Golden Star Resources Ltd.
Q4 2020 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Golden Star Resources Fourth Quarter 2020 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Thursday, February 25, 2021. I'd now like to turn the conference over to Andrew Wray. Please go ahead.

[Andrew Wray:]

Thank you, very much, and good morning, good afternoon, everyone. Welcome to Golden Star's Q4 and Full Year 2020 results call. If I can draw your attention, we'll move to Slide 2 on the presentation, you just got a disclaimer there, which I'll point out. Then moving on to Slide 3, you can see team on today

[Graham Crew:]

Thanks, Andrew. We move over to Slide 9. Just a bit of a recap of the scale of Wassa, with the long section there, you can see the current mining area as shown on that long section. And as Andrew mentioned, on Monday, we'll be coming out with the updated resource and reserve estimates. But important to note, the decline capacity at 5,000 tonnes a day, we've done some more work on that. We've sort of shown that over 2020, that that's achievable. And then, obviously, we've got the plant capacity is the kind of next milestone that we're looking for at Wassa. And Mitch will talk about some of the exploration activities that we're able to focus on through 2021. So moving over to the next slide, just characterize it the quarter at Wassa as a solid quarter. As Andrew mentioned, safety and sustainability, performance continues to be strong and a focus area for the team, especially in amongst COVID-19. So some good management controls there at Wassa that are keeping the business running well for us. Importantly, 6 quarters in a row of 4,000-tonnes-plus per day. Back off a little bit in Q4 compared to Q3 as we had some a little bit more high-grade coming through the plant. And you can see that how that reflects in the grade, recovery still nice and stable at Wassa as we've seen over time. Moving over to the next slide, just in terms of unit costs, seeing some of those slightly lower volumes reflected in the unit costs. Site G&A was starting to pick up a little bit extra G&A with the sale of Bogoso-Prestea. And as Andrew said, the site all-in sustaining costs pretty well in line with our expectations when you normalize for some of the low-grade material and the additional royalty costs. Moving on to the next slide across to Slide 12, probably the key highlights for me for the quarter at Wassa is really some of the infrastructure. We've talked about in previous quarters, but really getting that to the sharp end, we completed construction of the paste plant, we're a little bit delay in commissioning, just with travel restrictions, et cetera. But we did get November, December, we did get the commissioning engineers from commissioning groups on site that commissioning has progressed well. And we, in fact, this week, we're filling the first test start, so a little bit behind our original schedule, but about really a high quality facility that that's been built 100% in country with a lot less external support than we'd originally envisaged. And probably just highlighting some of the sustainability benefits of reusing the tailings material for backfill, we'll start to see more of that benefit of reducing the TSF volume and footprint, and obviously, the reduction in greenhouse gas emissions as compared to other backfill methods.

[Paul Thomson:]

Thank you, Graham. Yeah, 2020 was a transformational year, as Andrew just said. So this is reflected in the financial statements. So just as a quick recap in terms of the key events, so we had the disposal of Prestea that's no classified as a discontinued operation. Wassa's obviously continuing operation. Secondly, we had the refinancing of the Macquarie Credit Facility. And then the third major thing that happened from financial perspective was moving the corporate office to London. So all of these things were done against the backdrop of a volatile macroeconomic environment and also the challenges of COVID-19, I think, overall, a good year and a good quarter for the business. If we turn our attention to revenue, turn on Slide 16, 2020 with a good year of production, which benefited from the strength of the gold price. The average realized gold price in Q4 was $1,579 and $1,626 for the year. The Wassa non-cash adjustment in respect to the Royal Gold Stream and the deferred revenue component thereof, which takes into account the estimated number of ounces expected to be delivered as part of the Stream agreement. So that's over the life of mine. So with the number of ounces increasing, this resulted in a reduction to the revenue of just under $8 million and a reduction to the finance cost of $1.5 million as per the reported numbers, but it is key to just point out that these adjustments are non-cash in nature.

