| Debt
|
|
|
|
|
|
1. NATURE OF OPERATIONS
Through our 90% owned subsidiary Golden Star (Bogoso/Prestea) Ltd ("GSBPL") we own and operate the Bogoso/Prestea gold mining and processing operation ("Bogoso/Prestea") located near the town of Bogoso, Ghana. Through our 90% owned subsidiary Golden Star (Wassa) Ltd ("GSWL") we also own and operate the Wassa gold mine ("Wassa"), located approximately 35 kilometers east of Bogoso/Prestea. Wassa mines ore from pits near the Wassa plant and also processes ore mined at our Hwini-Butre and Benso ("HBB") mines located south of Wassa. We hold interests in several gold exploration projects in Ghana and elsewhere in West Africa including Sierra Leone, Burkina Faso, Niger and Côte d'Ivoire, and in South America we hold and manage exploration properties in Brazil.
|
2. BASIS OF PRESENTATION
Golden Star Resources Ltd ("Golden Star" or "Company") is a Canadian federally–incorporated, international gold mining and exploration company headquartered in the United States ("U.S."). Prior to 2011, Golden Star has reported to security regulators in both Canada and the U.S. using Canadian GAAP financial statements with a footnote reconciliation to U.S. GAAP. However, a change in SEC position in late 2009 required Canadian companies such as Golden Star, that do not qualify as a foreign private issuer, to file their financial statements in the U.S. using U.S. GAAP after December 31, 2010. We therefore adopted U.S. GAAP as of January 1, 2011 for all of our subsequent U.S. and Canadian filings. All comparative financial information presented in this Form 10-Q is thus reported in accordance with U.S. GAAP.
Since the U.S. GAAP financial statements contained in this Form 10-Q differ in certain respects from financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"), Note 21 has been added to this Form 10-Q which presents our Consolidated Balance Sheets, Statements of Operations and Statements of Cash Flow as if we had adopted IFRS. This is done to facilitate comparison of our financial results to those of other mining companies that report in IFRS.
These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the interim periods presented.
The results reported in these interim financial statements are not necessarily indicative of the results that may be reported for the entire year. Accordingly, these interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2010, including note 27, "Generally Accepted Accounting Principles in the United States", filed on Form 10-K.
|
3. RECENT ACCOUNTING PRONOUNCEMENTS
RECENTLY ADOPTED STANDARDS
In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2010-06, "Improving Disclosures about Fair Value Measurements," which amends Subtopic 820-10 of the FASB Accounting Standards Codification to require new disclosures for fair value measurements and provides clarification for existing disclosure requirements. More specifically, this update required (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This update clarified existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. We adopted this new guidance in the first quarter of 2010 and it did not materially expand our consolidated financial statement footnote disclosures.
In April 2010, the FASB issued Accounting Standards Update No. 2101-12 which amends topic 718 "Compensation—Stock Compensation". The amendment addresses the classification of an employee share-based payment awards with an exercise price denominated in the currency of a market in which the underlying equity security trades, stating that a share-based award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity. This new provision is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2010. While our stock option plan denominates option strike prices in Canadian dollars, a substantial portion of our common shares trade in Canada and thus this new guidance did not affect our consolidated financial position, cash flows, nor results of operations in 2011.
RECENTLY ISSUED STANDARDS
Presentation of Comprehensive Income: In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220)-Presentation of Comprehensive Income (ASU 2011-05), to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective for us in our first quarter of fiscal 2013 and should be applied retrospectively. We are currently evaluating the impact of our pending adoption of ASU 2011-04 on our consolidated financial statements.
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements: In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820)-Fair Value Measurement (ASU 2011-04), to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 is effective for us in our fourth quarter of fiscal 2012 and should be applied prospectively. We are currently evaluating the impact of our pending adoption of ASU 2011-04 on our consolidated financial statements.
Disclosure Requirements Related to Fair Value Measurements: In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (Topic 820)-Fair Value Measurements and Disclosures (ASU 2010-06), to add additional disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, and the activity in Level 3 fair value measurements. Certain provisions of this update will be effective for us in fiscal 2012 and we and do not believe these provisions will have a material impact on our consolidated financial statements.
|
4. FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
The carrying amounts and fair values of our financial assets are as follows:
As of June 30, 2011 | As of December 31, 2010 | |||||||||||||||||
Assets |
Category |
Estimated Fair Value |
Carrying Value |
Estimated Fair Value |
Carrying Value |
|||||||||||||
Cash and cash equivalents (1) |
Loans and receivables | $ | 127,915 | $ | 127,915 | $ | 178,018 | $ | 178,018 | |||||||||
Restricted cash (1) |
Loans and receivables | 2,405 | 2,405 | 1,205 | 1,205 | |||||||||||||
Accounts receivable (1) |
Loans and receivables | 14,494 | 14,494 | 11,885 | 11,885 | |||||||||||||
Derivative instrument - Riverstone Warrants (1) |
Held-for-trading | 334 | 334 | 375 | 375 | |||||||||||||
Available for sale investments (3) |
Available-for-sale | 1,058 | 1,058 | 928 | 928 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total financial assets |
$ | 146,206 | $ | 146,206 | $ | 192,411 | $ | 192,411 | ||||||||||
|
|
|
|
|
|
|
|
FINANCIAL LIABILITIES
The carrying amounts and fair values of financial liabilities are as follows:
As of June 30, 2011 | As of December 31, 2010 | |||||||||||||||||
Liabilities |
Category |
Estimated Fair Value |
Carrying Value |
Estimated Fair Value |
Carrying Value |
|||||||||||||
Accounts payable and accrued liabilities (1) |
Other financial liabilities | $ | 70,728 | $ | 70,728 | $ | 88,457 | $ | 88,457 | |||||||||
Derivative instrument-Structured Gold Options (1) |
Held-for-trading | 5,138 | 5,138 | — | — | |||||||||||||
Convertible senior unsecured debentures (2) |
Other financial liabilities | 123,473 | 123,062 | 147,779 | 147,353 | |||||||||||||
Equipment financing loans (2) |
Other financial liabilities | 15,726 | 15,143 | 16,113 | 15,714 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total financial liabilities |
$ | 215,065 | $ | 214,071 | $ | 252,349 | $ | 251,524 | ||||||||||
|
|
|
|
|
|
|
|
(1) | Carrying amount is a reasonable approximation of fair value. |
(2) | The fair values of the debt portion of the convertible senior unsecured debentures, the equipment financing loans, and the revolving credit facility are determined by discounting the stream of future payments of interest and principal at the estimated prevailing market rates of comparable debt instruments. The carrying values of these liabilities are shown net of any capitalized loan fees. The fair value of the equity component of the convertible debentures is estimated by a Black Scholes option pricing model. |
(3) | The fair value represents quoted market prices in an active market. |
The following tables illustrate the classification of the Company's financial instruments within the fair value hierarchy as at June 30, 2011. The three levels of the fair value hierarchy are:
|
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; |
|
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and |
|
Level 3 – Inputs that are not based on observable market data. |
Financial assets measured at fair value as at June 30, 2011 |
||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Available for sale investments |
$ | 1,058 | $ | — | $ | — | $ | 1,058 | ||||||||
Warrants |
— | 334 | — | 334 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,058 | $ | 334 | $ | — | $ | 1,392 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities measured at fair value as at June 30, 2011 |
||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Convertible senior unsecured debentures |
$ | — | $ | — | $ | 123,473 | $ | 123,473 | ||||||||
Gold price derivatives |
— | 5,138 | — | 5,138 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | — | $ | 5,138 | $ | 123,473 | $ | 128,611 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial assets measured at fair value as at December 31, 2010 |
||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Available for sale investments |
$ | 928 | $ | — | $ | — | $ | 928 | ||||||||
Warrants |
— | 375 | — | 375 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 928 | $ | 375 | $ | — | $ | 1,303 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities measured at fair value as at December 31, 2010 |
||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Convertible senior unsecured debentures |
$ | — | $ | — | $ | 147,779 | $ | 147,779 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | — | $ | — | $ | 147,779 | $ | 147,779 | |||||||||
|
|
|
|
|
|
|
|
The convertible senior unsecured debentures are recorded at fair value. These debentures are valued based on discounted cash flows for the debt portion and based on a Black-Scholes model for the equity portion. Inputs used to determine these values were; discount rate 8.86%, Risk Free interest rate of 1.58%, volatility of 71.9%, and a remaining life of 1.5 years. Note 11 - Debt has a more detailed discussion of the debentures.
