EX-2.6 4 d15986exv2w6.txt MATERIAL CHANGE REPORT DATED FEBRUARY 4, 2004 EXHIBIT 2.6 GOLDEN STAR RESOURCES LTD. 10579 Bradford Road, Suite 103 Littleton, Colorado 80127-4247 U.S.A.
ALBERTA SECURITIES COMMISSION BRITISH COLUMBIA SECURITIES COMMISSION 410, 300 - 5th Avenue S.W. 701 West Georgia Street Calgary, Alberta T2P 3C4 Vancouver, British Columbia V7Y 1L2 ATTENTION: MARKET SURVEILLANCE ATTENTION: CONTINUOUS DISCLOSURE DEPARTMENT ------------------------------- -------------------------------------------- SECURITIES DIVISION OF THE SASKATCHEWAN MANITOBA SECURITIES COMMISSION FINANCIAL SERVICES COMMISSION 1130, 405 Broadway Avenue 800 - 1920 Broad Street Winnipeg, Manitoba R3C 3L6 Regina, Saskatchewan S4P 3V7 ATTENTION: CONTINUOUS DISCLOSURE ATTENTION: MARKET SURVEILLANCE -------------------------------- ------------------------------ ONTARIO SECURITIES COMMISSION QUEBEC SECURITIES COMMISSION Suite 800, Box 55 800 Victoria Square 20 Queen Street P.O. Box 246, 22nd Floor Toronto, Ontario M5H 3S8 Montreal, Quebec H4Z 1G3 ATTENTION: DISCLOSURE SECTION ATTENTION: CONTINUOUS DISCLOSURE ------------------------------ --------------------------------- DEPARTMENT OF JUSTICE, SECURITIES BRANCH REGISTRAR OF SECURITIES Suite 606, Harbour Building 4th Floor, Shaw Building 133 Prince William Street 95 Rochford Street P.O. Box 5001 P.O. Box 2000 Saint John, New Brunswick E2L 4Y9 Charlottetown, Prince Edward Island C1A 7N8 ATTENTION: CONTINUOUS DISCLOSURE ATTENTION: CONTINUOUS DISCLOSURE --------------------------------- --------------------------------- NOVA SCOTIA SECURITIES COMMISSION DEPARTMENT OF GOVERNMENT SERVICES AND LANDS 2nd Floor, Joseph Howe Building 2nd Floor, Confederation Building West 1690 Hollis Street 75 O'Leary Avenue Halifax, Nova Scotia B3J 1V7 St. John's, Newfoundland A1B 4J6 ATTENTION: CONTINUOUS DISCLOSURE ATTENTION: CONTINUOUS DISCLOSURE DEPARTMENT --------------------------------- --------------------------------------------
Dear Sirs: RE: GOLDEN STAR RESOURCES LTD. MATERIAL CHANGE REPORT UNDER SECTION 146 OF THE SECURITIES ACT (ALBERTA), SECTION 85(1) OF THE SECURITIES ACT (BRITISH COLUMBIA), SECTION 84(1) OF THE SECURITIES ACT, 1988 (SASKATCHEWAN), SECTION 75(2) OF THE SECURITIES ACT (ONTARIO), SECTION 73 OF THE SECURITIES ACT (QUEBEC), SECTION 81(2) OF THE SECURITIES ACT (NOVA SCOTIA), SECTION 76 OF THE SECURITIES ACT (NEWFOUNDLAND) AND SIMILAR PROVISIONS IN OTHER PROVINCES ________________________________________________________________________________ This letter is intended as a statement setting forth certain matters that may be a material change in the affairs of Golden Star Resources Ltd. (the "Corporation" or "Golden Star"). For convenience, this letter 1 is itemized in the same manner as Form 27 of the Securities Act (Alberta), and equivalent forms of the Securities Act (British Columbia), The Securities Act, 1988 (Saskatchewan), The Securities Act (Manitoba), Securities Act (Ontario), Securities Act (Nova Scotia) and Securities Act (Newfoundland). Concurrent with this filing, this letter is being filed with the Toronto Stock Exchange and the American Stock Exchange. ALL AMOUNTS ARE IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED. ITEM 1 - REPORTING ISSUER ------------------------- Golden Star Resources Ltd. 10579 Bradford Road, Suite 103 Littleton, Colorado 80127 U.S.A. ITEM 2 - DATE OF MATERIAL CHANGE -------------------------------- The material change occurred on February 2, 2004. ITEM 3 - PUBLICATION OF MATERIAL CHANGE --------------------------------------- Press Releases were issued by Business Wire of Denver, Colorado, on February 2, 2004 and released across Canada and the United States. ITEM 4 - SUMMARY OF MATERIAL CHANGE ----------------------------------- On February 2, 2004, the Corporation announced a 61% increase in the proven and probable mineral reserves for its Bogoso/Prestea and Wassa gold properties in Ghana, West Africa, net of mining depletion, to 3.55 million ounces for the year ended December 31, 2003. On February 2, 2004, the Corporation announced record net income of $22.0 million as well as record gold production, record revenues and record cashflow from operations for 2003. The Corporation also