Golden Star Resources : Q2 2021 Press ReleasePDF (1.64 MB)

Golden Star Resources Reports Results for the Three and Six Months Ended June 30, 2021

Toronto, ON - July 28, 2021 - Golden Star Resources Ltd. (NYSE American: GSS; TSX: GSC; GSE: GSR) ("Golden Star" or the "Company") reports its financial and operational results for the three and six months ended June 30, 2021. All references herein to "$" are to United States dollars.

Q2 2021 HIGHLIGHTS:

• Q2 2021 production totaled 37.9 thousand ounces ("koz") from Wassa, at an all-in sustaining cost ("AISC") of $1,182 per ounce ("/oz"). H1 2021 production totaled 78.0koz at an AISC of $1,140/oz, and the Company remains on track to deliver on the recently revised production guidance of 145-155koz for 2021.
• The Wassa underground grade averaged 3.1 grams per tonne ("g/t") in Q2 2021, in line with the reserve grade and 4% higher than achieved in Q1 2021.
• Paste fill test work continued during the quarter with recent positive results supporting a second test stope currently in progress which, if successful, will lead to the restart of the planned filling schedule in Q4 2021.
• Q2 2021 saw continued investment in infill drilling and development at Wassa, ahead of planned future production expansion. Q2 2021 capital expenditure totaled $12 million ("m").
• Cash increased by $6.6m in Q2 2021 to total $72.7m at June 30, 2021, with net debt reducing to $31m.
• The senior secured credit facility with Macquarie Bank Limited (the "Macquarie Credit Facility") was restructured and upsized to a three-year $90m revolving credit facility ("RCF"), with $30m of undrawn liquidity. The amortization profile was also restructured, releasing $30m of liquidity in 2021 and 2022.
• The refinancing plus the cash on hand position Golden Star for the repayment of the 7% convertible debentures maturing in August 2021 (the "Convertible Debentures"). This deleveraging event will further strengthen the Company's balance sheet and deliver a lower cost of capital.
• In-mineexploration continued to deliver positive drill results adjacent to the current and planned reserve mining areas, with infill drilling now underway aimed at identifying mineral resources by the year end.

Table 1 - Q2 2021 Performance Summary (Continuing Operations unless otherwise stated)

1. See "Non-GAAP Financial Measures"		Q2	Q2	%	H1	H1	%
	2021	2020	change	2021	2020	change
Production - Wassa	Koz	37.9	44.8	(15)%	78.0	85.1	(8)%
Production - Prestea (discontinued operation)	Koz	-	5.9	(100)%	-	15.5	(100)%
Total gold produced	Koz	37.9	50.6	(25)%	78.0	100.6	(22)%
Gold sold - Wassa	Koz	37.7	46.5	(19)%	76.6	83.0	(8)%
Gold sold - Prestea (discontinued operation)	Koz	-	6.2	(100)%	-	15.2	(100)%
Total gold sold	Koz	37.7	52.7	(28)%	76.6	98.2	(22)%
Average realized gold price (incl. Deferred Revenue)	$/oz	1,709	1,621	5%	1,688	1,559	8%
Cash operating cost per ounce - Wassa1	$/oz	752	633	19%	734	632	16%
Cash operating cost per ounce - Prestea1	$/oz	-	2,292	(100)%	-	1,986	(100)%
Cash operating cost per ounce - Consolidated1	$/oz	752	827	(9)%	734	842	(13)%
All-in sustaining cost per ounce - Wassa1	$/oz	1,182	957	23%	1,140	958	19%
All-in sustaining cost per ounce - Prestea1	$/oz	-	2,910	(100)%	-	2,471	(100)%
All-in sustaining cost per ounce - Consolidated1	$/oz	1,182	1,186	-%	1,140	1,193	(4)%
Gold revenues	$m	64.4	75.4	(15)%	129.4	129.5	-
Adj. EBITDA1	$m	26.0	36.4	(28)%	53.3	57.6	(8)%
Adj. income/share attributable to shareholders - basic1	$/share	0.05	0.10	(50)%	0.09	0.12	(25)%

