quarter. This is up from income before tax of $12.7 million and income tax expense of $4.2 million in the third quarter of last year.

Prestea's net loss before tax reduced to $2.5 million in Q3 compared to a $3.8 million loss in 2018. The loss before tax at the corporate level reduced 71% to $2.6 million for the quarter, mainly as a result of the positive mark to market adjustments on the fair value of financial instruments.

In total, net income attributable to Golden Star shareholders was $6 million or $0.05 per share. This is compared to a net loss attributable to Golden Star shareholders of $3.2 million or $0.04 per share in the same period last year.

Now moving onto the cash flows on the next slide. The Wassa operations contributed an additional $21 million during the third quarter. This is consistent with prior quarter. While Prestea contributed $1.7 million, an improvement from the $5 million cash burn from operations incurred net income Q2 2019. G&A, excluding shared-based compensation, was $4.9 million and the company also made $2.6 million of interest payments during the quarter.

As a result, net cash provided by operating activities totaled $8.1 million. We continued to invest in our operations during the third quarter. We spent $15.4 million of cash on capital, of which the majority was spent at Wassa. This included $4.2 million on exploration drilling, $3 million on underground development, $2 million on mobile equipment, and then $1.5 million on the construction of the paste fill plant.

We also made principal debt repayments of $2.1 million on the Ecobank loans, resulting in a closing cash balance of approximately $57 million. Subsequent to the end of the quarter, we closed a $60 million credit facility with Macquarie and have repaid the remaining balance of the Ecobank loans, and settled the outstanding balance of the vendor agreement.

The company's debt structure is now much simpler than it was before, with only the $60 million Macquarie credit facility and $51.5 million on the convertible debentures outstanding. I will now hand it back to Andrew.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [5]

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Thanks very much, Andre. Moving forward onto Slide 20, looking at safety. I think it's important to highlight that as we've said, as Graham made clear, we're pushing the operations pretty hard in different ways with both Wassa and Prestea. The degree of pressure on those operations, they're delivering.

What we've got to be very careful is to make sure that they don’t deliver at the cost of safety and maintaining that focus on safety. So this is something that we continue to highlight to the operations to really focus on some of those leading indicators and ensure that we get better near miss reporting so that we can ensure that we remain ahead of any issues developing there.

So critical to us, as is prevention and prevention both in terms of safety as well as health. And you'll see from the malaria stats there, we're at the lowest level in 7 years, which likewise is encouraging both for our workforce but also for the broader community.

Moving onto Slide 21. There are something that personally I feel strongly about that as a business, operating sustainably and responsibly. It's critical to everything that we do. So it's encouraging to see some of those initiatives that we have running our operations being recognized in terms of being nominated for awards with the Global Compact Network in Canada. And those relate to poverty eradication. So putting in sustainable business around our mind sites. They relate to the health of those communities and also to providing decent and sustainable work for them. So that continues to be a key focus of ours, and I think something where as a business, we can continue to differentiate ourselves.

So moving on just to sump before we move across and take questions. On Slide 22, as I said, good quarter. So I think we've made encouraging progress across-the-board. At Wassa, they’ve worked their way through, as Graham explained, a pretty difficult period in terms of grade. They’ve continued that free cash flow generation, notwithstanding the fact that we're investing pretty heavily in Wassa because that continues to develop into an exciting mine, a significant ore body. So we're making sure that we put in place sufficient infrastructure, the fleet, and the know-how to develop that asset.

At Prestea, a lot of work going on likewise, and encouraging to start to see some of the early results of that, and starting to see the site progress and the team step up. And now they are working hard on translating that into a more robust budget, 2020, and then a better longer-term plan for that asset.

So a lot of work setting the business up for the longer-term. As Andre explained, Macquarie facility was finalized. That’s important in terms of establishing those lending relationships. And the additions to the team at a senior-level are likewise giving the capacity to grow a bigger business.

We'd expect to see further progress in the fourth quarter, and likewise into 2020 when we put our guidance out early next year. So with that, Tania, I'll finish, and I'll hand back to you.