reported record net income in the fourth quarter of 2003. ITEM 5 - FULL DESCRIPTION OF MATERIAL CHANGE -------------------------------------------- 1. INCREASED GOLD RESERVES On February 2, 2004, the Corporation announced a 61% increase in the proven and probable mineral reserves for its Bogoso/Prestea and Wassa gold properties in Ghana, West Africa, net of mining depletion, to 3.55 million ounces for the year ended December 31, 2003. The Corporation also announced total production at Bogoso/Prestea during 2003 of 174,315 ounces of gold at an average cash operating cost of $166 per ounce, better than previous targets. The Corporation had a strong year at Bogoso/Prestea, driven by higher than anticipated grade. The Corporation expects further production increases in 2004 and 2005, first from the commencement of operations at its Wassa Mine, followed by the planned expansion of Bogoso/Prestea. Total production from Ghana in 2004 is estimated to be in the range of 185,000 to 210,000 ounces rising to more than 350,000 ounces of production in 2005. Cash operating costs are expected to rise as a result of processing more transition and 2 sulfide material at Bogoso/Prestea in 2004 to be in the range of $200 to $225 per ounce. The impact of these two projects is that 2005 production is expected to be double the 2003 output. MINERAL RESERVES Proven and probable mineral reserves as at December 31, 2003 were as follows:
-------------------------------------------------------------------------------------------------- PROVEN PROBABLE TOTAL -------------------------------- -------------------------------- -------------------------------- PROPERTY TONNES GOLD CONTAINED TONNES GOLD CONTAINED TONNES GOLD CONTAINED (000) GRADE OUNCES (000) GRADE OUNCES (000) GRADE OUNCES (G/T) (000) (G/T) (000) (G/T) (000) ---------- -------- ------------ ---------- -------- ------------ ---------- -------- ------------ Bogoso/Prestea 8,254 3.31 878 19,048 3.29 2,011 27,302 3.29 2,890 Wassa 16,207 1.28 665 16,207 1.28 665 ---------- -------- ------------ ---------- -------- ------------ ---------- -------- ------------ Total 8,254 3.31 878 35,255 2.36 2,676 43,509 2.54 3,555 ========== ======== ============ ========== ======== ============ ========== ======== ============
The mineral reserves were determined using a gold price of $325 per ounce and were estimated in accordance with the definitions and requirements of Canada's National Instrument 43-101. The Qualified Person for the estimation of the mineral reserves is the Corporation's employee, Mr. David Alexander. Golden Star's share of the mineral reserves is subject to the Government of Ghana's right to a 10% dividend once the Corporation's capital costs have been recovered. A higher-grade, open pit probable mineral reserve at Mampon on the Dunkwa Property immediately north of Bogoso of 162,000 ounces of contained gold, grading 5.61 g/t, is included in the Bogoso/Prestea mineral reserve estimate. MINERAL RESOURCES Measured, indicated and inferred mineral resources as at December 31, 2003 are as follows:
-------------------------------------------------------------------------------------------- MEASURED INDICATED MEASURED & INFERRED INDICATED --------------------- ------------------------ -------------------- ------------------------ PROPERTY TONNES GOLD TONNES GOLD TONNES GOLD TONNES GOLD (000) GRADE (000) GRADE (000) GRADE (000) GRADE (G/T) (G/T) (G/T) (G/T) ----------- --------- ------------ ----------- ---------- --------- ------------ ----------- Bogoso/Prestea 11,253 2.45 16,024 2.53 27,277 2.50 29,690 2.43 Prestea Underground 1,606 8.58 Wassa 9,363 0.96 9,363 0.96 30,768 1.27 ----------- --------- ------------ ----------- ---------- --------- ------------ ----------- GHANA TOTAL 11,253 2.45 25,387 1.93 36,640 2.11 62,064 2.00 =========== ========= ============ =========== ========== ========= ============ ===========
