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spk03: 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 a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, May 6th, 2021. I would now like to turn the conference over to Michael Stoner. Please go ahead.
spk08: Thank you, Colin. And thank you, everyone, for taking time to join us for today's call. 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 also our recently published corporate responsibility report for 2020. And with that, I'll hand over to Andrew.
spk02: Thanks very much, Michael, and hi to everyone.
spk11: We'll start on slide four with the overview there of the business. That's a quick reminder of where we operate in Ghana, in the Ashanti Belt, and what we've been doing, which we've spoken about previously over the last year or so, to really set the business up to grow. That translated most recently into the technical report we released after our last set of results where we showed the reserve plans now my life of six years and then the pea that we did showed a further 11 year life on top of that and the two of those consensus gold pricing delivering in excess of 1.1 billion dollars of value moving on to slide five and uh really turning to the quarter in question q1 2021 what is that a solid q1 with over 40 000 ounces produced in the quarter volumes mines in line around 4 500 tons a day as we indicated great slightly below reserve grade at three grams versus reserve grade of 3.1 and also as you can see there on gold sold a slight lag just timing issue in terms of sales versus production and as a result of those elements the cost metrics were slightly above target and above where we'd expect them to be over the remaining quarters of the year we ended the quarter with just over 66 million dollars of cash and we raised just over eight and a half million through the ATM facility. And we also at the same time made a tax payment, the end of year tax payment of over $13 million. We've continued to manage through the COVID pandemic and actually achieved ongoing improvements in our health and safety statistics, as you can see there. And a lot of focus remains on that area. I'll turn over at this point to Philippa, who's going to talk a little bit more about our approach and what we're up to in the sustainability arena. Philippa.
spk06: Thanks very much, Andrew, and hi, everybody. Mike, if we can move to slide seven, please. Golden Star's approach to sustainability is underpinned by two key work streams, the effective management of risk and the creation of lasting value. Key topics under these streams are noted in the slide, and I'll touch on a few of these as we go through our presentation today.
spk05: Let's move on to slide eight, please.
spk06: The ongoing implementation of our health and safety strategy and plans have seen a year-on-year improvement in our injury frequency rates. In parallel, as Andrew mentioned, our COVID management has been recognised as industry-leading practice employing elements such as specific programs for vulnerable people in our workplace and routine screening of persons returning from break. This prevention-focused approach has been highly successful and not only have we not lost any of our team to COVID, but we've also had very few serious cases with limited operational impact. In recent excellent news, we're pleased to announce that over 600 of our employees have received their first COVID vaccination as part of the Ghana Health Services programming.
spk05: Let's move on to slide nine, please.
spk06: The ESG Scorecard provides the highlights of our 2020 sustainability performance as described in our recently published Corporate Responsibility Report. The report is our 15th communication on progress to the United Nations Global Compact, showing our long-term commitment to this important global initiative. Our excellent performance speaks to our ongoing programs on local content, as well as the positive impact of our focus on systems for inclusion and diversity, health and safety, and governance.
spk05: Let's move on to slide 10, please.
spk06: Many of you are familiar with the Golden Star Oil Palm Plantation, or GSOP, which is our landmark sustainability initiative. GSOP has successfully developed over 1,500 hectares of deforestation-free sustainable oil palm that supports over 700 families in high-value agribusiness. We're pleased to announce that Royal Gold has recently committed to making financial contributions to GSOP, for the benefit of our WASA host communities. This partnership will extend the genuine value that GSOP brings to our host communities in Ghana. I'll now hand over to Graham, who will take us through the WASA slides, commencing from slide 11. Over to you, Graham.
