TORONTO, May 7, 2015 /PRNewswire/ - Golden Star today announces the securing of a
$150 million financing with
Royal Gold, Inc. ("RGI") and its
wholly-owned subsidiary RGLD Gold AG ("RGLD"). The
$150 million financing consists of a
$130 million stream transaction with
RGLD and a further $20 million term
loan from RGI. All references to currency are to US
dollars.
- Funds received will facilitate development of Wassa and Prestea
underground mines which are expected to be in production by late
2016
- Financing enables Golden Star to
implement the company strategy to transform to a low cost,
non-refractory producer
- RGLD will provide Golden Star
with a $130 million advance payment
to be used for the development of underground mines and general
corporate purposes
- Golden Star will initially
deliver 8.5% of all production to RGLD at a cash purchase price of
20% of spot gold until 185,000 ounces have been delivered
- A further 5% of all production at a cash purchase price of 20%
of spot gold will be delivered thereafter until an additional
22,500 ounces have been delivered
- Thereafter 3% of all production at a cash purchase price of 30%
of spot gold will be delivered
- RGI will provide Golden Star a
four year $20 million loan at a gold
price linked interest rate of 0.625% per $100, being 7.5% at a gold price of $1,200
- Golden Star's outstanding
Ecobank I loan of $38 million will be
retired on receipt of the funds from RGI and RGLD
"The Stream and Loan financing with Royal Gold allows Golden
Star to execute on its strategy of becoming a low cost,
non-refractory gold producer at a whilst reducing the Company's
overall cost of capital," said Sam
Coetzer, President and CEO of Golden
Star.
"The development of the Wassa and Prestea Underground mines
will considerably improve Golden
Star's mine life with opportunities for further resource
conversion and exploration success at both assets. We are
encouraged by the vote of confidence in our development projects by
Royal Gold and we look forward to a
long and supportive relationship."
The Company will conduct a conference call and webcast today,
May 7, 2015, to discuss its first
quarter 2015 results as well as this financing at 10:00am EDT.
The call can be accessed by telephone or by webcast as
follows:
Participants - toll free: +1 888 390
0605
Participants - toll: +1 416 764
8609
Conference ID (all numbers):
25836040
Webcast: www.gsr.com
A recording of the conference call will be available until
May 14, 2015 by dialing:
Toll free: +1 888 390 0561
Toll: +1 416 764 8668
Replay passcode: 836040#
The webcast will also be available after the call at
www.gsr.com.
The Company's Annual General and Special Meeting of the
Shareholders will be held today, May
7th 2015, at 1:30pm EDT at the
St. Andrews Club, 27th Floor of 150 King Street West, Toronto.
Copies of the main transaction documents for the Gold Stream
Agreement and the Term Loan Agreement will be filed on SEDAR at
www.sedar.com and EDGAR at www.sec.gov.
Company Profile:
Golden Star Resources (NYSE MKT: GSS; TSX: GSC; GSE: GSR)
("Golden Star" or the "Company") is an established gold mining
company that holds a 90% interest in the Wassa, Prestea and Bogoso
gold mines in Ghana. In 2014, Golden
Star produced 261,000 ounces of gold and is expected to
produce 250,000 – 275,000 ounces in 2015. The Company is
financed to pursue brownfield development projects at its Wassa and
Prestea mines which are expected to transform these mines into
lower cost producers from 2016 onwards. As such, Golden Star offers investors leveraged exposure
to the gold price in a stable African mining jurisdiction with
significant development upside potential.
Gold Stream Arrangement
RGLD has agreed to pay Golden
Star a $130 million advance
payment in exchange for a gold stream on Golden Star's Bogoso, Prestea and Wassa
mines. The proceeds from the stream will allow Golden Star to develop the Wassa and Prestea
underground mines.
Under the purchase and sale agreement Golden Star will receive an initial $55 million payment when certain customary
conditions precedent have been met and the remaining $75 million will be paid as spending on the Wassa
and Prestea underground mines progresses in line with an agreed
payment schedule. It is anticipated that Golden Star will receive the full $130 million advance payment by September 2016.
In exchange for the advance, Golden
Star agrees to sell to RGLD:
- An initial gold stream of 8.5% of production from Bogoso,
Prestea and Wassa to RGLD at a cash purchase price of 20% of spot
price until 185,000 ounces have been delivered
- Thereafter a reduced gold stream of 5% of production at a cash
purchase price of 20% of spot gold until a further 22,500 ounces
have been delivered
- Thereafter a tail gold stream of 3% of production at a cash
purchase price of 30% of spot gold
After the 207,500 ounces of gold have been delivered in full,
Golden Star will have the option to
repurchase 50% of the tail stream thereby reducing the tail stream
to 1.5% of production. If RGLD elects not to sell 50% of the
tail stream back to Golden Star it
will be required to increase the tail stream by 50% for the same
price that Golden Star offered.
For the purpose of determining the gold production that is
deliverable to the RGLD stream, the economic effective date of this
gold stream arrangement is April 1,
2015, with gold production from the economic effective date
to be paid in three equal installments every 30 days from the date
of the commencement of funding.
In the event that Golden Star
expands its operations to outside its current mine license areas in
the future, the Company will have the option to deliver ounces from
these operations to satisfy the first and second delivery
thresholds under the RGLD stream agreement. However,
Golden Star would retain the upside
to these new operations as the RGLD tail stream would not be
applied.