Fair value measurements using Level 3 inputs
Convertible senior unsecured debentures |
||||
Balance of December 31, 2010 |
$ | 147,779 | ||
Gain included in net income |
(24,306 | ) | ||
|
|
|||
Balance at June 30, 2011 |
$ | 123,473 | ||
|
|
|
5. DERIVATIVE GAINS AND LOSSES
The derivative mark-to-market (gains)/losses recorded in the Statement of Operations are comprised of the following amounts:
For the three months ended June 30 |
For the six months ended June 30 |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Riverstone Resources, Inc. - warrants |
$ | 315 | $ | 812 | $ | 41 | $ | (319 | ) | |||||||
Gold forward price contracts |
2,115 | 1,066 | 6,638 | 1,066 | ||||||||||||
Convertible debenture |
(6,107 | ) | 8,955 | (24,292 | ) | 23,006 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivative (gain)/loss |
$ | (3,677 | ) | $ | 10,833 | $ | (17,613 | ) | $ | 23,753 | ||||||
|
|
|
|
|
|
|
|
|||||||||
For the three months ended June 30 |
For the six months ended June 30 |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Realized (gain)/loss |
$ | 1,499 | $ | 1,066 | $ | 1,499 | $ | 1,066 | ||||||||
Unrealized (gain)/loss |
(5,176 | ) | 9,767 | (19,112 | ) | 22,687 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivative (gain)/loss |
$ | (3,677 | ) | $ | 10,833 | $ | (17,613 | ) | $ | 23,753 | ||||||
|
|
|
|
|
|
|
|
RIVERSTONE RESOURCES INC. – WARRANTS
In the first quarter of 2008, we received 2 million warrants from Riverstone Resources Inc. ("Riverstone") as partial payment for the right to earn an ownership interest in our exploration projects in Burkina Faso. These warrants are exercisable through January 2012 at Cdn$0.45.
GOLD PRICE DERIVATIVES
In January 2011, we entered into a series of put and call contracts covering 76,800 ounces of future gold production between February and December 2011. The contracts are spread evenly in each week over this period and are structured as cashless collars with a floor of $1,200 per ounce and a cap of $1,457 per ounce. In early February 2011, we entered into a second set of put and call contracts covering 75,200 ounces of future gold production between February and December 2011. The contacts are spread evenly in each week during this period and are structured as cashless collars with a floor of $1,200 per ounce and a cap of $1,503 per ounce. As of June 30, 2011 each tranche had 41,600 ounces outstanding.
CONVERTIBLE DEBENTURES
The convertible senior unsecured debentures are recorded at fair value for U.S. GAAP purposes. These debentures are valued based on discounted cash flows for the debt portion and based on a Black-Scholes model for the equity portion. Inputs used to determine these values were; discount rate 8.86%, Risk Free interest rate of 1.58%, volatility of 71.9%, and a remaining life of 1.5 years. Note 11 - Debt has a more detailed discussion of the debentures
|
6. INVENTORIES
As of June 30 |
As of December 31 |
|||||||
2011 | 2010 | |||||||
Stockpiled ore |
$ | 4,712 | $ | 2,551 | ||||
In-process |
12,390 | 13,839 | ||||||
Materials and supplies |
48,775 | 48,814 | ||||||
Finished Goods |
— | — | ||||||
|
|
|
|
|||||
Total |
$ | 65,877 | $ | 65,204 | ||||
|
|
|
|
There were approximately 23,000 and 20,000 recoverable ounces of gold in the ore stockpile inventories shown above at June 30, 2011 and December 31, 2010, respectively. Stockpile inventories are short-term surge piles expected to be processed within the next 12 months.
|
7. AVAILABLE FOR SALE INVESTMENTS
The following table presents changes in available for sale investments in the first half of 2011 and the full year 2010:
As of June 30, 2011 | As of December 30, 2010 | |||||||||||||||
Riverstone | Riverstone | |||||||||||||||
Fair Value | Shares | Fair Value | Shares | |||||||||||||
Balance at December 31 |
$ | 928 | 1,300,000 | $ | 181 | 700,000 | ||||||||||
Acquisitions |
469 | 700,000 | 128 | 600,000 | ||||||||||||
OCI - unrealized gain/(loss) |
(339 | ) | — | 619 | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance as of June 30 |
$ | 1,058 | 2,000,000 | $ | 928 | 1,300,000 | ||||||||||
|
|
|
|
|
|
|
|
|
8. PROPERTY, PLANT AND EQUIPMENT
As of June 30, 2011 | As of December 31, 2010 | |||||||||||||||||||||||
Property, Plant and Equipment at Cost |
Accumulated Depreciation |
Property, Plant and Equipment Net Book Value |
Property, Plant and Equipment at Cost |
Accumulated Depreciation |
Property, Plant and Equipment, Net Book Value |
|||||||||||||||||||
Bogoso/Prestea |
$ | 164,640 | $ | (111,646 | ) | $ | 52,994 | $ | 157,010 | $ | (107,132 | ) | $ | 49,878 | ||||||||||
Bogoso sulfide plant |
186,909 | (54,180 | ) | 132,729 | 184,641 | (50,988 | ) | 133,653 | ||||||||||||||||
Wassa/HBB |
101,320 | (52,992 | ) | 48,328 | 89,875 | (45,607 | ) | 44,268 | ||||||||||||||||
Corporate & other |
1,580 | (829 | ) | 751 | 1,343 | (775 | ) | 568 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 454,449 | $ | (219,647 | ) | $ | 234,802 | $ | 432,869 | $ | (204,502 | ) | $ | 228,367 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
There was no interest capitalized in new additions to property, plant and equipment in the periods shown above.
|
9. MINING PROPERTIES
As of June 30, 2011 | As of December 31, 2010 | |||||||||||||||||||||||
Mining Properties |
Accumulated Amortization |
Mining Properties, Net Book |
Mining Properties |
Amortization | Mining Properties, Net Book |
|||||||||||||||||||
Bogoso/Prestea |
$ | 109,991 | $ | (58,173 | ) | $ | 51,818 | $ | 99,435 | $ | (56,488 | ) | $ | 42,947 | ||||||||||
Bogoso Sulfide |
57,562 | (39,862 | ) | 17,700 | 56,541 | (37,101 | ) | 19,440 | ||||||||||||||||
Mampon |
15,995 | — | 15,995 | 15,995 | — | 15,995 | ||||||||||||||||||
Wassa / HBB |
313,936 | (166,219 | ) | 147,717 | 303,379 | (147,558 | ) | 155,821 | ||||||||||||||||
Other |
19,235 | (2,330 | ) | 16,905 | 18,747 | (2,330 | ) | 16,417 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 516,719 | $ | (266,584 | ) | $ | 250,135 | $ | 494,097 | $ | (243,477 | ) | $ | 250,620 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
There was no interest capitalized in new additions to mining properties in the periods shown above.
|
10. ASSET RETIREMENT OBLIGATIONS
At the end of each period, Asset Retirement Obligations ("ARO") are equal to the present value of all estimated future costs required to remediate any environmental disturbances that exist as of the end of the period, using discount rates applicable at the time of initial recognition of each component of the liability. Included in this liability are the costs of closure, reclamation, demolition and stabilization of the mines, processing plants, infrastructure, tailings storage facilities, waste dumps and ongoing post-closure environmental monitoring and maintenance costs. While the majority of these costs will be incurred near the end of the mines' lives, it is expected that certain on-going reclamation costs will be incurred prior to mine closure. These costs are recorded against the asset retirement obligation liability as incurred. At June 30, 2011, and December 31, 2010, the total undiscounted amount of the estimated future cash needs was estimated to be $76.2 million and $84.3 million, respectively. Discount rates used to value the ARO range between 8% and 10%. The schedule of payments required to settle the June 30, 2011, ARO liability extends through 2029.