		Cash provided by operations before working capital		$m		34.9	(34)%	46.5	52.1	(11)%
		23.2
		Changes in working capital and taxes paid		$m		(4.0)	(158)%	(23.3)	(13.5)	(73)%
		(10.3)
		Net cash used in investing activities		$m		(9.6)	(8)%	(23.2)	(22.0)	(5)%
		(10.4)
		Net cash provided by financing activities		$m		(5.6)	175%	11.9	(5.5)	316%
		4.2
		Free cash flow1		$m		2.4		21.4	(89)%	-	16.5	(100)%
		Cash			$m		72.7		45.1	61%	72.7	45.1	61%
		Net Debt		$m		31.0		56.0	(45)%	31.0	56.0	(45)%

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Andrew Wray, Chief Executive Officer of Golden Star, commented:

"Our primary objectives for H1 2021 were to continue positioning the business for future production growth, as well as to be able to address the repayment of the $51.5m Convertible Debentures in August 2021. With the increase in the cash position to $72.7m during the quarter and the successful refinancing of the Macquarie Credit Facility, we now have adequate liquidity to be able to cash settle the Convertible Debentures on maturity.

Following the recent revision of our 2021 guidance, our key operational focus is the completion of the commissioning of the paste fill plant by the end of the year. Recent paste strength test work has yielded positive results and supports the advancement of a second test stope during Q3 2021. We will issue further updates through H2 2021 as we progress towards our target of production from secondary stopes in 2022.

While the paste fill test work progresses, we are also continuing to make operating changes aimed at unlocking further improvements in development rates in order to improve the operational flexibility. This work enabled the decline development to reach the 495 level during the quarter. This milestone was critical in providing the operations with more flexibility - this opens up the new production areas needed to provide access to the primary stopes that were originally planned for 2022 and are now being brought forward to partially replace the secondary stopes that were deferred as a result of the ongoing paste fill strength test work.

The step up in the investment in exploration in 2021 is yielding positive results, particularly the in-mine program where we are now reallocating resources from regional targets to carry out additional in-fill drilling to delineate resource in targets proximal to existing and planned reserve infrastructure.

As we go into H2 2021, the repayment of the convertible debenture represents another significant step in the restructuring and strengthening of our balance sheet while the operational focus on full commissioning of paste fill activities and consistent delivery of the increased development metres will return the operation to where we planned it to be to deliver further growth in 2022 and beyond."

Q2 2021 RESULTS WEBCAST AND CONFERENCE CALL

The Company will conduct a Q2 2021 results conference call and webcast on Thursday July 29, 2021 at 10.00 am ET.

Toll Free (North America): [phone]

Toronto Local and International: [phone]

Toll Free (UK): 0800 652 2435

Conference ID: 98666950

Webcast:https://produceredition.webcasts.com/starthere.jsp?ei=1477518&tp_key=0b1e14f35e

Following the conference call, a recording will be available on the Company's website at: www.gsr.com.

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KEY EVENTS - Q2 2021

Wassa Operational Performance and Infrastructure Investment

• The mining rate averaged 3,963 tonnes per day ("tpd") in Q2 2021, representing a 10% decrease on the 4,418tpd achieved in Q2 2020 and 12% lower than the mining rate of 4,499tpd achieved in Q1 2021 driven predominantly by an enforced change in the mine plan due to stoping constraints caused by lower than planned development rates.
• Underground mined grade averaged 3.1g/t, in line with the underground reserve grade of 3.1g/t and 4% higher than the grade achieved in Q1 2021.
• Processing of low-grade stockpiles continued during Q2 2021, given the continued strength of the gold price. This initiative, which utilizes latent capacity in the process plant without compromising gold recovery rates, contributes additional cash flow, albeit at a slightly higher AISC than achieved by the underground mine. This initiative contributed 5koz of production during Q2 2021.
• Investment in infrastructure continued throughout Q2 2021 to provide additional mining flexibility with the objective of increasing mining rates. Capital expenditure at Wassa totaled $12m during Q2 2021, including capitalized drilling of $1.9m.
• Operational improvements and recruitment of additional jumbo operators has seen an increase in development rates over the second half of the quarter, with June seeing rates in line with plan and representing a 15% increase compared to 2020. During the quarter, decline development reached the 495- level, access and level development has commenced bringing on new development and production areas into the mine plan for H2 2021. These stopes were originally planned for 2022 and will be brought forward to replace some of the secondary stope material delayed due to the delay in the completion of the paste plant commissioning process.

