Golden Star Resources (TSX: GSC; NYSE-MKT: GSS) has stayed within its guidance, but the market still took a harsh view of fourth-quarter production results.
The company’s two mines in Ghana’s Ashanti gold belt — Bogoso and Wassa — generated 75,429 oz. gold, with 44,337 of those ounces coming from Wassa mine and 31,093 oz. coming from Bogoso. For the year, the two mines produced 330,805 oz. gold.
This year-end number is in line with Golden Star’s revised guidance of 325,000 to 330,000 oz., and cash-operating costs are expected to be at the low end of the US$1,050 to 1,150 per oz. guidance range.
And while near BMO Research’s 77,500 oz. estimate for the quarter, the numbers disappointed Scotiabank analyst Trevor Turnbull, who was expecting a strong fourth quarter, but instead saw Golden Star production come in 24% below his estimate.
This year, Golden Star expects production below the 330,805 oz. it produced in 2013, as it pegged production guidance for 2014 in the 295,000 to 320,000 oz. range.
The numbers are slightly better than what BMO Capital Markets analyst Andrew Breichmanas expected, estimating 275,531 oz., with the difference attributed to Golden Star anticipating higher production at Bogoso.
Overall production is expected to come off slightly due to the lower production at Wassa, which is expected to turn out 130,000 to 140,000 oz. this year, compared to the 185,807 oz. it produced last year.
The drop-off is blamed on the higher-grade Father Brown satellite pit at Wassa, which is reaching the end of its mine life. In its place will emerge the Wassa Main pit. At Wassa Main it will take time to get to the deeper, higher-grade material. Golden Star says investors should expect higher grades and production as the year progresses at Wassa Main.
Switching pits at Wassa means that the Bogoso complex will play a big part in the company meeting its own guidance, and Breichmanas points out that Bogoso has historically been the least consistent of the two mines.
Even the company concedes that production numbers will go up and down throughout the year, as pushbacks need to be completed at Bogoso — which aren’t expected until the end of March.
Together, Bogoso and Wassa have proven and probable reserves of 67.1 million tonnes grading 2 grams gold for 4.31 million oz. gold.
Golden Star finished up the year with US$66 million in cash, after drawing US$20 million from its medium-term, US$50-million term facility. The company expects to spend US$50 million in capex for the year.
Turnbull and Breichmanas rate Golden Star as “sector underperform,” and Breichmanas has a 50¢ price target.
In Toronto on Jan. 9 — the day the results were released — the company’s shares were off 5¢, or 10% to 47¢, on 17,266 shares traded.
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