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Edited Transcript of GSC.TO earnings conference call or presentation 20-Feb-19 3:00pm GMT

Q4 2018 Golden Star Resources Ltd Earnings Call

Toronto Apr 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Golden Star Resources Ltd earnings conference call or presentation Wednesday, February 20, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel Monney Akwafo Owiredu

Golden Star Resources Ltd. - Executive VP, COO & Director

* Martin Raffield

Golden Star Resources Ltd. - Executive VP & Chief Technical Officer

* Pieter André van Niekerk

Golden Star Resources Ltd. - Executive VP & CFO

* Samuel T. Coetzer

Golden Star Resources Ltd. - President, CEO & Director

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Conference Call Participants

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* Eve Hurowitz

* Heiko Felix Ihle

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

* Nana Bompeh Sangmuah

Clarus Securities Inc., Research Division - MD of Equity Research for Metals and Mining

* Raj Udayan Ray

Desjardins Securities Inc., Research Division - Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. My name is Julie and I will be your conference operator today. At this time, I would like to welcome everyone to the Golden Star Fourth Quarter and Full Year 2018 Results Conference Call and Webcast. (Operator Instructions) After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

And with that, I would now like to turn the call over to Sam Coetzer, President and CEO of Golden Star Resources. Please go ahead.

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [2]

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Thanks, Julia, and thank you to all of you joining us on this call today. As you are aware, we released the 2018 full year results last night as well as the resource update and the drill results for Father Brown. I'll be discussing -- or we'll be discussing both these events on this morning's call.

Please take note of our normal disclaimer and our forward-looking information slide.

Joining me on this call today are Andre van Niekerk, the Executive Vice President and Chief Financial Officer; Dr. Martin Raffield, the Executive Vice President and Chief Technical Officer; and Dr. Daniel Owiredu, the Executive Vice President and Chief Operating Officer.

I'll start with a brief snapshot of Golden Star. Production guidance for 2019 on a consolidated basis is between 220,000 and 240,000 ounces. All-in sustaining cost guidance is between $875 and $955 per ounce. It's important to note that we ended the year with stronger cash balance than previous year's of just under $97 million as a result of the completion of the La Mancha deal, which closed in the fourth quarter. We have intensified our capital expenditure with a focus on Wassa, which we'll discuss further in more detail, with just under $62 million in CapEx allocated for 2019.

Before I go into the results, I think it's important to understand the philosophy that we are employing going forward with the company. Over the last 3 years, we embarked on establishing to producing underground mines, and in doing so, we realized that Wassa is now on its way to becoming a world-class operation. It's demonstrated this over the last few years and it's now become our flagship asset.

At this stage, at Prestea, we are looking at stabilizing production. This is a high-grade underground mine, but it has struggled over the last 12 months to reach its intended production profile.

We will continue to deliver on the expansion potential at both operating mines. Specifically, at Wassa, we are focusing on increasing the production profile. Wassa continues to improve and is now reaching close to 4,000 tonnes per day as we enter into 2019. Our exploration focus will be to source additional feed to close the gap and fill the mill, which is 8,000 tonnes per day roughly.

Over the last 5 months, we focused on drilling at the Father Brown deposit and we've released those results. Martin will talk more about those results later in the call.

At Wassa, exploration continues to remain a priority and we now have 7 drills running at surface to understand the deep extension and we're always infill drilling in order to get more indicative resources. Before the end of this quarter, we intend to report an update reserve and resource statement and in the second quarter we will release drill results from Prestea.

We continued to focus on operational excellence. We are embedding a culture across the whole company where safety and social responsibility is paramount. Daniel and his team are working very hard to ensure that we are doing things the right way to match the great assets that we believe we have. Areas of focus are improved maintenance practices, supervisory training and management and management of real-time data.

Before I talk to the full year results, I want to discuss Prestea operation for the last quarter. As anticipated, the fourth quarter was faced with various challenges. This included the transition of the processing facility, severance of a large group of people, reducing some of the immediate accounts payable and the unexpected failure of the pumping system. We believe these were one-offs and will not present themselves in the future. We completed a strategic investment with La Mancha in the fourth quarter and October completed a share consolidation at a ratio of 5:1. By the end of the year, we achieved production just below our guidance of 225,000 ounces.

