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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 4, 1999
GOLDEN STAR RESOURCES LTD.
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(Exact name of registrant as specified in its charter)
CANADA 000-21708 980101955
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1660 Lincoln St., Suite 3000, Denver, Colorado 80264
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(Address of principal executive offices) (zip code)
(303) 830-9000
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(Registrant's telephone number, including area code )
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
MANAGEMENT AND PERSONNEL CHANGES
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Important changes in the management of the Company were made during the fourth
quarter of 1998. On October 27, 1998 David Fennell resigned as President and
Chief Executive Officer of the Company. The Board of Directors appointed Pierre
Gousseland, Chairman of the Company, to serve as Acting Chief Executive Officer
of the Company until a new CEO is found. Mr. Gousseland is serving in such
capacity on a part time basis only. A search for a permanent, full time CEO is
currently underway. However, no assurance can be given as to how long it will
take to hire a permanent, full time CEO.
On November 27, 1998, Adrian Fleming resigned as Executive Vice President,
Exploration of the Company. Carlos Bertoni and Hilbert Shields, both
experienced geologists who were fulfilling Mr. Fleming's role before he was
hired in 1996, took over part of his responsibilities. In addition, Declan
Costelloe, who was recently appointed Manager of Mining Geology, is now
responsible for the technical review of all reports and disclosure relating to
mineral exploration, development programs, mining operations and reserve
estimates.
Management and the directors of the Company believe that the size of the Board
(currently nine directors) should be reduced to take into account recent changes
in the operations of the Company. In an effort to continue to reduce expenses
and be more efficient, it is expected that at least four directors of the
Company will either resign or not stand for reelection at the next Annual
General Meeting to be held in June 1999. It is currently expected that each
resigning or departing director will be granted a stock option to purchase up to
10,000 common shares of the Company and they will receive, subject to regulatory
approvals, a two-year extension for the exercise of their existing stock
options.
The Board of Directors of the Company has decided to seek all necessary
regulatory and shareholder approvals to amend outstanding stock options
previously granted by the Corporation to persons who are currently acting as
directors and senior officers of the Corporation, and to employees and
consultants currently working for the Corporation. If such approvals are
obtained, the exercise price of the re-priced options would be Cdn$1.80 and the
number of shares that can be purchased under each of these options would be
reduced by 20%.
During 1998, the Company has substantially curtailed its exploration activities
and general and administrative expenses in the field and at the corporate
headquarters in an effort to conserve cash resources. As a result, the number of
employees of the Company has been reduced from approximately 350 in December
1997 to approximately 200 in December 1998.
STRATEGIC ALTERNATIVES
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As part of its ongoing business activities, the Company is considering strategic
alternatives, which may include pursuing acquisitions by or of the Company, a
merger of the Company with another mining or exploration company or other
significant transactions. No agreements currently exist for any such transaction
and no assurance can be given that the Company will enter into any such
transaction.
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LIQUIDITY AND CAPITAL RESOURCES
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As of December 31, 1998, the Company had approximately $ 7.3 million of cash and
cash equivalents available to pursue its business operations. The Company will
require additional funds to continue its operations in accordance with its 1999
budget. The Company may consider proceeding with an equity financing to raise
such funds. No assurance can be given that the Company will proceed with such
financing or as to the terms under which such financing will be available. Other
potential sources of capital may include the establishment of joint ventures,
sale of property interests or other assets and issuance of debt securities.
BUSINESS UPDATE
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RESTATEMENT OF RESERVES AND MINERALIZED INVENTORIES BASED ON LOWER GOLD PRICE
In recognition of continued weak gold prices, the Company has decided to restate
its attributable proven and probable reserves on the basis of a $325 gold price
for year end 1998 compared to a gold price of $350 for year end 1997.
Management has adopted the policy only to report proven and probable reserves
based upon the completion of the engineering and economic studies required for,
at a minimum, the pre-feasibility evaluation of an individual project. Until
such time as these studies are completed at the Company's different projects,
only geologic mineralized inventories will be reported. Any eventual reserves
that may be established at a project would be included in the geologic
mineralized inventories.
The following table illustrates the Company's attributable proven and probable
reserves and geologic mineralized inventories at year end 1998 utilizing a $325
long term gold price compared to year end 1997 utilizing a $350 long term gold
price.
