GOLDEN STAR RESOURCES LTD
OVERVIEW OF GOLDEN STAR  We are a Canadian incorporated international gold mining and exploration company producing gold in Ghana,  West Africa.  We also conduct gold exploration in West Africa and in South America.  Golden Star Resources Ltd. was  established  under the  Canada  Business  Corporations  Act on May  15,  1992  as a  result  of the amalgamation of South American Goldfields Inc., a corporation incorporated under the  federal  laws of Canada,  and Golden Star  Resources  Ltd.,  a  corporation originally   incorporated   under  the   provisions  of  the  Alberta   Business Corporations  Act on March 7, 1984 as Southern Star Resources Ltd. Our principal office is located at 10901 West Toller  Drive,  Suite 300,  Littleton,  Colorado 80127,  and our registered and records  offices are located at 66 Wellington St. W, 42nd floor,  Box 20, Toronto  Dominion Bank Tower,  Toronto  Dominion Centre, Toronto, ON M5K 1N6. Our fiscal year ends on December 31.  Through our  subsidiaries  and joint  ventures we own a controlling  interest in four  significant  gold  properties  in  southern  Ghana  in  West  Africa:  the Bogoso/Prestea property  ("Bogoso/Prestea"),  the Wassa property ("Wassa"),  the St. Jude properties ("St. Jude Properties") and the Prestea Underground property ("Prestea Underground").  The Bogoso/Prestea  property encompasses the adjoining Bogoso and Prestea mining concessions,  which  are  operated  as a single  operation  and  referred  to as "Bogoso/Prestea."  Bogoso/Prestea  is owned by our 90% owned  subsidiary  Bogoso Gold  Limited   ("BGL").   In  2005,  we  sold  131,898   ounces  of  gold  from Bogoso/Prestea.   BGL  also  owns  a  90%  operating  interest  in  the  Prestea Underground.  We are currently conducting exploration and engineering studies to determine if the Prestea  Underground  mine can be  reactivated  on a profitable basis.  Wassa,  which is located 35 kilometers east of  Bogoso/Prestea,  is owned by our 90%  owned  subsidiary  Wexford  Goldfields  Limited  ("WGL").  Wassa  completed construction  and  commissioning  of a new processing plant and open pit mine at the end of March  2005 and the  project  was placed in service on April 1, 2005. Wassa  produced and sold 69,070 ounces of gold during 2005,  following its April 1, 2005 in service date.  The St. Jude  Properties in southwest  Ghana were acquired in December 2005 as a result of our acquisition of St. Jude Resources Ltd. ("St.  Jude"), as discussed below. The St. Jude Properties  consist of the Hwini-Butre and Benso concessions covering  an  area  of 201  square  kilometers  and  located  between  60 and 85 kilometers south of Wassa. We currently hold a 100% interest in these properties but the  Government  of Ghana is entitled to a 10% carried  interest when mining permits are issued.  We  also  hold  several  exploration   properties   including  interests  in  an exploration joint venture in Sierra Leone and active  exploration  properties in Ghana, Cote d'Ivoire,  Suriname and French Guiana. We hold indirect interests in gold  exploration  properties in Peru and Chile through an investment in Goldmin Consolidated  Holdings.  We also  own a 53%  interest  in EURO  Ressources  S.A. ("EURO"), a French registered, publicly traded royalty holding company (formerly known as Guyanor  Ressources  S.A.).  EURO  holds a  participation  right  which requires  Cambior Inc. to make quarterly  payments to EURO, the amounts of which are based upon the gold price and gold  production  from Cambior  Inc.'s Rosebel gold mine in Suriname.  All of our  operations,  with the  exception  of certain  exploration  projects, transact  business in US dollars and keep financial  records in US dollars.  Our accounting records are kept in accordance with Canadian GAAP.  We are a reporting  issuer or the  equivalent in all provinces of Canada and the United  States  and  file  disclosure  documents  with the  Canadian  securities regulatory authorities and the United States Securities and Exchange Commission.  ACQUISITION OF ST. JUDE  On December  21,  2005,  we completed  the  acquisition  of St. Jude, a Canadian corporation,  pursuant to a court ordered plan of  arrangement  under the Canada Business  Corporation Act (the  "Arrangement")  under which Golden Star acquired 100% of the issued and  outstanding  common  shares and other  securities of St. Jude.   Following  the  completion  of  the  Arrangement,   St.  Jude  became  a wholly-owned subsidiary of Golden Star.  Under the terms of the  Arrangement,  (i) the holders of St. Jude common  shares exchanged  their St. Jude common  shares for common shares of Golden Star on the basis of 0.72 of a Golden Star common share for each St. Jude common share,  and (ii) the outstanding warrants and options of St. Jude were exchanged for Golden                                           11   Star  warrants or options,  such that each holder will be entitled to receive on the exercise  thereof that number of Golden Star common  shares that is equal to the number of St. Jude common  shares that would  otherwise  have been  issuable upon the exercise  thereof  multiplied  by 0.72,  with the exercise  price being appropriately  adjusted as well.  A total of 31.4  million of our common  shares were issued in the  Arrangement  and a further 5.8  million  are  issuable  upon exercise of warrants and options exchanged for warrants and options of St. Jude.  GOLD SALES AND PRODUCTION  Ghana has been a  significant  gold  producing  country  for over 100 years with AngloGold Ashanti's Obuasi mine and the underground mine at Prestea historically being the two major  producers.  Several other areas in Ghana have also produced significant   amounts  of  gold.   The  gold  industry  in  Ghana  is  currently experiencing  growth in exploration and development and gold production.  Annual gold  production  in Ghana has exceeded 2 million  ounces in recent years and is expected to increase as planned  developments  and expansions now underway reach the production stage.  All of our gold production is sold to a South African gold refinery. Our gold is sold in the form of dore bars  which  average  approximately  91% gold by weight with the remaining  portion being primarily  silver.  Revenue is recognized when title is  transferred  at the  refinery.  The sales price is based on the London P.M. fix on the day of delivery to the refinery.  GOLD PRICE HISTORY  The price of gold is volatile  and is affected  by numerous  factors  beyond our control  such as the sale or  purchase  of gold by  various  central  banks  and financial  institutions,  inflation or  deflation,  fluctuation  in the relative values of the US dollar and foreign  currencies,  changes in global and regional gold demand, and the political and economic  conditions of major  gold-producing countries throughout the world.  The following  table presents the high, low and average  afternoon  fixed prices for gold per ounce on the London Bullion Market over the past ten years:                                                                                                    Average Price Received            Year                    High                 Low                Average             by Golden Star         -----------------------------------------------------------------------------------------------------------            1996                    415                  367                  388                    N/A            1997                    362                  283                  331                    N/A            1998                    313                  273                  294                    N/A            1999                    326                  253                  279                    293            2000                    313                  264                  279                    280            2001                    293                  256                  271                    271            2002                    349                  278                  310                    311            2003                    416                  320                  363                    364            2004                    454                  375                  410                    410            2005                    537                  411                  445                    446  To March 27, 2006                 572                  525                  553                    551  - -------------------- Data Source:  www.kitco.com                                            12   The following  diagram depicts the  organizational  structure of Golden Star and its significant subsidiaries:                                    ------------                                   GOLDEN STAR                                    RESOURCES                                       LTD.                                     (Canada)                                   ------------                                         |                                         |                ---------------------------------------------------                |                        |                        |                |                        |                        |         --------------          ----------------        ------------------         EURO RESOURCES          Caystar Holdings        St. Jude Resources         S.A. (France)           (Cayman Islands)          Ltd. (Canada)         Approximately                  (100%)                (100%)           (53%)                                         |                                         |                ---------------------------------------------------                |                                                 |                |                                                 |          ----------------                                ------------------         Bogoso Holdings                                  Wasford Holdings         (Cayman Islands)                                  (Cayman Islands)             (100%)                                            (100%)                |                                                 |                |                                                 |         ----------------                                ------------------           Bogoso Gold                                   Wexford Goldfields             Limited                                          Limited             (Ghana)                                          (Ghana)              (90%)                                            (90%)                |                |         ----------------             Prestea         Underground Joint         Venture (Ghana)              (90%)  BUSINESS STRATEGY AND DEVELOPMENT  Since 1999, our business and development  strategy has been focused primarily on the acquisition of producing and development  stage gold properties in Ghana and on the exploration,  development and operation of these properties.  Our overall objective over the past five years has been to grow our business organically and through  acquisitions.  As part of the effort to achieve this goal,  we actively investigate potential acquisition and merger candidates.  These efforts resulted in our acquisition of St. Jude.  Our ore processing plant and open pit mine at Wassa were completed and placed in service on April 1, 2005, and we are currently  carrying out  construction  of a sulfide  ore  processing  facility  at  Bogoso/Prestea.  If  the  expansion  and development plans at  Bogoso/Prestea  are completed as expected in late 2006 and assuming a full year of  production  from the sulfide  plant  during  2007,  our annualized production is expected to increase to 500,000 ounces of gold in 2007. Achievement of this target is subject to numerous  risks.  See the discussion of risk factors below.  We also  conduct gold  exploration  in West Africa and South  America  investing approximately  $17 million in such  activities  during  2005.  In Ghana,  we are actively  seeking to expand  reserves  around  our  existing  mines,  and we are planning  to  commence  exploration  activities  with  respect  to the St.  Jude Properties  in 2006.  We employ a number of different  strategies to achieve our exploration goals including the following:  o    we maintain a staff of  geologists in Ghana  responsible  for exploring for      new resources in Ghana and for  developing new reserves in areas around the      existing operations;                                           13   o    we contract with geologic  consultants  who advise us on existing  holdings      and who seek to identify new exploration opportunities;  o    we have purchased equity  ownership in gold exploration  companies that use      the equity funds provided by us to explore in their areas of expertise;  o    we  provide  funding  to joint  venture  partners  that use our  funding to      conduct active exploration efforts; and  o    we maintain an  international  exploration  group that  carries out work on      various  properties in the Guiana Shield area of South America and in other      areas of Africa outside of Ghana.  OUR ASSETS  Bogoso/Prestea  Property-  We own and  operate the  Bogoso/Prestea  gold mine in southwest  Ghana.  Ore is currently mined from the Plant-North  open-pit surface operation  at Prestea  and trucked  approximately  15  kilometers  to the Bogoso processing plant where the ore is processed. The current nominal capacity of the Bogoso processing plant is approximately 1.5 million tonnes per year. The Bogoso processing  plant  utilizes  CIL  technology  along with  gravity and  flotation processes to separate gold from the ore. CIL, gravity and flotation technologies are well known and are widely used for  treating  gold ores.  In addition to the mine and processing plant facility,  Bogoso/Prestea's  assets include a fleet of mining  equipment,   numerous   ancillary   facilities   including   warehouses, maintenance shops,  roadways,  administrative offices and a residential complex. Historical  gold  output at the Bogoso  processing  plant has  typically  ranged between  130,000 and 175,000 ounces per year. See the "Gold  Production and Unit Costs" table below for additional details on historical production and operating costs.  A new 3.5  million  tonne  per year  bio-oxidation  processing  plant  utilizing proprietary  BIOXPP(R) technology is currently under construction at Bogoso. The new  facility is located  next to the  existing  Bogoso  plant and will  process refractory  sulfide ores from the Bogoso and Prestea  properties as well as from other deposits in the local area. The currently  existing plant will continue to process oxide and certain  non-refractory ores. The two side-by-side plants will have a combined  capacity of approximately 5 million tonnes of ore per annum and should yield approximately 370,000 ounces of gold per annum once construction is completed in late 2006.  Mampon - The Mampon deposit,  located  approximately  35 kilometers north of the Bogoso  processing  plant,  was acquired in 2003 as part of the Dunkwa  property acquisition.  Mampon is an  undeveloped  gold deposit with 1.6 million tonnes of mineral  reserves  at an  average  grade of 4.53 g/t  most of  which  should  be recoverable  by open  pit  mining  methods.  Development  of this  deposit  as a satellite to our Bogoso/Prestea property is scheduled to begin in 2007.  Pampe - The Pampe deposit is located  approximately  19  kilometers  west of the Bogoso  processing  plant.  While we have owned the rights to Pampe for  several years,  drilling  during 2005  identified an indicated  mineral  resource of 0.2 million  tonnes  at an  average  grade  of 4.4  g/t,  most of  which  should  be recoverable  by open  pit  mining  methods.  Development  of this  deposit  as a satellite to our Bogoso/Prestea property is scheduled to begin in late 2006.  Prestea  Underground - The Prestea  Underground is located  directly beneath the Prestea property. It consists of a large underground gold mine that operated for over  100  years,  under a  number  of  former  owners,  producing  a  total  of approximately nine million ounces of gold prior to its closure in early 2002. We are continuing to conduct  exploration  and  development  drilling and carry out engineering, geological and economic analysis of the mine to determine if it can be reopened on a profitable  basis. The mine includes several useable shafts and several kilometers of underground  workings on numerous levels extending as deep as 1,400 meters below the surface.  Wassa Property- We own and operate the Wassa gold mine in southwest  Ghana.  The mine  includes an  open-pit  mine,  a CIL  processing  plant,  a fleet of mining equipment,   ancillary  facilities  including  an  administration   building,  a warehouse,  a  maintenance  shop,  a stand-by  power  generating  facility and a residential site with associated facilities.  The new Wassa processing plant was completed  in early 2005 and placed in  service on April 1, 2005.  Wassa's  2005 gold production and operating  costs are shown on the "Gold  Production and Unit Costs" table below.  St. Jude  Properties - The St. Jude  Properties  consist of the  Hwini-Butre and Benso concessions  containing undeveloped zones of gold mineralization and which together  cover an area of 201  square  kilometers.  These  two  properties  are located  between 60 and 85  kilometers  south of our Wassa mine.  Prior to being acquired by us, St. Jude conducted  extensive  exploration  work at the St. Jude Properties,  and based on our review of this past work we  estimated  a measured and indicated  gold resource of  approximately  5.3 million tonnes at an average grade of 4.56 g/t.                                           14   Rosebel  Participation  Right - Through our 53% owned  subsidiary EURO, we own a participation  right referred to as the "Rosebel  Royalty." This royalty is paid to our  subsidiary  by  Cambior  Inc.,  operator  of the  Rosebel  gold  mine in Suriname. Royalty income totaled $4.7 million in 2005 and $3.0 million in 2004.  Exploration  Assets - We have interests in numerous gold exploration  properties in Ghana,  Sierra Leone,  Burkina Faso,  Niger,  French Guiana,  Suriname and in other areas of South America.  GOLD PRODUCTION AND UNIT COSTS  The following  table shows  historical  and projected  gold  production and unit costs.                                                                                                                      2006              Production and Cost Per Ounce (1)                    2003          2004           2005       Projected - ------------------------------------------------------            ----          ----           ----       --------- BOGOSO/PRESTEA Ounces (thousands)                                                   174.3          147.9         131.9         180.0 Cash Operating Cost ($/oz)                                             166            250           338           330 Total Cash Cost ($/oz)                                                 184            264           351           344 Total Operating Cost  ($/oz)                                           216            350           423           420  WASSA(3) Ounces (thousands)                                                       -              -          69.1         120.0 Cash Operating Cost ($/oz)                                               -              -           468           340 Total Cash Cost ($/oz)                                                   -              -           482           354 Total Operating Cost  ($/oz)                                             -              -           587           420  CONSOLIDATED Consolidated Total Ounces(2) (thousands)                             174.3          147.9         201.0         300.0 Consolidated Cash Operating Cost ($/oz)                                166            250           383           335 Consolidated Total Cash Cost ($/oz)                                    184            264           396           348 Consolidated Total Operating Cost  ($/oz)                              216            350           479           420    (1)  See MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS      OF OPERATIONS  for  definitions  of the cost per ounce  measures as used in      this table. (2)  Gold  production  is shown on a 100% basis,  which  represents  our current      beneficial  interest in gold  production  and revenues.  The  Government of      Ghana,  which has a 10% carried interest in Bogoso/Prestea and Wassa, would      receive 10% of any dividends distributed from Bogoso/Prestea and Wassa once      all of the capital has been repaid. (3)  Wassa's 2005 production figures are for the nine-month period following its      April 1, 2005 in-service date.  MINERAL RESERVES  Our proven and probable  Mineral  Reserves are  estimated  in  conformance  with definitions set out in NI 43-101.  Technical Reports on our Mineral Reserves for Bogoso/Prestea  and Wassa have been filed as required  by NI 43-101.  The proven and  probable  Mineral   Reserves  are  those  ore  tonnages   contained  within economically  optimized pits,  configured using current and predicted mining and processing  methods and related operating costs and performance  parameters.  We believe that our Mineral  Reserves are calculated on a basis consistent with the definition of proven and probable mineral reserves  prescribed for use in the US by the US Securities and Exchange Commission and set forth in SEC Industry Guide 7. See our "Glossary of Terms."  We prepare our  estimates  of Mineral  Reserves  based on  information  compiled and/or validated by Mr. William Tanaka, our employee,  who holds the position of Group Reserves Manager.  Mr. Tanaka is a qualified  geological  engineer with 20 years of experience  and is a member of the  Australian  Institute of Mining and Metallurgy. Mr. Tanaka is considered a qualified person under NI 43-101.                                           15   The proven and  probable  Mineral  Reserves  as of  December  31, 2005 have been estimated at an economic  cut-off grade based on a gold price of $400 per ounce, which approximately  equates to the three year-rolling  average gold price. This compares  to $360 per ounce used for the  estimate  of our  Mineral  Reserves at December  31,  2004.  The  cut-off  grade  defines  reserve   material  that  is demonstrated  to  be  technically  and  economically  feasible  to  extract.  In determining reserves, we first design an economically optimized pit based on all operating  costs,  including the costs to mine.  Since all material lying within the optimized pit shell will be mined, the cut-off grade used in determining our reserves is  calculated  on the basis of material  that,  having been mined,  is economic to transport and process  without  regard to primary mining costs (i.e. mining  costs  that were  appropriately  applied  at the  economic  optimization stage).  The  QA/QC  controls  program  used in  connection  with the  estimation  of our reserves  consists of regular  insertion and analysis of blanks and standards to monitor  laboratory  performance.  Blanks  are used to check for  contamination. Standards  are used to check  for  grade-dependence  biases.  A total of  eleven standards are used,  five generated by Golden Star ranging from 0.24 to 4.55 g/t and six commercially available standards ranging from 0.22 to 3.42 g/t.  The  following  table  summarizes  our  estimated  proven and  probable  Mineral Reserves as of December 31, 2005 and December 31, 2004:                                           16            PROVEN AND PROBABLE MINERAL RESERVES                              As of December 31, 2005                     As of December 31, 2004 - ---------------------------------------------------------------------------------------------------------------------- Property                                    Tonnes        Gold Grade     Ounces      Tonnes    Gold Grade    Ounces Mineral Reserve Category                  (millions)         (g/t)     (millions)  (millions)     (g/t)    (millions) - ----------------------------------------------------------------------------------------------------------------------  Bogoso/Prestea Proven Mineral Reserves: Non-refractory                                       1.9         3.82        0.23          3.0       4.20        0.41 Refractory                                          13.0         3.00        1.25         11.4       2.97        1.09 - ----------------------------------------------------------------------------------------------------------------------                                                      14.9         3.11        1.48         14.5       3.23        1.51 - ----------------------------------------------------------------------------------------------------------------------  Probable Mineral Reserves: Non-refractory                                       7.0         2.26        0.51          7.3       2.34        0.55 Refractory                                          11.4         2.42        0.89          9.0       2.60        0.76 - ----------------------------------------------------------------------------------------------------------------------                                                      18.4         2.36        1.40         16.4       2.48        1.31 - ----------------------------------------------------------------------------------------------------------------------  Total Proven and Probable: Non-refractory                                       8.9         2.59        0.74         10.4       2.89        0.96 Refractory                                          24.4         2.73        2.14         20.5       2.81        1.85 - ----------------------------------------------------------------------------------------------------------------------  Total Bogoso/Prestea Proven and  Probable                                           33.3         2.69        2.88         30.9       2.83        2.81 - ----------------------------------------------------------------------------------------------------------------------  Mampon Probable Mineral Reserves: Non-refractory                                       1.0         3.54        0.12          0.3       4.63        0.04 Refractory                                           0.5         6.37        0.11          0.7       5.35        0.12 - ----------------------------------------------------------------------------------------------------------------------  Total Mampon Probable                                1.5         4.53        0.23          1.0       5.16        0.16 - ----------------------------------------------------------------------------------------------------------------------  Wassa Probable Mineral Reserves: Non-refractory                                      21.9         1.34        0.94         19.3       1.31        0.81 - ----------------------------------------------------------------------------------------------------------------------  Total Wassa Probable                                21.9         1.34        0.94         19.3       1.31        0.81 - ----------------------------------------------------------------------------------------------------------------------  Total Proven Mineral Reserves: Non-refractory                                       1.9         3.82        0.23          3.0       4.20        0.41 Refractory                                          13.0         3.00        1.25         11.5       2.97        1.09 - ----------------------------------------------------------------------------------------------------------------------                                                      14.9         3.11        1.48         14.5       3.23        1.51 - ----------------------------------------------------------------------------------------------------------------------  Probable Mineral Reserves: Non-refractory                                      30.0         2.26        1.57         26.9       1.62        1.40 Refractory                                          11.9         2.42        1.00          9.7       2.60        0.88 - ----------------------------------------------------------------------------------------------------------------------                                                      41.9         1.90        2.57         36.6       1.94        2.28 - ----------------------------------------------------------------------------------------------------------------------  Total Proven and Probable: Non-refractory                                      31.9         2.59        1.80         29.9       1.89        1.82 Refractory                                          24.9         2.73        2.25         21.2       2.89        1.97 - ----------------------------------------------------------------------------------------------------------------------  Total Proven and Probable                           56.8         2.22        4.05         51.1       2.30        3.78 - ----------------------------------------------------------------------------------------------------------------------    (1)  The terms  "non-refractory"  and "refractory" refer to the ore type and are      defined in the Glossary of Terms.  We plan to process the refractory ore in      our BIOX(R)  bio-oxidation  plant that is currently  being  constructed  at      Bogoso  and to  process  the  non-refractory  ore  using  more  traditional      gravity, flotation and/or cyanidation techniques in our existing processing      plants at Bogoso and Wassa.  (2)  Mineral Reserves are expressed on a 100% basis.  Golden Star's share of the      Mineral  Reserves  is subject to the  Government  of  Ghana's  10%  carried      interest  which entitles them to a 10% dividend once our capital costs have      been recovered.                                           17   Stockpiled Ores  Included in  Bogoso/Prestea's  proven and probable  Mineral Reserves at year-end 2005 and 2004 are  stockpiled  ores of 0.4 and 0.3 million  tonnes at an average grade of 2.42 g/t and 2.67 g/t, respectively. Ounces in stockpiles at Wassa were nil at the end of 2005. The table below summarizes the Bogoso/Prestea stockpiled ores.           - ---------------------------------------------------------------------------------------------------------- STOCKPILES INCLUDED IN RESERVES                        As of December 31, 2005                     As of December 31, 2004 - ---------------------------------------------------------------------------------------------------------- Property                        Tonnes    Gold Grade    Ounces           Tonnes    Gold Grade    Ounces Mineral Reserves Category     (millions)     (g/t)    (millions)       (millions)     (g/t)    (millions) - ---------------------------------------------------------------------------------------------------------- Bogoso/Prestea Proven Stockpiles:         Non-refractory          0.20          2.39      0.02              0.1         2.74        0.01         Refractory              0.16          2.44      0.01              0.2         2.64        0.02 - ----------------------------------------------------------------------------------------------------------         Total Proven Stockpiles 0.36          2.42      0.03              0.3         2.69        0.03 - ----------------------------------------------------------------------------------------------------------    Reconciliation  of  Mineral  Reserves  as shown  under NI  43-101  and under SEC Industry Guide 7  Since we report our Mineral  Reserves to both NI 43-101 and SEC Industry Guide 7 standards, it is possible for our reserve figures to vary between the two. Where such a  variance  occurs  it will  arise  from the  differing  requirements  for reporting Mineral  Reserves.  For example,  NI 43-101 has a minimum  requirement that reserves be supported by a pre-feasibility  study, whereas Industry Guide 7 requires  support  from a  detailed  feasibility  study that  demonstrates  that economic extraction is justified.  For the Mineral  Reserves at December 31, 2005 and 2004,  there is no difference between the Mineral  Reserves as disclosed  under NI 43-101 and those  disclosed under Industry Guide 7, and therefore we do not provide reconciliation.  Reconciliation  of Proven and Probable  Mineral  Reserves - December 31, 2004 to December 31, 2005  - ----------------------------------------------------------------------------- Reconciliation              Tonnes    Contained       Tonnes      Contained                            (millions)  Ounces     (% of Opening)   Ounces                                       (millions)                 (% of Opening) - ----------------------------------------------------------------------------- Opening Mineral Reserves        51.1       3.78           100            100 Gold Price                       7.4       0.44            15             12 Exploration                     11.0       0.77            21             20 Mining Depletion(1)             (6.4)     (0.39)          (13)           (10) Operating cost increases        (5.4)     (0.50)          (10)           (13) Design changes                  (0.9)     (0.10)           (2)            (2) - ----------------------------------------------------------------------------- Closing Mineral  Reserves(2)                    56.8       4.00           111            107 - -----------------------------------------------------------------------------  (1)  Depletion  represents contained ounces of Mineral Reserves processed during      2005 before  considering  recovery losses and therefore does not equal 2005      actual gold production.  (2)  Increases and  decreases in Mineral  Reserves can result from the discovery      of new  mineralization,  conversion  of  Non-Reserve  Mineral  Resources to      Mineral  Reserves,  and  changes  in  price  assumptions,  unit  costs  and      recoveries or any  combination of these  factors.  The increases in Mineral      Reserves  during 2005 were due primarily to the results of  exploration  at      Bogoso/Prestea  and Wassa,  and an increase to $400 per ounce from $360 per      ounce in the estimated gold price used to calculate Mineral Reserves.   NON-RESERVES - MEASURED AND INDICATED MINERAL RESOURCES  Measured and Indicated Mineral Resources                                           18   Cautionary Note to US Investors  concerning  estimates of Measured and Indicated Mineral Resources  This section uses the terms "measured Mineral  Resources" and "indicated Mineral Resources."  We advise US investors  that while those terms are  recognized  and required by Canadian regulations, the US Securities and Exchange Commission does not  recognize  them.  US investors are cautioned not to assume that any part or all of the mineral  deposits in these  categories  will ever be  converted  into mineral reserves.  Our measured and  indicated  Mineral  Resources  which are reported in this Form 10-K do not include that part of our Mineral  Resources that have been converted to proven and probable  Mineral Reserves as shown above, and have been estimated in conformance  with  definitions set out in NI 43-101.  We have filed Technical Reports on our Mineral Reserves and Mineral Resources  (Mineral Resources stated in the Technical Reports include Mineral Reserves) for  Bogoso/Prestea and Wassa as required by NI 43-101. See our "Glossary of Terms."  The total measured and indicated  Mineral Resources for our properties have been estimated at an economic  cut-off  grade based on a gold price of $480 per ounce for  December  31, 2005 and $430 per ounce for December 31, 2004 and on economic constraints  that we consider are  realistic.  The economic  cut-off  grades for resources are higher than those for reserves and are indicative of the fact that the resource  estimates  include  material that may become  economic  under more favorable conditions including increases in gold price.  The  following  table  summarizes  our  estimated   non-reserves  (measured  and indicated Mineral Resources) as of December 31, 2005 and December 31, 2004:           - ------------------------ ------------------------------- ---------------------------- ----------------------------- Property                            Measured                      Indicated               Measured & Indicated                          ------------------------------- ---------------------------- -----------------------------                              Tonnes        Gold Grade       Tonnes      Gold Grade        Tonnes       Gold Grade                            (millions)        (g/t)        (millions)       (g/t)        (millions)       (g/t) - ------------------------ --------------- --------------- ------------- -------------- --------------- ------------- Bogoso/Prestea                      4.8            2.05          29.2           2.07            34.0          2.07 Wassa                                 -               -          11.3           0.76            11.3          0.76 Pampe                                 -               -           0.2           4.38             0.2          4.38 Benso                                 -               -           2.6           3.77             2.6          3.77 Hwini-Butre                           -               -           2.7           5.27             2.7          5.27 - ------------------------ --------------- --------------- ------------- -------------- --------------- ------------- Total 2005                          4.8            2.05          46.0           2.05            50.8          2.05 - ------------------------ --------------- --------------- ------------- -------------- --------------- ------------- Total 2004                          7.8            1.55          27.8           2.14            35.6          2.01 - ------------------------ --------------- --------------- ------------- -------------- --------------- -------------   Notes to Non-Reserves - Measured and Indicated Mineral Resources Table:  (1)  The qualified  person for the  estimates of measures and indicated  Mineral      Resources is our Exploration  Manager,  Mr. S. Mitch Wasel.  Mr. Wasel is a      qualified  geologist  who has 16 years of experience in gold and base metal      exploration  and is a member of the  Australasian  Institute  of Mining and      Metallurgy.  (2)  The measured and  indicated  Mineral  Resources  are shown on a 100% basis.      Golden Star's share of the Mineral  Resources shown above is subject to the      Government  of Ghana's 10% carried  interest  which  entitles them to a 10%      dividend once our capital costs have been recovered.  (3)  Table may not add due to rounding.   NON-RESERVES - INFERRED MINERAL RESOURCES  Inferred Mineral Resources  Cautionary  Note  to US  Investors  concerning  estimates  of  Inferred  Mineral Resources  This section uses the term "inferred Mineral  Resources." We advise US investors that while this term is recognized and required by Canadian regulations,  the US Securities  and Exchange  Commission  does not recognize it.  "Inferred  Mineral Resources" have a great amount of uncertainty as to their  existence,  and great uncertainty  as to their  economic and legal  feasibility.  It cannot be assumed that all or any part of inferred  Mineral  Resources  will ever be upgraded to a higher  category.  In  accordance  with  Canadian  rules,  estimates of inferred Mineral  Resources  cannot  form the  basis  of  feasibility  or other  economic studies.  US  investors  are  cautioned  not to  assume  that part or all of the inferred Mineral Resource exists, or is economically or legally mineable.                                           19   Our  inferred  Mineral  Resources  which are  reported  in this Form 10-K do not include  that part of the Mineral  Resources  converted  to proven and  probable Mineral Reserves or measured and indicated Mineral Resources as shown above, and have been estimated in conformance  with  definitions  set out in NI 43-101.  We have filed  Technical  Reports on our Mineral  Reserves  and  Mineral  Resources (Mineral Resources stated in the Technical Reports include Mineral Reserves) for Bogoso/Prestea and Wassa as required by NI 43-101. See our "Glossary of Terms."  The  inferred  Mineral  Resources  for our  properties  have been  estimated  at economic  cut-off  grades  based on gold prices of $480 and $430 per ounce as of December 31, 2005 and December 31, 2004, respectively,  and economic constraints that we consider are realistic.  The following  table  summarizes our estimated  non-reserves - inferred  Mineral Resources  as of December  31, 2005 as  compared to the total for  December  31, 2004:  - ------------------------ -------------------------------                                     Inferred Property                 -------------------------------                              Tonnes        Gold Grade                            (millions)        (g/t) - ------------------------ --------------- --------------- Bogoso/Prestea                     24.5            2.10 Wassa                              10.1            1.20 Pampe                               0.8            3.76 Benso                               0.9            3.57 Hwini-Butre                         0.2            3.21 Prestea Underground                 6.1            8.14 Goulagou                            4.4            1.55 Paul Isnard                         8.2            1.78 - ------------------------ --------------- --------------- Total 2005                         55.2            2.57 - ------------------------ --------------- --------------- Total 2004                         70.4            2.15 - ------------------------ --------------- ---------------  Notes to Non-Reserves - Inferred Mineral Resources Table  (1)  The qualified person for the estimates of the inferred Mineral Resources at      all properties except Paul Isnard, is our Exploration Manager, Mr. S. Mitch      Wasel. Mr. Wasel is a qualified geologist who has 16 years of experience in      gold  and  base  metal  exploration  and is a  member  of the  Australasian      Institute of Mining and Metallurgy.  The qualified person for the estimates      of  inferred  Mineral  Resources  at Paul  Isnard is Mr.  Colin  Jones,  an      independent  mineral  resources  consultant.  Mr.  Jones is a  professional      geologist  with 22  years of  experience.  Mr.  Jones  is a  member  of the      Australasian Institute of Mining and Metallurgy.  (2)  Inferred Mineral  Resources are shown on a 100% basis.  Golden Star's share      of the inferred Mineral  Resources shown above for  Bogoso/Prestea,  Wassa,      Pampe,  Benso and  Hwini-Butre  are or will be subject to the Government of      Ghana's  10%  carried  interest  which  entitles  the  government  to a 10%      dividend  once our  capital  costs have been  recovered.  Inferred  Mineral      Resources at the Prestea  Underground  are subject to a Government of Ghana      19% carried interest. Inferred Mineral Resources at Goulagou are subject to      the Government of Burkina Faso's 10% carried interest.  (3)  The Paul Isnard property, located in French Guiana, is owned by EURO, a 53%      owned subsidiary. Golden Star has the right to earn a 100% interest in this      property  pursuant to the terms of a joint venture agreement with EURO. The      amount of Inferred  Mineral Resource at the Paul Isnard property that might      have been removed by illegal mining is not known but could be material. See      Risk Factors below.  (4)  Table may not add due to rounding.   EMPLOYEES                                           20   As of December 31, 2005, Golden Star, including our majority-owned subsidiaries, had approximately  1,500 employees and contract  employees,  a 30% increase from the  approximately  1,150 people  employed at the end of 2004.  Employees  hired during 2005 at our new Wassa  operations made up most of the increase.  The 2005 total includes 12 employees and one contract employee at our principal office in Littleton,  Colorado, four employees and one contract employee in Delta, British Columbia and three people in South America.  CUSTOMERS  Currently  all our gold  production  is sold to a South African gold refinery in accordance  with  a  long-term  contract.  We  receive  payment  for  gold  sold approximately  five  working  days  after  the gold  leaves  the mine  site.  We recognize  revenue when title passes to the buyer which occurs upon  delivery to the  refinery,  unless we decide to retain title and hold the gold as inventory. During 2005 we sold all of the gold shipped,  retaining no inventory of saleable dore  bars.  The global  gold  market is  competitive  with  numerous  banks and refineries  willing to buy gold on short  notice,  therefore we believe that the loss of our current customer would not materially delay or disrupt revenues.  COMPETITION  Our  competitive   position   depends  upon  our  ability  to  successfully  and economically  explore,  acquire and develop new and existing mineral properties. Factors that allow  producers to remain  competitive in the market over the long term  include the quality and size of ore bodies,  costs of  operation,  and the acquisition and retention of qualified  employees.  We compete with other mining companies  and other  natural  mineral  resource  companies in the  acquisition, exploration,  financing and development of new mineral properties. Many of these companies are larger and better  capitalized  than we are.  There is significant competition  for  the  limited  number  of  gold   acquisition  and  exploration opportunities.  We also compete with other mining companies for skilled mining  engineers,  mine and processing  plant  operators and mechanics,  geologists,  geophysicists  and other  technical  personnel.  This could  result in higher  turnover and greater labor costs.  AVAILABLE INFORMATION  We make  available,  free of charge,  on or through our  Internet  website,  our annual report on Form 10-K,  quarterly reports on Form 10-Q,  current reports on Form 8-K and amendments to those reports filed or furnished  pursuant to Section 13(a) or  15(d) of the  Securities  Exchange  Act of 1934 as soon as  reasonably practicable after we  electronically  file such material with, or furnish it to, the SEC.  Our Internet  address is  www.gsr.com.  Our  Internet  website and the information  contained  therein or  connected  thereto  are not  intended  to be incorporated into this Annual Report on Form 10-K.
RISK FACTORS  You should  consider the following  discussion of risks in addition to the other information contained in or included by reference in this Form 10-K. In addition to  historical   information,   the  information  in  this  form  10-K  contains "forward-looking"  statements  about our future  business and  performance.  Our actual  operating  results and financial  performance may be very different from what we  expect  as of the date of this  Form  10-K.  The  risks  below  address material  factors  that may affect our future  operating  results and  financial performance.  FINANCIAL RISKS  A substantial or prolonged  decline in gold prices would have a material adverse effect on us.  The price of our common  shares,  our  financial  results  and our  exploration, development and mining  activities have previously been, and would in the future be,  significantly  adversely  affected by a substantial or prolonged decline in the price of gold.  The price of gold is  volatile  and is  affected by numerous factors  beyond  our  control  such as the sale or  purchase  of gold by various central banks and financial institutions, inflation or deflation, fluctuation in the value of the  United  States  dollar  and  foreign  currencies,  global  and regional   demand,   and  the  political   and  economic   conditions  of  major gold-producing  countries  throughout  the world.  Any drop in the price of gold adversely  impacts  our  revenues,  profits  and cash flows.  In  particular,  a sustained low gold price could:                                           21   o    cause suspension of our mining  operations at  Bogoso/Prestea  and Wassa if      such operations become uneconomic at the  then-prevailing  gold price, thus      further reducing revenues;  o    cause us to be unable to fulfill our obligations  under agreements with our      partners or under our permits and licenses which could cause us to lose our      interests in, or be forced to sell, some of our properties;  o    cause us to be unable to fulfill our debt payment obligations;  o    halt or delay the development of new projects;  o    reduce  funds  available  for  exploration,  with the result that  depleted      reserves are not replaced; and  o    reduce  or  eliminate   the  benefit  of  enhanced   growth   opportunities      anticipated from the St. Jude acquisition.  Furthermore, the need to reassess the feasibility of any of our projects because of  declining  gold prices  could cause  substantial  delays or might  interrupt operations until the reassessment can be completed. Mineral reserve calculations and  life-of-mine  plans using  significantly  lower gold prices could result in reduced  estimates of mineral reserves and non-reserve  mineral resources and in material  write-downs  of our  investment  in mining  properties  and  increased amortization, reclamation and closure charges.  We may incur  substantial  losses in the future  that could make  financing  our operations and business strategy more difficult.  We had a net loss of $13.5 million  during the year ended  December 31, 2005 and annual  earnings of $2.6 million,  $22.0 million and $4.9 million in 2004,  2003 and 2002,  respectively.  We  reported  net losses of $20.6  million in 2001 and $14.9 million in 2000. Numerous factors,  including declining gold prices, lower than  expected ore grades or higher than  expected  operating  costs  (including increased commodity prices),  and impairment  write-offs of mine property and/or exploration property costs, could cause us to be unprofitable in the future. The acquisition  of St.  Jude,  which has no  operating  properties,  may  result in increased  future losses.  Any future  operating losses could make financing our operations  and  our  business   strategy,   including  pursuit  of  the  growth opportunities anticipated as a result of our acquisition of St. Jude, or raising additional  capital,  difficult or impossible and could materially and adversely affect our operating results and financial condition.  Our  obligations  could  strain our  financial  position and impede our business strategy.  We had total consolidated debt and liabilities as of December 31, 2005 of $165.7 million,  including  $7.6 million  payable to banks,  $15.8 million in equipment financing loans, $47.7 million in senior convertible notes maturing on April 15, 2009,  $26.1  million of  current  trade  payables,  accrued  current  and other liabilities,  $45.1  million  of  future  taxes,  $12.0  million  of  derivative liabilities  and an  $11.4  million  accrual  for  environmental  rehabilitation liabilities. We expect that our indebtedness and other liabilities will increase as a result of our corporate  development  activities.  These  liabilities could have important consequences, including the following:  o    increasing  our  vulnerability  to general  adverse  economic  and industry      conditions;  o    limiting our ability to obtain additional  financing to fund future working      capital,  capital  expenditures,  operating and exploration costs and other      general corporate requirements;  o    requiring  us to  dedicate  a  significant  portion  of our cash  flow from      operations to make debt service payments, which would reduce our ability to      fund working capital, capital expenditures, operating and exploration costs      and other general corporate requirements;  o    limiting our  flexibility  in planning for, or reacting to,  changes in our      business and the industry; and  o    placing us at a  disadvantage  when compared to our  competitors  that have      less relative to their market capitalization.  Our  estimates  of mineral  reserves  could be  inaccurate,  which  could  cause production  and costs to differ from  estimates.  Our estimates of  non-reserves mineral resources could also be inaccurate.  There are  numerous  uncertainties  inherent in  estimating  proven and probable mineral  reserves and  non-reserve  measured,  indicated  and  inferred  mineral resources,  including many factors beyond our control. The accuracy of estimates of mineral reserves and non-reserves is a function of the quantity and quality                                           22   of available data and of the assumptions  made and judgments used in engineering and  geological  interpretation,  which  could  prove  to be  unreliable.  These estimates of mineral reserves and non-reserves may not be accurate,  and mineral reserves and non-reserves may not be able to be mined or processed profitably.  Fluctuation  in gold  prices,  results of  drilling,  metallurgical  testing and production,  and the  evaluation  of mine  plans  subsequent  to the date of any estimate  could  require  revision  of the  estimates.  The  volume and grade of mineral reserves mined and processed and recovery rates might not be the same as currently  anticipated.  Any  material  reductions  in  estimates of our mineral reserves and  non-reserves,  or of our ability to extract these mineral reserves and  non-reserves,  could  have a  material  adverse  effect on our  results  of operations and financial condition.  We currently have only two major sources of operational  cash flows,  which will likely be  insufficient  by themselves to fund our  continuing  exploration  and development activities.  While we have  received  significant  infusions of cash from sales of equity and debt, our only current  significant  internal  sources of funds are  operational cash flows from Bogoso/Prestea and Wassa. The newly constructed Wassa processing plant and open pit mine were  completed  and placed in service on April 1, 2005, and we  currently  process  through the plant a mixture of ore from the open pit and materials  from the prior  owner's heap leach pads.  Production at Wassa was 69,070  ounces  during the last nine  months of 2005 and is  expected to average approximately  120,000 to 130,000 ounces per year after 2005.  However,  Wassa's production goal may not be achieved.  The anticipated continuing exploration and development of our properties  will require  significant  expenditures  over the next several  years,  which we expect to increase  with the  acquisition  of St. Jude. We expect that these expenditures will exceed free cash flows generated by Bogoso/Prestea  and Wassa during 2006 and possibly in later years and  therefore we expect in the future to require additional external debt or equity financing. Lower gold prices  during the five years prior to 2002  adversely  affected  our ability to obtain financing,  and recurring lower gold prices could have similar effects in the  future.  In the  future,  we may not be able to obtain  adequate financing on acceptable terms. If we are unable to obtain  additional  financing on acceptable  terms,  we might need to delay or indefinitely  postpone  further exploration and development of our  properties,  and as a result,  we could lose our interest in, or could be forced to sell, some of our properties.  Implementation of a gold hedging program might be unsuccessful and incur losses.  EURO Ressources S.A., our 53% owned subsidiary,  has entered into a cash-settled forward  gold price  agreement  with its lender  designed  to reduce in part the impact of gold price fluctuations on expected future Rosebel royalty revenues it receives from Cambior Inc., as required by its loan agreement.  While there is a risk of loss if the derivative  positions were to be liquidated early and during a period of unfavorable gold prices, loan covenants prohibit  liquidation of the position prior to the end of the loan  repayment.  Also,  while the  derivatives EURO has entered into are economically effective, accounting for the derivatives on a  mark-to-market  basis  could  show  large  swings  in  any  period  as any unrealized,  non-cash  losses/gains  are  recognized  through the  statement  of operations.  We have  purchased  and may continue to purchase  put options  ("puts") and sell call options  ("calls") from time to time during the  construction  phase of the new  processing  plant at Bogoso  in  Ghana.  Puts give us the right but not the obligation  to sell gold in the future at a fixed price.  Calls are  contractual commitments  which require us to sell gold at a fixed price on specified  future dates.  If the spot  market  gold price  exceeds  the call  option  price on the specified  sale date we would receive the call price rather than the higher spot market price for the gold ounces  covered by the call  option.  Our call options are set at $525 per ounce.  There  will be no cost to us unless the spot  market price of gold exceeds this level on the call options'  specified sales dates. Of our 2006  production,  approximately  17% is subject to calls at $525 per ounce, and approximately 50% is protected by puts at a floor price of $406 per ounce.  We continue to review  whether or not, in light of the potential for gold prices to fall, it would be appropriate to establish a more general hedging program. To date,  we have decided not to implement a more general  hedging  program on gold production from our own properties.  We  are  subject  to  fluctuations  in  currency  exchange  rates,  which  could materially adversely affect our financial position.  Our revenues are in United States  dollars,  and we maintain most of our working capital in United States dollars or United States dollar-denominated securities. We typically  convert our United  States funds to foreign  currencies as payment obligations become due. Accordingly, we are subject to fluctuations in the rates of currency exchange between the United States dollar and these foreign                                           23   currencies,  and  these  fluctuations  could  materially  affect  our  financial position and results of operations. A significant portion of the operating costs at Bogoso/Prestea and Wassa is based on the Ghanaian currency,  the Cedi. We are required to convert into Cedis only 20% of the foreign exchange proceeds that we receive from  selling  gold,  but the  Government  of Ghana could  require us to convert a higher  percentage of gold sales proceeds into Cedis in the future. In addition, we currently have future obligations that are payable in South African Rand and Euros, and receivables collectible in Euros. We obtain construction and other  services and materials  and supplies  from  providers in South Africa and other  countries.  The costs of goods and services could increase due to changes in the value of the United States dollar or the Cedi,  Euros,  the South African Rand or other  currencies,  such as the recent cost increase due to the decrease in the  value  of  the  United  States  dollar  relative  to  other  currencies. Consequently,  operation and development of our properties  might be more costly than we anticipate.  We have  purchased,  and expect to continue to purchase  South  African Rand and Euro forward contracts to hedge the expected purchase of capital assets in South Africa and Europe in connection with the Bogoso sulfide  expansion  project.  We may engage in additional  currency hedges in the future in connection with other projects.  Implementation  of a  currency  hedging  program  may not  adequately protect us from the effects of fluctuation in currency exchange rates.  Risks inherent in acquisitions  that we might  undertake could adversely  affect our current business and financial condition and our growth.  We plan to continue to pursue the  acquisition  of  producing,  development  and advanced  stage  exploration  properties  and  companies,  and we have  recently completed the  acquisition  and joint  venture of  exploration  and  development properties in Ghana and Sierra Leone and the acquisition of St. Jude on December 21, 2005. The search for attractive acquisition opportunities and the completion of suitable  transactions  are time consuming and expensive,  divert  management attention from our existing business and may be unsuccessful. Our success in our acquisition  activities  depends on our  ability  to  complete  acquisitions  on acceptable terms and integrate the acquired  operations  successfully with those of Golden Star. Any  acquisition  would be  accompanied  by risks.  For example, there may be a significant change in commodity prices after we have committed to complete a transaction  and  established the purchase price or exchange ratio, a material ore body may prove to be below expectations or the acquired business or assets may have unknown  liabilities  which may be significant.  We may lose the services of our key employees or the key employees of any business we acquire or have  difficulty  integrating  operations and personnel.  The  integration of an acquired   business  or  assets  may  disrupt  our  ongoing   business  and  our relationships  with  employees,  suppliers and  contractors.  Any one or more of these  factors or other  risks  could  cause us not to realize  the  anticipated benefits of an acquisition of properties or companies, and could have a material adverse  effect on our  current  business  and  financial  condition  and on our ability to grow.  We are subject to litigation risks  All industries, including the mining industry, are subject to legal claims, with and without merit. We are involved in various routine legal  proceedings,  which include labor matters such as unfair  termination  claims,  supplier matters and property issues incidental to our business.  Defense and settlement costs can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation  process,  the resolution of any particular  legal proceeding could have a material effect on our financial position and results of operations.  OPERATIONAL RISKS  The  technology,  capital costs and cost of  production  of  refractory  mineral reserves  and  non-reserves  at  Bogoso/Prestea  remain  subject  to a number of uncertainties, including funding uncertainties.  Based upon the completion of our Bogoso sulfide project  feasibility  studies in 2001 and 2005, the refractory  material at  Bogoso/Prestea  has been included in our proven and probable mineral reserves,  which are prepared in accordance with NI 43-101 of the  Canadian  securities  regulators.  While the  sulfide  project feasibility  study indicated that refractory  mineral reserves can be profitably mined and processed at current gold prices,  the capital cost to construct a new bio-oxidation  or BIOX(R) plant at Bogoso to process  refractory  ore,  together with related mining equipment and facilities, is significant, and is forecast to be $125  million,  of which  approximately  $36  million  had been  spent on the project through December 31, 2005. While the processing technology envisioned in the feasibility study has been successfully utilized at other mines, and despite our  testing,   engineering  and  analysis,   the  technology  may  not  perform successfully at commercial  production levels on the  Bogoso/Prestea  refractory sulfide ores, in which case our production estimates may not be achieved.                                           24   The integration of Golden Star and St. Jude may not occur as planned.  We have only recently begun the process of integrating  the operations of Golden Star and St. Jude. The acquisition of St. Jude was proposed with the expectation that its  successful  completion  would  over  time  result in  enhanced  growth opportunities  and the synergies  resulting  from the  combination  of increased earnings and reduced costs. These anticipated benefits depend in part on whether the operations of Golden Star and St. Jude can be integrated in an efficient and effective manner and whether the St. Jude Properties can be developed.  If these do not occur, the benefits we receive from the acquisition will be significantly less than  anticipated.  Most  operational and certain  staffing  decisions with respect to the combined  company have not yet been made. These decisions and the integration  of  the  two  companies  will  present  challenges  to  management, including the  integration  of systems and personnel of the two  companies,  and special risks, including possible unanticipated liabilities and costs.  We are subject to a number of operational  hazards that can delay  production or result in liability to us.  Our activities are subject to a number of risks and hazards including:  o    environmental hazards;  o    discharge of pollutants or hazardous chemicals;  o    industrial accidents;  o    labor disputes and shortages;  o    supply and shipping problems and delays;  o    shortage of equipment and contractor availability;  o    difficulty in applying technology such as bio-oxidation processing;  o    unusual or unexpected geological or operating conditions;  o    slope failures;  o    cave-ins of underground workings;  o    failure of pit walls or dams;  o    fire;  o    marine and transit damage and/or loss;  o    changes in the regulatory environment; and  o    natural  phenomena  such  as  inclement  weather  conditions,   floods  and      earthquakes.  These or other occurrences could result in damage to, or destruction of, mineral properties or production  facilities,  personal  injury or death,  environmental damage, delays in mining, delayed production, monetary losses and possible legal liability.  We could  incur  liabilities  as a result  of  pollution  and  other casualties.  Satisfying such  liabilities  could be very costly and could have a material adverse effect on our financial position and results of operations.  Our mining operations are subject to numerous  environmental  laws,  regulations and  permitting  requirements  that can delay  production  and adversely  affect operating and development costs.  Compliance with existing  regulations  governing the discharge of materials into the  environment,  or otherwise  relating to  environmental  protection,  in the jurisdictions  where we have projects may have a material  adverse effect on our exploration  activities,  results of operations and competitive position. New or expanded regulations, if adopted, could affect the exploration or development of our projects or otherwise have a material adverse effect on our operations.                                           25   A significant portion of our Dunkwa property and portions of our Wassa property, as well as some of our  exploration  properties  in Ghana,  are  located  within forest  reserve  areas.  Although  Dunkwa and Wassa have been  identified by the Government of Ghana as eligible for mining permits subject to normal  procedures and a site  inspection,  permits for projects in forest reserve areas may not be issued in a timely  fashion,  or at all,  and such  permits may contain  special requirements with which it is burdensome or expensive to comply.  Mining and processing gold from the south end of the Prestea  property,  the new tailings  dam at Bogoso  and other  activities  will  require  mining  and other permits  from the  Government  of Ghana.  These  permits  may not be issued on a timely  basis or at all,  and such  permits,  when  issued,  may be  subject  to requirements  or conditions  with which it is burdensome or expensive to comply. Such  permitting   issues  could  adversely  affect  our  projected   production commencement dates, production amounts and costs.  Due to an increased level of  non-governmental  organization  activity targeting the mining industry in Ghana, the potential for the Government of Ghana to delay the issuance of permits or impose new  requirements  or  conditions  upon mining operations in Ghana may be increased.  Any changes in the  Government of Ghana's policies may be costly to comply with and may delay mining operations. The exact nature of other environmental  control problems,  if any, which we may encounter in the future cannot be predicted,  primarily because of the changing  character of environmental  requirements that may be enacted within various jurisdictions. To the extent that we are subject to any such changes,  they may have a material adverse effect on our operations.  As a result of the foregoing risks, project expenditures,  production quantities and rates and cash operating costs, among other things,  could be materially and adversely  affected and could differ  materially from anticipated  expenditures, production  quantities and rates, and costs. In addition,  estimated  production dates  could  be  delayed  materially.  Any such  events  could  materially  and adversely affect our business,  financial  condition,  results of operations and cash flows.  The  development  and  operation  of  our  mining  projects   involve   numerous uncertainties  that  could  affect  the  feasibility  or  profitability  of such projects.  Mine  development  projects,  including  our  recent  development  at Wassa  and expansion at  Bogoso/Prestea,  and the potential  development  of any of the St. Jude Properties if reserves are established, typically require a number of years and significant  expenditures  during the development phase before production is possible.  Development  projects are subject to the  completion of  successful  feasibility studies  and  environmental  assessments,  issuance  of  necessary  governmental permits  and  receipt  of  adequate  financing.   The  economic  feasibility  of development projects is based on many factors such as:  o    estimation of mineral reserves and mineral resources;  o    anticipated metallurgical recovery rates;  o    environmental considerations and permitting;  o    future gold prices; and  o    anticipated capital and operating costs.  Our mine development projects could have limited relevant operating history upon which to base  estimates  of future  operating  costs and capital  requirements. Estimates of proven and probable mineral reserves and operating costs determined in feasibility studies are based on geologic and engineering  analyses and might not prove to be accurate.  The management of mine  development  projects and start up of new operations are complex,  and we do not have a history  of  simultaneously  managing  an ongoing operation,  the  start-up  of a  new  operation  and a  significant  development project.  Completion of development  and the  commencement  of production may be subject to delays,  as occurred at Wassa.  Any of the  following  events,  among others, could affect the profitability or economic feasibility of a project:  o    unanticipated  changes  in  grade  and  tonnage  of  ore  to be  mined  and      processed;  o    unanticipated adverse geotechnical conditions;                                           26   o    incorrect data on which engineering assumptions are made;  o    costs of constructing and operating a mine in a specific environment;  o    availability and cost of processing and refining facilities;  o    availability of economic sources of power;  o    adequacy of water supply;  o    adequate  access  to the  site  including  competing  land  uses  (such  as      agriculture and illegal mining);  o    unanticipated transportation costs and shipping incidents and losses;  o    significant  increases in the cost of diesel  fuel,  cyanide or other major      components of operating costs;  o    government   regulations   (including   regulations   relating  to  prices,      royalties, duties, taxes, permitting, restrictions on production, quotas on      exportation  of  minerals,  as  well  as the  costs  of  protection  of the      environment and agricultural lands);  o    fluctuations in gold prices; and  o    accidents, labor actions and force majeure events.  Adverse effects on the operations or further development of a project could also adversely affect our business,  financial  condition,  results of operations and cash flow. Because of these uncertainties,  and others identified in these "Risk Factors,"  our  production  estimates  at  Bogoso/Prestea  and  Wassa may not be achieved.  We need to continually discover,  develop or acquire additional mineral reserves for gold production and a failure to do so would  adversely  affect our business and financial position in the future.  Because mines have limited lives based on proven and probable mineral  reserves, we must continually replace and expand our mineral reserves as our mines produce gold. At current average  production rates, we estimate that  Bogoso/Prestea has about ten years of mine life and Wassa has about five  years of mine  life,  but our  estimates  might not be correct and the mine life would be  shortened if we expand production.  Our ability to maintain or increase our annual production of gold will be  dependent  in  significant  part on our ability to bring new mines into production and to expand or extend the life of existing mines.  Gold exploration is highly speculative,  involves substantial expenditures,  and is frequently non-productive.  Gold exploration,  including the exploration of the Prestea  Underground and the St.  Jude  Properties  and other  projects,  involves a high  degree of risk and exploration  projects  are  frequently  unsuccessful.  Few  prospects  that  are explored end up being  ultimately  developed into producing mines. To the extent that we continue to be involved in gold  exploration,  the long-term  success of our  operations  will be  related  to the cost and  success  of our  exploration programs.  We  cannot  assure  you  that our gold  exploration  efforts  will be successful.  The  success  of  gold  exploration  is  determined  in part on the following factors:  o    the  identification of potential gold  mineralization  based on superficial      analysis;  o    availability of prospective land;  o    availability of government-granted exploration and exploitation permits;  o    the quality of our management  and our geological and technical  expertise;      and  o    the capital available for exploration and development.  Substantial expenditures are required to determine if a project has economically mineable  mineralization.  It could take several  years to establish  proven and probable  mineral  reserves and to develop and construct  mining and  processing facilities.  As a result  of these  uncertainties,  we  cannot  assure  you that current and future exploration  programs will result in the discovery of mineral reserves,  the expansion of our existing mineral reserves and the development of mines.                                           27   We  face  competition  from  other  mining  companies  in  connection  with  the acquisition of properties.  We face strong  competition  from other mining  companies in connection with the acquisition of properties producing,  or capable of producing,  precious metals. Many of these companies have greater financial resources, operational experience and technical capabilities.  As a result of this competition, we might be unable to  maintain  or  acquire  attractive  mining  properties  on terms we  consider acceptable  or at all.  Consequently,  our  revenues,  operations  and financial condition could be materially adversely affected.  Title to our mineral properties could be challenged.  We seek to confirm the  validity  of our rights to title to, or contract  rights with respect to, each mineral property in which we have a material interest.  We have  mining  leases  with  respect  to our  Bogoso/Prestea,  Wassa and  Prestea Underground  properties.   However,  we  cannot  guarantee  that  title  to  our properties will not be challenged.  Title insurance  generally is not available, and our ability to ensure  that we have  obtained a secure  claim to  individual mineral  properties  or mining  concessions  could be severely  constrained.  We generally do not conduct  surveys of our properties  until they have reached the development  stage,  and  therefore,  the  precise  area  and  location  of such properties  could be in doubt.  Accordingly,  our  mineral  properties  could be subject to prior unregistered  agreements,  transfers or claims, and title could be affected by, among other things, undetected defects. In addition, we might be unable to operate  our  properties  as  permitted  or to enforce our rights with respect to our properties.  We depend on the services of key executives.  We are dependent on the services of key  executives  including our President and Chief  Executive  Officer and a small number of highly  skilled and  experienced executives  and personnel.  Due to the  relatively  small size of our management team,  the  loss of  these  persons  or our  inability  to  attract  and  retain additional  highly skilled  employees could adversely affect the exploration and development of our properties, which could have a material adverse effect on our business and future operations.  We have obtained key person insurance only with respect to our President and Chief Executive Officer.  The period of weak gold prices prior to 2002 resulted in depletion of the number of trained and experienced  professionals  and managers in our industry.  Higher gold prices have resulted in an increased demand for these people,  and it could therefore be more difficult to attract or retain such experienced  professionals and managers without significantly increasing the cost to us.  Our insurance coverage could be insufficient.  Our business is subject to a number of risks and hazards generally, including:  o    adverse environmental conditions;  o    industrial accidents;  o    labor disputes;  o    unusual or unexpected geological conditions;  o    ground or slope failures;  o    cave-ins;  o    changes in the regulatory environment;  o    marine transit and shipping damage and/or losses;  o    natural  phenomena  such  as  inclement  weather  conditions,   floods  and      earthquakes; and  o    political risks including expropriation and civil war.  Such occurrences could result in:  o    damage to mineral properties or production facilities;                                           28   o    personal injury or death;  o    loss of legitimate title to properties;  o    environmental damage to our properties or the properties of others;  o    delays in mining, processing and development;  o    monetary losses; and  o    possible legal liability.  Although we maintain insurance in amounts that we believe to be reasonable,  our insurance might not cover all the potential risks  associated with our business. We  might  also be  unable  to  maintain  insurance  to  cover  these  risks  at economically  feasible  premiums.  Insurance  coverage  might not continue to be available or might not be adequate to cover any resulting  liability.  Moreover, insurance  against risks such as  environmental  pollution or other hazards as a result of  exploration  and  production is not  generally  available to us or to other companies in the mining industry on acceptable terms. We might also become subject to liability  for  pollution  or other  hazards  which we cannot  insure against or which we might elect not to insure  against  because of premium costs or other reasons.  Losses from these events might cause us to incur  significant costs that could have a material  adverse effect upon our financial  performance and results of operations.  In addition, as of the completion of the Arrangement with St. Jude, our insurance  policies do not cover St. Jude and its properties, and we may not be able to obtain  insurance to cover St. Jude and its properties at economically feasible premiums or at all.  