[Mitch Wasel:]

Thanks, Paul. We're going to skip over the first slide here, we'll go to Slide 21. Slide 21 is sort of an overview of the current holdings that we have now along the eastern side of the Ashanti Belt, you can take a look there, she roughly have about 352 square kilometers and 90 kilometer strike length along what I like to call the eastern side of the Ashanti Belt, which is relatively unexplored. This year, our exploration guidance for the budget is going to be $15 million. So we're back into the drilling phase again, prior to what we've done from the previous years, and where we end up drilling, we end up finding significant ounces. So I'm glad to be back into the saddle again, as they say and going forward with the drilling. The programs we're looking at for 2021 that budget of $15 million is roughly split into roughly $7 million being spent to the Wassa and $7 million are more regional targets from there - $7 million or $8 million from there. We're going to be testing most of the targets around Wassa and I will hone in on this a little bit better on the next few slides, I'm just giving a brief overview here on this one. So what we're looking for milestones in 2021 is the mineral reserve and resource that's been updated. And as Andrew mentioned, we will be releasing that on the March 1, which is Monday. We're going to be doing some in-mine targets testing in and around the current resource and reserve at Wassa, and I'll show you some slides on that. And some of the earlier results that we picked up and some of the drilling again in Q4 more regional testing and the targets we've got down towards the south as well. And I'll show you some more detail on that one, plus when I'm quite excited about is we're going to be drilling some holes underneath, some of the Benso pits of , which we drilled in the past just to optimize open pits and do have a high-grade core and some of these pits that I think have some roots in them that have never been tested before. So we're looking forward to doing that drilling. And as you notice in the bottom left-hand corner, there's a joint venture that we have down there on their Abura concession, which has a good geological context, we'll be doing some initial testing on that as well. So we'll flip over to the next slide, which is Slide 22. We're looking at the Wassa deposit, one on the right-hand side of the plan view, on the left-hand side is the isometric view looking towards the east. And what you can see there and the greater than 1.5 grams show what we're looking at. And you'll see the 2 targets that we've got there, the up-dip extensions to the known mineralization on the down-dip extension. So these are targets that we're testing in sort of the near mine vicinity. So we're not looking at the very deep at this point in time. We're trying to define additional resources and reserves in the area where we have immediate infrastructure. So if we do - if we are successful, and I'll show you some of the results we do have on there with our successful on that that we can easily get in there, drill us off and be adding to the current resource based on that one. So what I'll do is I'm going to roughly show you there's 2 sections there, we'll be looking at one that's up 375, which is an up-dip extension that one at 19-600. So if you look at this slide, you can refer to the roughly where we are within ore body. So the first one we're looking at is on Section 19-375, and that's an up-dip extension. We drilled 2 holes here. The first of hole was drilling into more of an intrusive body that we intersected there with lots of alteration but not any significant intercepts on there. The hole of interest that we're looking at there as well 3, which is about 125 meters up-dip of the no mineralization that we've got defined already within the resource and the intersecting the significant result there. As you can see, this is an estimated true width that we're looking at there of about 21 meters and about 6.9 grams per tonne. So again, these are holes that will require follow up, because our spacing that we're looking at between those holes is greater than 100 meters at this point in time. So that that we consider successful up-dip hole. And the next one I'm going to show you is on 19-600 north, which is sort of the guts of the ore body as you move up towards to north. And this was a deeper hole drilled down-dip to test mineralization below the extensive ore resource, which you can see in this slide are the red outline now are same in the previous slide. And what we found in this was we've intersected not only the main zone, which intersected about 18 meters at 3.6 grams per tonne. But we've also seen a continuation of a hanging wall zone, and also the extension of wall zone at depth with the 2 intersections with the hanging walls on being about 4.2 meters at 4.7 grams per tonne. And then the footwall zone is 7.5 or 3.3. Subsequently, since we've drilled this hole, we have commenced the drilling of the daughter hole and give us roughly 100 meter spacing. So we're again testing this mineralization further down-dip trying to get some volume built out of it. And that's really the whole phase of the drilling at Wassa that we're doing up-dip and down-dip, it's very coarse at this point. So we're doing 200 meter space fences, we're testing roughly 100 meters, up and down dip on those fences. And approximately 10,000 meters will be drilled in 2021. So this encompasses the results from 2020, which is about 4,000 meters. So it's successful so far, and we'll probably have to be doing some follow-up on that later on in 2021. Okay, so I'm going to go through the next slide, which sort of summarizes the work that we're going to be doing on Wassa, which is Slide 25. So we have the exploration focus is sort of 2-fold here, we're looking at, as I shown previously, the up and down dip extensions of mineralization. But as you can see, just on that slide is kind of busy. But it shows the geochemistry overlaying with the geology overlaying with the geophysics. And the little 2.5 kilometer that you see on the right-hand side there on the image itself shows the extents of the underground workings right now. So it shows you how much we've actually tested so far, the strike length on the 1 zone, there's 2 parallel zones or so there's lots of additional targets that we'll be doing follow-up drilling on this year. And that's going to be involving roughly 8 targets and we'll test all of those. We will have 27,000 meters of RC and DD, and about 9,000 meters of Aircore drilling that will be following up with at Wassa. So we're pretty excited about that. And what this is going to do is give us information in order to really guide exploration going forward in 2022, and subsequent years from there. So - and then the main objection here is, the main objective here is to define some material within 10 kilometers of the plant, because, as Andrew rightly pointed out, and Graham pointed out, we have that excess capacity at the mill, which is roughly about 7,400 tonnes per day. And we're currently going to be putting about 5,000 tonnes per day through that, so with the underground feed. Okay, I'll progress over to Slide number 26. 26 sort of shows us more the regional prospects that we're looking at. So this is the Benso and the Chichiwelli and HBB concessions down towards the south of Wassa, which is approximately Chichiwelli would be 30 kilometers, Benso 50 and Father Brown at extreme south will be 85 kilometers. And those of you that are familiar with Golden Star's mining history, we have a haul road that goes from the Wassa mill all the way down to Father Brown 85 kilometers down through there. So we have access right through the center of this zone from there. So, yeah, it's exciting here. We're testing roughly 11 out of 30 targets that we've defined. And they're each one of those stars that you're seeing over top of the geochemistry there as representative of a target. And we'll be testing 11 of those targets this year. And the whole idea with that is to bring these targets' level of confidence up into a drilling phase. So we've got in there an exploration sort of target pyramid. And we're trying to advance these targets up through the pyramid in there. And those programs involve about 50,000 meters of Aircore. We've got some IP surveys that we're doing. And we've got roughly some follow-up drilling on about 14,000 meter of deeper RC and diamond drilling from there. Okay, that summarizes the exploration. And I'll pass it back over to Andrew to give us a wrap up.