GOLDEN STAR RESOURCES' SHARE OF PROVEN & PROBABLE RESERVES AND GEOLOGIC
INVENTORIES
YEAR-END 1998 AND YEAR-END 1997
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
@ $325 Gold Price @ $350 Gold Price
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<S> <C> <C> <C> <C>
PROVEN & PROBABLE RESERVES 1 MMt g Au/t MMt g Au/t
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Omai (30%) 12.9 1.4 16.2 1.4
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MINERALIZED INVENTORIES 2
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Gross Rosebel (50%) 3 38.5 1.5 38.5 1.5
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Yaou/Dorlin (35%) 12.3 1.6 12.3 1.6
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Paul Isnard (71%) 4 28.3 1.4 0.0 0.0
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TOTAL/ WT AVG 79.1 1.5 50.8 1.5
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</TABLE>
Notes:
1. Based upon actual operating costs or final feasibility estimates within
optimized pits.
2. Mineralized inventory based solely on the geologic context of the deposit,
without the application of prices, cost or engineering considerations.
PROVEN AND PROBABLE RESERVES ARE INCLUDED IN THE REPORTED MINERALIZED
INVENTORIES.
3. Includes 20.7 MMt @ 1.6 g Au/t which had previously been classified as
proven and probable reserves before being re-classified by Cambior Inc. (the
Company's joint venture partner) for year end 1998.
4. Despite the reporting in 1998 of open pit mineralized inventories at Paul
Isnard, commencing in 1999 only mineralized inventories will be reported
until such time as engineering and economic studies are initiated to provide
the basis for more certain estimation of reserves.
Cambior, the Company's 50% joint venture partner in the Gross Rosebel project in
Suriname, recently announced year end 1998 mining reserves and mineral
resources, restated at a $325 gold price, compared to a price of $350 per ounce
for year end 1997. For year end 1997, both the Company and Cambior reported
their 50% share of proven and probable mining reserves at Gross Rosebel, using a
$350 gold price, as 17.6 million tonnes grading 1.8 g Au/t, representing 996,000
ounces. For year end 1998, Cambior has estimated their 50% share of Gross
Rosebel at 20.7 million tonnes grading 1.6 g Au/t, representing 1,074,500 ounces
of gold, using a $325 gold price, but reclassified them as what is known in the
industry as "mineral resources" instead of proven and probable reserves. In the
United States, under SEC rules and regulations, companies must report "mineral
resources" as mineralized inventories. The Company has not yet reviewed the
Cambior's estimate for year end 1998. The Company intends to have it
independently verified, taking into account the parameters used in Cambior's
re-calculation, a $325 gold price and the recently revised operating costs.
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During 1998, inventories had also been reported at St-Elie in French Guiana,
Andorinhas in Brazil and Eagle Mountain in Guyana. The Company previously
reported that estimates of geologic inventories at St-Elie are not material in
relation to the Company's total geologic inventories and, as a result, estimates
of mineralized inventories at St-Elie will no longer be reported unless
material. At Andorinhas, the Company had previously reported geologic
inventories. However, the Company has decided to write off its investment in
Andorinhas and, as a result, will no longer report geologic inventories at
Andorinhas. The Company had also reported geologic inventories for Eagle
Mountain. However, since Eagle Mountain has been transferred to Omai Gold Mines
Ltd. ("OGML"), 30% owned by the Company, the Company will no longer report
geologic inventories until such time as OGML makes such estimates available. The
net impact of the exclusion of these three projects on total geologic
inventories is 5.8 million tonnes, or less than 6% of the total tonnage if they
were to be included.
The Omai mine was brought into commercial production in January 1993 and
currently is the Company's only significant producing property. Gold production
for 1996,1997 and 1998 totaled 254,950 ounces, 338,496 ounces and 327,546
ounces, respectively.
Gold production in 1998 was 327,546 ounces, approximately 3% lower than 1997.
