Q1 2021 Golden Star Resources Ltd Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the Golden Star Resources first quarter 2021 results conference call.
At this time all lines are in listen only mode. Following the presentation, we'll conduct the question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator. This call's being recorded on Thursday may 6th 2021, I would now like to turn the conference over to Michael Stoner. Please go ahead.
Thank you Colin.
And thank you everyone for taking time to join us for today's call and.
The slides are already available on our website and on slide two please note the disclaimer on forward looking statements.
I'm joined today by our senior team, who will run us through the Q1 results and all site.
The recently published corporate responsibility report for 2020.
And with that I'll hand over to Andrew.
Okay.
Thanks, very much Michael and hi, everyone and we'll start on slide four.
<unk>.
With the overview there of the business that's a quick reminder.
And where we operate in Ghana, and you shouldn't be boats.
And what we've been doing which we've spoken about previously over the last year or so.
It really set the business up to grow them.
And that translated most recently and to the technical report we released.
The trial last set of results where we.
We showed the reserve plans now mine life of six years and.
And then the P. I did showed the 11 year life on top of that and the two of those the consensus of scope pricing delivering in excess of $1 $1 billion of value.
Moving on to slide five.
And really turning to the quarter and question Q1, the 'twenty 'twenty. One watts has had a solid Q1, we like the 40000 ounces produced and the quarter volume.
And the mines and lying around 4005 hundred tonnes per day, as we indicated great slightly below.
Great three grams versus the reserve grade of $3 one and.
And.
So you can see their own gold so the slight lag.
The timing issue in terms of the sales versus production.
And as a result of those elements the cost metrics were slightly above target and about where we'd expected them to be over the remaining quarters of the year.
We ended the quarter with just the $66 million of cash.
And we raised just dive right in the half of million dollars through the ATM facility and at the same time made the tax payment at the end of year tax payment of.
<unk> millions of dollars.
We continue to manage through the COVID-19 pandemic and actually achieved on the go.
Improvements in now.
And safety statistics, and it's you can see that and a lot of focus remains on the other area.
I'll tell you at this point to Philip and Who's going to talk a little bit more about our approach and what we're up to and the sustainability of arena Philippa.
Thanks, very much Andrew and hi, everybody.
If we can move to slide seven please.
Golden Star's approach the sustainability is underpinned by check the K, what strains and the effective management of risk and the creation of lasting value.
K topics under the strains of nitrogen and the slide and I'll touch on a few of basis, regardless of our presentation today.
But let's move on to slide eight please.
The ongoing implementation of our health and safety strategy and plan.
And of year on year improvement in our injury frequency rates.
In parallel as Andrew mentioned, our private management is being recognized as industry leading practice.
Employing elements such as specific programs for vulnerable people and at what price and.
Great. Thanks screening of Pearsons returning from break.
This prevention focus the price you're staying highly successful and the.
And I'll try and we have we've not lost any of that change of COVID-19, but we've also had very serious serious cases with the limited operational impact.
And race and excellent news, we're pleased to announce that Ive of 600 of our employees have received the first COVID-19 vaccination as per.
Part of the gone of health services, probably grabbing.
Let's move on to slide nine please.
The ESG scorecard provides the highlights of our 2020 sustainability performance as described in our recently published corporate responsibility report.
The report is our fifth day communication on progress to the knowledge.
The nations global compact showing out of long term commitment to this important global initiatives.
Oh excellent performance speaks to our ongoing programs on life of content as.
As well as the positive impact of our cycles of systems, the inclusion and diversity health and safety and governance.
Let's move on to slide 10. Please.
Many of you are familiar with the Golden Star oil Palm plantation, or J shop, which is a landmark sustainability initiatives.
<unk> has successfully developed and like the 1500 hectares of <unk>.
As far as station free sustainable the oil palm.
It supports the 700 families and high value of Agri business.