The mineral resources, which are in addition to the mineral reserves described above, were determined using a gold price of $375 per ounce. The mineral resources were estimated in accordance with the definitions and requirements of Canada's National Instrument 43-101. The Qualified Person for the estimation of the mineral resources is the Corporation's employee, Mr. S. Mitchel Wasel. Golden Star's share of the mineral resources is subject to the Government of Ghana's right to a 10% dividend once the Corporation's capital costs have been recovered and to minority interests in the Prestea Underground in which Golden Star currently has a 59% beneficial interest. The mineral resource for Bogoso/Prestea includes an indicated mineral resource for Dunkwa of 402,000 tonnes at an average grade of 2.79 g/t and an inferred mineral resource of 2,393,000 tonnes at an average grade of 2.69 g/t. A technical report as required by Canada's National Instrument 43-101, with respect to the mineral reserve and mineral resource numbers as of December 31, 2003, is being prepared by Messrs. Alexander and Wasel, both qualified persons under National Instrument 43-101. 3 RECONCILIATION OF RESERVES (IN THOUSANDS OF OUNCES OF TOTAL CONTAINED GOLD)
---------------------------------------------------------------------------------------- PROPERTY DECEMBER 31, 2002 2003 DEPLETION INCREASE DECEMBER 31, 2003 --------------------- --------------------- --------------------- ---------------------- Bogoso/Prestea 2,211 (221) 738 2,728 - Mampon - - 162 162 Wassa - - 665 665 --------------------- --------------------- --------------------- ---------------------- TOTAL 2,211 (221) 1,565 3,555 ===================== ===================== ===================== ======================
Depletion represents contained ounces of reserves processed during 2003 before considering recovery losses and therefore does not equal 2003 gold production. 2. FOURTH QUARTER AND 2003 RESULTS On February 2, 2004, the Corporation announced record net income of $22.0 million as well as record gold production, record revenues and record cashflow from operations for 2003. The Corporation also reported record net income in the fourth quarter of 2003. 2003 HIGHLIGHTS o Net income up 350% at $22.0 million o Revenues of $64.4 million, up 66% from 2002 o Gold sales of 174,315 ounces, up 40% over 2002 o Realized gold price of $364/ounce o Cash operating cost of $166/ounce, compared to $193/ounce in 2002 o Net income per share of $0.20/share, compared to $0.07/share in 2002 FOURTH QUARTER HIGHLIGHTS o Record earnings of $7.9 million, or $0.07/share o Gold sales of 45,046 ounces, up 33% from 2002 quarter o Cash operating cost of $158/ounce o Realized gold price of $387/ounce The improvements in results for the quarter and for the year ended December 31, 2003 were primarily due to higher revenues, which resulted from a combination of increased gold output at the Corporation's Bogoso/Prestea gold mine and stronger gold prices. Improvements in ore grades and gold recovery at Bogoso/Prestea were responsible for the higher gold output. FINANCIAL AND OPERATIONAL SUMMARY FOR 2003
----------------------------------------------------------------- 2003 2002 2001 --------------------- --------------------- --------------------- Gold sold (ounces) 174,315 124,400 87,936 Price realized ($ per ounce) 364 311 271 Cash operating cost ($ per ounce) (1) 166 193 263 Royalties ($ per ounce) 18 22 8 Total cash cost ($ per ounce) (1) 184 215 271 Revenues (in thousands $) 64,370 38,802 24,658 ===================== ===================== =====================
4
----------------------------------------------------------------- 2003 2002 2001 --------------------- --------------------- --------------------- Net income (in thousands $) 21,956 4,856 (20,584) Net income per share ($) 0.198 0.070 (0.488) Net income per fully diluted share ($) 0.186 0.063 (0.488) Average shares outstanding (in millions) 111.0 72.4 42.2 Fully diluted shares outstanding (in millions) 117.9 76.7 42.2 Shares outstanding, end of year 132.9 87.4 49.3 ===================== ===================== =====================
Note 1: See note on non-GAAP financial measures below. Full details of the Corporation's 2003 performance can be found in its Form 10-K, which was filed with the SEC February 2, 2004 and will shortly have available on the Corporation's web site (http://www.gsr.com). All production during 2003 was mined from the Plant-North pit at Prestea and processed through the Bogoso mill.