The lower production in 1998 was primarily attributable to a lower average head
grade of 1.44 g Au/t compared to 1.54 g Au/t in 1997, while throughput averaged
approximately 21,100 tonnes per day processing 63% hard rock during 1998,
compared to 20,100 tonnes per day processing 73% in 1997. Gold recovery rates
were 92% in 1998 compared to 93% in 1997, while direct mining costs, including
royalties, were $240 per ounce in 1998, a slight improvement over the $245 per
ounce experienced in 1997. Quarterly production statistics for the Omai mine
for 1998 are as follows:
<TABLE>
<CAPTION>
1998
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First Second Third Fourth TOTAL / AVERAGE
Quarter Quarter Quarter Quarter 1998
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<S> <C> <C> <C> <C> <C>
Ore milled (mt) 1,880,506 1,895,797 1,918,248 2,011,071 7,705,622
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Rate (mt/day) 20,895 20,833 20,850 21,859 21,111
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Grade (g Au/mt) 1.45 1.46 1.32 1.51 1.44
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Recovery (%) 92 93 92 92 92
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Gold Production (oz) 80,620 82,743 75,058 89,125 327,546
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Cash cost of 244 242 247 228 240
production ($/oz)
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</TABLE>
For 1999, the Omai mine is expected to produce approximately 306,000 ounces of
gold at a direct mining cost of approximately $240 per ounce. Throughput is
budgeted at approximately 20,400 tonnes per day processing approximately 67%
hard rock. Head grades are anticipated to average
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1.4 g Au/t with a budgeted gold recovery of 93%. During 1999, the continued
stripping of waste is expected to result in a waste to ore ratio of
approximately 3.6:1, compared to a life of mine waste to ore ratio of 1.9:1. As
a result, the cost of additional waste stripping in excess of the average life
of mine ratio will continue to be deferred and amortized in later years.
In reaction to continuing weak gold prices, Omai restated its proven and
probable reserves for year-end 1998 using a $325 gold price compared to a $350
gold price used in 1997. On the basis of a $325 gold price, Omai's proven and
probable reserves at December 31, 1998, stood at 42.9 million tonnes at an
average grade of 1.4 g Au/t, representing approximately 1.89 million ounces of
gold. This is compared to proven and probable reserves at December 31, 1997 of
54.1 million tonnes at an average grade of 1.4 g Au/t, representing
approximately 2.52 million ounces of gold. Ore reserves at Omai are derived from
four sources: the Fennell Pit, the Wenot Lake Pit, alluvial deposits and
stockpiles. The following table summarizes the ore reserves for these sources at
year end 1997 and 1998:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
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Proven and Grade Contained Proven and Grade Contained
Probable (g Au/t) Gold (oz) Probable (g Au/t) Gold (oz)
Reserves/1/ Reserves/1/
(MMt) (MMt)
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<S> <C> <C> <C> <C> <C> <C>
Fennell Pit 22,894,000 1.47 1,086,600 27,266,000 1.54 1,347,000
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Wenot Lake 9,420,000 1.69 511,200 15,721,000 1.72 872,000
Pit
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Alluvials 1,117,000 0.90 32,300 1,117,000 0.90 32,000
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Stockpiles 9,498,000 0.84 257,900 10,025,000 0.82 266,000
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TOTAL 42,929,000 1.37 1,888,000 54,129,000 1.44 2,517,000
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</TABLE>
1. Reserves are calculated using a price of gold of $350 per ounce for 1997
and $325 per ounce for 1998 with a cutoff grade of 0.35 g Au/t for soft
rock reserves and 0.70 g Au/t for hard rock reserves.
PAUL-ISNARD AND EAU-BLANCHE
During the second half of 1998, Guyanor Ressources S.A. (the Company's
approximately 71% owned French public subsidiary) completed a geophysical survey
and a limited follow-up core drilling campaign to identify and confirm semi-
massive sulfide mineralization (SMS) previously intercepted in the Montagne d'Or
deposit located on the Paul-Isnard property in French Guiana. Eight core holes,
totaling approximately 1,600 meters, were completed to test the most robust
geophysical conductors. SMS mineralization was intercepted in seven of the
eight holes drilled, thereby confirming the results of the geophysical survey.
The SMS zones intercepted yielded a weighted average gold grade (uncut) of 23.1
g Au/t over an average length of 1.1 meters, which were included in an average
mineralized interval around these SMS zones exhibiting a weighted average grade
of 4.2 g Au/t over an average length of 6.4 meters. The results are consistent
with previous drilling and have improved the confidence level for both geologic
and grade continuity
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by reducing the drill hole spacing to a nominal 50 meters over 400 meters of
strike length in the eastern half of the Montagne d'Or deposit.
