Sunday, 18 October 2020

Labour agitation hits new owners of Bogoso-Prestea gold mines…workers demand severance payment


Adnan Adams Mohammed

While some 200 former workers of the Bogoso- Prestea gold mines, a subsidiary of Golden Star Resources (GSR) Limited are in court, the rest of the workers have petitioned the new owners, Future Gold Resources Ltd (FGR), demanding a discussion on their severance payment as soon as possible.

  

The petition was presented to the senior management of FGR, las week, after a mini-demonstration at work site. The petition signed by the leader of the workers union, MacDonald Kitson Hytey captured that; “We as workers are not part of the capital assets on the balance sheet transferred to you as a buyer in the recent acquisition of the mine. For us to be a part of your acquisition, the place would have to be Bristol or Liverpool, England and the time would have to be in the 18th century. This is sovereign Ghana in the 21st century and that shall not be the case”.

  

Our readers can remember that, fortnight ago, this paper (Economy Times) published a story on the front-page with a headline “Bogoso-Prestea Gold Mines sold to FGR in a ‘bizarre’ transaction arrangement”, where Golden Star Resources sold all it’s 90 percent interest in the Bogoso-Prestea mines to FGR effective October 1, 2020 at a deferred cost of $95 million.

 

The intriguing and bizarre news of the transaction is that, Future Global Resources Limited (FGR), which is an unexperienced newly incorporated company in this year and without listing experience on any stock exchange, is not paying the initial US$5.0 million cash consideration upfront, this means it is a deferred payment sales, and this has not sit well with some tax and extractive industry experts. Also, the remaining US$90 million is to be paid over a 3-year period during their operation. Further information gathered reveals that, mining giants with remarkable track record in the industry such as Newmont and Goldfields Ghana showed interest in buying the said mines a couple of years ago but were denied. However, government holds 10% shares in the company, these experts say Ghana could lose revenue in taxes and dividends.

 


“The sale strengthens Golden Star's balance sheet and allows the Company to accelerate the growth and development of the large resource base at the Wassa mine, and increase exploration activities in the wider Wassa-HBB project area”, Andrew Wray, President and Chief Executive Officer of Golden Star, who signed the press release noted which was released on the very day the transaction took effect,  adding that, “We now look forward to completing a Preliminary Economic Assessment on the development options for the ore body by the end of the year. In doing so we can subsequently provide the market with greater clarity around the potential path and timing for future growth at the asset.”

 

“Bogoso-Prestea will also benefit from having an owner solely focused on delivering the turnaround of the underground operation and assessing the significant potential of the sulfide resources. As a result, we see this transaction as positive for both FGR and Golden Star, our respective employees, Ghana, the host communities and all of our other stakeholders."

 

The petition

 

But, the over 700 former workers in their petition stated; “We are requesting that you give us an update following your promise, a week ago, to engage with GSR on the payment of our Severance as a matter of urgency.

 

“We have added to this petition a sample of what was done by way of precedence here in Bogoso in 1999 prior to the takeover of GSR from Bogoso Gold Limited. This is the expectation we have of GSR prior to your take over as FGR.

 

“We are demanding Severance letters from GSR and letters of appointment  offering a new employment by a new employer with a dotted line for us to sign acceptance or otherwise.

 

“We as workers are not part of the capital assets on the balance sheet transferred to you as a buyer in the recent acquisition of the mine. For us to be a part of your acquisition, the place would have to be Bristol or Liverpool, England and the time would have to be in the 18th century. This is sovereign Ghana in the 21st century and that shall not be the case.

 

“As a result of your public commitment to our long-term future at Bogoso Prestea, we believe that you will accede to our demand so we can continue to this common future peacefully.”

 

 

Details of the transaction arrangement:

 

The subsequent staged payments, totaling US$25 million, and contingent payments of US$20 to US$40 million ensure that FGR is able to focus its investment capacity on the business whilst providing Golden Star with exposure to Bogoso-Prestea's long-term growth potential

 

 

Following further commercial discussions, Golden Star and FGR agreed to amend the commercial terms of the sale of Bogoso-Prestea. The consideration remains unchanged with FGR taking on all the assets and liabilities of the Bogoso-Prestea subsidiaries at closing. The cash consideration is now all deferred and will be paid as follows:

$5 million of cash is payable on the earlier of (i) the date at which FGR puts in place a new reclamation bond with the Environmental Protection Agency, or (ii) March 30, 2021;

$10 million of cash is payable on July 31, 2021; and

$15 million of cash is payable on July 31, 2023.

 

 

In addition to the consideration payable at closing and the deferred payments, a contingent payment of up to $40 million conditional upon the occurrence of the milestones described hereinafter in respect of the development of the Bogoso Sulfide Project (the "Contingent Payment") may become payable by FGR to Golden Star.  The trigger point for the Contingent Payment is either (i) FGR's formal decision to proceed ("Decision to Proceed") with the Bogoso Sulfide Project, or (ii) the extraction of an aggregate of 5% of the sulfide resources as stated at the end of 2019, being 1.76 million ounces of measured and indicated resources and 0.07 million ounces of inferred resource. The quantum of the Contingent Payment is determined by reference to the average spot gold price for the 90 day period preceding the date of the Decision to Proceed:

$20 million, if the average spot gold price is less than or equal to $1,400/oz;

$30 million, if the average spot gold price is greater than $1,400/oz but less than or equal to $1,700/oz; or

$40 million, if the average spot gold price is greater than $1,700/oz

 

The Contingent Payment is payable in two tranches:

50% at the time of (i) the Decision to Proceed, or (ii) declaration that 5% of the sulfide mineral resources have been extracted; and

50% at the time of the first anniversary of (i) achieving commercial production following the Decision to Proceed, or (ii) the first anniversary of the declaration that 5% of the sulfide mineral resources have been extracted.

 

Restructuring of RGLD Gold AG streaming agreement:

Also, Caystar Finance Co. (a wholly-owned subsidiary of Golden Star) and RGLD Gold AG (an affiliate of Royal Gold, Inc.) have restructured the streaming agreement covering the Wassa mine and Bogoso-Prestea.  The stream has been restructured to separate Bogoso-Prestea from the current arrangement. Wassa now retains the remaining Tier One streaming obligation, which relates to the delivery of gold at a rate of 10.5% of production for a 20% delivery payment. As at June 30, 2020, there were c.129.5koz Tier One ounces remaining to deliver. Following the delivery of the remaining Tier One obligation, the streaming obligation at Wassa will transition into the Tier Two structure, which delivers 5.5% of gold production for a 30% delivery payment.

 

The Company's 2020 production and cost guidance is expected to be updated for the sale of Bogoso-Prestea as part of the reporting of the Q3 2020 results on October 28, 2020.

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