The average realized gold price was just over $1,225 for the year and I'm excited to see the improvement to the gold price at the start of 2019. Consolidated cash operating cost per ounce and all-in sustaining cost per ounce for the year were $847 and just over $1,100 per ounce respectively. Prestea has now completed its transition into an underground-only mine and Wassa production continues to improve as we're going into 2019. We've seen the drilling results at Father Brown and that resource continues to grow, as was reported last night.

Before I turn over to Andre, Daniel and then Martin, I'll take a moment to talk about upcoming milestones. In the first quarter, a mineral resource reserve will be reported at Wassa, and before the end of 2019, a PEA will be delivered on the Wassa Southern Extension. We're also looking forward to reporting our first quarter financial and operational result on May 2. And also in the second quarter, we will be releasing new drill results from Prestea.

Following the resource update on Father Brown that was released last night, in the second quarter, we will be taking a look at our exploration program and potentially accelerating drilling at Father Brown.

At this stage, I'll hand the call over to Andre to talk about our financial results.

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Pieter André van Niekerk, Golden Star Resources Ltd. - Executive VP & CFO [3]

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Thank you, Sam. During the fourth quarter, the company's balance sheet improved tremendously. The private placement by La Mancha added net cash of approximately $125 million. This resulted in working capital improving to approximately $6 million at the end of the year. This is up from working capital deficit of $62 million at December 31, 2017. Golden Star's net debt positioned improved by 94% from $68 million at the end of December 2018 to $4 million at the end of 2018 also due to the private placement by La Mancha.

Now let's take a look at the quarterly financial results. Revenue of approximately $57 million were down 30% compared to the fourth quarter of 2017. This is primarily due to the 32% reduction in gold production. Open pit gold production from both operations decreased by approximately 39,000 ounces as the company continued its planned transition to underground-only mining operations.

Underground gold production for the quarter increased by 71% at Wassa. However, Prestea Underground gold production only increased by 32% from Q4 2017. Daniel will provide further color on operational performance later during the call.

The consolidated mine operating margin for the fourth quarter of 2018 was approximately $16 million lower than the same period of 2017. Wassa's mine operating margin increased 116% to approximately $13 million in the fourth quarter despite producing less ounces in Q4 as compared to Q4 2017. Wassa's cost of sales excluding depreciation and amortization reduced by 37% since Wassa is now only mining high-margin underground ore.

At Prestea, we incurred a $20 million mine operating loss in the fourth quarter of 2018 compared to a $2 million mine operating margin in the same period last year. This is due to significant delivered gold production from Prestea open pits and the slower than expected ramp-up of Prestea Underground.

Also during the fourth quarter of 2018, Prestea incurred severance expenses of approximately $10 million compared to $3 million in the same period of 2017.

For the fourth quarter of 2018, we reported a net loss attributable to Golden Star shareholders of approximately $9 million compared to a net income of approximately $13 million in the fourth quarter of 2017. This was due primarily to a decrease in operating margin, an increase in deferred income tax expense at Wassa, and an increase in finance expense, which was partially offset by a gain on fair value of financial instruments, lower G&A expenses, and an increase in other income.

In 2018, the company incurred capital expenditures of $47 million, of which $35 million was spent at Wassa and $12 million at Prestea. These numbers included $10 million incurred on exploration.

I will now hand it over to Daniel to tell you more about our operational performance.

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Daniel Monney Akwafo Owiredu, Golden Star Resources Ltd. - Executive VP, COO & Director [4]

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Thank you, Andre. Wassa's production guidance for 2019 is between 170,000 and 180,000 ounces, which represents a 17% increase from 2018 achieved production of 149,697. We have a target of 4,000 tonnes per day by 2020, with an anticipated average rate of approximately 3,500 tonnes per day in 2019. And a PEA is expected in the second half of 2019 for the Southern Extension.

I'm really excited about what we've seen here. The team at Wassa has really stabilized and there are things to take away here: the targeted mining rate is 3,500 tonnes per day, which we are already reaching and exceeding that in the early part of this year; the ramp up capacity of 4,000 tonnes per day; and a processing plant capacity of 8,000 tonnes per day. I think we have a world-class asset here.

In the fourth quarter, we were slightly below on production than the year before having phased that open pit mining. However, year-over-year we produced more at Wassa and operating costs were down both quarter-over-quarter and year-over-year.