----------------------------------------------------------------- 2003 2002 2001 --------------------- --------------------- --------------------- Ore mined (thousands tonnes) 2,002 2,223 1,701 Waste mined (thousands tonnes) 6,792 5,211 4,851 Tonnes milled (thousands) 2,094 2,272 2,098 Average grade milled (g/t) 3.29 2.31 3.69 Mill recovery (%) 81.2 74.4 49.6 ===================== ===================== =====================
FINANCIAL AND OPERATIONAL SUMMARY FOR THE FOURTH QUARTER
----------------------------------------------------------------- FOR THE THREE MONTHS ENDED DECEMBER 31, ----------------------------------------------------------------- 2003 2002 -------------------------------- -------------------------------- Gold sold (ounces) 45,046 34,654 Price realized ($ per ounce) 387 325 Cash operating cost ($ per ounce) (1) 158 221 Royalties ($ per ounce) 12 24 Total cash cost ($ per ounce) (1) 170 245 Revenues (in thousands $) 17,735 11,421 Net income (in thousands $) 7,914 1,011 Net income per share ($) 0.067 0.012 Average shares outstanding (in millions) 124.2 84.7 ================================ ================================
Note 1. See note on non-GAAP financial measures below.
----------------------------------------------------------------- FOR THE THREE MONTHS ENDED DECEMBER 31, ----------------------------------------------------------------- 2003 2002 -------------------------------- -------------------------------- Ore mined (thousands tonnes) 347 576 Waste mined (thousands tonnes) 1,743 1,517 Tonnes milled (thousands) 531 594 Average grade milled (g/t) 2.85 2.22 Mill recovery (%) 85.5 80.4 ================================ ================================
CASH AND CASH FLOW Cash at the end of 2003 stood at $90.0 million, a $70.0 million increase from the cash position at the end of 2002. Improvements in gold prices and gold production levels combined to provide $29.1 million of cash flow from operations during 2003, an increase of $24.2 million as compared to 2002. A total of 5 $70.2 million was spent on capital projects during 2003, including $22.8 million on development and construction of the Wassa project. This compares to capital spending of $16.1 million in 2002. During 2003, the Corporation raised a net $102.9 million from equity offerings. The Corporation ended 2003 with $0.8 million of debt, down from $5.3 million at the end of 2002. BOGOSO/PRESTEA The Bogoso mill processed an average of 5,736 tonnes of ore per day, down from 6,090 tonnes per day in 2002. Processing rates were reduced to optimize recoveries from the higher grade feed material. The slower processing rate, combined with a gravity circuit installed in 2001, combined to push gold recovery up to 81% versus 74% in 2002. All the mill feed to the Bogoso mill during 2003 came from the Plant-North pit on the Prestea property and the Corporation expects the same situation in 2004. The Corporation expects gold production from Bogoso/Prestea of approximately 135,000 to 155,000 ounces in 2004 at a projected cash operating cost of between $200 and $220 per ounce. This estimate excludes any production contribution during 2004 from the expansion project. EXPANSION AT BOGOSO/PRESTEA The recent growth of mineral reserves and mineral resources at Bogoso/Prestea and the Corporation's confidence in the region's gold potential has prompted planning for an expansion of its mining and processing operations at Bogoso/Prestea. The expansion plans consist of three elements: first, the construction of a second processing plant near Prestea; second, the conversion of the existing Bogoso mill to process refractory sulfide ores using bio-oxidation technology; and third, the expansion of the Corporation's mining fleet to feed the expanded mill complex. The Corporation expects the first phase of the expansion program, the construction of a second processing plant, to commence soon and to be completed by late 2004 with first production in 2005. The majority of the equipment for this phase of the expansion program