Paste Fill Commissioning Update

• The Paste fill plant commissioning process started in Q1 2021, following the completion of the plant construction in Q4 2020. As previously announced, the commissioning was delayed by some quality assurance testing returning lower than expected fill strengths in the test stope in April 2021.
• As a result, the test work program has been extended. The Company is working in collaboration with Minefill Services and the University of Mines and Technology in Tarkwa, Ghana. Core samples for the initial test stope have been obtained and are being tested in parallel with further test work on the mix design. Additional samples have now arrived in Australia for confirmatory testing and mix design test work. Recent test results, particularly at a higher cement content of 7-10%, have shown results that support progression of the commissioning process onto filling of a second test stope.
• The second test stope has been identified and is currently progressing through the production phase ahead of filling, which is anticipated to occur during Q3 2021. The stope will be tested with a 10% cement blend for maximum fill strength, while off-site mix design optimization and test work continue. Should this test work return satisfactory strength results, as expected, the Company anticipates re-commencement of the filling schedule in Q4 2021 allowing for production from secondary stopes, as previously planned, in 2022.

COVID-19 PANDEMIC

• Ghana experienced a slight increase in COVID-19 cases in Q2 2021. A total of 5,953 positive cases had been confirmed in the Western Region, where the Wassa mine is located, of which 23 were active cases as at June 30, 2021, an improvement over the previous quarter. During Q2 2021, Wassa experienced 10 suspected COVID-19 cases with six confirmed cases and two pending results as at quarter end.
• During 2021, the COVID-19 pandemic has impacted the availability of our expatriate operators. This resulted in lower than planned development rates being achieved, as reported in the Q1 2021 results and the recent paste fill plant commissioning update. The Company is investing in additional resources and has

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made changes to our operating structures to mitigate the ongoing impact of the COVID-19 pandemic on development rates.

• Supply chains for the shipment of dore to the refinery and for the key consumables, including cyanide, lime, grinding media, fuel, and lubricants, have remained intact throughout the pandemic. All supply chains are being continually monitored and alternative suppliers have been identified for essential supply chains.

Safety and Health

• In June 2021, two employees at the Wassa mining operations suffered minor injuries. Both employees are undergoing medical treatment and review with diagnoses of potential for full recovery. Reflecting these incidents, the all-injury frequency rate ("AIFR") of the continuing operations as at June 30, 2021 was 2.91 and the total recordable injury frequency rate ("TRIFR") was 0.97, based on a 12-month rolling average per million hours worked. This compares to the continuing operations AIFR of 3.57 and TRIFR of 0.54 as at June 30, 2020.

Restructuring and Upsizing of the Macquarie Credit Facility

• On May 31, 2021, the Company announced the restructuring and upsizing of the Macquarie Credit Facility to a three-year RCF. The capacity of the RCF has been upsized by $20 million to $90 million, which created $30 million of liquidity over and above the drawn balance of $60 million.
• The restructuring also removed the $5 million quarterly capital repayment amortization profile which was due to come into effect in September 2021 if the Macquarie Credit Facility was fully drawn, or March 2022 if the current $60 million drawn amount was sustained. Therefore, this released a further $10 million of liquidity in 2021 and $20 million in 2022.
• The capacity of the RCF will remain at $90 million to June 30, 2023, when it steps down to $50 million until maturity on June 30, 2024. The term of the RCF and the step down in the capacity will be reviewed annually and could be further extended, subject to the successful conversion of mineral resources to mineral reserves through the planned infill drilling program.

Gold Hedges

• As a condition of amending the Macquarie Credit Facility, the Company extended its gold price protection hedging program into the first half of 2024 by entering into zero cost collars with Macquarie Bank on an additional 84,375 ounces.
• This brought the total hedged position to 150,000 ounces as at June 30, 2021, maturing at a rate of 12,500 ounces per quarter from September 30, 2021 to June 30, 2024.
• The hedging program now covers 25-30% of the forecast production during the current term of the RCF. All hedges have a floor of $1,600/oz and an average ceiling of $2,171/oz in 2021 and $2,179/oz in 2022, and a flat ceiling of $2,115/oz in 2023 and 2024.

