GOLDEN Star Resources has agreed to sell its troublesome Prestea mine in Ghana to Future Global Resources (FGR) which will take on the mine’s negative working capital and pay a small cash sum worth some $55m
Andrew Wray, president and CEO of Golden Star, said in an announcement today that selling Prestea would allow the company to accelerate the development of its remaining mine, Wassa, also in Ghana, as well as open the book on possible acquisitions.
Golden Star has La Mancha, an investment company owed by Naguib Sawiris, as its 35% shareholder. Sawiris is a gold bull and aggressive dealmaker having taken over Endeavour Mining which recently merged with SEMAFO, a Canadian firm.
Golden Star wrote down Prestea for $56.8m in February following a restructuring: the impairment resulted in a net loss of $78m for Golden Star’s 2019 financial year, deepening the $24.1m loss the firm recorded in the previous year. Now, however, the company’s prospects are significantly enhanced having got rid of Prestea – never a core asset – in a context of a surging gold price.
“Given the resulting improvement in the financial position of the Company we expect to now be able to accelerate our investment at Wassa and within our existing exploration pipeline and look for other opportunities to further expand our business,” said Wray.
In terms of the agreement, FGR will pay $5m in cash and assume $25m in negative working capital as per Prestea’s end-quarter accounts. The balance of $25m is payable in two tranches of $10m by July 31, 2021 and $15m by July 31, 2023 thereby allowing FGR time to get its hands around the asset.
Included in the package is the Bogoso Sulfide Project in which Golden Star will participate to the tune of $40m assuming it is developed. The project contains an estimated 1.76 million ounces of measured and indicated resources and 700,000 oz of inferred resource.
The triggers for the additional $40m in cash payment is gold price performance: $20m is payable if the gold price is less than or equal to $1,400/oz increasing to $40m if the gold price averages $1,700/oz. Spot gold has currently cruised through $1,900/oz owing to geopolitical stress, partly brought about by the Covid-19 pandemic.
“We have confidence in the potential for additional discoveries and extensions to the underground mineral resources, through which we hope to generate real value by investing in the workforce and our relationships with local stakeholders,” said Glenn Baldwin, CEO of FGR of the potential for Prestea-Bogosu as the asset is now being called.
FGR was formed this year with its initial focus on African mining. It has Blue International Holdings Limited, a UK based private investment holding company, as its principal shareholder. Blue International is the largest investor in Joule Africa Limited, a developer, owner and operator of sustainable power projects in sub-Saharan Africa.
The transaction, which the parties said they hoped to conclude in September, also requires a renegotiation of a streaming deal with Royal Gold which Golden Resources signed over both Prestea as well as Wassa.