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A special grant by the government of Ghana allowed the mineworkers union, known as Prestea Gold Resources (PGR), to reopen the mine. Currently, it is producing 2,000 oz. gold per month.
Golden Star has an agreement-in-principle with PGR to keep the mine going. Meanwhile, the company intends to complete its due diligence before proceeding with the US$12-million sale to existing property owner Barnato Exploration, an arm of JCI.
Upon completing the deal, the company would pay US$8 million, with the remainder due at the end of September 2002. Golden Star also has to pay the government US$2.5 million in return for exercising the mining leases at Prestea. The transaction is subject to government approval, as well as approval by the South African Reserve Bank.
To finance the acquisition, Golden Star intends to arrange debt or equity financing. Australia’s Anvil Mining, which owns a 20% interest in Bogoso, has the right to earn a proportionate interest in Prestea.
Bogoso, in which Golden Star holds a 70% interest, produced 31,626 oz. at a cash operating cost of US$194 per oz. in the second quarter.
Prestea is said to have produced more than 7 million oz. gold since the 1880s. Since 1995, Barnato has invested US$22 million in the project in the form of property payments, exploration expenditures and feasibility costs.
“The acquisition represents a quantum leap for the company,” says Golden Star’s chief financial officer, Allan Marter. “Instead of having 12 months of reserves at Bogoso, it gives us the potential for more than 12 years.”
Golden Star is most interested in the oxide potential at the 66.4-sq.-mile Prestea property. Mineralization could be trucked 12 miles to the processing plant at Bogoso. However, the interest in oxides will defer development of sulphide resources at Bogoso for some time.
In addition to the Prestea transaction, Golden Star has optioned six concessions west of the Bogoso mine.
“The Akropong trend and, to a lesser extent, the Prestea concession have not been subjected to the same degree of systematic exploration that has been undertaken at Bogoso,” says Golden Star President Peter Bradford. “When combined with the sulphide mineralized material potential for both Bogoso and Prestea, this represents significant blue-sky potential.”
In the second quarter, Golden Star incurred a loss of US$200,000 (or 1 per share), compared with a loss of US$4 million (13 per share) in the corresponding period of 1999.
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