RGLD's advance payment will be secured against the Wassa, Bogoso
and Prestea assets. RGLD will subordinate its security in
support of up to $25 million in
financing from the existing undrawn Ecobank II $25 million facility that will remain in
place.
Funding under the gold stream arrangement is contingent upon the
satisfaction of certain customary conditions precedent, including
the registration and filing of RGLD's security interests in the
collateral.
Term Loan Arrangement
RGI has agreed to provide Golden
Star with a $20 million
secured term loan for a four year period at an interest rate linked
to the gold price. The interest rate is calculated as the
product of the average spot gold price over the quarter and 62.50%
divided by 10,000, and shall not exceed 11.5%. At a gold
price of $1,200 this equates to an
interest rate of 7.5% and compares favourably to the interest rate
of 9.5% due on Golden Star's drawn
with Ecobank I loan.
The loan will be used to retire outstanding indebtedness under
the $50 million existing Ecobank
facility, of which $38 million is
currently outstanding. The remaining $18 million of this facility will be repaid with
a portion of the upfront proceeds from the stream
arrangement.
Interest payments on the loan will be made quarterly in arrears
and the remaining capital portion of the loan is due on the fourth
anniversary of the effective date of the transaction, subject to an
agreed quarterly 25-50% excess cash flow sweep from the third
quarter of 2017 onwards. There are no early prepayment
penalties.
RGI's secured loan will be secured against the Wassa, Bogoso and
Prestea assets. RGI will subordinate its security in support
of up to $25 million in financing
from the existing undrawn Ecobank II $25
million facility that will remain in place.
As part of the loan agreement Golden
Star has agreed to issue to RGI five million warrants
exercisable at 27 cents per share for
a period of four years from the date of signing. The exercise
price is based on a 30% premium to the ten day volume weighted
average share prices as traded on the NYSE MKT.
Funding under the loan is contingent upon the satisfaction of
certain customary conditions precedent, including the registration
and filing of Royal Gold's security
interests in the collateral for the loan.
Outlook
The Company expects to be fully funded to execute on its
strategy of transforming Golden Star
to a low cost producer by the end of 2016. Life of mine
average cash operating costs per ounce from the start of 2015 are
now estimated at approximately $750. Golden
Star believes there is strong potential to further improve
the cost position of the Company through resource conversion and
continued exploration success.
Tony Jensen and Chris Thompson, Directors of both RGI and
Golden Star, recused themselves from
the entire transaction process.
Golden Star's financial advisor
with respect to the gold stream and loan transactions was BMO
Capital Markets and its legal advisor is Fasken Martineau DuMoulin
LLP.
Technical Information
The life of mine average cash operating costs from the beginning
of 2015 have been estimated under the supervision of, and reviewed
and approved by, Dr. Martin
Raffield, Senior Vice President Technical Services for the
Company. Dr. Raffield is a "Qualified Person" as defined by
NI 43-101.
Cautionary note regarding forward-looking information
This report contains "forward looking information" within the
meaning of applicable Canadian securities laws and "forward-looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995, concerning the business,
operations and financial performance and condition of Golden Star. Generally, forward-looking
information and statements can be identified by the use of
forward-looking terminology such as "plans", "expects", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates", "believes" or variations of such words
and phrases (including negative or grammatical variations) or
statements that certain actions, events or results "may", "could",
"would", "might" or "will be taken", "occur" or "be achieved" or
the negative connotation thereof. Forward-looking information
and statements include, but are not limited to, information or
statements with respect to: satisfying the conditions
precedent under the stream arrangement and the loan, the Company's
strategy of transforming its business to being a lower cost
non-refractory producer, the timing for development of and first
production from Wassa underground and Prestea underground, the life
of mine at Wassa underground and Prestea underground, life of mine
average cash operating costs per ounce, the conversion of
resources, the improvement of the Company's cash position, and the
success of exploration..
Forward-looking information and statements are made based upon
certain assumptions and other important factors that, if untrue,
could cause the actual results, performances or achievements of
Golden Star to be materially
different from future results, performances or achievements
expressed or implied by such statements. Such statements and
information are based on numerous assumptions regarding present and
future business strategies and the environment in which
Golden Star will operate in the
future, including the price of gold, anticipated costs and ability
to achieve goals. Forward-looking information and statements
are subject to known and unknown risks, uncertainties and other
important factors that may cause the actual results, performance or
achievements of Golden Star to be
materially different from those expressed or implied by such
forward-looking information and statements, including but not
limited to: risks related to international operations, including
economic and political instability in foreign jurisdictions in
which Golden Star operates; risks
related to current global financial conditions; risks related to
joint venture operations; actual results of current exploration
activities; environmental risks; future prices of gold; possible
variations in Mineral Reserves, grade or recovery rates; mine
development and operating risks; accidents, labor disputes and
other risks of the mining industry; delays in obtaining
governmental approvals or financing or in the completion of
development or construction activities and risks related to
indebtedness and the service of such indebtedness. Although
Golden Star has attempted to identify important factors that could
cause actual results to differ materially from those contained in
forward-looking information and statements, there may be other
factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on
forward-looking information and statements. Forward-looking
information and statements are made as of the date hereof and
accordingly are subject to change after such date.
Forward-looking information and statements are provided for the
purpose of providing information about management's current
expectations and plans and allowing investors and others to get a
better understanding of the Company's operating environment.
Golden Star does not undertake to
update any forward-looking information and statements that are
included in this news release except in accordance with applicable
securities laws.
SOURCE Golden Star Resources Ltd.