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Questions and Answers

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Tania Shaw, Golden Star Resources Ltd. - VP of IR & Corporate Affairs [1]

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Thank you. Operator, if you'd like to open up the call for questions. I believe our first one comes from Bryce Adams at CIBC.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [2]

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Just a couple of quick questions starting with Wassa and your throughput versus your grade. Offsetting factors there. If we go back to the Q2 conference call, I thought the commentary around the grade expectation for Q3 was that it should look pretty much similar to Q2. So I was wondering what changed in the mine plan from then to now?

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [3]

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What was the other question as well, Bryce? And then we'll deal with them both.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [4]

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Okay. I guess I mean there's a few here actually. So you knew the grade was going to be lower so you pushed the throughput. Is that right or was throughput pushed and as a result, you accepted a higher dilution and grade came down? Which one came first? If it was a lower grade period, it was good that you were able to push a throughput to offset that.

But another question would be, in previous quarters, throughput had been one of the operating challenges. So what was the big difference quarter-over-quarter that enabled that throughput? Graham made a comment that grades would normalize -- have normalized in end of Q3 and into October. What does normalized mean? Is that coming back to the Q2 grades or coming back closer to the reserve grade?

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [5]

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Thanks, Bryce. I think probably that one is for Graham. I can assist with the last one, normalizing coming back around Q2, probably closer to reserve grade over the fourth quarter is what you should expect. But in terms of the other specific questions in terms of throughput versus grade tradeoffs, et cetera, maybe Graham, I'll leave those for you.

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [6]

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Thanks, Andrew. Bryce, so dealing with the grade challenge first. I think the grade, when we were sitting here at the end of quarter 2, the grades that we were seeing coming out of the hanging wall stopes in particular was a bit of a surprise at that point. And what we were seeing in the plan is that we were having more of that material. And then we were moving into, if you remember, the 595 and the 595 S2 stope also didn’t perform as well as what we had in the plan.

So the team was really challenged on grade and the response from the team on site -- there wasn’t a lot of pushing from me, I have to say -- but the response from the team on site was, well, we have to push the volume now to get near our plan. So a couple of things.

So just dealing with the grade to start with. The hanging wall zone, I think we talked about previously. Earlier in the year, we had the long-range model sort of giving us stopes in that area. When we put more drilling into that, we were seeing changes. And then when we went to mine that, it was still a bit of a surprise.

So we do have challenges in that hanging wall area and one of the things we're looking at for 2020 is how do we schedule that out, if you like, so that we can get some drilling into that and then be much more deliberate about our scheduling of those hanging wall areas. So we're putting work into that.

And also, similarly, the fold closures, sort of the upper areas when you're in the -- as the oil body dips away from you towards the south, when you're sort of on those fold closure top areas there, we've probably overestimated that high grade tonnage in some of those areas based on some narrower high grade intercepts that, in the meat of the oil body, the estimate works pretty well. And just in those upper areas where you're on the boundaries, we probably overestimated the amount of gold in those areas. And so we've taken some dilution within the stope shapes. So from not understanding that well enough.

So there are 2 areas from the grade challenge that we're putting a lot of work into understanding. And on the throughput, that’s what the team on site, how they responded was one of the things that we thought was that we had one of our new lighters early in -- fairly early in the quarter turn up and we kept maintaining some of the older fleet that was due for retirement. So we had some additional loader capacity. And we pushed the trucking feet pretty hard. So working guys on overtime and getting more out of that fleet.

So I mean, really important demonstration of what can be done up the decline. What we want to be able to do is make sure we're doing that in a much more planned way, rather than as a response to a challenge with the grade estimation. So recognizing that, dealing with the technical challenges of that, and then making sure that the plan accounts for that.

So the way that -- we're approaching that is we need to get the drilling in front of the plan, which is what we've been pushing over this year and will continue to push. And importantly, we need to get the development in place so that we've got the drilling platforms to be able to drill, get that definition drilling in place well ahead of the plan.

So we've still got work to do on that. There's no doubt about that but that’s what we're working on now.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [7]

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It would be great to see the grade and the throughput move together. So if we're going to (inaudible) 3.6 to 3.9 grams per tonne in Q4, is there a thought to keep pushing the throughput for Q4? I think you said it was (inaudible).