Well the place to announce the Royal Gold has recently committed to making financial contributions to chase up for the benefit of that whilst the highest communities.
This partnership will extend the genuine value the chase felt brings to our highest communities and Ghana.
I'll now hand over to cry, and who will take us through the what's the slides commencing from slide 11.
Over to you Graeme.
Thanks, Philip up startup cost per slide 12 things Michael.
As Andrey mentioned solid quarter at Wassa are tracking pretty well on the four and a half thousand tonnes per day.
It was a tough sorts of year for the same on slot.
And with some dilution coming through on the thoughtful board level meant that we were playing a bit of catch up through February and March but managed to pull together a pretty solid quarter.
Through that.
Plant continues to perform well.
Maintaining that recovery rate of 95% or better.
So a good performance of Ed during the quarter and the production of as Andrew mentioned, the size of 40000 ounces with the bit of a lag and styles.
Moving out of the slide 13, Michael.
Costs pretty well and line and processing a bit of improvement quarter on quarter, mainly related to volumes coming through.
And that's.
The that slide really speaks for itself in terms of the performance in the quarter.
Onto slide 14, probably the the one of the main updates as the ongoing commissioning of the paste backfill system through Q1.
We had a couple of the lives and the and the and the commissioning process during the quarter.
It's placements of report that the plant is now operating to these on and you had sort of a little bit of reengineering work there, but that's that's now operating cities on.
Some of the tests work and our first started some of the strength of come back a little bit different to the bench test what sorry.
Just working through that and.
Some of that could have some impacts lighter and the year, we've gotten all of the secondary studies planned and heights, one so I'd, probably say, we just need to work through that and just make sure that and.
Everything is as we expect that to be as we especially as we move through this quarter and move into <unk>.
The second half.
I think without arc and hand across to the poll to see how that reflects and the financial results.
Thank you Graham.
Please go to slide 16 please.
And so operationally Q1, 2021 of the steady quarter.
With respect to the macroeconomic environment the gold price was up year on year.
Some of the gold price at the end of the quarter actually debt slightly below 1700. However, the price has subsequently increased.
In terms of go down too so the width.
Turkey, and 942 and to show cause and average realized gold price of 17 18.
And 16 69 post the Royal Gold stream.
So you're able to see here that our business continues to produce strong and robust EBITDA.
EBITDA in the quarter was 31 6 million for the quarter and.
And adjusted EBITDA of $27 $2 million.
The with respect to lose the adjustments of $4 3 million to calculate the adjusted EBITDA for the rest of the West where I was just pointing out the least comprise the following to the tipping.
$7 2 million for fair value adjustments on financial instruments that we had $4 8 million adjustment for hedges and the convertible debenture of embedded derivatives of $2 4 million.
And obviously, both non cash it was also $2 9 million of other expenses, which are primarily comprised of $2 1 million of.
And good credit loss, which encompass the non cash at <unk> 5 million of restructuring costs.
In terms of the earnings per share even slightly below analyst consensus forecast, primarily due to depreciation of $7 $3 million and the core truck. This actually relates to the completion of the construction of a number of capital items, which were actually complete the during Q4 2020.
So that then devoted and the depreciation charges starting to come through and Q1, 2021 and the specifically relates to the paste plant and the change of our clients.
And you used the next slide please the second team.
And the effect of the balance sheet for net debt reduction. So the balance sheet continues to be well positioned to provide a stronger and more robust base of the business.
Absolutely key and it's the inverse.
And it is being made to underpin watches feature development.
With the convertible debenture and this is due to me the Dean and the 15th of August 2021. So this is one of the key focuses of the business.
It was the healthy cash balance at the end of the key one of $66 1 million, meaning that the net debt position was 39 five.
So with the underlying performance of Wassa and the businesses the ability to generate strong cash flow, particularly in the high gold price environment, So and respect of additional liquidity fat and placed in 2020. One we're able to point to 10 million of additional principal from the Macquarie facility we of course.