The changes in the carrying amount of the ARO during the six months ended June 30, 2011 and 2010 are as follows:
For the six months ended June 30 |
||||||||
2011 | 2010 | |||||||
Beginning balance |
$ | 44,952 | $ | 31,969 | ||||
Accretion expense |
3,116 | 1,201 | ||||||
Additions and change in estimates |
3,748 | — | ||||||
Cost of reclamation work performed |
(11,828 | ) | (3,599 | ) | ||||
|
|
|
|
|||||
Balance at June 30 |
$ | 39,988 | $ | 29,571 | ||||
|
|
|
|
|||||
Current portion |
$ | 15,459 | $ | 7,520 | ||||
Long term portion |
$ | 24,529 | $ | 22,051 |
|
11. DEBT
As of | ||||||||
June 30 2011 |
December 31 2010 |
|||||||
Current debt: |
||||||||
Equipment financing credit facility |
$ | 6,784 | $ | 7,189 | ||||
Capital lease |
1,529 | 2,825 | ||||||
Revolving credit facility |
— | — | ||||||
|
|
|
|
|||||
Total current debt |
$ | 8,313 | $ | 10,014 | ||||
|
|
|
|
|||||
Long term debt: |
||||||||
Equipment financing credit facility |
8,359 | 8,525 | ||||||
Convertible debentures |
123,062 | 147,353 | ||||||
|
|
|
|
|||||
Total long term debt |
$ | 131,421 | $ | 155,878 | ||||
|
|
|
|
EQUIPMENT FINANCING CREDIT FACILITY
GSBPL and GSWL maintain a $40 million equipment financing facility with Caterpillar Financial Services Corporation, with Golden Star as the guarantor of all amounts borrowed. The facility provides credit for new and used mining equipment. Amounts drawn under this facility are repayable over five years for new equipment and over two years for used equipment. The interest rate for each draw-down is fixed at the date of the draw-down using the Federal Reserve Bank 2-year or 5-year swap rate or London Interbank Offered Rate ("LIBOR") plus 2.38%. At June 30, 2011, approximately $24.8 million was available to draw down. The average interest rate on the outstanding loans was approximately 7.1% at June 30, 2011. Each outstanding equipment loan is secured by the title of the specific equipment purchased with the loan until the loan has been repaid in full.
CAPITAL LEASE
In February 2010, GSBPL accepted delivery of a nominal 20 megawatt power plant. Upon acceptance, a $4.9 million liability was recognized which, at the time, was equal to the present value of future lease payments. The life of the lease is two years from the plant's February 2010 in-service date. We are required to pay the owner/operator a minimum of $0.3 million per month on the lease, of which $0.23 million will be allocated to principal and interest on the recognized liability and the remainder of the monthly payments will be charged as operating costs.
CONVERTIBLE DEBENTURES
Interest on the $125 million aggregate principal amount of 4.0% convertible senior unsecured debentures due November 30, 2012, (the "Debentures") is payable semi-annually in arrears on May 31 and November 30 of each year. The Debentures are, subject to certain limitations, convertible into common shares at a conversion rate of 200 shares per $1,000 principal amount of the Debentures (equal to a conversion price of $5.00 per share) subject to adjustment under certain circumstances. The Debentures are not redeemable at our option. On maturity, we may, at our option, satisfy our repayment obligation by paying the principal amount of the Debentures in cash or, subject to certain limitations, by issuing that number of our common shares obtained by dividing the principal amount of the Debentures outstanding by 95% of the weighted average trading price of our common shares on the NYSE Amex stock exchange for the 20 consecutive trading days ending five trading days preceding the maturity date (the "Market Price").
Upon the occurrence of certain change in control transactions, the holders of the Debentures may require us to purchase the Debentures for cash at a price equal to 101% of the principal amount plus accrued and unpaid interest. If 10% or more of the fair market value of any such change in control consideration consists of cash, the holders may convert their Debentures and receive a number of additional common shares, determined as set forth in the Indenture.
The Debentures are direct senior unsecured indebtedness of Golden Star Resources Ltd., ranking equally and ratably with all our other senior unsecured indebtedness, and senior to all our subordinated indebtedness. None of our subsidiaries have guaranteed the Debentures, and the Debentures do not limit the amount of debt that we or our subsidiaries may incur.
See Note 4 – Financial Liabilities and Note 5 – Derivative Gains and Losses for additional information on the fair value of these convertible debentures.
REVOLVING CREDIT FACILITY
We have a revolving credit facility agreement (the "Facility Agreement") with Standard Chartered Bank which extends through September 30, 2012. The Facility currently provides us with $40.5 million of borrowing capacity and bears interest at the higher of LIBOR or the applicable lenders' cost of funds rate (which is capped at 1.25% per annum above LIBOR), plus a margin of 5% per annum. As of June 30, 2011, the outstanding balance was nil. The amount available under the Facility will be reduced, as scheduled in the agreement, by $9.0 million on December 31, 2011. Covenants require that we meet certain financial ratios at the end of each quarter, including that in excess of 90% of our assets are retained within a group of subsidiaries whose common shares are pledged as collateral for amounts drawn under the revolving credit facility. We were in compliance with all covenants at June 30, 2011 and December 31, 2010.
|
12. INCOME TAXES
The provision for income taxes includes the following components:
For the three months ended June 30 |
For the six months ended June 30 |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Current expense |
||||||||||||||||
Canada |
$ | — | $ | — | $ | — | $ | — | ||||||||
Foreign |
(686 | ) | (470 | ) | (1,684 | ) | (988 | ) | ||||||||
Future expense |
— | — | — | — | ||||||||||||
Canada |
— | — | — | — | ||||||||||||
Foreign |
(3,115 | ) | (781 | ) | (6,422 | ) | (1,791 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expense |
$ | (3,801 | ) | $ | (1,251 | ) | $ | (8,106 | ) | $ | (2,779 | ) | ||||
|
|
|
|
|
|
|
|
The future tax expense is related to the change in the temporary difference between book and tax basis at GSWL.
The current tax expense is related to a temporary tax levy on certain Ghanaian industries, including mining, brewing, banking, communications and insurance. The levy is set at 5% of "profits before tax" as disclosed on the statements of operations. The effective period of this levy has extended to 2011.
|
13. COMMITMENTS AND CONTINGENCIES
Our commitments and contingencies include the following items:
ENVIRONMENTAL BONDING IN GHANA
In July 2011 we increased a letter of credit for Wassa's environmental bonding from $2.85 million to $7.8 million. This brought the total bonded amount, including $0.15 million of cash, from $3.0 million to $7.95 million.
We have also bonded $9.0 million to cover rehabilitation and closure obligations at Bogoso/Prestea. These bonding requirements have been met by an $8.1 million letter of credit from a commercial bank and a $0.9 million cash deposit held by the EPA. The cash deposits are recorded as Restricted Cash on our Consolidated Balance Sheets.
In 2008, Bogoso/Prestea resubmitted an updated draft of the Environmental Management Plan ("EMP") to the EPA that included an updated estimate of the reclamation and closure costs prepared by a third party consultant. A consultant was commissioned to prepare the reclamation and closure cost estimate and the final EMP was submitted to the EPA in February 2009. Bogoso/Prestea has completed all the legal requirements and is waiting for the environmental certificate.
In March 2011, we provided $12 million of reclamation bonding to the Ghana Environmental Protection Agency ("EPA") to cover backfilling of the Plant North pit at Prestea which we mined from 2003 to 2006. The bonding requirements were met by a $1.2 million cash deposit and a $10.8 million letter of credit from a commercial bank. Provisions of the bond allow the bonded amount to be reduced as cash is spent on the progress of the backfill project. In the second quarter of 2011 the bonded amount was reduced by $2.7 million.