GOVERNMENTAL AND REGULATORY RISKS  As a holding company,  limitations on the ability of our operating  subsidiaries to  make  distributions  to  us  could  adversely  affect  the  funding  of  our operations.  We are a holding company that conducts  operations through foreign  (principally African)  subsidiaries and joint ventures,  and  substantially all of our assets consist of equity in these entities. Accordingly, any limitation on the transfer of cash or other assets between the parent  corporation and these  entities,  or among  these  entities,  could  restrict  our  ability  to fund  our  operations efficiently,  or to  repay  our  convertible  notes  or  other  debt.  Any  such limitations,  or the perception that such limitations  might exist now or in the future,  could have an adverse impact on available  credit and our valuation and stock price.  We are subject to changes in the regulatory  environment  where we operate which may increase our costs of compliance.  Our mining  operations  and  exploration  activities  are  subject to  extensive regulation governing various matters, including:  o    licensing;  o    production;  o    taxes;  o    disposal of process water or waste rock;  o    toxic substances;  o    development and permitting;  o    exports;  o    imports;  o    labor standards;  o    occupational health and safety;                                           29   o    mine safety; and  o    environmental protections;  Compliance with these regulations increases the costs of the following:  o    planning;  o    designing;  o    drilling;  o    operating;  o    developing;  o    constructing; and  o    closure and reclamation.  We  believe  that  we  are in  substantial  compliance  with  current  laws  and regulations  in Ghana and elsewhere.  However,  these laws and  regulations  are subject to frequent change and reinterpretation. Due to the substantial increase in mining development in Ghana in recent years, the Government of Ghana has been reviewing  the  adequacy of  reclamation  bonds and  guarantees  throughout  the country and in some cases has requested higher levels of bonding than previously had been  required.  Our bonds may be increased.  Amendments to current laws and regulations  governing  operations  and  activities of mining  companies or more stringent  implementation  or interpretation of these laws and regulations could have a material  adverse impact on us, cause a reduction in levels of production and delay or prevent the development or expansion of our properties in Ghana.  Government  regulations  limit  the  proceeds  from  gold  sales  that  could be withdrawn from Ghana.  Changes in regulations  that increase these  restrictions could  have a material  adverse  impact on us, as  Bogoso/Prestea  and Wassa are currently our only sources of internally generated operating cash flows.  The  Government  of Ghana has the right to increase its ownership and control of certain subsidiaries.  The Government of Ghana is entitled to a 10% carried interest in gold properties in Ghana.  The carried  interest comes into existence at the time the government issues a mining  license.  As such, the Government of Ghana  currently has a 10% carried interest in our subsidiaries that own the Bogoso Prestea mine, the Wassa mine and a 19% carried  interest in the Prestea  Underground  property in Ghana. The  Government of Ghana also has: (a) the right under the current mining law to acquire up to an additional  20% equity  interest in each of these  subsidiaries for a price to be determined by agreement or  arbitration  (although  this right does not exist in the new  Minerals and Mining Bill which is expected to receive Presidential  assent in  2006);  (b) the  right to  acquire  a special  share or "golden share" in such  subsidiaries  at any time for no  consideration  or such consideration as the Government of Ghana and such subsidiaries  might agree; and (c) a pre-emptive right to purchase all gold and other minerals produced by such subsidiaries.  The Government of Ghana may seek to exercise one or more of these rights,  which  could  reduce our equity  interest.  A  reduction  in our equity interest  could  reduce our income or cash flows from  Bogoso/Prestea  or Wassa, reducing amounts  available to us for  reinvestment and adversely  affecting our ability to take certain actions.  We are subject to risks relating to  exploration,  development and operations in foreign countries.  Certain laws, regulations and statutory provisions in certain countries in which we have mineral  rights could,  as they are currently  written,  have a material negative  impact on our  ability to develop or operate a  commercial  mine.  For countries where we have exploration or development stage projects,  we intend to negotiate  mineral  agreements  with the governments of these countries and seek variances  or  otherwise  be  exempted  from  the   provisions  of  these  laws, regulations and/or statutory provisions.  We cannot assure you, however, that we will be successful in obtaining mineral agreements or variances or exemptions on commercially acceptable terms.  In addition,  our assets and  operations  are affected by various  political and economic uncertainties, including:  o    the  risks of war,  civil  unrest,  coups or other  violent  or  unexpected      changes in government;                                           30   o    political instability and violence;  o    expropriation and nationalization;  o    renegotiation or nullification of existing concessions,  licenses, permits,      and contracts;  o    illegal mining;  o    changes in taxation policies;  o    restrictions on foreign exchange and repatriation; and  o    changing  political   conditions,   currency  controls,   and  governmental      regulations  that favor or  require  the  awarding  of  contracts  to local      contractors  or  require  foreign  contractors  to employ  citizens  of, or      purchase supplies from, a particular jurisdiction.  Illegal mining occurs on our  properties,  is difficult to control,  can disrupt our business and can expose us to liability.  We  continue  to  experience   significant   illegal  mining   activity  on  our Bogoso/Prestea  property  involving  illegal miners  numbering in the thousands. Most of this activity is close to our  Plant-North  pit and planned Bogoso North and Beta  Boundary  pit  areas  and  includes  areas  where we have  established reserves.  It is difficult to quantify the exact impact of this  activity on our reserves and non-reserve  mineral resources.  The impact of this illegal mining, to the extent known at this time, on our currently reported Mineral Reserves and Non-Reserve  Mineral Resources,  has been reflected in our year-end 2005 reserve figures.  While we are  proactively  working  with local,  regional and national governmental  authorities  to  obtain  protection  of our  property  rights on a timelier basis,  any action on the part of such  authorities may not occur,  may not fully address our problems or may be delayed.  In  addition  to the  impact on our  mineral  reserve  and non  reserve  mineral resources,  the  presence  of illegal  miners  could lead to project  delays and disputes and delays  regarding the  development or operation of commercial  gold deposits.  The work  performed by the illegal  miners could cause  environmental damage or other damage to our properties,  or personal injury or death for which we could  potentially be held  responsible.  Illegal miners work on other of our properties  from time to time,  including on the Paul Isnard  property in French Guiana,  and they may in the future  increase  their presence and have increased negative impacts such as those described above on such other properties.  Our activities are subject to complex laws, regulations and accounting standards that can  adversely  affect  operating  and  development  costs,  the  timing of operations, the ability to operate and financial results.  Our business,  mining operations and exploration and development  activities are subject to  extensive  Canadian,  United  States,  Ghanaian  and other  foreign, federal, state, provincial, territorial and local laws and regulations governing exploration,  development,  production,  exports, taxes, labor standards,  waste disposal,  protection  of the  environment,  reclamation,  historic and cultural resource  preservation,  mine safety and occupational  health, toxic substances, reporting and other matters,  as well as accounting  standards.  Compliance with these laws, regulations and standards or the imposition of new such requirements could  adversely  affect   operating  and  development   costs,  the  timing  of operations, the ability to operate and financial results.  We have  identified a material  weakness in our internal  control over financial reporting under Section 404 of the Sarbanes-Oxley  Act; failure in the future to achieve and maintain  effective  internal controls could have a material adverse effect on our business and share price.  We are required to annually  test our internal  control  procedures  in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires  annual  management  assessments of the  effectiveness  of our internal control  over  financial  reporting  and a  report  by our  independent  auditor addressing these  assessments.  In connection with management's  assessments for the year ended December 31, 2005,  management  identified a material weakness in our  internal  control  over  financial  reporting  related  to not  maintaining appropriate  documentation  to  support  the  use  of  hedge  accounting  in our subsidiary, EURO Ressources S.A. We determined that Golden Star did not have the necessary  controls in place to  properly  identify  the lack of  documentation, which was necessary to properly evaluate the derivative instruments to determine if hedge  accounting  was  appropriate.  As a result  of  this,  management  has concluded  that,  for the year ended  December  31,  2005,  Golden  Star did not maintain  effective  control  over  financial   reporting.   As  a  result,  our independent  registered  public accounting firm has issued an adverse opinion on our internal control over financial reporting as of December 31, 2005.                                           31   The treatment of the EURO  derivative  contracts has been properly  reflected in this  Annual  Report  on Form  10-K,  and we plan to  restate  our  consolidated financial  statements for the quarters ended March 31, June 30 and September 30, 2005 to reflect  such  change in  accounting  treatment.  We have taken steps to remediate the material weakness  discussed above;  however failure in the future to achieve and maintain an effective  internal control  environment could have a material adverse effect on our business and share price.  MARKET RISKS  The market price of our common  shares  could  experience  volatility  and could decline significantly.  Our common  shares are listed on the American  Stock  Exchange  ("AMEX") and the Toronto  Stock  Exchange  ("TSX").   Securities  of  small-cap   companies  have experienced substantial volatility in the past, often based on factors unrelated to the  financial  performance  or prospects of the  companies  involved.  These factors  include  macroeconomic  developments  in North America and globally and market  perceptions of the  attractiveness of particular  industries.  Our share price is also likely to be significantly  affected by short-term changes in gold prices or in our  financial  condition or results of  operations as reflected in our quarterly earnings reports.  Other factors unrelated to our performance that could have an effect on the price of our common shares include the following:  o    the extent of analytical  coverage  available to investors  concerning  our      business could be limited if investment banks with research capabilities do      not continue to follow our securities;  o    the trading  volume and general  market  interest in our  securities  could      affect an investor's ability to trade significant numbers of common shares;  o    the size of the public float in our common  shares may limit the ability of      some institutions to invest in our securities; and  o    a  substantial  decline in our stock price that  persists for a significant      period of time could cause our  securities to be delisted from the AMEX and      the TSX, further reducing market liquidity.  As a result of any of these  factors,  the market price of our common  shares at any given  point in time  might not  accurately  reflect  our  long-term  value. Securities  class action  litigation  often has been brought  against  companies following  periods of  volatility  in the market price of their  securities.  We could in the future be the target of similar litigation.  Securities  litigation could result in substantial costs and damages and divert management's  attention and resources.  Investors   could  have  difficulty  or  be  unable  to  enforce  certain  civil liabilities on us, certain of our directors and our experts.  Golden  Star is a  Canadian  corporation.  Substantially  all of our  assets are located outside of Canada and the United States,  and our head office is located in the  United  States.  It might  not be  possible  for  investors  to  collect judgments  obtained  in  Canadian  courts  predicated  on  the  civil  liability provisions  of  Canadian  or  U.S.  securities  legislation.  It  could  also be difficult  for you to effect  service of process in  connection  with any action brought in the United States upon our directors and experts. Execution by United States  courts of any  judgment  obtained  against us or, any of the  directors, executive  officers or experts  named in this report in the United States courts would be limited to our assets or the assets of such persons or corporations, as the case might be, in the United States.  The enforceability in Canada of United States   judgments  or  liabilities  in  original  actions  in  Canadian  courts predicated solely upon the civil liability  provisions of the federal securities laws of the United States is doubtful.  There may be certain tax risks associated with investments in Golden Star.  Potential  investors that are United States  taxpayers  should  consider that we could be considered to be a "passive foreign  investment  company"  ("PFIC") for U.S. federal income tax purposes.  Although we believe that we currently are not a PFIC  and do not  expect  to  become  a PFIC  in the  future,  the  tests  for determining  PFIC status are dependent  upon a number of factors,  some of which are  beyond  our  control,  and we can not assure you that we would not become a PFIC  in the  future.  If we were  deemed  to be a PFIC,  then a  United  States taxpayer  who disposes of common  shares at a gain,  or who received a so-called "excess distribution" on the common shares, generally would be required to treat such gain or excess  distribution  as ordinary income and pay an interest charge on a portion of the gain or distribution.                                           32   The existence of  outstanding  rights to purchase or acquire common shares could impair our ability to raise capital.  As of March 27, 2006  approximately  18.6 million  common shares are issuable on exercise  of  warrants,  options  or other  rights  to  purchase  common  shares (including  options and  warrants  issued in exchange  for St. Jude  options and warrants) at prices ranging from Cdn$0.29 to Cdn$9.07. In addition, 11.1 million common shares are currently  issuable upon conversion of our senior  convertible notes issued in April 2005. During the life of the warrants,  options, notes and other rights,  the holders are given an opportunity to profit from a rise in the market price of common shares,  with a resulting dilution in the interest of the other shareholders. Our ability to obtain additional financing during the period such rights are outstanding  could be adversely  affected,  and the existence of the rights could have an adverse effect on the price of our common  shares.  The holders of the  warrants,  options,  notes and other  rights can be  expected to exercise or convert them at a time when we would, in all likelihood,  be able to obtain  any  needed  capital  by a new  offering  of  securities  on terms  more favorable than those provided by the outstanding rights.
None                                           33
DESCRIPTION OF PROPERTIES  MAPS OF OPERATIONS AND PROPERTIES  The maps below  show the  locations  of  Bogoso,  Prestea,  Wassa,  the  Prestea Underground and Mampon in Ghana,  and various  exploration  properties in Africa and South America. These properties are described in further detail below.    GHANA OPERATIONS AND PROPERTIES MAP                                          34   WEST AFRICAN OPERATIONS AND EXPLORATION PROPERTIES MAP                                         35    SOUTH AMERICAN PROPERTIES MAP   PROPERTY STATUS TABLE  The chart below summarizes information regarding our more significant properties, which are described in further detail below:        - -------------------- ------------------------------ -------------- ---------------- --------- ----------------------      Property              Type of Interest          Expiry Date    Property size   2005            Comments                                                                                      Status - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Bogoso               Government granted mining      8/21/2017      95 km(2)         Active    Mining stage (Ghana)              leases held by a 90% owned     8/16/2018                      subsidiary - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Prestea              Government granted mining      7/6/2031       129 km(2)        Active    Mining stage (Ghana)              lease held by a 90% owned                      subsidiary - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Wassa                Government granted mining      9/16/2022      102 km(2),       Active    Mining stage (Ghana)              lease held by a 90% owned                     another 172                      subsidiary                                    km(2) applied                                                                    for - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Prestea Underground  Government granted mining      7/6/2031       129 km(2) lies   Active    Exploration stage (Ghana)              lease, 81%P(2)P beneficial                    directly below                      interest                                      Prestea                                                                    surface lease - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Dunkwa- Mampon       Prospecting License            1/26/07        66 km(2)         Active    Development stage (Ghana) - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Dunkwa-Mansiso       Prospecting License            Renewal        56 km(2)         Active    Exploration stage (Ghana)                                             pending.                                                     Expected in                                                     2006 - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Pampe                Prospecting License            5/3/06         5.8 km(2)        Active    Development stage - -------------------- ------------------------------ -------------- ---------------- --------- ----------------------                                            36         - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Hwini-Butre          2 Prospecting Licenses         3/10/08        180 km(2)        Active    Exploration stage (Ghana) - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Benso                3 Prospecting Licenses         05/16/06       21 km(2)         Active    Exploration stage (Ghana) - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Afema                Permis de Recherche            09/28/07       2,012 km(2)      Active    Exploration stage (Cote d'Ivoire) - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Mano JV              7 Prospecting Permits          Various        ~750 km(2)       Active    Exploration stage (Sierra Leone) - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Goulagou, Rounga,    3 Permis de Recherche          6/1/09         691 km(2)        Active    Advanced exploration Tiato                Agreements allow earning up                                              stage (Burkina Faso)       to 90%. - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Deba & Tialkam       2 Permis de Recherche          11/24/07       1,842 km(2)      Active    Exploration stage (Niger) - -------------------- ------------------------------ -------------- ---------------- --------- ---------------------- Saramacca            Various Government granted     Renewals       660 km(2)        Active    Exploration stage (Suriname)           rights of exploration and      Pending                      option agreements - -------------------- ------------------------------ -------------- ---------------- --------- ----------------------    MINING IN GHANA  Ghanaian Ownership and Special Rights  Ghana is  situated  on the West Coast of Africa,  approximately  600  kilometers north of the equator on the Gulf of Guinea. Accra, the capital city of Ghana, is located on the Prime  Meridian.  Following a period as a British  colony,  Ghana achieved  independence  in 1957 and it is now a republic  with a  democratically elected  government.  Ghana has a population of approximately 21 million people. English is the  official  and  commercial  language.  The total land area of the country  is  approximately  238,000  square  kilometers  and the  topography  is relatively flat. Ghana has a tropical climate with two rainy seasons and two dry seasons each year.  Rights to explore and develop a mine are  administered  by the Minister of Mines through the Minerals Commission, a governmental organization designed to promote and control the  development of Ghana's  mineral  wealth in accordance  with the current mining law. A company or individual can apply to the Minerals Commission for a renewable exploration  concession granting exclusive rights to explore for a  particular  mineral in a selected  area for a period of two years  subject to renewal.  When  exploration  has  successfully  delineated  a  mineable  mineral reserve,  an application is made to the Minerals  Commission for conversion to a mining  lease,  granting a company the right to produce a specific  product from the concession  area,  normally for a period of 20 to 30 years.  Production must typically begin within two years of the date of grant of a mining lease.  An amendment made to the current mining law in 1994 requires that any person who intends to acquire a controlling  share of the equity of any mining company that has been  granted a mining  lease by the  Government  of Ghana  shall first give notice of such  intention  to the  Government  and obtain its  consent  prior to acquiring such controlling share.  In accordance  with the current mining law, the Government of Ghana is granted a 10%  carried  interest  in all  companies  such as BGL and WGL that hold  mining leases.  The 10% carried interest entitles the Government of Ghana to a pro-rata share of future  dividends  (none have been declared to date),  if any, from BGL and WGL  once  all  capital  is  repaid,  and the  Government  of  Ghana  has no obligation  to contribute  development  or operating  expenses.  BGL and WGL owe $142.5  million  and  $120.6  million,  respectively,  to  Golden  Star  or  its subsidiaries as of December 31, 2005 for past advances,  and these amounts would be repaid to us before  payment of any  dividends.  Under the current mining law the  Government of Ghana is entitled to acquire up to an additional 20% interest in our operating  companies.  If the Government of Ghana wished to exercise this right,  it must first give reasonable  notice,  and pay a mutually agreed price. Under the new Minerals  and Mining bill,  which will become law when it receives Presidential  assent,  expected  later in 2006, the Government of Ghana would no longer have the right to acquire this additional interest.  The Government of Ghana is also entitled to acquire a special or golden share in BGL or WGL or any  mining  company  at any  time  for no  consideration  or such consideration as the Government of Ghana and BGL or WGL might agree. The special share  would  constitute  a  separate  class of shares  with such  rights as the Government  of  Ghana  and  BGL or WGL  might  agree.  In the  absence  of  such agreement, the special share would have the following rights:                                           37   o    the special  share would carry no voting  rights,  but the holder  would be      entitled to receive  notice of and attend and speak at any general  meeting      of the  members  or any  separate  meeting  of the  holders of any class of      shares;  o    the special share could only be issued to, held by, or  transferred  to the      Government or a person acting on behalf of the Government;  o    the written  consent of the holder of the  special  share would be required      for all  amendments  to the  organizational  documents of the company,  the      voluntary  winding-up or  liquidation of the company or the disposal of any      mining  lease  or the  whole  or any  material  part of the  assets  of the      company; and  o    the holder of the  special  share  would be  entitled  to the  payment of a      nominal sum of 1,000  Ghanaian  Cedis in a winding-up or liquidation of the      company in priority to any payment to other  members and could  require the      company to redeem the special  share at any time for a nominal sum of 1,000      Cedis.  BGL and WGL have not issued nor to date been requested to issue any such special share to the Government of Ghana.  The  Government of Ghana has a pre-emptive  right to purchase all gold and other minerals  produced  by BGL and WGL.  The  purchase  price would be agreed by the Government  of  Ghana  and BGL and WGL,  or the  price  established  by any gold hedging  arrangement  between  BGL or WGL and any third  party  approved  by the Government,  or the publicly quoted market price  prevailing for the minerals or products as  delivered  at the mine or plant where the right of  preemption  was exercised.  The  Government  of Ghana has  agreed to take no  preemptive  action pursuant to its right to purchase gold or other  minerals so long as BGL and WGL sell gold in accordance with certain procedures approved by the Bank of Ghana.  The existing legal  structure for mining in Ghana has been under review with the intent to make it more competitive and bring it in line with  international best practice.  To this end the new  Minerals  and Mining Bill was placed  before the Ghanaian  parliament in late 2004.  After being  subjected to public critique by various  stakeholders,  a revised bill was considered by the Ghanaian Parliament and passed in late December  2005.  The new law will come into force when it has been given Presidential assent and gazette notification as required by the Ghana constitution.  Based on currently available information,  we do not believe that the implementation of the new Bill will have a material impact on our operations in Ghana.  Ghanaian Royalty Requirements  Under the laws of Ghana, a holder of a mining lease is required to pay quarterly a  royalty  of not less than 3% per annum and not more than 12% per annum of the total  revenues  earned from the lease area.  Under the new  Minerals and Mining Bill,  the upper limit on the royalty  would be capped at 6%. The  Government of Ghana  determines the royalty  percentage  each year based on the ratio that the operating margin bears to the value of gold produced from a mining lease in that year.  Based on the Mineral  Royalty  Regulation of 1987, the royalty is 3% when the operating  ratio is 30% or less,  the royalty  increases  0.225% for each 1% increase in  operating  ratio  until the  royalty  reaches a maximum of 12% (see above) at an operating ratio of 70%. In 2005, 2004 and 2003 the royalty rate for BGL was 3% of revenues and BGL paid $1.8 million, $1.8 million and $1.9 million, respectively.  The royalty  payments  from BGL have not exceeded 3% per annum in any year. WGL also paid a 3% royalty in 2005 or $0.9 million.  Ghanaian Environmental Regulations  All  environmental  matters in Ghana,  including  those related to mining,  fall under the oversight of the Ghana  Environmental  Protection Agency ("EPA").  The EPA has  formulated  rules and  guidelines  which  govern  environmental  impact statements,  mine  operations,  and mine closure and  reclamation,  to which our operations are subject.  In conformance with EPA requirements,  we posted reclamation bonds for the Wassa and  Bogoso/Prestea  properties  in 2005. We bonded $3.0 million to cover future reclamation  obligations at Wassa  comprised of a $2.85 million letter of credit and  cash  deposit  of  $0.15   million.   We  also  bonded  $9.45  million  for Bogoso/Prestea  comprised of an $8.55 million  letter of credit and $0.9 million of  cash.  Signed  bonding  agreements  are now in  place  for  both  Wassa  and Bogoso/Prestea.                                           38   BGL  completed   significant  work  during  1999  to  identify  the  outstanding reclamation  liabilities for Bogoso/Prestea and to prepare a rehabilitation work plan.  Significant  work has been performed since that time to advance this plan and to reduce the outstanding historic reclamation  liability.  Expenditures for ongoing   rehabilitation  work,  including  the  capping  of  sulfide  material, back-filling of worked out pits, and the contouring and  re-vegetation  of waste dumps, were approximately  $0.7 million,  $0.7 million and $0.8 million in 2005, 2004, and 2003,  respectively.  In addition to the bonds detailed  above,  as at December 31, 2005,  BGL still had $3.4 million of restricted  cash set aside for environmental reclamation of the Bogoso mine since 1999 when we purchased Bogoso from the International Finance Corporation and a consortium of banks.  The Plant-North pit at Prestea has been developed in stages with the development of the final stage (Phase 3)  commencing  in August 2005.  Initiation of Phase 3 mining was  conditional  on a number of  mitigation  measures  identified in our Environmental  Impact Statement.  The EPA requested  suspension of mining of the Plant-North  Phase 3 pit on  September  13, 2005 and of the  Plant-North  pit on September 28, 2005 until certain outstanding mitigation measures were completed. The  mitigation  measures were completed and inspected by the EPA on October 19, 2005.  On November  1, 2005,  we received  approval  from the EPA to  recommence mining  operations at the  Plant-North pit and mining activity was recommenced a few days later  following a series of  informational  meetings  with the Prestea community.  During the mining suspension at Plant-North,  processing operations continued at the  Bogoso  processing  plant  using  stockpiled  ore.  Mining  and  processing operations at the Wassa mine and  construction  activities on the Bogoso sulfide expansion project also continued without interruption.  To our  knowledge,  all our  operations  in Ghana are  currently in  substantial compliance with all environmental requirements.  COMMUNITY DEVELOPMENT PROGRAMS AND SUSTAINABILITY  It is our policy and our intent to be a responsible  corporate  citizen of Ghana and in all other areas where we conduct our business.  We believe our success as an employer,  as a citizen of the local  community and as a  participant  in the local  economy  is  dependent  on  achieving  and  maintaining   good  community relationships.  As such, we strive to  accommodate  and support local efforts to improve  the  economic  and  overall  well being of the  communities  around our operations.  Alternative Livelihood and Sustainable  Development Program (ALSD) - In mid-2001 we  initiated  the ALSD  program in the  Bogoso/Prestea  area and  expanded  the program  during  2004 to include  Wassa.  The goals of the ALSD  program  are to assist  the  communities  in the  vicinity  of our mining  operations  to create alternative  employment  opportunities,  promote growth of sustainable  economic development and to reduce the community's dependence on mining.  Given the importance of  agriculture  in the local economy,  much of our efforts have been focused on agricultural opportunities.  Palm Oil - Palm oil is a major cash crop for many farmers in Southern  Ghana and based on the  historical  success of Ghana's palm oil industry,  we believe palm oil farming has the  potential to make a significant  contribution  to the local community's   economic   development.   Palm  oil   production   requires  land. Historically  the  economic  base  of many of the  communities  surrounding  our operations has been based on mine employment.  As a result many of the residents have not acquired  land and have thus been  excluded from farming in general and the palm oil business specifically.  In the past  three  years we have  assisted  and  trained in excess of 300 local residents to establish  palm oil  plantations  on  approximately  1,050 acres of reclaimed  waste rock dumps and other areas around our mines. In 2006 we plan to initiate a new four-year  program to significantly  expand on the success of our initial  palm oil  program.  To this end we have  procured  about 2,400 acres of additional  land holding and aim to increase  this to 5,000 acres of  additional land in 2006. The land will be used to expand the palm oil  cooperative  program providing  employment  and  eventual  land  ownership  to as many as 2,000 local residents.  We are also  negotiating  with a  business  partner  in the palm oil business who will assist by providing a processing facility and a market for the oil. These plantations should fully mature in about three years with an expected yield of about 4,200 metric tonnes of fresh fruit bunch annually.  Fish  Farm - We have  established  a fish farm in one of the  completed  pits at Bogoso.  The fish have done well and we now estimate there are  approximately 10 tonnes of fish ready for  harvesting.  We hope that the success of this  project will encourage development of private fish farms in the local communities.  Sericulture - We have  established a mulberry  plantation  and silk worm rearing facility at Bogoso.  Thirty local farmers are now  participating in this project and have to date produced 45 kilograms of silk cocoons.                                           39   Poultry - Our  demonstration  farm is also training and assisting  local farmers with poultry  production.  A ban on importation of poultry products from several countries  due to bird flu  concerns  has  created  this  opportunity  for local farmers.  The program has  implemented 12 poultry  projects with 2,650 chicks in ten communities. The poultry project will focus on egg production.  Other  Projects - Other  projects we are  supporting  or plan to support in 2006 include snail farming, mushrooms, citrus production and vocational training.  In collaboration with government agencies,  the Ghana Department of Cooperatives is assisting us in  developing  the project  beneficiary  groups into  commodity based associations  including the Oil Palm Farmers Association,  Poultry Farmers Association and Sericulture Farmers Association and four Ministry of Agriculture staff are providing  technical  support to the beneficiary  farmers in the areas surrounding  our  operations.  Other  contacts  have been  made  with  local and international  non-governmental organizations in developing micro-credit schemes on behalf of the company.  Community  Assistance  Programs  - In  addition  to the  alternative  livelihood projects  described  above,  we are  involved in the ongoing  funding of several community assistance projects.  Over the past few years we have provided funding and  assistance  for school  improvements  and  equipment,  libraries,  day care centers,  community centers, potable water systems and wells, sports facilities, toilet   facilities,   electrification   projects,   health   facilities,   road improvements and hospital equipment.  At our corporate headquarters in Denver, Colorado the employees and their family members initiated a book donation program in late 2005 seeking to obtain 150,000 books  which  will be used to stock  libraries  in the  communities  around  our operations.  To date approximately 25,000 volumes have been donated,  sorted and packed for shipment.  Local high school student volunteers have done most of the sorting and packing.  The books  acquired to date include a wide  assortment  of topics including primary and secondary school texts,  children's books,  novels, reference, travel and general interest books.  Endowment Fund - In late 2005, we established two endowment funds in Ghana,  one at Wassa and one at Bogoso.  The purposes of the endowment  funds are to promote and facilitate sustainable socio-economic development and to improve the quality of  life  in the  communities  surrounding  our  operations  and in 2006 we will transition to channeling all of our community  assistance programs through these funds.  The funds will provide funding for  development  projects and charitable causes. The fund will receive periodic cash contributions from BGL and WGL based on gold production and net income.  OPERATING PROPERTIES  The Bogoso/Prestea Gold Mine  Overview of the Bogoso/Prestea Operation  Bogoso/Prestea  consists of a gold mining and processing operation located along the Ashanti Trend in western Ghana, approximately 35 kilometers northwest of the town of Tarkwa. It can be reached by paved roads from Tarkwa and from Accra, the capital of Ghana.  Bogoso and  Prestea are  adjoining  mining  concessions  that together cover  approximately 40 kilometers of strike of the southwest  trending Ashanti  gold  district.  The mining  areas at Prestea  are linked to the Bogoso processing plant by  approximately 12 kilometers of paved and gravel  haul-roads located on our properties.  Equipment and facilities at  Bogoso/Prestea  include several open pit mines, a nominal 6,000 tonne per day CIL gold processing  plant and a fleet of haul trucks,  loaders and mining support equipment.  In addition, there are numerous  ancillary support  facilities such as power and water supply equipment,  haul roads,  housing for management  and technical  staff, a medical clinic, tailings storage facility,  waste dumps,  warehouse,  maintenance shops, offices and administrative  facilities. The Bogoso/Prestea properties and mining rights are granted  under four mining  leases,  which  expire on or after August 2017.  Commercial  mining at Bogoso dates back to the early years of the 20th  century. During its 20-year period of operations  from 1935 to 1955,  production  totaled over 900,000 ounces of gold at an average recovered grade of 3.73 g/t. From 1873 to 1965,  the current  Prestea  property was  comprised of a number of different licenses  operated  by  independent   mining  companies,   which  in  1965  were amalgamated by the Government of Ghana into Prestea  Goldfields  Limited,  under the aegis of the State Gold Mining Corporation.  Total gold production  from the Prestea area since recorded mining  commenced in the 1870s is reported by the Ghana  Mineral  Commission  to be in excess of nine million ounces,  making it the second largest  historical gold producing area in Ghana, after the Obuasi mine.                                           40   We acquired  Bogoso in late 1999 and all of our  production  came from  reserves located on the Bogoso  concession  until October 2001 when we commenced  surface mining on the adjoining Prestea concession.  The Prestea concession was acquired in mid-2001. From 1999 through 2005 we have produced 811,800 ounces of gold from Bogoso/Prestea.  Operating Results for Bogoso/Prestea  The following table displays historical operating results at Bogoso/Prestea.        Bogoso/Prestea Operating Results                   2005                  2004                2003 - --------------------------------------             ----                  ----                ---- Ore milled (t)                                   1,557,881             1,650,412          2,093,600 Rate (t/day)                                         4,268                 4,526              5,736 Grade milled (g/t)                                    4.14                  4.09               3.29 Recovery %                                            60.7                  67.3               81.2 Total gold production (oz)(1)                      131,898               147,875            174,315 Cash operating cost ($/oz)                             338                   250                166 Total cash cost ($/oz)                                 351                   264                184   (1)  Gold  production  is shown on a 100% basis,  which  represents  our current      beneficial  interest in gold production and revenues.  Once all capital has      been repaid,  the  Government  of Ghana would  receive 10% of the dividends      from the subsidiaries owning the Bogoso/Prestea and Wassa mines.  Bogoso/Prestea Expansion Project  Gold  ore  reserves  in  general  and  specifically  at  Bogoso/Prestea  can  be segregated  into  two  general  ore  types  referred  to  as  "refractory"   and "non-refractory." Refractory ores typically contain un-oxidized sulfide minerals with the gold trapped within the sulfide  minerals.  Such ores are also commonly referred to as  "sulfide"  ores and they  cannot be  economically  processed  in conventional CIL circuits such as our existing Bogoso processing plant.  Non-refractory  ores typically  contain no sulfides or the sulfide minerals have been  naturally  oxidized.   There  are  also  certain  sulfide  ores  that  are non-refractory if the gold exists on surface of the sulfide minerals rather than embedded within the sulfide minerals. Ores that have been naturally oxidized are referred to as "oxide" ores.  Non-refractory  ores, including oxide ores, can be efficiently processed through the existing Bogoso CIL processing plant.  Since 75% of the remaining ore reserves at  Bogoso/Prestea  are  refractory  and cannot be processed by our existing  plant,  a decision was made in June 2005 to construct  a new 3.5  million  tonne per annum  processing  facility  at Bogoso, located next to the existing non-refractory processing plant, which will utilize a proprietary BIOX(R)  bio-oxidation  technology to treat the refractory sulfide ore.  When  completed  in late 2006,  the new sulfide  plant  together  with the existing  CIL plant,  are  expected to be able to process a combined 5.0 million tonnes per year of ore. Completion on schedule and anticipated production levels for the new facility are subject to a number of risks, including the issuance in a timely manner of all necessary development and operating permits.  The existing CIL processing plant will retain its current configuration and will continue to process non-refractory ores during the construction phase of the new BIOX(R) plant. After the new BIOX(R) plant comes on line, it is anticipated that the existing Bogoso CIL processing  plant will process mostly oxide ores and the BIOX(R)   plant  will  process   mostly   refractory   sulfide  ores  and  mixed oxide-refractory  ores.  The two plants  sitting  side-by-side  are  expected to provide  operational  efficiencies  since  they will  share  management,  labor, reagents,  warehouse parts and maintenance  efforts. And with the two plants and their differing  technologies,  we should be able to effectively  process all of the ore types known to exist in the Bogoso/Prestea area.  Construction work on the BIOX(R) plant is proceeding within schedule and budget. Ordering of long lead-time  items is  substantially  complete as is the detailed engineering  design.  Concrete work is well progressed for all of the equipment. The stainless steel BIOX(R) reactor tanks have been erected and structural steel erection has  commenced.  Erection of the CIL tanks is also  nearing  completion which will allow  structural  steel  erection to also commence in this area. The electrical  contractor has mobilized and has commenced work. The crusher and new SAG mill were shipped to Ghana in March and the ball mill is already on site and mounted on its pedestal.                                           41   The design and  construction  of the  expansion  project is being managed by GRD Minproc on an engineering,  procurement and construction  management basis. Work has  proceeded  under a letter of agreement  entered into in February 2005 and a definitive contract is expected to be finalized shortly.  Pre-stripping  of two sulfide pits in  readiness  for the  commissioning  of the BIOX(R) plant has already  commenced  and will be  accelerated  when  additional trucks are delivered,  commencing in April 2006. The  non-refractory  plant will continue  to process  non-refractory  ores from the  Plant-North  pit at Prestea until  completion of mining in the fourth quarter of 2006.  Afterward we plan to feed the  non-refractory  plant with oxide ores from  Pampe,  Mampon and various areas on the south end of the Prestea property.  We  estimate  that the total  capital  cost of the new  sulfide  plant  project, including the expansion of the mining fleet, to be  approximately  $125 million, and we expect a 15 to 18 month construction period,  ending in late 2006. At the end of 2005, approximately $36 million of the total had been spent.  In 2007,  following the completion of the BIOX(R) plant,  we expect the combined gold  production from the two Bogoso plants to be  approximately  370,000 ounces per annum at an average cash operating cost of $330 per ounce. Based on our test work, we expect gold recoveries from the BIOX(R) process to average 86% and vary between 78% and 88%.  Geology at Bogoso/Prestea  The  Bogoso/Prestea  property lies within the Eburnean  Tectonic Province in the West African  Precambrian  Shield  along a 40  kilometer  stretch of the Ashanti Trend located  immediately south of the town of Bogoso. The area is dominated by a major  northeast-southwest  trending  structural fault zone referred to as the Ashanti  Trend,  which  hosts the  Prestea,  Bogoso,  Obuasi  and  Konongo  gold deposits,  among others.  Parallel to the Ashanti  Trend is the Akropong  Trend, which hosts the Ayanfuri deposit. The Akropong Trend is about 15 kilometers west of the Ashanti  Trend in the Bogoso  region,  and gradually  converges  with it, converging  at Obuasi and  forming the basis for the Obuasi  deposit,  owned and operated by AngloGold Ashanti Limited.  Mineral Reserves and Non-Reserve Mineral Resources at Bogoso/Prestea  Bogoso/Prestea  has proven and probable Mineral Reserves,  excluding the Mineral Reserves at Mampon  discussed  below,  of 33.3 million tonnes at a grade of 2.69 g/t containing  approximately  2.88 million ounces of gold (before any reduction for the  Government  of Ghana's  10%  minority  interest).  Total  measured  and indicated  Mineral  Resources,  excluding those Mineral  Resources at Mampon and Pampe discussed below, total 20.7 million tonnes with a grade of 2.18 g/t before a  reduction  for  the 10%  minority  interest.  Assuming  no new  reserves  are discovered,  the current  proven and probable  Mineral  Reserves  should support mining  operations for  approximately  seven years,  although we expect the mine life to be extended as we continue to evaluate mineral resources through ongoing exploration  efforts. See the Proven and Probable Mineral Reserves table and the Non-Reserves - Measured and Indicated  Mineral  Resource table in Item 1 of this Form 10-K.  Exploration at Bogoso/Prestea  Exploration  activities  on the Bogoso  property in 2005 focused on defining and expanding  the  sulfide  reserves  in advance  of  initiation  of a sulfide  ore pre-strip  program in early 2006. The drilling also focused on  requirements  to finalize pit designs at Chujah and  Buesichem.  These two pits are  scheduled to provide  sulfide feed to the new sulfide  plant in 2006,  2007 and into 2008. In addition,  drilling at other areas at Bogoso was  conducted  to  understand  and expand the sulfide reserves beneath several of the other old oxide pits. A total of $7.5 million was spent on exploration at Bogoso in 2005.  Surface exploration  drilling on the Prestea property during 2005 was limited to the evaluation of shallow  underground  targets in the Plant-North pit vicinity. While results in areas  drilled  during 2005 were not  encouraging,  other zones directly  beneath the Plant-North  pit will be tested in 2006. A  Bogoso/Prestea regional  geologic mapping program  initiated in 2004 continued during 2005. The program will cover  approximately  265 square  kilometers  around the Bogoso and Prestea properties when completed in early 2006.  The Mampon Project  The  Mampon  deposit,  which  is  located  within  the  Dunkwa  properties,   is approximately  35  kilometers  north  of the  Bogoso  processing  plant.  It was acquired in 2003, as part of the Dunkwa property acquisition. An analysis of the drilling and other geologic data provided by the former owner as well as our own drilling in 2004 and 2005 has  established a probable  reserve of  approximately 1.6 million tonnes grading 4.53 grams per tonne or approximately  230,000 ounces of gold which is accessible by open pit mining methods. The geology of the                                           42   Mampon deposit is similar to the geology at Bogoso/Prestea.  Our current plan is to haul the  Mampon ore by truck to the Bogoso  processing  plant to  supplement ores from the  Bogoso/Prestea  deposits.  Our current  long-term  plan calls for mining Mampon in 2007 and 2008.  Mampon ore is approximately  50% refractory and 50% non-refractory.  The Pampe Project  The Pampe  deposit is located  approximately  19  kilometers  west of the Bogoso processing plant on the Akropong trend.  While we have owned the rights to Pampe for several  years,  drilling  during 2005  identified a measured and  indicated resource of 0.2 million  tonnes at an average  grade of 4.4 g/t most of which is either  oxide  ore or  non-refractory  sulfide  ore and most of which  should be recoverable  by open pit  mining  methods.  Permitting  for this  project is now underway and haul road construction is scheduled for 2006. We expect to commence mining at Pampe before the end of 2006.  Bondaye/Tuapim Area  Due to the  presence of illegal  miners no work was carried out on the south end of the Prestea  property  during  2005.  Once the  illegal  miner  situation  is resolved,  we  anticipate  additional  exploration  work in these areas with the ultimate  goal of mining  oxide ores for the Bogoso  oxide plant after 2007.  We also expect to further  investigate  initially  the shallow and  ultimately  the deeper underground potential of this area.  The Wassa Gold Mine  Overview of the Wassa Gold Mine  The Wassa gold mine located  approximately 35 kilometers east of Bogoso/Prestea, was  initially  developed in the late 1990s by a consortium  of European  mining companies and consisted of an open pit mine, a crusher and a  conventional  heap leach  operation.  While  operating  as a heap leach  property,  Wassa  produced approximately  90,000  ounces  of gold per  annum  for a period of just over two years  beginning  in 1999 and ending in  mid-2001  when mining  operations  were suspended.  In September  2002 WGL, our 90% owned  subsidiary,  acquired the inactive  Wassa gold  property   located  35  kilometers   east  of   Bogoso/Prestea.   As  with Bogoso/Prestea,  the  Government  of Ghana  holds a 10% carried  interest  which entitles it to 10% of any future  dividends  (none have been  declared to date). Dividend payments will not be made until WGL has repaid all contributed  capital and shareholder advances to Golden Star.  In  late  2003,  following  completion  of  a  feasibility  study  we  initiated construction of a nominal 3.5 million tonnes per year (10,000 tonne per day) CIL processing plant at Wassa.  The construction  phase ended in early 2005, and the Wassa  open-pit  mine and plant was placed in  service on April 1, 2005.  In the nine months ended December 31, 2005,  Wassa  processed 2.7 million tonnes of ore at an average grade of 0.91 grams per tonne and shipped 69,070 ounces of gold at an average  total cash cost per ounce of $482.  Plant feed is a mixture of newly mined ore from the Wassa pit blended with material from the heap leach pads left by the prior owners.  During 2006, we expect to produce  approximately 120,000 ounces of gold at Wassa at an average cash operating  cost of  approximately  $340 per ounce.  We expect production  to increase and unit costs to decline later in 2006 and beyond as we expose  higher grade ores at deeper  levels in the pit and also resolve  certain plant design  issues which have limited  plant  through-put  to less than design capacity since its in-service date. In 2007, we expect annual gold production of approximately  130,000  ounces per year,  at an average cash  operating  cost of around  $340 per  ounce.  The  reserves  at Wassa at the end of 2005  should  be sufficient to support operations to early 2011.  Geology at Wassa  Wassa lies within the Eburnean Tectonic Province in the West African Precambrian Shield.  The Proterozoic rocks that comprise most of the West African craton and host the major gold mineralization in Ghana are subdivided into  metasedimentary and volcanic rocks of the Birimian and Tarkwaian sequences.  Wassa is hosted within the same Birimian volcano-sedimentary  greenstone package as  Bogoso/Prestea.  Wassa is  situated on the  southeastern  limb of the Tarkwa Syncline  while  Bogoso and  Prestea  occur  along the  northwestern  limb.  The northwestern  belt hosts the  Obuasi,  Prestea,  and  Bogoso  gold mines but the southeastern  limb also is characterized by gold mines and mineral  occurrences. Tarkwaian-hosted deposits along the southeastern limb include Goldfield's Tarkwa and Abosso mines, while Birimian-hosted gold occurrences include our Hwini-Butre concession and Wassa.                                           43   Mineral Reserves and Mineral Resources at Wassa  At December  31,  2005,  Wassa has a probable  mineral  reserve of 21.9  million tonnes with an average grade of 1.34 g/t containing  approximately  0.94 million ounces of gold before any reduction  for the  Government of Ghana's 10% minority interest.  Total indicated mineral resources consist of 11.3 million tonnes with a grade of  approximately  0.76 g/t before any  reduction  for the 10%  minority interest.   See  the  Proven  and  Probable   Mineral  Reserves  table  and  the Non-Reserves - Measured and Indicated  Mineral  Resource table in Item 1 of this 10-K.  Exploration at Wassa  Exploration  activities at Wassa during 2005  concentrated on RC drilling of two parallel  geochemical  anomalies  identified  in  2004  which  extend  southwest approximately  2 kilometers  from the main pit area.  Other than one narrow zone that typically  carried 3 to 3.5 grams per tonne,  results were not encouraging. Various other  geochemical  anomalies  were also tested at Wassa by RAB drilling during 2005 and while most of these  projects are at a very  preliminary  stage, results  were  encouraging  with  several  intercepts  at various  places on the property exceeding minimum ore grades. Work continued on the South Akyempim zone discovered in 2004. We have now identified  approximately  2.7 million tonnes of near-surface ore at an average grade of 1.47 grams per tonne in this area and we have  initiated  the process to acquire  mining  permits to allow mining of this deposit in the second half of 2006.  EXPLORATION STAGE PROPERTIES IN GHANA  Prestea Underground  Overview  The  Prestea  Underground  is an inactive  underground  gold  operation  located directly  beneath our Prestea  property  consisting of two operating  shafts and extensive  underground  workings  and  support  facilities.  Support  facilities include an administrative office,  maintenance shops, a warehouse and electrical substations.  Access to the mine site is via a paved road from  Tarkwa and Accra maintained by the Government of Ghana. Any potential future  production from the Prestea  Underground would most likely be trucked to the Bogoso processing plant for processing.  The Prestea Underground has produced  approximately nine million ounces of gold, the second highest production of any mine in Ghana. The underground workings are extensive,  reaching depths of approximately  1,400 meters and extending along a strike  length  of  approximately  ten  kilometers.   Underground  workings  can currently be accessed via two shafts,  one near the town of Prestea and a second approximately four kilometers to the southwest. Underground operations ceased in early 2002,  following an extended period of low gold prices. In March 2002, our subsidiary BGL entered into a joint venture  agreement with the former owners to further  explore  and  evaluate  the  remaining  potential  of  the  underground operations.  In late 2003,  our partner in the Prestea  Underground  joint  venture filed for bankruptcy in Ghana. Our partner's  position,  under the provisions of the joint venture  agreement  has now  reverted to a 2.5% net profits  interest,  which is currently controlled by the former partner's bankruptcy trustee.  Since there is currently no production from the Prestea Underground mine there is no net profit to share with our bankrupt partner. BGL now holds a 90% ownership in the Prestea Underground.  The  Government  of Ghana  continues  to hold a 10%  ownership  in Prestea  Underground  as well as its 10%  holding  in BGL,  resulting  in an 81% beneficial ownership by Golden Star.  Geology of Prestea Underground  The Prestea  deposits are found along the Ashanti  Trend which  extends over 220 kilometers  and which  accounts for 80% to 90% of the total  quartz  lode-hosted gold extracted in Ghana. Other mines located along the same shear are our Bogoso pits and the Obuasi and Konongo mines owned by others.  Two  types  of  gold  hosts  have   historically  been  recognized  at  Prestea: fault-related  hydrothermal  quartz veins; and disseminated  sulfide-hosted gold mineralization  associated with metavolcanic pods. The first type of ore was the focus of intense mining during Prestea's past production.  We intend to evaluate both types of mineralization.                                           44   Mineral Resources at Prestea Underground  As of December 31, 2005 we have identified  total  non-reserve  inferred mineral resources at the Prestea  Underground  of 6.1 million tonnes at an average grade of 8.1 g/t before any reduction for the 19% minority interest.  Exploration Activities at Prestea Underground  A total of 8,096 meters of underground exploration drilling was completed at the Prestea  Underground  during 2005. The drilling focused on testing extensions of the high grade West Reef shoot between  levels 17-24 (a depth of between 700 and 900 meters) and also prospective zones of remnant mineralization lying below and to the south of the  Plant-North  pit which could be exploited  via a decline at the base of the pit.  Results from both these areas have been  encouraging  with drilling to continue in 2006.  A deep surface hole at Bondaye was initiated during 2004 to test the down plunge extension of high grade  mineralization  to  approximately  250 meters below the extent of current  historical  workings.  Although technical problems and delays were seen in 2004,  the  drilling  was  completed  mid 2005 for a total of 2,109 meters  including a parent hole to 1,604 meters and a "wedged"  daughter hole to 1,504 meters. Only spotty,  discontinuous gold mineralization was encountered in the reef zone at both the  parent and  daughter  hole.  However  this may simply reflect the typical  "pinch and swell"  character of the Prestea reef system and cannot be considered a definitive test of the Bondaye plunge potential.  Total spending on long term assets at Prestea  Underground totaled $12.1 million in 2005,  up from $7.1  million  during  2004.  Spending in 2005  included  $2.6 million on underground drilling and other geological activities, $5.8 million on feasibility work, $2.3 million on dewatering, security and site maintenance, and $1.4  million on equipment  purchases.  Support  crews  continue to maintain the underground  and  surface  facilities  in good  working  order  and  assist  the underground drilling teams.  By the end of 2005,  dewatering  efforts had cleared the lowest  sections of the old underground workings and an extensive  underground drilling program has been initiated  which will  continue  during  most of 2006 to test areas  immediately below the deepest old workings.  We believe these deeper levels provide the best opportunities  for significant new  discoveries in the Prestea  Underground.  We intend to complete an initial  feasibility  study by the end of 2006  evaluating the economic  potential of restarting  production  from the Prestea  Underground mine.  St. Jude Properties  The St. Jude  Properties  were acquired in late December 2005 as part of the St. Jude  acquisition.  These  properties  consist of the Hwini-Butre and Benso gold concessions  (prospecting  licenses) at the southeastern end of the Ashanti gold belt  region in Ghana.  While we now hold a 100%  interest  in these  properties (through our  subsidiaries),  the Government of Ghana will become  entitled to a 10% carried interest at the time mining permits are granted.  The Hwini-Butre concession is located approximately 80 kilometers south of Wassa and occupies an area of approximately  180 square  kilometers.  St. Jude and its predecessors have previously  carried out numerous  exploration  programs on the concessions and identified two significant zones of gold mineralization.  The St. Jude Properties also include the Benso concession, located in the Tarkwa District,  directly north of the Hwini-Butre  concession and about 40 kilometers south of Wassa. The Benso  concession  covers an area of approximately 21 square kilometers,  and consists of three blocks: the Amantin, Subriso, and Chichiwelli blocks.  St. Jude and its predecessors  previously  conducted a geochemical soil sampling  survey  over the  Benso  concession  and drill  programs  on the three blocks.  We commenced our own exploration  activities on the St. Jude Properties in early 2006, and have budgeted approximately $4.6 million for the program in 2006.  The Hwini-Butre and Benso  concessions lie along the  southeastern  flank of the Birimian-aged  (lower Proterozoic) Ashanti Belt, along the same structural trend as Wassa. The southwestern part of the Hwini-Butre  concession covers the Mpohor Complex,  a syn-volcanic  mafic intrusive that is bound to the east and north by the Butre volcanic  sequence.  The Mpohor Complex is a polyphase  intrusion with compositions ranging from gabbroic to granophyric, with intermediate phases such as diorite and granodiorite.  The Butre volcanic sequence,  which also underlies the Benso concession  further north,  mostly comprises volcanic flows with minor metasediment   horizons.   The  main  regional  structural   orientation  trends northeasterly but extensive north to northwest trending  cross-cutting  fracture systems are also well developed. The latter host much of the mineralization in                                           45   the district, with vein systems at Dabokrom, Father Brown, Adoikrom, the Subriso zones  and  Amantin   located   within  or  marginal  to  the  Mpohor   Complex. Mineralization  on the  Hwini-Butre  concession  is  typically  associated  with shallowly  east-dipping  narrow  quartz  veins  and their  associated  sericitic alteration  halos,  with coarse free gold associated with sulfides and as specks within the quartz veins and altered host rocks. In contrast,  mineralization  at Subriso West and Central  Subriso  forms a series of relatively  steep  dipping, north-trending  zones  characterized  by strong  shearing and  pervasive  silica replacement with local silica flooding and only minor thin quartz veining.  Studies  will be carried out during 2006 to  determine  if ore from the St. Jude Properties  should  be  hauled  to  the  Wassa  plant  for  processing  or  if a stand-alone  processing plant should be built in the general vicinity of the St. Jude Properties.  Akropong Trend Properties  During 2005,  we  continued  working on the Akropong  Trend  properties  located approximately 10 to 20 kilometers to the west of  Bogoso/Prestea.  The objective of this work was to identify  additional  mineral reserve  opportunities  in the immediate  vicinity  of  Bogoso/Prestea  that  could,  in  the  future,  provide additional sources of processing plant feed for the Bogoso processing plants. As explained  above,  drilling at the Pampe  property  established  a measured  and indicated  resource at Pampe during 2005.  The other Akropong Trend projects are still at an  early  stage  of  exploration  and to date  they do not  have,  and ultimately might not have, proven and probable mineral reserves.  We spent approximately $1.4 million on Akropong projects during 2005 compared to $0.4 million in 2004.  Most of the  Akropong  spending was related to RAB and RC drilling at the Pampe property.  Dunkwa Properties (including Mampon)  Overview of the Dunkwa Properties  In 2003, we purchased two prospecting licenses,  Asikuma and Mansiso,  along the Ashanti  Trend  from  Birim  Goldfields  Inc.,  which we refer to as the  Dunkwa properties.  These  properties  cover 45  kilometers of strike along the Ashanti Trend directly north of and contiguous with the current Bogoso concession.  They are accessible by Ghanaian public roads. The addition of the Asikuma and Mansiso prospecting  licenses,  which cover 56 and 69 square  kilometers,  respectively, increases  our  property  holdings  along  the trend to over 100  kilometers  in length.  In 2003, we also acquired from Ashanti  Goldfields  Company Limited the rights to the Mampon prospect located on the Asikuma license. Ore from Mampon is expected to be trucked to the Bogoso processing plant commencing in 2007.  The Mampon  prospect was discovered in 1988 using regional  geochemical  methods and  consists  of narrow  quartz  veins  with  strong  pyrite  and  arsenopyrite mineralization  in the  wall  rocks  ranging  up to 15%  total  sulfides.  These prospects are also associated with shearing and/or graphitic faults,  similar to those  seen at  Bogoso.  There  are five  known  gold  prospects  on the  Dunkwa concession.  All of these occur in the same approximate  stratigraphic  position within lower Birimian  sediments  from 1 to 1.5  kilometers  west of the contact with the Birimian metavolcanics.  Exploration Activities at the Dunkwa Properties  Most of the work on the Dunkwa  properties during 2005 was focused on the Mampon area where data was  gathered  to assist in pit  design for  surface  mining now scheduled  for  late  2007.  Late in 2005 we  began  a  drilling  program  on an unexplored nine kilometer  section of the property  covered by Opon river valley sediments  which coincides with a conductivity  anomaly.  Spending in the Dunkwa area totaled $1.4 million in 2005.  Regional Activities in Ghana  In 2005,  we continued  with several early stage  regional  projects in southern Ghana by conducting  geochemical  surveys over  extensive  areas to the east and south  of the  Bogoso/Prestea  and  Wassa  areas  extending  east to  within  30 kilometers  of  Accra  (see  map at the  beginning  of  Item  2  Description  of Properties.)  This work has identified  gold anomalies which will be followed up with  additional  sampling  in 2006.  We applied  for and  received  prospecting licenses on these properties, referred to as Breman-Asikuma and Takoradi North.                                           46   OTHER EXPLORATION STAGE PROPERTIES IN AFRICA  Mano River Joint Venture, Sierra Leone  In late 2003 we entered into a joint venture agreement with Mano River Resources Inc.,  which holds seven gold properties in Sierra Leone totaling  approximately 750 square  kilometers.  A diamond core drilling program  commenced in mid-March 2004 at the Yirisen  prospect on the North  Pampana  license,  and 26 holes were completed.   Grades  and  gold   mineralization   proved  to  be  variable   and discontinuous.  However,  due to the  prospective  nature of the local area,  as evidenced by numerous artisanal workings and favorable geology, a reconnaissance soil  sampling  program was initiated  over all the joint venture  properties in late 2004 which continued into 2005.  Final assay results were received near the end of the third  quarter 2005 and showed  anomalies  worthy of follow up on the Pampana and Sonfon projects.  In the meantime, it has been agreed with our joint venture  partner,  Mano River  Resources  Inc.,  that the earn-in period will be extended by 12 months. A minimum of $750,000 is budgeted for exploration on this project in 2006.  Moto Goldmines Investment  Moto Goldmines  Limited ("Moto") is a Canadian listed gold  exploration  company which focuses its activities in the Democratic  Republic of the Congo in central Africa.  At the end of 2005 we  owned  approximately  11.1% or five  million  of Moto's  outstanding common shares plus warrants to acquire a further one million shares before June 2006 at an exercise price of Australian  $2.25 per share. Our Vice  President of  Exploration  serves on Moto's board of  directors.  In March 2006, we exercised the remaining warrants,  at a cost of $1.7 million,  bringing our total ownership to six million shares and immediately afterward sold all the shares in a  bought-deal  transaction  in Canada for  Cdn$7.50 per share for net proceeds to Golden Star of Cdn$45.0 million ($38.9 million).  Afema, Cote d'Ivoire  In March 2005,  we entered into an option to purchase the Afema  project in Cote d'Ivoire  from  the  Ivorian   parastatal   company   Societe   d'Etat  pour  le Developpement  Minier de la Cote  d'Ivoire  (`SO.DE.MI.").  The  Afema  property covers an area of 2,012 square kilometers of prospective Birimian rocks in south east Cote d'Ivoire which represent the southeastern  extension of the Sefwi Belt meta-volcanics  and the  Kumasi  Basin  meta-sedimentary  rocks.  In Ghana  this `belt-basin'  contact  hosts the  multi-million  ounce  Chirano and Bibiani gold deposits.  Under the terms of the  acquisition  agreement,  we made an immediate payment of $0.1 million to SO.DE.MI.  which gave us the right to carry out a six month detailed  technical due  diligence,  after which we will have the right to complete  the  transaction  to acquire 100% of  SO.DE.MI.'s  rights in the Afema property for $1.5 million (subject to a statutory 10% interest by the Government of Cote  d'Ivoire).  If we proceed  with the  acquisition,  in  addition  to the acquisition payments, Golden Star will pay to SO.DE.MI. a royalty on future gold production  from the Afema property  indexed to the gold price.  At current gold prices (in the range of $550 per ounce) the royalty rate would be 2.5%.  Golden Star undertook an intensive  exploration  program at Afema during the six months following signing of the option, including the collection and analysis of over 12,000 soil samples and compilation and assessment of previous  exploration data. Despite this work, we were unable to come to a definitive  decision on the merits of the project and hence a six month  extension to the option  period was requested, which SO.DE.MI. has granted. We plan to use the extension to continue the assessment of previous data and to complete infill sampling and trenching of some of the better anomalies defined by the initial program.  Approximately $1.0 million was spent on this project in 2005, and a further $2.2 million (including the option exercise payment) is budgeted for 2006.  Goulagou, Burkina Faso  We hold an 80%  beneficial  interest in the Goulagou and  adjoining  Rounga gold properties,  which were  acquired  as part of the St. Jude  acquisition  in late 2005.  Together the two contiguous  properties  cover  approximately  691 square kilometers and are located approximately 100 kilometers west of Ouagadougou, the capital city of Burkina Faso, and 20 kilometers north of the city of Ouahigouya. Drilling  program  carried  out by St.  Jude and their  predecessors  identified several areas of gold enrichment  including two parallel gold mineralized  zones on the Goulagou property.  Deba and Tialkam Projects, Niger  The  Deba  and  Tialkam  properties  are gold  exploration  properties  in Niger acquired  as  part  of the St.  Jude  acquisition  in  late  2005.  Through  our subsidiary,  St. Jude, we hold a 100% interest in the two  exploration  permits, subject to the 10%  interest  of the  Government  of Niger.  St.  Jude  obtained certain data from exploration carried out by previous owners and initiated a new drilling  program in late 2005. The first phase results of the drilling  program are being evaluated.                                           47   Mininko, Mali  In early  2005,  a review of 2004 drill  results at Mininko  indicated a limited potential  for this  project.  We withdrew  from the joint  venture in the first quarter of 2005 and wrote off all of the $1.1  million of costs  incurred in the project.  EXPLORATION STAGE PROPERTIES IN SOUTH AMERICA  Saramacca Property  The  Saramacca  project is located in Suriname and is owned 100% by Golden Star. Two successive  soil auger sampling  programs  completed in 2003-04  evaluated a series of stream  sediment gold  anomalies  and defined a 5 kilometer  long soil anomaly  forming a series of  en-echelon  zones.  Deep  augering in 2004 further confirmed the anomaly now termed `Anomaly M'.  Shallow  diamond core  drilling  comprising 24 holes for a total of 1,315 meters commenced  at  Anomaly  M in  March  2005.  This  work  was  undertaken  with  a lightweight  man-portable  drill rig due to the rugged  terrain,  limiting  hole depths to less than 100 meters.  Mineralization  intersected  within drill cores consisted of variably  sheared  silicified  pyritic  metasediments of tuffaceous origin  and  volcanic  conglomerates,  often with  little or no quartz  veining. Significant gold assays were also intersected within the upper 5 to 10 meters of enriched  lateritic  duricrust and mottled  saprolite.  Based on the encouraging results  from the 2005 work,  we plan to follow up with a second phase of deeper core drilling and a program of  mechanized  trenching in an attempt to elucidate the structure of the host rocks beneath the  duricrust  capping.  A budget of $1 million has been earmarked for this work in 2006, but we are also  investigating joint venture possibilities for the property.  Bon Espoir Property  The Bon Espoir  property is located in French Guiana and is owned 100% by Golden Star. It covers a sheared "belt-basin"  volcanic-sediment contact zone analogous to those we are exploring in similar aged (lower Proterozoic) terrains in Ghana. During  2005,  we  conducted  a  regional  soil  sampling  along  much of the 40 kilometer  long  sediment-volcanic  contact  shear zone that hosts the  Wayamaga prospect drilled by previous owners of the Bon Espoir permit. This soil sampling program was completed during July, with some 32.2 kilometers of baseline and 120 kilometers  of cross lines cut,  and soil  sampling  completed on 26 cross lines spaced 1600 meters apart on 100 meter  centers.  As expected,  the assay results identified coherent zones of anomalous low grade zones of gold and arsenic along the main Wayamaga  structural break;  however the tenor of the anomalism was not strong enough to warrant  immediate  follow-up.  It is planned to reduce the Bon Espoir  permit  area  to  cover  the  best of  these  anomalies  while  regional extensions of the Wayamaga structure are investigated.  Paul Isnard  The Paul Isnard  project is located in the western part of French  Guiana,  some 200 km west of  Cayenne.  The  project  covers  rocks of the  Lower  Proterozoic Paramacca  Formation  which contain gold  mineralization  in the form of pyritic disseminated  zones or stringer zones and sulfide-rich shear zones, which can be reasonably  correlated  between the  current  widely  spaced  (200 meter)  drill sections.  An inferred  mineral  resource of 8.2 million  tonnes  grading  1.78g/t has been identified  at  Montagne  d'Or  on the  southern  boundary  of the  Paul  Isnard concession.  Further work is warranted  to identify  additional  sources of hard rock  mineralization,  which together with the mineral resource at Montagne d'Or could support a future  mining  operation.  In 2005, we reviewed the  historical work on the  property  and as a result  in early  2006  reduced  the area of the permit to 140 km(2) covering only the most prospective areas.  Benzdorp  The 72 km(2)  Benzdorp South gold project is located along the eastern border of Suriname,  approximately  220 km southeast of  Paramaribo.  The Benzdorp  mining district is underlain by the Lower Proterozoic Paramacca greenstone and a felsic intrusive  assemblage.  Recorded and  estimated  alluvial gold  production  from historical dredging and present-day  small-scale alluvial mining is in excess of 600,000 ounces.  Exploration to date by Golden Star has identified several zones of bedrock  mineralization  but none of these are regarded as being economically viable at current gold prices.  In early 2006 a third party was  conducting  due diligence on the property as a prelude to acquiring it from Golden Star.                                           48   Minera IRL  Minera IRL is a private,  junior exploration company active in Peru and Chile in which we hold an approximate  19% interest  through our  shareholding in Goldmin Consolidated  Holdings.  Minera IRL has  developed  a portfolio  of  exploration projects,  the most advanced of which,  Corihuarmi in Peru,  was drilled in 2003 with encouraging results. Corihuarmi, located 250 km east of Lima near Huancayo, consists  of  an  extensive  high  sulfidation   epithermal   system  with  gold mineralization  hosted in  massive/vuggy  silica and alunite zones. The focus of Minera IRL's exploration has been two massive siliceous  outcrops known as Susan and Diana,  which  crop-out  boldly above the  surrounding  softer  argillically altered  volcanic  rocks.  It  is  thought  that  the  better-grade  oxide  gold mineralization  at Susan and Diana is structurally  controlled within silicified crackle breccia zones where they are cut by feeder  structures.  Several similar zones have been  identified  and  additional  drilling was  completed in 2005 to expand the size of the current gold resource in readiness for a full feasibility study in 2006.  Other  earlier-stage  projects  being  investigated  by Minera IRL  include:  1) Frontera,  located in northern Chile, 90 km northeast from the seaport of Arica, and just across the Peruvian border from Minsur's Checocollo project,  which has been intensively  drilled over the last 12 months, 2) Cushuro in the La Libertad district of northern Peru, and 3) the Chama prospect near Abancay. Minera IRL is actively assessing other properties throughout the Andean cordillera.  Other Areas  In addition to the  project  work  discussed  above we have  undertaken  several regional  reconnaissance  initiatives  using  both our own  staff  and  contract geologists in Ghana, Cote d'Ivoire,  Mauritania,  Brazil, Argentina and Bolivia, spending  approximately  $0.9 million in 2005 for such activities.  We have also held  discussions  with other  companies  to  identify  opportunities  for joint venture exploration efforts in several areas, including the Guiana Shield.
