Golden Star Resources Ltd. (USA) (GSS)

GSS has been performing well so far during this correction relative to peers, which suggest to me that some investors had their eyes on this one for just such a dip. The 1-year chart sure doesn't look like the chart of a company producing unhedged gold, which has gone up 34% over that year, while GSS is down 24% over the same period! Meanwhile, they are forecasting a 63% increase in production in 2008. Get the picture? This one has gone from cheap to ridiculously cheap... and there are plenty of other producing juniors out there in the same boat.

"Golden Star is a mid-tier gold mining company whose principal properties are located in Ghana, West Africa. The Company produced a record 246,278 ounces of unhedged gold in 2007 from its Bogoso/Prestea and Wassa open pit mines. In 2008, we expect a significant increase in production of approximately 370,000 to 425,000 ounces at an average cash cost of $490 to $540 per ounce."

BUY Golden Star Resources (GSS)—Ghanian gold
Thu, 19 Jul 07

Golden Star Resources (GSS) is another Transmeridian…that is, a company that has had to overcome myriad problems to access and develop what appear to be world-class natural resource properties. Instead of oil in Kazakhstan, however, this time we are talking gold in Ghana…lots of gold. Indeed, the rich Ashanti Gold Belt has attracted several mining companies (AngloGold Ashanti (AU), GoldFields (GV), and Newmont Mining (NEM) all operate in Ghana). But actually getting the gold out of the ground and to the market has been a challenge.

Admittedly, some of Golden Star’s woes have been self-inflicted. In 2003, GSS stock had a great run from $2 in January to $8+ in December. But then management announced the first in what would become a long string of production delays associated with the company’s new Wassa mine…and then in the spring of 2004, seeking to capitalize on their inflated stock, GSS management launched a poorly planned hostile takeover bid for IAMGold (IAG), which fizzled.

Amidst a plague of logistical problems, some of which were not under management’s control—such as a pernicious drought that led to rationing of hydropower-generated electricity in Ghana—and some that were, or should have been, management then proceeded to miss production targets and cost targets quarter after quarter, for the better part of three years. The stock sank back into the doldrums, as low as $2.10 in 2005 and hovering around $3 in 2006.

Strategically, the major problems the company has to deal with are [a] while plentiful, the quality of the ore they mine is low and requires relatively expensive processing to retrieve the gold and [b] getting things done in Ghana is a challenge. Progress has been fitful, but there has been progress. As gold yields using the standard cyanidation process were low with GSS ores, in 2005, the company began construction of a bio-oxidation (BIOX®) plant at Bogoso to pre-process their ore. The gold in this ore is encapsulated in sulphide minerals such as pyrite, arsenopyrite and pyrrhotite, thus preventing the standard cyanide leaching process from accessing it. The BIOX® process destroys the sulphide minerals and exposes the gold for subsequent cyanidation, thereby increasing the overall gold recovery that can be achieved. (Don’t be trying all this at home in your kitchen sink.) The contractor, Gold Fields, have commissioned nine previous BIOX® plants worldwide, the largest of which is already in Ghana, run by AU. The plan was to start production in mid-2006, but—typically—there have been delays. However, last week the company announced that the sulfide processing plant at Bogoso had finally begun commercial production at the end of the second quarter. By the end of the year, production should be up and costs down.

Furthermore, the company has taken another strategic step to improve their logistical situation in Ghana. In conjunction with the other mining companies operating in the country, they are building their own power plant which should come online sometime this quarter. The company has been running expensive diesel generators to maintain operations during government power rationing, so this will help cut production costs.

If GSS can cut per-ounce production costs from the current $500+ to close to $400, and if they can up production from last year’s 200M ounces to (in 2008) well north of 400M, we will be looking at a highly profitable operation, with considerable upside with respect to their reported 5MM ounces of reserves. We believe it is extremely likely that these eventualities will come to pass, and that The Street is undervaluing GSS here at $4+/share.

I was hot on this stock but when a company starts playing games to create wealth for a few people by issueing warrents on the pretense of capitalizing the company.

this not only dillutes stockholder equity it diminishes the stocks value

I think this was a ad move and as an example look at the price since the warrents were issued,

A lot of experienced people in the mining biz got out and so will I if the mgmt doesn't quit playing games

Gold and silver have taken a sudden drop during the past week. Many speculators are panicing and claiming that this is the end of the "commodity bubble". I don't think so. If you look at the fundamental reason behind the last 6 months rise in precious metals, you have to ask yourself....has anything changed? I don't think so. The Fed continues to pump liquidity into the market, the interest rate continues to decline, inflation continues to increase and the dollar continues to fall. That being said....if due to demand decreases oil drops sharply from here...there is a possibility that precious metals will follow. Precious metals will experience quite a bit of volatility and the gyrations may be tough to handle but I think due to the fundamentals that I mentioned above that a year from now precious metals will be much higher.