ROYALTIES
Dunkwa Properties
As part of the acquisition of the Dunkwa properties in 2003, we agreed to pay the seller a net smelter return royalty on future gold production from the Mansiso and Asikuma properties. As per the acquisition agreement, there will be no royalty due on the first 200,000 ounces produced from Mampon which is located on the Asikuma property. The amount of the royalty is based on a sliding scale which ranges from 2% of net smelter return at gold prices at or below $300 per ounce and progressively increases to 3.5% for gold prices in excess of $400 per ounce.
Government of Ghana
The Ghana Government royalty has been set at a flat rate of 5% of mineral revenues and became effective March 31, 2011.
Benso
Benso pays a $1.00 per ounce gold production royalty to former owners.
Hwini-Butre
As part of the agreement for the purchase of the Hwini-Butre properties, Golden Star agreed to pay B.D. Goldfields Ltd, Hwini-Butre's former owner, an additional $1.0 million in cash if at least one million ounces of gold are produced and recovered in the first five years of production from the area covered by the Hwini-Butre prospecting license. Gold production was initiated at Hwini-Butre in May 2009. It is not possible at this time to know if future exploration work will increase Hwini-Butre's reserves sufficiently to yield production of one million ounces prior to May 2014.
EXPLORATION AGREEMENTS
Obuom
In October 2007, we entered into an agreement with AMI Resources Inc. ("AMI"), which gives AMI the right to earn our 54% ownership position in the Obuom property in Ghana. Should AMI eventually obtain full rights to our position on the property and develop a gold mining operation at Obuom, we would receive from AMI a 2% net smelter return royalty on 54% of the property's gold production.
Goulagou and Rounga
In October 2007, we entered into an option agreement with Riverstone Resources Inc. ("Riverstone") whereby Riverstone has the right to acquire our 90% interest in the Goulagou and Rounga properties in Burkina Faso. To exercise the option, Riverstone is required to spend Cdn$4 million on exploration programs on the Goulagou and Rounga properties over a four-year period, and may then purchase our interest for $18.6 million in cash or Riverstone common shares. We were entitled to receive up to 2 million shares of Riverstone over the term of the option, all of which were received as of March 31, 2011. In addition we received a one-time distribution of two million Riverstone common share purchase warrants during 2008. The Riverstone purchase warrants have an exercise price of Cdn$0.45.
LEGAL PROCEEDINGS
B.D. Goldfields Action
On July 19, 2011 B.D. Goldfields, Ltd. ("plaintiff"), a Ghanaian registered company, filed suit in the Superior Court of Judicature in the High Court of Justice, Commercial Division in Accra, Ghana (suit number RPC/282/2011), against Golden Star Resources Ltd. and our subsidiary St. Jude Resources Ltd. The plaintiff is challenging the validity of the concession contracts and settlements related to our acquisition of the Hwini-Butre gold property in Ghana in 2006. More specifically the plaintiff is taking the position that the original sales agreement covered only a small section of the Hwini-Butre concession and is now seeking $24 million plus a royalty for the remaining portion of the concession. The plaintiff has previously filed similar suits in other jurisdictions, challenging our ownership of the Hwini-Butre concession and these prior claims were dismissed by the courts. The plaintiff is seeking an injunction which would halt mining on the concession until all legal issues are resolved. No further developments are expected in this litigation until October 2011 when the court reconvenes after its recess.
|
15. COST OF SALES
For the three months ended June 30 |
For the six months ended June 30 |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Mining operations costs |
$ | 82,621 | $ | 74,809 | $ | 171,100 | $ | 139,326 | ||||||||
Operations costs from/(to) metal inventory |
2,231 | 1,146 | (459 | ) | 234 | |||||||||||
Mining related depreciation and amortization |
15,490 | 27,298 | 36,519 | 52,732 | ||||||||||||
Accretion of asset retirement obligations |
2,183 | 601 | 3,116 | 1,201 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Cost of Sales |
$ | 102,525 | $ | 103,854 | $ | 210,276 | $ | 193,493 | ||||||||
|
|
|
|
|
|
|
|
|
16. STOCK BASED COMPENSATION
STOCK OPTIONS
We have one stock option plan, the Third Amended and Restated 1997 Stock Option Plan (the "Plan") approved by shareholders in May 2010, under which options are granted at the discretion of the Board of Directors. Options granted are non-assignable and are exercisable for a period of ten years or such other period as stipulated in a stock option agreement between Golden Star and the optionee. Under the Plan, we may grant options to employees, consultants and directors of the Company or its subsidiaries for up to 25,000,000 shares, of which 9,213,846 are available for grant as of June 30, 2011, and the exercise price of each option is not less than the closing price of our shares on the Toronto Stock Exchange on the day prior to the date of grant. Options typically vest over periods ranging from immediately to three years from the date of grant. Vesting periods are determined at the discretion of the Board of Directors.
Non-cash employee compensation expense recognized in general and administrative expense in the statements of operations with respect to the Plan are as follows:
For the three months ended June 30th |
For the six months ended June 30th |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Total stock compensation expense |
$ | 879 | $ | 502 | $ | 2,220 | $ | 1,919 | ||||||||
|
|
|
|
|
|
|
|
We granted 1,918,000 and 1,308,500 options during the second quarters of 2011 and 2010, respectively. We do not receive a tax deduction for the issuance of options. As a result we do not recognize any income tax benefit related to the stock compensation expense.
The fair value of our option grants are estimated at the grant dates using the Black-Scholes option-pricing model. Fair values of options granted in the first six months of 2011 and 2010 were based on the assumptions noted in the following table:
For the six months ended June 30 | ||||
2011 | 2010 | |||
Expected volatility |
66.33 to 69.79% | 67.95 to 77.37% | ||
Risk-free interest rate |
2.17 to 2.26% | 2.34 to 2.58% | ||
Expected lives |
5.6 to 8.5 years | 6.0 to 8.6 years | ||
Dividend yield |
0% | 0% |
Expected volatilities are based on the mean reversion tendency of the volatility of Golden Star's shares. Golden Star uses historical data to estimate share option exercise and employee departure behavior and this data is used in determining input data for the Black–Scholes model. Groups of employees that have dissimilar historical behavior are considered separately for valuation purposes. The expected term of the options granted represents the period of time that the options granted are expected to be outstanding; the range given above results from certain groups of employees exhibiting different post–vesting behaviors. The risk–free rate for periods within the contractual term of the option is based on the Canadian Chartered Bank administered interest rates in effect at the time of the grant.
A summary of option activity under the Plan during the six months ended June 30, 2011:
Options ('000) |
Weighted– Average Exercise price (Cdn$) |
Weighted– Average Remaining Contractual Term (Years) |
Aggregate intrinsic value Cdn($000) |
|||||||||||||
Outstanding as of December 31, 2010 |
6,724 | 3.35 | 7.0 | 9,001 | ||||||||||||
Granted |
1,918 | 2.80 | 10.0 | — | ||||||||||||
Exercised |
(73 | ) | 2.14 | 5.0 | — | |||||||||||
Forfeited, cancelled and expired |
(128 | ) | 3.65 | 6.0 | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Outstanding as of June 30, 2011 |
8,441 | 3.23 | 7.0 | 711 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Exercisable as of June 30, 2011 |
5,923 | 3.34 | 7.0 | 556 |
Stock Bonus Plan
In December 1992, we established an Employees' Stock Bonus Plan (the "Bonus Plan"). The activity and status of the Bonus Plan is unchanged from what was disclosed in our December 31, 2010 annual report on Form 10-K.
Deferred Share Units
On March 9, 2011 the Board adopted a Deferred Share Unit Plan ("DSU plan") which was subsequently approved by shareholders at the May 2011 annual meeting. The DSU Plan creates Deferred Share Units ("DSUs") representing the right to receive one share of Golden Star common stock upon redemption. DSUs may be redeemed only upon termination of the holder's services to the Company, and may be subject to vesting provisions. DSU awards are granted at the sole discretion of the Company's compensation committee. The DSU Plan allows directors, at their option, to receive all or any portion of their retainer by accepting DSUs in lieu of cash.