was acquired in 2003 when the Corporation acquired a 4,500 tonne per day processing plant from an inactive mine in Ghana. Phase 2 of the expansion program, conversion of the existing Bogoso processing plant with the addition of a bio-oxidation circuit, is expected to commence in late 2004 and to be completed in 2005. The expansion is expected to increase overall gold production from Bogoso/Prestea, reduce average haulage costs, provide general economies of scale, and allow more efficient scheduling of the Corporation's mining operations by being able to simultaneously process a full range of ore types. WASSA DEVELOPMENT PROJECT Following the successful completion of a feasibility study for the Wassa gold project in Ghana in July 2003, a lump sum turnkey contract was awarded to a South African contractor for the construction of a 10,000 tonne per day carbon-in-leach mill and infrastructure at Wassa. Construction is on track for a first-quarter 2004 completion and start-up. Construction and development costs at Wassa are projected at $25.5 million, with an approximate $15 million of capital needed for a mining fleet, scheduled in late 2004. Gold production from Wassa is expected to begin in early 2004 with the re-processing of existing heap leach pads through the Corporation's new mill, producing an estimated 50,000 to 55,000 ounces of gold in 2004 at cash operating costs of between $200 and $240 per pounce. When mining from the open pit commences in early 2005, Wassa is expected to produce approximately 140,000 ounces annually at an average cash operating cost of about $200 per ounce. Mining permits are expected to be received to allow the start of operations in early 2004. 6 PRESTEA UNDERGROUND The compilation of a mine-wide digital plan for the Prestea Underground was completed in 2003, with more detailed digitizing and structural mapping still taking place in areas of specific interest. This project pulled together over 100 years of mining and geologic records and the resulting electronic data base is now being used to identify unmined zones and to gain a better understanding of the potential of the Prestea gold system. This work has identified a number of drill targets and the Corporation has begun drill testing the first of these. The drilling program and the rate of the Corporation's investment in the Prestea Underground is expected to expand significantly, with its investment in 2004 projected at $9.1 million. The 2004 exploration program will focus on drilling relatively shallow (400-500 meters depth) remnant quartz reef potential beneath the existing Plant-North pit and the proposed Beta-Boundary pit as well as drilling down dip beneath the Beta Boundary Shoot below 550 meters depth. In addition, underground drill stations will also be developed at 1,100 meters depth in preparation for drilling planned for 2005 on extensions of the Prestea Main Shoot beneath the Plant-North pit. EXPANSION OF GHANA LAND POSITION During 2003, the Corporation acquired the Asikuma and Mansiso exploration properties from Birim Goldfields Inc. for $3.4 million plus a net smelter return royalty. This followed the successful acquisition of the Mampon project from Ashanti Goldfields Company Limited in the second quarter. The addition of these properties delivers access to an additional 45 kilometers of the Ashanti Trend immediately north of Bogoso. Golden Star is now the largest mining property owner on the prolific Ashanti Trend, controlling over 100 kilometers of strike length. EXPANSION OF EXPLORATION PROGRAM IN WEST AFRICA In late 2003, the Corporation entered into joint venture agreements whereby it has the right to earn an interest of 51 to 82.5% in the Mininko gold property in Mali and an interest of 51 to 85% in three properties in Sierra Leone totaling 500 square kilometers subject to Golden Star meeting certain expenditure commitments. ROYALTY BUYBACKS IN 2003 When it acquired the Wassa gold project in 2002, the Corporation agreed to pay to the sellers two separate gold