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Golden Star Misses in 2Q


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Golden Star Resources, Ltd. (GSS - Snapshot Report), engaged in acquiring, exploring, developing and operating gold properties, saw an improvement in its bottom line in second-quarter 2012. The company earned 1 cent per share in the quarter, improving from a loss of 2 cents per share in the year-ago quarter. However, the results missed the Zacks Consensus Estimate by a penny.

Golden Star reported net income of $2.5 million in the quarter compared with a loss of $5 million recorded in the prior-year quarter.

Revenues jumped 24% year over year to $136.3 million on the back of an increase in gold sales and improvement in average realized price of gold. Gold sales came in at 85,183 ounces in the quarter, a 17.4% higher than last year. Average realized gold price increased 5.75% year over year to $1,600 per ounce in the quarter.

Remarkably, Golden Star’s cash operating costs declined 14.6% year over year to $921 per ounce. Also, the actual costs were well behind the company’s guidance of $1,040 per ounce.

The company has two gold mines under its jurisdiction, namely Bogoso/Prestea and Wassa/HBB and intends to ramp up production at both the mines and reduce costs simultaneously. Encouraged by the results from the drilling program at Wassa, Golden Star has decided to install three additional rigs at the mine, thus taking the rig count in the mine to five.

Golden Star’s cash flow from operations was $17.6 million in the quarter, a significant improvement from $1.5 million of cash used in operations last year. More importantly, the company has managed to maintain positive cash flow from operations for four consecutive quarters.

Cash and cash equivalents were $105.7 million as of June 30, 2012, down from $127.9 million as of June 30, 2011. Golden Star also has a borrowing capacity of $19 million through its equipment financing credit facility.

Golden Star expects to produce 338,000 ounces of gold in 2012, up from 301,000 ounces produced last year. Cash operating costs is expected in the range of 1,040-1,100 per ounce.  

Golden Star currently carries a Zacks #5 Rank, reflecting a short-term (1 to 3 months) Strong Sell rating.

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