The compensation committee may also award DSUs to executive officers and/or directors in lieu of cash as a component of their long term performance compensation, the amount of such awards being in proportion to the officer's/director's achievement of pre-determined performance goals. As with DSU awards for directors' retainers, DSUs received as performance compensation are redeemable only upon termination of the holder's services to the Company. The Company may, at its option, provide cash in lieu of common shares upon a holder's redemption, the cash value being established by the share price on the DSU original award date, less all applicable tax withholding. There were nil DSUs outstanding at June 30, 2011.
|
18. OPERATIONS BY SEGMENT AND GEOGRAPHIC AREA
Africa | ||||||||||||||||||||||||
As of and for the three months ended June 30 |
Bogoso/ Prestea |
Wassa/ HBB |
Other | South America |
Corporate | Total | ||||||||||||||||||
2011 |
||||||||||||||||||||||||
Revenues |
$ | 51,609 | $ | 58,198 | $ | — | $ | — | $ | — | $ | 109,807 | ||||||||||||
Net income/(loss) attributable to Golden Star |
(8,166 | ) | 8,374 | (675 | ) | (167 | ) | (4,414 | ) | (5,048 | ) | |||||||||||||
Income tax (expense)/benefit |
— | (3,801 | ) | — | — | — | (3,801 | ) | ||||||||||||||||
Capital expenditure |
12,508 | 6,456 | 178 | — | — | 19,142 | ||||||||||||||||||
Total assets |
359,857 | 247,332 | 4,255 | (253 | ) | 105,930 | 717,121 | |||||||||||||||||
2010 |
||||||||||||||||||||||||
Revenues |
$ | 63,255 | $ | 57,052 | $ | — | $ | — | $ | — | $ | 120,307 | ||||||||||||
Net income/(loss) attributable to Golden Star |
9,671 | 1,887 | (961 | ) | (19 | ) | (16,196 | ) | (5,618 | ) | ||||||||||||||
Income tax (expense)/benefit |
— | (1,251 | ) | — | — | — | (1,251 | ) | ||||||||||||||||
Capital expenditure |
6,060 | 5,898 | 537 | 89 | 94 | 12,678 | ||||||||||||||||||
Total assets |
344,865 | 232,517 | 3,766 | 213 | 160,213 | 741,574 | ||||||||||||||||||
Africa | ||||||||||||||||||||||||
As of and for the six months ended June 30 |
Bogoso/ Prestea |
Wassa/ HBB |
Other | South America |
Corporate | Total | ||||||||||||||||||
2011 |
||||||||||||||||||||||||
Revenues |
$ | 94,097 | $ | 132,216 | $ | — | $ | — | $ | — | $ | 226,313 | ||||||||||||
Net income/(loss) attributable to Golden Star |
(15,770 | ) | 19,015 | (1,380 | ) | (264 | ) | (721 | ) | 880 | ||||||||||||||
Income tax (expense) |
— | (8,106 | ) | — | — | — | (8,106 | ) | ||||||||||||||||
Capital expenditure |
20,850 | 16,769 | 275 | — | — | 37,894 | ||||||||||||||||||
Total assets |
359,857 | 247,332 | 4,255 | (253 | ) | 105,930 | 717,121 | |||||||||||||||||
2010 |
||||||||||||||||||||||||
Revenues |
$ | 114,209 | $ | 109,362 | $ | — | $ | — | $ | — | $ | 223,571 | ||||||||||||
Net income/(loss) attributable to Golden Star |
15,605 | 6,411 | (1,277 | ) | 134 | (35,741 | ) | (14,868 | ) | |||||||||||||||
Income tax (expense) |
— | (2,780 | ) | — | — | — | (2,780 | ) | ||||||||||||||||
Capital expenditure |
16,691 | 8,102 | 1,583 | — | 94 | 26,470 | ||||||||||||||||||
Total assets |
344,865 | 232,517 | 3,766 | 213 | 160,213 | 741,574 |
|
19. RELATED PARTIES
During the first six months of 2011, we obtained legal services from a firm to which one of our board members is of counsel. The cost of services incurred from this firm during the first six months of 2011 and 2010 was $0.2 million and $0.5 million, respectively. Our board member did not personally provide any legal services to the Company during these periods nor did he benefit directly or indirectly from payments for the services performed by the firm.
|
20. SUPPLEMENTAL CASH FLOW INFORMATION
In the first half of 2011, $1.8 million was paid for income taxes. Cash paid for income taxes during the first half of 2010 was $1.0 million. Cash paid for interest was $3.1 million in the first half of 2011 and, $3.6 million in the first half of 2010.
In February 2010, the company recognized a non-cash $4.9 million liability and an offsetting $4.9 million asset related to delivery of a 10 megawatt power plant upon successful commissioning of a stand-by power plant by Bogoso.
|
21. INTERNATIONAL FINANCIAL REPORTING STANDARDS
Our consolidated financial statements have been prepared in accordance with U.S. GAAP which differ from financial statements prepared in accordance with IFRS. The effect of applying IFRS to our financial statements is shown below:
CONSOLIDATED BALANCE SHEETS UNDER IFRS
US GAAP | IFRS | IFRS | ||||||||||||||||||
As of June 30 2011 |
Note | Adjustments | As of June 30 2011 |
As of December 31 2010 |
||||||||||||||||
ASSETS |
||||||||||||||||||||
CURRENT ASSETS |
||||||||||||||||||||
Cash and cash equivalents |
$ | 127,915 | $ | 127,915 | $ | 178,018 | ||||||||||||||
Accounts receivable |
14,494 | 14,494 | 11,885 | |||||||||||||||||
Inventories |
65,877 | 1 | (167 | ) | 65,710 | 65,204 | ||||||||||||||
Deposits |
9,814 | 9,814 | 5,865 | |||||||||||||||||
Prepaids and other |
2,735 | 2,735 | 1,523 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Current Assets |
220,835 | 220,668 | 262,495 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
RESTRICTED CASH |
2,405 | 2,405 | 1,205 | |||||||||||||||||
PROPERTY, PLANT AND EQUIPMENT |
234,802 | 234,802 | 227,367 | |||||||||||||||||
INTANGIBLE ASSETS |
6,319 | 6,319 | 7,373 | |||||||||||||||||
MINING PROPERTIES |
250,135 | 2, 3 | 38,721 | 288,856 | 293,102 | |||||||||||||||
DEFERRED EXPLORATION |
— | 4 | 15,552 | 15,552 | 14,487 | |||||||||||||||
OTHER ASSETS |
2,625 | 2,625 | 3,168 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Assets |
$ | 717,121 | $ | 771,227 | $ | 809,197 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
LIABILITIES |
||||||||||||||||||||
CURRENT LIABILITIES |
||||||||||||||||||||
Accounts payable |
$ | 22,959 | $ | 22,959 | $ | 34,522 | ||||||||||||||
Accrued liabilities |
47,769 | 47,769 | 53,935 | |||||||||||||||||
Fair value of derivatives |
5,138 | 5,138 | — | |||||||||||||||||
Asset retirement obligations |
15,459 | 15,459 | 23,485 | |||||||||||||||||
Current tax liability |
761 | 761 | 1,128 | |||||||||||||||||
Current debt |
8,313 | 8,313 | 10,014 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Current Liabilities |
100,399 | 100,399 | 123,084 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
LONG TERM DEBT |
131,421 | 6 | (10,413 | ) | 121,008 | 117,290 | ||||||||||||||
ASSET RETIREMENT OBLIGATIONS |
24,529 | 3 | 16,552 | 41,081 | 42,826 | |||||||||||||||
CAPITAL LEASES |
— | — | — | |||||||||||||||||
NET DEFERRED TAX LIABILITY |
22,024 | 5 | 5,892 | 27,916 | 21,094 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Liabilities |
$ | 278,373 | $ | 290,404 | $ | 304,294 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
COMMITMENTS AND CONTINGENCIES |
— | — | — | |||||||||||||||||
SHAREHOLDERS' EQUITY |
||||||||||||||||||||
SHARE CAPITAL |
||||||||||||||||||||
First preferred shares, without par value, unlimited shares authorized. |
||||||||||||||||||||
No shares issued and outstanding |
— | — | — | |||||||||||||||||
