Golden Star Resources Ltd., which owns and operates the Wassa underground mine in the Western Region of Ghana, has announced in a statement that it has concluded negotiations with Future Global Resources Limited (FGR) to restructure the consideration for the purchase of the Bogoso-Prestea mine that was completed on September 30, 2020. 

HIGHLIGHTS:

The conclusion of negotiations to restructure the consideration for the purchase of the Bogoso-Prestea mine represents a full and final settlement of all existing and future claims, together with a mutual release between Golden Star and FGR

The deferred consideration (the "Deferred Consideration") detailed in the share purchase agreement dated July 26, 2020, as supplemented by a letter agreement dated September 30, 2020, and amended by a first amending agreement dated March 28, 2021 and a second amending agreement dated May 31, 2021 (collectively, the "Share Purchase Agreement") will now be replaced by a net smelter return ("NSR") agreement which will trigger certain payments once 100,000 ounces of gold have been produced from the Prestea underground mine.

The NSR payments are capped at $35 million, equaling the value of the initial Deferred Consideration and the working capital balancing payment that were defined in the Share Purchase Agreement

The quantum of the Sulphides Contingent Payment defined in the Share Purchase Agreement remains unchanged.

Golden Star has agreed to adjust the timing of the staged payments in order to support the development of the refractory resource at Bogoso-Prestea

The Chief Executive Officer of Golden Star, Mr Andrew Wray, said: "By working with the FGR team we have been able to conclude discussions on an amicable and cooperative basis. The future of the Bogoso-Prestea mine, its workers and other stakeholders was our priority. We have agreed to restructure the acquisition consideration into an NSR agreement, in order to better align any payments owed to Golden Star with the performance of the Prestea underground mine operation”.

“While the quantum of the Sulphides Contingent Payment remains unchanged, we have agreed to provide FGR with further financial flexibility for the development of the refractory resource by adjusting the timing of the payments associated with the sulphide project to allow time for production to reach 500,000 ounces before we realize the full contingent payment”, Mr Wray said.

He added: “We are pleased to reach a full and final settlement of all existing and future claims, as this will allow both the Golden Star and FGR management teams to focus fully on their respective assets to deliver the best outcome for all stakeholders."

Revised payment terms

The restructuring of the consideration is aimed at better aligning the payments due to Golden Star with the anticipated performance of the Bogoso-Prestea asset.

The Deferred Consideration has, therefore, been replaced by an NSR agreement with the following commercial terms:

From October 1, 2020, NSR royalty payments in respect of products produced from the Prestea underground mine will be paid at a rate of 1.0% of the net smelter returns once production exceeds 100,000 ounces of gold, and up to a total of 300,000 ounces of gold

Once production from the Prestea underground mine exceeds 300,000 ounces of gold, the royalty rate will increase to 2.0%, until cumulative royalty payments total $35 million at which point the obligation to make royalty payments will automatically terminate

These payments apply to production from the areas containing the underground resources and reserves declared at the Prestea underground mine at the time it was acquired by FGR

Sulphides Contingent Payment

The value of the Sulphides Contingent Payment of up to $40 million relating to the Bogoso-Prestea refractory gold resources remains unchanged from those outlined in the Share Purchase Agreement. The quantum of the Contingent Payment is determined by reference to the average spot gold price for the 90 day period preceding the date of the trigger point for such payment (as described below):

$20 million, if the average spot gold price is less than or equal to $1,400/oz;

$30 million, if the average spot gold price is greater than $1,400/oz but less than or equal to $1,700/oz; or

$40 million, if the average spot gold price is greater than $1,700/oz

The trigger point for the Sulphides Contingent Payment is the extraction of an aggregate of 5% of the sulphide resources as stated at the end of 2019, being 1.76 million ounces of measured and indicated mineral resources and 0.07 million ounces of inferred mineral resource.

The Sulphides Contingent Payment is now payable in three tranches, rather than the two tranches defined in the Share Purchase Agreement, as follows:

33.3% at the time when 5% of the sulphide mineral resources have been extracted;

33.3% at the time of the first anniversary of the declaration that 5% of the sulphide mineral resources have been extracted; and

The remaining unpaid amount of the Sulphides Contingent Payment will fall due once a cumulative 500,000 ounces of gold have been produced from the Bogoso Sulphide project.

Golden Star is listed on the NYSE American, the Toronto Stock Exchange and the Ghanaian Stock Exchange.