spk10: Thanks, Philippa. Straight across to slide 12. Thanks, Michael. As Andrew mentioned, solid quarter. at Wasa, tracking pretty well on the 4,500 tonnes per day. It was a tough start to the year for the team on site, with some dilution coming through on the 545 level. It 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 good performance there during the quarter. And the production, as Andrew mentioned, just over 40,000 ounces with a bit of a lag in sales. Moving over to slide 13, Michael. Costs pretty well in line, certainly in processing, a bit of improvement quarter on quarter, mainly related to volumes coming through. and that slide really speaks for itself in terms of the performance in the quarter. On to slide 14, probably one of the main updates is the ongoing commissioning of the paste backfill system through Q1. We had a couple of delays in the commissioning process during the quarter. It's pleasing to report that the plant is now operating to design. We had to do a little bit of re-engineering work there, but that's now operating to design. Some of the test work in our first stokes, some of the strengths have come back a little bit different to the bench test work. So we're just working through that. That could have some impacts later in the year. We've got no secondary stokes planned in. but obviously we just need to work through that and just make sure that everything is as we expect that to be, especially as we move through this quarter and move into the second half. I think with that I can hand across to Paul to see how that reflects in the financial results. Thank you Graeme.
spk04: Make this good to slide 16 please. So operationally, Q1 2021 was a steady quarter. With respect to the macroeconomic environment, the gold price was up year on year. So the gold price at the end of the quarter actually dipped slightly below 1,700. However, the price has subsequently increased. In terms of gold ounces sold, it was 38,942 ounces sold with an average realized gold price of 1,780. and 1669 posted 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 an adjusted EBITDA of $27.2 million. So with respect to those adjustments of 4.3 million to calculate the adjusted EBITDA, Probably worthwhile just pointing out that these comprise the following. So there was 7.2 million for fair value adjustments on financial instruments. So we had 4.8 million adjustment for hedges and the convertible debenture embedded derivative of 2.4 million. These are obviously both non-cash. There was also 2.9 million of other expenses, which primarily comprises 2.1 million of expected credit loss, which is obviously non-cash, and 0.5 million of restructuring costs. In terms of the earnings per share, these are slightly below analyst consensus forecasts, primarily due to depreciation of $7.3 million in the quarter. This actually related to the completion of the construction of a number of capital items, which were actually completed during Q4 2020. So that then resulted in the depreciation charges starting to come through in Q1 2021. And this specifically relates to the PACE plan and the GEN2R plan. Can you go to the next slide, please, 17? In respect of the balance sheet for net debt reduction, so the balance sheet continues to be repositioned to provide a stronger, more robust base for the business. This is absolutely key. as the investment is being made to underpin WASA's future development. With the convertible venture, this is due to be redeemed on the 15th of August 2021, so this is one of the key focuses of the business. There was a healthy cash balance at the end of Q1 of $66.1 million, meaning that the net debt position was $39.5 million. So with the underlying performance of WASA, the business has the ability to generate strong cash flow, particularly in a high gold price environment. So in respect of additional liquidity factors in 2021, we're able to point to 10 million of additional principal from the Macquarie facility. We've got the receipt of the deferred consideration from FGR, and we've also got the APM. By way of downside protection, we have cost protection in terms of zero-cost collars. Those were put in place over 2021 and 2022. So each year, we've got 43,750 ounces, and those are delivered quarterly. So there's a floor of $1,600, and the ceiling in 2021 is $2,176, and in 2022, the ceiling is $2,188. This is a good range of pricing which preserves significant upside on the gold price whilst giving cost protection at a sensible level with respect to WAFTA's ongoing development. Can you go to the next slide, please, 18? In terms of the net cash flow, how has this moved in the quarter? So with the continuing potential impact of COVID, cash management is a key consideration for the business, obviously. We ended the quarter with 66 million. The key points to note in the cash flow bridge are as follows. So the WASA cash generation is 7.3 million. So there continues to be capital investment to underpin the future development of WASA. And one point to note on the tax page, that's 13.2 million, which actually relates to Q4 2020. The taxes paid quarterly in the very early part of the following quarter. So this actually resulted in the Q4 2020 tax being paid in the first week of January 2021. So this $13.2 million, it's actually an elevated amount compared to other typical quarters. This is the final payment of taxes for the year 2020. So this is due to the actual realized gold price being higher than budgeted. And the more normalized payment would be probably in the range of about $8 million per quarter. Another point to note here is the cash generation from the ATM program. That was $8.6 million in the quarter. And a further $1.8 million was raised in Q2 2021. That was during April. If you could hand over to Mitch Wessel now, who will run through the exploration piece, please. Thank you.