Common shares, without par value, unlimited shares authorized. Shares issued and outstanding: 258,559,486 at March 31, 2011; 258,511,236 at December 31, 2010 |
693,705 | 693,705 | 693,487 | |||||||||||||||||
CONTRIBUTED SURPLUS |
18,720 | 7 | 1,019 | 19,739 | 17,433 | |||||||||||||||
EQUITY COMPONENT OF CONVERTIBLE NOTES |
— | 6 | 34,542 | 34,542 | 34,542 | |||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME |
1,620 | 1,620 | 1,959 | |||||||||||||||||
DEFICIT |
(273,156 | ) | 3,666 | (269,490 | ) | (243,930 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
TOTAL GOLDEN STAR EQUITY |
440,889 | 480,116 | 503,491 | |||||||||||||||||
NONCONTROLLING INTEREST |
(2,141 | ) | 8 | 2,848 | 707 | 1,412 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
TOTAL EQUITY |
438,748 | 480,823 | 504,903 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ | 717,121 | $ | 771,227 | $ | 809,197 | ||||||||||||||
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS UNDER IFRS
US GAAP | IFRS | IFRS | ||||||||||||||||||
For the three months ended June 30 2011 |
Note | Adjustments | For the three months ended June 30 2011 |
For the three months ended June 30 2010 |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Gold revenues |
$ | 109,807 | $ | 109,807 | $ | 120,307 | ||||||||||||||
Cost of sales |
102,525 | 1,2,3 | (526 | ) | 101,999 | 100,347 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Mine operating margin |
7,282 | 7,808 | 19,960 | |||||||||||||||||
Exploration expense |
1,569 | 4 | (1,021 | ) | 548 | 451 | ||||||||||||||
General and administrative expense |
7,252 | 7 | 92 | 7,344 | 4,219 | |||||||||||||||
Abandonment and impairment |
— | 4 | 167 | 167 | 71 | |||||||||||||||
Derivative mark-to-market gains |
(3,677 | ) | 6 | 6,107 | 2,430 | 1,878 | ||||||||||||||
Property holding costs |
1,689 | 1,689 | 1,197 | |||||||||||||||||
Fair value of debt |
— | — | — | |||||||||||||||||
Foreign exchange loss |
462 | 462 | 204 | |||||||||||||||||
Interest expense |
2,112 | 6 | 1,875 | 3,987 | 4,167 | |||||||||||||||
Interest and other income |
(63 | ) | (63 | ) | (97 | ) | ||||||||||||||
Minority intererst |
2 | 2 | — | |||||||||||||||||
Gain on sale of investments |
— | — | — | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) before income tax |
(2,064 | ) | (8,758 | ) | 7,870 | |||||||||||||||
Income tax expense |
(3,801 | ) | 5 | 365 | (3,436 | ) | (2,572 | ) | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) |
$ | (5,865 | ) | $ | (12,194 | ) | $ | 5,298 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) attributable to noncontrolling interest |
(817 | ) | 8 | 389 | (428 | ) | 1,549 | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) attributable to Golden Star shareholders |
(5,048 | ) | (11,766 | ) | 3,749 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net loss attributable to Golden Star shareholders per share: |
||||||||||||||||||||
Basic |
$ | (0.020 | ) | $ | (0.045 | ) | $ | 0.015 | ||||||||||||
Diluted |
$ | (0.020 | ) | $ | (0.045 | ) | $ | 0.014 | ||||||||||||
Weighted average shares outstanding (millions) |
258.6 | 258.6 | 257.9 | |||||||||||||||||
OTHER COMPREHENSIVE INCOME/(LOSS) |
||||||||||||||||||||
Net income/(loss) |
$ | (5,865 | ) | $ | (12,194 | ) | $ | 5,298 | ||||||||||||
Other comprehensive income |
(424 | ) | (424 | ) | (592 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Comprehensive income/(loss) |
$ | (6,289 | ) | $ | (12,618 | ) | $ | 4,706 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Comprehensive income/(loss) attributable to Golden Star shareholders |
$ | (5,472 | ) | $ | (12,190 | ) | $ | 3,157 | ||||||||||||
Comprehensive income attributable to noncontrolling interest |
(817 | ) | (428 | ) | 1,549 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Comprehensive income/(loss) |
$ | (6,289 | ) | $ | (12,618 | ) | $ | 4,706 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Deficit, beginning of period |
$ | (268,108 | ) | $ | (257,723 | ) | $ | (238,436 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||||||
Deficit, end of period |
$ | (273,156 | ) | $ | (269,489 | ) | $ | (234,687 | ) | |||||||||||
|
|
|
|
|
|
US GAAP | IFRS | IFRS | ||||||||||||||||||
For the six months ended June 30 2011 |
Note | Adjustments | For the six months ended June 30 2011 |
For the six months ended June 30 2010 |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Gold revenues |
$ | 226,313 | $ | 226,313 | $ | 223,571 | ||||||||||||||
Cost of sales |
210,276 | 1,2,3 | (1,215 | ) | 209,061 | 188,822 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Mine operating margin |
16,037 | 17,252 | 34,749 | |||||||||||||||||
Exploration expense |
2,148 | 4 | (1,231 | ) | 917 | 678 | ||||||||||||||
General and administrative expense |
14,354 | 7 | 146 | 14,500 | 9,248 | |||||||||||||||
Abandonment and impairment |
— | 4 | 167 | 167 | 347 | |||||||||||||||
Derivative mark-to-market gains |
(17,613 | ) | 6 | 24,292 | 6,679 | 747 | ||||||||||||||
Property holding costs |
4,363 | 4,363 | 2,298 | |||||||||||||||||
Fair value of debt |
— | — | — | |||||||||||||||||
Foreign exchange loss |
719 | 719 | 571 | |||||||||||||||||
Interest expense |
4,470 | 6 | 3,886 | 8,356 | 8,296 | |||||||||||||||
Interest and other income |
(102 | ) | (102 | ) | (295 | ) | ||||||||||||||
Minority intererst |
2 | 2 | — | |||||||||||||||||
Gain on sale of investments |
— | — | — | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) before income tax |
7,696 | (18,349 | ) | 12,859 | ||||||||||||||||
Income tax expense |
(8,106 | ) | 5 | 136 | (7,970 | ) | (4,943 | ) | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) |
$ | (410 | ) | $ | (26,319 | ) | $ | 7,916 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) attributable to noncontrolling interest |
(1,290 | ) | 8 | 530 | (760 | ) | 2,060 | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income/(loss) attributable to Golden Star shareholders |
880 | (25,559 | ) | 5,856 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net loss attributable to Golden Star shareholders per share: |
||||||||||||||||||||
Basic |
$ | 0.003 | $ | (0.099 | ) | $ | 0.023 | |||||||||||||
Diluted |
$ | 0.003 | $ | (0.099 | ) | $ | 0.023 | |||||||||||||
Weighted average shares outstanding (millions) |
258.6 | 258.6 | 257.7 | |||||||||||||||||
OTHER COMPREHENSIVE INCOME/(LOSS) |
||||||||||||||||||||
Net income/(loss) |
$ | (410 | ) | $ | (26,319 | ) | $ | 7,916 | ||||||||||||
Other comprehensive income |
(339 | ) | (339 | ) | 340 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Comprehensive income/(loss) |
$ | (749 | ) | $ | (26,658 | ) | $ | 8,256 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Comprehensive income/(loss) attributable to Golden Star shareholders |
$ | 541 | $ | (25,898 | ) | $ | 6,196 | |||||||||||||
Comprehensive income attributable to noncontrolling interest |
(1,290 | ) | (760 | ) | 2,060 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Comprehensive income/(loss) |
$ | (749 | ) | $ | (26,658 | ) | $ | 8,256 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Deficit, beginning of period |