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [8]

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It will come off a little bit and we -- as I said, we need to make sure that we're carefully planning how we can do that. But I think that’s -- what we've demonstrated now is that you can push the throughput a little bit. So we'll continue to work on ways we can do that. Some of the fleet investment will be important to that. New jumbo replacing some of the older loaders through next year. And then as trucks come up for retirement, putting some more capacity in there as well. And then looking at the kind of utilization pieces, how we can maintain that sort of utilization over the longer-term.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [9]

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Last one for Wassa. Was that throughput underground mining rates, was that all up 1 decline or did you utilize a second decline for ore and waste haulage at the same time?

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [10]

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No, all of the haulage is out of the one (inaudible).

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [11]

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A couple of quick ones for Prestea. On the proposed or the potential, I should say, long haul stoping, what would be the minimum stope width that you'd be thinking you could get down to with that proposal? And then for the Alimak underground mining costs, what is your target cost per tonne for Alimak mining, not for stoping?

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [12]

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They're both a couple of things that we're working through at the moment. I can't give you the breakdown of the Alimak development versus stoping right here, right now especially because one of the key improvements we're looking at is reducing the height of those Alimak stopes. So part of that is we'll be cycling and turning those over quicker.

In terms of the minimum mining width, we'd like to get that down to the kind of 2 meters is what would be the ideal. But obviously, dilution has been a big issue for us at Prestea. So we're trying not to overcook those assumptions as we work through that.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [13]

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Early days.

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [14]

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Yes.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [15]

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I look forward to seeing your Q4 results and keep demonstrating progress at the assets.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [16]

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Just turning back, Tania, sorry, just to come back -- just to make sure we're clear in terms of the volumes at Wassa. And if you remember earlier in the year, we said we'd try and target somewhere around 3,500 tonnes a day this year, probably heading to 4,000 tonnes a day in 2020. Now obviously, we shot through there in Q3.

I think to be fair for Q4, we'd be pushing more to the 2020 sort of numbers than what we guided for 2019. But it's not going to be a repeat of Q3, just so that everyone is clear on that.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [17]

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Got it -- 4,000 tonnes a day at call it 3.7 grams a tonne would be a fair estimate.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [18]

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That’s what we're going to strive to try and get it to in terms of volumes. So the kind of -- that’s the order of magnitude.

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Bryce Adams, CIBC Capital Markets, Research Division - Analyst [19]

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It would be a great finish to the year. That’s for sure.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [20]

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Couldn’t agree more. Thanks, Bryce.

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Tania Shaw, Golden Star Resources Ltd. - VP of IR & Corporate Affairs [21]

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Our next question is from Heiko at H.C. Wainwright. Operator, if you can open Heiko's line.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [22]

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First question. Can you provide us with a progress update on the staffing situation for the London office? And in particular, how is the search for the new CEO coming along?

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [23]

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CFO. It's something I don’t know if it's CEO.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [24]

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CFO.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [25]

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Sorry, I missed (inaudible). Probably deliberately. I can take that in a second. Do you want to go through any other questions and then we can just divvy them up?

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [26]

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And then second question is, you spent some time in the release going over the Wassa Genser plant. Can you maybe give us more detail in regards to the timeline and try to quantify cost savings for the project. And then just to confirm, there is no real CapEx cost to you as they're paying for it.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [27]

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Anything else Heiko?

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [28]

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No, that’s it.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [29]

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On progress on London, we are in very early days of that. So as it stands today, I'm in London. As everybody knows, it's October the 31st. So as a good Brit, I assumed we'd be crashing out of the European Union today but we'll probably have the same conversation on the 31st of October for the next few years. I'm one of 2 people in the office here. Everybody else is on the road.

We will be moving that gradually over the next few months. So we'll end up with a team of probably 15 to 20 people, similar to what we currently have in the Toronto office. A fair few of those are either in place or earmarked. The key will be to get an orderly transition of the finance, the central finance team across. So Andre is in the early days of planning that transition.

And in terms of the CFO search, just I think from a personal perspective, I'm sad that I've got to make that search because in the few months we've worked together, I've really enjoyed working with Andrew. He's a very high caliber individual. Decided that Toronto is the place to stay rather than come to London, which we fully respect.

So we've mandated someone to start to run a search for us on that. We've got a transition, as we said, through to the end of April next year. So we've got a little bit of visibility on that. And as and when there's any news, we'll obviously inform the market of that. But it's underway.

In terms of the Genser plant, I'll give you a brief overview and Andre can add anything he wants to. But we're really looking roughly around 6 months or so to put that in place. No CapEx, as you say, on our part. We're purely off taking from that arrangement. Obviously, the benefit to us is that we're not going to suffer transmission losses. It's at site. We're going to get that security and regularity of power, which is critical.