Underground production in the fourth quarter was up by 71% compared to the same period in the year prior. Tonnes mined were up and mining rates increased to approximately 3,500 tonnes per day compared to the 1,900 tonnes per day previous year. I am pleased to say the year has started off with good tonnage so far.

At Prestea, our focus now is to stabilize production. As we start into a new year, we have seen improvements at Prestea already. Our target is to reach 650 per day and we are confident that we will get there in the second half of the year. Truck capacity is 1,500 tonnes per day and the processing plant capacity is 4,000 tonnes per day.

As Sam mentioned, we saw challenges in the fourth quarter. We had a decrease in production of 42% in Q4 2018 compared to the same period a year prior as a result of issues with our pumping system, which created a 10 day delay; the transition of the processing facility; and as well the year prior on the same period high-grade ore was being mined out of main open pit. I'm pleased to say that the pumping issues have been resolved and I'm confident this will not repeat.

While severance payments affected the cost in the fourth quarter, I believe these costs related to the rightsizing of the mine will have a positive impact on cost going forward.

Before I hand this over to Martin, I just want to reiterate the tremendous improvement we are already seeing at Prestea. So far this month, we are above 520 tonnes per day, giving me confidence that we will get to the 650 tonnes per day in the second half of the year. We are also seeing costs being reduced at the same time as well.

Thank you. And Martin, over to you.

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Martin Raffield, Golden Star Resources Ltd. - Executive VP & Chief Technical Officer [5]

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Thanks, Dan. I'm going to be talking about our latest drilling results for Father Brown and our plans going forward. The Father Brown area is 85 kilometers to the south of Wassa and we operated 2 pits in this area from 2011 to 2015. During this period, we mined 2.2 million tonnes at a grade of 4.4 grams a tonne, producing approximately 300,000 ounces of gold.

Over the past 5 months, we've been drilling below these pits to determine if we have underground mining potential in this area. The initial drilling results have been very encouraging and we are pleased to announce a 93% increase in inferred resources from 246,000 ounces at the end of 2017 to 474,000 ounces. In addition to this, we also have 238,000 ounces of indicated resource below the pits. Both of these resources are at a grade of 6.7 grams a tonne.

This resource increase is based on the results of 8,900 meters of drilling in 18 new holes in addition to the historic open pit drilling. 2019, we have allocated $1.5 million to carry out an additional 9,000 meters of drilling to expand the inferred resource.

Over the next 2 months, we'll be preparing a concept study which will determine the potential economics of a new mine. This concept study will help us to direct the next phase of drilling to convert inferred resource to an indicated category in preparation for a preliminary assessment.

This slide shows a cross section of the Father Brown and Adoikrom resources. Father Brown at 35 degrees and Adoikrom at 65 degrees, both to the west. At this stage in the exploration process, it appears that Father Brown merges into Adoikrom at depth, but further drilling is required to fully define this intersection.

This slide shows the Father Brown block model and drill intersections. The plunge of the high-grade shown by the dashed red line is to the north and we'll be drilling in 2019 to determine the extension of this resource. Currently, the inferred resource extends about 300 meters vertically below the bottom of the pit with a strike length of about 500 meters and a 2.5- to 3-meter width.

The next slide shows the Adoikrom block model. The high-grade portion of this resource indicated by the dashed red line plunges steeply to the south. This 65 degree dipping 2-meter wide resource, which extends 500 meters below the pit with a strike length of 400 meters, is going to be our primary target for the concept study. We are extremely excited about the potential of this resource to add value to the Wassa mine in the near term and we will continue to update you on the progress of the drilling throughout the year.

And now moving on to our Wassa mine drilling program. Currently, we are feeding our plant at a rate of 3,500 to 4,000 tonnes a day. The goal of the Wassa drilling program is to increase our reserves and ultimately to increase our production rate to the 7,500- to 8,000-tonne plant capacity.

Since our last update in Q2 2018, we've focused our drilling in the following areas: to upgrade our near term indicated resources to a measured category, to convert inferred resources in our current life of mine plant to an indicated category, and to expand our deeper F Shoot inferred resources to the north and south. The results of these drill programs will be reported at the beginning of quarter 2.

And now back to you, Sam.

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [6]

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Thanks, Andre, Daniel and Martin. I firmly believe that we've now put the noise of the company that we specifically saw in the fourth quarter behind us. We are focusing on operating 2 underground mines. We are now set to produce between 220,000 and 240,000 ounces in 2019. Our consolidated cash operating cost will be between $620 and $680. And an all-in sustaining cost of $875 to $955 an ounce.