Prestea Gold Resources Limited ("PGR"), our joint venture partner in the Prestea Underground,  entered  receivership  in March 2003. The joint venture  agreement between BGL and PGR specified  that if either party to the joint venture were to go into  receivership  any  remaining  interest held in the  partnership  by the insolvent partner would  immediately vest with the solvent partner.  While PGR's official liquidator affirmed that the vesting of this interest in BGL was proper under the terms of the joint  venture  agreement,  the  transfer  and vesting of PGR's  ownership was  challenged in an action  brought  before the High Court in Accra,  Ghana  against the official  liquidator by Merchant Bank (Ghana) Ltd, in its capacity as a judgment creditor of PGR. The action was commenced on February 28, 2005 and sought an order of the court to compel the official  liquidator  to take  control of PGR's  residual  interest in the joint  venture and to have the interest  valued  with  the  ultimate  goal of  making  proceeds  available  for distribution among all the creditors of PGR.  The judgment creditor's claim was based on the assertion that the vesting of the residual  interest in BGL under the joint venture  agreement was either  illegal and void and/or that such vesting  should  necessarily go with the assumption by BGL of all PGR's obligations owed to third parties, including those unrelated to the joint venture.  In June  2005,  the High  Court  issued a  preliminary  finding  in favor of the Merchant Bank (Ghana) Ltd. While the ruling transferred PGR's ownership position to the  liquidator,  it did not require BGL to assume any of PGR's  obligations. Nevertheless,  by September  30,  2005,  continued  project  spending by BGL had diluted PGR's original  ownership  position to less than 10%. Under the terms of the joint venture  agreement,  if either  partner allows itself to be diluted to 10% or less, that partner's  residual interest would immediately  convert into a 2.5%  net  profit  interest  in  potential  future  earnings  from  the  Prestea Underground  mine.  While the court's ruling has effectively  given the 2.5% net profits interest to the bankruptcy trustee, the trustee still must establish the fair value of the  interest and then find a buyer.  At a  bankruptcy  hearing in December 2005, none of the creditors were willing to fund a valuation study.  We are also engaged in routine  litigation  incidental  to our business  none of which is deemed to be material.  No material legal proceedings,  involving us or our  business  are  pending,  or,  to  our  knowledge,   contemplated,   by  any governmental authority. We are not aware of any material events of noncompliance with environmental laws and regulations.                                           49
No  matters  were  submitted  to a vote of  security  holders  during the fourth quarter of 2005.                                           50
Our common shares trade on the Toronto Stock Exchange  ("TSX") under the trading symbol "GSC" and on the American  Stock  Exchange  under the symbol "GSS." As of March 27,  2006,  207,265,758  common  shares  were  outstanding  and we had 966 shareholders  of record.  On March 27, 2006, the closing price per share for our common  shares  as  reported  by the TSX was Cdn $3.96  and as  reported  by the American Stock Exchange was $3.42.  The  following  table sets forth,  for the periods  indicated,  the high and low market  closing prices per share of our common shares as reported by the TSX and the American Stock Exchange:                                              Toronto Stock Exchange                     American Stock Exchange                                     Cdn$                  Cdn$                   $                     $            2005                     High                  Low                  High                   Low                             --------------------  --------------------  -------------------  --------------------- First Quarter                       4.94                  3.15                 4.04                  2.58 Second Quarter                      4.02                  3.01                 3.23                  2.35 Third Quarter                       4.33                  3.40                 3.73                  2.84 Fourth Quarter                      3.78                  2.54                 3.32                  2.12                                        Toronto Stock Exchange                     American Stock Exchange                                     Cdn$                  Cdn$                   $                     $            2004                     High                  Low                  High                   Low                             --------------------  --------------------  -------------------  --------------------- First Quarter                       9.43                  7.00                 7.25                  5.29 Second Quarter                      9.20                  5.90                 7.07                  4.27 Third Quarter                       6.73                  4.91                 5.27                  3.71 Fourth Quarter                      7.10                  4.32                 5.61                  3.50   We have not  declared  or paid cash  dividends  on our common  shares  since our inception and we expect for the foreseeable future to retain all of our earnings from  operations  for use in  expanding  and  developing  our  business.  Future dividend   decisions  will  consider  then  current   business   results,   cash requirements and our financial condition.  RECENT SALE OF UNREGISTERED SECURITIES  In the  Arrangement  with St. Jude in which we  acquired  100% of the issued and outstanding  common shares and other securities of St Jude, we issued a total of 31,377,588  Golden Star common shares in exchange for St. Jude common shares and issued Golden Star options and warrants  exercisable for an additional 5,773,176 Golden Star common  shares in exchange  for St. Jude options and  warrants.  The common shares were issued pursuant to Section 3(a)(10) under the Securities Act.  CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS  The  following   summarizes   the   principal   Canadian   federal   income  tax considerations applicable to the holding and disposition of our common shares by a holder of one or more common shares,  who for Canadian  income tax purposes is resident in the United  States of America and holds the common shares as capital property.  This summary is based on the current  provisions of the Canada-United States Income Tax Convention (1980) (the "Treaty"), Income Tax Act (Canada) (the "Tax  Act"),  the  regulations  there  under and all  amendments  to the Tax Act publicly  proposed by the Government of Canada to the date hereof. It is assumed that each such  amendment  will be  enacted  as  proposed  and there is no other relevant  change in any  governing  law,  although no assurance  can be given in these  respects.  Limited  liability  corporations  created  under  the  limited liability  company   legislation  of  certain  U.S.  states  and  treated  as  a partnership  or  disregarded  entity  under US tax law cannot  access any of the benefits of the Treaty as described in the paragraphs below.                                           51   Dividends  paid or credited by us to a holder of one or more common  shares will be subject to Canadian  non-resident  withholding  tax at the rate of 25%. Under the Treaty,  the rate of withholding tax is reduced to 5% of the gross amount of the  dividend  where  the  holder  is a  company  that  owns at least 10% of the company's voting stock and beneficially owns the dividend,  and 15% in any other case.  Under the Tax Act, a holder will not be subject to  Canadian  tax on any capital gain realized on an actual or deemed disposition of a common share,  including a deemed  disposition at death,  provided that he did not hold the common share as capital  property used in carrying on a business in Canada,  and that neither he nor persons with whom he did not deal at arm's length, alone or together,  owned (or have an option or interest in) 25% or more of the issued shares of any class of our  stock at any  time in the 60  month  period  immediately  preceding  the disposition.  A holder  who is  liable  under the Tax Act for  Canadian  tax in  respect  of a capital gain realized on an actual or deemed disposition of a common share could be relieved under the Treaty from such liability unless:            (a)  the  common  share  formed  part of the  business  property  of a                permanent  establishment  or fixed base in Canada that the holder                has  or  had  within  the   twelve-month   period  preceding  the                disposition; or            (b)  the holder was an individual; and                 (i)  was  resident in Canada for 120 months  during any period of                     20 consecutive years preceding the disposition; and                 (ii) was  resident  in  Canada at any time  during  the ten years                     immediately preceding the disposition; and                 (iii) owned the common  share when he ceased to be a resident  of                     Canada.  To the extent that no Treaty  relief is  available,  generally,  one-half of any capital  gain  realized  by a holder in a taxation  year must be included in the income of the holder for the year,  and one-half of any capital loss realized by a holder in a taxation year must be deducted from taxable capital gains realized by the holder in that  year.  Capital  losses  for a taxation  year in excess of taxable  capital gains for that year  generally may be carried back and deducted in any of the three preceding  taxation years or carried forward and deducted in any subsequent  taxation year against net taxable capital gains realized in such years. A holder is required to file a Canadian  income tax return if such holder disposes  of a common  share and the gain or loss is  subject  to tax in Canada, based on the  application  of the rules outlined in the above  paragraphs,  even where the Treaty applies to relieve the Canadian tax liability.  This  summary  is of a general  nature  and is not  intended,  nor  should it be construed, to be legal or tax advice to any particular shareholder. SHAREHOLDERS SHOULD  CONSULT  THEIR  OWN  TAX  ADVISERS  AS  TO  THE  INCOME  AND  OTHER  TAX CONSEQUENCES ARISING IN THEIR PARTICULAR CIRCUMSTANCES.  CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS  Potential  investors  that are US  taxpayers  should  consider  that we could be considered to be a "passive  foreign  investment  company"  ("PFIC") for federal income tax purposes. Although we believe that we currently are not a PFIC and do not expect to become a PFIC in the near future,  the tests for determining  PFIC status  are  dependent  upon a number of  factors,  some of which are beyond our control,  and we can not  assure  you  that we  would  not  become a PFIC in the future.  If we were deemed to be a PFIC,  then a US taxpayer  who disposes or is deemed to dispose of our shares at a gain,  or who received a so-called  "excess distribution"  on the shares,  generally would be required to treat such gain or excess  distribution  as ordinary income and pay an interest charge on a portion of the  gain or  distribution  unless  the  taxpayer  makes a  timely  qualified electing  fund  election  (a "QEF"  election).  A US  taxpayer  who  makes a QEF election generally must report on a current basis his or her share of any of our ordinary  earnings  and net capital  gain for any taxable year in which we are a PFIC,  whether or not we distribute  those  earnings.  Special  estate tax rules could be applicable to our shares if we are  classified as a PFIC for income tax purposes.                                           52
The  selected  financial  data set forth  below  are  derived  from our  audited consolidated  financial  statements for the years ended December 31, 2005, 2004, 2003,  2002 and 2001,  and should be read in  conjunction  with those  financial statements and the notes thereto.  The  consolidated  financial  statements have been prepared in accordance with Canadian GAAP.  Selected financial data derived in  accordance  with US GAAP  has  also  been  provided  and  should  be read in conjunction with Note 28 to the financial  statements.  Reference should also be made to "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations."  Summary of Financial Condition  (Amounts in thousands except per share data)                     Canadian GAAP           As of Dec.  As of Dec. As of Dec. As of Dec. As of Dec.                                     31, 2005   31, 2004   31, 2003   31, 2002   31, 2001 - -----------------------------------------------------------------------------------------  Working capital                     $91,974    $61,366    $96,784    $21,963    $(5,149)  Current assets                      132,789     78,846    104,935     32,843      9,636  Total assets                        564,603    252,160    222,391     74,135     36,552  Current liabilities                  40,815     17,480      8,151     10,880     14,785  Long-term liabilities               124,919     10,367      8,402      8,973      7,765  Shareholder's equity                392,240    217,960    198,362     49,384     12,342 - -----------------------------------------------------------------------------------------             Canadian GAAP            For the     For the    For the    For the    For the                                    Year Ended  Year Ended Year Ended Year Ended Year Ended                                    Dec. 31,    Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,                                      2005        2004       2003       2002       2001 - -----------------------------------------------------------------------------------------  Revenues                            $95,465    $65,029    $64,370    $38,802    $24,658  Net income/(loss)                   (13,531)     2,642     21,956      4,856    (20,584)  Net income/(loss) per share -   basic                               (0.094)     0.019      0.198      0.067     (0.488) - -----------------------------------------------------------------------------------------             US GAAP                  As of Dec.  As of Dec. As of Dec. As of Dec. As of Dec.                                     31, 2005   31, 2004   31, 2003   31, 2002   31, 2001 - -----------------------------------------------------------------------------------------  Working capital                     $91,974    $61,366    $96,784    $22,262    $(5,149)  Current assets                      132,789     78,846    104,935     33,391      9,636  Total assets                        522,443    219,972    200,337     62,644     24,232  Current liabilities                  40,815     17,480      8,151     10,880     14,785  Long-term liabilities               127,253     10,367      8,402      8,973      7,818  Shareholder's equity                352,411    188,226    180,417     41,069      1,533 - -----------------------------------------------------------------------------------------             US GAAP                  For the     For the    For the    For the    For the                                    Year Ended  Year Ended Year Ended Year Ended Year Ended                                    Dec. 31,    Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,                                      2005        2004       2003       2002       2001 - -----------------------------------------------------------------------------------------  Revenues                          $102,237    $65,029    $64,370    $38,802    $24,658  Net income/(loss)                  (28,948)    (9,146)    13,357      6,752     (5,352)  Net income/(loss) per share -   basic                              (0.202)    (0.066)     0.120      0.093     (0.126) - -----------------------------------------------------------------------------------------                                            53
The following  discussion and analysis  should be read in  conjunction  with the accompanying  consolidated financial statements and related notes. The financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Cdn GAAP").  For a reconciliation to accounting  principles generally  accepted  in the  United  States  ("US  GAAP"),  see  Note  28 to the consolidated financial statements.  This Management's Discussion and Analysis of Financial Condition and Results of Operations includes information  available to March 27, 2006.  In this Form 10-K,  we use the terms "total  operating  cost per ounce,"  "total cash cost per ounce" and "cash operating cost per ounce."  Total  operating  cost per ounce for a period is equal to "Total mine  operating costs" for the period,  as found on our  consolidated  statements  of operations divided by the ounces of gold sold in the  period.  Total mine  operating  costs include  all  mine-site   operating  costs,   including  the  costs  of  mining, processing,  maintenance, work in process inventory changes, mine-site overhead, production taxes and royalties, mine site depreciation, depletion, amortization, asset  retirement  obligations  and  by-product  credits,  but  do  not  include exploration  costs,  corporate general and administrative  expenses,  impairment charges,  corporate business development costs, gains and losses on asset sales, interest  expense,  mark-to-market  gains  and  losses on  derivatives,  foreign currency gains and losses, gains and losses on investments and income tax.  Total cash cost per ounce for a period is equal to "Mining operations" costs for the period, as found on our consolidated statements of operations divided by the number of ounces of gold sold during the period.  Cash  operating  cost per ounce for a period is equal to "total  cash costs" for the period less production royalties and production taxes, divided by the number of ounces of gold sold during the period.  The  calculations of total cash cost per ounce and cash operating cost per ounce are in compliance  with an industry  standard for such measures  established  in 1996 by the Gold Institute, a non-profit industry group.  The following table shows the derivation of these measures and a  reconciliation of "total cash cost per ounce" and "cash operating cost per ounce."         Derivation of Total Mine Operating Cost                               2005                                                  --------------------------------------------------                                                     Wassa (1)     Bogoso/Prestea        Total  - --------------------------------------------------------------------------------------------------- Mining operations                                        $33,277          $46,322          $79,599 - --------------------------------------------------------------------------------------------------- Mining related depreciation, depletion &  amortization                                              7,105            8,878           15,983 - --------------------------------------------------------------------------------------------------- Accretion of asset retirement obligations                    190              562              752 - --------------------------------------------------------------------------------------------------- Total mine operating costs                               $40,572          $55,762          $96,334 - ---------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------- Ounces sold                                               69,070          131,898          200,968 - ---------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------- Derivation of Costs per Ounce: - --------------------------------------------------------------------------------------------------- Total operating cost per ounce - GAAP ($/oz)                 587              423              479 - --------------------------------------------------------------------------------------------------- Less depreciation, depletion & amortization  ($/oz)                                                      103               67               80 - --------------------------------------------------------------------------------------------------- Less accretion of asset retirement obligation  ($/oz)                                                        3                4                4 - --------------------------------------------------------------------------------------------------- Total cash cost ($/oz)                                       482              351              396 - --------------------------------------------------------------------------------------------------- Less royalties and production taxes ($/oz)                    14               13               13 - --------------------------------------------------------------------------------------------------- Cash operating cost ($/oz)                                   468              338              383 - ---------------------------------------------------------------------------------------------------  (1)  The Wassa mine was  placed in  service  on April 1, 2005 and thus  includes      only nine months of operational data to December 31, 2005.                                           54         Derivation of Total Mine Operating Cost                                  2004                                                  --------------------------------------------------                                                             Wassa     Bogoso/Prestea        Total - --------------------------------------------------------------------------------------------------- Mining operations                                             $-          $39,095          $39,095 - --------------------------------------------------------------------------------------------------- Mining related depreciation, depletion &  amortization                                                  -            8,096            8,096 - --------------------------------------------------------------------------------------------------- Accretion of asset retirement obligations                      -              645              645 - --------------------------------------------------------------------------------------------------- Total mine operating costs                                    $-          $47,836          $47,836 - ---------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------- Ounces sold                                                    -          147,875          147,875 - ---------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------- Derivation of Costs per Ounce: - --------------------------------------------------------------------------------------------------- Total operating cost per ounce - GAAP ($/oz)                   -              323              323 - --------------------------------------------------------------------------------------------------- Less depreciation, depletion & amortization  ($/oz)                                                        -               55               55 - --------------------------------------------------------------------------------------------------- Less accretion of asset retirement obligation  ($/oz)                                                        -                4                4 - --------------------------------------------------------------------------------------------------- Total cash cost ($/oz)                                         -              264              264 - --------------------------------------------------------------------------------------------------- Less royalties and production taxes ($/oz)                     -               14               14 - --------------------------------------------------------------------------------------------------- Cash operating cost ($/oz)                                     -              250              250 - ---------------------------------------------------------------------------------------------------  (1)  The Wassa mine did not commence commercial production until April 2005.   We use  total  cash  cost per  ounce  and cash  operating  cost per ounce as key operating indicators. We monitor these measures monthly,  comparing each month's values to prior period's values to detect trends that may indicate  increases or decreases in operating  efficiencies.  These measures are also compared  against budget to alert  management  to trends that may cause actual  results to deviate from planned operational  results. We provide these measures to our investors to allow them to also monitor  operational  efficiencies of our mines. We calculate these measures for both individual operating units and on a consolidated basis.  Total cash cost per ounce and cash operating cost per ounce should be considered as  non-GAAP  financial  measures as defined in SEC  Regulation  S-K Item 10 and should not be  considered  in  isolation  or as a  substitute  for  measures  of performance  prepared in accordance  with GAAP.  There are material  limitations associated with the use of such non-GAAP  measures.  Since these measures do not incorporate  revenues,  changes in working capital and non-operating cash costs, they are not  necessarily  indicative  of  operating  profit  or cash  flow from operations as determined under GAAP. Changes in numerous factors including,  but not limited to, mining rates, milling rates, gold grade, gold recovery,  and the costs of labor, consumables and mine site general and administrative  activities can cause these measures to increase or decrease. We believe that these measures are the same as, or similar to the measures of other gold mining companies,  but may not be comparable to similarly titled measures in every instance.  All  figures  and  amounts  in this  Item 2 are  shown  on a 100%  basis,  which represents our current beneficial interest in gold production and revenues. Once all capital has been repaid,  the  Government  of Ghana would receive 10% of the dividends  distributed from the subsidiaries owning the Bogoso/Prestea and Wassa mines.  OUR BUSINESS  Through our  subsidiaries  and joint  ventures we own a controlling  interest in four  significant  gold  properties  in  southern  Ghana  in  West  Africa:  the Bogoso/Prestea property, which comprises the adjoining Bogoso and Prestea mining leases ("Bogoso/Prestea"), the Wassa property ("Wassa"), the Prestea Underground property ("Prestea Underground") and the St. Jude Properties.  Bogoso/Prestea is owned by our 90% owned subsidiary Bogoso Gold Limited ("BGL"). All of our gold  production  prior  to  April  2005  came  from  Bogoso/Prestea. Bogoso/Prestea produced and sold 131,898 ounces of gold during 2005.  Through another 90% owned subsidiary, Wexford Goldfields Limited ("WGL"), we own the  Wassa  gold  mine  located  some  35  kilometers  east  of  Bogoso/Prestea. Construction and commissioning of Wassa's new processing plant and open pit mine was  completed at the end of March 2005 and the project was placed in service on April 1, 2005.  Wassa  produced and sold 69,070 ounces of gold in 2005 following its April 2005 in-service date.  The Prestea  Underground  is located on the Prestea  property  and consists of a currently inactive underground gold mine and associated support facilities.  BGL owns a 90%  operating  interest in the  Prestea  Underground.  We are  currently conducting  exploration and engineering  studies to determine if the underground mine can be reactivated on a profitable basis.                                           55   Through our 100% owned subsidiary,  St. Jude Resources Ltd. ("St. Jude"), we own the St. Jude Properties in southwest Ghana.  The St. Jude Properties  consist of the Hwini-Butre and Benso concessions which together cover an area of 201 square kilometers.  Both concessions contain undeveloped zones of gold  mineralization. These two concessions  are located between 40 and 85 kilometers  south of Wassa. The  mineralized  zones have been  delineated  through  the efforts of the prior owner who conducted extensive exploration work from the mid-1990s to 2005.  We hold interests in several gold exploration projects in Ghana and elsewhere in Africa including Sierra Leone, Ghana, Burkina Faso, Niger and Cote d'Ivoire.  We also hold and manage  exploration  properties in Suriname and French Guiana.  We hold indirect interests in gold exploration properties in Peru and Chile through a 19% shareholding  investment in Goldmin Consolidated  Holdings.  We also own a 53%  interest  in  EURO   Ressources   S.A.,   ("EURO")  a  French   registered, publicly-traded  royalty holding company  (formerly known as Guyanor  Ressources S.A.) which owns a royalty  interest based on gold  production at Cambior Inc.'s Rosebel gold mine in Suriname.  Our corporate  headquarters  is located in Littleton,  Colorado.  Our accounting records are kept in compliance  with  Canadian  GAAP and all of our  operations, except for certain  exploration  projects,  transact  business in US dollars and keep financial records in US dollars.  BUSINESS STRATEGY AND DEVELOPMENT  Since 1999 our business and development  strategy has been focused  primarily on the acquisition of producing and development  stage gold properties in Ghana and on the exploration,  development and operation of these  properties.  Since 1999 our exploration efforts have been focused on Ghana, other West African countries and South America.  In line with our business  strategy we acquired Bogoso in 1999 and have operated the Bogoso  processing  plant since that time.  In 2001 we acquired  Prestea and have been mining at Prestea since late 2001. In late 2002 we acquired  Wassa and following  completion of a feasibility  study,  constructed a new CIL processing plant at Wassa which began commercial  operation in April 2005. We are currently constructing a new processing  plant at Bogoso designed to expand  production at Bogoso/Prestea  from  approximately  130,000  ounces (in 2005) to  approximately 370,000 ounces in 2007.  Based on currently known reserves we expect a mine life of approximately  seven years at  Bogoso/Prestea.  Achievement of this target is subject to numerous risks. See the discussion of Risk Factors in Item 1A above.  In late 2005,  we acquired  the St. Jude  Properties  where we plan to carry out geological  and  engineering  studies  during  2006 to  determine  the  economic viability of these undeveloped gold properties.  Our  overall  objective  since  1999 has been to grow our  business  to become a mid-tier  gold  producer  (which we  understand  to be a  producer  with  annual production of approximately  500,000 ounces).  With the benefit of a full year's production from the Bogoso expansion project in 2007, we now anticipate reaching this goal in 2007. We continue to actively investigate potential acquisition and merger  candidates  which could  further  increase  our annual gold  production, however we  presently  have no agreement  or  understanding  with respect to any specific potential transaction.  SIGNIFICANT TRENDS AND EVENTS DURING 2005  Quarterly Restatement for 2005 and Mark-to-Market Reporting  In the first quarter of 2005, EURO implemented  hedge accounting for its forward gold pricing derivatives established in January. EURO also used hedge accounting for  additional  derivatives  acquired in August 2005. In completing our audited consolidated financial statements for 2005, it was concluded that EURO's forward gold pricing  derivatives did not qualify for hedge  accounting  under Cdn GAAP, AcG-13,  "Hedging  Relationships".  As a result, EURO will restate its unaudited financial  statements and we will restate our unaudited  consolidated  financial statements for the first three  quarters of 2005.  EURO and Golden Star will now be  required to  recognize  mark-to-market  valuations  of EURO's  forward  gold pricing  derivatives  through the  statements  of  operations at the end of each period.  During 2005, EURO and Golden Star recognized  gains and losses from the forward gold pricing  derivatives  in the  statements of operations  only in the periods in which they settled.  Since EURO is a majority owned  subsidiary,  the impact of these changes flows  through to Golden Star's  consolidated  financial statements in the same amounts and in the same periods as in EURO. The effect of the change on our first three quarters' results are as shown below:                                           56            ACCOUNT                                 First Quarter 2005     Second Quarter 2005       Third Quarter 2005                                      -------------------------------------------------------------------------- ( in $ millions, except per share    As Reported As Restated As Reported As Restated As Reported  As Restated  data) - --------------------------------------------------------------------------------------------------------------- Royalty income                             $1.1         $1.1        $1.1        $1.0        $1.1          $1.0 Loss on derivative                            -          1.3         0.5         0.6         0.5           5.5 Provision for future income taxes           0.4          0.1         0.1           -           -           1.7 Net loss                                   (1.4)        (2.2)       (3.6)       (3.7)       (3.3)         (6.7) Loss per share (basic)                    (0.01)       (0.02)      (0.03)      (0.03)      (0.02)        (0.05)  Future tax asset                            1.2          1.6         1.1         1.6         1.1           3.3 Loan fees                                   1.1          0.2         1.6         1.0         1.0           1.0 Fair value of derivatives                   1.0          1.3         0.5         1.9         0.6           7.4 Other accrued liabilities                  10.3         10.2        13.2        12.7        23.3          22.4 - ---------------------------------------------------------------------------------------------------------------   Golden Star will issue restated unaudited  quarterly reports on Form 10-Q/As for the first three quarters of 2005, reflecting the impact of these changes.  St. Jude Acquisition  In late December 2005, we completed the  acquisition of 100% of the  outstanding shares of St. Jude. Our total cost to acquire St. Jude was $112.8 million.  This includes issuance of 31.4 million of our common shares at a price of $3.45 each, 3.3  million  warrants  with an  aggregate  fair value of $1.0  million  and 2.5 million  options at an aggregate  fair value of $1.6 million and $1.9 million of transaction  costs. The transaction  resulted in St. Jude  shareholders  holding approximately  19% of Golden  Star on a fully  diluted  basis at the date of the acquisition.  St. Jude's  principal  assets are the Hwini-Butre and Benso gold projects at the southeastern end of the Ashanti gold belt region in Ghana. Based on our analysis of St. Jude's past  exploration  work, we reported in February 2006 measured and indicated  Mineral  Resources of 2.7 million  tonnes at an average  grade of 5.3 grams per tonne at  Hwini-Butre  and 2.6 million  tonnes at an average  grade of 3.77  grams per tonne at Benso.  In  addition,  St.  Jude has other  exploration projects in Ghana, Burkina Faso and Niger.  Equity Financing  On December 30, 2005, we closed a bought deal equity  offering of  approximately 31.59 million  common  shares at Cdn$2.80  ($2.40) per common share and realized gross  proceeds of  approximately  Cdn$88.5  million  ($75.8  million).  The net proceeds of the  offering are being used to fund the  development  of the Bogoso sulfide expansion project and for general corporate purposes.  Wassa Start-Up  Following the completion of construction and  commissioning in the first quarter of 2005, the Wassa mine was placed in service on April 1, 2005.  Wassa has since processed  2.7 million  tonnes of ore at an average  rate of 9,789 tonne per day and an average  grade of 0.91 grams per tonne,  and has  shipped and sold 69,070 ounces of gold.  Sale of Convertible Notes  On April 15, 2005 we sold $50 million of senior unsecured convertible notes (the "Notes")  maturing on April 15, 2009, to a private  investment  fund.  The Notes were issued at par and bear  interest  at 6.85%.  The Notes are  convertible  to common shares at a fixed  conversion  price of $4.50 per share, a 48% premium to the closing price of the common shares on April 5, 2005.  Proceeds from the sale of the Notes are being used for the Bogoso  sulfide  expansion  project  and for general corporate purposes.  Put and Call Options  We purchased  gold put options  ("puts")  during 2005 to provide  down-side gold price  protection  for a portion of our expected gold sales spread  equally over the Bogoso sulfide expansion project  construction  period.  This action reduced the risk of reduced cash flow from  operations  during the  construction  period that would otherwise have occurred as a result of a drop in gold prices. We sold call options ("calls") to offset the cost of a portion of the puts.                                           57   Each put gives us the right, but not the obligation, to sell an ounce of gold to a counter party on a specified future date at a contractually agreed upon strike price.  Each put has a specified expiry date. The strike price of the put is set at a point below the spot market price on the date the put is  established.  The closer the put strike price is to the spot market price,  the higher the cost of the put.  We paid an  average of $7.10 per ounce for the puts  purchased  in the second  quarter of 2005 locking in an average  strike price of $409.75 per ounce when the spot market price was between $427 and $429 per ounce.  A put, in effect,  becomes an insurance policy that guarantees us a minimum gold price on ounces covered by the puts. Through our puts we have guaranteed that we will  receive at least  $409.75 per ounce for  140,000  ounces to be sold during 2006 and early 2007.  If, on the expiry date, the spot market price is above the put strike price we will allow the put to expire unused.  We are not required to deliver gold to cover a put.  Each call obligates us to sell an ounce of gold at a specified  future date to a counter  party at a  contractually  agreed upon  price.  If the spot market gold price  exceeds the call strike  price we will receive only the lower call strike price on ounces covered by the calls.  We sell calls to and receive payment from a counterparty.  If the counterparty declines to exercise the call on its expiry date (i.e.  the spot market price of gold is below the calls  strike  price) the calls expire unused with no additional financial impact.  In the third  quarter of 2005,  we bought an  additional  90,000 puts and at the same time sold 90,000  calls.  The strike  prices of the calls and the puts were set so that the revenue on the sale of the calls exactly offsets the cost of the puts,  and thus no cash was required for the  transactions.  The strike price of the puts was set at $400 per ounce and the calls at $525 per ounce.  At the time that these puts and calls were  acquired the spot price of gold was between $424 and $440 per ounce.  Puts acquired in the second quarter of 2005 and outstanding at December 31, 2005 expire as follows: 90,000 in 2006 and 22,500 in 2007. Puts and calls acquired in the third  quarter of 2005 expire at a rate of 5,000 per month  between  October 2005 and March 2007. In December 2005 we  repurchased  calls on 15,000 ounces at an average  price of $4.13 per covered  ounce.  The  repurchased  calls were for December 2005 and January and February 2006.  Derivative  accounting  rules  require  that  at the  end of  each  period,  the remaining  unexpired  puts and calls be  revalued to their  mark-to-market  fair value  (the price at which we could sell the puts or the price at which we could buy back the call  options).  The initial  mark-to-market  value of the puts was equal to the price we paid for them. The  mark-to-market  values at December 31, 2005 decreased  because gold prices rose after we bought the puts thereby making it less  likely  that the floor price  established  by the puts would  provide a future benefit.  The $0.9 million  decrease in the  mark-to-market  value of the puts as of December 31, 2005, has been recorded in our Consolidated Statement of Operations.  The remaining  fair value of the puts at December 31, 2005 was $0.1 million.  If the gold price were to fall in the future,  the  mark-to-market  value of the puts would increase since it would be more likely that the floor price mechanism in the puts would provide an economic benefit. In such a case we would recognize a gain equal to the increase in the mark-to-market value of the puts.  The value of the call  options is also  marked to market each period in a manner similar to the put options. The only difference is that the mark-to-market value would be based on the  price we would  have to pay to the  counter  party to buy back the call options. As gold prices increase, the value of calls increase. The fair  value of calls  (the price we would have to pay to buy back the calls) was $2.3  million as of December 31, 2005 and we  recognized  a non-cash  expense of this amount in our Consolidated  Statement of Operations for the increase in the buy-back  cost. It is noted that the  mark-to-market  fair value will be brought back into revenue in the statement of operations over the next 15 months.  Rand and Euro Forwards  During 2005 we  established  forward  contracts  for South  African Rand and for Euros. We took this action to limit the potential impact of unfavorable  foreign currency fluctuations on the cost of equipment and services we expect to acquire from South African and European  vendors  during the  construction  phase of the Bogoso sulfide expansion project.  At  December  31,  2005 we held  forward  positions  that  allow us to buy 122.1 million  South  African Rand at an average  exchange  rate of 6.801 Rand per the dollar.  All of these Rand  forward  positions as of December 31, 2005 expire in 2006. The fair value of the Rand positions at December 31, 2005 was $1.1 million more than we paid for them. This gain helped to offset the fair value loss on                                           58   the puts and calls.  We also held at December  31, 2005 forward  positions  that allow us to buy 2.5 million  Euros at an average  exchange  rate of 0.8009 Euros per the dollar.  At the end of December  the fair value our Euro  positions  had dropped  resulting in a $0.2 million loss. All of these Euro forwards  expire in the first five months of 2006.  Acquisition of the Afema Property  In March 2005 we entered into an agreement allowing us to acquire a 90% interest in the Afema gold property in south east Cote d'Ivoire from Societe  d'Etat pour le  Developpement  Minier de la Cote  d'Ivoire.  The Government of Cote d'Ivoire retains a 10% interest in this property.  The Afema  property  covers an area of 2,012 square  kilometers of the Sefwi Belt  meta-volcanics  and the Kumasi Basin meta-sedimentary  rocks which  extend  into the Cote  d'Ivoire.  In Ghana,  this `belt-basin'  contact  hosts the  multi-million  ounce  Chirano and Bibiani gold deposits.  In the 1990s approximately  125,000 ounces of gold were produced from oxide  ores on the Afema  property  from  several  small  open  pits  along a 12 kilometer strike-length.  (See "Afema - Cote d'Ivoire" discussion above in "Item 2 Description of Properties"  for additional  information  about the acquisition and activities at Afema during 2005.)  Temporary Mining Suspension at Bogoso/Prestea's Plant-North Pit  The Plant-North pit at Prestea has been developed in stages with the development of the final stage (Phase 3)  commencing  in August 2005.  Initiation of Phase 3 mining was  conditional  on a number of  mitigation  measures  identified in the Environmental  Impact  Statement.  The  Ghana  Environmental  Protection  Agency ("EPA")  requested  suspension  of  mining  of the  Plant-North  Phase  3 pit on September  13,  2005 and of the  Plant-North  pit on  September  28,  2005 until certain outstanding mitigation measures were completed.  The mitigation measures were  completed  and  inspected by the EPA on October 19,  2005.  On November 1, 2005, we received  approval from the EPA to recommence  mining operations at the Plant-North pit and mining activity was recommenced a few days later following a series of informational meetings with the Prestea community.  During the mining suspension at Plant-North,  processing operations continued at the  Bogoso  processing  plant  using  stockpiled  ore.  Mining  and  processing operations at the Wassa mine and  construction  activities on the Bogoso sulfide expansion project also continued without interruption.  Environmental Reclamation Bonds  In compliance with Ghana EPA requirements we provided environmental  reclamation bonds during 2005 for both  Bogoso/Prestea  and Wassa. We bonded $3.0 million to cover future  reclamation  obligations at Wassa,  with a $2.85 million letter of credit and $0.15 million of cash which was deposited  with the EPA. We have also bonded $9.0 million to cover future  reclamation  obligations at Bogoso/Prestea, with an $8.1 million letter of credit and a $0.9 million cash bond.  EURO Ressources Loans and Derivatives  On  January  8,  2005  EURO,  a 53%  owed  subsidiary  (formerly  named  Guyanor Ressources  S.A.),  drew  down,  under a loan  agreement,  $6.0  million  from a commercial bank and paid the full amount to Golden Star as the first installment for the  purchase of the Rosebel  participation  right (the  "Rosebel  Royalty") which it purchased  from Golden Star for $12.0 million (plus  contingent  future payments  based on  production  from the  Rosebel  mine in excess of 2.0 million ounces) in December  2004.  In August 2005,  EURO  borrowed an  additional  $3.0 million from the same  commercial bank and forwarded the proceeds to Golden Star leaving an  outstanding  balance  due to Golden Star of $3.0  million  (plus the future  payments).  As required by the loan  agreements,  EURO also entered into cash-settled  forward gold pricing agreements with its lender designed to reduce in part the impact of gold price fluctuations on expected future Rosebel Royalty revenues it receives  from  Cambior  Inc.  EURO is now seeking  funding to allow payment of the final $3.0  million  owed to Golden  Star.  Covenants in the loan agreements  preclude EURO from acquiring any additional  debt without the bank's approval.  The first derivative agreement specifies that beginning April 20, 2005 and every three months thereafter until July 30, 2007, when the average gold price for the prior quarter is less than $421 per ounce,  the bank will pay to EURO in cash an amount equal to 5,700 ounces times the difference between the $421 per ounce and the average gold price for the quarter. In quarters where the average gold price exceeds  $421 per  ounce,  EURO will pay cash to the bank in an amount  equal to 5,700  ounces times the  difference  between the average gold price and $421 per ounce.  The 5,700  ounces is a notional  amount  agreed to by EURO and the bank. Neither EURO nor the bank is required to deliver gold under the  agreement.  The net effect of the agreement is that EURO receives  royalty  revenue on the first 5,700 ounces of gold mined at the Rosebel  mine each  quarter  based on $421 per ounce gold price regardless of the actual gold price. We expect the Rosebel mine to produce approximately 80,000 ounces of gold per quarter.                                           59   As required  under the August 2005 loan,  EURO entered  into another  derivative agreement  on 5,700 ounces per quarter from October 30, 2007 to January 29, 2010 at a price of $458.50 per ounce. The second derivative is structured  exactly as the first derivative described above except for the higher agreed sales price.  Gold  prices  averaged  $427,  $427,  $439 and $484 per ounce  during the first, second,  third and fourth  quarters of 2005 resulting in EURO making payments to the  bank of  $0.04,  $0.04,  $0.1  and $0.4  million  respectively  in the four quarters  of 2005.  Since  quarterly  gold prices  exceeded  $421 per ounce (the forward sales price per the  agreement)  EURO's royalty  revenues  received from Cambior on the first 5,700  ounces in each  quarter of 2005,  were higher by the same amounts, thereby exactly offsetting the payments to the bank.  As required by its loan agreement with the bank,  all Rosebel  Royalty  proceeds are initially deposited with the bank. Funds are subsequently  disbursed to EURO on an as-needed  basis.  Excess  funds  retained by the bank are  classified  as restricted cash on the Golden Star consolidated balance sheet.  During 2005, EURO and Golden Star reported their unaudited  quarterly  financial results  on  the  assumption  that  hedge  accounting  could  be  used  for  the derivatives, but in completing our audited consolidated financial statements for 2005,  it was concluded  that EURO's  forward gold pricing  derivatives  did not qualify for hedge accounting under Cdn GAAP, AcG-13, "Hedging Relationships". As a result, EURO and Golden Star will restate their unaudited financial statements for the first three  quarters of 2005 as discussed  above.  EURO and Golden Star will now be required to recognize  mark-to-market  valuations of EURO's  forward gold pricing derivatives through the statements of operations at the end of each period. Since EURO is a majority-owned  subsidiary,  the impact of these changes flows through to Golden  Star's  consolidated  financial  statements in the same amounts and in the same periods as in EURO.  EURO Private Placement  EURO sold four  million of its  common  shares at  (euro)0.20  each in a private placement in December 2005 raising  (euro)0.8  million.  EURO also received,  as part of the same  transaction,  (euro)0.05  million from the sale of 1.0 million warrants which allow the holder to purchase  EURO's common shares at (euro) 0.45 each until  December  12,  2007.  EURO plans to use the  proceeds to augment its working capital and to pursue new investment opportunities.  Based on the dilutive effect of the private placement on Golden Star's ownership position and on a zero value in EURO's minority  interest  account,  Golden Star recognized a $1.0 million gain on the transaction.  Gold Prices  Gold prices have generally trended upward during the last five years, from a low of just  under  $260 per ounce in early  2001 to a high  above $560 per ounce in January  2006.  Much of the price  increase  during  this  period  appears to be related to  decreases in the value of the US dollar  versus other major  foreign currencies,  but in recent quarters prices appear to be responding to additional influences with a resulting increase in the rate of increase.  Our realized gold price for shipments  during 2005  averaged  $446 per ounce  compared to $410 per ounce average price received in 2004.  Illegal Mining  There has been a  significant  increase in illegal gold mining in Ghana over the past two years  which has  impacted  most of the gold  producers  in the country including us. This trend is raising concern about property rights, environmental degradation,  security and safety issues. Many of the major producers, including Golden Star,  have sought  government  assistance to find peaceful and equitable resolutions to these problems.  Most of the  illegal  mining  on our  properties  has  taken  place at  Prestea, particularly  toward the southern end of the Prestea  property.  Due to security concerns and our policy of avoiding unnecessary  confrontation,  we have limited access to many of the areas on our property  where illegal  mining is occurring. As a result we have not been able to update estimates made in the fourth quarter of 2004 of gold illegally  removed from our property.  In addition,  we have not been able to carry out a comprehensive  survey of the environmental  degradation caused by the illegal miners, but aerial surveys indicate it is extensive and it includes improper disposal of waste,  mercury pollution from the mercury used by the illegal  miners to recover the gold,  deforestation  and possible  acid mine drainage.                                           60   In February 2005,  Ghana  government  authorities  resolved  formally,  with the support of the  Chamber of Mines and other  stakeholders,  that  illegal  mining would not be tolerated and accordingly  notice was given by the Ghana government to  illegal  miners  nationwide  that  they  were to cease  all  illegal  mining operations.  In particular,  the  government  singled out illegal miners who are operating on our Bogoso/Prestea property, and the government announced that they would  undertake  measures  using  government  security  agencies  to remove the illegal miners if they did not voluntarily depart. The notice given by the Ghana government has expired.  Separately,  the Ghanaian  Minister for Lands,  Forestry and Mines  commenced an initiative to simplify the process for persons to become  legitimate small scale miners and to identify suitable areas for legitimate small scale mining. Several areas,  which are outside our property  holdings,  have been  designated  by the Ghana  Minerals  Commission  for such  purposes.  The Ghana  government  and its agencies have also carried out  educational  programs for the illegal miners and the nearby communities relating to the negative social, health and environmental impacts of illegal  mining.  The program also seeks to make illegal miners aware of  the  government's  small  scale  mining  initiative  and  educates  them  on environmental and safety issues.  We, and most of the other gold mining  companies  working in Ghana,  are working closely with the Ghana  government to reduce  tensions in the area and to reduce the risk of an escalation  of the  situation  and possible  injury to people and damage to property.  Unfortunately,  the actions proposed by the government have caused unrest in the community at Prestea  resulting in a number of protests and demonstrations  during which  violence  has  occurred  and during which  illegal miners have entered our pits where they damaged property and removed ore.  RESULTS OF OPERATIONS  2005 Compared to 2004 - Summary  Summary - We  incurred a net loss of $(13.5)  million or  $(0.094)  per share on revenues  of $96.0  million  during  2005  versus net income of $2.6  million or $0.019 per share on revenues of $65.0 million  during 2004.  While gold revenues in 2005 were $29.0 million  higher than in 2004,  due mostly to production  from our new Wassa mine and from higher  realized gold prices,  operating  costs were $48.5 million higher, also due mostly to costs from Wassa and increased costs at Bogoso/Prestea.  The major  factors  contributing  to the $16.1 million swing in operating  results  include a $9.1  million  operating  loss at  Wassa,  a $10.0 million reduction in operating income at Bogoso/Prestea on lower gold production and  higher   operating   costs  and  a  $9.6   million   unrealized,   non-cash mark-to-market adjustment for the EURO derivatives.  In addition, a $2.3 million increase  in  interest  expense  and $1.4  million of  impairment  write offs of exploration  properties  were  partially  offset by a $4.3 million  reduction in corporate  development  costs,  a $1.7 million  increase in royalty income and a $1.0 million gain from sale of common shares by our subsidiary EURO. Recognition of a $6.4 million tax asset at EURO, the recognition of a $4.9 million tax asset related  to the 2006 sale of Moto  shares  and a $1.5  million  increase  in tax assets  at BGL  reduced  our net loss by $12.9  million.  Realized  gold  prices averaged  $446 per ounce  during  2005,  a 9%  increase  from the $410 per ounce realized in 2004.         SUMMARY OF FINANCIAL RESULTS                  2005              2004              2003 - ---------------------------------------------------------------------------------------------- Gold sold (oz)                               200,968           147,875           174,315 Average price realized ($/oz)                  446               410               364 Total revenues (in $ thousands)              95,465            65,029            64,370 Cash flow provided by operations              1,060            13,910            29,076 Net income/(loss) (in $ thousands)           (13,531)           2,642            21,956 Net income/(loss) per share - basic ($)      (0.094)            0.019             0.198 - ----------------------------------------------------------------------------------------------    Bogoso/Prestea  Operations - Bogoso/Prestea  generated $3.3 million of after-tax operating income during 2005 on sales of 131,898 ounces of gold, down from $13.3 million of after-tax  operating  income on sales of 147,875  ounces in 2004. The major factors  contributing  to 2005's lower  earnings were lower gold sales and increases in operating  costs.  Gold  production  was down 15,977 ounces in 2005 versus  2004 due to a  combination  of lower  plant  through-put  and lower gold recovery, both of which were caused by the metallurgical  characteristics of the deeper, harder non-refractory  sulfide Plant-North ores processed in 2005 versus the shallower and softer oxide and  non-refractory  sulfide ores milled in 2004. The first five months of 2004  benefited  from the oxide ores  processed in that period  which yield  higher mill  throughput  rates,  better  recovery and lower operating  costs  than  did  the  transition  and  non-refractory  sulfide  ores processed during 2005.  Processing of low grade stock pile material in September and October 2005, during the EPA's requested mining stoppage also contributed to the decrease in ounces of gold sold.                                           61         BOGOSO/PRESTEA                                ------------------------------------------------     OPERATING RESULTS               2005            2004            2003 - ------------------------------------------------------------------------------- Ore mined (t)                        1,646,276       1,411,243       2,001,905 Waste mined (t)                     10,740,550       8,065,915       6,791,926 Ore processed (t)                    1,557,881       1,650,412       2,093,600 Grade processed (g/t)                     4.14            4.09            3.29 Recovery (%)                              60.7            67.3            81.2 Gold sold (oz)                         131,898         147,875         174,315 Cash operating cost ($/oz)                 338             250             166 Royalties ($/oz)                            13              14              18 Total cash cost ($/oz)                     351             264             184 - -------------------------------------------------------------------------------   Mining  costs in 2005  increased  $6.2  million at  Bogoso/Prestea  versus 2004. Increases in fuel and labor  charges  accounted  for  approximately  half of the increase in costs. The balance of the increase was a combination of higher costs for  supplies  and  consumables  including  explosives,  ore haulage  contracts, drilling supplies, grinding balls, maintenance and tires.  The Bogoso  processing  plant processed an average of 4,268 tonnes per day at an average  grade of 4.14 grams per tonne,  as compared to 4,526  tonnes per day at 4.09 grams per tonne in the same period in 2004. Gold recovery  dropped to 60.7% in 2005 from 67.3% in 2004, the higher  recovery in 2004 a function of the oxide ore processed in the first half of 2004.  The lower gold output and higher mine operating  costs resulted in a significant increase in unit costs.  Cash  operating  costs averaged $338 per ounce in 2005, compared  to $250 per ounce in 2004,  and total  cash  costs  averaged  $351 per ounce, up from $264 per ounce in 2004.  Wassa Operations - The Wassa operating  results discussed below are for the nine month period  following  Wassa's  April 1, 2005  in-service  date.  There was no production from Wassa in 2003 and 2004.  Wassa generated a $9.1 million after-tax operating loss in the nine months ended December  31,  2005 on sales of 69,070  ounces  of gold.  Cash  operating  costs averaged $468 per ounce and total cash costs averaged $482 per ounce.  The Wassa processing  plant  processed  an average  of 9,789  tonnes per day at an average grade of 0.91 grams per tonne with a gold recovery of 88.7%.              WASSA                                ------------------------------------------------       OPERATING RESULTS             2005            2004            2003 - ------------------------------------------------------------------------------- Ore mined (t)                        2,059,777        -               - Waste mined (t)                      7,848,410        -               - Ore processed (t)                    2,691,923        -               - Grade processed (g/t)                     0.91        -               - Recovery (%)                              88.7        -               - Gold sold (oz)                          69,070        -               - Cash operating cost ($/oz)                 468        -               - Royalties ($/oz)                            14        -               - Total cash cost ($/oz)                     482        -               - - -------------------------------------------------------------------------------  Overall, Wassa's operating results were disappointing. We had anticipated higher mill through-put,  higher grades, and lower operating costs than those achieved. Operating  costs were  adversely  impacted early in the year by high power costs from our diesel fired,  on-site power plant. This was remedied by late June when Wassa was  connected to the national  power grid.  Mining costs were also higher than expected early in the year as we utilized  contract miners and used smaller than optimal,  rented mining equipment.  By the end of 2005 we had completed the acquisition  of our own  fleet of new  nominal  100  tonne  haulage  trucks  and hydraulic  loaders.  The lower power costs and more efficient  mining  equipment should contribute to lower costs during 2006.                                           62   Several  design  bottlenecks  were  discovered  at the  processing  plant during Wassa's  first nine  months of  operations  and certain  improvements  were made during  the year,  but at year end we were still  dealing  with  frequent  plant blockages mostly related to the high clay content of the weathered, near-surface ores mined and  processed in 2005. By the end of 2005 we had mined to sufficient depth in the pit to access  fresher ores which have lower clay content and which we expect will reduce some of the plant  blockage  problems in the future.  As a result we expect better mill throughput in 2006.  Finally, as we progress deeper into the fresh ore we expect the ore grades to  improve.  The higher  grades are also expected to help achieve higher gold recovery rates.  Derivatives - The $12.4 million in unrealized,  non-cash  mark-to-market  losses were mostly a result of the impact of higher gold prices on EURO's  forward gold price agreements (a loss of before tax of $9.6 million),  Golden Star's calls (a loss of $2.3  million),  and puts (a loss of $0.9  million.)  Our Euro  currency accounts lost $0.2 million.  A $1.1 million  mark-to-market  gain on the forward Rand  positions  partially  offset  the put,  call and EURO  losses.  EURO  also recognized a $0.5 million  reduction in royalty  revenues for cash payments made related to its derivative positions, such payments being related to increases in gold prices during the year.  Interest - The increase in interest expense is a function of increased  balances on equipment  financing loans, EURO's bank loans and interest on the $50 million of convertible notes sold during 2005. In addition to the interest expense shown on the  consolidated  statement  of  operations,  $1.8  million of interest  was capitalized as part of the Bogoso sulfide expansion project.  Other  revenues and costs - The  operating and  non-operating  losses and higher costs were partly offset by a $1.6 million  increase in royalty  income from the Rosebel royalty related to higher gold prices and increased  output from Cambior Inc.'s Rosebel mine. The increase in the royalty also reflects the fact that the Rosebel mine and its associated  royalty did not commence  production until near the end of the first quarter in 2004, yielding only a partial year of operations in 2004.  Corporate  development  charges  in 2005  were  down from 2004 when we incurred $4.5 million of expense in an unsuccessful merger attempt.  2004 Compared to 2003  Net income for 2004  totaled  $2.6  million or $0.019 per share on  revenues  of $65.0  million,  versus  net  income of $22.0  million  or  $0.198  per share on revenues of $64.4 million during 2003. Higher gold prices and ore grades in 2004 were more than offset by decreased gold  production,  higher costs per ounce and $4.5 million of corporate development expenses mostly related to an unsuccessful merger  attempt.  Recognition  of future  tax assets  added $1.5  million to net income in 2004 versus nil in the prior year.  Realized  gold prices  averaged $410 per ounce for the year, a 13% increase from the $364 per  ounce  realized  in 2003.  Gold  revenues  were  based on sales of 147,875  ounces,  a 15% decrease from 174,315  ounces in 2003. The change in ore type during 2004 was the major  factor  contributing  to the reduced gold output versus the prior year.  During 2003 we  processed  exclusively  oxide ores while during  most of  2004 we  processed  harder  and  more  complex  transition  and non-refractory sulfide ores which, due to the harder ore and complex metallurgy, resulted in lower gold  recovery  and lower  plant  throughput.  We  processed a mixture of oxide,  transition and non-refractory  sulfide ores in the first half of 2004 and a mixture of transition and  non-refractory  ores in the second half of the year.  Gold  recovery  averaged  73.6%  during the first half of 2004 but dropped to approximately  60.2% in the second half.  Plant  throughput  averaged 5,141 tonnes per day in the first half of the year but decreased to 3,884 tonnes per  day  in  the  second  half.   Unusually  high  rainfall  also  impeded  ore availability  and plant  efficiency in the third quarter by causing  flooding in the pit and wet ore handling problems at the processing plant.  