[Andrew Wray:]

Many thanks, Mitch. And it's great to see that step-up in activity and exploration, a lot going on. And look forward to updating everybody as we go through the year. So, just moving on to Slide 27, just to finalize the presentation. A lot has been accomplished in 2020. But really, that's laying the foundations now for what we do next and for future development, particularly of Wassa, but also of some of those targets Mitch was referring to. I think we showed the resilience and discipline in 2020 through that delivery during the pandemic. And I think the important thing there is, there will be critical elements as we look to deliver on the longer-term plans. Critically, we've also made major strides on the balance sheet in 2020, which has been an area that's needed to be addressed for some time. And I think, as we go through this year with the settlement of the convertible debenture in August 2021, then really, we set ourselves up on a much more stable footing. And as we go through the year, there's going to be a number of catalysts in the business. And really that starts with the PEA we're putting out Monday next week. So with that, I'll hand it back to Carmen and we will take any questions that anybody has.

[Operator:]

Thank you. Your first question comes from Don DeMarco with National Bank Financial. Please go ahead.

[Don DeMarco:]

Thanks for taking my call. Hi, Andrew and team. Maybe I'll just start off with a question about your underground mining fleet. I think your fleet consists of 40K tonne trucks. Do you guys have intention to replace these with larger trucks? And if so, how much would that increase the capacity of a single declined and what would be the timing, presumably the years?

[Andrew Wray:]

Yeah, Don, I'll let Graham give you the detail on that. Graham?