At this point, I want to add that we have restructured our local operations and strengthened our management structure under Daniel. We also strengthened Andre's department by bringing in [Robert Wallace] into Corporate Development. Martin is now Executive Vice President and will be responsible for the strategic business plan for the company.

We're also now in a position where we can view opportunities both internally and externally to the company. I'm looking forward to the year and I think the challenges we faced during the transition are now behind us. I'm confident that in 2019 we will establish Golden Star as a leading underground gold mining company in West Africa. We look forward to updating you again for the first quarter results on May 2.

Thank you for listening, and I will now hand it over to the operator so that we can take some questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from Nana Sangmuah with Clarus Securities.

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Nana Bompeh Sangmuah, Clarus Securities Inc., Research Division - MD of Equity Research for Metals and Mining [2]

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A couple of questions from me. At Wassa, I thought we were expecting grades at 4 grams plus. But it sort of came below that. I mean, any comment on -- as to what we should be expecting going forward? Where the high grades deferred into later quarters that we'll be seeing in Q1, Q2?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [3]

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No, you picked it up right. Thanks, Nana, for that question. In the fourth quarter, we had a fairly large stope that we predicted was going to come in earlier in the year at a higher grade, over the 4-gram material. It came in -- it was large, contributed to the operation as well. And it came in at below our expectations. It was the first of all the stopes that we saw the year that had that strange grade profile to it. Since we've exited that stope and we're back into the rest of the operations, we are running the first 2 months of this year at higher grades or the grades that you're used to. So there was this one outlier of a stope that we saw. Martin, can you give more color on that?

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Martin Raffield, Golden Star Resources Ltd. - Executive VP & Chief Technical Officer [4]

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No, that's right, Sam. We continually find additional resources outside of the main mining areas and we go into those and sometimes the grades are a little lower than expectations. But Sam is absolutely right that we're certainly back to reserve grade or above into the start of this year.

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Nana Bompeh Sangmuah, Clarus Securities Inc., Research Division - MD of Equity Research for Metals and Mining [5]

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Great. And moving on to Father Brown. We eventually didn't see consistent news flow till this upgrade. I mean, what should we be expecting going forward? Are we going to be seeing results more frequently?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [6]

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Yes, you're right. When we started with this drilling, remember we accelerated after we received the finances or the funds in late -- in October, and then we set up ourselves to drill in that area. And as you can indicate from that drilling, at this stage Mitch thinks he has found how the direction of the plunge is, so we're now more directed. When you start drilling these orebodies, you just don't get your direction of the plunge. And I think from now on we'll be able to more regularly update on the drilling profile going forward at Father Brown. Martin?

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Martin Raffield, Golden Star Resources Ltd. - Executive VP & Chief Technical Officer [7]

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Yes, absolutely. Nana, we've only been drilling for about 4 months now and we were really looking for an overall understanding of the orebody and initially we actually thought that the Father Brown orebody might be the best one going forward. So this first round of drilling has really given us a good broad understanding of what we've got in that area beneath the Adoikrom and Father Brown pits and we're going to be doing a much more targeted drilling going forward. And as I said, we're going to be looking at an internal concept study that will help us target the drilling. And then later in the year, we'll be looking to drill to indicate a resource so we can put together a PEA.

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Nana Bompeh Sangmuah, Clarus Securities Inc., Research Division - MD of Equity Research for Metals and Mining [8]

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Great. And with all these incremental ore sources potentially to fill the Wassa plant, have you done any metallurgical work on these new zones, i.e., Father Brown and Adiokrom and Wassa Deeps and can you comment what you're seeing there?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [9]

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We mine both these. If you remember, we did mine the Father Brown and Adoikrom. So we haven't updated the deeper results. We don't expect any changes. But it will be part of the studies going forward. The Wassa Deeps, I think, Martin, maybe you can comment on that.

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Martin Raffield, Golden Star Resources Ltd. - Executive VP & Chief Technical Officer [10]

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Yes. We have done some preliminary met work on the Wassa Deeps' orebody. So we took 4 of our original holes and created a bulk sample for those areas. We've had that met testing done. And we really see very little in the way of change from what we're mining at the moment even down at 1 kilometers depth at the bottom of the orebody. So we are confident that the Wassa orebody is not going to change metallurgically going forward. And met testing will be one of the early things we start to look at with Father Brown. Again, with Father Brown, we don't expect a big -- a significant change from what we originally mined in the Father Brown pit.