Spent the last 3 years getting their act together. Spent tons of money getting to this point. Those efforts/investments, particularly in their new BIOX plant, are just about ready to pay off. Additionally, they had the bad haabit of overpromising ond underdelivering. They alienated a lot of investors, institutional and retail, in doing so, I'd like to think they've learned their lesson in that regard and, if/when that's proven to be the case, a lot of money will jump back in. Of course, this is a gold mining company. You're gambling on them finding more gold and gambling on the price of gold. Investing in any company is a gamble. This is a bigger gamble....but the potential for very large returns are certainly there.

Gold and growth.
These guys have been in the gutter for a long time and their new production plant will start to pump out the ounces in 4Q with greatly expand capasity and lower cost per ounce. These guy are sitting on a "gold mine" that will start to pay off big time in 07.

Mine is making all fine tuning adjustments to reach original production expectations. very cheap and overlooked also an obvious takeover candidate which could be among the first to go.

a hunch to grab 5 points

Again, gold at its highest, great investment.

Don't believe in a sustained price of gold above 1K. No inflation pressure in the short/medium term. No high demand in real economy. Pure speculative gold play by gold bugs.

Gold mininc company. BIOX will reduce gold costs and increase production. New power plant will elleviate dependancy on rain and hydro power. Gold production to double soon. Share value is leveraged to rising price of gold ($800 per ounce = $11 share value, $1,200 per ounce = $45 share value).

Hurray for Gold!!! Hurray for Silver!!! Hurray for Oil!!! Hurray for Base Metals!!! Down with $US!!! Down with US Banks!!! Up with US stock market nominal basis!!! Down with US stock market real basis!!! Down with US Houses!!! Down with Citigroup!!! Down with US Economy!!! and DOWN WITH INFIDELS!!!!!!!!

Whoever shorts metals company because of no revenue is stupid!!! Why trade good metals for bad $US just to report revenue!!! A company can have no revenue, just sleep, but if the price of their metals go up, market cap go up! All metals miners should stop producing, have no worthless $US revenues, and wait until supply goes down until Gold hits $5000 then to sell their metals!!!

Looking for a takeover candidate? Look no further then GSS. On the path to become a half million ounce a year producer by the end of 2008, a maket cap around a billion, a new CEO who actually knows what he is doing, and a history of being the leader in conspiracy theory driven, investor mutiied, constantly beaten-down, options-players-manipulated stock, when they finally begin to execute on full scale with their biox plant, one of two of this size in the world for extracting gold from highly oxidized ore not normally salvageable.... They will be bought immediately.

At a half million ounces a year, once the negative "surprises" (which were the only thing you could count on with GSS for so long,( finally a thing of the past-- whether dillutions, earnings misses, extensions on time needed to hit goals, mgmt changes, etc,,,

This is a ten dollar stock, easy. Only a handful of select big boys produce half a million ounces a year or more: Flagship names like Barrick, Kinross, Yamana, Newmont, Goldcorp, Harmony, Goldfields.... And already positioned in the HUI, with an all time high right at the start of the gold bull of 8+ dollars, (in 2003 dollars)-- this stock is destined for much bigger things.

They will be bought. The question is, will you own them when they are?

I know this one is already a 4 star caps pick, but I like an awful lot of things about this stock and I am a recent buyer at around $1.50 during it's latest correction. A gold ONLY mining company based in Littleton, CO that has been around since 1984 makes it stable, GOOD at what it does(25 years) AND American owned all of which are characteristics badly needed in this economy today. Most of it's working mines and development properties are located in Ghana, West Africa with a few exploration projects in South America meaning most of it's 1,600 employees are probably NOT American giving them a cost per ounce advantage I would think. Their 3rd quarter earnings call was a good one despite the falling price of the stock: "Revenues for the third quarter of 2008 of $64.1 million were 34% higher than the $47.8 million
for the same period in 2007. Revenues for the first nine months of 2008 totaled $187.7 million and were improved by 78% over gold revenues for the first nine months of 2007 at $105.7 million". The 4th quarter earnings call is Thursday, Feb. 26th and they expect more of the same with expectations for 2009 right now at 400-450k oz. of production. I look for this stock to run up as we get closer to that call and there are some fund managers who seem to be in agreement, including: Tiaa Cref(NEW holding, Feb.), Churchill Management(NEW holding, Jan.), Putnam Vt Global Asset(NEW holding, Nov. 08), Credit Suisse(ADDED), Dec. & Nov. 08), Credit Agricole(ADDED, Feb. 09) to name just a few of the 98 institutions who hold their stock. The chart on GSS is one of the few found today with a steady uphill trend and an inevitable 50/100 moving average cross setting up nicely with both of those lines pointing up. It is however a bit extended trading near it's 200 day and it is currently in a correction. If it can get through resistance at $1.69 it should run up to $3 quickly.

Sink or swim

Gold..Gold..Gold...the $ might be down...but the demand for Gold will Rise..Rise..Rise!

Should outperform, its BIOX plant should be completed in the next few months. Has posted better than expected earnings throughout the year.

Throw the dice and bet that these guys can finally get production on track. If so, should be a nice ride. Will not perform like other gold stocks, though. Too speculative. If you are going to own one gold miner, this is NOT the one.

Undervalued