And the receipt of the deferred consideration from F. G. R and we've also got the ATM.
By way of the.
Downside protection, we have of course protection in terms of zero cost collars and those would pick and place over 2021 and 'twenty two.
Each year with growth 43750 lives.
And those at the lip of course like.
And there's a flow of 16 hung the dollars and the ceiling and 2021 is $21 76.
And then 'twenty two the ceiling is 21 and 88.
The good range of pricing, which preserve significant upside and the gold price.
Given of course protection at a sensible level with respect to walk through some of them growing development.
I could go to the next slide please the 18.
In terms of the net cash flow how does this moved in the quarter so with.
And the continuing to and potential impact of COVID-19 and cash management is a key consideration because of the business obviously.
We ended the quarter with 66 million the key point to note and the cash flow bridge are as follows the.
The what's the cash generation of seven 3 million.
And so there continues to be cap the investment to underpin the future development of Wassa and.
And one point to note and the tax paid so that's $13 2 million, which actually relates to Q4, 2020 the taxes paid quarterly and the very early part of the following quarter.
So that's actually the go to the Q4, 2020 tax being paid and the first week of.
January 2021, so this $13 2 million and that's actually and elevate the demand compared to other technical coworkers.
This is the final payment of taxes, and the year 2020.
So it's just choose to do.
And that should we like gold price being higher than budgeted.
And the more normalized payment would be.
Probably in the range of about $8 million per quarter.
The other point to note here is the cash generation from the ATM program that was $8 $6 million in the quarter and up.
Further $1 8 million was raised in Q2 2021 that was during April.
It's a good hand over to Mitch, who actually know who will run through the exploration piece of please thank you.
Thanks, Paul.
And people move on to slide 24 of them in place.
The first of all of them. Shortly here is an overview of the exploration efforts for 2021 of the.
And the more focus for our exploration is actually the in line of exploration, which is focusing on the up and down dip extension of the Wassa Reserve and I'll show you a few slides on that.
But we are continuing to test some of the targets along the HPV trend, which we recall Easter and Ashanti belt as well they've got one air core rig that's drilling and close to the southern and out of the sensors on it on the target down there of called sacral home and we will be mobilizing a drill rig to the event so ml to be drilling underneath the debris, so east and subleasing.
West pits, where we've identified some cleansing of mineralization and we hope to sort of a redo of the loss of model, where we go from the open pit.
All of the plunge of Dallas and look at these as far as underground potential of concerns. So we'll be doing some of that exploration and the next quarter.
On to slide four.
And one Michael please.
And as an isometric view of the wassa ore body and showing that like <unk>.
And five Gram ISO shelf and leapfrog and what you can see there is the drilling that was conducted and the fourth quarter of 2020, and what we've done so far in 2021, IC and <unk>.
Look at those spacing on the drill holes generally is around 200 meters, so very broad brush strokes.
The touchy feely start to see what we've got other up dip and down dip of the reserve and <unk>.
The successful holes now awesome severely from last year whole free and particular, which intersected 20 meters at $6 nine up debt and what we're intending on doing is redirecting some of the funds that we had for follow up on the air core down towards the southern extension of mineralization and.
And spending another 3000 of 3500 meters of drilling in and around that particular target and we've got there which was the 125 meters update from the reserve.
Yeah.
And so the reserve earlier than expected as I mentioned I think last quarter are these areas are very close of the underground development. So if we were to find additional reserves out of these particular areas of resources out there for now.
And would certainly be able to add those into the operational profile going forward.
I'll show you a few exceptions and that we're gonna move over onto the section.
Slide number 22.
Which is the drill section that shows some of the uptick results that we've received this quarter.
And roughly you're looking at the whole there are a number of 'twenty, one zero and zero three we intersected the series of mineralization up dip from the existing drilling there roughly what was the same as what we've intersects of previously, but now extending mineralization up to 150 meters up debt or the <unk>.
