I received the below detailed update about GSS's third quarter results in which GSS swung to a profit of 1.4 cents per share from an investor who has been closely following this stock for quite some time:
"Game winning home run in the bottom of the 9th!
Concerns/results:
* Apparent end of rainy season left Biox start-up in question. / Biox being treated as an existing facility. 75% of needed power already allocated. Shortfall being made up with diesel and Prestea Underground work idled. 3.5mm TPA new plant has already been running for several weeks. Should bring in another 35 - 50,000 ounces of production in Q4.
* Existing Bogoso and Wassa plants could face further power cutbacks. / Not going to happen. Aboadze generating station back in full service any day. Reservoir water levels have risen sufficiently to increase hydro power. These 2 mills are scheduled to produce 52,000 oz. in Q4, even with current power curtailment.
* Lower production meant they could run short of cash while paying for an idle Biox
plant. / Q4 generated $7mm, plus a $15mm credit facility is in place. They have plenty of cash w/o selling other assets. Q4 production between 85-90,000 ounces.
* Potential long term power shortages in Ghana. * New 100 mw power plant being purchased by the miners in Ghana, plus an additional new 160mw VRA power station coming online by mid-year. There is more than enough power for everyone.
Bottom line: Golden Star not only survived, but has turned the corner and returned to profitability. Q4 '06 and Q1 '07 will both feature sequentially higher earnings and higher production. Q2 '07 should hit the jackpot with all 3 mills running at maximum output and processing the most beneficial type of ore at each mill. Throw in Hwini Butre-Benso ore that is almost 3x richer in late '07, and they should hit their 500,000 ounce target easily.
Looking beyond, Prestea Underground should be back in production in '08, and they have ore grading up to 160 g/ton. GSS is back, it'll just take a little patience. The facts are there, but due your own DD in case I missed something.
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