Mining firm Golden Star Resources has entered a long-term, strategic relationship with La Mancha Holding a Luxembourg-incorporated private gold investment company.
The deal which has brought in some US$125.7 million is targeted at accelerating underground development and production at Wassa Underground and Prestea Underground mines of the company.
La Mancha has committed to investing approximately the US$125.7 million cash into Golden Star through a private placement and in exchange, for 163,210,500 Golden Star common shares, representing approximately 30% of the outstanding share capital on a non-diluted basis)
Commenting on the deal the President and Chief Executive Officer of Golden Star, Sam Coetzer said, “We are 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.”
Sam Coetzer also said, “La Mancha has 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.”
Mr Coetzer further stated that La Mancha’s US$125.7 million investment will allow Golden Star to fast-track exploration and expansion programs 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. I am very encouraged by the professional approach of the La Mancha team and with our experience of building and operating mines, together we have the expertise and funding to grow across Africa,” he added.
La Mancha will also have anti-dilution rights, which provide the ability for La Mancha to maintain its approximately 30% equity stake in Golden Star, and customary registration rights.
“Following the success of our strategic partnerships with Evolution Mining and Endeavour Mining, which have rapidly both become leading gold producers, we are excited to have the opportunity to partner with Golden Star.
Our strategic goal is to create value with a long-term, supportive approach to the benefit of all stakeholder,” Chief Executive Officer of La Mancha, Andrew Wray stated.
“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,” the Chief Executive Officer of La Mancha, Andrew Wray stated.
He added that the firm looks forward to working with Sam Coetzer and his team to unlock the value of Golden Star’s organic growth pipeline and to use their financial resources to help take advantage of external growth opportunities in Africa.
The Executive Vice-President and Chief Operating Officer of the Golden Star Resources, Mr Daniel Owiredu, explained to B&FT in Accra that the investment also promised more value to communities and the government.
With this fresh capital, Golden Star Resources who have shut down their Prestea underground operations is expected to have a significantly stronger balance sheet, he said.
The Company will be well-positioned to unlock its organic growth opportunities and to pursue external growth opportunities.
Golden Star intends to deliver a disciplined acquisition strategy, in conjunction with progressing its expansion opportunities at both Wassa Underground and Prestea Underground, with the objective of bringing additional assets into the Company’s portfolio and expanding its production profile.
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.
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.
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 said 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.