As  anticipated,  operating  costs increased both in absolute terms and on a per unit basis at  Bogoso/Prestea  during 2004 due primarily to the harder nature of the  transition  and  non-refractory  sulfide ores  processed  after April 2004. Increases in fuel and electric power costs added  approximately  $1.5 million to operating costs during the year. Plant maintenance,  explosives, liner costs and grinding media costs all increased by a total of  approximately  $1.6 million as compared  to  2003.  The  harder  ore  required  increased  amounts  of  certain consumables  which increased costs by another $0.7 million.  We also experienced increased costs in other maintenance areas, labor,  community  assistance,  camp costs and other overhead areas. A reduction in  work-in-process  inventory and a $0.7 million provision for redundancies also contributed to the higher costs.  The lower gold output and higher mine operating  costs resulted in a significant increase in unit costs.  Cash operating costs averaged $250 per ounce,  compared to $166 per ounce in 2003, and total cash costs averaged $264 per ounce, up from $184 per ounce in 2003.                                           63   Depreciation  and  amortization  were  higher  than  in 2003  mostly  due to the amortization  costs of new  assets  added in late  2003 and in 2004  such as the flotation  plant at Bogoso.  Increases in corporate  general and  administrative costs  contributed to the lower income versus 2003.  Higher  compensation  costs relating to additional  administrative  personnel relative to 2003, increases in investor  relations costs,  higher insurance  costs,  Sarbanes-Oxley  compliance costs and an overall  higher  level of  corporate  activity  in  response to the growth  of  the  company  all   contributed  to  the  increase  in  general  and administrative costs.  A $1.5 million tax benefit was recorded  during 2004.  Recognition of a deferred tax asset was deemed  appropriate  at the end of 2004 in light of the  continued operating  profits at BGL. We have  substantial  tax assets in Canada and France mostly due to past losses, capital allowances and tax pools, but a tax valuation allowance  has been  provided  in an  amount  equal to net tax  assets  in these jurisdictions.  DEVELOPMENT PROJECTS  Bogoso Sulfide Expansion Project  Nearly 75% of the remaining ore reserves at  Bogoso/Prestea  are  refractory and cannot be processed at our existing  plant. We therefore made a decision in June 2005 to  construct  a new 3.5  million  tonne per annum  processing  facility at Bogoso alongside the existing  non-refractory  processing  plant. The new plant, which is currently  under  construction,  will utilize the  proprietary  BIOX(R) bio-oxidation  technology to treat the refractory sulfide ore. When completed in late 2006,  the new  sulfide  processing  plant and the  existing  CIL plant are together  expected  to  process a combined  5.0  million  tonnes  per year.  The existing  CIL mill will retain its current  configuration  and will  continue to process  non-refractory  ores during the  construction  phase of the new BIOX(R) plant.  After the new BIOX(R)  plant comes on line, it is  anticipated  that the existing  Bogoso CIL plant will process  mostly oxide ores and the BIOX(R) plant will process mostly refractory sulfide ores and mixed oxide-refractory ores. The two plants sitting side-by-side are expected to provide operational efficiencies since they will share common management,  labor, reagent inventories,  warehouse parts and  maintenance  efforts.  And with the two  plants  and their  differing technologies,  we should  be able to  effectively  process  all of the ore types known to exist in the Bogoso/Prestea area.  Construction  work is proceeding  within  schedule and budget.  Ordering of long lead-time items is substantially complete as is the detailed engineering design. Concrete work is well  progressed for all of the equipment.  The stainless steel BIOX(R)  reactor  tanks have been  erected  and  structural  steel  erection  is commencing.  Erection  of the CIL tanks is also  nearing  completion  which will allow  structural  steel  erection to also commence in this area. The electrical contractor  has mobilized and has commenced  work.  The crusher and new SAG mill were  shipped to Ghana in March and the ball mill is already on site and mounted on its pedestal.  The design and  construction  of the  expansion  project is being managed by GRD Minproc on an engineering,  procurement and construction  management basis. Work has  proceeded  under a letter of agreement  entered into in February 2005 and a definitive contract is expected to be finalized shortly.  During the first several years of its life, the new BIOX(R) plant is expected to process sulfide ores from pits on the Bogoso  property.  Pre-stripping at two of these sulfide pits is now underway  using new mining  equipment  acquired  since mid-2005.  The non-refractory plant will continue to process non-refractory ores from the  Plant-North  pit at Prestea  until  completion of mining in the fourth quarter of 2006.  Afterward we plan to feed the non-refractory  plant with oxide ores from  Pampe,  Mampon  and  various  areas on the  south end of the  Prestea property.  We  estimate  that the total  capital  cost of the new  sulfide  plant  project, including the expansion of the mining fleet, to be  approximately  $125 million, and  expect  construction  to be  completed  by  late  2006.  At the end of 2005 approximately $36.7 million of the total had been spent.  In 2007,  following  completion of the BIOX(R)  plant,  we expect  combined gold production from the two Bogoso plants to be  approximately  370,000 ounces at an average  cash  operating  cost of $330 per  ounce.  Based  on our  metallurgical testwork,  gold  recoveries from the BIOX(R) process are expected to average 86% and vary between 78% and 88%.  Prestea Underground  Underground   drilling  and  sampling  continued  during  2005  at  the  Prestea Underground resulting in an increase in the non-reserve inferred resource of 6.1 million  tonnes at an average grade of 8.14 grams per tonne.  By the end of 2005 dewatering efforts had provided access to some of the lowest levels of the old                                           64   workings  and new drills were  mobilized  underground  to start work on the deep levels where ore grade material was being  extracted when mining ceased in 2002. We intend to accelerate the underground drilling, especially at the lower levels during 2006 and expect to have a much better  assessment of the potential of the underground potential by year-end 2006.  St. Jude Properties  We have budgeted  approximately  $4.6 million of exploration work during 2006 on the St. Jude Properties  including the evaluation of several previously untested areas on the St. Jude Properties. If our exploration, testing and studies verify St. Jude's earlier  exploration  results we would anticipate  releasing  Mineral Reserve numbers for the St. Jude Properties during 2006.  EXPLORATION PROJECTS  Total  expenditures on exploration  activities in 2005 were $17.1 million,  down slightly  from  $18.2  million  in 2004.  During  2006 we plan to  continue  our exploration efforts to identify  exploration  opportunities and new resources in Africa,  South America and elsewhere.  The main exploration focus in 2005 was to increase  the level of  confidence  in our  resources  and  reserves  around our existing mining operations at Bogoso-Prestea and Wassa, and to use our knowledge of the  regional  geology of southwest  Ghana and adjacent  areas to acquire and explore  properties  that  provide  significant   synergies  with  our  existing operations.  Exploration in Ghana  During  2005 our  exploration  in  Ghana  focused  on  converting  resources  to reserves,  and  defining  mineralization  that could be  economically  processed through  our  existing  facilities  at Bogoso and Wassa.  The Ghana  exploration activities totaled  approximately  $13.4 million and accounted for approximately 78% of our 2005 exploration spending including:  o    Drilling  of  refractory  sulfide  mineralization  at Chujah  and Dumasi at      Bogoso, which converted a substantial proportion of the previously inferred      and  indicated  resources to reserves.  These  reserves  will  underpin the      Bogoso sulfide expansion project currently nearing completion.  o    Drilling  around  the  South  Akyempim  zone  at  Wassa,  which  delineated      significant new zones of  mineralization  at higher grades and provided the      basis for most of the 16% net increase in reserves at Wassa.  o    Drilling at Pampe on the  Akropong  Trend west of Bogoso,  which  defined a      modest  non-refractory  resource which potentially can be processed through      the Bogoso oxide circuit commencing in late 2006 and in 2007.  o    Drilling at Mampon, which increased the confidence in the reserves there in      preparation for permitting for mining in 2007 and 2008.  Only limited  drilling of oxide  targets was  undertaken  during 2005,  with the emphasis on increasing  sulfide  reserves to support  Bogoso  sulfide  expansion project.  Exploration Elsewhere in Africa  Exploration  continued  on our Mano River joint  venture in Sierra  Leone,  with regional soil sampling  programs  revealing major new zones of gold anomalism on the Pampana and Sonfon properties.  In 2006 we plan to more closely define these anomalies with further soil sampling prior to drilling.  In early 2005 we entered  into an option to purchase  the 2012 square  kilometer Afema property in southeast Cote d'Ivoire.  This property lies within extensions of the  prolific  Birimian  Sefwi Belt,  which in Ghana hosts the  multi-million ounce Ahafo,  Bibiani and Chirano  deposits.  Initial  exploration  has revealed extensive  new  gold-in-soil   anomalies  that  will  be  a  focus  for  further exploration in 2006.  Following  disappointing  results from the Mininko joint  venture in Mali,  this project was dropped in the first quarter of 2005.                                           65   Exploration on the Guiana Shield  Due to similarities in the geology and ages of the rocks, we consider the Guiana Shield in the northeast corner of South America as a geological extension of the West  African  shield  where our Ghanaian  properties  are located.  Following a restructuring  of  our  holdings  on the  Guiana  Shield  during  2004  we  have revitalized  our  exploration  there,  with an  emphasis  on our  properties  in Suriname and French Guiana.  In Suriname we completed a limited diamond core drilling program at Saramacca to test a  previously  identified 5 kilometer  long  gold-in-soil  anomaly,  termed Anomaly M. This drilling  returned  encouraging  results from a number of holes, and in 2006 we plan to follow up the initial  relatively shallow drilling with a second phase of core drilling to test the mineralization at greater depths.  In French Guiana we completed  broad-spaced  first-pass soil sampling on the Bon Espoir property,  targeting a major mineralized shear zone. Initial results have not  been  encouraging  but  have  highlighted  the  regional  potential  of the structure for future work.  2006 Opportunities  We have budgeted $16.5 million for  exploration in 2006, and intend to focus our efforts on core assets in Ghana, including the newly acquired St Jude Properties at Hwini-Butre and Benso. Key areas where we plan to be active include:  o    Mineralized areas around the operating mines;  o    Prestea  Underground,  where  we  have  intensified  exploration  to  allow      feasibility (upper levels) and scoping studies (deep levels) to commence in      early 2007;  o    Prestea South - Bondaye area, where we plan to resume drilling of the known      oxide targets to allow  feasibility  and  permitting to be completed by end      2006;  o    Hwini-Butre and Benso,  where intensive drilling programs are planned to be      undertaken to allow feasibility and permitting by the end of 2006.  By the end of 2005,  dewatering  efforts at the Prestea  Underground had cleared the lowest sections of the old underground workings and an extensive underground drilling  program has been initiated  which will continue during most of 2006 to test areas immediately  below the deepest old workings.  We believe these deeper levels provide the best  opportunities  for  significant  new discoveries in the Prestea  Underground.  We intend to complete an initial feasibility study by the end of 2006 evaluating the economic potential of restarting  production from the Prestea Underground mine.  Other opportunities include:  o    Saramacca Anomaly M in Suriname, where we plan to follow up the encouraging      2005 drilling;  o    Cote d'Ivoire and Sierra  Leone,  where we plan to advance our interests to      key decision points;   LIQUIDITY AND CAPITAL RESOURCES  Operations  generated  $1.1  million of cash during the year.  This  compares to $13.9  million of cash  generated by  operations  in 2004.  Lower gold output at Bogoso/Prestea and higher than expected  operating costs at both  Bogoso/Prestea and Wassa contributed to the decrease in cash flow from operations.  Financing  activities  provided  $143.3  million  of cash  in  2005.  New  debt, including equipment financing loans,  convertible notes and bank loans accounted for  $71.2  million  of the  total  and an  equity  offering  in  December  2005 contributed  $71.7 million after issuance  costs.  Option and warrant  exercises yielded $1.4 million of cash during 2005.                                           66   Capital assets and capital projects including deferred  exploration,  new mining equipment  and our major  development  projects used $110.8  million  during the year. Approximately $36.7 million was spent on the Bogoso sulfide project during 2005  including  construction  costs of the new  sulfide  plant  and  additional sulfide  development  drilling in and around the sulfide pits at Bogoso. A total of $36.3  million  was spent on plant and  equipment  needs with  completion  of construction of the new plant at Wassa, new mining equipment at Wassa and Bogoso and development  drilling in and around Wassa and Bogoso/Prestea being the major items  making up the total.  A total of $6.0  million  was spent on  exploration projects outside the Wassa and Bogoso/Prestea operation areas.  Our cash and cash  equivalent  balance  stood at $89.7  million at December  31, 2005, up from $51.7  million at the end of 2004.  At December 31, 2005,  working capital was $90.0 million, versus $61.3 million at the end of 2004.  Liquidity Outlook  Capital expenditure plans for 2006 include the following projects:                                                               Amount Capital Spending                                           (millions) - ---------------------------------------------------------------------- Development - ---------------------------------------------------------------------- Bogoso Expansion Project                                       $ 89.0 - ---------------------------------------------------------------------- Bogoso/Prestea pre-stripping and inventory build up              25.0 - ---------------------------------------------------------------------- Pampe                                                             4.0 - ---------------------------------------------------------------------- Mampon                                                            1.2 - ---------------------------------------------------------------------- St. Jude properties                                               1.0 - ----------------------------------------------------------------------  - ---------------------------------------------------------------------- Sustaining Capital - ---------------------------------------------------------------------- Bogoso/Prestea                                                    7.0 - ---------------------------------------------------------------------- Prestea Underground care and maintenance                          4.8 - ---------------------------------------------------------------------- Wassa                                                             6.2 - ----------------------------------------------------------------------  - ---------------------------------------------------------------------- Exploration - ---------------------------------------------------------------------- Bogoso/Prestea                                                    1.7 - ---------------------------------------------------------------------- Prestea Underground                                               3.3 - ---------------------------------------------------------------------- Wassa                                                             0.9 - ---------------------------------------------------------------------- St. Jude properties                                               4.6 - ---------------------------------------------------------------------- Other                                                             6.3 - ----------------------------------------------------------------------  - ---------------------------------------------------------------------- Total                                                          $155.0 - ----------------------------------------------------------------------  Approximately 80% of the expected Bogoso expansion project spending is scheduled in the first half of 2006.  And 90% of all capital  spending is scheduled in the first three quarters of 2006.  Cash on hand stood at $89.7 million at December 31, 2005. At current gold prices (approximately  $550 per  ounce)  we  expect  both  Bogoso/Prestea  and Wassa to generate positive operating cash flows in 2006, but this source of funding along with the $89.7  million  of cash at the start of 2006,  will not meet all of our growth needs.  In March 2006, we exercised the remaining Moto warrants  bringing our total Moto  ownership  to six million  shares and  immediately  sold all the shares in a bought-deal  transaction in Canada for Cdn$7.50 per share.  The sale of the six million  shares  resulted in net  proceeds to Golden Star of Cdn$45.0 million ($38.9 million). We are currently negotiating with banks to set up a $30 million  revolving  line of credit  that  could be drawn on if we find that cash from  operations  and cash on hand,  including  proceeds from the Moto shares in March 2006, are not sufficient to meet our projected needs. We may also consider selling other  non-key  assets if necessary to complete our capital plans during 2006.  LOOKING AHEAD  Our main objectives for 2006 include:  o    completion  of  mining  and  commencement  of  reclamation  at the  Prestea      Plant-North pit;  o    permitting  and  commencement  of oxide  mining from Pampe on the  Akropong      trend west of Bogoso,  to provide  oxide ore to the Bogoso plant  following      exhaustion of the Prestea Plant-North ores;  o    commencement of sulfide mining at Bogoso;  o    completion  of  construction  and   commissioning  of  the  Bogoso  sulfide      expansion project by the end of 2006;                                           67   o    achievement of improved production rates and costs at Wassa;  o    a continued high level of exploration effort;  o    continued evaluation of the Prestea Underground potential;  o    assimilation and further exploration of the St. Jude Properties; and  o    continuation  of efforts to  identify  and  pursue  acquisition  and growth      opportunities in Ghana and elsewhere.  We expect gold production at Bogoso/Prestea  during 2006 to total  approximately 180,000 ounces at an average cash operating cost for the year of $330 per ounce. We  expect   production   in  the  first  quarter  to  be  20,000  ounces  at  a commensurately  higher cash operating cost reflecting scheduled lower throughput and grades in that  quarter.  Production  is the expected to increase  gradually through the second and third quarter,  and  significantly  in the fourth quarter when production from the new BIOX(R) facility is expected to commence.  We expect 2006 gold production at Wassa to total approximately 120,000 ounces at an average  cash  operating  cost of  approximately  $340 per  ounce.  We expect production  in the first  quarter of about 24,000  ounces and for  production to increase gradually throughout the remainder of the year as a result of improving throughput  and  increasing   grade.   Cash  operating   costs  should  decrease significantly after the first quarter due to a lower stripping ratio through the rest of the year and  should  improve  gradually  through  the  remaining  three quarters commensurately with the increasing grade and gold production profile.  As more fully  disclosed  in the Risk Factors  Item 1A above,  numerous  factors could cause our estimates and  expectations to be wrong or could lead to changes in our plans. Under any of these  circumstances,  the estimates  described above could change materially.  MINING IN GHANA  We regularly  monitor and evaluate the social and political  aspects of Ghana in particular  and of West  Africa in general to  apprise  ourselves  of the social situation and political risks that exist in the region. Ghana has benefited from an extended period of political  stability and a democratic  governmental system including orderly governmental  transitions via free elections. It is our belief that Ghana is committed to creating a stable political and economic  environment that will foster additional economic growth.  Ghana is endowed  with  abundant  mineral  resources  and is  actively  pursuing policies designed to support  expansion of its mineral industry.  Because of the political  stability and  supportive  policies,  several  international  mineral companies have initiated  exploration  and mining  activities in Ghana in recent years  and  we are  now  seeing  some  of  these  companies  making  significant investments in gold exploration and development.                                           68   It is our policy and our intent to be a responsible  corporate  citizen of Ghana and as such we have worked  diligently to establish  good working  relationships with both local and national governmental  authorities as well as with the local citizens in the areas adjacent to our operations.  Recently,  however,  we have  experienced  ongoing and  escalating  incidents of artisanal  miners  illegally  working on our  properties in Ghana.  While we are sympathetic to the economic needs of those engaged in this activity, such mining is  illegal,  unsafe  and  results  in  uncontrolled  environmental  damage.  In addition,   failure  to  discourage  illegal  mining  on  our  properties  could jeopardize  legal  title to our mineral  rights.  As such we have sought to stop this  activity  both by  dialogue  with the  government  and by  establishing  a security  presence.  The governmental  authorities in western Ghana are aware of the  illegal  mining  situation  and have been of  assistance  in our efforts to discourage such activity but more needs to be done.  SEASONALITY  Most of our operations are in tropical  climates which  experience  annual rainy seasons.  Typically mining  operations are not materially  affected by the rainy seasons in Ghana but unusually  high rainfall in the late summer of 2004 impeded mine production at Bogoso/Prestea and also interrupted  underground  drilling in the Prestea  Underground.  Exploration efforts in Ghana and in the Guiana Shield in South  America  are  generally  timed  to avoid  the  rainy  periods  to ease transportation logistics associated with wet roads and swollen rivers.  RELATED PARTY TRANSACTIONS  During 2005 we obtained  legal  services from a legal firm to which our Chairman is counsel.  Total value of all services purchased during 2005 was $1.2 million. Our Chairman did not  personally  perform any legal  services for us during 2005 nor did he  benefit  directly  or  indirectly  from  payments  for the  services performed by the firm.  During 2005, a corporation  controlled by Michael A. Terrell provided management services  (including  those of Mr.  Terrell)  to St.  Jude for which it was paid Cdn$250,000.  Mr.  Terrell  became a  director  of  Golden  Star  following  our acquisition of St. Jude in December.  CRITICAL ACCOUNTING POLICIES AND ESTIMATES  Our financial statements reflect the application of Cdn GAAP, which is different in certain  material  respects from US GAAP. The accounting  policies  reflected therein are generally those applied by similarly  situated  mining  companies in Canada.  Our  accounting  policies under Cdn GAAP are described in Note 1 to our consolidated financial statements.  Preparation  of  our  consolidated  financial  statements  requires  the  use of estimates  and  assumptions   that  can  affect  reported   amounts  of  assets, liabilities,  revenues  and  expenses.  Accounting  policies  relating  to asset impairments,  depreciation  and  amortization  of  mining  property,  plant  and equipment,  tax  assets and site  reclamation/closure  accruals  are  subject to estimates and  assumptions  regarding  reserves,  gold  recoveries,  future gold prices, future operating and reclamation costs and future mining activities.  Decisions to write off, or not to write off, all or a portion of our  investment in various properties,  especially exploration properties, subject to impairment analysis, are based on our judgment as to the actual value of the properties and are therefore subjective in most cases. We have written off substantially all of our pre-1999 investments in exploration properties based upon our assessments of the amounts recoverable from these properties. Additional exploration properties have been found to be impaired and were written off in 2005,  2004 and 2003.  We continue to retain title to certain  properties after  impairment  write-offs as future events and  discoveries may ultimately  prove that they have  significant value.  Listed  below are the  accounting  policies  and  estimates  that we believe are critical to our financial statements due to the degree of uncertainty  regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.  o    Ore  stockpiles:  Stockpiles  represent  coarse ore that has been extracted      from the mine and is  available  for  further  processing.  Stockpiles  are      measured by  estimating  the number of tonnes of ore added and removed from      the stockpile,  the number of contained ounces based on assay data, and the      estimated  recovery  percentage  based on the expected  processing  method.      Stockpiles  are valued  based on mining  costs  incurred up to the point of      stockpiling  the  ore  including  applicable  depreciation,  depletion  and      amortization relating to mining operations.  Costs are added to a stockpile      based on current  mining  costs and are removed at the average  mining cost      per tonne for  material  processed.  Stockpiles  are reduced as material is      removed and fed to the mill. A 10% adjustment of the stockpile value, based      on stockpile  levels in recent periods,  would change the carrying value of      the stockpile  inventory by approximately  $0.6 million and a 10% change in      operating costs would yield the same amount.                                           69   o    Impairment  Charges:  We  periodically  review and evaluate our  long-lived      assets for impairment when events or changes in circumstances  indicate the      related carrying amounts may not be recoverable from continued operation of      the asset.  An asset  impairment  is  considered to exist if the sum of all      estimated  future cash flows, on an undiscounted  basis,  are less than the      carrying  value of the  long-lived  asset.  The  determination  of expected      future cash flows requires  numerous  estimates about the future  including      gold prices,  operating costs,  gold recovery,  reclamation  spending,  ore      reserves and capital expenditures. A review of Bogoso/Prestea's and Wassa's      expected  future cash flows as of December 31, 2005 indicated that there is      no impairment.  o    Mining  properties:  Mine properties  recorded on our financial records are      amortized  using a  units-of-production  method  over  proven and  probable      reserves.  Reserve  estimates,  which serve as the  denominator in units of      production  amortization  calculations,  involve the exercise of subjective      judgment  and are based on  numerous  assumptions  about  future  operating      costs,  future  gold  prices,  continuity  of  mineralization,  future gold      recovery rates, spatial  configuration of gold deposits,  and other factors      that may prove to be  incorrect.  A 10%  adjustment  in estimated  reserves      could result in an approximately $1.6 million annual change in amortization      expense.  o    Tax Assets: Recognition of future tax assets requires an analysis of future      taxable  income  expectations  to evaluate the  probability  of  sufficient      future taxable income to utilize the accrued tax benefits. Determination of      expected  future  taxable  income  requires  numerous  estimates  of future      variable  including but not limited to, gold prices,  operating costs, gold      recovery, ore reserves, gold production, ore grades,  administrative costs,      tax rates, and potential changes in tax laws.  o    Asset retirement  obligation and reclamation  expenditures:  Accounting for      reclamation  obligations  requires  management  to make  estimates  at each      mining  operation of  reclamation  and closure  costs to be incurred in the      future  as  required  to  complete  the   reclamation   and   environmental      remediation work mandated by existing laws, regulations and customs. Actual      costs  incurred in future  periods  could  differ from  amounts  estimated.      Additionally,  future changes to environmental  laws and regulations  could      increase the extent of reclamation  and  remediation  work required.  Based      upon our current  situation,  we  estimate  that a 10%  increases  in total      future  reclamation and closure costs would result in an approximately $1.2      million increase in our asset retirement obligations.  RECENT ACCOUNTING PRONOUNCEMENTS  Section  3831 -  Non-Monetary  Transactions:  Issued in June 2005,  replaces the previous  recommendations of Section 3830 and establishes new guidelines for the evaluation and disclosure relating to non-monetary transactions.  Its provisions determine whether a non-monetary  transaction is to be measured at fair value or at book value.  This  section will be effective  for  non-monetary  transactions concluded in periods beginning on or after January 1, 2006.  Section 1530 -  Comprehensive  Income:  Introduces new  disclosure  requirements regarding comprehensive income and its components, as well as net income, in its financial  statements.  As a consequence,  certain  unrealized gains and losses, which would  otherwise  be excluded  from the  calculation  of net income and be assigned   directly  to  shareholders'   equity,   will  be  used  to  calculate comprehensive  income. This section will be effective for fiscal years beginning on or after  October 1, 2006.  We will  adopt this new  requirement  in our 2007 reporting.  Section 3855 - Financial  Instruments,  Recognition and Measurement:  Determines the time and  value at which a  financial  instrument  must be  recorded  in the balance  sheet.  In some  cases,  it may be  measured at fair value or, in other cases,  at cost.  The standard  also  provides for the manner in which gains and losses related to financial instruments are to be recorded. This section will be effective for interim  periods and fiscal years beginning on or after October 1, 2006. We will adopt this new requirement in our January 2007 reporting.  Section 3861 - Financial  Instruments - Disclosures and  Presentation:  Replaces Section  3860  "Financial  Instruments  -  Disclosure  and  Presentation",   and establishes   requirements   for   presentation   and  disclosure  of  financial instruments and non-financial derivatives.                                           70   Section 3865 - Hedges:  Provides  guidance for hedge  accounting when applied to certain derivatives that meet the definition of a hedge.  Application of Section 3865 to derivatives that qualify as hedges is optional, but once a derivative is classified  as a hedge,  the  provisions  of  Section  3865 are then  mandatory. Section  3865  replaces  AcG-13,   "Hedging  Relationships"  and  completes  the provisions of Section 1650, "Foreign Currency Translation", by addressing how to account for hedges and related  disclosure  of  information  requirements.  This section will be  effective  for fiscal  years  beginning on or after  October 1, 2006. We will adopt this new requirement in our January 2007 reporting.  OFF BALANCE SHEET ARRANGEMENTS  We have no off balance sheet arrangements.  TABLE OF CONTRACTUAL OBLIGATIONS                   Contractual Obligations                       Payment due by period (thousands)                                       ---------------------------------------------------------------       (as of December 31, 2005)          Total    Less than 1  1 to 3 years 3 to 5 years More than                                                        year                                  5 years - ----------------------------------------------------------------------------------------------------- Long term debt (1)                        $73,486       $6,855      $12,448      $54,183          $- - ----------------------------------------------------------------------------------------------------- Interest on long term debt                 15,869        5,057        9,418        1,394           - - ----------------------------------------------------------------------------------------------------- Operating lease obligations                   441          143          298            -           - - ----------------------------------------------------------------------------------------------------- Asset retirement obligations(2)            20,129        3,107        4,478        2,161      10,383 - ----------------------------------------------------------------------------------------------------- Total                                    $109,925      $15,162      $26,642      $57,738     $10,383 - -----------------------------------------------------------------------------------------------------             (1)  Includes  $50.0 million of  convertible  notes  maturing in 2009.                Golden  Star has the right to repay the $50.0  million in cash or                in common shares at the due date under certain circumstances. The                presentation shown above assumes payment is made in cash and also                assumes no  conversions  of the debt to common shares by the note                holders prior to the maturity date.            (2)  Other   long  term   liabilities   represent   asset   retirement                obligations.   Asset  retirement   obligations   include  several                estimates  about  future  reclamation  costs,  mining  schedules,                timing of the performance of reclamation work and the quantity of                ore reserves which in turn  determine the ultimate  closure date,                which in turn  impacts  the  discounted  amounts of future  asset                retirement  liabilities.  The discounted value of these projected                cash flows is recorded as "Asset  retirement  obligations" on the                balance  sheet of $11.4  million as of  December  31,  2005.  The                amounts shown above are  undiscounted  to show full expected cash                requirements.  OUTSTANDING SHARE DATA  This MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION includes information available to March 27, 2006. As of March 27, 2006 we had  outstanding  207,265,758  common  shares,  options to acquire  6,828,451 common shares, warrant to acquire 11,724,334 common shares and convertible notes which are convertible into 11,111,111 common shares.                                           71
Our  exposure to market  risk  includes,  but is not  limited to, the  following risks:  changes in interest rates on our investment  portfolio and debt, changes in foreign  currency  exchange rates,  commodity price  fluctuations  and equity price risk.  Interest Rate Risk  From  time to time we  invest  excess  cash  in  high  quality  short-term  debt instruments.  The rates received on such  investments may fluctuate with changes in economic  conditions.  As a result,  our investment  income may fall short of expectations during periods of lower interest rates. We estimate that, given the cash balances  expected  during 2006, a 1% change in interest rates would result in a $0.1 to $0.3 million change in annual interest income.  We have both fixed rate and variable rate debt. At December 31, 2005 we had $7.7 million of variable rate debt which carries an interest rate of LIBOR plus 2.5%. We estimate  that a 1% increase in the interest  rate on the variable  rate debt would result in a $0.1 million change in annual  interest  expense.  We have not entered into any  agreements  to hedge against  unfavorable  changes in interest rates, but may in the future actively manage our exposure to interest rate risk.  Foreign Currency Exchange Rate Risk  While our major  operating  units transact most of their business in US dollars, many purchases of labor,  operating  supplies and capital assets are denominated in Euros,  British pounds,  Australian dollars,  South African Rand and Ghanaian Cedis. As a result, currency exchange fluctuations may impact the costs incurred at our operations. Gold is sold throughout the world based principally on the US dollar  price,  but portions of our  operating  expenses and some of our capital purchases are incurred in currencies other than the US dollar.  The appreciation of non-US dollar currencies against the US dollar increases production costs and the cost of capital  assets in US dollar terms at mines located  outside the US, which  can  adversely  impact  our net  income  and cash  flows.  Conversely,  a depreciation of non-US dollar currencies usually decreases  production costs and capital asset purchases in US dollar terms.  The  value  of cash and  cash  equivalent  investments  denominated  in  foreign currencies also fluctuates with changes in currency exchange rates. Appreciation of  non-US  dollar  currencies  results  in a  foreign  currency  gain  on  such investments and a decrease in non-US dollar currencies results in a loss.  While in the past we have not  utilized  market risk  sensitive  instruments  to manage our exposure to foreign currency  exchange rates,  during 2005 we entered into forward purchase contracts for the South African Rand and the Euro to hedge expected  future  purchases  of  capital  assets  in  South  Africa  and  Europe associated  mostly  with the  Bogoso  sulfide  expansion  project.  We also hold portions of our cash reserves in non-US dollar currencies.  Commodity Price Risk  Gold is our primary product and, as a result, changes in the price of gold could significantly  affect our results of  operations  and cash flows.  According  to current estimates,  a $10 per ounce change in our average realized price of gold for 2006  would  result in a $2.5  million  to $3.0  million  change in  pre-tax earnings and cash flows.  During 2005, to reduce the risk of unfavorable  gold price  fluctuations  on our operating  cash flows  during  the  construction  period of the  Bogoso  sulfide expansion project, we purchased puts to lock in minimum gold prices for portions of our expected  gold sales in 2005,  2006 and 2007.  As of December 31, 2005 we have 187,500 put options  remaining  which establish an average minimum price of $405 per ounce on 187,500  ounces of expected  gold  production  spread  monthly through 2006 and early 2007.  We also sold calls  during  2005 to offset a portion of the costs of  purchasing the puts. At December 31, we had 65,000 call options  remaining  which expire in 2006 and early 2007, each carrying a strike price of $525 per ounce.  Since the Rosebel Royalty revenues  received by EURO fluctuate with gold prices, EURO's loan  agreements  required that EURO enter into a series of  cash-settled forward gold price agreements with the lender designed to eliminate a portion of the  potential  impact of gold price  fluctuations  on expected  future  Rosebel royalty  revenues.  These  cash-settled  forward gold price  agreements meet the definition of a derivative.                                           72   During 2005, EURO and Golden Star reported their unaudited  quarterly  financial results  assuming hedge  accounting  could be used for the  derivatives,  but in completing  our  audited  consolidated  financial  statements  for 2005,  it was concluded that EURO's forward gold pricing derivatives did not qualify for hedge accounting under Cdn GAAP, AcG-13,  "Hedging  Relationships".  As a result, EURO and Golden Star will restate their unaudited financial  statements for the first three  quarters of 2005.  EURO and Golden Star will now be required to recognize mark-to-market valuations of EURO's forward gold pricing derivatives through the statements of  operations  at the end of each period,  which is likely to create large unrealized, non-cash losses if gold prices continue to rise. Since EURO is a majority-owned subsidiary, the impact of these changes flows through to Golden Star's  consolidated  financial  statements  in the same amounts and in the same periods as in EURO.  We are experiencing significant price increases in certain operating consumables including  fuel,  cyanide,  tires,  and  other  chemical  reagents  used  in our processing plants. Fuel prices have risen from $0.60 per liter in September 2004 to $0.85 in  September  2005 and we have  seen a 43%  increase  in the  price of cyanide.  The price paid for several other  consumables,  including truck tires, have risen 20% to 40% in the past 12 months.  Equity Price Risk  We have in the past and may in the future seek to acquire  additional funding by sale of common  shares.  Movements  in the price of our common  shares have been volatile in the past and may also be volatile in the future. As a result,  there is a risk that we may not be able to sell new  common  shares  at an  acceptable price should the need for new equity funding arise.                                           73       ITEM  8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                    Index to Consolidated Financial Statements of                            Golden Star Resources Ltd.  Auditors' Report..................................................................................... 75  Consolidated Balance Sheets as of December 31, 2005 and 2004......................................... 78  Consolidated Statements of Operations for the years ended          December 31, 2005, 2004 and 2003............................................................ 79  Consolidated Statement of Changes in Shareholders' Equity for the years ended          December 31, 2005, 2004 and 2003............................................................ 80  Consolidated Statements of Cash Flows for the years ended          December 31, 2005, 2004 and 2003 ........................................................... 81  Notes to the Consolidated Financial Statements....................................................... 82 - 106                                            74   INDEPENDENT AUDITORS' REPORT   To the Shareholders of Golden Star Resources Ltd.  We have  audited the  accompanying  consolidated  balance  sheets of Golden Star Resources  Ltd.  (the  "Company")  at December 31, 2005 and 2004 and the related consolidated  statements of operations,  shareholders' equity and cash flows for each of the three years in the period  ended  December  31,  2005.  We have also audited the  effectiveness  of the  Company's  internal  control over  financial reporting as at December 31, 2005 based on the criteria  established in Internal Control  --  Integrated   Framework   issued  by  the  Committee  of  Sponsoring Organizations  of the Treadway  Commission  (COSO) and  management's  assessment thereof  included in  Management's  Report on Internal  Control  Over  Financial Reporting.   The  Company's   management  is  responsible  for  these  financial statements,  for maintaining effective internal control over financial reporting and for its assessment of the  effectiveness  of internal control over financial reporting.  Our  responsibility  is to express  an  opinion  on these  financial statements,  an  opinion  on  management's  assessment  and  an  opinion  on the effectiveness of the Company's  internal control over financial  reporting based on our audits.  A company's  internal control over financial  reporting is a process designed to provide reasonable  assurance  regarding the reliability of financial  reporting and the preparation of financial  statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial  reporting  includes those policies and procedures that (1) pertain to the  maintenance  of records that, in reasonable  detail,  accurately and fairly reflect the  transactions  and  dispositions  of the assets of the company;  (2) provide  reasonable  assurance  that  transactions  are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting  principles,  and that receipts and  expenditures  of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of  unauthorized  acquisition,  use, or  disposition  of the company's assets that could have a material effect on the financial statements.  Because of its inherent  limitations,  internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate  because of changes in  conditions,  or that the degree of compliance with the policies or procedures may deteriorate.                                           75   We conducted our audits of the Company's financial statements in accordance with Canadian  generally  accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain  reasonable  assurance  about whether the financial  statements are free of material  misstatement.  An audit of financial statements includes examining,  on a test basis, evidence supporting the amounts and disclosures in the financial  statements.  A financial  statement audit also includes assessing the accounting principles used and significant estimates made by management,  and evaluating the overall financial statement presentation.  We conducted our audit of the effectiveness of the Company's  internal control over financial  reporting and management's  assessment thereof in accordance with the standards of the Public  Company  Accounting  Oversight  Board (United  States). Those standards  require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial  reporting was maintained  in  all  material   respects.   Our  audit  included   obtaining  an understanding   of  internal  control  over  financial   reporting,   evaluating management's  assessment,  testing  and  evaluating  the  design  and  operating effectiveness  of internal  control and performing  such other  procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.  A  material  weakness  is  a  control  deficiency,  or  combination  of  control deficiencies,  that  results  in more than a remote  likelihood  that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management's assessment identified the following material weakness: As of December 31, 2005, management did not maintain effective controls over the presentation and documentation of certain derivatives. Specifically, the Company did not prepare and maintain sufficient documentation to support the designation and effectiveness of hedges of certain gold future contracts entered into by its subsidiary,  EURO Ressources S.A., during 2005. This control deficiency resulted in the requirement for the restatement of the Company's  consolidated  financial statements  for the quarters  ended March 31, June 30 and September 30, 2005 and an audit adjustment to the 2005 annual  consolidated  financial  statements.  In addition,  this control  deficiency could result in a misstatement of derivative related  accounts   including  fair  value  of  derivatives  and  mark-to-market adjustments  that would  result in a  material  misstatement  of the  interim or annual  consolidated  financial  statements  that  would  not  be  prevented  or detected.  Accordingly,  management has concluded  that this control  deficiency constitutes  a material  weakness.  This  material  weakness was  considered  in determining the nature,  timing,  and extent of audit tests applied in our audit of the 2005  consolidated  financial  statements,  and our opinion regarding the effectiveness of the Company's  internal  control over financial  reporting does not affect our opinion on those consolidated financial statements.                                          76   As  described  in  Management's   Report  on  Internal  Control  Over  Financial Reporting,  management  has excluded St. Jude Resources Ltd. from its assessment of internal control over financial  reporting as of December 31, 2005 because it was acquired by the Company in a purchase  business  combination on December 21, 2005.  For this reason,  we have also excluded St. Jude  Resources Ltd. from our audit of internal control over financial reporting. St. Jude Resources Ltd. is a wholly-owned  subsidiary  whose  total  assets  represent  28% of the  Company's consolidated assets as of December 31, 2005.  In our opinion, the consolidated  financial statements referred to above present fairly, in all material  respects,  the financial  position of the Company as of December 31, 2005 and 2004 and the results of its  operations and its cash flows for each of the three years in the period ended  December 31, 2005 in accordance with Canadian generally accepted accounting principles.  In our  opinion,  management's  assessment  that the  Company  did not  maintain effective  internal control over financial  reporting as of December 31, 2005 is fairly  stated,  in all  material  respects,  based on criteria  established  in Internal Control -- Integrated Framework issued by the COSO.  In our opinion,  because of the effect of the material weakness  described above on the  achievement  of the  objectives  of the  control  criteria,  Golden Star Resources  Ltd. has not  maintained  effective  internal  control over financial reporting  as of December  31, 2005 based on  criteria  established  in Internal Control -- Integrated Framework issued by the COSO.   /s/ PricewaterhouseCoopers LLP ................................ Chartered Accountants Calgary, Alberta, Canada March 27, 2006                                             77                           GOLDEN STAR RESOURCES LTD.                   CONSOLIDATED BALANCE SHEETS   (Stated in thousands of US dollars except shares issued and outstanding) - --------------------------------------------------------------------------------------------------------                                                                                  As of December 31,                                                                              2005                  2004 - -------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS    Cash and cash equivalents                                              $89,709               $12,877    Short term investments (Note 2)                                              -                38,850    Accounts receivable                                                      6,560                 3,592    Inventories (Note 3)                                                    23,181                15,366    Due from sale of property (Note 4)                                           -                 1,000    Future tax assets (Note 19)                                              6,248                 1,542    Fair value of derivatives (Note 14)                                      1,220                     -    Deposits (Note 5)                                                        5,185                 5,102    Prepaids and other                                                         686                   517 - --------------------------------------------------------------------------------------------------------              Total Current Assets                                         132,789                78,846  RESTRICTED CASH (Note 16c)                                                  3,865                 3,351 LONG TERM INVESTMENTS (Note 6)                                              8,160                 5,528 DEFERRED EXPLORATION AND DEVELOPMENT COSTS (Notes 7 and 24)               167,532                 7,452 PROPERTY, PLANT AND EQUIPMENT (Note 8)                                     84,527                28,653 MINING PROPERTIES (Note 9)                                                118,088                74,197 CONSTRUCTION IN PROGRESS (Note 10)                                         36,707                51,159 DEFERRED STRIPPING (Note 11)                                                1,548                 1,357 LOAN ACQUISITION COSTS (Note 13)                                            1,020                     - FUTURE TAX ASSETS (Note 19)                                                 8,223                     - OTHER ASSETS                                                                2,144                 1,617 - --------------------------------------------------------------------------------------------------------                        Total Assets                                      $564,603              $252,160 ========================================================================================================  LIABILITIES CURRENT LIABILITIES    Accounts payable                                                        $9,093                $7,010    Other accrued liabilities                                               17,051                 9,203    Fair value of derivatives (Note 14)                                      4,709                     -    Asset retirement obligations                                             3,107                     -    Current debt (Note 12)                                                   6,855                 1,267 - --------------------------------------------------------------------------------------------------------              Total Current Liabilities                                     40,815                17,480  LONG TERM DEBT (Note 12)                                                   64,298                 1,707 ASSET RETIREMENT OBLIGATIONS  (Note 15)                                     8,286                 8,660 FAIR VALUE OF DERIVATIVES (Note 14)                                         7,263                     - FUTURE TAX LIABILITY  (Notes 19 and 24)                                    45,072                     - - --------------------------------------------------------------------------------------------------------                    Total Liabilities                                      165,734                27,847  MINORITY INTERESTS                                                          6,629                 6,353 COMMITMENTS AND CONTINGENCIES (Note 16)                                         -                     -  SHAREHOLDERS' EQUITY SHARE CAPITAL    First preferred shares, without par value, unlimited shares     authorized. No shares issued.                                               -                     -    Common shares, without par value, unlimited shares authorized.     Shares issued and outstanding:     205,954,582 at December 31, 2005; 142,244,112 at December 31, 2004                                                                           522,510               340,888 CONTRIBUTED SURPLUS                                                         6,978                 3,646 EQUITY COMPONENT OF CONVERTIBLE NOTES (Note 12c)                            2,857                     - DEFICIT                                                                  (140,105)             (126,574) - --------------------------------------------------------------------------------------------------------              Total Shareholders' Equity                                   392,240               217,960 - --------------------------------------------------------------------------------------------------------                        Total Liabilities and Shareholders'                         Equity                                           $564,603              $252,160 ======================================================================================================== The accompanying notes are an integral part of these consolidated financial statements.   By: /s/ David K. Fagin - Director                By: /s/ Peter J. Bradford - CEO    ------------------------------                   ----------------------------                                          78                                    GOLDEN STAR RESOURCES LTD.                       CONSOLIDATED STATEMENTS OF OPERATIONS           (Stated in thousands of US dollars except per share amounts)                                                                 For the years ended December 31,                                                            2005             2004            2003 - ------------------------------------------------------------------------------------------------------- REVENUE Gold sales                                                    $89,663          $60,690         $63,512 Royalty income                                                  4,178            3,049               - Interest and other                                              1,624            1,290             858 - -------------------------------------------------------------------------------------------------------          Total revenues                                        95,465           65,029          64,370 - -------------------------------------------------------------------------------------------------------  EXPENSES Mining operations                                              79,609           39,095          32,125 Depreciation, depletion and amortization                       15,983            8,096           4,993 Accretion of asset retirement obligations                         752              645             578 - -------------------------------------------------------------------------------------------------------          Total mine operating costs                            96,344           47,836          37,696  Exploration expense                                               951              895             594 Corporate general and administrative and options expense        8,631            8,197           5,556 Corporate development expense                                     248            4,504              10 Loss on equity investments                                        239              331               - Abandonments and impairments                                    1,403              470             175 Derivative mark-to-market adjustments                          11,820                -               - Interest expense                                                2,416              139              42 Gain on sale of marketable securities                               -                -          (1,905) Gain on subsidiary's sale of common shares                       (977)               -               - Foreign exchange (gain)/loss                                      574              280          (2,331) - -------------------------------------------------------------------------------------------------------          Total expenses                                       121,649           62,652          39,837 - -------------------------------------------------------------------------------------------------------                    Income/(loss) before minority interest     (26,184)           2,377          24,533 Minority interest                                                (277)          (1,277)         (2,577) - -------------------------------------------------------------------------------------------------------          Net income/(loss) before income tax                  (26,461)           1,100          21,956 Provision for future income taxes                              12,930            1,542               - - -------------------------------------------------------------------------------------------------------          Net income/(loss)                                   $(13,531)          $2,642         $21,956 =======================================================================================================  Net income/(loss) per common share - basic (Note 20)          $(0.094)          $0.019          $0.198 Net income/(loss) per common share - diluted (Note 20)        $(0.094)          $0.018          $0.186 Weighted average shares outstanding (millions of shares)        143.6            138.3           111.0 - ------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.                                            79                                   GOLDEN STAR RESOURCES LTD.            CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY        (Stated in thousands of United States dollars except share amounts) - ------------------------------------------------------------------------------------------------------                                                                                     Equity                                                                                    Component                                                                  Contributed         of                                      Number of                     Surplus        Convertible                                       Common          Share   --------------------                                       Shares         Capital   Warrants  Options  Debentures  Deficit - ------------------------------------------------------------------------------------------------------ Balance at December 31, 2002         87,400,702     $198,954     $2,085       $-         $- $(151,655) - ------------------------------------------------------------------------------------------------------ Shares issued                        33,030,000      107,598          -        -          -         - Issue costs                                   -       (6,455)         -        -          -         - Warrants issued                               -            -      1,780        -          -         - Warrants exercised                            -        1,504     (1,504)       -          -         - Options issued - net of forfeitures           -            -          -      955          -         - Shares issued under options           1,518,420        2,858          -        -          -         - Shares issued under warrants          8,167,956        8,595          -        -          -         - Stock bonus                              57,200          118          -        -          -         - Shares issued to acquire property     2,750,000       11,090          -        -          -         - Cumulative effect of change in  accounting method                            -            -          -        -          -       483 Net income                                    -            -          -        -          -    21,956 - ------------------------------------------------------------------------------------------------------ Balance at December 31, 2003        132,924,278      324,262      2,361      955          -  (129,216) - ------------------------------------------------------------------------------------------------------  Warrants exercised                            -          755       (755)       -          -         - Options issued - net of forfeitures           -            -          -    1,218          -         - Shares issued under options             767,180        1,239          -     (133)         -         - Shares issued under warrants          8,494,609       14,332          -        -          -         - Shares issued to acquire property        58,045          300          -        -          -         - Net income                                    -            -          -        -          -     2,642 - ------------------------------------------------------------------------------------------------------ Balance at December 31, 2004        142,244,112      340,888      1,606    2,040          -  (126,574) - ------------------------------------------------------------------------------------------------------  Shares issued                        31,589,600       75,864          -        -          -         - Issue costs                                   -       (4,168)         -        -          -         - Warrants issued                               -            -        992                   -         - Warrants exercised                            -           22        (22)       -          -         - Options issued - net of forfeitures           -            -          -    2,476          -         - Shares issued under options             312,940          722          -     (114)         -         - Shares issued under warrants            385,000          718          -        -          -         - Stock bonus                              45,342          166          -        -          -         - Shares issued to acquire property    31,377,588      108,298          -        -          -         - Equity Component of Convertible  Debentures                                   -            -          -        -      2,857         - Net loss                                      -            -          -        -          -   (13,531) - ------------------------------------------------------------------------------------------------------ Balance at December 31, 2005        205,954,582     $522,510     $2,576   $4,402     $2,857 $(140,105) - ------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these consolidated financial statements.                                            80                                   GOLDEN STAR RESOURCES LTD.                       