Focus was really on the down dip and I'll move on to slide 22 down debt you can see on section and this is true 075, we intersected mineralization and.
And the hanging wall zone, which is quite interesting out there and the hanging wall zone.
And that just stay tuned for it because we have been hitting some of it kicks out and there are quite a bit and we've actually done a lot of mining there and 2000 and 2020, one and it's relatively untested and open towards the south and towards the North post op and downtime and so we're gonna be continuing to test that mineralization.
And the importance also as Youll see it and the whole four we've intersected mineralization and five eight meters at three eight.
And you got to recognize fail at Wassa of this is 300 meters down depth from the known reserves. So that's now opens up a whole new exploration target for us, which demonstrates the mineralization does continue below the existing reserve up to about 300 meters. There. So this is going to be another future exploration targets target for us to start looking at.
And as you know we have the the deep silver towards the south of at Wassa and now we're starting to get the tags up and below the actual underground workings that we have where we've been exporting of mineralization of for the last three or four years. So it's exciting up and that part of the world too.
We'll move on to slide number 24, which shows the intersection we drilled and on 19 600, which was shown both the hanging wall zone again, showing up as well as intersecting the main b shoot trend and the new haul results that we have here is actually and a daughter hole and we drove debt.
Drove the roughly 150 meters below of the intersection and the mother of all and.
And that bid and the intersected mineralization again of three seven meters at four six grams per tonne, which now really extends mineralization of b shoot the 65 meters. We did with the original hole and then and additional 150 meters. So well over 200 meters below the existing reserve at this point. So again as I mentioned previously we have certainly opened up the stairs.
And out of future exploration at depths within close proximity to where we have all of our.
The development at this point and time.
That wraps it up for the exploration overview and I'll hand, it back over to Andrew to give you the the wrap up.
Excellent many thanks Mitch.
Just concluding the last couple of slides and slide 25.
As you can see there and as we've been talking a little bit through the presentation and the real focus for us as we go through the year.
Lots of itself is on the infill drilling with reserve resource to reserve conversion development to give ourselves access as we go forward.
And then to some of what Mitch has just been talking about both sides.
And the mine exploration as well as some more regional targets, which are starting to deliver some quite interesting early results.
And also on Slide 25, the reminder of that of the guidance for 2020, one which as of today with the Q1 results is unchanged for the year.
Finally on slide 26, just to summarize.
There's quite a step up and activity.
This year across the business.
We've made good progress during the first quarter.
<unk> got a number of catalysts coming up and you can see that with respect to.
Some of the infrastructure investments, we've made the drilling and I spoke about addressing the.
And the further issues and the balance sheet and particularly the repayment of the convertibles in August and then ongoing exploration results as we go through the year and a thing.
And that's a good degree of confidence amongst the team that we can continue to and look what we see a significant amount of you and the asset base.
So with that I'll stop there and hand back to Colin and so we can take any questions anybody has.
Thank you ladies and gentlemen, we'll now begin the question and the answer session should you have a question. Please press star followed by one on your Touchtone phone, you'll hear of three tone from technology and your request and your questions will be pulled and the order of they are received and should you wish the clients on the polling process. Please press star.
Followed by two if you're using a speaker phone. Please lift the handset before pressing and he keys one moment for your first question.
Okay. Your first question comes from Bryce Adams from CIBC price. Please go ahead.
Good afternoon, and thanks for taking my question.
Firstly on COVID-19 and the 23 cases that you reported.
Oh, God, I and workforce, so with some of the expat employees and impacted as well.
Do you want to run through the net price if you want to run through your questions and then I consider the dividend up to the team and if you're happy to do that.
Yeah, that's the one I've got four and total so the first one of the guys.
Second one is on the ATM whats your decision, making process on new issues, new issuance is it focused on the share price or is it more dependent on the cash balance.