At The Market Equity Program

• On October 28, 2020, the Company entered into an at-the-market equity distribution program (the "ATM Program") with BMO Capital Markets Corp. ("BMO") relating to Golden Star common shares pursuant to a sales agreement (the "Sales Agreement"). In accordance with the terms of the Sales Agreement, the Company may distribute shares of common stock having a maximum aggregate sales price of up to $50 million from time to time through BMO as agent for the distribution of shares or as principal. The proceeds from the ATM Program will be used for discretionary growth capital at Wassa, exploration, general corporate purposes and working capital.
• A total of 4,220,213 shares of common stock had been sold under the Sales Agreement up to June 30, 2021, generating net proceeds of $13.8m, of which $5.2m was generated in Q2 2021.

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Changes to the Board of Directors

• Karen Akiwumi-Tanoh and Gerard De Hert were elected as directors of the Company at the annual general meeting on May 6, 2021 (the "AGM"). Robert Doyle retired as a director of the Company after the AGM in line with Golden Star's board of directors (the "Board") mandate of a maximum term limit of 10 years for directors. Mona Quartey replaced Mr. Doyle as chair of the audit committee of the Board.

Sale of Prestea - Deferred Consideration Amendment Agreement

• On September 30, 2020, the Company completed the sale of its 90% interest in Prestea to Future Global Resources Limited ("FGR") pursuant to a share purchase agreement (the "SPA") for the sale by Golden Star's wholly owned subsidiary, Caystar Holdings ("Caystar"), and the purchase by FGR of all the issued and outstanding share capital of Bogoso Holdings ("Bogoso"), the holder of 90% of the shares of GSBPL, for a deferred consideration of $34.3 million guaranteed by Blue International Holdings ("BIH"), a major shareholder of FGR, which, prior to the amendments to the SPA as described below, was payable by FGR to Golden Star in the following tranches:
  o $5 million in cash to be paid on the earlier of (i) the date at which FGR puts in place a new reclamation bond with the Environmental Protection Agency of Ghana (the "EPA") in relation to Prestea, and (ii) March 30, 2021;
  o $10 million in cash and the net working capital adjusted balancing payment (as described in the

SPA) which as at the date hereof amounts to approximately $4.3 million, to be paid on July 31, 2021; and

• 1. $15 million in cash to be paid on July 31, 2023. SPA Amendments
• On March 28, 2021, the Company and Caystar, entered into an agreement with FGR and BIH, to amend the SPA to account for deferred consideration conditions. The staged payments that form the deferred consideration, as outlined in the SPA, were reprofiled such that (i) the $5 million that was originally due on March 30, 2021 and (ii) the $10 million that was originally due on July 31, 2021, each became payable on May 31, 2021.
• On May 31, 2021, the Company and Caystar, entered into a second amending agreement with FGR and BIH, to further amend the SPA. The staged payments that form the deferred consideration were reprofiled to allow time for FGR to complete ongoing financing transactions and the environmental bonding process for Bogoso- Prestea. Pursuant to this second amendment to the SPA, the deferred consideration payments fall due as follows:
• 1. the $15 million payment that was due on May 31, 2021 must be paid by no later than July 16, 2021; and

• 1. an amount of approximately $4.6 million (comprised of the working capital balancing payment of approximately $4.3 million and fees of approximately $0.3 million for services provided by Caystar to FGR pursuant to a transition agreement dated September 30, 2020) must be paid by no later than July 31, 2021.
• As of the date hereof, FGR has defaulted on its obligation to pay Caystar $15 million by no later than July 16, 2021. FGR has claimed that it is entitled to set-off its obligation to make such payment under the SPA, as amended, as a result of various alleged breaches of the SPA, a claim which Golden Star and Caystar believe to be completely without merit. Caystar has also demanded that FGR pay the amount of $15 million pursuant to the guarantee made by BIH in the SPA. In the event payment is not received from BIH, Golden Star and Caystar are evaluating all available avenues of recourse in order to seek full recovery of amounts owed by FGR under the SPA.

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