[Graham Crew:]

Yeah, that's correct, Don. So the plan is to, as low as 40 tonne fleet start coming to the end of their life. We'll start introducing 60 tonne fleet that will start this year. And that new fleet will sort of roll in over a couple of years this year with the - with kind of ramping up the paste fill and that will enable us to ramp-up the production rate sort of over 2021. Our key focus this year is really to push the capital development and get the decline down a little bit further ahead of ourselves, get some more levels in and that will, as much as the trucking fleet, that will enable a bit of an increase in production. But that the 60 tonne fleet itself is not the only key to increasing that production rate beyond 5,000 tonnes per day.

[Don DeMarco:]

Right, okay, because 40 to 60, I mean, that's a 50% increase. But it wouldn't be a commensurate increase from 5,000 up to closer to the 6,000 or 7,000, would it? Just by the - no?

[Graham Crew:]

No, the key will be availability of stopes and keeping a stock of available stopes at any given time. That gives you blending capability from a grade perspective, gives you plan flexibility from a tonnage perspective. And having those things available and then, obviously, the fleet will add a little bit, but the decline then becomes a constraining piece, because you have to handle all the various bits of traffic, and drills and jumbos and things rolling up and down the decline as well. So something, Andrew touched on the PEA, something we can point to some of those key parts of the longer-term plan that sort of - that show that roadmap.

[Don DeMarco:]

Okay, yeah, we're looking forward to the PEA. And just shifting to exploration, Mitch had talked about some of the regional targets. If you do you have success regionally, would that mean that you could potentially continue with just a single decline at Wassa? We're looking for the PEA and maybe with regional success as a pass, you might not implement some of the plans in the PEA, which might include different methods to increase mine rate.

[Andrew Wray:]

I think I'll give you my view on that. I don't think that regional success displaces the expansion of the underground at Wassa, given there's a compelling argument for that. I think what it potentially could open up to is an expansion of processing capacity. I mean, that's certainly more the way I've looked at it, if we're in the position where, let's say, I guess, what you'd call a quality problem to have that we've got near-mine exploration success. Ideally, that comes sooner rather than later. So we're able to fill the plant sooner rather than later. But if we've got sufficient material on a longer-term basis, then I think you look very carefully, then does that justify an expansion of the plan, and then, you know, bigger overall production volume coming out of the asset. I don't know, Graham, if there's anything you want to say at this point in that?

[Graham Crew:]

No, that's exactly the answer that I would have given. The opportunity is to really optimize Wassa. And then if there's more material with the exploration, then, yeah, that that creates opportunity to expand the plant. So, yeah, completely agree.

[Don DeMarco:]

Okay, thanks for that. And maybe just - well, my last question was actually could you expand the mill above 7 the nameplate. It was mentioned at 7,400. I know maybe this is preliminary, but how high could you take it and what would be the cost potentially?

[Andrew Wray:]

I'll pass that on to Graham. We've done some very high-level thinking about that. But, Graham, I don't know if there's anything else you want to say at this point.

[Graham Crew:]

No, except to say that the plant, we haven't done any detailed work on that, Don. I mean, really, the focus has been on how do we unlock the capacity that we do have. But we've had a quick look at things. There is plenty of crushing capacity. So you might need to add some milling capacity or you might change to a semi-autogenous grinding method or something. But you've got a very good footprint. You've got really good infrastructure. The paste fill means that, nearly all of Wassa generated tailings will be going back underground. So you've got tailings capacity longer-term. So I think it would be - you wouldn't be talking masses of capital to do an expansion. But preliminary as you say.

[Don DeMarco:]

Yeah. Okay. Well, thanks so much for that. Good luck. That's all for me.

[Andrew Wray:]

Thanks, Don.

[Graham Crew:]

Thanks, God.

[Operator:]

There are no further questions at this time. Please proceed.

[Andrew Wray:]

Thank you very much. And we'll be back Monday, where we'll be, I'd obviously take you through a lot more detail on the PEA. So I'm sure there'll be a lot more to talk about at that point in time. But as ever, give us a call if there's anything else you want to go through in the meantime. Thank you very much.

[Graham Crew:]

Thank you, everyone.

[Operator:]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines. Have a great day.