Golden Star Resources increased gold production at its Bogoso/Prestea and Wassa gold mines in West Africa

GOLD STOCKS NEWS - Gold stocks surged higher as the gold price broke out back above $1,100 per ounce. Denver-based gold mining company, Golden Star Resources (GSS), reported record production of 410,000 ounces of gold and net cash flow from operations of $0.44 per share for the fiscal year ended December 31, 2009. Production surpassed the previous year by 39% while cash cost for the full year came in at $564 per ounce, a 21% decrease from 2008.

Net income for 2009 totaled $16.5 million or $0.07 per share on sales of $400.7 million compared to a net loss of $119.3 million ($0.506 per share) on revenue of $257.4 million in 2008. Cash flow from operations before changes in working capital was $123.0 million ($0.52 per share) and net cash flow from operations totaled $104.6 million, over three times 2008 net cash flow of $30.0 million.

Operations at the gold mining company’s two major properties, Bogoso/Prestea and Wassa, showed improvement. Bogoso/Prestea posted a 9% increase in ounces sold - primarily due to recovery rates at the sulfide plant that averaged 70.7% versus a rate of 66.5% in 2008. Cash costs decreased as well, falling 15.8% from 2008 levels. Wassa gold sales increased over 78%, owing in large part to a doubling of the grade of ore processed - from 1.33 g/t gold to 2.76 g/t gold - and improved recovery rates. Cash costs fell 19.3% from 2008 levels to $447 per ounce.

Golden Star Resources ended the year with cash of $154.1 million compared to $33.6 million the previous year. The increase was a result of improved net cash flow from operations and $71.0 million in proceeds from the company’s December 2009 equity offering. The gold mining company expects that cash requirements for 2010 can be met by its cash on hand, cash flow from operations, and existing committed credit facilities.

Golden Star previously announced a 14% net increase in reserves, or 450,000 ounces, to 48.3 million tonnes grading 2.4 g/t for contained gold reserves of 3.73 million ounces. Total reserve additions amounted to 920,000 ounces and were driven by successful exploration efforts, cost reductions and the increase in the gold price. Measured and indicated mineral resources decreased 10% for the year to 26.6 million tones or ore grading 2.52 g/t due to the conversion of these resources into the reserve category. The company reiterated its previous guidance for 2010 production of 400,000 ounces at a cash cost of $585 per ounce.

Chief Executive Officer Tom Mair noted that the company was in the final stages of the permitting process for Prestea South, which at a minimal CAPEX of roughly $5 million could add between 72,000 and 100,000 ounces of gold to the company’s production profile. This potential catalyst appears to be off the radar screen of most investors.

Golden Star continues to trade at a significant discount to its peers on a number of valuation metrics. Just yesterday, Canada’s Globe and Mail highlighted comments by Kevin MacLean, manager of the Sentry Select Precious Metals Growth Fund, on GSS. MacLean noted that Golden Star is the “cheapest stock” in his universe of established gold producers. With a market capitalization of roughly $750 million, a 14% free cash flow yield, and growing gold production and cash flow looking towards 2011, MacLean has a C$7.00 ($6.63) price target on shares of Golden Star.

Golden Star Resources is an international gold mining and exploration company with operations in Ghana and other parts of West Africa and South America. Shares of GSS were up $0.25, or 8.9%, to $3.05 in early afternoon trading.