$ | (274,036 | ) | $ | (243,930 | ) | $ | (240,543 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||||||
Deficit, end of period |
$ | (273,156 | ) | $ | (269,489 | ) | $ | (234,687 | ) | |||||||||||
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER IFRS
US GAAP | IFRS | IFRS | ||||||||||||||||||
For the three months ended June 30 2011 |
Note | Adjustments | For the three months ended June 30 2011 |
For the three months ended June 30 2010 |
||||||||||||||||
OPERATING ACTIVITIES: |
||||||||||||||||||||
Net loss |
$ | (5,865 | ) | (6,329 | ) | $ | (12,194 | ) | $ | 5,298 | ||||||||||
Reconciliation of net loss to net cash provided by operating activities: |
||||||||||||||||||||
Depreciation, depletion and amortization |
15,274 | 2, 4 | 2,618 | 17,892 | 30,911 | |||||||||||||||
Amortization of loan acquisition cost |
318 | 318 | (159 | ) | ||||||||||||||||
Abandonment and impairment |
— | 4 | 167 | 167 | — | |||||||||||||||
Gain/Loss on sale of assets |
2 | 2 | 71 | |||||||||||||||||
Non cash employee compensation |
879 | 7 | 92 | 971 | 577 | |||||||||||||||
Future income tax expense |
3,040 | 5 | (365 | ) | 2,675 | 1,472 | ||||||||||||||
Fair value of derivatives |
930 | 930 | 812 | |||||||||||||||||
Fair value (gains)/losses on convertible debt |
(6,107 | ) | 6 | 6,107 | — | — | ||||||||||||||
Accretion of asset retirement obligations |
2,183 | 3 | (1,851 | ) | 332 | 2,462 | ||||||||||||||
Reclamation expenditures |
(7,945 | ) | (7,945 | ) | (2,049 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
2,709 | 3,148 | 39,395 | ||||||||||||||||||
Changes in non-cash working capital: |
||||||||||||||||||||
Accounts receivable |
(1,779 | ) | (1,779 | ) | (11,692 | ) | ||||||||||||||
Inventories |
(15 | ) | 2 | 167 | 152 | (411 | ) | |||||||||||||
Deposits |
245 | 245 | (364 | ) | ||||||||||||||||
Accounts payable and accrued liabilities |
(2,185 | ) | (2,185 | ) | 6,722 | |||||||||||||||
Other |
(425 | ) | 6 | 1,875 | 1,450 | 3,230 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net cash provided by operating activities |
(1,450 | ) | 1,031 | 36,880 | ||||||||||||||||
INVESTING ACTIVITIES: |
||||||||||||||||||||
Expenditures on deferred exploration projects |
— | 4 | (1,020 | ) | (1,020 | ) | (795 | ) | ||||||||||||
Expenditures on mining properties |
(9,191 | ) | 2 | (1,461 | ) | (10,652 | ) | (15,915 | ) | |||||||||||
Expenditures on property, plant and equipment |
(9,951 | ) | (9,951 | ) | (5,461 | ) | ||||||||||||||
Proceeds from the sale of assets |
— | — | — | |||||||||||||||||
Change in accounts payable and deposits on mine equipment and material |
(4,077 | ) | (4,077 | ) | 2,593 | |||||||||||||||
Other |
— | — | 1,332 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net cash used in investing activities |
(23,219 | ) | (25,700 | ) | (18,246 | ) | ||||||||||||||
FINANCING ACTIVITIES: |
||||||||||||||||||||
Principal payments on debt |
(2,573 | ) | (2,573 | ) | (8,197 | ) | ||||||||||||||
Proceeds from debt agreements and equipment financing |
3,470 | 3,470 | 4,506 | |||||||||||||||||
Other |
26 | 26 | 1,437 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net cash provided by financing activities |
923 | 923 | (2,254 | ) | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Increase in cash and cash equivalents |
(23,746 | ) | (23,746 | ) | 16,380 | |||||||||||||||
Cash and cash equivalents, beginning of period |
151,661 | 151,661 | 164,852 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Cash and cash equivalents end of period |
$ | 127,915 | $ | 127,915 | $ | 181,232 | ||||||||||||||
|
|
|
|
|
|
US GAAP | IFRS | IFRS | ||||||||||||||||||
For the six months ended June 30 2011 |
Note | Adjustments | For the six months ended June 30 2011 |
For the six months ended June 30 2010 |
||||||||||||||||
OPERATING ACTIVITIES: |
||||||||||||||||||||
Net loss |
$ | (410 | ) | (25,909 | ) | $ | (26,319 | ) | $ | 7,916 | ||||||||||
Reconciliation of net loss to net cash provided by operating activities: |
||||||||||||||||||||
Depreciation, depletion and amortization |
36,492 | 2, 4 | 2,529 | 39,021 | 53,842 | |||||||||||||||
Amortization of loan acquisition cost |
672 | 672 | (195 | ) | ||||||||||||||||
Abandonment and impairment |
— | 4 | 167 | 167 | — | |||||||||||||||
Gain/Loss on sale of assets |
2 | 2 | 347 | |||||||||||||||||
Non cash employee compensation |
2,220 | 7 | 146 | 2,366 | 2,055 | |||||||||||||||
Future income tax expense |
6,347 | 5 | (136 | ) | 6,211 | 3,338 | ||||||||||||||
Fair value of derivatives |
5,179 | 5,179 | (319 | ) | ||||||||||||||||
Fair value (gains)/losses on convertible debt |
(24,292 | ) | 6 | 24,292 | — | — | ||||||||||||||
Accretion of asset retirement obligations |
3,116 | 3 | (2,451 | ) | 665 | 4,425 | ||||||||||||||
Reclamation expenditures |
(11,828 | ) | (11,828 | ) | (3,600 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
17,498 | 16,136 | 67,809 | ||||||||||||||||||
Changes in non-cash working capital: |
||||||||||||||||||||
Accounts receivable |
(2,804 | ) | (2,804 | ) | (12,429 | ) | ||||||||||||||
Inventories |
(421 | ) | 2 | 167 | (254 | ) | (4,312 | ) | ||||||||||||
Deposits |
(700 | ) | (700 | ) | (280 | ) | ||||||||||||||
Accounts payable and accrued liabilities |
(18,799 | ) | (18,799 | ) | 4,603 | |||||||||||||||
Other |
(2,089 | ) | 6 | 3,886 | 1,797 | 4,041 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net cash provided by operating activities |
(7,315 | ) | (4,624 | ) | 59,432 | |||||||||||||||
INVESTING ACTIVITIES: |
||||||||||||||||||||
Expenditures on deferred exploration projects |
— | 4 | (1,230 | ) | (1,230 | ) | (1,871 | ) | ||||||||||||
Expenditures on mining properties |
(18,031 | ) | 2 | (1,461 | ) | (19,492 | ) | (17,879 | ) | |||||||||||
Expenditures on property, plant and equipment |
(19,863 | ) | (19,863 | ) | (17,289 | ) | ||||||||||||||
Proceeds from the sale of assets |
— | — | — | |||||||||||||||||
Change in accounts payable and deposits on mine equipment and material |
(3,184 | ) | (3,184 | ) | 2,593 | |||||||||||||||
Other |
— | — | 2,220 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net cash used in investing activities |
(41,078 | ) | (43,769 | ) | (32,226 | ) | ||||||||||||||
FINANCING ACTIVITIES: |
||||||||||||||||||||
Principal payments on debt |
(5,338 | ) | (5,338 | ) | (16,410 | ) | ||||||||||||||
Proceeds from debt agreements and equipment financing |
3,470 | 3,470 | 14,506 | |||||||||||||||||
Other |
158 | 158 | 1,842 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net cash provided by financing activities |
(1,710 | ) | (1,710 | ) | (62 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Increase in cash and cash equivalents |
(50,103 | ) | (50,103 | ) | 27,144 | |||||||||||||||
Cash and cash equivalents, beginning of period |
178,018 | 178,018 | 154,088 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Cash and cash equivalents end of period |
$ | 127,915 | $ | 127,915 | $ | 181,232 | ||||||||||||||
|
|
|
|
|
|
Notes to IFRS Financial Statements:
The Company adopted IFRS as of January 1, 2011 with a transition date of January 1, 2009.