spk01: Thanks, Paul. Michael, if you can move on to slide 20 for me, please. The first slide I'm showing you here is an overview of our exploration efforts for 2021. The main focus for our exploration is actually the in-mine exploration, which is focusing on the up and down dip extensions of the Wausau Reserve, and I'll show you a few slides on that. But we are continuing to test some of the targets along the HBB trend, which we call Eastern Ashanti Belt as well. We've got one air core rig that's drilling close to the southern end of the extensions on the target down there called Sacrome, and we will be mobilizing a drill rig to the Bento ML to be drilling underneath the Cebriso East and Cebriso West pits where we've identified some plunging mineralization, and we hope to sort of redo the WASA model where we go from the open pit, follow the plunge down, and look at these as far as underground potential is concerned. So we'll be doing some of that exploration in the next quarter. Move on to slide 21, Michael, please. This is an isometric view of the WASA war body, showing that in 1.5-gram ISO shell from LeapFrog. And what you can see there is the drilling that was conducted in the fourth quarter of 2020 and what we've done so far in 2021. If you look at those spacing on the drill holes, generally it's around 200 meters, so very broad, dust oak, touchy-feely stuff to see what we've got out there, up-dip and down-dip of the reserve. We've had some successful holes now from some drilling from last year, hole three in particular, which intersected 20 meters at 6.9 up-dip. And what we are 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 spending another 3,000 to 3,500 meters of drilling in and around that particular target we've got there, which was 125 meters up-dip from the reserve and into the reserve earlier than expected. As I mentioned, I think last quarter, These areas are very close to the underground development, so if we were to find additional reserves out in these particular areas or resources out there for now, we would certainly be able to add those into the operational profile going forward. I'll show you a few sections now. We're going to move over onto slide number 22, which is a drill section that shows some of the up-dip results that we've received this quarter. Roughly, you're looking at the hole there, number 21003. We intersected a series of mineralization up-dip from the existing drilling there. It roughly is the same as what we've intersected previously, but now extending mineralization up to 150 meters up-dip. The focus was really on the down-dip, and I'll move on to slide 22. Down-dip, you can see on section, this is 2075. We intersected mineralization in the hanging wall zone, which is quite interesting out there. And this hanging wall zone is something to stay tuned for because we have been hitting some kicks out there quite a bit. We've actually done a lot of mining there in 2020 and 21, and it's relatively untested and open towards the south and towards the north, both up and down plunge. So we're going to be continuing to test that mineralization. Of importance also, as you'll see that in hole four, we've intersected some mineralization 5.8 meters at 3.8. You get to recognize stale at Wausau. This is 300 meters down depth from the known reserve. So this now opens up a whole new exploration target for us, which demonstrates that mineralization does continue below the existing reserve up to about 300 meters there. So this is going to be another future exploration target for us to start looking at As you know, we have the deep silver towards the south at Wausau. Now we're starting to get tags up and below the actual underground workings that we have where we've been exploiting mineralization for the last three or four years. So it's exciting up in that part of the world too. We'll move on to slide number 24, which shows the intersection we drilled on 1900, which showed both the hanging wall zone again showing up as well as intersecting the main B chute trend and the new hole results that we have here is actually in a daughter hole that we drilled that was drilled roughly 150 meters below the intersection in the mother hole and that did intersect the mineralization again at 3.7 meters at 4.6 grams per ton which now really extends mineralization of B chute the 65 meters we did with the original hole and then an 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 this area now to future exploration at depth within close proximity to where we have all of our development at this point in time. And that wraps it up for the exploration overview, and I'll hand it back over to Andrew to give you the wrap up.
spk02: Excellent. Many thanks, Mitch.
spk11: So just concluding last couple of slides, on slide 25, As you can see there, and as we've been talking a little bit through the presentation, the real focus for us as we go through the year at Water itself is on the infill drilling with 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 that at and near mine exploration, as well as some more regional targets, which are starting to deliver some quite interesting early results. And also on slide 25, a reminder there of the guidance for 2021, 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 in activity this year across the business. We've made good progress during the first quarter. We've got a number of catalysts coming up, as you can see there, with respect to some of the infrastructure investments we've made, the drilling I spoke about, addressing the further issues in the balance sheet, but particularly the repayment of the convertibles in August, and then ongoing exploration results as we go through the year. And I think there's a good degree of confidence amongst the team that we can continue to unlock what we see as significant value in the asset base. So with that, I'll hand back to Colin so we can take any questions that anybody has.
