Golden Star Resources Ltd. has extended its hedging of gold prices, adding another 84, 375 ounces of gold to its price protection programme in order to support the conversion of a fixed loan to a revolving credit facility (RCF).
Per the company’s strategy, the gold price protection hedging programme covers 25-30 percent of forecast production of gold in its Wassa underground mine in Ghana. The hedging program is expected to continue into 2023 and the first half of 2024.
Andrew Wray, President and Chief Executive Officer of Golden Star, commented:
“The RCF structure removes the capital repayment amortization profile of the Credit Facility and better aligns the Facility with the investment in the growth of the Wassa gold mine outlined in the recent updated technical report.
“The extension of the gold price protection program into 2024 secures an attractive floor and ceiling price for the period, further de-risking the Company’s ability to deliver on its financial obligations while also investing in the growth of Wassa.”
Andrew Wray, president and Chief Executive Officer of Golden Star
Moreover, the Company’s recent forecast of average annual gold production was set at 294,000 ounces for 11 years after completing a preliminary study of the mine’s underground potential.
According to Golden Star Resources, the hedging strategy will amount to a total of 160, 938 ounces with 10, 938 ounces maturing on June 30, 2021. And the remainder at a rate of 12, 500 ounces per quarter from September 30, 2021 to June 30, 2024.
Furthermore, all hedges have a floor of US$ 1,600/oz and an average ceiling of US$ 2,171 per ounce in 2021, which is then upped to US$ 2, 179 per ounce in 2022 and a flat ceiling of US$ 2,115 per ounce in 2023 and 2024.
The Debt Restructuring
In terms of the restructuring of the credit facility, the Company has moved from an amortizing term loan to a three-year revolving credit facility (RCF).
According to Andrew Wray, “restructuring the Credit Facility to an RCF and increasing the capacity reflect the progress made over the last year in improving the financial position of the business.”
The terms of the arrangement include an upgrade from US$20 million to US$90 million. This creates US$30 million in immediate liquidity over and above the current drawn balance of US$60 million.
More so, with the purpose of drawing down the incremental debt capacity, Golden Star must meet a US$35 million forecast minimum cash covenant net at the time of the drawdown.
This represents net of an assumed repayment of convertible debentures maturing in August 2021, the report said. Consequently, this will eventually reduce to US$ 25 million for the remaining life of the facility.
“Following the repayment of the higher cost convertible debentures in August 2021, overall indebtedness is expected to be at a conservative level and forecast net debt: Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) ratios should see us achieve the lower end of the interest cost range. We expect to achieve an improvement in our cost of capital, equating to an annual saving of up to $2.7 million.”
Andrew Wray, president and Chief Executive Officer of Golden Star
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