production royalties on future gold production from Wassa. The sellers also agreed to hold a $1.9 million note to be paid once Wassa began producing gold. In October 2003 the Corporation paid $11.5 million to buy back the two royalties and to pay off the debt. When it acquired Prestea in 2001, the Corporation agreed to pay to the sellers a gold production royalty on the first one million ounces of gold produced from Bogoso/Prestea following the acquisition. The Corporation had been making these royalty payments to the sellers since that time. In November 2003 the Corporation paid $12.0 million to the sellers to buy back the balance of the royalty obligation. SUMMARY FINANCIAL STATEMENTS The following information is summarized and excerpted from the Corporation's audited consolidated financial statements and notes thereto as filed in the Form 10-K, which was filed with the SEC February 3, 2004, in thousands, except per share amounts: 7 CONDENSED CONSOLIDATED BALANCE SHEETS
------------------------------------------ 2003 2002 --------------------- -------------------- Cash $ 89,970 $ 20,016 Other current assets 14,965 12,827 Property, plant and equipment 18,202 8,490 Deferred exploration 9,108 4,743 Mine property 56,808 17,580 Mine construction-in-progress 27,376 4,543 Other long term assets 5,962 5936 Total assets $222,391 $74,135 --------------------- -------------------- Current liabilities $ 8,151 $10,880 Long term debt 657 1,727 Asset retirement obligations 7,745 7,246 Minority interest 7,476 4,898 Shareholders' equity 198,362 49,384 Total liabilities and shareholders' equity $222,391 $74,135 --------------------- --------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------ 2003 2002 2001 -------------- ------------- ------------- Revenues $64,370 $38,802 $ 24,658 Mining operations expense 32,125 26,747 24,824 Depreciation, depletion and amortization 4,993 2,459 3,420 General and administrative expenses, including option expense 5,566 3,886 2,669 Abandonment and impairment of properties 175 - 15,010 Foreign exchange gain (2,331) (139) (50) Gain on sale of assets (1,905) - - Other expenses 1,214 155 454 Net income before minority interest 24,533 5,694 (21,669) Minority interest (2,577) (838) 1,085 Net income $21,956 $ 4,856 $(20,584) Earning per share - basic $0.198 $0.070 $(0.488) Earnings per share - diluted $0.186 $0.063 $(0.488) ============== ============= =============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------ 2003 2002 2001 -------------- ------------- ------------- Cash provided by operations $29,076 $ 4,893 $ 2,429 Cash used in investing activities (68,040) (10,370) (5,186) Cash provided by financing activities 108,918 24,984 2,275 Increase/(decrease) in cash and cash equivalents 69,954 19,507 (482) Cash and cash equivalents at end of year $89,970 $20,016 $ 509 ============== ============= =============
ITEM 6 - RELIANCE ON SECTION 146(2) SECURITIES ACT (ALBERTA), SECTION 85(2) SECURITIES ACT (BRITISH COLUMBIA), SECTION 75(3) SECURITIES ACT (ONTARIO), SECTION 84(2) OF THE SECURITIES ACT 1988 (SASKATCHEWAN), AND SECTION 81(3) SECURITIES ACT (NOVA SCOTIA) AND SIMILAR PROVISIONS IN THE OTHER PROVINCES Not applicable 8 ITEM 7 - OMITTED INFORMATION ---------------------------- Not applicable ITEM 8 - SENIOR OFFICER ----------------------- The names of Senior Officers of the Corporation who are knowledgeable about the material change and who can be contacted by the Commission are:
GOLDEN STAR RESOURCES LTD. +1800 553 8436 Peter J.L. Bradford President and CEO +1303 894 4613 Allan J. Marter Senior Vice President and CFO +1303 894 4631
ITEM 9 - STATEMENT OF SENIOR OFFICER ------------------------------------ The foregoing accurately discloses the material change referred to herein. DATED this 4th day of February, 2004. Yours truly, GOLDEN STAR RESOURCES LTD. "ALLAN J. MARTER" PER:____________________________________________ ALLAN J. MARTER SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY CC: TORONTO STOCK EXCHANGE THE AMERICAN STOCK EXCHANGE 9