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Article Excerpt
OPERATOR: Greetings and welcome to the Golden Star Resources 2008 and fourth-quarter results conference call. At this time, all participants are in a listen-only mode. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Tom Mair, President and Chief Executive Officer.
TOM MAIR, PRESIDENT, CEO, GOLDEN STAR RESOURCES LTD.: Thank you. Good morning, ladies and gentlemen. I am Tom Mair, President and CEO of Golden Star Resources and I would like to welcome you to today's conference call to review the earnings for the fourth quarter of 2008.
Today's presentation will make use of some PowerPoint slides that are available on our website at www.GSR.com. If you have not already done so, and you have access to an Internet connection, I urge you to access the slides so that you may follow these during the presentation.
Joining me today on the call are John Labate, our CFO; Roger Palmer, our VP Finance and Controller; Bruce Higson-Smith, our VP Corporate Development; and Anne Hite, our Investor Relations Manager.
Before proceeding with the presentation, I would like to draw your attention to the fact that, unless otherwise stated, all currency amounts will be in U.S. dollars. I also draw your attention to the notes regarding forward-looking statements; risk factors; measured, indicated, and inferred resources; and cash operating costs that are set out in more detail in our SEC filings.
The last time we spoke, in early November, conditions were abysmal in both the equity and gold markets. GSS was $0.79 and GSC was $0.94, on their way to lows in early December of $0.40 for GSS and $0.50 for GSC. Gold was $730, on its way to a six-month low of $710 in mid-November.
We said at that time that the economic crisis would pass and Golden Star would survive and thrive. Well, as we are all too aware, the economic crisis is still in full swing. But we have survived and we are going to thrive.
Both the gold market and our equity prices have recovered from the lows mentioned above. We continue to focus on reducing our costs, improving the reliability of our operations, and building our cash.
The main objective of today's presentation is to review our financial results for the fourth-quarter and full-year 2008. These results are set out in greater detail in our recent press release and Form 10-K filing of yesterday. Following the presentation, I will discuss -- the financial presentation, I will discuss our operations and development projects and exploration activities. After the presentation, I will open the phone line for questions.
In Q4, we produced 86,000 ounces at a cash cost of $637 per ounce. As you recall, our guidance was 85,000 ounces at $700 per ounce. In Q4, our cash balance increased by $8 million and we ended the year at $33.6 million. We are confident that we will generate significant free cash flow in 2009 and we have no need to do a financing.
Due to the high volatility seen in the gold price and the need to give ourselves breathing room to reduce costs at the Bogoso operation, we started a program to reduce the gold price risk in late Q3. The purpose is to ensure a margin at Bogoso by locking in a gold price on about 15,000 ounces per month.
In 2009, we have locked in the price for Q1 -- 45,000 ounces at $825. We did this in mid-December and this was reported in our 10-K. We have also tied up Q2 -- 45,000 ounces at an average price of $950, and have completed half the program for Q3 -- 22,500 ounces at $950.
The important thing to note is that less than half our production is being hedged and we participate substantially in the upside to gold price. Once we have the cost structure at Bogoso at lower levels, we will not have to protect our margin in this fashion.
We had some significant impairments -- impairment write-offs in 2008 and I wanted to discuss a couple of these in detail. We finalized our underground pre-feasibility study, which looked at a case with significant production volumes of 900 tons per day of ore. Our conclusion was that this scale required capital expenditures of well over $100 million spread over the next several years.
We don't believe this to be our best use of funds, so we are stepping back and recasting the study to determine what volumes we could do with minimal upgrades to the existing infrastructure. This approach will allow us to use our capital wisely, potentially get into production in a shorter timeframe, upgrade the skills of our workforce, reduce our care and maintenance costs by generating revenue, and make a substantial positive contribution to the Prestea community.
This lower production approach didn't allow us to support the $44 million valuation for the underground and we reduced the carrying value to zero.
Goulagou is an asset we acquired with the St. Jude purchase in 2005. We have recently updated the resource estimate on this property and reduced the mineable ounces to 100,000. These volumes don't support the $18 million valuation and we have written this asset to zero.
In addition, we cleaned up some other exploration assets where the balance sheet values were not supported.
Turning to Bogoso Prestea, at Bogoso our focus for Q4 was to continue improving recoveries, improve reliability and throughput at the sulfide mill, and reduce our costs. We made good progress on recovery and costs, but we missed our targets on throughput.
The quality of power supplied by VRA continued to cause problems in Q4. Our target is to mill 750,000 to 780,000 tons per quarter in the sulfide mill and we milled just over 700,000 tons in Q4.
We made...
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