Number three for the low grade stockpile of what's the thinking the processing around 1000 tonnes per day. It looks like you did a bit more in Q1, so what drove that decision and just trying to reconcile the gold recoveries for the stockpile are they less and the higher grade underground ore.
And then the last one is just a clarification.
Clarification on exploration data.
So the guidance has $11 million expenses.
But Q1 and.
The results in 2020, they've been around about 1 million bucks of less per quarter.
And what's the expected run rate for exploration expenses.
That's that's the whole question of thanks.
Thanks, very much price.
Maybe Philip Bruce do you want to give a little bit of color on COVID-19 cases studying of the first question.
Sure Thanks, very much fries and the.
The suspect cases within our work force, where a combination of Don and I and unexpected.
But interesting Tonight that the ex factory it well.
For the the handful of positive cases that we had with people they say and in the country for longer than the incubation periods to kind of and indicating that they had had contracted likely.
And I believe of caught everybody.
And everybody has fully recovered and back to work.
Okay, and those expenses that are tested positive, but they didn't.
To return home at the end of the roster or do they do and extended swing.
Not everybody was able to rich and Chaim and everybody recovered, whilst wealthy and gone up and in fact, most of the cases, what I seem to matic, we had very few people, who actually out of out of all of the debt twenty-three confirmed cases, very CA actually had any symptoms.
And voice that did westworld managed quite slates rates of recovery.
It has not affected.
Movements of of many table, we did have one ex Patriot and his departure was the light slightly by having contracted.
Okay. Thanks Philip.
Thank you for the us.
And on the ATM.
Deal with that one in terms of use of the ATM facility.
And really it's more driven by our view on overall liquidity cash balances, which and as you know the function of where we see production moving where the gold price is and then what the opportunities we'd go from a capital perspective as well as the obligations. We have got the main ones.
Being the convertible repayment of just over $50 million and August. So it really is just ensuring that we've got what we see is a sufficient level of flexibility there and two.
And to a degree and so taking advantage of any inbound inquiries, we get of people looking to pick up still good of a certain level. So.
The little bit of.
Just being opportunistic and accessing that facility and overall, ensuring that we've got what we see as a cents per level of liquidity and the business.
Okay. Thanks, and then.
Subsequent to the the convertibles and you wouldn't expect to use the ATM.
From September and beyond September.
At this point and side of things a bit early to say, but I think.
Realistically that's the key for us is to get through that period and time and.
And then we've got the facility there.
For example, we have and.
The full additional or are we see a benefit and additional significant exploration spend as an example, if we hit success on multiple of those targets. Then it's always there was the potential to ramp that up but the ordinary cool snowy wouldn't require it.
Okay understood the printed.
Then maybe Brian talk a little bit about the stockpile material and and recovery of not material.
So yeah, so processed on recovery, firstly generally blame and so we generally doing of about a five one blend sorry, that's the sort of how you get.
I've got one fault to blend.
We can tell you sort of get the 6000 tons per day.
Sorry, and.
And with diet, and we say very flat and grade recovery curve for Wassa, we have done some work in previous quarters on batch milling just to make sure that that all makes sense and even even on the low grade stockpile that you do get and you'd get a bit of a recovery dropped but not.
Not too much I'm pretty comfortable with the blending strategy there.
As I mentioned through the quarter. We were January was it was a bit of a tough month for the underground thing.
So we pushed a bit more log ride through there just because just the base of production and the ounces.
And to see what we can do with the mills, if we could push a bit more true their box.
But in general, it's just keep that north steady blend in and low cost of the recovery is the general strategy.
And then the vote against Gram and Q1 being a little bit higher than we'd seen previously.
Yeah, just just as I mentioned is trying to just trying to push the middle a little bit and see what we can do we haven't tightened up sort of 100%.
Yet, but it certainly is.
And my guys along of that 6000 tons per day and.
The little bit of all our returns.
And performs very consistently.
Thanks Grant.
And then the last one was the last question price it was the name.
The ratio and in terms of the call.