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Nana Bompeh Sangmuah, Clarus Securities Inc., Research Division - MD of Equity Research for Metals and Mining [11]

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Great. And moving on to Prestea. You mentioned that -- I mean, I think Daniel mentioned that you're currently at 500 tonnes per day. Could you comment on the delta in the lead production indicators what they were at the exit of the quarter and what they are right now and particularly on the grade profile? Are you seeing much more reconciliation to the reserve model?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [12]

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Right. Before I just hand it over, I think the exit was about between 350 and 480, Nana. And the start of this year, as Martin indicated -- as Daniel indicated, we're north of the 500. I think the big difference was our ability to create inventory during the period that we had the challenges with the plant. But we have more available stopes that are blasted. It is a surgical mine and obviously the blasting practices we still need to fix that up so that we don't create undue dilution. Most metrics seem to be improving dramatically. So Daniel, I don't know if you wanted to add more to that.

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Daniel Monney Akwafo Owiredu, Golden Star Resources Ltd. - Executive VP, COO & Director [13]

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Yes, Nana. As Sam indicated, most of our metrics have seen tremendous improvement. I mean, you remember we had issues with blasting and we've got over those issues and we're blasting consistently now. The alignment between the processes are much better than we had before and our raising is going better as well as our long hole drilling. So that's all cumulated into I think a much better production profile tonnes per day in this month, north of the 500.

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Nana Bompeh Sangmuah, Clarus Securities Inc., Research Division - MD of Equity Research for Metals and Mining [14]

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Great. So with the Alimak cycle, are you guys closer to the 150 day cycle or...

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [15]

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Where would you say now? I think where we're sitting at was at 160 on the last one. I saw the numbers, right. Yes, yes.

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Daniel Monney Akwafo Owiredu, Golden Star Resources Ltd. - Executive VP, COO & Director [16]

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No, we're somewhere around 180. And as we get more improvement -- that's why we're confident in the second half of the year we're going to hit the 600-plus.

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Nana Bompeh Sangmuah, Clarus Securities Inc., Research Division - MD of Equity Research for Metals and Mining [17]

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Great. And the last question. I'm not sure if your guidance, your cost guidance includes the new nonrefundable VAT tax that was imposed by the government or we should factor that into our models?

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Pieter André van Niekerk, Golden Star Resources Ltd. - Executive VP & CFO [18]

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Yes, we have included. I mean, it's a small component on local purchases that we had to consider. And yes, that has been included in our guidance.

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Operator [19]

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Your next question comes from Raj Ray with Desjardins.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [20]

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Just a few questions from me, first up on Prestea. Can you comment on the issues that you've had in Q4 and what steps have been taken so that we don't see a recurrence going forward?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [21]

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Yes, I'll start off and then hand to Daniel to give more color. So the first one that was unexpected -- let me talk about what was unexpected first, was the pumping failure that we had in Bondaye Shaft, which is our second escape route, that you obviously can't work when you don't have a second escape route. Those pumps failed. It was strange for us that it failed at that point in time because they were running fairly well before that. Since then what Daniel and the team has realized that, away from the operation, there was some galamsey working, not in our property, but that links to the underground mine. And because of previous open pits, it appeared that there was holes in the ground that led to the underground. And then we had that big rainfall, it filled that and we had this rushing of water during that period. That challenged the pump. So the corporate team, the social responsibility team under the direction of Daniel closed up all those holes. And we have seen the water now after further rainfall since we've closed that holes, that there wasn't a rushing of water back into the mine. The second component was the plant, the plant switchover. When we completed that, we had to fill the CIL tanks with obviously ore that will be held in inventory at the bottom of the new tanks. And that didn't release the gold as we intended to see it being released. So that had an impact, I mean, from a cost perspective obviously once you have those 2 events taking place and you have a heavy severance component as we reduced the workforce by 110 people, it made the quarter probably look even worse than it was. Now those are all main ones, so -- I mean, when you compare the fourth quarter last year when we had the [month] on -- in there, it actually looks in a comparative much worse than the underground would be if it didn't have those events. So it was a quarter full of a lot of noise and -- but we knew we had to get through that and we need to move forward like 2 years ago in the third quarter when we took Wassa into the underground. I'm comfortable that with the reduction of the workforce and the changes -- obviously, Andre and Daniel has regular cost meetings and we've already seen the direct cost coming down at Prestea and we expect that to move even further down going forward. So Daniel, I don't know if you wanted to add more to that.