CONSOLIDATED STATEMENTS OF CASH FLOWS                        (Stated in thousands of US dollars)  - ------------------------------------------------------------------------------------------------------------                                                                      For the years ended December 31, - ------------------------------------------------------------------------------------------------------------                                                                         2005           2004            2003 - ------------------------------------------------------------------------------------------------------------  OPERATING ACTIVITIES: Net income/(loss)                                                   $(13,531)        $2,642         $21,956  Reconciliation of net income to net cash provided by operating  activities: Depreciation, depletion and amortization                              16,042          8,096           4,993 Amortization of loan acquisition costs                                   228              -               - Stock based compensation                                               1,007          1,386           1,085 Deferred stripping                                                      (191)        (1,357)              - Loss on equity investment                                                239            331               - Abandonment and impairment of mineral properties                       1,413            470             175 Sale of common shares by subsidiary                                     (977)             -               - Fair value of derivatives                                             10,752              -               - Provision for future income tax                                      (12,930)        (1,542) Accretion of asset retirement obligations                                752            645             578 Cash used for reclamation                                               (691)          (730)           (841) Accretion of convertible debt                                            523              -               - Minority interests                                                       277          1,277           2,577 - ------------------------------------------------------------------------------------------------------------                                                                        2,913         11,218          30,523 Changes in assets and liabilities: Accounts receivable                                                   (2,853)        (2,802)          1,187 Inventories                                                           (7,815)        (2,705)         (4,240) Deposits                                                                 163              -               - Marketable securities                                                      -              -             906 Accounts payable and accrued liabilities                               8,817          8,204             690 Other                                                                   (165)            (5)             10 - ------------------------------------------------------------------------------------------------------------                     Net cash provided by operating activities          1,060         13,910          29,076 - ------------------------------------------------------------------------------------------------------------  INVESTING ACTIVITIES:  Expenditures on deferred exploration and development                  (5,954)        (5,260)         (4,539) Expenditures on mining properties                                    (26,631)       (18,302)        (29,950) Expenditures on property, plant and equipment                        (36,321)       (12,286)        (10,691) Expenditures on construction in progress                             (35,530)       (23,783)        (22,833) Sale of property                                                       1,000          1,000           1,000 Change in payable on capital expenditures                                434              -               - Short term investments                                                38,850        (38,850)              - Long term investments                                                 (2,871)        (4,971)           (888) Deposits                                                                (246)        (5,102)              - Other                                                                   (220)          (894)           (139) - ------------------------------------------------------------------------------------------------------------                     Net cash used in investing activities            (67,489)      (108,448)        (68,040) - ------------------------------------------------------------------------------------------------------------  FINANCING ACTIVITIES: Issuance of share capital, net of issue costs                         73,132         15,270         113,408 Debt repayments (Note 13)                                             (3,678)          (153)         (5,289) Issuance of debt (Note 13)                                            71,334          2,328             799 Equity portion of convertible notes                                    2,857              -               - Other                                                                   (384)             -               - - ------------------------------------------------------------------------------------------------------------                     Net cash provided by financing activities        143,261         17,445         108,918 - ------------------------------------------------------------------------------------------------------------  Increase/(decrease) in cash and cash equivalents                      76,832        (77,093)         69,954 Cash and cash equivalents, beginning of period                        12,877         89,970          20,016 - ------------------------------------------------------------------------------------------------------------                     Cash and cash equivalents end of period          $89,709        $12,877         $89,970 - ------------------------------------------------------------------------------------------------------------ See Note 21 for supplemental cash flow information The accompanying notes are an integral part of these consolidated financial statements.                                           81                                   STAR RESOURCES LTD.                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS   (All amounts in tables are in thousands of US Dollars unless noted otherwise) - --------------------------------------------------------------------------------  1.       Summary of Significant Accounting Policies  Basis of Consolidation and the Preparation of Financial Statements  These  consolidated  financial  statements  are  prepared and reported in United States  ("US")  dollars and in accordance  with  generally  accepted  accounting principles in Canada  ("Canadian  GAAP") which differ in some respects from GAAP in the United States ("US GAAP").  These  differences in GAAP are quantified and explained in Note 28. The consolidated financial statements include the accounts of the Company and its majority  owned  subsidiaries  whether owned  directly or indirectly.  All  material  inter-company  balances and  transactions  have been eliminated.  Certain prior period comparative figures in the preceding  financial  statements and in the following  notes have been  reclassified to conform to current period presentation.  Fiscal Year  Our fiscal year runs from January 1 to December 31.  Use of Estimates  Preparation  of  our  consolidated   financial  statements  in  conformity  with generally accepted  accounting  principles requires management to make estimates and  assumptions  that can  affect  reported  amounts  of  assets,  liabilities, revenues and expenses. The more significant areas requiring the use of estimates include  asset   impairments,   stock  based   compensation,   depreciation  and amortization of assets,  and site reclamation and closure  accruals.  Accounting for these areas is subject to estimates and assumptions  regarding,  among other things,  gold reserves,  gold recoveries,  future gold prices,  future operating costs,  asset usage rates,  and future mining  activities.  Management bases its estimates on historical  experience  and on other  assumptions  we believe to be reasonable under the circumstances.  However, actual results may differ from our estimates.  Cash and Cash Equivalents  Cash and cash equivalents  include cash deposits,  in any currency,  residing in checking,  interest  bearing  checking  accounts,  money  market funds and sweep accounts.  Cash equivalents consist of highly liquid short term investments.  We consider all highly liquid marketable securities with maturities of less than 91 days at date of purchase to be cash  equivalents.  Our cash equivalents  consist mostly of US and Canadian government treasury bills and agency notes.  Short Term Investments  When cash is  invested  in  auction  rate  certificates,  which  are short  term positions in long term  investments,  such  investments  are deemed  "Short Term Investments"  and displayed as a current asset next to Cash and Cash Equivalents on the Consolidated balance Sheets.  Marketable Securities  Short term investments in publicly traded marketable  securities are recorded at the lower of cost or quoted market prices,  with  unrealized  losses included in income. The market value is based on the closing price at the end of the period, as reported on recognized securities exchanges.  Inventories  Inventories  classifications  include "stockpiled ore," "in-process  inventory," "finished goods  inventory" and "materials and supplies." All of our inventories are recorded at the lower of cost or market. The stated value of all inventories include  direct  production  costs and  attributable  overhead and  depreciation except for materials and supplies inventories.                                           82   Stockpiled ore  represents  coarse ore that has been extracted from the mine and is ready for further  processing.  Stockpile ore is measured by  estimating  the number of tonnes (via truck counts or by physical surveys) added or removed from the  stockpile,  the number of  contained  ounces  (based on assay data) and the estimated gold recovery  percentage.  Stockpiled ore value is based on the costs incurred  (including  depreciation and  amortization) in bringing the ore to the stockpile.  Costs are added to the  stockpiled ore based on current mining costs per tonne and are removed at the average cost per  recoverable  ounce of gold in the stockpile.  In-process  inventory represents material that is currently being treated in the processing  plants to extract  the  contained  gold and to  transform  it into a saleable product.  The amount of gold in the in-process  inventory is determined by assay and by measure of the quantities of the various gold-bearing  materials in the recovery  process.  The  in-process  gold is valued at the average of the beginning inventory and the cost of material fed into the processing stream plus in-process  conversion costs including applicable  depreciation and amortization related to the processing facilities.  Finished  goods  inventory is composed of saleable gold in the form of dore bars that have been poured but not yet delivered to the buyer. The bars are valued at the lower of total cost or market  value.  Included  in the total  costs are the direct  costs  of the  mining  and  processing  operations  as  well  as  direct overheads, amortization and depreciation.  Materials and supplies  inventories  consist mostly of equipment parts, fuel and lubricants and reagents  consumed in ore processing.  Materials and supplies are valued at the lower of average cost or replacement cost.  Reserve Quantities Used in Units-of-Production Amortization  Gold ounces contained in ore stockpiles  recognized in inventory balances on the balance   sheet   are   excluded   from   total   reserves   when    determining units-of-production amortization of mining property, asset retirement assets and other assets.  Exploration Costs  Exploration costs related to specific,  identifiable  properties,  including the cost  of  acquisition,   exploration  and  development,  are  capitalized  until viability  of the  exploration  property is  determined.  Exploration  costs not directly related to an identifiable property are expensed as incurred.  Management  periodically reviews, on a property-by-property  basis, the carrying value of such  properties  including the costs of  acquisition,  exploration and development incurred to date. A decision to abandon, reduce or expand a specific project is based upon many factors including general and specific assessments of contained or potential mineralized  materials,  potential reserves,  anticipated future mineral prices,  the anticipated costs of additional  exploration and, if warranted,  costs of potential future development and operational costs, and the expiration terms and ongoing expenses of maintaining leased mineral  properties. We do not set a  pre-determined  holding  period for  properties  with  unproven reserves;  however,  properties  which  have  not  demonstrated  suitable  metal concentrations  at the  conclusion of each phase of an  exploration  program are re-evaluated  to  determine  if future  exploration  is  warranted  and if their carrying values are appropriate.  If an  exploration  property is abandoned or it is determined  that its carrying value cannot be supported by future  production  or sale,  the related costs are charged against operations in the year of abandonment or determination of value. Any subsequent costs incurred for that property are expensed as incurred.  The accumulated  costs of mineral  properties are reclassed as mine property and depleted on a units-of-production basis at such time as production commences.  Impairment of Long-Lived Assets  We review and evaluate our  long-lived  assets for  impairment at least annually and also when events or changes in  circumstances  indicate the related carrying amounts may not be recoverable.  Asset  impairment is considered to exist if the total estimated  future cash flows, on an undiscounted  basis, are less than the carrying  amount of the  long-lived  asset.  An impairment  loss is measured and recorded based on discounted  estimated future cash flows. Future cash flows are based on estimated quantities of recoverable  minerals,  expected gold and other commodity prices  (considering  current and historical prices,  price trends and related factors),  production  levels and cash costs of production,  capital and reclamation costs, all based on detailed engineering life-of-mine plans.  The significant  assumptions  used in determining the future cash flows for each operating unit at December 31, 2005,  apart from production cost and capitalized expenditure  assumptions  unique to each  operation,  included a long-term  gold price of $556 per ounce plus future contango.  In estimating  future cash flows, assets are grouped at the lowest  levels for which there are  identifiable  cash flows that are largely independent of future cash flows from other asset groups.                                           83   With the exception of other mine-related  exploration  potential and exploration potential  in  areas  outside  of  the  immediate  mine-site,  all  assets  at a particular  operation are considered  together for purposes of estimating future cash flows. In the case of mineral interests  associated with other mine-related exploration  potential  and  exploration  potential  in  areas  outside  of  the immediate mine-site, cash flows and fair values are individually evaluated based primarily on recent exploration results.  Various  factors  could  impact our  ability to  achieve  forecasted  production schedules from proven and probable  reserves.  Additionally,  commodity  prices, capital  expenditure  requirements  and reclamation  costs could differ from the assumptions used in the cash flow models used to assess impairment.  The ability to achieve the estimated  quantities of  recoverable  minerals from  exploration stage  mineral  interests  involves  further  risks in addition to those factors applicable  to mineral  interests  where proven and probable  reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically.  Material  changes to any of these factors or assumptions  discussed  above could result in future impairment charges to operations.  Property, Plant, Equipment and Mine Development  Property,  plant  and  equipment  assets,   including,   machinery,   processing equipment,  mining  equipment,  mine site facilities,  vehicles and expenditures that  extend the life of such  assets are  recorded  at cost,  including  direct acquisition  costs.  Depreciation  for mobile  equipment and other assets having estimated lives shorter than the estimated life of the ore reserves, is computed using the straight-line method at rates calculated to depreciate the cost of the assets,  less their  anticipated  residual values,  if any, over their estimated useful lives.  Mineral  property  acquisition,  exploration and development  costs,  buildings, processing plants and other long-lived assets which have an estimated life equal to or greater than the estimated  life of the ore reserves,  are amortized  over the  life  of  the  reserves  of  the   associated   mining   property  using  a units-of-production  amortization method. The net book value of property,  plant and equipment assets at property locations is charged against income if the site is  abandoned  and it is  determined  that the  assets  cannot  be  economically transferred to another project or sold.  Deferred Stripping  We employ a deferred stripping accounting  convention to capitalize the costs of waste rock mined from one of our open pit mines  during  periods when waste rock is removed in amounts that exceed the  life-of-mine  average waste removal rate. The amount of stripping  costs to be capitalized in each period is calculated by determining the tonnes of waste moved in excess of the life-of-pit average strip ratio and valuing the excess tonnage of removed waste at the average mining cost per tonne  during the period.  Costs are  recovered  in periods  when the actual tonnes of waste  moved are less than what would  have been moved at the  average life-of-pit  rate,  such tonnes being valued at the rolling  average cost of the waste tonnage amounts capitalized.  The  capitalized  component  of  waste  rock  removal  costs  is  shown  on  our consolidated  balance sheets in the line item titled  "Deferred  Stripping." The cost impact is included in the  Statements of Operations in the line item titled "Mining operations."  Environmental Rehabilitation and Closure  In accordance with the  requirements of the CICA Handbook  Section 3110,  "Asset Retirement  Obligations"  environmental  reclamation and closure liabilities are recognized  at the time of  environmental  disturbance  in amounts  equal to the discounted  value  of  expected  future   reclamation  and  closure  costs.  The discounted cost of future reclamation and closure activities is capitalized into mine property and amortized over the life of the property.  The estimated future cash  costs of such  liabilities  are based  primarily  upon  environmental  and regulatory  requirements of the various  jurisdictions in which we operate. Cash expenditures  for  environmental  remediation and closure are netted against the accrual as incurred.  Foreign Currencies and Foreign Currency Translation  Our functional  currency is the US dollar.  Transaction  amounts  denominated in foreign  currencies are translated to US dollars at exchange rates prevailing at the  date  of the  transaction.  The  carrying  value  of  monetary  assets  and liabilities  is  translated  at the rate of exchange  prevailing  at the balance sheet  date.  Non-monetary  assets  are  translated  at the  rates  of  exchange prevailing when the assets were acquired or the liabilities assumed. Revenue and expense items are translated at the average rate of exchange  during the period. Translation gains or losses are included in net earnings for the period.                                           84   Canadian  currency in these financial  statements is denoted as "Cdn$," European Common Market currency is denoted as "Euro" or " (euro)," and Ghanaian  currency is denoted as "Cedi" or "Cedis."  Income and Mining Taxes  Income and mining taxes  comprise the provision (or recovery) for taxes actually paid or  payable  and for future  taxes.  Future  income  and  mining  taxes are computed  using the asset and liability  method whereby future income and mining tax  assets  and   liabilities  are  recognized  for  the  expected  future  tax consequences  attributable  to  temporary  differences  between the tax basis of assets and liabilities and their reported  amounts in the financial  statements. Future income and mining tax assets and  liabilities  are computed  using income tax rates in effect when the temporary  differences are expected to reverse. The effect on the  future tax  assets  and  liabilities  of a change in tax rates is recognized in the period of substantive  enactment.  The provision or relief for future taxes is based on the changes in future tax assets and liabilities during the period.  In  estimating  future  income and mining tax  assets,  a valuation allowance is determined to reduce the future tax assets to amounts that are more likely than not to be realized.  Net Income per Share  Basic  income per share is  calculated  by dividing  income  available to common shareholders by the weighted average number of common shares  outstanding during the period.  In periods with earnings the  calculation of diluted net income per common share uses the treasury  stock method to compute the dilutive  effects of stock  options,  warrants and other  dilutive  instruments.  In periods of loss, diluted net income per share is equal to basic income per share.  Revenue Recognition  Revenue from the sale of gold is recognized when title and the risk of ownership pass to the buyer.  Title and risk of  ownership  pass to the buyer when dore is delivered  into the buyer's  custody.  Our gold is sold to a South  African gold refinery and revenue is recognized  when title is transferred to the customer at the  refinery.  The sales  price is based on the London  P.M.  fix on the day of delivery.  Credits from by-products are credited  against  operating costs and not included in  revenues.  By-product  costs have been de  minimis  to date at our  existing properties.  Stock Based Compensation  In accordance with the requirements of CICA Handbook Section 3870,  "Stock Based Compensation  and other  Stock-based  Payments"  we use the fair value method to expense the fair value of options  granted to employees and directors.  The fair value of options  granted  is  established  at the date of the grant,  using the Black-Scholes  option-pricing  model.  Compensation  expense  for  options  with immediate vesting is recognized in the period of the grant. Compensation expense for options with graded  vesting is recognized on a straight line basis over the vesting periods.  Derivatives and Hedges  We utilize  forward foreign  exchange and commodity price  derivatives to manage exposure to fluctuations in foreign currency  exchange rates and gold prices. We do not employ  derivative  financial  instruments  for  trading  purposes or for speculative purposes.  Derivative  instruments that do not qualify as a hedge under AcG-13,  or are not designated  as a hedge,  are  recorded on the  balance  sheet at fair value with changes in fair value  recognized  in  earnings  at the end of each period in an account titled mark-to-market adjustments.  When financial  instruments are designated as hedges,  we formally  document the relationships  between the hedge instrument and the hedged items, as well as the risk management  objectives and strategy for undertaking the hedge  transaction. The effectiveness of the hedging relationship is also documented.  The gains and losses on derivative  instruments designated as hedges are not recognized on the balance  sheet and gains and losses are  recognized in income in the period when the  instrument is settled.  We did not utilize hedge  accounting for any of our derivatives in 2005.                                           85   Reclassifications  For comparative  purposes,  certain prior year amounts have been reclassified to conform to the current year presentation.  Recent Accounting Pronouncements  Section 3831 -  Non-Monetary  Transactions  Section  3831,  issued in June 2005, replaces  the  previous  recommendations  of Section  3830 and  establishes  new guidelines  for  the  evaluation   and  disclosure   relating  to   non-monetary transactions.  Its provisions determine whether a non-monetary transaction is to be measured at fair value or at book value.  This section will be effective  for non-monetary  transactions concluded in periods beginning on or after January 1, 2006.  Section 1530 -  Comprehensive  Income / This Section  introduces  new disclosure requirements regarding  comprehensive income and its components,  as well as net income, in its financial statements. As a consequence,  certain unrealized gains and losses, which would otherwise be excluded from the calculation of net income and be assigned  directly to  shareholders'  equity,  will be used to  calculate comprehensive  income. This section will be effective for fiscal years beginning on or after October 1, 2006. We will adopt this new  requirement  in our January 2007 reporting.  Section 3855 - Financial  Instruments - Recognition and Measurement Section 3855 determines the time and value at which a financial  instrument  must be recorded in the balance  sheet.  In some  cases,  it may be measured at fair value or, in other cases,  at cost.  The standard also provides for the manner in which gains and losses  related to financial  instruments  are to be recorded.  This section will be effective  for interim  periods and fiscal  years  beginning on or after October  1,  2006.  We will  adopt  this new  requirement  in our  January  2007 reporting.  Section 3865 - Hedges - Section 3865 provides guidance for hedge accounting when applied to certain derivatives that meet the definition of a hedge.  Application of Section 3865 to derivatives that qualify as a hedges is optional,  but once a derivative  is classified  as a hedge,  the  provisions of Section 3865 are then mandatory.  Section 3865 replaces AcG-13,  "Hedging Relationships" and completes the provisions of Section 1650,  "Foreign Currency  Translation",  by addressing how to account for hedges and related  disclosure of  information  requirements. This section will be effective for fiscal years beginning on or after October 1, 2006. We will adopt this new requirement in our January 2007 reporting.  Section 3861 - Financial  Instruments - Disclosure and Presentation Section 3861 replaces Section 3860,  "Financial  Instruments - Disclosure and  Presentation", and establishes the  requirements  for  presentation and disclosure of financial instruments and non-financial derivatives.  EIC-160 - Stripping Costs Incurred in the Production Phase of a Mining Operation - - In response to an EITF issued in the US in  mid-2005  which  prohibits  use of deferred  stripping  accounting during the production phase, the Emerging Issues Committee  ("EIC") in Canada issued a "Draft Abstract of Issue Discussed" titled "D56 Accounting for Stripping Costs in the Mining Industry" which concluded that deferred  stripping  could be retained  as an  acceptable  accounting  method in Canada under certain circumstances. In late 2005 the EIC issued further guidance in  EIC-160  "Stripping  Costs  Incurred  in the  Production  Phase  of a Mining Operation".  EIC-160  concluded  that  "stripping  costs should be accounted for according  to the benefit  received by the entity.  Generally,  stripping  costs should be accounted for as variable  production costs that should be included in the costs of the inventory  produced (that is, extracted) during the period that the stripping costs are incurred.  However stripping costs should be capitalized of the  stripping  activity can be shown to  represent a betterment  the mineral property.  The EIC also concluded that  "capitalized  stripping  costs should be amortized in a rational and  systematic  manner over the reserves  that directly benefit  from the  specific  activity.  In the  mining  industry,  the  units of production is generally the  appropriate  method." The EIC went on to state that capitalized  stripping  costs should  appear in the statement of cash flow as an investing  activity.  Provisions of EIC-160 are  applicable  to years  beginning after July 1, 2006.  2.       Short Term Investments  Short  term  investments  are  comprised  of funds  invested  in AA or AAA rated Auction Rate  Certificates.  The  certificates  are short term positions in long term securities. The interest rate received is reset every 7, 28 or 35 days, and the certificates can be liquidated for cash at each interest reset date.                                           86   3.       Inventories                                              As of                                          December 31,                            ----------------------------------------                                   2005                2004 - ------------------------------------------------------------------- Stockpiled ore                          $5,753              $3,659 In-process                               3,106               2,858 Materials and supplies                  14,322               8,849 - ------------------------------------------------------------------- Total inventories                      $23,181             $15,366 - -------------------------------------------------------------------   There were  approximately  16,000 and 15,400  recoverable  ounces of gold in ore stockpile  inventories at December 31, 2005 and 2004 respectively.  These ounces contained  in ore  stockpile  inventories  are  included  in ore  reserves.  The stockpile inventories are for the most part short-term surge piles which will be processed in the next 12 months or less.  4.       Due from Sale of Property  In late 2001 we sold our interest in the Rosebel  exploration  property in South America to Cambior  Inc.  ("Cambior").  In  addition to a $5.0  million  payment received at closing in 2002,  terms of the sale agreement  provided that Cambior would make three deferred payments of $1.0 million each plus Price Participation Right (royalty)  payments on the first seven million ounces of gold  production. The deferred payments were received in the first quarters of 2003, 2004 and 2005 respectively.  5.       Deposits  Represents cash advances for equipment, and materials purchases at WGL and BGL.  6.       Long Term Investments  We hold a 19% interest in Goldmin  Consolidated  Holdings, a privately held gold exploration company with a focus on South America.  The investment is carried on an equity  investment basis at $1.2 million,  and we recognized $0.2 million and $0.3 million of equity losses in 2004 and 2005, respectively.  As of December 31, 2005 we also held approximately 11% of the outstanding common shares of Moto Goldmines  Limited  ("Moto"),  a gold exploration and development company  publicly  traded  in  Canada,  with a  focus  on gold  exploration  and development  in the  Democratic  Republic  of  Congo.  Our  investment  in  Moto increased  by $2.9  million  during 2005 to $7.0  million upon the exercise of a portion of our Moto warrants.  We also held 1.0 million additional Moto warrants which if exercised  would require the investment of an additional  $2.25 million Australian  dollars.  The fair value of our  approximately 11% interest in Moto, based on the market price of its shares on December 31, 2005, was $15.1 million, which exceeded our cost basis by $8.1 million.  In March 2006 we exercised the remaining 1.0 million warrants bringing our total ownership to 6.0 million shares and  immediately  afterward sold all six million common shares in a bought-deal transaction in Canada for Cdn$7.50 per share. The sale of the six  million  shares  resulted  in net  proceeds  to Golden  Star of Cdn$45.0 million ($38.9 million).  The sale is expected to realize approximately $30.3 million of pre-tax capital gain for Golden Star, which will be recorded as income in the first quarter of 2006.                                           87   7.       Deferred Exploration and Development Costs  Consolidated  property  expenditures  on our  exploration  projects for the year ended December 31, 2005 were as follows:                                                 Deferred                                     Deferred                                     Exploration                                  Exploration                                           &                                            &                                     Development Capitalized                      Development                                        Costs    Exploration Acquistion              Costs                                        as of    Expenditures  Costs   Impairments   as of                                       12/31/04                                     12/31/05 - --------------------------------------------------------------------------------------------- AFRICAN PROJECTS     Akropong trend and other Ghana       $2,443      $3,114        $-      $(320)     $5,237     Prestea property - Ghana              2,067           7         -          -       2,074     Mininko - Mali                        1,033          50         -     (1,083)          -     Mano River - Sierra Leone               758         527         -          -       1,285     Afema - Ivory Coast                       -         918       110          -       1,028     Hweni-Butre/South Benso - Ghana           -           -   135,832          -     135,832     Goulagou - Burkina Faso                   -           -    18,247          -      18,247     Other Africa                              -           -     1,460                  1,460 SOUTH AMERICAN PROJECTS     Saramacca - Suriname                    394         337         -          -         731     Bon Espoir - French Guiana              501         881         -          -       1,382     Paul Isnard - French Guiana             256           -         -          -         256 - --------------------------------------------------------------------------------------------- TOTAL                                    $7,452      $5,834  $155,649    $(1,403)   $167,532 - ---------------------------------------------------------------------------------------------  Consolidated  property  expenditures  on our  exploration  projects for the year ended December 31, 2004 were as follows:                                         Deferred                                                     Deferred                                     Exploration                                                    Exploration                                           &                                                             &                                     Development Capitalized                        Reclassified    Development                                        Costs    Exploration Acquistion              to mining         Costs                                        as of    Expenditures  Costs   Impairments   Property          as of                                       12/31/03                                                      12/31/04 - ---------------------------------------------------------------------------------------------------------------- AFRICAN PRODUCTS     Bogoso Sulfide Project - Ghana      $5,930      $    -      $  -      $   -    $(5,930)      $      -     Akropong Trend & Other - Ghana       2,037         406         -          -          -          2,443     Prestea Property Projects - Ghana        -       2,537         -       (470)         -          2,067     Beta Boundary - Ghana                  814           -         -                  (814)             -     Mininko - Mali                         130         903         -          -          -          1,033     Mano River - Sierra Leone                -         758         -          -          -            758 SOUTH AMERICAN PROJECTS     Saramacca - Suriname                   197         197         -          -          -            394     Bon Espoir - French Guiana               -           -       501          -          -            501     Paul Isnard - French Guiana              -           -       256          -          -            256 - ---------------------------------------------------------------------------------------------------------------- TOTAL                                   $9,108      $4,801     $ 757      $(470)   $(6,744)      $  7,452 - ----------------------------------------------------------------------------------------------------------------                                              88   8.       Property, Plant and Equipment                                       As of December 31, 2005                   As of December 31, 2004                    ------------------------------------------------------------------------------------                    Property, Plant Accumulated    Property,     Property,   Accumulated    Property,                     and Equipment  Depreciation   Plant and     Plant and    Depreciation  Plant and                        at Cost                   Equipment Net Equipment at               Equipment Net                                                   Book Value       Cost                    Book Value - ------------------------------------------------------------------------------------------------------- Bogoso/Prestea            $40,802        $8,240       $32,562       $27,722       $5,057       $22,665 Prestea Underground         2,748             -         2,748           238            -           238 EURO Ressources             1,456         1,449             7         1,969        1,951            18 Wassa                      50,701         1,985        48,716         5,460            -         5,460 Corporate & Other             611           117           494         1,060          788           272 - ------------------------------------------------------------------------------------------------------- TOTAL                     $96,318       $11,791       $84,527       $36,449       $7,796       $28,653 - -------------------------------------------------------------------------------------------------------   9.       Mining Properties                                             As of December 31, 2005              As of December 31, 2004                           ---------------------------------------------------------------------------                             Mining    Accumulated    Mining      Mining    Accumulated     Mining                            Properties  Amortization Properties, Properties  Amortization  Properties,                              at Cost                 Net Book    at Cost                   Net Book                                                        Value                                 Value - ----------------------------------------------------------------------------------------------------- Bogoso/Prestea                $46,970      $28,792     $18,178    $43,420        $23,113     $20,307 Prestea Underground            21,612                   21,612     12,984              -      12,984 Wassa                          50,810        5,104      45,706      9,653              -       9,653 Bogoso Sulfide                 13,065                   13,065     13,065              -      13,065 Mampon                         15,062                   15,062     13,676              -      13,676 Other                           4,465                    4,465      4,512              -       4,512 - ----------------------------------------------------------------------------------------------------- TOTAL                        $151,984      $33,896    $118,088    $97,310        $23,113     $74,197 - -----------------------------------------------------------------------------------------------------   Some  prior  period   numbers  have  been   adjusted  to  conform  to  the  2005 presentation.  10.      Mine Construction-in-Progress  At December 31, 2004, mine construction in progress represents costs incurred at the Wassa project subsequent to acquisition,  including feasibility study costs, equipment  purchases and construction  costs,  including interim payments to the construction contractor and development costs.  At December 31, 2005, mine  construction in progress  represents  costs incurred during 2005 at the Bogoso sulfide expansion  project.  The balance is made up of development  drilling costs,  equipment  purchases,  materials and  construction costs, including payments to the construction contractors.  11.      Deferred Stripping  In recent  years  mining at the Plant North pit at Prestea  has  trended  toward deeper pits with longer lives and higher and more variable stripping ratios than in the past.  Stripping ratios at the Plant-North pit increased from 2.3 to 1 in 2002,  to 3.4 to 1 in 2003,  to 5.1 to 1 in 2004 and to 6.5 to 1 during 2005. In response to the changing  stripping rate we initiated a deferred waste stripping policy at the Plant-North pit in the third quarter of 2004.  The amount of stripping  costs to be capitalized in each period is calculated by determining the tonnes of waste moved in excess of the life-of-pit average strip ratio and valuing the excess tonnage of removed waste at the average mining cost per tonne  during the period.  Costs are  recovered  in periods  when the actual tonnes of waste  moved are less than what would  have been moved at the  average life-of-pit  rate,  such tonnes being valued at the rolling  average cost of the waste tonnage amounts capitalized.                                           89   The  capitalized  component  of  waste  rock  removal  costs  is  shown  on  our consolidated  balance sheets in the line item titled  "Deferred  Stripping." The cost impact is included in the  Statements of Operations in the line item titled "Mining  operations."  In periods when the strip ratio  exceeds the pit average, the  costs of the  excess  stripping  are  excluded  from  our  cost  per  ounce calculations.  In  periods  when the strip  ratio is less than the pit  average, capitalized  waste costs are added back to operating  costs and included in cost per ounce calculations.  Based on actual results from 2004 and our January 1, 2005 mine plan, we expected to move 3.7 million  tonnes of ore and 18.0  million  tonnes of waste during the overall life of the Plant-North pit and thus the expected strip ratio was 4.8 to 1. Deferrals during 2005 were based on this average rate, which will also be the rate for deferrals in 2006.  A total of $1.4 million of Plant-North  deferred  waste  stripping  cost,  which would have been  included in  operating  costs under our  previous  policy,  was capitalized  in 2004.  During  2005,  an  additional  $3.6  million of  deferred stripping  costs were  deferred  but, as explained  below,  $3.4 million of this deferral was reversed in December 2005.  A new mining  plan was  completed  in January  2006 adding four months of mining life and 38,000 ounces of gold output to the Plant North pit's life. But the new plan also added  significant  amounts of unanticipated  waste tonnage versus the December  2004  mining  plan and  projections  of the  life-of-mine  strip ratio resulting from the new plan  indicated  that $3.4 million of deferred  stripping costs  accrued as of December 31, 2005 would not be  recovered.  As a result,  a $3.4  million  write-off  was taken in December  2005  leaving a balance of $1.5 million in the account at the end of 2005.  The current  Plant North mining plan anticipates  that this amount will be  recovered  by the fourth  quarter of 2006 when we expect to complete mining of the Plant North.  See Note 1 "Summary  of  Significant  Accounting  Policies  - Recent  Accounting Pronouncements" for additional discussion of new guidance for deferred stripping accounting in Canada and Note 28 "Generally  Accepted  Accounting  Principles in Canada and the United States - Impact of Recently Issued  Accounting  Standards" for other new developments in deferred stripping accounting in the US.  12.      Debt                                                                     As of               As of DEBT                                                    December 31, 2005   December 31, 2004 - ----------------------------------------------------------------------------------------------- Current debt:     Bank loan - at EURO Ressources (Note a)                         $2,667              $    -     CAT equipment financing loans (Note b)                           4,188               1,267 - -----------------------------------------------------------------------------------------------         Total current debt                                          $6,855              $1,267 - -----------------------------------------------------------------------------------------------  Long term debt:     Bank loan - at EURO Ressources (Note a)                         $5,000              $    -     CAT equipment financing loans (Note b)                          11,632               1,707     Convertible notes (Note c)                                      47,666                   - - -----------------------------------------------------------------------------------------------         Total long term debt                                       $64,298              $1,707 - -----------------------------------------------------------------------------------------------        (a)  Bank debt - In January 2005, EURO  Ressources S.A.  ("EURO") drew down           $6.0 million under a credit facility from a bank and paid the funds to           Golden Star as the first  installment  on its  purchase of the Rosebel           royalty.  The loan is  repayable  in nine equal  payments  of $666,667           beginning July 29, 2005.  Accrued  interest is added to each quarterly           payment.  The interest  rate for each period is set at LIBOR plus 2.5%           and EURO may  choose a 1, 2 or 3 month  interest  period.  The loan is           collateralized  by the assets of EURO,  including the Rosebel royalty.           The lender has no recourse to Golden Star.            In September  2005 EURO borrowed an  additional  $3.0 million from the           same commercial bank and forwarded the proceeds to Golden Star leaving           an outstanding  balance due Golden Star of $3.0 million (plus a future           royalty).  The interest rate on the new debt is set at LIBOR plus 2.5%           and  EURO  may  choose  a 1, 2 or 3 month  interest  period.  The $3.0           million is to be repaid by five  quarterly  payments  of $0.6  million           each  commencing  October  31,  2007.  Fair  value  of the  bank  debt           including the current  portion,  is essentially  equal to its carrying           value.       (b)  Equipment  financing  credit  facility  - We  have  established  a $25           million equipment  financing  facility between  Caterpillar  Financial           Services  Corporation,  BGL and WGL, with Golden Star as the guarantor           of all amounts borrowed. The facility provides credit for a mixture of           new and used mining equipment.  This facility is reviewed annually and                                           90             was  renewed  for 12 months in April  2005.  Amounts  drawn under this           facility are repayable  over five years for new equipment and over two           years for used  equipment.  The  interest  rate for each  draw-down is           fixed at the date of the  draw-down  using the  Federal  Reserve  Bank           2-year or 5-year swap rate plus 2.38% or a floating  interest  rate of           LIBOR  plus  2.38%.  As  of  December  31,  2005,  $15.8  million  was           outstanding  under this  facility.  The average  interest  rate on the           outstanding  CAT  loans  is  approximately  6.8%.  Fair  value  of the           equipment financing debt including the current portion, is essentially           equal to its carrying value.       (c)  Convertible   notes  -  We  sold  $50  million  of  senior   unsecured           convertible  notes to a private  investment  fund on April  15,  2005.           These notes,  maturing on April 15, 2009,  were issued at par and bear           interest at 6.85% with a conversion  price of $4.50 per common  share.           At the  maturity  date,  we have the  option,  at our  discretion  and           assuming  the market  price of our  common  shares  exceeds  $4.50 per           share,  to pay the  outstanding  notes with cash or by issuing  common           shares to the note holders. If the notes are paid in common shares the           number of shares will be determined by dividing the loan balance by an           amount equal to 95% of the average  price of the 20 trading day period           ended  five  days  before  the notes  are due.  Due to the  conversion           feature, approximately $47.1 million of the note balance was initially           classified as a liability  and $2.9 million was  classified as equity.           Periodic accretion will increase the liability to the full $50 million           amount due (after  adjustments for converted  notes) by the end of the           note life. The periodic accretion is classified as interest expense. A           total  of $1.8  million  of  interest  on the  convertible  notes  was           capitalized  into the Bogoso sulfide  expansion  project  costs.  Fair           value of the convertible  notes is essentially equal to their carrying           value.  13.      Loan Acquisition Costs  In the second  quarter of 2005  approximately  $0.9 million of loan  acquisition fees were  incurred in  obtaining  the $50 million of  convertible  notes.  This amount was capitalized and is being amortized to interest  expense over the life of the notes. In addition we recorded loan acquisition  costs at EURO related to its January 2005 and its August 2005 borrowings.  As with the convertible notes, the balance is being  amortized  to interest  expense over the life of the loan. The net balance of loan  acquisition  costs was $1.0  million as of December 31, 2005.  14.      Hedging and Derivatives  In January 2005,  EURO, a majority  owned  subsidiary,  entered into a series of contracts  that qualify as a derivative as part of a $6.0 million loan agreement (see note 12a).  EURO's  derivative  is tied to a future  stream of gold royalty payments EURO expects to receive from a Canadian mining company that purchased a mining property  interest from Golden Star in 2002. Golden Star originally owned the royalty but sold the royalty to EURO in 2004. The  derivative  provides that (a) when the average gold price for a quarter exceeds $421 per ounce,  EURO will pay to the counter  party cash equal to the  difference  between  the  quarter's average  gold price per ounce and $421 per ounce,  times 5,700  ounces,  and (b) when the average quarterly gold price is below $421 per ounce, EURO will receive a cash payment from the  counterparty  equal to the difference  between $421 per ounce and the  average  gold price per ounce times  5,700  ounces.  The $421 per ounce  figure  was the  spot  gold  price  on the  date  EURO  entered  into the derivative.  The  derivative  agreement  established 10 tranches of 5,700 ounces each which settle quarterly over ten quarters  beginning in the first quarter of 2005.  In August 2005, EURO entered into a second set of derivative position related to a $3.0  million  debt  facility.  These  positions  are spread over ten quarters beginning  in the last  quarter of 2007,  and have a fixed  price of $458.50 per ounce which was  approximately  $18 per ounce over the spot price on the date of the agreement.  The quarterly  cash payments are determined  exactly as with the first derivative  describe above except $458.50 per ounce is the reference price for calculating the quarterly payments.  During 2005,  we recorded a $0.5 million  reduction in royalty  revenues for the cash settlement of the first four quarterly tranches and in addition we recorded $9.6 million of unrealized,  non-cash  mark-to-market  losses as of December 31, 2005.  Gold  Derivatives  - To provide  gold  price  protection  during  the  2005/2006 construction  phase of the Bogoso  sulfide  expansion  project,  we  purchased a series of gold puts.  In the second  quarter of 2005 we purchased put options on 140,000 ounces of gold at an average floor price of $409.75 paying approximately $1.0 million in cash for the options.  During the third  quarter we purchased an additional  90,000 put options locking in a $400 per ounce floor for each of the 90,000  ounces.  Due to increases in gold prices since  purchasing  the puts the mark-to-market  value of the puts at  December  31,  2005 stood at $0.1  million dollars or $0.9  million  less than we paid for them.  This decline in value has been  recognized in our statement of operations  for the year ended December 31, 2005.                                           91   During the third  quarter we sold 90,000  ounces of call  options  with a strike price of $525 per ounce.  The  revenues  from sale of the call  options  exactly offset  the cost of the put  options  bought  in the third  quarter.  Due to the increase in gold prices  since the call options  were sold,  the  mark-to-market value has  fallen by $2.3  million  at  December  31,  2005 and this  amount was recognized in our statement of operations for the year ended December 31, 2005.  Foreign  Currency  Forward  Positions - To help  control the  potential  adverse impact  of  fluctuations  in  foreign  currency  exchange  rates  on the cost of equipment and materials we expect o purchase during the 2006 construction  phase of the Bogoso  sulfide  expansion  project,  we have  entered into Rand and EURO forward  contracts.  These contracts,  established  without cost, had a positive fair value of $1.0  million at December  31, 2005 and the $1.0  million gain was recognized in our statement of operations at December 31, 2005.  The following table summarizes our derivative contracts at December 31, 2005:                                                                Fair                Amount Outstanding/                Total /                                                       Value                  Average Price                   Average                                                   -------------------------------------------------------------------                           At December 31, 2005      12/31/2005     2006         2007        Thereafter - ---------------------------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------------------------- Gold Forward Contracts (EURO Ressources) - --------------------------------------------------------------------------------------------------------------------- Ounces (thousands)                                                     22.8         22.8            51.3        96.9 Average price per ounce                                                 421          430             459         443 - --------------------------------------------------------------------------------------------------------------------- Fair value ($ thousands)                               $(9,560) - ---------------------------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------------------------- Gold Put Options (Golden Star) - --------------------------------------------------------------------------------------------------------------------- Ounces (thousands)                                                      150         37.5               -       187.5 Average price per ounce                                                 407          405               -         407 - --------------------------------------------------------------------------------------------------------------------- Fair value ($ thousands)                                   $74 - ---------------------------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------------------------- Gold Call Options (Golden Star) - --------------------------------------------------------------------------------------------------------------------- Ounces (thousands)                                                       50           15               -          65 Average price per ounce                                                 525          525               -         525 - --------------------------------------------------------------------------------------------------------------------- Fair value ($ thousands)                               $(2,250) - ---------------------------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------------------------- Foreign Exchange Forward Contracts (Golden Star) - --------------------------------------------------------------------------------------------------------------------- South African Rand (millions)                                         122.1            -               -       122.1 Average Rate (ZAR/$)                                                    6.8            -               -         6.8 - --------------------------------------------------------------------------------------------------------------------- Fair value ($ thousands)                                $1,146 - ---------------------------------------------------------------------------------------------------------------------  - --------------------------------------------------------------------------------------------------------------------- Euros (millions)                                                        2.5            -               -         2.5 Average Rate (EUR/$)                                                   0.80            -               -        0.80 - --------------------------------------------------------------------------------------------------------------------- Fair value ($ thousands)                                 $(162) - ---------------------------------------------------------------------------------------------------------------------    The puts, calls and foreign exchange forward contracts are comprised of numerous individual contracts each with a different settlement date.  15.      Asset Retirement Obligations  Our Asset Retirement  Obligations  ("ARO") are equal to the present value of all estimated  future  closure cost  associated  with  reclamation,  demolition  and stabilization  of  our  Bogoso/Prestea  and  Wassa  mining  and  ore  processing properties.  Included  in this  liability  are the  costs  of mine  closure  and reclamation,  processing  plant and  infrastructure  demolition,  tailings  pond stabilization  and reclamation and  environmental  monitoring  costs.  While the majority of these costs will be incurred near the end of the mines' lives, it is expected that cash costs will be incurred in interim  periods  reclaiming  areas where  mining  has been  completed,  such costs  being  netted  against  the ARO provision.  The  changes  in the  carrying  amount of the ARO  during  2005 and 2004 were as follows:                                          92                                                              Year ended                                                        December 31, 2005 - ------------------------------------------------------------------------- Balance at December 31, 2004                                  $8,660 Accretion expense                                                752 Cost of reclamation work performed                              (691) New AROs incurred during the period                            2,672 - ------------------------------------------------------------------------- Balance at December 31, 2005                                 $11,393 - ------------------------------------------------------------------------- Current portion                                               $3,107 Long term portion                                             $8,286  - -------------------------------------------------------------------------                                                            Year ended                                                        December 31, 2004 - ------------------------------------------------------------------------- Balance at December 31, 2003                                  $7,745 Accretion expense                                                645 Cost of reclamation work performed                              (730) New AROs incurred during the period                            1,000 - ------------------------------------------------------------------------- Balance at December 31, 2004                                  $8,660 - -------------------------------------------------------------------------   16.      Commitments and Contingencies  Our commitments and contingencies include the following items:       (a)  Environmental Regulations and Asset Retirement Obligations - The exact           nature of  environmental  control  problems  we may  encounter  in the           future  cannot  be  predicted,   primarily  because  of  the  changing           character of  environmental  requirements  that may be enacted  within           various  jurisdictions.  ARO liabilities,  which include environmental           rehabilitation liabilities for reclamation and for closure costs, were           $8.1 million at  Bogoso/Prestea  at December  31,  2005,  up from $6.0           million at December 31, 2004.  ARO  liabilities  at Wassa totaled $3.3           million at December 31, 2005, up from $2.7 million at the end of 2004.       (b)  Environmental  Bonding in Ghana - In March 2005, at the request of the           Ghana Environmental  Protection Agency ("EPA"), we bonded $3.0 million           to cover future reclamation  obligations at Wassa. To meet the bonding           requirements  we  established  a $2.85  million  letter of credit  and           deposited  $0.15 million of cash with the EPA. An $8.55 million letter           of  credit  has  been   established  to  cover  our   obligations  for           Bogoso/Prestea  bonding  and $0.9  million of cash has been  deposited           with the EPA. Final  signatures were received from the EPA in February           2006 thereby completing our obligations.       (c)  Cash  Restricted  for  Environmental  Rehabilitation  Liabilities - In           1999, we were required,  according to the  acquisition  agreement with           the sellers of BGL, to  restrict  $6.0  million of cash to be used for           the ongoing and final  reclamation  and closure  costs at Bogoso.  The           withdrawal  of these funds must be agreed to by the  sellers,  who are           ultimately  responsible  for  the  reclamation  in  the  event  of our           non-performance.  Between  1999 and 2001 we drew $2.6  million  of the           restricted cash to cover our  out-of-pocket  cash  reclamation  costs.           There have been no  disbursements  of the restricted  cash since 2001.           Now that the BGL  reclamation  bonding  process is completed,  we will           seek to amend  the  agreement  with the  original  sellers  of BGL and           obtain  their  consent  to allow us to  withdraw  the  remaining  $3.4           million of restricted cash.       (d)  Royalties -            (i)  Dunkwa  Properties:  As part  of the  acquisition  of the  Dunkwa                properties  in August  2003,  we  agreed to pay the  seller a net                smelter return royalty on future gold production from the Mansiso                and Asikuma properties. Per the acquisition agreement, there will                be no  royalty  due on the first  200,000  ounces  produced  from                Mampon  which is located on the Asikuma  property.  The amount of                the royalty is based on a sliding  scale which  ranges from 2% of                net  smelter  return at gold prices at or below $300 per ounce up                to 3.5% for gold prices in excess of $400 per ounce.                                           93             (ii) Government  of  Ghana:  Under  the laws of  Ghana,  a holder of a                mining  lease is  required  to pay an annual  royalty of not less                than 3% and not more than 12% of the total  revenues  earned from                the lease area. The royalty is payable on a quarterly  basis.  We                currently  pay  a 3%  annual  royalty  on  gold  production  from                Bogoso/Prestea  and Wassa  production.  The  Government  of Ghana                retains  the right to  increase  the amount of the  royalty to as                much as 12% based upon a formula related to operating margins.            (iii) Benso:  Benso is subject to two  royalties.  The first is a 1.5%                net smelter return. The royalty can be purchased for $4.0 million                or  for  $6.0  million if a feasibility study indicates more than                3.5 million  ounces of  recoverable  gold.  The second royalty is                $1.00 per ounce of gold  produced.  This royalty can be purchased                for $0.5 million.       (e)  Mano River Joint Venture - We entered into a joint  venture  agreement           in late 2003 to invest up to $6  million  over four  years in the Mano           River project in Sierra Leone via an earn-in  agreement  with a junior           exploration company,  Mano River Resources Inc. which holds a group of           gold  exploration  properties in Sierra Leone. The initial $6 million,           if fully  funded,  would yield a 51%  interest  in the joint  venture.           Further   provisions  of  the  joint  venture  agreement  provide  the           opportunity  to  acquire up to 85% of the joint  venture by  continued           long term funding. Spending in 2004 totaled $0.8 million, leaving $0.2           million  on our  minimum  commitment  to the  project.  We spent  $0.5           million on the Mano River  project  during 2005,  thereby  meeting the           minimum commitment.  In addition,  agreement has been reached with our           partner to extend the earn in period by 12 months.       (f)  Afema  Project - On March 29, 2005 we entered into an  agreement  with           Societe  d'Etat  pour le  Developpement  Minier  de la  Cote  d'Ivoire           ("SO.DE.MI."), the Cote d'Ivoire state mining and exploration company,           to acquire their 90% interest in the Afema gold property in south-east           Cote d'Ivoire. A $0.1 million initial payment to SO.DE.MI. gave us the           right  to carry  out a six  month  detailed  technical  due  diligence           program which was  essentially  completed by September of 2005. We now           have the  right to  acquire  100% of  SO.DE.MI.'s  rights in the Afema           property for an  additional  $1.5  million.  A six month  extension to           March 2006 has subsequently been granted by SO.DE.MI.  to allow Golden           Star to carry out further due diligence  work and to analyze the large           quantity of data collected during 2005 before making a decision on the           $1.5 million  payment.  In addition to the  acquisition  payments,  we           agreed to pay SO.DE.MI.  a royalty on any future gold  production from           the Afema  property.  The  royalty  is  indexed  to the gold price and           ranges  from 2% of net smelter  returns at gold prices  below $300 per           ounce to 3.5% of net smelter  returns for gold prices  exceeding  $525           per ounce. If we proceed with the $1.5 million payment to acquire full           rights to the property the purchase  agreement requires us to spend an           additional  $3.5  million  on  exploration  work at Afema,  subject to           exploration success, over the following three and a half years.       (g)  Pending Legal Issues - Prestea Gold  Resources  Limited  ("PGR"),  our           joint venture partner in the Prestea Underground, entered receivership           in  March  2003.  The  joint  venture  agreement  between  BGL and PGR           specified  that if either  party to the joint  venture were to go into           receivership  any remaining  interest held in the  partnership  by the           insolvent  partner would  immediately  vest with the solvent  partner.           While  PGR's  official  liquidator  affirmed  that the vesting of this           interest  in BGL was  proper  under  the  terms of the  joint  venture           agreement,  the transfer and vesting of PGR's ownership was challenged           in an action brought before the High Court in Accra, Ghana against the           official liquidator by Merchant Bank (Ghana) Ltd, in its capacity as a           judgment  creditor of PGR.  The action was  commenced  on February 28,           2005  and  sought  an  order  of the  court  to  compel  the  official           liquidator  to take  control of PGR's  residual  interest in the joint           venture  and to have the  interest  valued with the  ultimate  goal of           making proceeds  available for distribution among all the creditors of           PGR.            The  judgment  creditor's  claim was based on the  assertion  that the           vesting  of the  residual  interest  in BGL under  the  joint  venture           agreement was either  illegal and void and/or that such vesting should           necessarily  go with the  assumption  by BGL of all PGR's  obligations           owed to third parties, including those unrelated to the joint venture.            In June 2005, the High Court issued a finding in favor of the Merchant           Bank  (Ghana)  Ltd.  While  the  ruling  transferred  PGR's  ownership           position  to the  liquidator,  it did not require BGL to assume any of           PGR's obligations.  Nevertheless,  in subsequent periods following the           vesting of PGR's ownership position in BGL, continued project spending           by BGL diluted PGR's original  ownership  position to less than 10% by           September 30, 2005. The joint venture agreement further specifies that           if either  partner  allowed  itself to be diluted to 10% or less,  the           residual  value  would  immediately  convert  into a 2.5%  net  profit           interest in potential  future  earnings  from the Prestea  Underground           mine.  While the  court's  ruling has  effectively  given the 2.5% net           profits  interest to the  bankruptcy  trustee,  the trustee still must           establish  the fair value of the interest  and then find a buyer.  The           trustee has approached the creditors asking for funding of a valuation           study  but  to-date  the  creditors  have not  provide  the  requested           funding.            We are also engaged in routine litigation  incidental to our business.           No  material  legal  proceedings,  involving  us or our  business  are           pending,  or,  to our  knowledge,  contemplated,  by any  governmental           authority.  We are not aware of any material  events of  noncompliance           with environmental laws and regulations.                                           94   17.      Warrants  The following warrants were outstanding as of December 31, 2005.                                                      Warrants                         Expiration                         Date issued       outstanding   Exercise price        date Issued with: - ----------------------------------------------------------------------------------------- Equity Offering      February 14, 2003       8,448,334     Cdn$4.60     February 14, 2007 - ----------------------------------------------------------------------------------------- St. Jude Acquisition December 21, 2005       3,240,000     Cdn$4.17     November 20, 2008 - ----------------------------------------------------------------------------------------- Total                                       11,688,334 - -----------------------------------------------------------------------------------------    The 8.4 million  warrants  expiring  February 14, 2007 are traded on the Toronto Stock Exchange under the symbol  GSC.WT.A.  During 2005,  385,000  warrants were exercised resulting in cash proceeds of $0.7 million to Golden Star.  18.      Stock Based Compensation  Stock  Options - We have one stock option plan,  the 1997 Stock Option Plan,  as amended  (the "GSR Plan") and  options are granted  under this plan from time to time at the  discretion  of the  Compensation  Committee.  Options  granted  are non-assignable  and are  exercisable  for a period  of ten  years or such  other period as stipulated  in a stock option  agreement  between  Golden Star and the optionee. Under the GSR Plan, we may grant options to employees, consultants and directors  of the Company or its  subsidiaries  for up to  15,000,000  shares of common stock.  Options take the form of  non-qualified  stock  options,  and the exercise  price of each option is not less than the market price of our stock on the date of grant.  Options typically vest over periods ranging from immediately to four years from the date of grant.  Vesting  periods  are  determined  at the discretion of the Compensation Committee.  The following tables summarize information about options under the GSR Plan:                                                    2005                            2004                     2003 - ------------------------------------------------------------------------------------------------------------------------------- GSR Plan                                    Weighted-Average                Weighted-Average               Weighted-Average                                 Shares       Exercise Price       Shares     Exercise Price     Shares      Exercise Price                                 (000s)          (Cdn$)            (000s)       (Cdn$)           (000s)         (Cdn$) - ------------------------------------------------------------------------------------------------------------------------------- Outstanding at  beginning of year              5,271            3.17             5,241           2.41          4,489            1.36 Granted                         3,047            2.56               855           6.95          2,354            3.99 Exercised                        (313)           2.37              (767)          2.12         (1,518)           1.73 Forfeited                        (615)           5.42               (58)          4.31            (84)           2.92 - ------------------------------------------------------------------------------------------------------------------------------- Outstanding end of  year                           7,390            2.75             5,271           3.17          5,241            2.41 Options vested and  exercisable at  year-end                       6,414            2.34             4,140           2.54          3,803            1.81 Weighted-average fair  value of options granted  during the year                                 0.95                             2.45                           1.25 - -------------------------------------------------------------------------------------------------------------------------------                                           95            GSR Plan             Options Outstanding                             Options Exercisable - ---------------------------------------------------------------------------------------------   Range of        Number      Weighted-Average  Weighted-Average    Number        Weighted-   Exercise    Outstanding at      Remaining      Exercise Price  Exercisable at    Average     Prices     December 31,    Contractual Life                   December 31,    Exercise                     2005                                              2005          Price    (Cdn$)         (000s)            (years)          (Cdn$)          (000s)        (Cdn$) - ---------------------------------------------------------------------------------------------  0.00 to .99              140               1.1            0.29             140         0.29 1.00 to 2.50            5,099               4.1            1.77           5,024         1.76 2.51 to 4.00              655               7.1            3.21             481         3.19 4.01 to 7.00            1,419               8.5            6.00             730         5.90 7.01 to 10.00              76               7.9            8.39              38         8.39 - ---------------------------------------------------------------------------------------------                         7,390               5.2            2.75           6,414         2.34 - ---------------------------------------------------------------------------------------------  Options granted during 2005:         Date        Number of Options   Strike Price   Fair Value per Total Fair Value    Option       Granted            (000s)              (Cdn$)   option (Cdn$)   (000s of Cdn$)      Life - ---------------------------------------------------------------------------------------------------- January 26, 2005                 345            4.58            1.68             579       5 January 26, 2005                 169            4.58            1.37             231      3.5 December 21, 2005                339            1.82            1.16             393      3.5 December 21, 2005                612            2.50            0.68             416       3 December 21, 2005                140            0.29            2.41             338    6 months December 21, 2005                722            1.82            0.91             658    6 months December 21, 2005                720            2.50            0.37             266    6 months  - ----------------------------------------------------------------------------------------------------               Total            3,047            2.56            0.95           2,881 - ----------------------------------------------------------------------------------------------------   Options granted during 2004:         Date        Number of Options   Strike Price   Fair Value per Total Fair Value    Option       Granted            (000s)              (Cdn$)   option (Cdn$)   (000s of Cdn$)      Life - ---------------------------------------------------------------------------------------------------- May 14, 2004                     855            6.95            2.45           2,094    10 years - ----------------------------------------------------------------------------------------------------               Total              855            6.95            2.45           2,094    10 years - ----------------------------------------------------------------------------------------------------  The fair value of options granted during 2005, 2004 and 2003 were estimated at the grant dates using the Black-Scholes option-pricing model with the following weighted average assumptions:                                                 2005             2004             2003 - -------------------------------------------------------------------------------------------- Expected volatility                        27.3% - 34.9%         36%              34% Risk-free interest rate                    2.75% - 3.5%     3.72% - 4.06%    3.01% - 4.46% Expected lives                            0.5 to 5 years   3.5 to 5 years   3.5 to 5 years Dividend yield                                  0%               0%               0% - --------------------------------------------------------------------------------------------    In November 2003 the  Accounting  Standards  Board of the Canadian  Institute of Certified   Accountants   amended  CICA  Handbook  CICA  3870,  -   "Stock-based Compensation and other  Stock-based  Payments" to require expensing of all stock based  compensation  awards for fiscal years  beginning  on or after  January 1, 2004. In light of this  development we adopted the new provision of CICA 3870 in 2003.  As  a  result,  we  recognized  stock  based   compensation   expense  of approximately  $0.9 million and $1.4 million in 2005 and 2004  respectively  for stock options granted during 2005 and 2004.  Stock Bonus Plan - In December 1992, we  established  an Employees'  Stock Bonus Plan (the "Bonus Plan") for any full-time or part-time  employee (whether or not a  director)  of  the  Company  or  any of our  subsidiaries  who  has  rendered meritorious  services which  contributed to the success of the Company or any of its  subsidiaries.  The  Bonus  Plan  provides  that a  specifically  designated committee of the Board of Directors  may grant bonus common shares on terms that it might determine,  within the limitations of the Bonus Plan and subject to the rules of applicable regulatory authorities. The Bonus Plan, as amended, provided for the issuance of 900,000 common shares of bonus stock of which 491,162 common shares have been issued as of December 31, 2005.                                           96   During  2005,  2004 and 2003 a total of  45,342,  nil and 57,200  common  shares respectively were issued to employees  pursuant to the Bonus Plan. We recognized compensation  expense  related to bonuses under the Bonus Plan during 2005, 2004 and 2003 of $0.2 million, nil and $0.1 million  19.      Income Taxes  We recognize future tax assets and liabilities  based on the difference  between the  financial  reporting  and tax basis of  assets  and  liabilities  using the enacted tax rates expected to be in effect when the taxes are paid or recovered. We provide a valuation  allowance  against future tax assets for which we do not consider  realization of such assets to meet the required "more likely than not" standard.  Our future tax assets and  liabilities at December 31, 2005 and 2004 include the following components:                                                2005          2004 - ---------------------------------------------------------------------- Future tax assets: Offering costs                                   $2,577        $2,218 Loss carryovers                                  62,745        48,163 Capital loss carryovers                          12,206        11,632 Tax pools                                        10,840        18,132 Reclamation costs                                 1,226             - Derivatives                                       4,288             - Other                                             1,479             - Valuation allowance                             (39,240)      (64,399)                                           ---------------------------- Future tax assets                               $56,121       $15,746                                           ----------------------------  Future tax liabilities: Mine property costs                             $85,575       $13,805 Derivatives                                         388             - Conversion feature discount                         759             - Reclamation costs                                     -           399                                           ---------------------------- Deferred tax liabilities                         86,722        14,204 - ---------------------------------------------------------------------- Net future tax assets/(liability)              $(30,601)       $1,542 - ----------------------------------------------------------------------  The composition of our valuation allowance is summarized as follows:                                                 2005          2004 - ----------------------------------------------------------------------  Canada                                          $23,712       $32,756 France                                            5,584        26,141 Ghana                                             9,944         5,502                                           ---------------------------- Total valuation allowance                       $39,240       $64,399 - ----------------------------------------------------------------------   During  2005,  we released  $3.3  million  and $4.9  million,  respectively,  of valuation  allowance  related to our net future tax assets in France and Canada. The  release of the French  valuation  allowance  related  to  projected  future royalty income.  The release of the Canadian  valuation  allowance resulted from the anticipated  utilization of $30 million of capital loss  carryovers  against the March 2006 gain on the sale of Moto shares.  Valuation  allowances  were not provided on the future tax assets resulting from 2005 losses in France and Ghana totaling $3.2 million and $1.5 million, respectively.  The provision for income taxes includes the following components:                                           97                                2005               2004        2003 - -----------------   --------------   ----------------   -------------- Current    Canada          $            -   $              -   $            -    Foreign                      -                  -                - - -----------------   --------------   ----------------   -------------- Total              $            -   $              -   $            - - -----------------   --------------   ----------------   --------------  Deferred    Canada          $       (4,926)  $              -   $            -    Foreign                 (8,004)            (1,542)               - - -----------------   --------------   ----------------   -------------- Total              $      (12,930)  $         (1,542)  $            - - -----------------   --------------   ----------------   --------------  A reconciliation  of expected income tax on net income before minority  interest at statutory  rates with the actual  expenses  (recovery) for income taxes is as follows:                                                            2005           2004           2003 - ------------------------------------------------------------------------------------------- Net income (loss) before minority interest          $(26,184)        $2,377        $24,533 Statutory tax rate                                      32.5%          32.1%          34.1% - ------------------------------------------------------------------------------------------- Tax expense (benefit) at statutory rate               (8,515)           763          8,365 - ------------------------------------------------------------------------------------------- Enacted future tax rate reductions                         -              -           (490) Foreign tax rates                                     (3,296)          (152)        (6,489) Change in tax rates                                      568              -              - Nondeductible portion of capital losses                  270          3,174              - Expired loss carryovers                               16,287          1,450          2,866 Ghana investment allowance                              (666)          (316)          (636) Nondeductible stock option compensation                  274            445            129 Nondeductible expenses                                   163            119              - Tax loss sale of EURO shares                               -         (2,898)             - Loss carryover not previoulsy recognized                (444)         4,447              - Intercompany asset basis not deductible                6,320              -              - Ghana property basis not previously recognized           862         (2,733)           716 Nondeductible Ghana property basis                       597              -              - Change in future tax assets due to echange  rates                                                   238         (3,919)        (8,283) Change in valuation allowance                        (25,588)        (1,922)         3,822 - ------------------------------------------------------------------------------------------- Income tax expense (recovery)                       $(12,930)       $(1,542)       $     - - -------------------------------------------------------------------------------------------   During 2005,  2004 and 2003, we recognized  $4.2 million,  $0.3 million and $6.4 million,  respectively,  of share offering costs.  Shareholders' equity has been credited in the amounts of $1.3  million,  $0.1 million and $2.1 million for the tax  benefits  of these  deductions;  however  a  valuation  allowance  had been provided  against  their full amount.  In  addition,  in 2005 we reported a $2.9 million discount related to our convertible debt.  Shareholders' equity has been charged in the amount of $0.9 million for the  associated  tax  expense.  A $0.4 million  valuation  allowance has been provided in shareholders'  equity for the net tax impact of the share offering costs and discount  items.  At December 31, 2005 we had loss carryovers expiring as follows:                  Canada    Ghana     France               ------------------------------ 2006             $2,595        $-        $- 2007                356         -         - 2008              1,901         -         - 2009              2,344         -         - 2010              1,101         -         - 2014             10,645         -         - 2015              4,569         -         - Indefinite       42,623   182,283    28,288               ------------------------------ Total           $66,134  $182,283   $28,288 - --------------------------------------------  20.      Earnings per Common Share  The following table provides a reconciliation between basic and diluted earnings per common share:                                           98                                                              For the years ended December 31,                                                   ----------------------------------------                                                       2005         2004         2003 - ------------------------------------------------------------------------------------------ Net Income/(Loss)                                     ($13,531)      $2,642       $21,956 - ------------------------------------------------------------------------------------------  Shares (in millions) - -------------------------------------------------- Weighted average number of common shares                 143.6        138.3         111.0 Impact of Dilutive Securities:        Options                                             2.7          2.9           2.7        Convertible notes                                     -            -             -        Warrants                                              -          2.5           4.2 - ------------------------------------------------------------------------------------------ Weighted average number of dilutive common shares        146.3        143.7         117.9 - ------------------------------------------------------------------------------------------  Basic Income/(Loss) Per Common Share                   ($0.094)      $0.019        $0.198 Diluted Income/(Loss) Per Common Share                 ($0.094)      $0.018        $0.186 - ------------------------------------------------------------------------------------------  21.      Supplemental Cash Flow Information  The following is a summary of non-cash transactions:                                                                                      2005       2004       2003 - --------------------------------------------------------------------------------------------------------------- Barnex royalty buy-  back                                                                                 $-         $-    $12,045 Common shares issued for Barnex royalty buy-back                                       -          -    (12,045) Investment in Goldfields Miniere S.A.                                                  -        300          - Common shares issued to purchase Goldfields Miniere S.A.                               -       (300)         - Non-Cash Component of Investment in St. Jude Resources Ltd.                      110,924 Common shares, warrants and options issued to purchase St. Jude Resources Ltd.  (110,924)                    - - ---------------------------------------------------------------------------------------------------------------   There was no cash paid for income taxes during  2005,  2004 and 2003.  Cash paid for interest was $3.1 million in 2005,  $0.1 million in 2004 and $0.1 million in 2003.  A total of $0.06  million of  depreciation  was  included  in general and administrative costs or was capitalized into projects.  22.      Operations by Segment and Geographic Area  The following  segment and  geographic  data includes  revenues based on product shipment origin and long-lived assets based on physical location.  The corporate entity is incorporated in Canada and domiciled in the United States.                              Africa - Ghana                           --------------------------- (as of December 31 or for Bogoso/    Wassa    Other   South   Corporate  Total  the year ended)           Prestea                    America - --------------------------------------------------------------------------------  2005       Revenues             $58,534  $31,405       $-   $4,282   $1,244  $95,465       Net Income/(Loss)      4,578   (8,994)     (20)    (412)  (8,683) (13,531)       Total Assets         143,111  103,506  200,287   10,604  107,095  564,603 - --------------------------------------------------------------------------------  2004       Revenues             $61,002       $-       $-   $3,145     $882  $65,029       Net Income/(Loss)     12,533     (168)       -    1,772  (11,495)   2,642       Total Assets          90,297   70,681   31,080      817   59,285  252,160 - --------------------------------------------------------------------------------  2003       Revenues             $63,640       $-       $-     $102     $628  $64,370       Net Income/(Loss)     23,253     (171)       -   (1,411)     285   21,956       Total Assets          64,828   44,523   20,058      352   92,630  222,391 - --------------------------------------------------------------------------------                                           99   23.      Related Parties  During 2005, we obtained  legal services from a legal firm to which our Chairman is of  counsel.  Total  cost of all  services  purchased  during  2005  was $1.2 million.  Our  Chairman  did not  personally  perform any legal  services for us during 2005 nor did he benefit  directly or  indirectly  from  payments  for the services performed by the firm.  During 2005, a corporation  controlled by Michael A. Terrell provided management services (including  those of Mr.  Terrell)  to  St.  Jude for which it was paid Cdn$250,000.  Mr.  Terrell  became a  director  of  Golden  Star  following  our acquisition of St. Jude in December.  24.      Acquisitions  In late December 2005, we completed the  acquisition of 100% of the  outstanding shares of St. Jude Resources Ltd., a Canadian  company with a focus on Ghana and other West  African  countries.  Our total cost to acquire  St.  Jude was $112.8 million.  This included issuance of 31.4 million of our common shares at a price of $3.45  each,  3.2 million  warrants  with a fair value of $1.0  million,  2.5 million  options at a fair value of $1.6 million and $1.9 million of transaction costs. The transaction resulted in St. Jude shareholders  holding  approximately 19% of Golden Star on a fully diluted basis at the date of the transaction.  St. Jude's  earnings  were  recognized in our  consolidated  statement of operations beginning on December 22, 2005.  Since the  acquisition was completed so late in the fiscal year,  the  allocation  of the  purchase  costs shown below should be considered a preliminary  allocation.  Further analysis of the fair value of St. Jude's assets,  liabilities  and the costs  inherent in combining  personnel and operations  in 2006  may  require  adjustments  to the  allocation.  Furthermore several  estimates  were  required  to  accrue  transaction  costs.  Many of the decisions  about  severance  and office  closures,  it any, and other aspects of combining  the two  entities  have not yet been  addressed  due to timing of the acquisition in relation to the end of our fiscal year.  The purchase cost and the  allocation of the purchase costs to St. Jude's assets and liabilities are as follows:  ST. JUDE ACQUISITION COSTS                                              AMOUNT         VALUE                                           ---------------------------- Golden Star Common Shares issued            31,377,588       $108,298 Golden Star Common Share Options Issued      2,533,176          1,634 Golden Star Common Share Warrants Issued     3,240,000            992 Golden Star's transaction costs                      -          1,869                                                        ---------------     Total Acquisition Cost                                   $112,793  - ----------------------------------------------------------------------  ALLOCATION OF PURCHASE COSTS  Current assets                                                 $2,803 Mineral properties - Ghana - Hinwi-  Butre/Benso                                                  135,832 Mineral properties - Burkina Faso -  Goulagou and Other                                            18,247 Mineral properties - Ghana - Shein Hills                        1,095 Mineral properties - Niger                                        365 Equipment net                                                     203                                                        --------------- Total Assets                                                 $158,545  Accounts Payable and Accrued Expenses                            $680 Future Tax Liability                                           45,072                                                        --------------- Total Liabilities                                             $45,752                                                         --------------- Net Asset Value                                              $112,793                                                        ===============  An analysis of St. Jude's current assets and current liabilities  indicated they were carried at fair value.  Amounts allocated to mineral  properties were based on comparable  sales or on cash flow projections for properties where sufficient data was available to prepare cash flow projections.  Cash flow projections were based on resource data received from St. Jude.  Construction  costs,  sustaining capital costs and operating costs were included in the  projections.  The future tax liability  recognizes the fact that while the long term assets were revalued to fair value as required for purchase  accounting,  there was no  corresponding step-up  in the  tax  basis  of the  long  term  assets  and  thus  future  book amortization will exceed tax amortization.                                          100   The following condensed  unaudited pro forma consolidated  results of operations for 2004 and for 2005 are presented as if the  acquisition of St. Jude had taken place  on  January  1,  2004 and on  January  1,  2005.  The pro  forma  results incorporate  St.  Jude's  2004 and 2005  revenues  and  expenses  as adjusted to reflect  adjustments  required to harmonize St. Jude's accounting  policies with ours and to convert St. Jude's results to US dollars.                                                           Cdn GAAP             US GAAP                                             ------------------------------------------   (in $ million, except per share amounts)       2004      2005       2004       2005 - -------------------------------------------------------------------------------------- Net sales                                       $65.2     $95.6      $65.2     $102.4 Income before changes in accounting  principles                                       1.0     (15.2)     (15.4)     (34.2) Net income/(loss)                                 1.0     (15.2)     (15.4)     (34.2) Earnings/(loss) per common share                $0.01    $(0.09)    $(0.09)    $(0.20) - -------------------------------------------------------------------------------------- Comprehensive income                            NA        NA         (15.4)     (26.0) - --------------------------------------------------------------------------------------   These  differences  include  converting  St.  Jude  balances  from  Cdn$ to US$, converting  St. Jude  accounting  policies to match  Golden  Star  policies  and adjustments for corporate  entity costs that would not have been incurred by St. Jude.  The unaudited pro forma  information is not  necessarily  indicative of what the actual  combined  results  of  operation  would  have  been had the  acquisition occurred at the beginning of the respective periods presented.  25.      Financial Instruments  Fair  Value - Our  financial  instruments  are  comprised  of  cash,  short-term investments,  accounts  receivable,  restricted cash, accounts payable,  accrued liabilities,  accrued wages,  payroll taxes and debt. The fair value of cash and short-term   investments,   accounts  receivable,   accounts  payable,   accrued liabilities  and accrued  wages,  payroll  taxes and current  debt equals  their carrying  value due to the short-term  nature of these items.  The fair value of restricted  cash is equal to the  carrying  value  as the  cash is  invested  in short-term,  high-quality instruments.  See Note 12 for fair values of long term debt.  26.      Gain on Sale of Subsidiaries Sale of Common Shares  EURO sold 4.0 million of their  common  shares at  (euro)0.20  each in a private placement in December 2005 raising  (euro)0.8  million.  EURO also received,  as part of the same  transaction,  (euro)0.05  million in exchange  for 1.0 million warrants which allow the holder to purchase  EURO's common shares at (euro) 0.45 each until  December  12,  2007.  Based on the  dilutive  effect of the  private placement  on  Golden  Star's  ownership  position  and on a nil value in EURO's minority  interest  account,  Golden Star  recognized a $1.0 million gain on the transaction.  27.      Subsequent Event  In March 2006, we exercised our remaining 1.0 million Moto warrants bringing our total ownership in Moto to 6.0 million shares and immediately afterward sold all six million  common shares in a bought-deal  transaction  in Canada for Cdn$7.50 per share. The sale of the six million shares resulted in net proceeds to Golden Star of  Cdn$45.0  million  ($38.9  million).  The sale is  expected  to realize approximately  $30.3 million of pre-tax capital gain for Golden Star, which will be recorded as income in the first quarter.  28.      Generally Accepted Accounting Principles in the United States  Our  consolidated  financial  statements  have been prepared in accordance  with accounting  principles  generally accepted in Canada, which differ from US GAAP. The effect of applying US GAAP to our financial statements is shown below.                                          101        (a) Consolidated Balance Sheets Under US GAAP                          As of December 31,                                                                   ----------------------------                                                                            2005          2004 - ---------------------------------------------------------------------------------------------- ASSETS Current assets:    Cash and cash equivalents                                            $89,709       $12,877    Short term investments                                                     -        38,850    Accounts receivable                                                    6,560         3,592    Inventories                                                           23,181        15,366    Due from sale of property                                                  -         1,000    Current tax assets                                                     6,248         1,542    Fair value of derivatives                                              1,220             -    Deposits                                                               5,185         5,102    Other current assets                                                     686           517 - ----------------------------------------------------------------------------------------------        Total current assets                                             132,789        78,846  Restricted cash                                                           3,865         3,351 Long term investments (Notes d1 and  d2)                                 15,182         4,132 Deferred exploration and development costs (Notes d3 and d4)            155,649             - Property, plant and equipment (Note d5)                                  83,813        28,653 Mine construction in progress                                            36,706        49,430 Mining properties (Notes d3, d4 and d5)                                  81,504        52,586 Deferred stripping (Note d6)                                              1,548         1,357 Loan acquisition costs                                                    1,020             - Deferred tax asset                                                        8,223             - Other assets                                                              2,144         1,617 - ----------------------------------------------------------------------------------------------          Total assets                                                  $522,443      $219,972 ============================================================================================== LIABILITIES Current liabilities                                                     $40,815       $17,480 Long term debt (Note d7)                                                 66,632         1,707 Asset retirement obligations                                              8,286         8,660 Future tax liability                                                     45,072             - Fair value of long term derivatives                                       7,263             - - ----------------------------------------------------------------------------------------------        Total liabilities                                                168,068        27,847 - ----------------------------------------------------------------------------------------------  Minority interest                                                         1,964         3,899 Commitments and contingencies                                                 -             -  SHAREHOLDERS' EQUITY Share capital (Note d8)                                                 519,540       339,524 Contributed surplus                                                       8,294         2,040 Accumulated comprehensive income and other (Note d2)                      8,179         1,316 Deficit                                                                (183,602)     (154,654) - ----------------------------------------------------------------------------------------------        Total shareholders' equity                                       352,411       188,226 - ----------------------------------------------------------------------------------------------          Total liabilities and shareholders' equity                    $522,443      $219,972 - ----------------------------------------------------------------------------------------------                                          102        (b)  Consolidated Statements of Operations under US GAAP                    For the Years ended December 31,                                                                            ----------------------------------                                                                                  2005       2004        2003 - ------------------------------------------------------------------------------------------------------------- Net income under Cdn GAAP                                                    $(13,531)    $2,642     $21,956 Deferred exploration expenditures expensed per US GAAP (Note d3)              (14,597)    (5,735)     (5,252) Net loss at Wasa mine prior to Canadian GAAP in-service date (Note d5)         (4,888)         -           - Write-of of deferred exploration properties (Note d3)                           1,403          -           - Capitalized mine property acquisition costs expensed for US GAAP (Note d4)          -     (6,799)     (4,763) Other  (Notes d3 and d7)                                                          455          -           - - ------------------------------------------------------------------------------------------------------------- Net income/(loss) under US GAAP before minority interest                      (31,158)    (9,892)     11,941 Minority interest, as adjusted                                                  2,210        746         933 - ------------------------------------------------------------------------------------------------------------- Net income/(loss) under US GAAP before cumulative effect of change in  accounting method                                                            (28,948)    (9,146)     12,874 Cumulative effect of change in accounting method                                    -          -         483 - ------------------------------------------------------------------------------------------------------------- Net Income/(loss) under US GAAP                                               (28,948)    (9,146)     13,357 Other comprehensive income - gain on marketable securities (Note d2)            8,179          -        (548) - ------------------------------------------------------------------------------------------------------------- Comprehensive income/(loss)                                                  $(20,769)   $(9,146)    $12,809 - -------------------------------------------------------------------------------------------------------------  Basic net income/(loss) per share under US GAAP before cumulative effect of  change in accounting method                                                  $(0.202)   $(0.066)     $0.116 Cumulative effect of change in accounting method                                    -          -       0.004 Basic net income/(loss) per share under US GAAP after cumulative effect of  change in accounting method                                                  $(0.202)   $(0.066)     $0.120 - -------------------------------------------------------------------------------------------------------------  Diluted net income/(loss) per share under US GAAP before cumulative effect  of change in accounting method                                               $(0.202)   $(0.066)     $0.109 Cumulative effect of change in accounting method                                    -          -       0.004 Diluted net income/(loss) per share under US GAAP after cumulative effect  of change in accounting method                                               $(0.202)   $(0.066)     $0.113 - -------------------------------------------------------------------------------------------------------------        (c)  Consolidated  Statements of Cash Flows under US GAAP                    For the years ended December 31,                                                                              --------------------------------                                                                                  2005       2004        2003 - ------------------------------------------------------------------------------------------------------------- Cash provided by (used in):           Operating Activities                                                $(27,530)  $    575   $ 19,029           Investing activities                                                 (38,899)   (95,113)   (57,993)           Financing activities                                                 143,261     17,445    108,918 - ------------------------------------------------------------------------------------------------------------- Increase/(Decrease) in cash and cash equivalents for the year                   76,832    (77,093)    69,954 Cash and cash equivalent beginning of the year                                  12,877     89,970     20,016 - ------------------------------------------------------------------------------------------------------------- Cash and cash equivalents end of the year                                     $ 89,709   $ 12,877   $ 89,970 - -------------------------------------------------------------------------------------------------------------   (e)      Notes.       (1)  Minority  investments  in  entities  whose  major  business is mineral           exploration  are deemed for US GAAP to be  equivalent  to  exploration           spending and are expensed as incurred.       (2)  Under US GAAP,  investments in marketable equity securities are marked           to  fair  value  at the end of  each  period  with  gains  and  losses           recognized  in the statement of  operations.  Under Cdn GAAP gains and           losses on marketable equity securities are noted in the foot notes and           recognized in the statement of operations  only when the investment is           sold.       (3)  Under US GAAP, exploration, acquisition and general and administrative           costs  related  to  exploration  projects  are  charged  to expense as           incurred. Under Cdn GAAP, exploration,  acquisition and direct general           and   administrative   costs  related  to  exploration   projects  are           capitalized. In each subsequent period, the exploration,  engineering,           financial  and  market  information  for each  exploration  project is           reviewed by  management to determine if any of the  capitalized  costs           are impaired. If found impaired,  the asset's cost basis is reduced in           accordance with Cdn GAAP provisions.       (4)  Under US GAAP,  the  initial  purchase  cost of mining  properties  is           capitalized.  Pre-acquisition  costs and subsequent  development costs           incurred,  until such time as a final  feasibility study is completed,           are  expensed in the period  incurred.  Under Cdn GAAP,  the  purchase           costs  of new  mining  properties  as  well as all  development  costs           incurred after  acquisition are capitalized and subsequently  reviewed           each period for impairment.  If found impaired, the asset's cost basis           is reduced in accordance with Cdn GAAP provisions.                                          103        (5)  Under US GAAP new production facilities are placed in service once the           facility has been  constructed  and fully tested to the point where it           can be shown that it is capable of  producing  its  intended  product.           Under Cdn GAAP new  production  facilities  are placed in service when           output  reaches  a  significant   portion  of  the  facility's  design           capacity.  As such,  the new Wassa mine and  processing  operation was           placed in  service on  January  1, 2005 for US GAAP  purposes  and was           placed  in  service  on April  1,  2005  for Cdn  GAAP  purposes.  All           operating expenses, including ARO accretion,  depreciation,  depletion           and  amortization  and  work in  process  inventory  adjustments  were           recognized in the statement of operations for US GAAP during the first           quarter of 2005 while such  costs  were  capitalized  net of  revenues           generated for Cdn GAAP.       (6)  In March  2005,  the  Emerging  Issues  Task  Force  of the  Financial           Accounting  Standards  Board issued  statement  04-6  "Accounting  for           Stripping  Costs Incurred  During  Production in the Mining  Industry"           ("EITF  04-6") which  precludes  deferral of stripping  costs during a           mine's production  phase.  EITF 04-6 requires that deferred  stripping           costs be considered a variable  production cost. The new pronouncement           is  effective  January  1, 2006 and  transition  provisions  allow any           remaining  balances in deferred  stripping asset accounts to be closed           directly  to  retained  earnings  on January  1,  2006.  In Canada the           Emerging Issues  Committee  ("EIC") has since issued a "Draft Abstract           of Issue Discussed"  titled "D56 Accounting for Stripping Costs in the           Mining  Industry"  which  concludes that deferred  stripping  could be           retained as an  acceptable  accounting  method in Canada under certain           circumstances.  We have opted to  discontinue  deferral of  production           phase  stripping  costs as of January 1, 2006 for both US and Cdn GAAP           and thus will have no accounting  differences  between US and Canadian           GAAP in this area.       (7)  For US GAAP purposes,  100% of the $50.0 million of convertible  notes           issued in the second  quarter of 2005 was  classified  as a liability.           Under Cdn GAAP, the fair value of the conversion feature is classified           as equity and the  balance is  classified  as a  liability.  Under Cdn           GAAP,  the liability  portion is accreted each period in amounts which           will increase the liability to its full amount as of the maturity date           and the accretion is recorded as interest expense.       (8)  Numerous  transactions  since the Company's  organization in 1992 have           contributed  to the  difference in share  capital  versus the Cdn GAAP           balance,  including:  (i)  under US  GAAP,  compensation  expense  was           recorded  for the  difference  between  quoted  market  prices and the           strike price of options granted to employees and directors under stock           option plans while under Cdn GAAP, recognition of compensation expense           was not  required;  (ii)  in May  1992  our  accumulated  deficit  was           eliminated through an amalgamation (defined as a  quasi-reorganization           under US GAAP);  - under US GAAP the  cumulative  deficit  was greater           than the deficit under Cdn GAAP due to the past  write-offs of certain           deferred  exploration  costs;  and (iii) gains  recognized in Cdn GAAP           upon issuances of subsidiaries' shares are not allowed under US GAAP.       (9)  Impact of Recently Issued Accounting Standards.                 In June 2005, the Financial  Accounting Standards Board, which we                refer to as the "FASB",  issued SFAS No. 154, "Accounting Changes                and Error  Corrections",  applying  to all  voluntary  accounting                principle  changes as well as the accounting for and reporting of                such  changes.   SFAS  No.  154  replaces  APB  Opinion  No.  20,                "Accounting  Changes",  and SFAS  No.  3,  "Reporting  Accounting                Changes  in  Interim  Financial  Statements."  SFAS  No.  154  is                effective for accounting  changes and  corrections of errors made                in fiscal years  beginning  after  December  15, 2005.  We do not                expect SFAS No. 154 to affect our financial  condition or results                of operations.                 In March 2005, the FASB issued  Interpretation No. 47 ("FIN 47"),                Accounting for Conditional Asset Retirement  Obligations." FIN 47                clarifies   that  an  entity  must  record  a  liability   for  a                "conditional"  asset  retirement  obligation if the fair value of                the  obligation  can be  reasonably  estimated.  The provision is                effective  no later  than the end of fiscal  years  ending  after                December 15, 2005. FIN 47 had no material impact on our financial                condition or results of operations in 2005.                                          104                  In December 2004,  the FASB  finalized SFAS No. 123R  Share-Based                Payment,  amending  SFAS No. 123,  effective  beginning our first                quarter of fiscal 2006. SFAS 123R requires the Company to expense                stock  options  based on grant date fair  value in its  financial                statements. Further, the SFAS 123R requires additional accounting                related to the  income  tax  effects  and  additional  disclosure                regarding  the  cash  flow  effects  resulting  from  share-based                payment  arrangements.  In March 2005,  the U.S.  Securities  and                Exchange  Commission (the "SEC") issued Staff Accounting Bulletin                ("SAB") No. 107, which expresses views of the SEC staff regarding                the  interaction  between  SFAS  123R and  certain  SEC rules and                regulations,   and  provides  the  staff's  views  regarding  the                valuation  of  share-based   payment   arrangements   for  public                companies.  We adopted the optional provisions of FAS 123 in 2003                and have expensed share based payments since that time.                 In December  2004,  the FASB issued SFAS No. 153,  "Exchanges  of                Non-monetary  Assets,  an Amendment of APB Opinion No. 29", which                is  effective  for  non-monetary  exchanges  occurring  in fiscal                periods  beginning  after June 15, 2005.  SFAS No. 153 amends APB                Opinion No. 29,  "Accounting for  Non-monetary  Transactions"  to                eliminate  the exception  for  non-monetary  exchanges of similar                productive  assets and replaces it with a general  exception  for                exchanges  of  non-monetary  assets  that do not have  commercial                substance.  A non-monetary  exchange has commercial  substance if                the  future  cash  flows of the  entity  are  expected  to change                significantly as a result of the exchange.  We do not expect SFAS                No.  153  to  affect  our  financial   condition  or  results  of                operations.                 In November 2004, the FASB issued SFAS No. 151,  "Inventory Costs                an amendment of ARB 43,  Chapter 4." SFAS No. 151 clarifies  that                abnormal  amounts of idle  facility  expense,  freight,  handling                costs,  and wasted  materials(spoilage)  should be  recognized as                current-period  charges  and  requires  the  allocation  of fixed                productions  overheads to inventory  based on the normal capacity                of the  production  facilities.  SFAS No.  151 is  effective  for                fiscal years beginning after June 15, 2005. We do not expect SFAS                No.  151  to  affect  our  financial   condition  or  results  of                operations.                 FASB Staff Position No. FAS 115-1 and FAS 124-1,  "The Meaning of                Other-Than-Temporary  Impairment  and Its  Application to Certain                Investments"  (the  "FSP"),  was  issued  in  November  2005  and                addresses the  determination  of when an investment is considered                impaired; whether the impairment is other than temporary; and how                to measure an impairment loss. The FSP also addresses  accounting                considerations    subsequent   to   the    recognition    of   an                other-than-temporary  impairment on a debt security, and requires                certain  disclosures  about unrealized  losses that have not been                recognized as other-than-temporary  impairments. The FSP replaces                the impairment guidance in EIFT Issue No. 03-1 with references to                existing authoritative literature concerning other-than-temporary                determinations (principally SFAS No. 115 and SEC Staff Accounting                Bulletin 59). Under the FSP, impairment losses must be recognized                in earnings equal to the entire difference between the security's                cost and its fair value at the financial  statement date, without                considering  partial recoveries  subsequent to that date. The FSP                also requires that an investor recognize an  other-than-temporary                impairment  loss when a decision to sell a security has been made                and the  investor  does not expect the fair value of the security                to fully recover  prior to the expected time of sale.  The FSP is                effective  for reporting  periods  beginning  after  December 15,                2005.  We do not  expect  a  material  impact  on  our  financial                condition  or results of  operations  upon  adoption  of this new                guidance.                 In March 2005,  the Emerging  Issues Task Force of the  Financial                Accounting  Standards Board issued statement 04-6 "Accounting for                Stripping  Costs  Incurred   During   Production  in  the  Mining                Industry"  ("EITF  04-6") which  precludes  deferral of stripping                costs during a mine's  production  phase. EITF 04-6 requires that                deferred  stripping  costs be  considered  a variable  production                cost.  The new  pronouncement  is  effective  January 1, 2006 and                transition  provisions  allow any remaining  balances in deferred                stripping  asset  accounts  to be  closed  directly  to  retained                earnings on January 1, 2006. In line with this new pronouncement,                we will close the $1.5 million remaining deferred stripping asset                balance directly to retained earnings on January 1, 2006.                                          105                  Following the change in US GAAP,  the Emerging  Issues  Committee                ("EIC") in Canada  issued a "Draft  Abstract of Issue  Discussed"                titled  "D56   Accounting  for  Stripping  Costs  in  the  Mining                Industry"  which  concluded  that  deferred  stripping  could  be                retained as an acceptable  accounting method in Canada.  Based on                this new  development  in Cdn GAAP,  we plan to continue  using a                deferred  stripping policy for our Cdn GAAP financial  statements                and will thus have a US/Cdn GAAP  difference  related to deferred                stripping costs after December 31, 2005.  29.      Quarterly Financial Data              Summary of Quarterly Results   ($ millions, execept per share data)             (unaudited) - ------------------------------------------------------------------------------------------                      2005 Quarters ended (1)                    2004 Quarters ended                    -----------------------------------------------------------------------                     Dec. 31 Sept. 30 June 30 March 31  Dec. 31 Sept. 30  June 30 March 31 - ------------------------------------------------------------------------------------------ Revenues              $27.7   $24.7    $24.9    $18.1    $15.2    $13.4    $16.5    $19.9 Net  earnings/(loss)       (1.0)   (6.7)    (3.7)    (2.2)     0.6     (4.3)     1.1      5.2 - ------------------------------------------------------------------------------------------ Net earnings/(loss)  per share   Basic              $(0.01) $(0.05)  $(0.03)  $(0.02)   $0.00   $(0.03)   $0.01    $0.04   Diluted            $(0.01) $(0.05)  $(0.03)  $(0.02)    0.00    (0.03)    0.01     0.04 - ------------------------------------------------------------------------------------------   (1) Quarters  one, two and three have been restated as if hedge  accounting  had not been applied to EURO's gold futures contracts. (See Item 9A below). EURO did not apply hedge accounting to quarter four and thus it is not restated.
There have been no disagreements with  PricewaterhouseCoopers LLP, our auditors, regarding  any  matter  of  accounting  principles  or  practices  or  financial statement disclosure.
Evaluation of Disclosure Controls and Procedures:  As of December 31, 2005, an evaluation was carried out under the supervision and with  the  participation  of  the  Company's  management,  including  the  Chief Executive  Officer and Chief  Financial  Officer,  of the  effectiveness  of the design and operation of Golden Star's  disclosure  controls and  procedures  (as defined in Rules  13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934).  Based on the evaluation the Chief Executive  Officer and Chief Financial Officer  have  concluded  that as of December 31, 2005  disclosure  controls and procedures  were not effective,  because of the material  weakness  discussed in managements report on internal control over financial reporting.  Management's report on internal control over financial reporting:  Management  of Golden  Star is  responsible  for  establishing  and  maintaining adequate  internal  control over  financial  reporting.  Golden Star's  internal control over financial  reporting is a process designed under the supervision of Golden Star's Chief  Executive  Officer and Chief  Financial  Officer to provide reasonable  assurance  regarding the reliability of financial  reporting and the preparation  of  the  Company's  financial  statements  for  external  reporting purposes in accordance with Canadian GAAP.  As of December 31, 2005, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the criteria established in Internal  Control - Integrated  Framework issued by the Committee of Sponsoring  Organizations of the Treadway  Commission (COSO). This assessment identified  one  control  deficiency  in the  Company's  internal  control  over financial  reporting  that  constitutes a material  weakness,  as defined by the Public  Company  Accounting  Oversight  Board's  Auditing  Standard  No. 2, that existed as of December 31, 2005.  As of December  31, 2005,  management  did not maintain  effective  controls over the presentation and documentation of certain derivatives.  Specifically,  the Company did not prepare and maintain sufficient documentation to support the designation and  effectiveness of hedges of certain gold future  contracts  entered into by its subsidiary,  EURO  Ressources  S.A., during  2005.  This  control  deficiency  resulted  in the  requirement  for the restatement of the Company's  consolidated financial statements for the quarters ended March 31, June 30 and  September  30, 2005 and an audit  adjustment to the 2005  annual  consolidated  financial  statements.  In  addition,  this  control deficiency  could  result  in a  misstatement  of  derivative  related  accounts including fair value of derivatives and  mark-to-market  adjustments  that would result  in a  material  misstatement  of  the  interim  or  annual  consolidated financial  statements  that would not be prevented  or detected.  Because of the existence of the  deficiency in question at year-end,  management  has concluded that the Company's internal control over financial  reporting was ineffective as of December 31, 2005.  Our assessment  excluded St. Jude Resources Ltd.  because it was acquired by the Company in a purchase  business  combination  on  December  21,  2005.  St. Jude Resources  assets  represent 28% of our  consolidated  assets as of December 31, 2005.  Management's  assessment of the effectiveness of the Company's  internal control over  financial   reporting  as  of  December  31,  2005  has  been  audited  by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated  in  their  report  appearing  on  pages  75 and  76 of the  Consolidated Financial  Statements,  which  expresses an unqualified  opinion on management's assessment  and,  due to the  control  deficiency  described  above,  an adverse opinion with respect to the effectiveness of the Company's internal control over financial reporting as of December 31, 2005.  Management's report on Consolidated Financial Statements  Management  has concluded that the  consolidated  financial  statements  present fairly, in all material  respects,  the financial  position of the Company as at December 31, 2005 and 2004 and the results of its  operations and its cash flows for each of the three years in the period ended  December 31, 2005 in accordance with  Canadian  generally  accepted  accounting  principles.   The  consolidated financial statements have been audited by  PricewaterhouseCoopers  LLP as stated in their report which expressed an unqualified opinion thereon.
None.                                          106   ITEMS 10, 11, 12, 13 AND 14  In accordance with General  Instruction  G(3), the information  required by Part III is hereby  incorporated  by reference  from our proxy  statement to be filed pursuant to Regulation 14A not later than 120 days after the fiscal year covered by this report.