Is it the absolute comes and you were getting at all of the classification of the spend.
And maybe just a little bit of help if I've got the misclassified, but I think guidance is the $11 million.
Exploration expense, but the run rate seems to be about a million bucks a quarter of list.
Just kind of refining our model to be a little more accurate.
Yes, no problem should I take that Andrew.
And Q1 breaks we had the cost of $2 2 million so.
That was split between <unk> 8 million, which was expenses and.
And one $4 million, which was capitalized.
So going forward, we're looking at something around 4% to four to five per quarter.
And just over 12 for the remainder of the year of which 3 million will be capex and about nine to 10 lightly be expense per day that.
The that Capex expense ratio may change, depending on how the how that drilling program goes in terms of the feedback and interpretation of it and so.
So.
And broad terms of that directly where does that.
Okay. So we should expect a step up and exploration expense in Q2, three and four.
Yeah, that's correct Yep.
Okay. Thanks, everyone.
Appreciate the time and.
Thank you.
Thank you, Brian and Keith.
Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by one.
Okay. Your next question comes from Raj Ray from BMO capital markets. Please go ahead.
Thank you, operator, and good afternoon, and Andrew and team and.
Just had a quick question and I am and I apologize if you already talked about the previous was a bit late and joining.
One of them and get a sense on the books.
And the challenges that'd be faced with the pace growth strength and some of the test stopes.
Did mention that in Q2, Youre looking to fix it and just wanted to get some detailed some of.
And what Youre doing currently what the issues, where and when I owned and then you talked about in the <unk>.
Second half of the year.
And having some contingencies in place. So if you can also.
Throw some color on what contingencies you have in place.
Thanks, Roger and I think Brian and Thats one for you.
That's me yet.
Hi, Raj Yeah. Good good question and sorry, just as well.
And we're doing the test sites, obviously, we were doing a lot of strength testing.
Some of those quality assurance results and come back at the.
Lower than what we would've expected from the bench test work that went into the feasibility.
So we want to get a good understanding of that size.
Of the lying feeling at this point in time and as I said, we've got nothing no production.
And H, one that's impacted by that but what's just the line that we're doing some work we've got Sam who of the cement supplier and they obviously pretty expert in what what the.
The chemical composition of the Symantec and we've given them some more tilings.
The samples to work a little bit more on that and we're all sides of heartening partnering with a group out of Australia cold months sales services.
Pretty much experts in the field and they are collaborating with the university of mining and technology and in Ghana.
Just to make sure we've got a pretty robust test regime. So that that's that's the kind of three.
The three streams in terms of contingencies, there's a few things.
One is increased.
The increase some of the cement contents from planned which would obviously have a bit of our costs and pack side.
Need to understand that pretty well.
The second opportunity is just around re sequencing.
Sorry, repricing some of the secondary starts that we have and the plan with primaries.
And that would involve the all star recycled and seeing some of the developments so you'd be mining cost cuts in the primary start there is as opposed to.
Secondary site that would.
And we're just trying to the the mix a little bit in terms of where the production is coming per home.
The things that we're working through at the moment.
Okay. Thanks, Pam and then.
Assuming the.
There's a bit of a delay and getting this fixed the you're still confident about the production guidance and the cost guidance.
Yeah.
Yeah.
For the time being we are maintaining guidance and is is once we work through that.
We need to see one of the length of the day light as Graham said, whether it's resolved during this quarter it.
And extends beyond this quarter and then walk through some of the potential re sequencing and most of the claims looked like to see if there is.
Any impact.
But at this stage, we don't see that we'll obviously update and that changes at any point.
Okay, and thanks, Andrew and that's it for me.
Thanks, very much Ron and John.
There are no further questions at this time on and I'll turn it back to Andrew for closing remarks.
Excellent well. Thank you very much everybody and we look forward to staying in touch as we go through the year and.
Who knows maybe even seeing some of you at some stage. So thank you again.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.