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Daniel Monney Akwafo Owiredu, Golden Star Resources Ltd. - Executive VP, COO & Director [22]

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As Sam indicated, the pumps first of all was overwhelmed by the Galamsey pit, which with the help of the community we've got all those sealed up and we don't expect them and we've got monitoring going on. So we don't expect that to give us any issues. We have also made some changes to the pumps, added in additional new pumps in some of the levels. So we're confident that we do have a -- I mean, some of the very old pumps which was there have been replaced and we have a much more structured business now and we don't expect to have the pump issue. And on the plant, as Sam indicated, when we did a (inaudible) -- obviously, when you're filling tanks, you're going to lock up inventory. And during that period over 8 days when the plant was shut down, there was nothing coming out. And once you start up, the inventory locks up as well. So it all contributed to that, plus the additional cost of the redundancy we did.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [23]

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Okay. And then on Prestea Underground, you mentioned that you're already at 500 tonnes per day. Can you comment on how far ahead are you in your development and are you comfortable with that, to be able to get to 600 tonnes per day by the second half of this year?

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Daniel Monney Akwafo Owiredu, Golden Star Resources Ltd. - Executive VP, COO & Director [24]

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Yes, the lateral development is ahead. We're well ahead on the lateral development. We actually passed the stope 14 already. So I believe we -- in terms of development, we don't have an issue there. We're well in tuned. And as I said, the alignment in our stoping is getting better every time.

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [25]

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I think it's fair to say that stoping, we now have stope 7, 8 blasting, so...

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Daniel Monney Akwafo Owiredu, Golden Star Resources Ltd. - Executive VP, COO & Director [26]

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Stope 8.

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [27]

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Stope 8 blasting. Stope 7 is still full of ore, and we still have ore in stope 6. So inventory seems to be building up now, Raj, I heard. But we're giving to it a bit more chance. We still believe we have a lot of work to keep -- to stabilize this operation the way we want it.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [28]

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And Sam, on the unit cost side at Prestea Underground, has there been any major changes, so with all the modifications you have taken over, over the last 12, 18 months?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [29]

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Well, I -- yes, there will be -- on the unit cost -- on the process facility there will be changes to that, but not what we've guided differently. We've seen better performance of the plant than what we expected in terms of a cost basis. The underground is probably running a bit high stope because of being at 550 and not 600. And G&A is well below. The team has really reduced the amount of people on a G&A basis. I can't remember all the numbers right now. Martin or Daniel, you want to add to that? No? Yes. So it's mainly the plant that would see the different cost structure, which will be much lower than what we predicted. Just to give you on a total direct operating expense target that we have, the mine used to run just north of $7 million a month and we're now targeting to be about $4.5 million. That's where we want to be. So that's about the focus that we're going to get to. I think Dan is indicating to me there has been some expat reduction and the mine is now running much more leaner than it has before.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [30]

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Okay. Then lastly on Wassa. I think in the press release you commented that you're already closer to 4,000 tonnes per day, but then for the year you're -- you mentioned that you're trying to average 3,500. Is that -- do you expect some volatility in the throughput at Wassa Underground or...

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [31]

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I'm going to make an overarching statement before I answer that. I see upside in the short and long term for Wassa and I see a little bit of downside at Prestea short term and upside for Prestea long term. So I'll start with that. Yes, it started fabulously because we find more stopes. I don't want to change -- we don't want to change any guidance, but on a consolidated basis it's looking good. And Daniel is very close to 4,000 tonnes a day for the first part of the quarter. But just -- let's just stay at the 3,500 until we see that the run rate that you're seeing at Wassa continues because things can change as we continue downwards on that mine. And I think the way that we've budgeted was sensible. It takes into account ventilation and development and blasting and people. So we've had a good start to the year. But we -- I would guess that there's probably upside hopefully at Wassa in the short term. But let's keep the year where it is.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [32]

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And Sam, are you going to wait for the paste fill plant to be completed before you put in the -- I mean, start mining the high-grade stuff?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [33]

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Yes, Martin, you've got the plant.

