The Golden Star Resources Limited has entered into a strategic relationship with Luxembourg-based gold investment firm, La Mancha Holdings, that will see the latter invest US$125.7 million into the mining giant in exchange for 30 per cent shares.
The board of directors of the Golden Star Resources has approved the transaction, paving the way for shareholders’ approval at a yet-to-be announced Extraordinary General Meeting (EGM).
The investment is the first of its kind in the firm which has two operations in the country – the Wassa Underground and Prestea Underground mines, both in the Western Region.
Beyond strengthening the company’s balance sheet, the investment will empower the Golden Star Resources which focuses on mining in Africa to explore for more ore deposits at the two sites in Ghana.
The explorations will help to confirm more viable ore deposits in the company’s licence areas, thereby increasing the life of mine of the two operations.
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The Executive Vice-President and Chief Operating Officer of the Golden Star Resources, Mr Daniel Owiredu, told the Daily Graphic in Accra that the investment also promised more value to communities and the government.
In addition to guaranteeing the jobs of employees, Mr Owiredu explained that the expected increased production resulting from the investment would lead to increased employment for persons in the surrounding communities.
More gold productions will also mean that the government will earn more revenue through royalties, corporate taxes and other statutory payments, he said.
As a result, he described it as a win-win transaction that shows the faith La Mancha has in Golden Star’s operations and the competences of its management.
The successful approval of the transaction will allow La Mancha to appoint a maximum of three directors to the Golden Star’s board.
Utilisation of funds
In a statement released earlier, the Golden Star Resources said proceeds of the transaction would be used to accelerate underground development and production at Wassa and Prestea.
It further saaid it would fund accelerated exploration and mineral reserve definition drilling at Wassa Underground, Prestea Underground and the Father Brown satellite deposit as well as fast track the necessary studies and development of the southern portion of the Wassa Underground deposit.
It could also serve potential future acquisitions and general corporate purposes.
De-risking balance sheet
The President and Chief Executive Officer of Golden Star, Mr Sam Coetzer, said his outfit was delighted to welcome La Mancha as a long-term strategic investor.
“We share the vision of building a leading, Africa-focused gold producer and this transformative deal clearly endorses the potential of Golden Star's assets,” he said.
He said La Mancha had a strong track record of creating sustainable shareholder value and “their previous investments demonstrate their ability to identify compelling growth opportunities at an early stage.
“La Mancha's US$125.7 million investment will allow Golden Star to fast track our exploration and expansion programmes at both Wassa Underground and Prestea Underground.
“The transaction also de-risks our balance sheet and lends us a platform to participate actively in the consolidation of the African gold mining industry,” he said.
The statement also quoted the Chief Executive Officer of La Mancha, Mr Andrew Wray, as saying the firm’s strategic goal was to create value with a long-term, supportive approach to the benefit of all stakeholders.
“The Golden Star Board and management team share this objective and we have been impressed with their successful track record of project discovery and development around their existing assets in Ghana.
“We look forward to working with Sam and his team to unlock the value of Golden Star's organic growth pipeline and to use our financial resources to help take advantage of external growth opportunities in Africa," he added.
In return for the US$125.7 million, La Mancha has been offered some 163.2 million common shares, equivalent to 30 per cent of the mining firm.
This means one share was valued at US$0.77 under the transaction.