The Company has taken certain elections under IFRS 1 (International Financial Reporting Standard 1 – First-time Adoption of International Financial Reporting Standards Summary) to allow departure from retrospective application in certain areas. The areas that the Company has applied IFRS 1 to include:
|
non-controlling interests; |
|
business combinations; |
|
share-based payment transactions; |
|
asset retirement obligations; and |
|
borrowing costs. |
1. | In-Process inventory – Costs that qualify as betterment stripping are capitalized as Mining Properties under IFRS, but included within inventory and expensed for U.S. GAAP. As a result the amount of waste mining costs expensed and included within in-process metal inventory is higher under U.S. GAAP than under IFRS. |
2. | Deferred Stripping - Under IFRS, expenditures for stripping costs (i.e., the costs of removing overburden and waste material to access mineral deposits) that can be shown to be a betterment of the mineral property are capitalized and subsequently amortized on a units-of-production basis over the mineral reserves that directly benefit from the specific waste stripping activity. U.S. GAAP has no provision for capitalization of betterment stripping costs. Thus in periods where betterment stripping occurs, operating costs are higher under U.S. GAAP since all waste costs are expensed. The amounts of capitalized betterment stripping are shown in the table immediately below and are included in the Mining Properties totals shown in the IFRS consolidated balance sheets. |
Costs of Betterment Stripping Capitalized under IFRS
Wassa/HBB | Bogoso/Prestea | TOTAL | ||||||||||
Balance as of December 31, 2010 |
$ | 12,935 | $ | 5,558 | $ | 18,493 | ||||||
Additions in the six months ended June 30, 2011 |
— | 1,461 | 1,461 | |||||||||
Amortization of betterment stripping assets |
(2,815 | ) | — | (2,815 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance as of June 30, 2011 |
$ | 10,120 | $ | 7,019 | $ | 17,139 | ||||||
|
|
|
|
|
|
It is expected that Wassa's deferred betterment stripping costs will be amortized in 2011 and 2012. Bogoso's deferred betterment stripping costs are expected to be amortized between 2012 and 2015.
3. | Forecasted amounts of required future environmental, reclamation and closure costs are the same under U.S. GAAP and IFRS. However, differences exist in determining the discount rate to be applied to the future costs. Under U.S. GAAP the estimated liability for future reclamation and closure costs of each period's new environmental disturbances are discounted at the prevailing discount rates in effect during the period of the new disturbance and once the discount rate is applied, it is not revised in subsequent periods. This in effect creates layers of liability for new disturbances incurred in each time period. Under IFRS, at the end of each period the entire pool of all estimated future cash costs for existing disturbances are discounted using the discount rate existing at the end of each period. |
4. | Under U.S. GAAP, mineral property acquisition costs are capitalized. Pre-acquisition costs and subsequent exploration, mine development and direct general and administrative costs are expensed as incurred until a feasibility study shows that the mineral property is economically viable. Following completion of a viable feasibility study all subsequent exploration, development and direct general and administrative costs are capitalized. For IFRS purposes, all exploration, mine development, acquisition and direct general and administrative costs related to exploration and development projects are capitalized into Deferred Exploration once sufficient work has been performed to demonstrate that an exploration asset exists. In each subsequent period, under IFRS, the exploration, engineering, development, financial and market information for each exploration project is reviewed by management to determine if such capitalized exploration and development costs are impaired. If found impaired, the exploration asset's cost basis is reduced in accordance with IFRS provisions. Amounts written off in the current year under IFRS, which have previously been expensed under U.S. GAAP, result in an adjustment when reconciling net income for the year. |
Deferred Exploration IFRS - Consolidated capitalized expenditures on our exploration projects for the period ended June 30, 2011, were as follows:
Deferred Exploration & Development Costs as of 12/31/2010 |
Capitalized Exploration Expenditures |
Transfer to Mining Properties |
Impairments | Other | Deferred Exploration & Development Costs as of 6/30/2011 |
|||||||||||||||||||
AFRICAN PROJECTS |
||||||||||||||||||||||||
Ghana |
$ | 8,048 | $ | 1,826 | $ | — | $ | (166 | ) | $ | — | $ | 9,708 | |||||||||||
Sonfon - Sierra Leone |
4,271 | 197 | — | — | (792 | ) | 3,676 | |||||||||||||||||
Other Africa |
1,018 | — | — | — | — | 1,017 | ||||||||||||||||||
SOUTH AMERICAN PROJECTS |
||||||||||||||||||||||||
Saramacca - Suriname |
1,151 | — | — | — | — | 1,151 | ||||||||||||||||||
Paul Isnard – French Guiana |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 14,488 | $ | 2,023 | $ | — | $ | (166 | ) | $ | (792 | ) | $ | 15,552 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
5. | Income tax - The application of U.S. GAAP and IFRS tax accounting is the same for the company. The difference in the tax liability and expense arise from the changes in reported pre-tax income or loss under the different GAAPs as well as the differing treatment of various assets and liabilities. |
6. | Convertible debentures - Under U.S. GAAP convertible debt is measured at fair value at each reporting date with changes in fair value shown in the statement of operations. Fair value includes the value of the future stream of cash flows from the debt plus the fair value of the option component attached to the debenture. Fair value of the interest and principal is determined by discounting the cash flows at our external cost of funds. Fair value of the option component is determined using a Black-Scholes option pricing model. Under IFRS, the convertible debentures are separated into a liability and equity component. The fair value of the liability is determined at the origination of the debentures based on discounted cash flows of the future interest and principal, with the residual allocated to the equity portion. The amount of the liability is subsequently accreted through interest expense up to the full $125 million face value over the life of the debentures. |
7. | Shareholders' Equity - Differences in Contributed Surplus reflect differences in stock option expense recognition. Under U.S. GAAP the expense for a grant is recognized evenly over the vesting period of the grant. Under IFRS we expense each tranche of a grant evenly over that tranches vesting period. |
8. | Noncontrolling interest - The application of non-controlling interest accounting is the same under U.S. GAAP and IFRS. The difference in the recognized equity account and related expense arise from the changes in reported income or loss under the different GAAPs. |
9. | Recently issued IFRS accounting standards |
IAS 1 Presentation of Items of Other Comprehensive Income ("OCI") - IAS 1 is intended to change the disclosure of items presented in Other Comprehensive Income ("OCI"), including a requirement to separate items presented in OCI into two groups based on whether or not they may be recycled to profit or loss in the future. The new pronouncement is effective for years beginning on/after January 1, 2012. Certain provisions of this pronouncement will be effective for us beginning in 2012. It is expected that these provisions will not have a material impact on our consolidated financial statements.
IFRS 13 Fair Value Measurement and Disclosure Requirements – IFRS 13 provides a single source of guidance on how to measure fair value where it is already required or permitted by other IFRS and enhances disclosure requirements for information about fair value measurement. Certain provisions of this pronouncement will be effective for us beginning in 2013. It is expected that these provisions will not have a material impact on our consolidated financial statements.
IFRS 10 Consolidated Financial Statements – IFRS 10 replaces guidance on control and consolidation in IAS 27, Consolidated and Separate Financial Statements, and SIC-12 Consolidations – Special Purpose Entities. IFRS 10 changes the definition of control under IFRS so that the same criteria are applied to all entities to determine control. Certain provisions of this pronouncement will be effective for us beginning in 2013. It is expected that these provisions will not have a material impact on our consolidated financial statements.
IFRS 11 Joint Agreements – IFRS 11 replaces IAS-31 Interests in Joint Ventures. IFRS 11 reduces the types of joint arrangements to two: "joint ventures" and "joint operations". IFRS 11 requires the use of equity accounting for interests in joint ventures, eliminating the existing policy choice of proportionate consolidation for jointly controlled entities under IAS 31. Entities that participate in joint operations will follow accounting much like that for jointly controlled assets and jointly controlled operations under IAS 31. Certain provisions of this pronouncement will be effective for us beginning in 2013. It is expected that these provisions will not have a material impact on our consolidated financial statements.
IFRS 12 Disclosure if Interest in Other Entities – IFSR 12 sets out the disclosure requirements for entities reporting under IFRS 10 and IFRS 11, and replaces the disclosure requirements currently found in IAS 28 Investments in Associates. Certain provisions of this pronouncement will be effective for us beginning in 2013. It is expected that these provisions will not have a material impact on our consolidated financial statements.