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Martin Raffield, Golden Star Resources Ltd. - Executive VP & Chief Technical Officer [34]

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The pace plant will be completed Q2 2020. That's when the system will be commissioned. We are working on that at the moment. We're not holding back what we're doing in the stoping at the moment, waiting for it. We have a mining method that we've been using for the past 2 years that's working very well with stopes and pillars. When the pace plant comes online, then we'll move to a primary, secondary stoping system and we'll time it so that the overlap is minimal and we continue to mine at the rate we expect.

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Operator [35]

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Eve Hurowitz with CIBC.

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Eve Hurowitz, [36]

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I just wanted to find out if there was any rightsizing left at Prestea or if this has been completely finished in 2018?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [37]

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Eve, good question. It's 98% complete. Maybe a very small, but not -- a negligible amount -- but yes, for all intents and purposes it's complete now. It's now focusing on getting the mine to operate under the new regime.

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Eve Hurowitz, [38]

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Okay, great. And just one more. Should we expect albeit insignificant production from the Prestea open pits given that mining seems to have continued?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [39]

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Well, what we will do because we have the capacity -- let me say, no, you will not expect any production. But there will be from time to time that we will find maybe little pods, but not significant. If we -- if there is a windfall, if we see gold prices that there is a margin on it, we could add to the tonnage. But we have not put that in our guidance or direction going forward. There's a -- there could be a small portion that comes through, but not significant.

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Operator [40]

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Heiko Ihle of H.C. Wainwright.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [41]

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With Father Brown, I mean, given the increased drilling and focus on drilling below the pits, can you just -- and also the reason press release, can you sort of just walk us through a timeline that you had used in the updated resource? I mean, how long has this been ongoing for? And on that same token -- and I'm just thinking out loud here. You managed to increase resource by 93% based on drilling 8,900 meters. You're going to drill another 9,000 meters this year. I mean, if one could expect somewhat similar results of 2018 at Father Brown, shouldn't there be even more drilling at the site? I get it that there is a constraint in the size -- or potentially a constraint in the sizing, but shouldn't there be an even bigger focus on that area?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [42]

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Well, good question. Obviously, we budget with the information we have at the point in time. Our [governance probe] is very clear. We base it on the results. Results guide us how to -- where the best rate of return is on what we perceive. We are going to a board meeting in the next 2, 3 days. Martin will be taking an enhanced drilling plan. Mitch is ready. We have the drills out there. We have the philosophy, the clear direction where we want to -- we would not want to just throw drills at it, Heiko. Mitch and Martin and the team has been looking what the plunge and where the best area for drilling is. So it's not just throwing a lot of money at it, but really making sure that we have a strategic direction in terms of how we can turn it to an operation sooner rather than later. Martin, what would -- I mean add to that.

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Martin Raffield, Golden Star Resources Ltd. - Executive VP & Chief Technical Officer [43]

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I think going back to your question, Heiko, we've had this on our radar for about a year now. We did wait for the La Mancha investment before we started spending money on the drilling. We've been drilling for 3 to 4 months. We're starting to get a good understanding of it. The budgeted drilling that we have at the moment for the site is really the first stage, and that's to determine how big the orebody potentially is. And as Sam said, we'll be going to the board and talking about what's next. Next is likely to get a good understanding of what could be mined from the current resource based on an internal concept study. And then we'll use that concept study to design and define the extent of the next drill program, which would probably come in the second half of the year.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [44]

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It's always nice when people say a good question at the beginning. This one is not nearly as exciting. But I mean as gold has been moving up nicely, your $620 to $600 -- $680 cash operating cost estimate mid-year, $875 to $955 all-in sustaining cost estimate, what gold price is based on your internal model to get those figures?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [45]

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We use 12 -- did we use 12...

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Pieter André van Niekerk, Golden Star Resources Ltd. - Executive VP & CFO [46]

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$1,250.

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [47]

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$1,250 for the 2019 expenditures and where we want it to be.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [48]

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$1,250, you said?

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [49]

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Yes, for our budget purposes. All right, thanks, guys.

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Operator [50]

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That is all the time we have for questions today. This does conclude today's conference call. Thank you for your participation and you may now disconnect.

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Samuel T. Coetzer, Golden Star Resources Ltd. - President, CEO & Director [51]

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Thank you, everybody, for calling and we'll talk soon in the next few months. Goodbye.