SHARES in Golden Star Resources rose another 17% taking total gains for the month to 49% following a report by Reuters that China’s Chifeng Gold Mining (Chifeng Gold), and an unnamed partner, had agreed to buy the company for $470m in cash.
The Toronto-listed company is currently capitalised at about C$644m or US$520m.
The agreement marks Chifeng’s second attempt to gain a foothold in the West African country after walking away in April from a deal to buy Resolute Mining’s Bibiani gold mine, said Reuters. Chifeng Gold withdrew from Bibiani amid confusion regarding its mining lease which had been withdrawn by the government.
Chifeng said on Monday that its Chijin International unit would buy 62% of Golden Star at $3.91 per share, equating to about $291m. The unnamed third party will contribute a further $179m and take a 38% stake, it added.
Golden Star CEO Andrew Wray said the deal would provide the company’s assets with a large capital base. The company’s Wassa mine is on an expansion drive. In March, Golden Star forecast average annual gold production of 294,000 ounces for 11 years after completing a preliminary study of the mine’s underground potential.
The mine produced 168,000 oz of gold in 2020 and has proved and probable reserves of 1.09 million oz.
The company also said the agreed price represented a 24.1% premium over its closing share price on the New York Stock Exchange on Friday.
“We intend to invest significant financial and human capital into Wassa to realise the mine’s full potential, and in doing so expand our operating footprint into West Africa,” Chifeng President Lu Xiaozhao was quoted as saying in the statement.
Outside China, Chifeng already operates the Sepon gold and copper mine in Laos and in September agreed to invest A$2m ($1.5m) in Australia’s Metalstech, said Reuters.
In August, Golden Star said it had repaid a convertible debenture for a total of $51.5m in cash. This means the company had halved net debt from the first quarter of 2020.
However, efforts by Golden Star to sell its other Ghana mine, Bogosu-Prestea, ran into delays earlier this year. Last month, Golden Star issued a demand to the mine’s buyer, Future Global Resources (FSG), to pay a previously agreed $15m instalment on the asset.