There's been some inconsistency in supply this year. It causes issues across the plant. It causes issues with pumping. So it will be good to have that regular stable power. There's a number of other assets. Accra have got it and 3 others that are taking a similar sort of system to what we've got. So it's tried and tested.

We'd expect that it brings down our per kilowatt cost by just under $0.02. So that means we'll sort of building up. Next year, we'll get some savings as it gradually comes on stream and it will build up to around $1.5 million to $2 million of annual savings, which is a meaningful amount.

But as I say, the other element that perhaps a little harder to quantify. But just giving that stability of power is important to us as well. Andre, please add or correct is there's anything there that I've missed.

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Pieter André van Niekerk, Golden Star Resources Ltd. - Executive VP & CFO [30]

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I think that’s a good summary, Andrew. In addition to that, I would say the benefit of this is it's a modular system. So as we look at the future of Wassa, we'll be able to add generating capacity to that. And whatever route we decide to take, we will have the ability to scale while having a ceiling to that price per kilowatt-hour.

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Tania Shaw, Golden Star Resources Ltd. - VP of IR & Corporate Affairs [31]

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Our next question is from Justin Chan from Numis Securities. Justin?

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Justin Chan, Numis Securities Limited, Research Division - Analyst [32]

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My first one is probably one for Graham. Just at Wassa, could you comment on your drill definition cycle now and how many weeks or months are you ahead of the current mine planning? And then related to that I guess would be, in terms of not pushing to 4,000 tonnes a day, is that more an infrastructure decision or is it more to do with your drill definition and how much you think you can mine accurately for the next quarter?

And then just going into next year and the tonnage ramp up, could you give us some commentary there on the ramp up to 5,000 and what you need to do between now and then and how long that might be expected to take? So that’s on Wassa. Happy to hear the answer now or I have a couple questions on Prestea. Not sure if I should ask them up front or wait.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [33]

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There was a few there. So maybe Graham, if you noted those down, deal with those first.

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [34]

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Sure. In terms of drilling, not as far ahead as we probably wanted to be. Probably at this stage, we're pushing over 60% of next year's plan is in the kind of measured category or definition drilled. And what we're looking at, as we're looking at next year's budget and we're looking into the budget and guidance, et cetera, is how we can best schedule that to derisk that as much as possible, while continuing to try and push the definition drilling ahead of the plan.

So yes, we've still got work to do on that and probably, unfortunately, one of the outcomes of what we've managed to do over the last few months is we've been consuming that inventory even quicker, so which means we need to increase the drilling rate.

In terms of the 4,000 tonnes per day, I think it's a combination of the things that you mentioned. One is trying to get the inventory ahead. So making sure that we've got the development in place and the drilling in place. So we'll focus, although we won't true up the focus on the stoping, but our focus will be going more onto the development side, and especially the decline development. And in fact, the team is already making that adjustment.

So there will be a bit heavier focus on development and getting the development ahead of the mine. So I think the next 12 months are going to be pretty critical to Wassa, and looking at what we can do in terms of getting drill sites set up. Whether we can -- we're pretty happy with drilling rights now that we're -- productivity we're seeing from the drills now.

The question is whether we can set up more sites and drill -- get more definition ahead of us that way, but we need the development in place to do that. So really, it's kind of just switching gears a little bit on a little bit more focus on development to get set up for drilling. And then production coming after that.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [35]

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The only other thing, Justin, I'd just add before we go onto Prestea is in terms of Wassa, it's a function, as Graham was setting out, of the level of definition drilling we've got and what we've got in terms of measured inventory. I think the other factor is the confidence level we have in what we're mining in 2020 in terms of where is that within the ore body. And also, where are those drill intercepts that we do have in place.

And certainly, I think the view would be that we've got a better level of confidence in the plan that we're putting together for 2020 even if we don’t have that at the point of being 100% measured inventory, which is obviously where we're targeting. So that’s an important factor to bear in mind as well.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [36]

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Before I move onto Prestea, I think that’s kind of jogged a couple follow-ups. As we look to 5,000, is that timeline very much dependent on drill definition and where you are? And can you give any guidance on what your current thinking is in terms of ramping up to that rate? And just on the areas, it king of jogged a question for me. The hanging wall areas, I guess what category are they right now and would they fall within measured? Just touch on that.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [37]

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Graham, did you get those?

