Golden Star Upped to Strong Buy

On Nov 27, Zacks Investment Research upgraded Golden Star Resources Ltd. (GSS) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Golden Star delivered better-than-expected third-quarter 2013 results on Nov 4. The company posted earnings of a penny per share which beat the Zacks Consensus Estimate of a loss of 4 cents and was a turnaround from a loss of 8 cents per share posted a year ago. Revenues fell year over year but managed to beat the Zacks Consensus Estimate. Gold production increased during the quarter driven by improved results at Bogoso.

Golden Star remains committed to lowering its costs, and its cost-cutting initiatives are expected to provide savings of $45 million over the balance of 2013. By the third quarter, the company reached half of this target, and expects to have continued cost savings in the fourth quarter.

Golden Star has a significant pipeline of projects. Collectively, these assets can provide meaningful ore sources to both the refractory and non-refractory plants at Bogoso. At Prestea South, the company gets strong support from the Prestea community to develop its pits.

Golden Star has access to an undrawn term loan of $40 million from Ecobank, and another $20 million is available on its equipment lease facility. Combined, the company has good liquidity and financial flexibility. At the end of the third quarter, the company’s cash and cash equivalents were about $67 million.

Since the company's third-quarter earnings release, the Zacks Consensus Estimate of a loss for 2013 has narrowed 45% to 11 cents per share. For 2014, the Zacks Consensus Estimate of a loss has gone down 67% to 2 cents per share.

Other Stocks to Consider

Other companies in the gold mining industry that are also worth considering include Agnico Eagle Mines Limited (AEM), AngloGold Ashanti Ltd. (AU) and B2Gold Corp. (BTG). All these stocks carry a Zacks Rank #2 (Buy).

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