Has Golden Star Resources Ltd. (USA) (GSS) Become the Perfect Stock?

Golden Star has faced a tough year, as pressures throughout the mining industry have hurt small companies. With the Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ) down almost 40% over the past year, few small miners have avoided the sting of higher costs and disruptions that have caused companies across the industry to underperform the price of gold bullion.

But looking forward, things may be turning around for Golden Star. The company’s gold production rose 12% in 2012, with fourth-quarter growth of 31%. The company expects production levels to remain steady in 2013, and with new management on board, Golden Star hopes to push forward with new strategic moves to bolster growth.

Still, the big challenge for the company is in its high cash operating costs, which it expects to fall within the range of $1,040 to $1,100 per ounce. By contrast, low-cost miners Yamana Gold Inc. (USA) (NYSE:AUY) and Goldcorp Inc. (USA) (NYSE:GG) can better handle volatility in gold prices and production, as their cost structure gives them an added margin of safety.

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For Golden Star to improve, it needs its Wassa mine in Ghana to match up to the increases the company recently put on its proven and probable reserves. Moreover, cutting costs to boost margins will be a key component of Golden Star’s success if it wants to move closer to perfection in the years ahead.

The article Has Golden Star Resources Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned.

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