spk03: Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. You'll hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Okay, your first question comes from Bryce Adams from CIBC. Bryce, please go ahead.
spk09: Good afternoon, all. Thanks for taking my question. Firstly, on COVID, the 23 cases that you reported, Are they all Ghanaian workforce or have some of the expat employees been impacted as well?
spk11: Do you want to run through, I don't know, Bryce, if you want to run through all your questions and then I can sort of divvy them up to the team if you're happy to do that.
spk09: Yeah, that's fine. I've got four in total. That was the first one. Okay. Second one is on the ATM, what's your decision-making process on new issuance? Is it focused on the share price or is it more dependent on the cash balance? Number three, for the low-grade stockpiles, what's the thinking of processing around 1,000 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 stockpiles, are they less than the higher-grade underground ore? And then the last one is just a clarification on exploration guidance. So guidance has $11 million expensed But Q1 and results in 2020, they've been around about a million bucks or less per quarter. What's the expected run rate for exploration expense? That's the four questions. Thanks.
spk11: Thanks very much, Bryce. Maybe, Philippa, if you want to give a little bit of colour on COVID cases, starting with the first question.
spk06: Sure. Thanks very much, Bryce. The COVID suspect cases within our workforce were a combination of Ghanaian and expatriates. But interesting to note that the expatriate workforce, the handful of positive cases that we had, were people who'd been in the country for longer than the incubation period for COVID, indicating that they had contracted locally.
spk05: And everyone, do you believe... Everybody's fully recovered and back to work.
spk09: Okay. And those expatriates that tested positive, were they then able to return home at the end of their roster or did they do an extended swing?
spk06: No, everybody was able to return home. Everybody recovered whilst in Ghana. In fact, most of the cases were asymptomatic. We had very few people who actually, out of all of the 23 confirmed cases, very few actually had any symptoms. And those that did were all managed closely through to recovery. And it has not affected movements of many people. We did have one expatriate whose departure was delayed slightly by having contracted.
spk02: Okay. Thanks, Philippa. Thank you for the question.
spk11: On the ATM, I'll deal with that one in terms of use of the ATM facility. Really, it's more driven by a view on overall liquidity cash balances, which, as you know, is a function of where we see production moving, where the gold price is, and then what opportunities we've got from a capital perspective as well as the obligations we've got, the main one being the convertible repayment, just over $50 million in August. So really it's just ensuring that we've got what we see as a sufficient level of flexibility there, and to a degree also taking advantage of any inbound inquiries we get of people looking to pick up stock at a certain level. So there's a little bit of flexibility just being opportunistic in accessing that facility and overall ensuring that we've got what we see as a sensible level of liquidity in the business.
spk09: Okay, thanks. And then subsequent to the convertibles, you wouldn't expect to use the ATM from September, you know, beyond September?
spk11: At this point, I think it's a bit early to say, but I think realistically that's the key for us is to get through that period in time and you know, then we've got the facility there. If, for example, we have a need for additional or we see a benefit in additional significant exploration spend, as an example, if we, you know, hit success on multiple of those targets, then it's always there as a potential to ramp that up. But for ordinary course, no, we wouldn't require it.
spk02: Okay. Understood.
spk11: Thank you.
spk10: then maybe graham talk a little bit about the stockpile material and recovery on that material sure yep uh so prices on recovery first we generally blend um so we're generally doing a about a five one blend so that's that's sort of how you get uh five five one five two blend um which is how you sort of get those six thousand tons per day um so and we see a very flat grade recovery curve for WASA. We have done some work in previous quarters on batch milling, just to make sure that that all makes sense. And even on the low-grade stockpile, you do get a bit of a recovery drop, but not too much. So pretty comfortable with the blend strategy there. As I mentioned, through the quarter, January was a bit of a tough month for the underground team. So we pushed a bit more low-grade through there just to boost the production and the ounces and to see what we could do with the mills, see if we could push a bit more through there. But in general, it's just keep that nice steady blend and look after the recovery is the general strategy.
