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Due Diligence Report: GSS Raises %15 million at $0.66; Currently Trading at $0.71
Summary:
Golden Star Resources Ltd., incorporated on May 15, 1992, is a gold mining and exploration company. The Company’s segments include Wassa, Bogoso/Prestea and Other. The Company holds interest in the Wassa and Bogoso/Prestea gold mines in Ghana. The Company is pursuing brownfield development projects at its Wassa and Prestea mines. The Company holds interests in gold exploration projects in Ghana and other parts of West Africa. In South America, the Company holds and manages exploration properties in Brazil.
The Company, through its subsidiary, Golden Star (Wassa) Limited, owns and operates the Wassa open pit mine, located in the southwestern region of Ghana approximately 30 kilometers northeast of the town of Tarkwa, Ghana. Wassa has a nonrefractory processing plant (Wassa processing plant) consisting of a carbon-in-leach (CIL) system with a capacity of approximately 2.7 million tons per annum. Ore from the Wassa mine is processed at the Wassa processing plant.
The Company, through its subsidiary, Golden Star (Bogoso/Prestea) Limited, owns and operates the Bogoso gold mining and processing operations and the Prestea mining operations located near the town of Prestea, Ghana. Bogoso/Prestea has a CIL processing facility, which is suitable for treating non-refractory gold ore (Non-refractory plant) with capacity of approximately 1.5 million tons per annum. The Prestea mining operations consists of an existing underground mine, neighboring open pit deposits and associated support facilities. Bogoso/Prestea processes the Prestea open pit ore through the Non-refractory plant.
Golden Star Resources Ltd. has a current market capitalization of $325.19 with 259.90 M outstanding shares. Its daily average volume traded is 2.82 M shares.
Financial Highlights (Q4 2015):
Revenue: 56.42 M
Gross Profit: 10.01M
Net Income: 13.78 M
Cash and Cash Equivalents: 35.11 M
Total Debt: 125.85 M
Recent News and Analysis:
The company recently announced that it has entered into an agreement with BMO Capital Markets (the “Underwriter”), under which BMO Capital Markets has agreed to buy on bought deal basis 22,750,000 common shares (the “Common Shares”), at a price of US$0.66 per Common Share for gross proceeds of approximately US$15 million (the “Offering”). The Company has granted the Underwriter an option, exercisable at the offering price for a period of 30 days following the closing of the Offering, to purchase up to an additional 15% of the Common Shares purchased under the Offering to cover over-allotments, if any. The net proceeds of the Offering will be used for debt reduction as well as for working capital and general corporate purposes. This will further enhance the reduction in debt that occurred in, and subsequent to, the first quarter of 2016 which includes the repurchase of $3.6 million principal amount of the Company’s 5% Convertible Debentures for $1.8 million that included an interest payment of $0.1 million, leaving $73.9 million principal amount outstanding of the Convertible Debentures that will mature on June 1, 2017.
This news and the recent price activity is promising for GSS. Not only does the stock have decent short-term momentum, but it is seeing solid activity on the earnings estimate revision front as well. These positive earnings estimate revisions suggest that analysts are becoming more optimistic on GSS’s earnings for the coming quarter and year. In fact, consensus estimates have moved sharply higher for both of these time frames over the past four weeks, suggesting that Golden Star Resources could be a solid choice for investors. In the past 30 days, 1 estimate has gone higher for Golden Star Resources while none has gone lower in the same time period. The trend has been pretty favorable too, with estimates narrowing from a loss of 2 cents 30 days ago, to a gain of a penny today, a significant move. Meanwhile, Golden Star Resources current year figures are also looking quite promising, with 2 estimates moving higher in the past month, compared to none lower. The consensus estimate trend has also seen a boost for this time frame, with estimates narrowing from a loss of 5 cents 30 days ago, to a breakeven today, a significant move.
Conclusions:
The stock has also started to move higher lately, adding 58.7% over the past four weeks, suggesting that investors are starting to take note of this impressive story. Looking at the price action of GSS in the longer-term chart, we can see that dips under 25 cents have been bought during the past year. Prices are above the 40-week moving average. The On-Balance-Volume (OBV) line is rising and the Moving Average Convergence/Divergence oscillator is positive. The next resistance on GSS is not until the 75 cents area. Wait a minute. Don’t switch your screen over to your online brokerage account to buy GSS. The real reason for this update is to get you to think about this small part of the equity market. Soaring speculative names are usually a sign of a frothy market but because there are so few opportunities in this space, I think we will see more of this happening and it won’t be a sign of a top. Yes, gold could have some setbacks, but it trades strong as minor corrections have been intraday or just sideways. Gold could be the big surprise market of 2016 and 2017.
Sources:
- http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=GSS
- http://www.google.ca/finance?q=NYSEMKT%3AGSS&fstype=ii&hl=en&gl=ca&ei=xAkpV7jVFcaVjAH2ia3wAg
- http://finance.yahoo.com/news/golden-star-resources-announces-us-120321849.html
- http://finance.yahoo.com/news/why-golden-star-resources-gss-131201618.html
- http://realmoney.thestreet.com/articles/03/08/2016/golden-star-resources-get-ready-go-vertical?puc=yahoo&cm_ven=YAHOO
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