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [38]

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Do you want me to go with that?

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [39]

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Yes.

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [40]

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So in terms of hanging wall areas, I couldn’t give you an exact proportion, Justin. But a lot of the focus of our drilling has been on the main [base chute] (inaudible). So I would say logically a high proportion is in that but I'd have to get back to you on the exact proportion of how much of that is measured and indicated.

And sorry, just remind me of your first question again?

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Justin Chan, Numis Securities Limited, Research Division - Analyst [41]

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It was just on I guess 5,000 tonnes a day and drill definition, and how do those 2 relate? And what's your current thinking on timeline as when you might start pushing out to those levels?

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [42]

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I think that’s part of the work we're doing right now, looking at the budget for next year. That’s something that we'll be in a much better position to talk about when we give the guidance for next year. I mean the timeline is still roughly the same. Sort of continuing to improve that productivity.

But I think the lesson over the last 2 quarters means we've got to make sure that we're not just pushing tonnage. We're actually pushing the process in terms of getting that definition in front. So in a much better position at the end of the year to kind of report on that. But I think the focus for the next 12 months will be on development and drilling on the back of that.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [43]

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So reading between the lines, we'll know more later but perhaps be conservative modeling for now, more 2021 than 2020 type of thing.

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [44]

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I think that’s a reasonably fair comment, yes.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [45]

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As I said before, Justin, we sort of 2020 target was 4,000. Now we've shown at least over a quarter we can get there a little bit sooner. But in terms of the development, the drilling, the fleet, there's a lot to be done. And we want to make sure that we get there sustainably as well. So we previously indicated that was several years out and I wouldn't change anything until we come back with updates to that.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [46]

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I realize I've burned up a lot of airtime so I'll be just very quick on Prestea. A couple things. One, on open pit mining and tonnage, how much longer should we expect any tonnes from the open pit there? And in Q4 what would the expectation be from your end? And just in terms of the overall concept, is it fair to say the concept is taking shape now? Or is there still alto of optimization work to do to kind of -- between now and the Q1 new mine.

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Andrew Wray, Golden Star Resources Ltd. - CEO & Director [47]

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Graham, do you want to take those?

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [48]

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I think what we will see out of the open pits, as I said, we did approve an extension of the mining at the [pond] where we're currently mining. We have got some other resource material but there's work to do on whether that needs update drilling, more drilling, permitting, et cetera.

So what we'll be looking at for -- so that production that we're currently doing should see us through to roughly around the end of the year, maybe depending on progress, maybe slightly into Q1. But that's really kind of re-optimizing the current resource we had and extending that down a couple of benches based on the $1,400 gold price.

And so other areas need more work before we can put them into the plan. So at this stage, it's unlikely they'll get into the budget but we will keep doing some work on them to see if there is some supplemental production that we can continue with there.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [49]

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Just on the Prestea I guess concept, how much has that taken shape now and is there anything you can share on perhaps the second stope level? Does it provide a bit less variability or is that too early to say?

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Graham Crew, Golden Star Resources Ltd. - Executive VP & COO [50]

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Look, we're pushing the decline development from '17 down to '24 and that’s a big enabler. Probably something that is in the presentation but I didn’t touch on is also the ventilation raised from 24 to 17 helps open up. It helps improve conditions on 24 level. But it will also help open up 17 level as well. So we're making progress. It's probably just a little bit too early, as we work through that plan.

Again, it's something that we're working to what's the plan for next year and the guidance around that. But we're making progress on some of those physical things. But it's really now, it's just trying to make sure that the high-level conceptual plan and what we're doing onsite marry up and sort of melding those 2 plans together.

So that’s really what the team is heavily working on now.

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Justin Chan, Numis Securities Limited, Research Division - Analyst [51]

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Thanks a lot, Andrew and Graham. I realize I burned up alto of airtime so I'll clear out for everyone else to get their questions in.

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Tania Shaw, Golden Star Resources Ltd. - VP of IR & Corporate Affairs [52]

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That’s all the questions that we have today. Thank you everybody who logged in online for the call or called in by phone. We look forward to updating you again in February on the year-end results and have a great day everyone.