(h)  The following documents are filed as part of this Report:            (i)  Financial Statements            o    Management's Report           o    Auditors' Report           o    Consolidated Balance Sheets as of December 31, 2005 and 2004           o    Consolidated   Statements  of  Operations  for  the  years  ended                December 31, 2005, 2004 and 2003           o    Consolidated  Statements of Changes in  Shareholders'  Equity for                the years ended December 31, 2005, 2004 and 2003           o    Consolidated  Statements  of  Cash  Flows  for  the  years  ended                December 31, 2005, 2004 and 2003           o    Notes to the Consolidated Financial Statements            (ii) Financial Statement Schedules                 Financial  Statement  schedules  have been omitted since they are                either  not  required,  are  not  applicable,   or  the  required                information  is  shown in the  financial  statements  or  related                notes.       (i)  Exhibits   3(i) Incorporating Documents of the Company, including:  Articles of Arrangement      dated May 14, 1992, with Plan of Arrangement attached,  with Certificate of      Amendment with respect thereto dated May 15, 1992; Certificate of Amendment      dated May 15, 1992,  with Articles of Amendment;  Certificate  of Amendment      dated March 26, 1993,  with Articles of Amendment;  Articles of Arrangement      dated March 7, 1995, with Plan of Arrangement attached, with Certificate of      Amendment  with  respect  thereto  dated  March 14,  1995;  Certificate  of      Amendment dated July 29, 1996, with Articles of Amendment;  and Certificate      of  Amendment  dated  July  10,  2002,  with  Articles  of  Amendment  (all      incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed on      January 23, 2003); Articles of Amendment dated May 6, 2005  3(ii) Bylaws of the Company,  including:  Bylaw Number One, amended and restated      as of April 3,  2002  (incorporated  by  reference  to  Exhibit  4.3 to the      Company's Registration Statement on Form S-3 (Reg. No. 333-102225) filed on      December 27, 2002);  Bylaw Number Two, effective May 15, 1992 (incorporated      by reference to Exhibit 4.2 to the Company's  Form 8-K filed on January 23,      2003);  and Bylaw Number  Three,  effective May 15, 1992  (incorporated  by      reference  to Exhibit  4.2 to the  Company's  Form 8-K filed on January 23,      2003)  4.1  Form of Specimen  Certificate for Common Shares  (incorporated by reference      to Exhibit 4.1 to the Company's  Registration Statement on Form S-3/A (Reg.      No. 333-91666) filed on July 15, 2002)  4.2  Amended  and  Restated  Shareholder's  Rights Plan dated as of May 20, 2004      between  the  Company  and CIBC  Mellon  Trust  Company,  as  rights  agent      (incorporated  by reference to Exhibit 4.1 to the Company's  Form 8-K filed      June 3, 2004)  4.9  Warrant  Indenture,  dated as of February 14, 2003, between the Company and      CIBC Mellon Trust Company,  including the Form of Warrant  (incorporated by      reference  to Exhibit 4.1 of the  Company's  Form 8-K filed on February 14,      2003)  4.11 Securities  Purchase Agreement dated April 15, 2005 between the Company and      Amaranth LLC  (incorporated  by  reference to Exhibit 4.1 to the  Company's      Form 8-K filed on April 19, 2005)                                          107   4.12 Form of Senior  Convertible  Note dated  April 15,  2005  (incorporated  by      reference to Exhibit 4.2 to the Company's Form 8-K filed on April 19, 2005)  4.13 Registration  Rights Agreement dated April 15, 2005 between the Company and      Amaranth LLC  (incorporated  by  reference to Exhibit 4.3 to the  Company's      Form 8-K filed on April 19, 2005)  4.14 Form of Warrant issued to warrantholders of St. Jude Resources Ltd.  4.15 Form of Option issued to optionholders of St. Jude Resources Ltd.  10.1 Summary of Executive  Management  Performance  Bonus Plan  (incorporated by      reference  to Exhibit 10.1 of the  Company's  Form 8-K filed on January 23,      2003)  10.2 Second  Amended and Restated 1997 Stock Option Plan,  effective as of April      8, 2004  (incorporated  by reference to Exhibit 10.2 to the Company's  Form      10-K for the year ended December 31, 2004)  10.3 Form of Indemnification  Agreement between the Company and its officers and      directors  (incorporated by reference to Exhibit 10.3 of the Company's Form      8-K filed on January 23, 2003)  10.4 Employees'  Stock  Bonus  Plan  amended  and  restated  to  April  6,  2000      (incorporated  by reference to Exhibit 10(j) to the Company's Form 10-K for      the year ended December 31, 2000)  10.5 Guyanor  Ressources  S.A. Stock Option Plan amended and restated as of June      15,  1999  (English  translation)  (incorporated  by  reference  to Exhibit      10.35(a) to the Company's Form 10-K for the year ended December 31, 1999)  10.6 Amended and Restated  Employment  Agreement  with Mr. Peter  Bradford dated      April 30, 2004 (incorporation by reference to Exhibit 10.7 to the Company's      Form 10-K for the year ended December 31, 2004);  Letter Agreement amending      Mr. Bradford's Amended and Restated Employment  Agreement dated February 3,      2005  (incorporated  by reference to the  Company's  Form 10-K for the year      ended December 31, 2004)  10.7 Amended and Restated  Employment  Agreement  with Mr. Allan J. Marter dated      April 30, 2004 (incorporation by reference to Exhibit 10.8 to the Company's      Form 10-K for the year ended December 31, 2004)  10.8 Amended and Restated  Employment  Agreement  with Dr.  Douglas  Jones dated      April 30, 2004 (incorporation by reference to Exhibit 10.9 to the Company's      Form 10-K for the year ended December 31, 2004)  10.9 Amended and Restated Employment Agreement with Mr. Bruce Higson-Smith dated      April  30,  2004  (incorporation  by  reference  to  Exhibit  10.10  to the      Company's Form 10-K for the year ended December 31, 2004)  10.10 Amended and Restated  Employment  Agreement with Mr. Richard Q. Gray dated      April  30,  2004  (incorporation  by  reference  to  Exhibit  10.11  to the      Company's Form 10-K for the year ended December 31, 2004)  10.11 Agreements  between the Company and its outside  directors  granting  them      options to purchase Guyanor Class "B" common shares,  (1) dated December 8,      1995, and December 10, 1996  (incorporated by reference as Exhibit 10.39 to      the Company's  Form 10-K for the year ended  December 31, 1996),  (2) dated      December 9, 1997  (incorporated  by  reference  to Exhibit  10.39(a) to the      Company's  Form  10-K for the year  ended  December  31,  1997),  (3) dated      December 8, 1998  (incorporated  by  reference  to Exhibit  10.39(b) to the      Company's Form 10-K for the year ended  December 31, 1998),  (4) dated June      15, 1999  (incorporated  by reference to Exhibit  10.39(c) to the Company's      Form 10-K for the year ended  December 31, 1999),  and (5) dated August 16,      2001 (incorporated by reference to Exhibit 10.11 to the Company's Form 10-K      for the year ended December 31, 2002)  10.12 Agreement,  dated  November  16,  2001,  between  Bogoso Gold  Limited and      Prestea Gold  Resources  Limited for the  purchase of Prestea  mining lease      rights and option  payments  (incorporated  by reference to Exhibit 10.2 to      the Company's Form 8-K filed on March 6, 2002)  10.13 Guiana Shield  Transaction  Agreement  with Cambior Inc. dated October 25,      2001 for the sale and swap of Golden  Star's  interest in Gross Rosebel and      other  properties  (incorporated  by  reference  to  Exhibit  10.3  to  the      Company's Form 8-K filed March 6, 2002)  10.14 Mining  lease,  dated  August 16,  1988,  between  the  Government  of the      Republic of Ghana and Canadian Bogosu  Resources  Limited,  relating to the      Bogoso property                                          108   10.15 Mining  lease,  dated  August 21,  1987,  between  the  Government  of the      Republic of Ghana and Canadian Bogosu  Resources  Limited,  relating to the      Bogoso property  10.16 Mining lease,  dated June 29, 2001, between the Government of the Republic      of  Ghana  and  Bogoso  Gold  Limited,  relating  to the  Prestea  property      (incorporated  by reference to Exhibit 10.1 to the Company's Form 8-K filed      on March 6, 2002)  10.17 Mining  lease,  dated  September  17, 1992 between the  Government  of the      Republic of Ghana and Satellite Goldfields Limited, with letter dated April      25, 2002 form the Ministry of Mines  consenting  to  assignment  to Wexford      Goldfields Ltd., relating to the Wassa property (incorporation by reference      to Exhibit 10.26 to the Company's Form 10-K for the year ended December 31,      2004)  10.18 Mining lease dated June 29, 2001,  between the  Government of the Republic      of Ghana and Prestea Gold  Resources,  relating to the Prestea  underground      property (incorporation by reference to Exhibit 10.27 to the Company's Form      10-K for the year ended December 31, 2004)  10.19 Joint  Operating  Agreement,  dated January 31, 2002,  between Bogoso Gold      Limited and Prestea Gold Resources  Limited  (incorporated  by reference to      Exhibit  10.25 to the Company's  Form 10-K for the year ended  December 31,      2002)  10.20 Memorandum  of  Agreement,  dated  March  14,  2002,  among  Prestea  Gold      Resources,  Bogoso Gold  Limited and others  (incorporated  by reference to      Exhibit  10.26 to the Company's  Form 10-K for the year ended  December 31,      2002)  10.21 Letter  agreement  between the Company and Guyanor  Ressources  S.A. dated      September 30, 2004 relating to sale of Gross  Rosebel  Participation  Right      (incorporated  by reference to Exhibit 10.30 to the Company's Form 10-K for      the year ended December 31, 2004)  10.22 Arrangement  Agreement dated November 11, 2005 between the Company and St.      Jude  Resources  Ltd.  (incorporated  by  reference  to Exhibit  2.1 to the      Company's Form 8-K filed on November 17, 2005)  10.23 Executive  Employment  Agreement,  dated July 1, 2002,  between  St.  Jude      Resources Ltd. and Bluestar Management Inc.  10.24 License  Agreement,  dated June 28, 2004 between Biomin  Technologies S.A.      and Bogoso Gold Limited  14   Code of Ethics for Directors,  Senior Executive and Financial  Officers and      Other Executive Officers  21   Subsidiaries of the Company  23.1 Consent of PricewaterhouseCoopers LLP  23.2 Consent of Colin Jones  31.1 Certification of Principal Executive Officer pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002  31.2 Certification of Principal Financial Officer pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002  32.1 Certificate  of  Principal  Executive  Officer  pursuant to 18 U.S.C.  1350      (Section 906 of the Sarbanes-Oxley Act of 2002)  32.2 Certificate  of  Principal  Financial  Officer  pursuant to 18 U.S.C.  1350      (Section 906 of the Sarbanes-Oxley Act of 2002)                                          109   SIGNATURES  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.                                                       GOLDEN STAR RESOURCES LTD.                                                      Registrant                                                                By:      /s/ Peter J. Bradford                                                         ----------------------------------------------------------                                                               Peter J. Bradford                                                               President and Chief Executive Officer                                                       Date:    March 27, 2006   Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:   By:      /s/ Peter J. Bradford                             By:      /s/ Allan J. Marter          --------------------------------------------               ------------------- Name:    Peter J. Bradford                                 Name:    Allan J. Marter Title:   President and Chief Executive Officer             Title:   Senior Vice-President and Chief Financial Officer Date:    March 27, 2006                                    Date:    March 27, 2006  By:      /s/ James E. Askew                                By:      /s/ David L. Bumstead          --------------------------------------------               --------------------- Name:    James E. Askew                                    Name:    David L. Bumstead Title:   Director                                          Title:   Director Date:    March 27, 2006                                    Date:    March 27, 2006  By:      /s/ David K. Fagin                                By:      /s/ Ian MacGregor          --------------------------------------------               ----------------- Name:    David K. Fagin                                    Name:    Ian MacGregor Title:   Director                                          Title:   Director Date:    March 27, 2006                                    Date:    March 27, 2006  By:      /s/ Michael Martineau                             By:      /s/ Michael Terrell          --------------------------------------------               ------------------- Name:    Michael Martineau                                 Name:    Michael Terrell Title:   Director                                          Title:   Director Date:    March 27, 2006                                    Date:    March 27, 2006                                           110                                       EXHIBITS  3(i) Incorporating Documents of the Company, including:  Articles of Arrangement      dated May 14, 1992, with Plan of Arrangement attached,  with Certificate of      Amendment with respect thereto dated May 15, 1992; Certificate of Amendment      dated May 15, 1992,  with Articles of Amendment;  Certificate  of Amendment      dated March 26, 1993,  with Articles of Amendment;  Articles of Arrangement      dated March 7, 1995, with Plan of Arrangement attached, with Certificate of      Amendment  with  respect  thereto  dated  March 14,  1995;  Certificate  of      Amendment dated July 29, 1996, with Articles of Amendment;  and Certificate      of  Amendment  dated  July  10,  2002,  with  Articles  of  Amendment  (all      incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed on      January 23, 2003); Articles of Amendment dated May 6, 2005  3(ii) Bylaws of the Company,  including:  Bylaw Number One, amended and restated      as of April 3,  2002  (incorporated  by  reference  to  Exhibit  4.3 to the      Company's Registration Statement on Form S-3 (Reg. No. 333-102225) filed on      December 27, 2002);  Bylaw Number Two, effective May 15, 1992 (incorporated      by reference to Exhibit 4.2 to the Company's  Form 8-K filed on January 23,      2003);  and Bylaw Number  Three,  effective May 15, 1992  (incorporated  by      reference  to Exhibit  4.2 to the  Company's  Form 8-K filed on January 23,      2003)  4.1  Form of Specimen  Certificate for Common Shares  (incorporated by reference      to Exhibit 4.1 to the Company's  Registration Statement on Form S-3/A (Reg.      No. 333-91666) filed on July 15, 2002)  4.2  Amended  and  Restated  Shareholder's  Rights Plan dated as of May 20, 2004      between  the  Company  and CIBC  Mellon  Trust  Company,  as  rights  agent      (incorporated  by reference to Exhibit 4.1 to the Company's  Form 8-K filed      June 3, 2004)  4.9  Warrant  Indenture,  dated as of February 14, 2003, between the Company and      CIBC Mellon Trust Company,  including the Form of Warrant  (incorporated by      reference  to Exhibit 4.1 of the  Company's  Form 8-K filed on February 14,      2003)  4.11 Securities  Purchase Agreement dated April 15, 2005 between the Company and      Amaranth LLC  (incorporated  by  reference to Exhibit 4.1 to the  Company's      Form 8-K filed on April 19, 2005)  4.12 Form of Senior  Convertible  Note dated  April 15,  2005  (incorporated  by      reference to Exhibit 4.2 to the Company's Form 8-K filed on April 19, 2005)  4.13 Registration  Rights Agreement dated April 15, 2005 between the Company and      Amaranth LLC  (incorporated  by  reference to Exhibit 4.3 to the  Company's      Form 8-K filed on April 19, 2005)  4.14 Form of Warrant issued to warrantholders of St. Jude Resources Ltd.  4.15 Form of Option issued to optionholders of St. Jude Resources Ltd.  10.1 Summary of Executive  Management  Performance  Bonus Plan  (incorporated by      reference  to Exhibit 10.1 of the  Company's  Form 8-K filed on January 23,      2003)  10.2 Second  Amended and Restated 1997 Stock Option Plan,  effective as of April      8, 2004  (incorporated  by reference to Exhibit 10.2 to the Company's  Form      10-K for the year ended December 31, 2004)  10.3 Form of Indemnification  Agreement between the Company and its officers and      directors  (incorporated by reference to Exhibit 10.3 of the Company's Form      8-K filed on January 23, 2003)  10.4 Employees'  Stock  Bonus  Plan  amended  and  restated  to  April  6,  2000      (incorporated  by reference to Exhibit 10(j) to the Company's Form 10-K for      the year ended December 31, 2000)  10.5 Guyanor  Ressources  S.A. Stock Option Plan amended and restated as of June      15,  1999  (English  translation)  (incorporated  by  reference  to Exhibit      10.35(a) to the Company's Form 10-K for the year ended December 31, 1999)  10.6 Amended and Restated  Employment  Agreement  with Mr. Peter  Bradford dated      April 30, 2004 (incorporation by reference to Exhibit 10.7 to the Company's      Form 10-K for the year ended December 31, 2004);  Letter Agreement amending      Mr. Bradford's Amended and Restated Employment  Agreement dated February 3,      2005  (incorporated  by reference to the  Company's  Form 10-K for the year      ended December 31, 2004)                                          111   10.7 Amended and Restated  Employment  Agreement  with Mr. Allan J. Marter dated      April 30, 2004 (incorporation by reference to Exhibit 10.8 to the Company's      Form 10-K for the year ended December 31, 2004)  10.8 Amended and Restated  Employment  Agreement  with Dr.  Douglas  Jones dated      April 30, 2004 (incorporation by reference to Exhibit 10.9 to the Company's      Form 10-K for the year ended December 31, 2004)  10.9 Amended and Restated Employment Agreement with Mr. Bruce Higson-Smith dated      April  30,  2004  (incorporation  by  reference  to  Exhibit  10.10  to the      Company's Form 10-K for the year ended December 31, 2004)  10.10 Amended and Restated  Employment  Agreement with Mr. Richard Q. Gray dated      April  30,  2004  (incorporation  by  reference  to  Exhibit  10.11  to the      Company's Form 10-K for the year ended December 31, 2004)  10.11 Agreements  between the Company and its outside  directors  granting  them      options to purchase Guyanor Class "B" common shares,  (1) dated December 8,      1995, and December 10, 1996  (incorporated by reference as Exhibit 10.39 to      the Company's  Form 10-K for the year ended  December 31, 1996),  (2) dated      December 9, 1997  (incorporated  by  reference  to Exhibit  10.39(a) to the      Company's  Form  10-K for the year  ended  December  31,  1997),  (3) dated      December 8, 1998  (incorporated  by  reference  to Exhibit  10.39(b) to the      Company's Form 10-K for the year ended  December 31, 1998),  (4) dated June      15, 1999  (incorporated  by reference to Exhibit  10.39(c) to the Company's      Form 10-K for the year ended  December 31, 1999),  and (5) dated August 16,      2001 (incorporated by reference to Exhibit 10.11 to the Company's Form 10-K      for the year ended December 31, 2002)  10.12 Agreement,  dated  November  16,  2001,  between  Bogoso Gold  Limited and      Prestea Gold  Resources  Limited for the  purchase of Prestea  mining lease      rights and option  payments  (incorporated  by reference to Exhibit 10.2 to      the Company's Form 8-K filed on March 6, 2002)  10.13 Guiana Shield  Transaction  Agreement  with Cambior Inc. dated October 25,      2001 for the sale and swap of Golden  Star's  interest in Gross Rosebel and      other  properties  (incorporated  by  reference  to  Exhibit  10.3  to  the      Company's Form 8-K filed March 6, 2002)  10.14 Mining  lease,  dated  August 16,  1988,  between  the  Government  of the      Republic of Ghana and Canadian Bogosu  Resources  Limited,  relating to the      Bogoso property  10.15 Mining  lease,  dated  August 21,  1987,  between  the  Government  of the      Republic of Ghana and Canadian Bogosu  Resources  Limited,  relating to the      Bogoso property  10.16 Mining lease,  dated June 29, 2001, between the Government of the Republic      of  Ghana  and  Bogoso  Gold  Limited,  relating  to the  Prestea  property      (incorporated  by reference to Exhibit 10.1 to the Company's Form 8-K filed      on March 6, 2002)  10.17 Mining  lease,  dated  September  17, 1992 between the  Government  of the      Republic of Ghana and Satellite Goldfields Limited, with letter dated April      25, 2002 form the Ministry of Mines  consenting  to  assignment  to Wexford      Goldfields Ltd., relating to the Wassa property (incorporation by reference      to Exhibit 10.26 to the Company's Form 10-K for the year ended December 31,      2004)  10.18 Mining lease dated June 29, 2001,  between the  Government of the Republic      of Ghana and Prestea Gold  Resources,  relating to the Prestea  underground      property (incorporation by reference to Exhibit 10.27 to the Company's Form      10-K for the year ended December 31, 2004)  10.19 Joint  Operating  Agreement,  dated January 31, 2002,  between Bogoso Gold      Limited and Prestea Gold Resources  Limited  (incorporated  by reference to      Exhibit  10.25 to the Company's  Form 10-K for the year ended  December 31,      2002)                                          112   10.20 Memorandum  of  Agreement,  dated  March  14,  2002,  among  Prestea  Gold      Resources,  Bogoso Gold  Limited and others  (incorporated  by reference to      Exhibit  10.26 to the Company's  Form 10-K for the year ended  December 31,      2002)  10.21 Letter  agreement  between the Company and Guyanor  Ressources  S.A. dated      September 30, 2004 relating to sale of Gross  Rosebel  Participation  Right      (incorporated  by reference to Exhibit 10.30 to the Company's Form 10-K for      the year ended December 31, 2004)  10.22 Arrangement  Agreement dated November 11, 2005 between the Company and St.      Jude  Resources  Ltd.  (incorporated  by  reference  to Exhibit  2.1 to the      Company's Form 8-K filed on November 17, 2005)  10.23 Executive  Employment  Agreement,  dated July 1, 2002,  between  St.  Jude      Resources Ltd. and Bluestar Management Inc.  10.24 License  Agreement,  dated June 28, 2004 between Biomin  Technologies S.A. and Bogoso Gold Limited  14   Code of Ethics for Directors,  Senior Executive and Financial  Officers and      Other Executive Officers  21   Subsidiaries of the Company  23.1 Consent of PricewaterhouseCoopers LLP  23.2 Consent of Colin Jones  31.1 Certification of Principal Executive Officer pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002  31.2 Certification of Principal Financial Officer pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002  32.1 Certificate  of  Principal  Executive  Officer  pursuant to 18 U.S.C.  1350      (Section 906 of the Sarbanes-Oxley Act of 2002)  32.2 Certificate  of  Principal  Financial  Officer  pursuant to 18 U.S.C.  1350      (Section 906 of the Sarbanes-Oxley Act of 2002)                                          113    EX-4.14 2 a5110399ex414.txt EXHIBIT 4.14                                                                      Exhibit 4.14                              FORM OF WARRANT CERTIFICATE                             GOLDEN STAR RESOURCES LTD.  Warrant Certificate No. (*)                                Warrants to Purchase                                                             (*) Common Shares             The Warrants represented by this Warrant Certificate will be void and of no value unless  exercised prior to 4:30 p.m.  (Toronto time) on November 20, 2008 (the "Expiry Time").             THIS IS TO CERTIFY THAT, for value received,  (*) (the "Holder"),  of (*), is entitled to purchase, at any time and from time to time, up to (*) fully paid and  non-assessable  common shares  without par value (the "Shares") in the capital of Golden Star Resources Ltd. (the  "Company"),  upon and subject to the terms and conditions hereinafter referred to.  1.         The Holder is entitled to purchase  the Shares at and for an exercise price of $4.17 (the "Exercise Price") until the Expiry Time:  2.         Such right to purchase the Shares may only be exercised by the Holder within the time hereinbefore set out by:            (i)  duly  completing,  in the manner  indicated,  and  executing  the                Subscription Form attached hereto; and            (ii) surrendering this Warrant  Certificate to the Company at 10901 W.                Toller Drive, Suite 300, Littleton, Colorado, 80127-6312, U.S.A.,                or such other  address as may be  specified  by the Company  from                time to time, together with cash or a certified cheque payable to                the order of the Company in the amount of the aggregate  exercise                price of the Shares subscribed for.  3.         This Warrant  Certificate  and such certified  cheque or cash will be deemed to be so  surrendered  and exercised only upon the date of actual receipt thereof by the Company (the "Exercise Date").  4.         Any Shares  issued on the  exercise  of the  Warrants  will be issued effective on the Exercise Date.  Unless  otherwise  directed,  the Company will, within three business days of the Exercise Date,  mail or caused to be mailed to the Holder at the address  indicated on the Subscription  Form attached hereto a certificate or certificates  representing such Shares. A registration  statement under the United  States  Securities  Act of 1933,  as amended (the  "Securities Act"),  will be filed with respect to the Shares.  If the Warrants are exercised before the  registration  statement  is  effective or during any period that the registration  statement is not effective,  the Shares will be subject to certain restrictions   on  transfer  under  the  Securities  Act  and  the   certificate representing the Shares will bear a legend to that effect.  5.         The Holder may  subscribe for and purchase any lesser number than the whole number of Shares  purchasable under this Warrant  Certificate and, in such event, will be entitled to receive a new Warrant Certificate with respect to the remaining balance of the Shares purchasable under this Warrant Certificate.  6.         Unless  there  is   something  in  the  subject   matter  or  context inconsistent  therewith, in this Warrant Certificate the words and terms defined below will have the following respective meanings:       (a)  "Adjustment  Period" means the period  commencing on the date of issue           of this Warrant Certificate and ending at the Expiry Time;       (b)  "Current  Market  Price" of the Shares at any date means the price per           Share  equal to the  weighted  average  price at which the Shares have           traded on the Toronto Stock Exchange (the "TSX") or, if the Shares are               not then listed on the TSX, on such other  Canadian  stock exchange as           may be selected by the  directors  of the Company for such purpose or,           if the Shares are not then listed on any Canadian stock  exchange,  on           the  American  Stock  Exchange  based  on the  noon  exchange  rate as           reported by the Bank of Canada on the date of calculation),  of if the           Shares are not then listed thereon,  in the  over-the-counter  market,           during the period of any twenty  consecutive  trading  days ending not           more than five  business  days  before  such date;  provided  that the           weighted  average  price will be  determined by dividing the aggregate           sale price of all Shares sold on the said  exchange or market,  as the           case may be,  during the said twenty  consecutive  trading days by the           total  number of  Shares so sold;  and  provided  further  that if the           Shares are not then listed on any Canadian stock exchange or traded in           the over-the  counter  market,  then the Current  Market Price will be           determined by such firm of independent chartered accountants as may be           selected by the directors of the Company;       (c)  "director"  means a director  of the  Company  for the time being and,           unless  otherwise  specified  herein,  a  reference  to action "by the           directors" means action by the directors of the Company as a board or,           whenever empowered, action by a committee of such board; and       (d)  "trading  day" with  respect to a stock  exchange or  over-the-counter           market means a day on which such stock  exchange or market is open for           business.  7.         The  Exercise  Price and the number of Shares  issuable to the Holder will be subject to adjustment  from time to time in the events and in the manner provided as follows:       (a)  If at any time during the Adjustment Period the Company:            (i)  fixes a record  date for the issue of, or  issues,  Shares to the                holders of all or substantially all of the outstanding  Shares by                way of a stock dividend;            (ii) fixes  a  record  date  for  the  distribution  to,  or  makes  a                distribution to, the holders of all or  substantially  all of the                Shares  payable  in  Shares  or  securities  exchangeable  for or                convertible into Shares;            (iii) subdivides  the  outstanding  Shares  into a  greater  number of                Shares; or            (iv) consolidates  the  outstanding  Shares  into a lesser  number  of                Shares;            (any of such events in  subparagraphs  (i), (ii), (iii) and (iv) above           being herein  called a "Common  Share  Reorganization"),  the Exercise           Price will be  adjusted  on the  earlier  of the record  date on which           holders of Shares are  determined for the purposes of the Common Share           Reorganization   and  the   effective   date  of  the   Common   Share           Reorganization  to the amount  determined by multiplying  the Exercise           Price in effect  immediately  prior to such record  date or  effective           date, as the case may be, by a fraction:                 (A)  the  numerator  of  which  will  be  the  number  of  Shares                     outstanding  on such  record date or  effective  date before                     giving effect to such Common Share Reorganization; and                 (B)  the  denominator  of which will be the number of Shares that                     will be outstanding  immediately after giving effect to such                     Common  Share  Reorganization  (including  in the  case of a                     distribution of securities  exchangeable  for or convertible                     into Shares at no additional  cost to the holder thereof the                     number  of  Shares  that  would  be  outstanding   had  such                     securities  all been  exchanged for or converted into Shares                     on such date).                                          2             To the  extent  that  any  adjustment  in the  Exercise  Price  occurs           pursuant  to this  subparagraph  (a) as a result of the  fixing by the           Company  of  a  record  date  for  the   distribution   of  securities           exchangeable for or convertible  into Shares,  the Exercise Price will           be readjusted immediately after the expiry of any relevant exchange or           conversion  right to the  Exercise  Price that would then be in effect           based upon the number of Shares actually issued and remaining issuable           after such expiry and will be further  readjusted  in such manner upon           the expiry of any further such rights.       (b)  If at any time during the Adjustment Period the Company fixes a record           date  for  the  issue  or  distribution  to  the  holders  of  all  or           substantially  all of the  outstanding  Shares of  rights,  options or           warrants pursuant to which such holders are entitled,  during a period           expiring  not more than 45 days after the  record  date for such issue           (such period being the "Rights Period"),  to subscribe for or purchase           Shares or securities  exchangeable for or convertible into Shares at a           price  per  Share (or in the case of  securities  exchangeable  for or           convertible  into Shares at an exchange or conversion  price per Share           at the  date of  issue  of such  securities)  of less  than 95% of the           Current  Market  Price of the Shares on such  record date (any of such           events being herein called a "Rights  Offering"),  the Exercise  Price           will be adjusted  effective  immediately after the record date for the           Rights  Offering to the amount  determined by multiplying the Exercise           Price in effect on such record date by a fraction:            (i)  the numerator of which will be the aggregate of:                 (A)  the number of Shares  outstanding on the record date for the                     Rights Offering; and                 (B)  the quotient determined by dividing                      (1)  either (a) the product of the number of Shares  offered                          during  the  Rights  Period   pursuant  to  the  Rights                          Offering  and  the  price  at  which  such  Shares  are                          offered,  or,  (b)  the  product  of  the  exchange  or                          conversion  price of the  securities so offered and the                          number  of  Shares  for or into  which  the  securities                          offered   pursuant  to  the  Rights   Offering  may  be                          exchanged or converted, as the case may be, by                      (2)  the Current Market Price of the Shares as of the record                          date for the Rights Offering; and            (ii) the  denominator  of which will be the aggregate of the number of                Shares  outstanding  on such record date and the number of Shares                offered pursuant to the Rights Offering (including in the case of                the  issue or  distribution  of  securities  exchangeable  for or                convertible  into  Shares  the number of Shares for or into which                such securities may be exchanged or converted).            If by the terms of the rights,  options,  or  warrants  referred to in           this subparagraph (b), there is more than one purchase,  conversion or           exchange price per Share,  the aggregate  price of the total number of           additional  Shares  offered  for  subscription  or  purchase,  or  the           aggregate   conversion  or  exchange  price  of  the   convertible  or           exchangeable securities so offered, will be calculated for purposes of           the  adjustment  on the basis of the lowest  purchase,  conversion  or           exchange  price per Share,  as the case may be. Any Shares owned by or           held  for  the  account  of  the  Company  will  be  deemed  not to be           outstanding  for the  purpose of any such  calculation.  To the extent           that any  adjustment  in the Exercise  Price  occurs  pursuant to this           subparagraph  (b) as a result of the fixing by the Company of a record           date for the issue or  distribution  of rights,  options  or  warrants           referred  to in this  subparagraph  (b),  the  Exercise  Price will be           readjusted  immediately  after the  expiry of any  relevant  exchange,           conversion or exercise  right to the Exercise Price that would then be           in  effect  based  upon the  number  of  Shares  actually  issued  and           remaining issuable after such expiry and will be further readjusted in           such manner upon the expiry of any further such rights.                                          3        (c)  If at any time during the Adjustment Period the Company fixes a record           date  for  the  issue  or  distribution  to  the  holders  of  all  or           substantially all of the Shares of:            (i)  shares of the Company of any class other than Shares;            (ii) rights,  options  or  warrants  to acquire  Shares or  securities                exchangeable  for or convertible  into Shares (other than rights,                options  or  warrants  pursuant  to which  holders  of Shares are                entitled,  during a period  expiring  not more than 45 days after                the record  date for such  issue,  to  subscribe  for or purchase                Shares  at a  price  per  share  (or in the  case  of  securities                exchangeable  for or  convertible  into  Shares at an exchange or                conversion  price  per  share  at  the  date  of  issue  of  such                securities)  of at least 95% of the Current  Market  Price of the                Shares on such record date);            (iii) evidences of indebtedness of the Company; or            (iv) any property or assets of the Company;            and if such issue or  distribution  does not constitute a Common Share           Reorganization or a Rights Offering (any of such  non-excluded  events           being herein called a "Special Distribution"), the Exercise Price will           be  adjusted  effective  immediately  after  the  record  date for the           Special  Distribution  to the amount  determined  by  multiplying  the           Exercise   Price  in  effect  on  the  record  date  for  the  Special           Distribution by a fraction:                 (A)  the numerator of which will be the difference between                      (1)  the product of the number of Shares outstanding on such                          record date and the Current  Market Price of the Shares                          on such record date, and                      (2)  the fair value,  as  determined by the directors of the                          Corporation,  to  the  holders  of  the  Shares  of the                          shares,  rights,   options,   warrants,   evidences  of                          indebtedness  or  property  or  assets  to be issued or                          distributed in the Special Distribution, and                 (B)  the  denominator  of which will be the  product  obtained by                     multiplying the number of Shares  outstanding on such record                     date by the  Current  Market  Price  of the  Shares  on such                     record date.            Any Shares  owned by or held for the  account of the  Company  will be           deemed not to be outstanding for the purpose of such  calculation.  To           the extent that any adjustment in the Exercise  Price occurs  pursuant           to this subparagraph (c) as a result of the fixing by the Company of a           record  date for the  issue or  distribution  of  rights,  options  or           warrants  to  acquire  Shares  or  securities   exchangeable   for  or           convertible  into Shares  referred to in this  subparagraph  (c),  the           Exercise Price will be readjusted  immediately after the expiry of any           relevant  exercise,  exchange or  conversion  right to the amount that           would then be in effect if the fair market  value had been  determined           on the basis of the  number of Shares  issued and  remaining  issuable           immediately after such expiry,  and will be further readjusted in such           manner upon the expiry of any further such rights.       (d)  If at any time during the Adjustment Period there occurs:            (i)  a reclassification  or redesignation of the Shares, any change of                the Shares into other shares or  securities  or any other capital                reorganization  involving  the Shares,  other than a Common Share                Reorganization;                                          4             (ii) a  consolidation,  amalgamation or merger of the Corporation with                or  into  any   other   body   corporate   that   results   in  a                reclassification  or  redesignation  of the Shares or a change of                the Shares into other shares or securities or property; or            (iii) the transfer of the  undertaking or assets of the Corporation as                an   entirety  or   substantially   as  an  entirety  to  another                corporation or entity;            (any of such events being herein  called a "Capital  Reorganization"),           then after the effective date of the Capital Reorganization the Holder           will be entitled to receive,  and shall accept, for the same aggregate           consideration, upon exercise of the Warrants, in lieu of the number of           Shares to which the Holder was theretofore  entitled upon the exercise           of the  Warrants,  the kind and  aggregate  number of shares and other           securities or property resulting from the Capital Reorganization which           the  Holder  would  have been  entitled  to receive as a result of the           Capital  Reorganization if, on the effective date thereof,  the Holder           had been the registered holder of the number of Shares that the Holder           was at such time  entitled to purchase or receive upon the exercise of           the Warrants. If necessary, as a result of any Capital Reorganization,           appropriate  adjustments  will  be  made  in  the  application  of the           provisions of this Warrant  Certificate with respect to the rights and           interest  thereafter  of the Holder to the end that the  provisions of           this  Warrant  Certificate  will  thereafter  correspondingly  be made           applicable as nearly as may  reasonably be possible in relation to any           shares or other securities or property thereafter deliverable upon the           exercise of the Warrants.       (e)  If at  any  time  during  the  Adjustment  Period  any  adjustment  or           readjustment  in the Exercise Price occurs  pursuant to the provisions           of  subparagraphs  (a),  (b) or (c) hereof,  then the number of Shares           purchasable  upon the  subsequent  exercise  of the  Warrants  will be           simultaneously  adjusted  or  readjusted,  as  the  case  may  be,  by           multiplying the number of Shares  purchasable upon the exercise of the           Warrants  immediately  prior to such  adjustment or  readjustment by a           fraction that is the reciprocal of the fraction used in the adjustment           or readjustment of the Exercise Price.  8.         The  following  rules  and  procedures  will  be  applicable  to  any adjustments  made  pursuant  to  the  preceding  paragraph  7  of  this  Warrant Certificate:       (a)  Subject to the following provisions of this paragraph, any adjustments           made will be made  successively  whenever an event  referred to in the           preceding paragraph occurs.       (b)  No  adjustment  in the  Exercise  Price  will be  required  unless the           adjustment  would  result  in a change of at least one per cent in the           Exercise  Price then in effect and no  adjustment  will be made in the           number  of Shares  purchasable  or  issuable  on the  exercise  of the           Warrants  unless  it  would  result  in  a  change  of  at  least  one           one-hundredth  of a Share;  provided,  however,  that any  adjustments           that,  except for the provisions of this  paragraph,  would  otherwise           have been  required to be made will be carried  forward and taken into           account  in  any  subsequent  adjustment.  Notwithstanding  any  other           provision of the  preceding  paragraph,  no adjustment of the Exercise           Price will be made that would  result in an increase  in the  Exercise           Price or a decrease in the number of Shares issuable upon the exercise           of  the  Warrants  (except  in  respect  of  a  consolidation  of  the           outstanding Shares).       (c)  If at any time during the Adjustment  Period the Corporation takes any           action  affecting  the  Shares,  other  than  an  action  or an  event           described  in the  preceding  paragraph,  which in the  opinion of the           directors would have a material  adverse effect upon the rights of the           Holder under this Warrant  Certificate,  the Exercise Price and/or the           number of Shares  purchasable  under this Warrant  Certificate will be           adjusted  in  such  manner  and at  such  time  as the  directors  may           determine to be equitable in the circumstances.  Failure of the taking           of action by the directors so as to provide for an adjustment prior to           the effective  date of any action by the Company  affecting the Shares           will be deemed  to be  conclusive  evidence  that the  directors  have           determined  that  it  is  equitable  to  make  no  adjustment  in  the           circumstances.                                          5        (d)  No  adjustment  in the  Exercise  Price  or in the  number  or kind of           securities purchasable on the exercise of the Warrants will be made in           respect  of any event  described  in the  preceding  paragraph  if the           Holder is  entitled  to  participate  in such  event on the same terms           mutatis mutandis as if the Holder had exercised the Warrants prior to,           or on, the record date or effective  date, as the case may be, of such           event.       (e)  If the Company sets a record date to  determine  holders of Shares for           the  purpose of  entitling  such  holders to receive  any  dividend or           distribution or any subscription or purchase rights and thereafter and           before  the  distribution  to  such  holders  of  any  such  dividend,           distribution or  subscription or purchase rights legally  abandons its           plan to pay or deliver such dividend,  distribution or subscription or           purchase rights,  no adjustment in the Exercise Price or the number of           Shares  purchasable upon the exercise of the Warrants will be required           by reason of the setting of such  record date and any such  adjustment           that has been made will be reversed.       (f)  In any  case  in  which  this  Warrant  Certificate  requires  that an           adjustment  become  effective  immediately  after a record date for an           event referred to in the preceding  paragraph hereof,  the Company may           defer, until the occurrence of such event:            (i)  issuing  to the  Holder,  to the  extent  that the  Warrants  are                exercised  after such  record date and before the  occurrence  of                such event, the additional  Shares issuable upon such exercise by                reason of the adjustment required by such event; and            (ii) delivering to the Holder any  distribution  declared with respect                to such additional  Shares after such record date and before such                event;            provided,  however,  that  the  Company  delivers  to  the  Holder  an           appropriate  instrument  evidencing the right of the Holder,  upon the           occurrence of the event requiring the adjustment,  to an adjustment in           the  Exercise  Price or the  number  of  Shares  purchasable  upon the           exercise of the Warrants.       (g)  If a dispute  arises at any time with respect to any adjustment of the           Exercise  Price or the number of Shares  purchasable  pursuant to this           Warrant Certificate,  such dispute will be conclusively  determined by           the  auditors of the Company or if they are unable or unwilling to act           by such  other firm of  independent  chartered  accountants  as may be           selected by the directors.       (h)  All  adjustments  to the  Exercise  Price  or  the  number  of  Shares           purchasable  pursuant to this Warrant  Certificate  are subject to the           prior approval of the TSX.       (i)  As a  condition  precedent  to the  taking of any  action  that  would           require an adjustment pursuant to the preceding paragraph, the Company           will take any action that may, in the opinion of the  Company's  legal           counsel,  be  necessary  in order that the  Company  may  validly  and           legally  issue as  fully  paid and  non-assessable  shares  all of the           Shares that the Holder is entitled to receive in  accordance  with the           provisions of this Warrant Certificate.  9.         At least 21 days prior to any record date or effective  date,  as the case may be, for any event that  requires or might  require an adjustment in any of the  rights of the Holder  under  this  Warrant  Certificate,  including  the Exercise  Price or the number of Shares that may be obtained  under this Warrant Certificate,  the Company will deliver to the Holder, at the Holder's registered address,  a certificate of the Company  specifying the particulars of such event and, if  determinable,  the  required  adjustment  and the  calculation  of such adjustment. In case any adjustment for which a notice in this paragraph has been given is not then determinable,  the Company will promptly after such adjustment is determinable  deliver to the Holder,  at the Holders  registered  address,  a certificate  providing the  calculation of such  adjustment.  The Company hereby covenants and agrees that the register of transfers and share transfer books for the Shares  will be open,  and that the  Company  will not take any action  that might deprive the Holder of the  opportunity of exercising the rights  contained in this Warrant Certificate, during such 21 day period.                                          6   10.        To the extent  that this  Warrant  Certificate  confers  the right to purchase a fraction of a Share,  such right may be  exercised in respect of such fraction only in combination with another Warrant or other Warrants which in the aggregate entitle the Holder to purchase a whole number of Shares. No fractional Shares will be issued nor consideration given in lieu thereof.  11.        The Holder may, at any time prior to the Expiry Time,  upon surrender hereof to the Company and upon payment of such  applicable  transfer  charges as may be  required  by the  Company  from  time to  time,  exchange  this  Warrant Certificate for other Warrant Certificates  entitling the Holder to subscribe in the  aggregate  for the same  number  of Shares as are  purchasable  under  this Warrant  Certificate at the time of such exchange.  12.        Upon  receipt of  evidence  satisfactory  to the Company of the loss, theft,  destruction or mutilation of this Warrant  Certificate and, if requested by the Company, upon delivery of a bond of indemnity satisfactory to the Company (or, in the case of mutilation, upon surrender of this Warrant Certificate), the Company will issue to the Holder a replacement  certificate (containing the same terms and conditions as this Warrant Certificate).  13.        The terms and holding of this Warrant  Certificate  do not constitute the Holder to be a shareholder of the Company or entitle the Holder to any right or interest with respect thereto except as herein expressly provided.  14.        The  Company  will  reserve  and set aside  sufficient  shares in its authorized  capital to issue the Shares which may be issued from time to time on exercise of the Warrants.  15.        Any  notice  to be given  hereunder  to the  Holder  will be given in writing and either sent by  telecopier,  delivered  or mailed by prepaid post to the Holder at the address  indicated  on this  Warrant  Certificate,  or at such other  address as the Holder may  hereafter  designate by notice in writing.  If such notice is sent by  telecopier  or is  delivered,  it will be deemed to have been given at the time of delivery;  if such notice is sent by mail,  it will be deemed to have been given 48 hours following the date of mailing thereof. In the event of a mail strike or disruption in postal service at or prior to the time a notice is deemed to have been received by mail, such notice will be delivered or sent by telecopier.  16.        This  Warrant  Certificate  will  be  governed  by and  construed  in accordance with the laws of the Province of Ontario.  17.        Time will be of the essence hereof.             IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be signed by its duly authorized officer as of the 21st day of December, 2005.                                                   GOLDEN STAR RESOURCES LTD.                                                  Per:                                                      ---------------------------                                                      Authorized Signatory                                          7                                    SUBSCRIPTION FORM    TO:        Golden Star Resources Ltd.            10901 W. Toller Drive, Suite 300            Littleton, Colorado            80127-6312, U.S.A.              Terms used but not defined herein have the meanings  ascribed thereto in the within Warrant Certificate.             The undersigned Holder of the within Warrant Certificate, does hereby subscribe for  ______________  Shares  according to the  conditions  thereof and herewith makes payment in the aggregate amount of $_____________ as the purchase price in full for the said number of Shares at the price of $4.17 per Share.             The  undersigned   Holder  hereby  directs  that  the  Shares  hereby subscribed for be issued and delivered as follows:  Name(s) in full                   Address                        No. of Shares   ________________________________________________________________________________   ________________________________________________________________________________   ________________________________________________________________________________   ________________________________________________________________________________   DATED this         day of            ,         .                                                 __________________________________                                               Name:  __________________________________________ Mailing Address  __________________________________________   __________________________________________      EX-4.15 3 a5110399ex415.txt EXHIBIT 4.15                                                                      Exhibit 4.15                             FORM OF OPTION CERTIFICATE                            --------------------------  Option Certificate No.: (*)  Participant's Name: (*) (the "Participant")  Number of Options: (*)  Exercise Price: Cdn.$ (*)  Expiry Date: (*)  This Certificate  represents the number of options set forth above ("Participant Options") of Golden Star Resources Ltd. (the  "Corporation").  Each  Participant Option hereby  entitles the  Participant to purchase one (1) common share of the Corporation  (the  "Participant  Shares") at the Exercise Price specified above, subject to the terms and conditions set forth herein,  including the Arrangement Stock Option Terms (2005) attached as Schedule "A" (the "Terms").  I.       Term of Participant Options  Except as  otherwise  provided in this  Option  Certificate  or the Terms,  each Participant  Option may be  exercised  from the date hereof until the earlier of the Expiry Date set forth above or such earlier date as the  Participant  Option may terminate in accordance  with the Terms (the "Option  Period").  For greater certainty,  in the event that the Participant Options would otherwise expire due to the  completion  of the  arrangement  contemplated  by  the  agreement  dated November  11,  2005 (the  "Agreement")  between  the  Corporation  and St.  Jude Resources Ltd. as a result of a Participant  ceasing to be an employee,  officer or director within 90 days after the completion of the arrangement  contemplated by the Agreement,  the Option Period will expire,  and the  Participant  Options represented  hereby will  terminate,  on the date that is 90 days after December 21, 2005. The Participant  Options will expire at 5:00 p.m. (Denver time) on the last day of the Option Period.  II.      Method of Participant Option Exercise  Except as  otherwise  provided  in this  Option  Certificate  or the Terms,  the Participant may exercise each  Participant  Option at any time during the Option Period by giving  written  notice of the  Participant's  intention  to  exercise Participant  Options by completing  the Notice of Exercise  attached as Schedule "B" (or a  substantively  similar form) and submitting the Notice of Exercise to the Corporation at Golden Star Resources Ltd., 10901 W. Toller Drive, Suite 300, Littleton, Colorado, 80127-6312, U.S.A, Attention: Corporate Secretary.  The notice  must be  accompanied  by payment in full of the  aggregate  purchase price for the Participant  Shares being purchased  (which is equal to the number of  Participant  Options being  exercised  multiplied by the Exercise  Price) by cash,  certified  cheque or bank  draft or such  other  form of  payment  as the Corporation may accept.  III.     Participant Options Non-assignable  No Participant Options or any interest therein are transferable or assignable by the  Participant  otherwise  than by a legal  will or  pursuant  to the  laws of succession and no  Participant  Option may be exercised by anyone other than the Participant or the Participant's legal representative.  In the event  Participant  Options  are  exercised  by the  Participant's  legal representative,  the  written  Notice of  Exercise  must be  accompanied  by the appropriate  proof such  person(s)  has the right to  exercise  the  Participant Options and such other documentation as the Corporation may reasonably request.  IV.      U.S. Securities Law Limitation  The  Corporation  intends  to  file a  registration  statement  registering  the issuance of the  Participant  Shares  issuable  on  exercise of the  Participant Options  under the U.S.  Securities  Act of 1933,  as amended  (the  "Securities Act"). The Participant  represents and agrees that the Participant Options shall not be  exercisable  unless  (i)  the  registration  statement  registering  the issuance of the  Participant  Shares  issuable upon exercise of the  Participant Option  is  effective  or  (ii)  unless,  in the  opinion  of  counsel  for  the     Corporation,  the proposed  issuance of such Participant  Shares would be exempt from  the  registration   requirements  of  the  Securities  Act  and  from  the qualification  requirements of any applicable  state  securities law and in such case, the certificate representing Participant Shares issued shall bear a legend to that effect.  The Corporation may require,  as a condition of the exercise of the Participant Options, that the Participant make such further  representations and execute and deliver such other  documents as it reasonably  determines to be necessary  or  appropriate  to  assure  and  to  evidence  compliance  with  the requirements of the Securities Act and other laws.  V.       No Rights  The  holding  of  Participant   Options  does  not  constitute  a  condition  of employment,  officership  or  directorship  or any other  relationship  with the Corporation  or any of its  affiliates,  nor a  commitment  on the  part  of the Corporation  or any of its  affiliates  to ensure  the  Participant's  continued employment,  officership or  directorship  or any such other  relationship.  The Participant  has none of the rights of a shareholder  with respect to any of the Participant  Shares subject to the Participant  Options granted  hereunder until the Participant  Shares are issued in the  Participant's  name following the due exercise of the Participant Options.  VI.      Responsibilities  The Participant  Options represented hereby do not provide any guarantee against loss or profit  which may result from  fluctuations  in the market  value of the common shares of the Corporation. The Corporation does not assume responsibility for personal income tax incurred or other tax  consequences.  The Participant is advised to consult with the  Participant's  own tax advisors  regarding  the tax treatment of Participant  Options on the exercise  thereof and on any subsequent sale of  Participant  Shares  issued upon the  exercise of any such  Participant Options.  VII.     Other Important Provisions  This  Certificate and the Terms and all related matters shall be governed by and interpreted  in  accordance  with the laws of the  Province  of Ontario  and the federal laws of Canada applicable therein.  The Participant  acknowledges  and is deemed to acknowledge that the Participant Options  represented  hereby  are  subject  to all  provisions  of  this  Option Certificate  and the Terms (as they may be amended or changed  from time to time by the  Corporation).  In the event of any  inconsistency  between the Terms and this Option Certificate, the Terms shall govern.  Dated as of this 21st day of December, 2005.                                               GOLDEN STAR RESOURCES LTD.                                                By: _______________________________                                                   Name: Allan Marter                                                   Title: Chief Financial Officer  ACKNOWLEDGEMENT  I have reviewed the  provisions of this Option  Certificate  and the Terms and I acknowledge and agree that the Participant  Options are subject to the terms and conditions of this Option  Certificate  and the Terms (as they may be amended or changed from time to time) and I hereby confirm my acceptance of the Participant Options  under the  provisions,  terms and  conditions  set forth in this Option Certificate and the Terms, as evidenced by my signature below.  Dated this ________ day of _______________________, 200___.    - ----------------------------- Participant's Signature                                          2                                      SCHEDULE "A"                             GOLDEN STAR RESOURCES LTD.                        ARRANGEMENT STOCK OPTION TERMS (2005)  1.       PURPOSE  These Arrangement Stock Option Terms (the "Terms") of Golden Star Resources Ltd. (the "Corporation")  govern the terms of the common share stock purchase options (the  "Options") of the  Corporation  that are issued pursuant to an arrangement agreement dated November 11, 2005 (the "Agreement")  between the Corporation and St. Jude Resources Ltd. ("St. Jude") and in exchange for the outstanding options of St. Jude ("St. Jude Options").  For the purposes of the Terms the term  "affiliate"  shall have the same meaning ascribed thereto in the Ontario Securities Act (the "Act").  2.       IMPLEMENTATION  The  Options and  exercise  of any Options  pursuant to the Terms are subject to compliance with the applicable  requirements of each stock exchange on which the common shares of the Corporation are listed and of any governmental authority or regulatory body to which the Corporation is subject.  3.       ADMINISTRATION  The Options and the Terms shall be administered by the Board of Directors of the Corporation  (the "Board")  which shall,  without  limitation but subject to the express  provisions of the Terms, have full and final authority to interpret the Terms,  to prescribe,  amend and rescind rules and  regulations  relating to the Options and the Terms and to make all other  determinations  deemed necessary or advisable  for the  administration  of the Options and the Terms.  The Board may delegate any or all of its authority with respect to the  administration  of the Options and the Terms and any or all of the rights,  powers and discretions with respect to the Options and the Terms  granted to it hereunder to such  committee of  directors  of the  Corporation  as the  Board  may  designate  and upon such delegation such committee of directors,  as well as the Board, shall be entitled to exercise any or all of such authority,  rights,  powers and discretions  with respect to the Terms. When used hereafter in the Terms,  "Board" shall be deemed to include a committee of directors acting on behalf of the Board.  4.       NUMBER OF SHARES UNDER THE TERMS  The  aggregate  number of common  shares of the  Corporation  subject to Options issued in exchange  for St.  Jude  Options  pursuant  to the Terms (the  "Option Shares")  shall not exceed  2,533,176  authorized  but  unissued  common  shares without par value in the capital stock of the Corporation, subject to adjustment of such number  pursuant to the provisions of Section 6.10 hereof.  In the event that any Option for any reason  expires or is  terminated,  those Option  Shares allocated to the unexercised portion of such Option will no longer be capable of being issued.  5.       ELIGIBILITY  Options  subject to the Terms only will be issued in exchange for, and to former holders ("Participants") of, St. Jude Options, provided that the total number of Option  Shares does not exceed the number set forth in Section 4. Subject to the provisions of the Terms the total number of Option  Shares to be made  available under the Terms and to each  Participant,  the time or times and price or prices at which  Options  shall be  issued,  the  time or  times at which  Options  are exercisable,  and any  conditions  or  restrictions  on the exercise of Options, shall be in the full and final discretion of the Board.  6.       TERMS AND CONDITIONS  All  Options  under  the  Terms  shall be  subject  to the  following  terms and conditions:     6.1 Exercise Price  The  exercise  price to each  Participant  for  each  Option  Share  shall be as determined by the Board in accordance with the Agreement and as set forth in the Option Certificate of each Participant.  6.2 Acceleration of Vesting  In the event of a formal bid,  as defined in the Act,  being made for any of the common shares of the Corporation,  the Participant may, notwithstanding the time or times  specified in the Option  Certificate (as defined in Section 6.5 below) for the exercise of the Option governed thereunder, elect to purchase all or any of the Option  Shares then  subject to such Option for the purpose of  tendering such Option Shares under such formal bid,  provided that the Board may take such steps and require such  documentation  from the Participant which in its opinion are necessary to ensure that such Option Shares are purchased for such purpose.  6.3 Going Private Transaction  In  the  event  that  an  amalgamation,   arrangement,  consolidation  or  other transaction is proposed to be carried out as a consequence of which the interest of some  or all of the  holders  of  common  shares  of the  Corporation  may be terminated,  whether  pursuant to a statutory right of acquisition or otherwise, without the consent of such holders and without the substitution  therefor of an interest of  equivalent  value in a security of the  Corporation,  an  affiliate thereof or a successor to the Corporation  that carries the right to participate in earnings to an unlimited  degree or that by its terms is convertible  into or exchangeable for or carries the right to purchase such a security, the Board may terminate  the  Option  at the time of and  subject  to the  completion  of such amalgamation, arrangement, consolidation or other transaction by giving at least 10 days prior written notice of such  termination to the  Participant and paying to the Participant at the time of completion of such amalgamation,  arrangement, consolidation  or other  transaction  an amount  equal to the fair value of such Option as determined by the Board,  and absent manifest error the  determination of the  Board  will  be  conclusive  and  binding  on the  Participant  and  the Corporation.  For such purpose the Participant  will be deemed to be entitled to exercise its rights as to the purchase of all of the Option  Shares then covered by such Option  notwithstanding  any restrictions  which may be specified in the Option  Certificate for the exercise of the Option.  6.4 Limitation on Number of Options  If a Participant  is a person other than a director,  officer or employee of the Corporation,  a  Participant  may  not  hold  Options  in  excess  of 2% of  the Corporation's  outstanding  shares in a 12 month period. The aggregate number of Options  which  may be held  by  Participants  who  conduct  investor  relations activities  for  the  Corporation  may  not  exceed  2%  of  the   Corporation's outstanding common shares in a 12 month period.  6.5 Option Certificate  All Options shall be represented by a certificate (the "Option  Certificate") to which the Terms shall be attached,  signed by or on behalf of the Corporation in the form as may be approved from time to time by the Board,  such approval to be conclusively  evidenced by the  execution of the Option  Certificate  by any one director or officer of the Corporation.  If there is any  inconsistency  between the terms of the Option Certificate and the Terms, unless the Option Certificate provides  otherwise the  provisions  of the Terms shall govern.  6.6 Duration of Options  All Options  shall expire on such date as  determined  by the Board,  which date shall not be later than that date which is ten years from the date such  Options were granted, and which expiry date shall be set forth in an Option Certificate.  6.7 Non Transferability of Options  All Options shall be non-transferable and non-assignable  (whether absolutely or by way of  mortgage,  pledge  or  other  charge)  by a  Participant  and  may be exercisable during the lifetime of the Participant only by such Participant.                                          2   6.8 Exercise and Payment  Any  Option  may be  exercised  by a  Participant,  or if  applicable  the legal representatives  of a Participant,  giving notice to the Corporation  specifying the number of Option Shares in respect of which such Option is being  exercised, accompanied  by payment (by cash,  certified  cheque or bank draft or such other form of payment as the  Corporation may accept and which shall be payable to the Corporation)  of the  entire  exercise  price  (determined  and as set  forth in accordance  with  the  Option  Certificate)  for the  number  of  Option  Shares specified in the notice.  Upon any such  exercise of an Option by a  Participant the  Corporation  shall cause the  registrar  and transfer  agent for the common shares  of  the  Corporation  to  deliver  to  such  Participant  or  the  legal representative of such Participant, as the case may be, within 10 days following receipt by the Corporation of any such notice a share certificate in the name of such Participant or the legal  representative of such  Participant,  as the case may be,  representing the number of Option Shares  specified in the notice.  6.9 Third Party Offer  If at any time when an Option  remains  unexercised  with  respect to any Option Shares,  an offer to  purchase  all of the common  shares  without  value of the Corporation  is made by a third  party,  the  Corporation  may upon  giving each Participant written notice to that effect,  require the acceleration of the time for the exercise of the option  rights  granted  under the Terms and of the time for the fulfilment of any conditions or restrictions on such exercise.  6.10 Alterations in Shares  In the event of a stock dividend, subdivision, redivision,  consolidation, share reclassification  (other  than  pursuant  to the  Terms)  amalgamation,  merger, consolidation, corporate arrangement, reorganization, liquidation or the like of or by the Corporation, the Board may make such adjustment, if any, of the number of  Option  Shares,  or of  the  exercise  price,  or  both,  as it  shall  deem appropriate to give proper effect to such event. In any such event,  the maximum number of shares available under the Terms may be appropriately  adjusted by the Board.  If  because  of a  proposed  merger,  amalgamation  or  other  corporate arrangement or  reorganization,  the exchange or replacement of common shares in the Corporation  for those in another  company is imminent,  the Board may, in a fair and equitable manner,  determine the manner in which all unexercised Option rights granted under the Terms shall be treated including,  without  limitation, requiring  the  acceleration  of the time for the exercise of such rights by the Participants   and  of  the  time  for  the  fulfilment  of  any  conditions  or restrictions  on such  exercise.  All  determinations  of the Board  under  this Section 6.10 shall be full and final.  6.11 Termination  If a Participant becomes disqualified to act as a director of the Corporation or one of its affiliates, is dismissed as an officer or employee by the Corporation or one of its affiliates for cause or ceases to provide ongoing  services to the Corporation  or  one  of  its  affiliates,   all  unexercised  Options  of  that Participant shall immediately  terminate,  notwithstanding  the original term of the Option  granted to such  Participant;  provided  that, in the event of a St. Jude Option that would otherwise expire due to the completion of the arrangement contemplated  by the  Agreement  as a result of a  Participant  ceasing to be an employee,  officer  or  director  within  90 days  after the  completion  of the arrangement  contemplated by the Agreement,  subject to receipt of any necessary regulatory  approvals,  the expiry  date of such  Option will be extended to the date that is 90 days after the date hereof.  6.12 Termination Other Than for Cause  If a Participant ceases to be a director, officer or employee of the Corporation or  one  of  its  affiliates  or  ceases  to  provide  ongoing  services  to the Corporation  or one of its affiliates for any reason other than:       (a)  as a result  of  becoming  disqualified  to act as a  director  of the           Corporation or one of its subsidiaries;       (b)  having been dismissed for cause as provided in Section 6.11; or       (c)  as a result of the Participant's death;                                          3   such  Participant  shall have the right for a period of time  determined  by the Board (the "Grace  Period") from the date of ceasing to be a director,  officer, employee or provider  of  services  to exercise  the Option with  respect to all Option Shares of such  Participant  to the extent they were  exercisable  on the date of ceasing to be a director,  officer,  employee  or provider of  services; provided that, in the event of a St. Jude Option that would otherwise expire due to the completion of the  arrangement  contemplated by the Agreement as a result of a Participant  ceasing to be an employee,  officer or director within 90 days after the completion of the arrangement  contemplated by the Agreement,  subject to receipt of any necessary regulatory approvals, the expiry date of such Option will be  extended  to the date that is 90 days after the date  hereof.  Upon the expiration of the Grace Period all unexercised Option rights of that Participant shall immediately terminate, notwithstanding the original term of the Option.  6.13 Deceased Participant  Unless a shorter  period is otherwise  determined by the Board,  in the event of the  death  of  any  Participant  the  legal  representatives  of  the  deceased Participant  shall  have the right for a period of one year or until the  normal expiry date of the Option rights of such Participant,  if earlier, from the date of death of the deceased  Participant  to exercise  the  deceased  Participant's Option with  respect to all Option  Shares of the  deceased  Participant  to the extent they were  exercisable on the date of death.  Upon the expiration of such period  all  unexercised  Option  rights  of  the  deceased   Participant  shall immediately  terminate,  notwithstanding the original term of the Option. In the event the Option has been granted to a corporation wholly owned by a Participant the  provisions of this Section 6.13 shall be  applicable,  with such changes as may be necessary, upon the death of such Participant.  7.       AMENDMENT AND DISCONTINUANCE OF TERMS  The Board may from time to time amend or revise the  provisions  of the Terms or may discontinue the application of the Terms at any time,  provided that no such action may in any manner  adversely  affect the rights under any Options earlier granted  to  a  Participant   under  the  Terms  without  the  consent  of  that Participant.  Subject to applicable laws, any subsequent amendments or revisions to the Terms, or the  discontinuance of the application of the Terms,  shall not need to be approved by the shareholders of the Corporation.  8.       NO FURTHER RIGHTS  Nothing contained in the Terms or in any Option granted hereunder shall give any Participant or any other person any interest or title in or to any shares of the Corporation or any rights as a shareholder of the Corporation or any other legal or equitable right against the Corporation whatsoever other than as set forth in the Terms and pursuant to the  exercise of any Option,  nor shall it confer upon any Participant any right to continue as a director,  officer or employee of the Corporation or its affiliates or in any other  relationship with the Corporation or its affiliates.  9.       DATE OF GRANT  The date of any Option shall be the date determined by the Board as set forth in an Option Certificate containing the terms specified by the Board.  10.      COMPLIANCE WITH LAWS  The  obligations  of the  Corporation  to issue common  shares and deliver share certificates  under the Terms are subject to such  compliance by the Corporation and the  Participants as the  Corporation  deems necessary or advisable with all applicable  corporate  and  securities  laws,  rules  and  regulations  and  all applicable  Toronto  Stock  Exchange  and  American  Stock  Exchange  rules  and policies.  11.      DATE OF TERMS  The Terms are dated as of December 21, 2005.                                          4                                      SCHEDULE "B"                                     OPTIONS OF                             GOLDEN STAR RESOURCES LTD.                                 NOTICE OF EXERCISE   SECTION A - PURCHASE REQUEST - TO BE COMPLETED BY PARTICIPANT  Name:       --------------------------------------------------------------------------  Mailing Address:                  ---------------------------------------------------------------  Social Insurance Number:                           Telephone:                          ------------------                   ------------------  Current Position in Corporation:                                  -----------------------------------------------  - --------------------------------------------------------------------------------                    Number of Option             Participant Options Certificate Number Exercised Hereby *(A) Option Price (B) Purchase Price (A x B) - ------------------ --------------------- ---------------- ----------------------                                           Cdn.$            Cdn.$ - ------------------ --------------------  ---------------- ----------------------                                           Cdn.$            Cdn.$ - ------------------ --------------------  ---------------- ----------------------                                           Cdn.$            Cdn.$ - ------------------ --------------------  ---------------- ----------------------                                      Total Purchase Price: Cdn.$                                                                -----------------  Method of Payment:     [ ] Cash      [ ] Certified cheque     [ ] Bank draft  *I hereby elect to exercise the number of Participant Options to purchase common shares of Golden Star Resources Ltd. as indicated above.   Signature:                                      Date:            ----------------------------               --------------------------      EX-10.14 4 a5110399ex1014.txt EXHIBIT 10.14                                                                     Exhibit 10.14                          Dated This 16TH Day of AUGUST 1988                          GOVERNMENT OF THE REPUBLIC OF GHANA                                          AND                           CANADIAN BOGOSU RESOURCES LIMITED                               ==============================                                  GOLD MINING LEASE                           ==============================                                                                                 [STAMP]                                   [illegible signature]                                 SOLICITOR OF THE                                   SUPREME COURT                                       GHANA                THIS MINING LEASE                  is made the  16TH day of AUGUST 1988 BETWEEN THE GOVERNMENT OF THE REPUBLIC OF GHANA (hereinafter  called "THE GOVERNMENT") acting by RICHARD KWAME PEPRAH,  P.N.D.C.  Secretary for Lands and Natural Resources  (hereinafter  called "THE SECRETARY") of the one part and CANADIAN  BOGOSU  RESOURCES  LIMITED  having  its  registered  office  in  Accra (hereinafter called "THE COMPANY") of the other part:  WHEREAS: 1.   The Company  was  granted a  Prospecting  Licence  dated 12th May,  1986 to      prospect  for gold in the Bogosu  area of Western  Region  covering  147.69      square kilometres. 2.   The Company  applied for and was granted a Mining  Lease dated 21st August,      1987 covering an area of 50.0 square  kilometres within the area covered by      the said  Prospecting  Licence and has now  applied  for a Mining  Lease to      work,  develop  and  produce  gold  within a  further  area of 45.0  square      kilometres of the prospecting area. 3.   