Exploration expenditures for Paul-Isnard of approximately $0.5 million are
budgeted for 1999. Efforts in 1999 will focus primarily on identification of
additional targets to supplement what had been previously outlined at Montagne
d'Or. Work will include follow-up geochemical evaluation and trenching at the
Elysee target, northwest of the Montagne d'Or deposit and continued evaluation
of the Montagne d'Or VMS setting. Additional work may include, subject to
availability of funding, an airborne geophysical survey of the entire project
area to investigate the possibility of additional geologic settings similar to
that found at Montagne d'Or.
ST-ELIE AND DIEU-MERCI
On December 17, 1998, Societe des Mines de St-Elie, a wholly owned subsidiary of
Guyanor ("SMSE"), notified TEXMINE of their intention to terminate the Dieu-
Merci option agreement. Under the four-year option agreement, SMSE had the
obligation to incur minimum exploration expenditures and make certain cash
payments in order to maintain its rights in the option on the 155 square
kilometer Dieu-Merci project located to the south and east of the St-Elie
Concession. After several attempts to substantially reduce or eliminate these
minimum commitments and property payments failed, Guyanor decided to withdraw
from the option agreement. Management felt that, in the current business climate
where cost reduction is a priority, it should instead focus its efforts on the
Yaou, Dorlin, St-Elie and Paul-Isnard projects. Following the termination of the
option agreement, the owner of the Dieu-Merci project has demanded from SMSE
payment (commandement de payer) of the sum of 2,000,000 French Francs
(approximately $350,000), which according to TEXMINE is owed to it in spite of
the termination of the option agreement. SMSE does not believe that such sum is
owed to TEXMINE and, therefore, intends to defend itself vigorously against any
legal action that TEXMINE may take to obtain payment. There can be no assurance,
however, that the Company will be successful.
As a result of the decision to withdraw from the option agreement, Guyanor will
record a write-down in the fourth quarter of 1998 of approximately $0.9 million
of deferred exploration expenditures relating to Dieu-Merci. The termination of
the Dieu-Merci option agreement had no impact on either the Company's or
Guyanor's reported mineralized inventories and does not affect the Company's
legal rights to the St-Elie Concession, 100% owned by Guyanor.
The Company has budgeted exploration expenses of approximately $0.5 million at
St-Elie during 1999. Exploration will focus on continued shallow auger and
geochemical evaluation of an area representing approximately 75% of the St-Elie
concession that has not yet been explored with the objective of defining new
targets for more advanced exploration.
YAOU/DORLIN
Efforts continue in connection with the preparation of studies in support of
applications for a mining concession covering the Yaou and Dorlin projects.
Currently, Guyanor holds on behalf of its 50/50 joint venture with Cambior 10
type "B" exploration permits over the Yaou/Dorlin area in French Guiana. The
permits are scheduled to expire at the end of March and June 1999. The studies,
called "Memoires Techniques" in France, will provide a comprehensive framework
for the development of each project, including preliminary engineering,
environmental impact assessments and economic analysis of development options.
The current development concept
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under evaluation involves consideration of an 10,000 tonnes per day milling
operation at Yaou and concurrent development of a 5,000 tonnes per day heap
leach operation for soft rock mineralization at Dorlin. Following completion of
mining at Yaou, the milling facilities would be moved to Dorlin, approximately
45 kilometers east of Yaou, where hard rock mining and milling would then begin.
The studies are anticipated to be completed during the first quarter of 1999 and
will serve as the basis for the mining concessions applications, which if
granted, will preserve Guyanor's rights in the properties through the conversion
of the exploration permits into mining concession. There can be no assurance
that any of these applications will be granted. Guyanor has budgeted
expenditures of approximately $0.6 million in 1999 for its share of expenditures
at Yaou and Dorlin.
GROSS ROSEBEL
Metallurgical tests were performed during 1998 on soft rock ore from Gross
Rosebel. The tests have demonstrated favorable agglomeration and gold recovery
characteristics for soft rock ore. Average recoveries of 88% were obtained over
a 30 day leach cycle. Metallurgical tests were also completed on Gross Rosebel
transition and hard rock ores, yielding average gold recoveries of approximately
50% over a 30 day period in heap leach column tests. These tests have also
demonstrated that grinding to -50mm does not significantly improve gold
recoveries.