spk11: And then the volumes, Graeme, in Q1 being a little bit higher than we'd seen previously?
spk10: Yeah, just as I mentioned, just trying to push the middle a little bit to see what we can do. We haven't taken it up to 100% yet, but it certainly goes along with that 6,000 tonnes per day and a little bit higher at times and performs very consistently.
spk02: Thanks, Graham. And then the last one.
spk11: What's the last question, Bryce?
spk04: It was an exploration in terms of the cost.
spk11: Yeah. Was it the absolute quantum you're getting at or the classification of the spend?
spk09: Yeah, maybe just a little bit of help if I've got it misclassified. But I think guidance says 11 million exploration expense, but the run rate seems to be about a million bucks a quarter or less. Just trying to refine our model to be a little more accurate.
spk04: Yeah, no problem. Should I get that, Andrew? Yeah, please. In Q1, Bryce, we had a cost of $2.2 million. So that was split between $0.8 million, which was expensed, and $1.4 million, which was capitalized. So going forward, we're looking at something around $4 to $4.25 a quarter, so just over $12 for the remainder of the year, of which 3 million will be capex, and about 9 to 10 will likely be expensed. But that capex expense ratio may change depending on how that drilling program goes in terms of the feedback and interpretation of it and so on. In broad terms, that's roughly where it's at.
spk09: Okay, so we should expect a step up in exploration expense in Q2, 3, and 4.
spk04: Yeah, that's correct, yeah.
spk09: Okay, thanks, everyone. I appreciate the time, and keep well. Thank you. Thanks. Thank you, Brian.
spk03: Thank you. 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. Raj, please go ahead.
spk07: Thank you, Alfred. Good afternoon, Andrew and team. I just had a quick question, and I apologize if you have already talked about this previously. I was a bit late in joining. I just wanted to get a sense on the challenges that you faced with the pay scale strength in some of the test jobs. You did mention that in Q2 you're looking to fix it. I just wanted to get some details on what you're doing currently, what the issues were around. And then you talked about in the second half of the year having some contingencies in place. I'll throw some colour on what contingencies you're having, please.
spk11: Thanks, Raj. I think, Graeme, that's one for you. I think that's me, yeah.
spk10: Hi, Raj. Yeah, good question. So just as we were doing the test soaps, obviously we were doing a lot of strength testing. Some of those quality assurance results have come back a bit lower than what we would have expected from the bench test work that went into the feasibility. So we want to get a good understanding of that. So we're delaying filling at this point in time. As I said, we've got nothing, no production, certainly in H1 that's impacted by that, but we're just delaying that. We're doing some work with GARCEM, who are the cement supplier, and they're obviously pretty expert in what the chemical composition of their cement is, and we've given them some more tailings samples to work a little bit more on that and we're also partnering with a group out of Australia called Minefield Services who are pretty much experts in the field and they're collaborating with the University of Mining and Technology in Ghana just to make sure we've got a pretty robust test regime so that's the kind of three streams. In terms of contingencies there's a few things. One is we might increase some of the cement contents from planned, which would obviously have a bit of a cost impact, so we need to understand that pretty well. The second opportunity is just around resequencing, so replacing some of the secondary stoves that we have in the plan with primaries, and that would involve also re-sequencing some of the development. So you'd be mining cross-cuts into primary stoke areas as opposed to either secondary. So that would just change the mix a little bit in terms of where the production is coming from. So they're all things that we're working through at the moment. Okay, thanks Dan.
spk07: Assuming there's a bit of a delay in getting this fixed, are you still confident about the production guidance and the cost guidance here?
spk11: Yeah. For the time being, we're maintaining guidance as is whilst we work through that. We need to see, one, the length of the delay, as Graham said, whether it's resolved during this quarter or it extends beyond this quarter, and then work through some of the potential resequencing and what the plans look like to see if there is any impact. But at this stage, we don't see that. We'll obviously update if that changes at any point.
spk02: Okay, thanks, Andrew. That's it from me. Thanks very much, Raj.
spk03: There are no further questions at this time. I'll now turn it back to Andrew for closing remarks.
spk11: Excellent. Well, thank you very much, everybody. 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. Thank you again.
spk03: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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