Engineering costs of $194,000 are budgeted for scoping studies which will
consider heap leaching alternatives as well as other saprolite-only and staged
development mining alternatives. These studies are intended to determine the
viability of alternative processing designs which may make the project feasible
at lower gold prices by reducing capital and operating costs. These studies are
anticipated to be completed by mid 1999 and will determine scope of further
evaluation work and/or development programs.
The Company's operations in Suriname in 1999 will consist primarily of care and
maintenance for Gross Rosebel and continued engineering evaluation of the
project. Golden Star's total Suriname expenditures in 1999 are budgeted to be
approximately $0.5 million.
EAGLE MOUNTAIN
The transfer of the Eagle Mountain License to OGML was approved by the Guyana
government on December 21, 1998. The purchase agreement between the Company,
OGML and Cambior Inc. was executed on December 23, 1998 and, in accordance with
the agreement, the Company received $80,000 on December 31, 1998 as
consideration for the sale. OGML also advanced to the Company $3,169,230 in the
form of a non-interest bearing and unsecured loan to be repaid from the proceeds
of redemption of Class I Preference Shares of OGML.
BRAZIL
Work plans for 1999 in Brazil consist primarily of completing the Abacaxis
drilling program initiated in late 1998. The 2,000 m drilling program, expected
to be completed in the first quarter of 1999, is budgeted at $200,000. Results
of the program will be used to try to secure a joint venture partner to continue
advancement of the project.
No funds have been budgeted for the Andorinhas project in 1999. In order to
attempt to define resources sufficient to meet the minimum 1.0 million ounce
threshold needed to vest under the terms
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of the Company's agreement with Companhia Vale do Rio Doce ("CVRD"), costly
underground development would be needed. The Company does not have sufficient
cash resources to justify such expenditures, particularly in the current gold
price environment. However, in order to maintain its right in the property, the
Company has notified CVRD of its intention to extend for another 24 months the
period during which it must demonstrate the existence of a deposit of one
million troy ounces. On the other hand, on November 5, 1998, the Company
notified several land owners of its intention to terminate its agreement with
them pursuant to which it acquired improvements and surface rights over the
three principal target areas on the Andorinhas property. The agreement
contemplated the payment by the Company of approximately $5 million over the
next two to three years. After several attempts to negotiate with the land
owners substantial reductions in these property payments failed, the Company
decided to withdraw from the agreement. Management felt that, in the current
business climate where cost reduction is a priority, it was more justified to
spend funds on other projects. On November 5, 1998, the Company offered to sell
back to its former owners the Santa Ines farm and certain equipment in
consideration for the reimbursement of the amount of the purchase price already
paid to the former owners up to the date of termination.
The Company will incur a write-down in the fourth quarter of 1998 of
approximately $10.0 million of deferred exploration expenditures related to the
Andorinhas project and other activities in Brazil.
Total 1999 expenditures in Brazil, including certain closure and other
administration costs, are estimated to be $0.4 million.
GUYANA
In an effort to conserve cash resources, most exploration activity in Guyana
will be temporarily suspended in 1999. Expenditures at the Company's Guyana
operations are budgeted to be $0.2 million after recovery of bonds at certain
properties and sales of assets. The Company will record a write-down in the
fourth quarter of 1998 of deferred exploration of approximately $6.4 million
related to projects in Guyana.
Special Note Regarding Forward-Looking Statements
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Certain statements in this Form 8-K constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of the company to be materially different from any
future results, performance, or achievements express or implied by such forward-
looking statements. Such factors include, among others, gold and diamond
exploration and development costs and results, fluctuation of gold prices, the
establishment, quantification and recovery of reserves and mineralized
inventories, capitalization and commercial viability and requirements for
obtaining permits and licenses. Please refer to a discussion of these and other
factors in the Company's 10-K, 10-Q and other Securities and Exchange Commission
filings.
The mineralized inventories mentioned in this report do not qualify as reserves.
Estimation of mineralized inventory will not qualify as a reserve until a more
comprehensive evaluation based upon unit cost, grade, recoveries and other
material factors is concluded. Consequently, there can be no assurance that the
mineralized inventories will ever become ore reserves.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GOLDEN STAR RESOURCES LTD.
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Registrant
Date February 4, 1999 By: /s/ Gordon J. Bell
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Gordon J. Bell, Vice President
Chief Financial Officer
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