The  Government  is desirous of  developing  its mineral  resources in such      manner as will  ensure  that the maximum  possible  benefits  accrue to the      nation  from the  exploitation  of  minerals  and has  agreed  to grant the      Company  a Gold  Mining  Lease  on the  terms  and  conditions  hereinafter      following.       THIS AGREEMENT WITNESSES AS FOLLOWS:  1.   GRANT OF SURFACE AND MINING RIGHTS      ----------------------------------       (a)  "The  Government"  hereby grants to the Company ALL that piece of land           described in the Schedule hereto and more  particularly  delineated on           the Plan hereto attached and shown edged pink (hereinafter called "the           Lease Area" together with mines,  beds, seams,  veins,  channels,  and           strata of gold and other associated mineral substances lying and being           within and under the surface for a term of thirty  years from the date           of this Agreement.      (b)  "The Government"  hereby grants to the Company the exclusive rights to           work,  develop and produce gold in the Lease Area for the said term of           30 years (including, the processing, storing and transportation of ore           and  materials   together  with  the  rights  and  powers   reasonably           incidental  thereto)  subject to the  provisions of this Agreement for           the said term of thirty years.                                          -1-        (c)  "The Company" shall not,  however,  conduct any operations in a sacred           area and shall  not,  without  the prior  consent  of the  "Secretary"           conduct any operations:           (i)  within 50 yards of any building, installation,  reservoir or dam,                public road, railway or area appropriated for railway; or           (ii) in an  area  occupied  by a  market,  burial  ground/cemetery  or                Government  office,  or situated  within a town or village or set                apart for, used, appropriated or dedicated to a public purpose.      (d)  The Company shall conduct its operations in a manner  consistent  with           good commercial  mining practices so as not to interfere  unreasonably           with  vegetation in the Mining Area or with the  customary  rights and           privileges  of persons to hunt and snare  game,  gather  firewood  for           domestic purposes and to collect snails.      (e)  The public shall be permitted at their sole risk to use without charge           any road  constructed  by the  Company  in the Lease  Area in a manner           consistent with good mining practices,  safety and security,  provided           that such use does not  unreasonably  interfere with the operations of           the Company hereunder and provided also that such permission shall not           extend to areas enclosed for mining operations.      (f)  The Company may use the existing trees in the Lease Area to the extent           that such use is necessary for its operations hereunder, cultivate for           its  exclusive  use  such  trees,  wood or  timber  species  as may be           required for purposes of firewood, timber or mine support.      (g)  Nothing  contained  in this  Agreement  shall be deemed to confer  any           rights on the Company  conflicting  with  provisions  contained in the           Minerals and Mining Law, 1986 P.N.D.C.L. 153 nor to permit the Company           to dispense  with the  necessity  of applying  for and  obtaining  any           permit  or  authority  which the  Company  may be  required  by law or           regulation to obtain in respect of any work or activity proposed to be           carried out hereunder.  2.   RIGHTS OF THIRD PARTIES IN THE MINING AREA      ------------------------------------------       (a)  Subject to satisfactory  arrangement  between "the Government" and the           Company,  "the Government" shall grant the first option to the Company           to work minerals other than gold discovered in the Mining Area.                                          -2-        (b)  Failing such  satisfactory  arrangements  between "the Government" and           the Company,  "the Government" reserves the right to grant licences to           third  parties to  prospect  for or to enter into  agreements  for the           production  of minerals  other than gold in the Mining Area,  provided           that any such  activity  shall  not  unreasonably  interfere  with the           rights granted to the Company hereunder.  3.   POWER OF GOVERNMENT TO EXCLUDE PARTS OF THE MINING AREA      -------------------------------------------------------       (a)  "The  Government"  may by reasoanble  notice in writing to the Company           exclude  from the Lease Area,  at any time and from time to time,  any           part which may be required for any stated public  purpose  whatsoever,           provided that:           (i)  The  parts  so  excluded  shall  not have a  surface  area in the                aggregate greater than ten percent of the Lease Area.           (ii) Any parts of the Lease Area so  excluded  shall  continue to form                part of the Lease Area subject to this  Agreement  except that no                mining operations shall be conducted on the parts so excluded.           (iii) No part of the Lease  Area  shall be so  excluded  in respect of                which the Company shall have given prior notice  specifying  that                such part is required for mining operations hereunder or on which                active  operations  have  commenced  or are in progress  (such as                digging,  construction,  installation  or other works  related to                gold  mining) but, in lieu  thereof,  a part equal in area to any                such part shall be excluded for such public purposes, and           (iv) "The  Government"  shall  not take to  itself  nor grant to third                parties the right to mine gold from any part so excluded.      (b)  "The  Company"  shall be relieved of all  liabilities  or  obligations           hereunder in respect of any part excluded under this paragraph  except           liabilities or obligations accrued prior to such exclusion.  4.   WORKING OBLIGATIONS      -------------------       "The Company" shall  continuously  operate in the Mining Area in accordance      with good mining  practices until such time as the reserves or deposits may      be exhausted or the mine can no longer be economically worked or until this      Agreement expires, whichever shall be sooner.                                         -3-   5.   CONDUCT OF OPERATIONS:      ---------------------       (a)  The Company shall  conduct all of its  operations  hereunder  with due           diligence,  efficiency,  safety and economy,  in accordance  with good           mining  practices and in a proper and  workmanlike  manner,  observing           sound technical and engineering  principles using  appropriate  modern           and effective equipment,  machinery, materials and methods, and to pay           particular  regard  to  reclamation,  conservation  and  environmental           protection.      (b)  The Company  shall mine and extract ore in accordance  with  Paragraph           5(a)  herein  utilizing  methods  which  include  quarrying,  pitting,           trenching, stoping, shaft sinking, and dredging in the Mining Area.      (c)  The Company shall  maintain all equipment in good and safe  condition,           normal wear and tear  excluded,  and shall keep all  excavated  areas,           shafts,  pits and  trenches  in good and safe  condition  and take all           practical steps: -           (i)  To prevent damage to adjoining farms and villages;           (ii) To avoid damage to trees, crops, buildings,  structures and other                property in the Lease Area. To the extent, however, that any such                damage is unavoidable,  the Company shall pay fair and reasonable                compensation.      (d)  The Company shall fence off effectually  from the adjoining lands, all           pits, shafts and other works made or used under the powers hereof.      (e)  The Company  shall as far as is necessary or  practicable  provide and           maintain in good repair and condition roads,  gates, stiles and fences           for the convenient occupation of the surface of the Mining Area.      (f)  The Company shall provide and maintain  proper and sufficient  drains,           culverts,  arches to  passageways  for  carrying  off any waters which           shall arise or be produced or  interrupted  by any of the works hereby           authorised so that the drainage of the Lease area may not be prevented           or prejudiced.  6.   NOTIFICATION OF DISCOVERY OF OTHER MINERALS      -------------------------------------------       (a)  The Company  shall  report  forthwith  to "the  Secretary",  the Chief           Inspector of Mines, the Chief Executive of the Minerals Commission and           the Director of Geological  Survey, the discovery in the Lease Area of           any other  mineral  deposits and the Company  shall be given the first           option to prospect  further and to work the said minerals,  subject to           satisfactory arrangements between the Government and the Company.                                         -4-        (b)  Failing any arrangements to the contrary the Company shall not produce           any  minerals  from the Lease  Area other  than gold  except  they are           unavoidably linked with the production of gold.  7.   SAMPLES:      -------       (a)  The Company  shall not during the currency of this  agreement  remove,           dispose  of or  destroy,  except in  analyses,  any  cores or  samples           obtained  from the Lease Area without the prior  consent in writing of           the Chief Inspector of Mines.      (b)  The Company shall provide the Director of Geological  Survey with such           samples  from the Lease  Area as he may from  time to time  reasonably           request.  8.   HEALTH, SAFETY AND ENVIRONMENTAL PROTECTION:      -------------------------------------------       (a)  The Company shall comply with all such reasonable  instructions as may           from  time to time be  given  by the  Chief  Inspector  of  Mines  for           securing the health and safety of persons  engaged or  connected  with           the operations hereunder.      (b)  The Company  shall adopt all  necessary  and  practical  precautionary           measures to prevent undue  pollution of rivers and other potable water           and to ensure that such  pollution  does not cause harm or destruction           to human or animal life or fresh water fish or vegetation.  9.   POWER OF CHIEF INSPECTOR OF MINES TO EXECUTE CERTAIN WORKS:      ----------------------------------------------------------       If the Company shall at any time fail to comply with any provisions of this      agreement or applicable  law and such failure is likely,  in the opinion of      the Chief Inspector of Mines, to:            (i)  endanger the health or safety of persons, or           (ii) cause harm or destruction to potable water; or           (iii) result  in damage to mining  equipment  or other  structure  and                installation,  the Chief  Inspector of Mines,  shall after giving                the  Company  reasonable  notice,  execute any works which in his                opinion are necessary and  practicable in the  circumstances  and                the  costs  and  expenses  of such  works  shall  be borne by the                Company.                                         -5-   10.  LIABILITY FOR DAMAGE OR INJURY AND INDEMNITY:      --------------------------------------------       (a)  Nothing in this Agreement  shall exempt the Company from liability for           any damage, loss or injury caused to any person,  property or interest           as a result of the  exercise  by the  Company  of any rights or powers           granted to it under this Agreement.      (b)  The Company  shall at all times  indemnify  "the  Government"  and its           officers and agents  against all claims and  liabilities in respect of           any loss  suffered by or damage done to third  parties  arising out of           the  exercise  by the  Company of any  rights or powers  granted to it           under this Agreement  provided that the Company shall not so indemnify           "the Government", its officers and agents where the claim or liability           arises out of the wrongful or negligent acts of "the Government",  its           officers and agents.  11.  EMPLOYMENT AND TRAINING:      -----------------------       (a)  Citizens  of Ghana shall be given  preference  for  employment  by the           Company  in all  phases of its  operations  hereunder  to the  maximum           possible extent, consistent with safety, efficiency and economy.      (b)  Except with  respect to  unskilled  personnel,  the Company may employ           non-Ghanaian  personnel in the conduct of its operations provided that           the number of such  non-Ghanaian  personnel  employed shall not exceed           the quota permitted by the Government.      (c)  The Company shall provide  appropriate  programmes of instruction  and           theoretical  and  practical   training  to  ensure  the   advancement,           development,  improved skills and qualification of Ghanaian  employees           in all categories of employment.  12.  PREFERENCE FOR GHANAIAN GOODS AND SERVICES:      ------------------------------------------       In the conduct of its  operations  and in the  purchase,  construction  and      installation of facilities, The Company shall give preference to: -       (a)  materials and products made in Ghana,  if such  materials and products           are  comparable  or better in price,  quality and delivery  dates than           materials and products from foreign sources;      (b)  service  agencies  located  in Ghana  owned by  Ghanaian  citizens  or           companies  organized  pursuant  to  Ghanaian  law,  including  but not           limited to, insurance agencies,  bidding contractors,  import brokers,           dealers and agents if such  agencies  give or provide  equal or better           price and  quality of service  than  competing  foreign  firms and can           render services at such times as the Company may require.                                         -6-   13.  AFFILIATED COMPANY TRANSACTIONS:      -------------------------------       (a)  Any  services  including  services  in  respect  of the  purchase  and           acquisition  of  materials  outside  Ghana  provided by an  affiliated           company,  which are normally required by the Company shall be obtained           only at a price which is fair and reasonable.           The Company  shall,  at the request of the  "Secretary",  provide such           justification  of  costs  as may be  required,  duly  supported  by an           Auditor's certificate if necessary.      (b)  Any other  transactions  between the Company and an affiliated Company           shall be on the basis of  competitive  international  prices  and such           other terms and  conditions as would be fair and  reasonable  had such           transactions taken place between unrelated parties.      (c)  The Company shall notify the  "Secretary" of any and all  transactions           between the Company and an  affiliated  Company and shall  supply such           details relating to such transactions as "The Secretary" may by notice           reasonably require.  14.  TECHNICAL RECORDS:      -----------------       (a)  The Company shall maintain at its registered or mine offices  complete           records  of pits and  trenches  (location,  depths or  overburden  and           gravel  and assay  value)  in the Lease  Area in such form as may from           time to time be  approved  by the  Chief  Inspector  of  Mines,  Chief           Executive of the Minerals  Commission  and the Director of  Geological           Survey.      (b)  The Company shall  maintain at the said offices  copies of all reports           including  interpretations  dealing  with gold  prospects in the Lease           Area in the course of its operations hereunder and copies of all tests           and analyses,  geological  and  geophysical  maps,  diagrams or charts           relevant to its operations hereunder. These reports and records may be           examined  by  persons  in the  service  or  acting  on  behalf of "The           Government" and authorized in writing by "the Secretary".      (c)  The  Company   shall   maintain  at  the  said  offices   correct  and           intelligible  plans and sections of all mines which plans and sections           shall show the  operations  and workings which have been carried on as           well as dykes,  veins,  faults and other  disturbances which have been           encountered  in such  workings  and  operations.  All such  plans  and           sections  shall be made,  amended and  completed  from actual  surveys           conducted for that purpose.                                         -7-        (d)  Upon  expiration or  termination of this Agreement or the surrender of           any part of the Lease Area,  such  records and data as are required to           be  maintained  pursuant to this  paragraph  which relate to the Lease           Area,  or such  part of the Lease  Area as may have  been  surrendered           shall be delivered to the Chief Inspector of Mines, Chief Executive of           the  Minerals  Commission  and the Director of  Geological  Survey and           shall become the property of the Government without charge.  15.  PRODUCTION RECORDS:      ------------------       The  Company  shall  maintain at the said  offices  complete  and  accurate      technical  records of its  operations  and  production in the Lease Area in      such form as may from time to time be  approved by the Chief  Inspector  of      Mines.  16.  FINANCIAL RECORDS:      -----------------       (a)  The Company shall maintain at its registered and Mine Offices detailed           and  complete  accounts  and  systematic   financial  records  of  its           operations  as may be required by law. The books of account shall show           all revenues  received by the Company from all sources  including  its           operations  hereunder,  as well as all its  expenditure.  The  Company           shall  provide for a clear basis for  understanding  and  relating the           financial records and accounts to its operations.      (b)  The Company's books of account shall be kept on the basis of generally           accepted accounting principles.      (c)  The Company shall keep separately records and financial  statements in           terms of Ghana  currency  and also in terms of U.S.  Dollars  or other           international  currency and may record such claims and  liabilities as           arise in such foreign currency.      (d)  The  Company's  books of account  shall be  audited  within six months           after  the close of each  Financial  Year by a  qualified  Accountant,           member of the Ghana  Institute  of Chartered  Accountants.  Such audit           shall  not  in  any  way  imply  acceptance  of  such  audit  by  "the           Government" or preclude "the  Government"  from auditing such books of           account.  The Company shall deliver to "the Secretary" without charge,           copies  of any  part  of  such  records  as he may  from  time to time           reasonably request.                                         -8-   17.  REPORTS:      -------       (a)  The Company shall furnish a report each quarter,  to "The  Secretary",           the Chief  Inspector  of Mines,  the Chief  Executive  of the Minerals           Commission and the Director of Geological  Survey, in such form as may           from time to time be approved by the  Secretary,  of the quantities of           gold won in that quarter,  quantities  sold, the revenue  received and           royalties  payable for that quarter and such other  information as may           be required.  Such reports  shall be submitted  not later than 30 days           after the end of each quarter.      (b)  The Company shall furnish a report each half-year to "the  Secretary",           the Chief  Inspector  of Mines,  the Chief  Executive  of the Minerals           Commission  and the Director of Geological  Survey in such form as may           from  time to time be  approved  by "the  Secretary"  summarizing  the           results of its  operations  in the Lease Area during the half-year and           records to be kept by the Company pursuant to paragraphs 14, 15 and 16           hereof. Each such report shall include a description of any geological           or geophysical work carried out by the Company in that half-year and a           plan upon a scale  approved by the Chief  Inspector  of Mines  showing           mine workings and dredging areas.  Such reports shall be submitted not           later than forty days after the half-year to which they relate.      (c)  The  Company  shall  furnish  a  report  each  Financial  Year to "the           Secretary",  the Chief Inspector of Mines,  and the Chief Executive of           the  Minerals  Commission  in such  form as may  from  time to time be           approved by "the Secretary"  summarizing the results of its operations           in the Lease Area during that Financial Year and the records  required           to be kept by "the  Company"  pursuant  to  paragraphs  14,  15 and 16           hereof.  Each such report shall include a description  of the proposed           operations  for the following  year with an estimate of the production           and revenue to be obtained therefrom.  Such reports shall be submitted           not later than sixty days after the end of each Financial Year.      (d)  The Company  shall  furnish "the  Secretary",  the Chief  Inspector of           Mines, the Chief Executive of the Minerals Commission and the Director           of Geological  Survey not later than three months after the expiration           or termination of this  Agreement,  with a report giving an account of           the  geology  of  the  Lease  Area  including  the  stratigraphic  and           structural  conditions,  together  with a  geological  map on a  scale           prescribed in the Mining Regulations.                                         -9-        (e)  The Company shall furnish the Secretary and the Chief Executive of the           Minerals Commission,  with a report of the particulars of any proposed           alteration to its  regulations as well as a report of the  particulars           of  any  proposed   transfer  of  any  share  of  its  capital   stock           representing one percent or more of the total number of such shares of           the capital stock then issued and outstanding.  The Company shall also           furnish  "the  Secretary"  and the  Chief  Executive  of the  Minerals           Commission  with a report on the  particulars  of any fresh  issues of           shares  of its  capital  stock or  borrowings  in  excess of an amount           equivalent  to the Stated  Capital of the  Company.  All such  reports           shall be in such  form as "the  Secretary"  may  require  and shall be           submitted  not  less  than  sixty  days  in  advance  of the  proposed           alteration, transfer, issue or borrowing, as the case may be.      (f)  The  Company  shall,  not  later  than 180 days  after the end of each           financial year, furnish "the Secretary" and the Chief Executive of the           Minerals  Commission with a copy each of its annual financial  reports           including  a balance  sheet,  profit and loss  account,  and all notes           pertaining thereto,  duly certified by a qualified accountant who is a           member  of  the  Ghana  Institute  of  Chartered   Accountants.   Such           certificate  shall not in any way imply  acceptance of such reports by           "the   Government"  or  preclude  the  Government  from  auditing  the           Company's books of account.      (g)  The Company  shall  furnish "the  Secretary",  the Chief  Inspector of           Mines, the Chief Executive of the Minerals Commission and the Director           of Geological Survey with such other reports concerning its operations           hereunder as they may from time to time reasonably require.  18.  INSPECTION:      ----------       (a)  Any person or  persons  in the  service of or acting on behalf of "the           Government"  and  authorized  in writing by "the  Secretary"  shall be           entitled  at all  reasonable  times to enter into and upon any part of           the Lease Area and the  Company's  registered  office,  for any of the           following purposes:                                         -10-             (i)  to examine the mine workings, equipment, buildings,  installation                and any other structures used in the Mining operation;           (ii) to inspect the  samples  which the Company is required to keep in                accordance with the provisions of this Agreement;           (iii) to inspect and check the  accuracy  of the weights and  measures                and weighing and measuring devices, which the Company is required                to keep  or  make  in  accordance  with  the  provisions  of this                Agreement;           (iv) to examine and make  abstracts  of the books and records  kept by                the Company pursuant to this Agreement;           (v)  to ensure  compliance by the Company with all applicable laws and                regulations and with its obligations hereunder;           (vi) to execute  any works which the Chief  Inspector  of Mines may be                entitled  to execute in  accordance  with the  provisions  of the                Mining Laws and Regulations of Ghana or of this Agreement.      (b)  The Company shall make reasonable  arrangements to facilitate any such           inspection,  including  making  available  employees of the Company to           render  assistance  with  respect  to any  such  inspection.  All such           inspections  shall be listed by the Company in the  reports  furnished           each half year.  19.  CONFIDENTIAL TREATMENT:      ----------------------       "The  Government"  shall  treat all  information  supplied  by the  Company      hereunder  as  confidential  for a period  of five  years  from the date of      submission  of such  information  or  upon  termination  of this  Agreement      whichever is sooner and shall not reveal such  information to third parties      except with the written  consent of the Company  which consent shall not be      unreasonably  withheld.  The  Government  and  persons  authorized  by "the      Government" may nevertheless use such information received from the Company      for the purpose of preparing and publishing  general reports on Minerals in      Ghana and in connection with any dispute  between "the  Government" and the      Company.                                         -11-   20.  RENTALS:      -------       (a)  The  Company  shall  pay  rent  to  "the  Government"  at the  rate of           C22,500.00 per annum (C500.00 per square kilometre).      (b)  The said rent  shall be paid half  yearly in  advance on or before the           first day of  January  and on or before  the first day of July in each           year.      (c)  In the event of a surrender of any part of the Lease Area  pursuant to           paragraph 25 hereof,  no rental payments shall be refunded in whole or           in part in respect of any area so surrendered  for which yearly rental           has been paid in advance nor shall rental  payments be refunded in the           event of termination.  21.  ROYALTIES:      ---------       (a)  The Company  shall pay to "the  Government"  royalty as  prescribed by           legislation.      (b)  The Company shall pay royalty to "the Government" each quarter through           the  Commissioner of Internal Revenue based on the production for that           quarter,  within 30 days from the end of the  quarter.  Any  necessary           adjustments  shall be made annually  within 60 days of the end of each           Financial Year,  except that any  over-payment of royalty shall not be           refunded by "the Government" but shall be credited against royalty due           and payable in the next quarter.      (c)  In the event of a  dispute  with  respect  to the  amount  of  royalty           payable hereunder the Company shall first make payment of the lower of           the disputed  amounts and shall pay any further royalty which shall be           found to be payable  forthwith  upon the amount  being  agreed upon or           determined by arbitration in accordance with paragraph 35 hereof. Such           further royalty shall carry interest at the ruling prime rate in Ghana           at the time of the award or  agreement to take effect from the date on           which such amount ought originally to have been paid.      (d)  The Company shall also pay royalty on all timber felled by the Company           in accordance with existing legislation.  22.  LATE PAYMENTS:      -------------       (a)  Anything herein contained to the contrary notwithstanding, the Company           shall pay as penalty for any late payment to "the  Government"  of any           amounts due hereunder,  an additional amount calculated at the Bank of           Ghana re-discount rate for every thirty-day period or part thereof for           the  period  of the  delay in paying  the  amounts  that is to say the           period between the actual payment date and the date on which each such           payment should have been made.                                         -12-        (b)  In  the  event  the  Company  shall  fail  to  make  payment  to  "the           Government"  of any amount due  hereunder,  "the  Government"  without           prejudice  to  any  other  rights  and  remedies  to  which  it may be           entitled,  may, after giving 30 days notice in writing, enter into and           upon the Lease Area and seize and distrain  and sell as landlords  may           do for rent in  arrears,  all or any of the  stocks  of gold  produced           therefrom,  and  the  plant  and  equipment,  materials  and  supplies           belonging to the Company  which shall be thereon and out of the monies           obtained  from the sale of such distress may retain and pay all of the           arrears  of any  amounts  due  hereunder  and the costs  and  expenses           incidental  to any such  distress  and sale and deliver up the surplus           (if any) to the Company.  23.  TAXATION:      --------       The  Company shall pay tax in accordance with the laws of Ghana.  24.  FOREIGN EXCHANGE:      ----------------       All foreign exchange  transactions  shall be in accordance with the laws of      Ghana.  25.  SURRENDER:      ---------       (a)  The Company may surrender at any time and from time to time, by giving           not less than three months'  notice to "the  Secretary" all its rights           hereunder  in  respect of any part of the Lease Area not larger in the           aggregate  than 20% of the said Area.  The  Company  may  surrender  a           larger part of the Lease Area by giving not less than  twelve  months'           notice  to "the  Secretary".  The  Company  shall be  relieved  of all           obligations  in  respect  of the part or parts  of the  Lease  Area so           surrendered  except  those  obligations  which  accrued  prior  to the           effective date of surrender.      (b)  The  Company  shall leave the part of the Lease Area  surrendered  and           everything  thereon in a good and safe  condition,  provided,  however           that the Company shall have no such obligations for areas  surrendered           on which the  Company has not  undertaken  any works or which have not           been  affected  by the  operations  of the  Company.  In  addition  to           complying  with the  provisions  of paragraph  29 hereof,  the Company           shall take all  reasonable  measures,  in accordance  with good mining           practices  to  leave  the  surface  of  such  part of the  Lease  area           surrendered,  in  good  and  usable  condition  having  regard  to the           ecology, drainage,  reclamation and the protection of the environment.           In the event that the Company  fails to do so, "the  Secretary"  shall           make  such  part and  everything  thereon  safe  and in  good,  usable           condition  at  the  expense  of  the  Company.   The   provisions   of           sub-paragraphs (a) and (c) of Paragraph 28 hereof shall apply.                                         -13-        (c)  The Company shall,  on such terms and conditions as may be agreed upon           between the Government and the Company, be entitled to such wayleaves,           easements or other rights  through or across the  surrendered  part or           parts as may be necessary for its operations and such wayleaves  shall           not form part or be  included  in the  calculation  of the area of the           retained part.      (d)  "The  Government"  may require  that there be  reserved  over any part           surrendered  such wayleaves,  easements or other rights as will in its           opinion  be  necessary  or  convenient  to  any  party  to  whom  "the           Government" may subsequently grant a Gold Prospecting  Licence or Gold           Mining Lease.  26.  EXTENSION:      ---------       If the  Company,  not  less  than  six  months  before  expiration  of this      Agreement  applies to "the  Secretary"  for an extension of the term hereof      and if the Company shall not be in default at that time in the  performance      of any of its  obligations  hereunder,  the Company shall be entitled to an      extension of the  Agreement  upon such terms and  conditions as the parties      may then agree.  27.  COMPANY'S RIGHT TO TERMINATE AGREEMENT:      --------------------------------------       The Company  may, if in its opinion the Mine can no longer be  economically      worked,  terminate  this Agreement by giving not less than nine (9) months'      notice to "the Government".  Such termination shall be without prejudice to      any obligation or liability  incurred by the Company hereunder prior to the      effective date of such termination.  28.  GOVERNMENT'S RIGHT TO TERMINATE AGREEMENT:      -----------------------------------------       (a)  "The  Government"  may,  subject to the provisions of this  paragraph,           terminate this Agreement if any of the following events shall occur: -           (i)  The Company  shall fail to make any of the payments  described in                this Agreement on the payment date;                                         -14-             (ii) The  Company  shall  contravene  or fail to comply with any other                conditions of this Agreement; or           (iii) The Company shall become insolvent or bankrupt or enter into any                agreement or composition  with its creditors or take advantage or                any  law for  the  benefit  of  debtors  or go into  liquidation,                whether  compulsory  or  voluntary,  except for the  purposes  of                reconstruction or amalgamation; or           (iv) The Company makes a written  statement to "the Government" on any                material  matter in  connection  with this  Agreement or with its                operations  which the Company knows is false or makes  recklessly                without due regard as to whether it was true or false.      (b)  If and whenever the Government  decides there are grounds to terminate           this  Agreement  pursuant  to  clauses  (i) and (ii) of the  preceding           sub-paragraph,   "the  Government"   shall  give  the  Company  notice           specifying  the  particular  contravention  or failure  and permit the           Company to remedy the same within three months of such notice, or such           longer  period as the  Secretary  may  specify in such notice as being           reasonable in the circumstances.      (c)  If the Company shall fail to remedy any event specified in clauses (i)           and (ii) of  sub-paragraph  (a) of this  Paragraph  within  the stated           period,  or an event  specified in clauses  (iii) and (iv) of the said           sub-paragraph  shall  occur  "the  Government"  may by  notice to "the           Company"  terminate  this  Agreement,  provided  that  if the  Company           disputes whether there has been any contravention or failure to comply           with  the  conditions   hereof   (including  any  dispute  as  to  the           calculation of payments by the Company to the  Government  hereunder),           and the  Company  shall,  within such  period as  aforesaid  refer the           dispute to  arbitration  in accordance  with  Paragraph 35 hereof and,           thereafter,   diligently   prosecute   its  claim   thereunder,   "the           Government"  shall not terminate this Agreement except as the same may           be consistent with the terms of the arbitration award.      (d)  No delay or  omission or course of dealing by "the  Government"  shall           impair any of its rights  hereunder  or be construed to be a waiver of           any event  specified  in  sub-paragraph  (a) of this  Paragraph  or an           acquiescence therein.                                         -15-        (e)  Upon  termination  of  this  Agreement,  every  right  of the  Company           hereunder  shall  cease  (save  as  otherwise   specifically  provided           hereunder)  but  subject  nevertheless  and without  prejudice  to any           obligation or liability imposed or incurred under this Agreement prior           to the  effective  date  of  termination  and to such  rights  as "the           Government" may have under the law.  29.  ASSETS ON TERMINATION OR EXPIRATION:      -----------------------------------       (a)  Upon the termination or expiration of this Agreement, immovable assets           of the Company in the Mining Area and all other  appurtenances,  pits,           trenches and boreholes  shall on the effective  date of termination or           expiration, become the property of "the Government" without charge.      (b)  All  materials,  supplies,  vehicles and other  movable  assets of the           Company  in the  Mining  Area  which  are  fully  depreciated  for tax           purposes,  shall become the property of the Government  without charge           on the effective date of termination or expiration.  Any such property           which is not then fully  depreciated for tax purposes shall be offered           for sale to The  Government  within sixty days from the effective date           of such  termination  or  expiration at the  depreciated  cost. If the           Government  shall not accept such offer within sixty days, the Company           may sell,  remove or otherwise  dispose of all such property  within a           period of one  hundred and eighty  days after the  expiration  of such           offer.  All such property not sold,  removed or otherwise  disposed of           shall become the property of "the Government" without charge.      (c)  Notwithstanding  the foregoing,  the  Secretary,  may by notice to the           Company  require  the  removal  or  destruction  of any  assets of the           Company in the Lease Area and if the Company does not remove or destry           such  assets  within  a period  of  thirty  days  from the date of the           Secretary's  notice to that  effect,  the  Secretary  shall cause such           removal or destruction at the expense of the Company.      (d)  The Company shall take all  reasonable  measures to ensure that all of           the assets to be offered for sale to "the  Government"  or transferred           to "the  Government"  in  accordance  with  this  Paragraph  shall  be           maintained in  substantially  the same condition in which they were at           the  date  of the  termination  or  the  date  on  which  the  Company           reasonably knew that such termination  would occur and any such assets           shall  not  be  disposed  of,   dismantled  or  destroyed   except  as           specifically provided for in this Paragraph.                                         -16-        (e)  Upon the  termination  or  expiration of this  Agreement,  The Company           shall leave the Lease Area and everything  thereon in good  condition,           having regard to the ecology, conservation, reclamation, environmental           protection,  drainage  and safety;  provided  however that the Company           shall have no obligation in respect of areas where the Company has not           undertaken  any work or which have not been  affected by the Company's           operations.  In this  connection,  unless the Chief Inspector of Mines           otherwise directs, "The Company" shall, in accordance with good mining           practice,  fill up or fence and make safe all holes and excavations to           the  reasonable  satisfaction  of the Chief  Inspector  of  Mines.  In           addition the Company shall take all  reasonable  measures to leave the           surface of the Mining  Area in useable  condition  and to restore  all           structures  thereon not the property of the Company to their  original           condition.  In the  event  that  the  Company  fails  to do  so,  "the           Secretary"  shall restore and make safe the Lease Area and  everything           thereon at the expense of the Company.      (f)  The Company  shall have the right to enter upon the Lease Area for the           aforesaid purposes, subject to the rights of surface owners or others,           for a period of six months from the effective date of the  termination           or such longer period as the Secretary may decide.  30.  FORCE MAJEURE:      -------------       (a)  All  obligations  on the part of the Company to comply with any of the           conditions herein (except the obligation to make payment of monies due           to the Government) shall be suspended during the period the Company is           prevented  by force  majeure from  fulfilling  such  obligations,  the           Company  having  taken  all  reasonable  precautions,   due  care  and           reasonable  alternative  measures  with the objective of avoiding such           non-compliance  and of carrying  out its  obligations  hereunder.  The           Company shall take all  reasonable  steps to remove such causes of the           inability to fulfil the terms and  conditions  hereof with the minimum           of delay.      (b)  For the purpose of this paragraph,  force majeure includes  government           restraints not arising from the non-compliance by the Company with the           conditions  herein,  acts of God, war, strikes,  insurrection,  riots,           earthquakes,  storm,  flood or other adverse weather conditions or any           other  event  which the Company  could not  reasonably  be expected to           prevent  or  control,  but shall  not  include  any event  caused by a           failure to observe good mining  practices or by the  negligence of the           Company or any of its employees or contractors.                                         -17-        (c)  The Company shall notify the "Secretary"  within  forty-eight hours of           any  event of force  majeure  affecting  its  ability  to  fulfil  the           conditions  hereof or of any events  which may  endanger  the  natural           resources  of  Ghana  and  similarly  notify  the  Government  of  the           restoration  of normal  conditions  within  forty-eight  hours of such           restoration.  This provision shall be in addition to the  requirements           contained in the Mining Regulations in force in Ghana.      (d)  The terms of this  Agreement  shall be  extended  for a period of time           equal to the period or periods  during  which the Company was affected           by  conditions  set  forth  in  sub-paragraphs  (a)  and  (b) of  this           paragraph or for such period as may be agreed by the parties.  31.  POLITICAL ACTIVITY:      ------------------       The Company shall not engage in political  activity of any kind in Ghana or      make a donation,  gift or grant to any political  party.  The Company shall      make it a condition of employment that no employee, other than a citizen of      Ghana shall  engage in  political  activity  and shall not make  donations,      gifts or grants to any political  party.  In the event of any such employee      acting in disregard to this condition, he shall be dismissed forthwith.  32.  ADVERTISEMENTS, PROSPECTUSES, ETC.      ----------------------------------       Neither "the Company" nor any affiliated  Company shall in any manner claim      or suggest,  whether  expressly or by implication  that "the Government" or      any agency or official  thereof,  has expressed any opinion with respect to      gold in the Lease Area and a statement to this effect shall not be included      in or endorsed on any prospectus  notice,  circular,  advertisement,  press      release or similar document issued by the Company or any Affiliated Company      for the purpose of raising new capital.                                         -18-   33.  CO-OPERATION OF THE PARTIES:      ---------------------------       Each of the parties hereto  undertake that it will from time to time do all      such acts and make,  enter into,  execute,  acknowledge  and deliver at the      request of the other party,  such  supplemental or additional  instruments,      documents,  agreements,  consents,  information  or  otherwise  as  may  be      reasonably  required for the purpose of implementing or assuring the rights      and obligations of the other party under this Agreement.  34.  NOTICE:      ------       Any  application,  notice,  consent,  approval,  direction,  instruction or      waiver  hereunder  shall be in writing and shall be delivered by hand or by      registered  mail.  Delivery by hand shall be deemed to be effective at such      time as it would in the ordinary  course of registered mail be delivered to      the addressee.  35.  ARBITRATION AND SETTLEMENT OF DISPUTES:      --------------------------------------       (a)  Any dispute or  differences  between the parties  arising out of or in           connection with this Agreement or any agreed  variation  thereof or in           respect of the interpretation or enforcement of the provisions of this           document  or any  agreed  variation  or as to the  rights,  duties  or           liabilities  of either party shall unless the parties  agree to submit           to any  procedures  available  in  Ghana  for the  settlement  of such           dispute be submitted at the instance of any party to the  jurisdiction           of the International  Centre for the Settlement of Investment Disputes           for  settlement  by  reconciliation  or  arbitration  pursuant  to the           Convention on the Settlement of Investment Disputes between States and           Nationals of other States.      (b)  The Parties  acknowledge and agree that this Agreement was made on the           basis  of the  laws  and  conditions  prevailing  at the  date  of the           effective   conclusion  of  the  negotiation  of  this  Agreement  and           accordingly,   if  thereafter,  new  laws  and  conditions  come  into           existence  which unfairly  affect the interest of either party to this           agreement,  then the party so unfairly  affected  shall be entitled to           request a re-negotiation and the parties shall thereupon re-negotiate.           The parties  hereby  undertake  and  covenant  with each other to make           every effort to agree,  co-operate,  negotiate and to take such action           as may be necessary to remove the causes of unfairness or disputes.                                         -19-   36.  ASSIGNMENT AND TRANSFER OF STOCK:      --------------------------------       (a)  This  Agreement  shall  not be  assignable  in whole or in part by the           Company without the consent of `the Government".      (b)  "The Government" may impose such conditions precedent to the giving of           such  consent  as it may deem  appropriate  in the  circumstances.  No           assignment,  however, may relieve the Company of its obligations under           this Agreement except to the extent that such obligations are actually           assumed by the Assignee.      (c)  During the term of this  Agreement,  no shares of the capital stock of           the Company may be transferred without the prior consent in writing of           "the Government" unless such a transfer will not result in a change in           control of the Company.  37.  HEADINGS:      --------       The headings given to paragraphs in this Agreement are for convenience only      and shall not affect the construction or  interpretation of this Agreement.   38.  GOVERNING LAWS:      --------------       This Agreement  shall be governed and construed in accordance with the Laws      for the time being in force in Ghana.                                         -20-                             THE SCHEDULE ABOVE REFERRED TO                          ------------------------------                 All that area  covering  approximately  45.00  square  kilometres                lying  approximately  between  latitude  5'28 "North and latitude                5'38"  North and  longitudes  1'58"  and  2'07"  West in Bogosu -                Western Region of Ghana which piece of land is more  particularly                delineated  on  the  plan  annexed  hereto  for  the  purpose  of                identification and not of limitation.   IN WITNESS  WHEREOF  the party of the first part has  hereunto  set his hand and affixed the seal of the  Ministry of Lands and Natural  Resources  and the party hereto of the second part has hereunto  caused its common Seal to be affixed the day and year first above written. SIGNED, SEALED AND DELIVERED: THE REPUBLIC OF GHANA   BY:     ----------------------------------------------      P.N.D.C. Secretary for Lands and Natural      Resources for and on behalf of the Government       [illegible signature]      of Ghana who by his execution warrants to         -------------------------      the other party that he is duly authorized      and empowered to enter into this      Agreement.       In the presence of:                                 [illegible signature]                                                        -------------------------      Name:   [illegible signature]             ------------------------      Address: CHIEF DIRECTOR (A)               MINISTRY OF LANDS & NATURAL               RESOURCES  CANADIAN BOGOSU RESOURCES LIMITED                                                           [illegible signature]                                                        -------------------------                                                                DIRECTOR   In the presence of:                                      [illegible signature]                                                        ------------------------- Name:     SAM OKUDZETO Address:  P.O. BOX 5520           ACCRA                                         OATH OF PROOF  I,  RICHARD KOFI AFENU of ACCRA make oath and say that on the 16TH day of AUGUST 1988 I was present and saw RICHARD KWAME PEPRAH duly execute the  Instrument now produced to me and market "A" and that the said  RICHARD  KWAME  PEPRAH can read and write.  SWORN at Accra, this 16TH day of     ) AUGUST          One Thousand Nine    )                   [illegible signature]                                                         ------------------------ Hundred and Eighty-Eight   (1988     )                          DEPONENT                        BEFORE ME                     [STAMP]                     REGISTRAR OF LANDS                                   CERTIFICATE OF PROOF                               --------------------  On the 16TH day of AUGUST 1988 at 3:30 o'clock in the AFTERNOON this  Instrument was proved before me by the Oath of the within-named  RICHARD KOFI AFENU to have been duly executed by the within-named RICHARD KWAME PEPRAH for and on behalf of "the Government" of the Republic of Ghana the Lessor herein.                                                                [STAMP]                                                         REGISTRAR OF LANDS             THIS IS THE PLAN REFERRED TO IN THE ANNEXED GOLD MINING LEASE.         DATED THIS 16TH DAY OF AUGUST 1988.           [illegible signature]       PNDC SECRETARY FOR LANDS & NATURAL RESOURCES                                                  CANADIAN BOGOSU RESOURCES LIMITED                                        [illegible signature]                                     --------------------------------------------                                                     DIRECTOR                                     GOLD MINING LEASE AREA                        FOR CANADIAN BOGOSU RESOURCES LIMITED                                  SITUATE AT BOGOSU                                  SHEWN EDGED PINK                       AREA = 45.00 SQUARE KILOMETRES APPROX.                                          [ MAP ]                                   [graphic omitted]     EX-10.15 5 a5110399ex1015.txt EX-10.15                                                                     Exhibit 10.15                          Dated this 21st day of August 1987                 --------------------------------------------------                         GOVERNMENT OF THE REPUBLIC OF GHANA                                         AND                          CANADIAN BOGOSU RESOURCES LIMITED                  --------------------------------------------------                                       Indenture                  --------------------------------------------------                                   Gold Mining Lease                                       WR.2762/278                                 [illegible signature]                                   SOLICTOR FOR                                 THE SUPREME COURT              THIS INDENTURE AGREEMENT AND LEASE is made the 21st day of August, 1987 BETWEEN  THE  GOVERNMENT  OF THE  REPUBLIC  OF GHANA  (hereinafter  called  "THE GOVERNMENT")  Acting by RICHARD KWAME PEPRAH,  P.N.D.C.  Secretary for Lands and Natural  Resources  (hereinafter  called  "THE  SECRETARY")  of the one part And CANADIAN  BOGOSU  RESOURCES  LIMITED  having  its  registered  office  in  Accra (hereinafter called "THE COMPANY") of the other part:  W H E R E A S:  1. The  COMPANY  was  granted a  Prospecting  License  dated  12th May,  1986 to prospect for gold in the Bogosu area of Western  Region  covering  149.41 square kilometres  and the Company has applied to the  Government for a Mining Lease to work develop and produce gold within 50 square  kilometres out of the total area covered by the Prospecting License.  2. The Government is desirous of developing its mineral resources in such manner as will ensure that the maximum possible  benefits accrue to the nation from the exploitation of minerals and has agreed to grant the Company a Gold Mining Lease on the terms and conditions hereinafter following.  NOW THIS AGREEMENT WITNESSES as follows:  1.      GRANT OF SURFACE AND MINING RIGHTS       (a)  "The  Government"  hereby grants to the Company ALL that piece of land           described in the Schedule hereto and more  particularly  delineated on           the Plan hereto attached and shown edged pink (hereinafter called "The           Mining Area" together with mines, beds, seams,  veins,  channels,  and           stratas  of gold and other  associated  mineral  substances  lying and           being within and under the surface for a term of Thirty years from the           date of this Agreement.         (b)  "The Government"  hereby grants to the Company the exclusive rights to           work,  develop and produce  gold in the Mining  Area  (including,  the           processing,  storing and  transportation of ore and materials together           with the rights and powers  reasonably  incidental  thereto subject to           the provisions of this Agreement for the said term of Thirty years.       (c)  "The Company" shall not,  however,  conduct any operations in a sacred           area and shall  not,  without  the prior  consent  of the  "Secretary"           conduct any operations:            (i)  within 50 yards of any building, installation,  reservoir or dam,                public road, railway or area appropriated for railway; or            (ii) in an  area  occupied  by a  market,  burial  ground/cemetery  or                Government  office,  or situated  within a town or village or set                apart for, used, appropriated or dedicated to a public purpose       (d)  The Company shall conduct its operations in a manner  consistent  with           good commercial  mining practices so as not to interfere  unreasonably           with  vegetation in the Mining Area or with the  customary  rights and           privileges  of persons to hunt and snare  game,  gather  firewood  for           domestic purposes and to collect snails.       (e)  The public shall be permitted at their sole risk to use without charge           any road  constructed  by the  Company in the Mining  Area in a manner           consistent with good mining practices,  safety and security,  provided           that such use does not  unreasonably  interfere with the operations of           The Company hereunder and provided also that such permission shall not           extend to areas enclosed for mining operations.                                         3        (f)  The  Company  may use the  existing  trees in the  Mining  Area to the           extent  that  such  use is  necessary  for its  operations  hereunder,           subject to the payment of Royalty as hereinafter  provided,  and shall           cultivate for its exclusive use such trees,  wood or timber species as           may be required for purposes of firewood, timber or mine support.       (g)  Nothing  contained  in this  Agreement  shall be deemed to confer  any           rights on the Company  other than those set forth herein nor to permit           the  Company  to  dispense  with the  necessity  of  applying  for and           obtaining any permit or authority which the Company may be required by           law or  regulation  to obtain  in  respect  of any work or  activities           proposed to be carried out hereunder.  2.      RIGHTS OF THIRD PARTIES IN THE MINING AREA:       (a)  Subject to satisfactory  arrangements between "the Government" and the           Company,  "the Government" shall grant the first option to the Company           to work minerals other than gold discovered in the Mining Area.       (b)  Failing such  satisfactory  arrangements  between "the Government" and           the Company, "the Government" reserves the rights to grant licences to           third  parties for  prospecting  or to enter into  agreements  for the           production  of minerals  other than gold in the Mining Area,  provided           that any such  activity  shall  not  unreasonably  interfere  with the           rights granted to the Company hereunder.  3.      POWER OF GOVERNMENT TO EXCLUDE PARTS OF THE MINING AREA       (a)  "The  Government"  may by reasonable  notice in writing to the Company           exclude from the Mining Area,  at any time and from time to time,  any           part which may be required for any stated public  purpose  whatsoever,           provided that:                                          4             (i)  The  parts  so  excluded  shall  not have a  surface  area in the                aggregate greater than ten percent of the Mining Area.            (ii) Any parts of the Mining Area so excluded  shall  continue to form                part of the mining Area subject to this Agreement  except that no                mining operations shall be conducted on the parts so excluded            (iii) No part of the Mining  Area shall be so  excluded  in respect of                which the Company shall have given prior notice  specifying  that                such part is required for mining operations hereunder or on which                active  operations  have  commenced  or are in progress  (such as                digging,  construction of installations or other works related to                gold  mining) but, in lieu  thereof,  a part equal in area to any                such part shall be excluded for such public purposes, and            (iv) "The  Government"  shall  not take to  itself  nor grant to third                parties the right to mine gold from any parts so excluded.       (b)  "The  Company"  shall be relieved of all  liabilities  or  obligations           hereunder in respect of any part excluded under this paragraph  except           liabilities or obligations accrued prior to such exclusion.  4.      WORKING OBLIGATIONS       "The Company" shall  continuously  operate in the Mining Area in accordance      with good mining  practices until such time as the reserves or deposits may      be exhausted or the mine can no longer be economically worked or until this      Agreement expires, whichever shall be the sooner.                                          5   5.      CONDUCT OF OPERATIONS:       (a)  The Company shall  conduct all of its  operations  hereunder  with due           diligence,  efficiency,  safety and economy,  in accordance  with good           mining  practice  and in a proper and  workmanlike  manner,  observing           sound technical and engineering  principles using  appropriate  modern           and effective equipment,  machinery, materials and methods, and to pay           particular  regard  to  reclamation,  conversation  and  environmental           protection.       (b)  The Company  shall mine and extract ore in  accordance  with Par. 5(a)           herein utilizing methods which include quarrying,  pitting, trenching,           stoping, shaft sinking, and dredging in the Mining Area.       (c)  The Company shall  maintain all equipment in good and safe  condition,           normal wear and tear  excluded,  and shall keep all  excavated  areas,           shafts,  pits and  trenches  in good and safe  condition  and take all           practical steps:-            (i)  To prevent damage to adjoining farms and villages;            (ii) To avoid damage to trees, crops, buildings,  structures and other                property in the Mining  Area.  To the extent,  however,  that any                such  damage  is  unavoidable,  the  Company  shall  pay fair and                reasonable compensation.       (d)  The Company shall fence off  effectually  from the adjoining lands all           pits, shafts and other works made or used under the powers hereof.       (e)  The Company  shall as far as is necessary or  practicable  provide and           maintain in good repair and condition roads,  gates, stiles and fences           for the convenient occupation of the surface of the Mining Area.                                          6        (f)  The Company shall provide and maintain  proper and sufficient  drains,           culverts,  arches to  passageways  for  carrying  off any waters which           shall arise or be produced or interrupted by any of the works hereby  6.      NOTIFICATION OF DISCOVERY OF OTHER MINERALS       (a)  The Company  shall  report  forthwith  to "the  Secretary",  the Chief           Inspector of Mines,  the Chief  Executive of the Minerals  Commission,           and the Director of  Geological  Survey,  the  discovery in the Mining           Area of any other mineral  deposits and the Company shall be given the           first  option  to  prospect  further  and to work the  said  minerals,           subject to  satisfactory  arrangements  between the Government and the           Company.       (b)  Failing any arrangements to the contrary the Company shall not produce           any  minerals  from the Mining  Area other than gold  except  they are           unavoidably linked with the production of gold.  7.      SAMPLES:       (a)  The Company shall not during the currency of this Agreement dispose of           or destroy, except in analyses, any cores or samples obtained from the           Mining  Area  without  the  prior  consent  in  writing  of the  Chief           Inspector of Mines.       (b)  The Company shall provide the Director of Geological  Survey with such           samples  from the Mining  Area as he may from time to time  reasonably           request.  8.      HEALTH, SAFETY AND ENVIRONMENTAL PROTECTION:       (a)  The Company shall comply with all such reasonable  instructions as may           from  time to time be  given  by the  Chief  Inspector  of  Mines  for           securing the health and safety of persons engaged in or connected with           the operations hereunder.                                          7        (b)  The Company  shall adopt all  necessary  and  practical  precautionary           measures to prevent undue  pollution of rivers and other potable water           and to ensure that such  pollution  does not cause harm or destruction           to human or animal life or fresh water fish or vegetation.  9.      POWER OF CHIEF INPECTOR OF MINES TO EXECUTE CERTAIN WORKS:          If the Company shall at any time fail to comply with any provisions of         this  Agreement or applicable  law and such failure is likely,  in the         opinion of the Chief Inspector of Mines, to:            (i)  endanger the health or safety of person, or            (ii) cause harm or destruction to potable water; or            (iii) result  in damage to mining  equipment  or other  structure  and                installation,  the Chief  Inspector of Mines,  shall after giving                the  Company  reasonable  notice,  execute any works which in his                opinion are necessary and  practicable in the  circumstances  and                the  costs  and  expenses  of such  works  shall  be borne by the                Company.  10.     LIABILITY FOR DAMAGE OR INJURY AND INDEMNITY:       (a)  Nothing in this Agreement  shall exempt the Company from liability for           any damage or injury  caused to any person,  property or interest as a           result of the exercise by the Company of any rights or powers  granted           to it under this Agreement.       (b)  The Company  shall at all times  indemnify  "the  Government"  and its           officers and agents  against all claims and  liabilities in respect of           any loss  suffered by or damage done to third  parties  arising out of                                          8             the  exercise  by the  Company of any  rights or powers  granted to it           under this Agreement  provided that the Company shall not so indemnify           "the Government", its officers and agents where the claim or liability           arises out of the wrongful or negligent acts of "the Government",  its           officers and agents.  11.     EMPLOYMENT AND TRAINING:       (a)  Citizens  of Ghana shall be given  preference  for  employment  by the           Company  in all  phases of its  operations  hereunder  to the  maximum           possible extent, consistent with safety, efficiency and economy.       (b)  Except with  respect to  unskilled  personnel,  the Company may employ           non-Ghanaian  personnel in the conduct of its operations provided that           the number of such  non-Ghanaian  personnel  employed shall not exceed           the quota permitted by the Government.       (c)  The Company shall provide  appropriate  programmes of instruction  and           theoretical  and  practical   training  to  ensure  the   advancement,           development,  improved skills and qualification of Ghanaian  employees           in all categories of employment.  12.     PREFERENCE FOR GHANAIAN GOODS AND SERVICES:          In the conduct of its operations and in the purchase, construction and         installation of facilities, The Company shall give preference to:-       (a)  materials and products made in Ghana,  if such  materials and products           are  comparable  or better in price,  quality and delivery  dates than           materials and products from foreign sources;       (b)  service  agencies  located  in Ghana  owned by  Ghanaian  citizens  or           companies  organized  pursuant  to  Ghanaian  law,  including  but not           limited to, insurance agencies,  bidding contractors,  import brokers,                                          9             dealers and agents if such  agencies  give or provide  equal or better           price and  quality of service  than  competing  foreign  firms and can           render services at such times as the Company may require.  13.     AFFILIATED COMPANY TRANSACTIONS:       (a)  Any  services  including  services  in  respect  of the  purchase  and           acquisition  of  materials  outside  Ghana  provided by an  affiliated           company, which are normally required by the Company in accordance with           good mining  practice  shall be obtained only at a price which is fair           and reasonable.  The Company shall, at the request of the "Secretary",           provide such  justification of costs as may be required duly supported           by an Auditor's certificate if necessary.       (b)  Any other  transactions  between the Company and an affiliated Company           shall be on the basis of  competitive  international  prices  and such           other terms and  conditions as would be fair and  reasonable  had such           transactions taken place between unrelated parties.       (c)  The Company shall notify the  "Secretary" of any and all  transactions           between the Company and an  affiliated  Company and shall  supply such           details relating to such transactions as "The Secretary" may by notice           reasonably require.  14.     TECHNICAL RECORDS:       (a)  The Company shall maintain at its registered or mine offices  complete           records  of pits and  trenches  (location,  depths or  overburden  and           gravel and assay  value) in the  Mining  Area in such form as may from           time to time be  approved  by the  Chief  Inspector  of  Mines,  Chief           Executive of the Minerals  Commission  and the Director of  Geological           Survey.                                          10        (b)  The Company shall  maintain at the said offices  copies of all reports           including  interpretations  dealing with gold  prospects in the Mining           Area in the course of its operations hereunder and copies of all tests           and analyses,  geological  and  geophysical  maps,  diagrams or charts           relevant to its operations hereunder. These reports and records may be           examined  by  persons  in the  service  or  acting  on  behalf of "The           Government" and authorized in writing by "the Secretary".       (c)  The  Company   shall   maintain  at  the  said  offices   correct  and           intelligible  plans and sections of all mines which plans and sections           shall show the  operations  and workings which have been carried on as           well as dykes,  veins,  faults and other  disturbances which have been           encountered  in such  workings  and  operations.  All such  plans  and           sections  shall be made,  amended and  completed  from actual  surveys           conducted for that purpose.       (d)  Upon  expiration or  termination of this Agreement or the surrender of           any part of the Mining Area,  such records and data as are required to           be maintained  pursuant to this  paragraph  which relate to the Mining           Area,  or such part of the  Mining  Area as may have been  surrendered           shall be delivered to the Chief Inspector of Mines, Chief Executive of           the  Minerals  Commission  and the Director of  Geological  Survey and           become the property of the Government without charge.  15.     PRODUCTION RECORDS:          The Company  shall  maintain at the said offices  complete and accurate         technical  records of its  operations and production in the Mining Area         in  such  form as may  from  time to  time  be  approved  by the  Chief         Inspector of Mines.                                          11   16.     FINANCIAL RECORDS:       (a)  The Company shall maintain at its registered and Mine Offices detailed           and  complete  accounts  and  systematic   financial  records  of  its           operations  as may be required by law. The books of account shall show           all revenues  received by the Company from all sources  including  its           operations  hereunder,  as well as all its  expenditure.  The  Company           shall  provide for a clear basis for  understanding  and  relating the           financial records and accounts to its operations.       (b)  The Company's books of account shall be kept on the basis of generally           accepted accounting principles.       (c)  The Company shall keep separately records and financial  statements in           terms of Ghana  currency  and also in terms of U.S.  Dollars  or other           international  currency and may record such claims and  liabilities as           arise in such foreign currency.       (d)  The  Company's  books of account  shall be  audited  within six months           after  the close of each  Financial  Year by a  qualified  Accountant,           member of the Ghana  Institute  of Chartered  Accountants.  Such audit           shall  not  in  any  way  imply  acceptance  of  such  audit  by  "the           Government" or preclude "the  Government"  from auditing such books of           account.  The Company shall deliver to "The Secretary"  without charge           copies  of any  part  of  such  records  as he may  from  time to time           reasonably request.  17.     REPORTS:       (a)  The Company shall furnish a report each quarter,  to "The  Secretary",           the Chief  Inspector  of Mines,  the Chief  Executive  of the Minerals           Commission and the Director of Geological  Survey, in such form as may                                          12             from time to time be approved by the  Secretary,  of the quantities of           gold won in that quarter,  quantities  sold, the revenue  received and           royalties  payable for that quarter and such other  information as may           be required.  Such reports  shall be submitted  not later than 30 days           after the end of each quarter.       (b)  The Company shall furnish a report each half-year to "the  Secretary",           the Chief  Inspector  of Mines,  the Chief  Executive  of the Minerals           Commission  and the Director of Geological  Survey in such form as may           from  time to time be  approved  by "the  Secretary"  summarizing  the           results of its  operations in the Mining Area during the half-year and           records to be kept by the Company pursuant to paragraphs 14, 15 and 16           hereof. Each such report shall include a description of any geological           or geophysical work carried out by the Company in that half-year and a           plan upon a scale  approved by the Chief  Inspector  of Mines  showing           mine workings and dredging areas.  Such reports shall be submitted not           later than 40 days after the half-year to which they relate.       (c)  The  Company  shall  furnish  a  report  each  Financial  Year to "the           Secretary",  the Chief Inspector of Mines,  and the Chief Executive of           the  Minerals  Commission  in such  form as may  from  time to time be           approved by "the Secretary"  summarizing the results of its operations           in the Mining Area during that Financial Year and the records required           to be kept by "the  Company"  pursuant  to  paragraphs  14,  15 and 16           hereof.  Each such report shall include a description  of the proposed           operations  for the following  year with an estimate of the production           and revenue to be obtained therefrom.  Such reports shall be submitted           not later than sixty days after the end of each Financial Year.                                          13        (d)  The Company  shall  furnish "the  Secretary",  the Chief  Inspector of           Mines, the Chief Executive of the Minerals Commission and the Director           of Geological  Survey not later than three months after the expiration           or termination of this  Agreement,  with a report giving an account of           the  geology  of the  Mining  Area  including  the  stratigraphic  and           structural  conditions,  together  with a  geological  map on a  scale           prescribed in the Mining Regulations.       (e)  The Company shall furnish the Secretary and the Chief Executive of the           Minerals Commission,  with a report of the particulars of any proposed           alteration  to  its   regulations   together  with  a  report  of  the           particulars of any proposed transfer of any share of its capital stock           representing one percent or more of the total number of such shares of           the capital stock then issued and outstanding.  The Company shall also           furnish  "the  Secretary"  and the  Chief  Executive  of the  Minerals           Commission  with a report of the  particulars  of any fresh  issues of           shares  of its  capital  stock or  borrowings  in  excess of an amount           equivalent  to the Stated  Capital of the  Company.  All such  reports           shall be in such  form as "the  Secretary"  may  require  and shall be           submitted  not  less  than  sixty  days  in  advance  of the  proposed           alteration, transfer, issue or borrowing, as the case may be.       (f)  The  Company  shall,  not  later  than 180 days  after the end of each           financial year, furnish "the Secretary" and the Chief Executive of the           Minerals  Commission with a copy each of its annual financial  reports           including  a balance  sheet,  profit and loss  account,  and all notes           pertaining thereto,  duly certified by a qualified accountant who is a           member  of  the  Ghana  Institute  of  Chartered   Accountants.   Such           certificate  shall not in any way imply  acceptance of such reports by           "the   Government"  or  preclude  the  Government  from  auditing  the           Company's books of account.       (g)  The Company  shall  furnish "the  Secretary",  the Chief  Inspector of           Mines, the Chief Executive of the Minerals Commission and the Director           of Geological Survey with such other reports concerning its operations           hereunder as they may from time to time reasonably require.                                          14   18.     INSPECTION:       (a)  Any person or  persons  in the  service of or acting on behalf of "the           Government"  and  authorized  in writing by "the  Secretary"  shall be           entitled  at all  reasonable  times to enter into and upon any part of           the Mining Area and the Company's  registered  office,  for any of the           following purposes:            (i)  to examine the mine workings, equipment, buildings,  installation                and any other structures used in the Mining operation;            (ii) to inspect the  samples  which the Company is required to keep in                accordance with the provisions of this Agreement;            (iii) to inspect and check the  accuracy  of the weights and  measures                and weighing and measuring devices, which the Company is required                to keep  or  make  in  accordance  with  the  provisions  of this                Agreement;            (iv) to examine and make  abstracts  of the books and records  kept by                the Company pursuant to this Agreement;  (v) to ensure compliance                by the Company with all applicable  laws and regulations and with                its obligations hereunder;            (vi) to execute  any works which the Chief  Inspector  of Mines may be                entitled  to execute in  accordance  with the  provisions  of the                Mining Laws and Regulations or of this Agreement.       (b)  The Company shall make reasonable  arrangements to facilitate any such           inspection,  including  making  available  employees of the Company to           render  assistance  with  respect  to any  such  inspection.  All such           inspections  shall be listed by the Company in the  reports  furnished           each half year.                                          15   19.     CONFIDENTIAL TREATMENT:          "The  Government"  shall treat all information  supplied by the Company         hereunder as confidential  (for a period of five years from the date of         submission of such  information  or upon  termination of this Agreement         whichever  is sooner)  and shall not reveal such  information  to third         parties  except with the written  consent of the Company  which consent         shall  not  be  unreasonably   withheld.  The  Government  and  persons         authorized by "the  Government" may  nevertheless  use such information         received from the Company for the purpose of preparing  and  publishing         general reports on Minerals in Ghana and in connection with any dispute         between "the Government" and the Company.  20.     RENTALS:       (a)  The  Company  shall  pay  rent  to  "the  Government"  at the  rate of           (cent)19,300.00 per annum ((cent)386.10 per square kilometre).       (b)  The said rent  shall be paid half  yearly in  advance on or before the           first day of  January  and on or before  the first day of July in each           year.       (c)  In the event of a surrender of any part of the Mining Area pursuant to           paragraph 25 hereof,  no rental payments shall be refunded in whole or           in part in respect of any area so surrendered  for which yearly rental           has been paid in advance nor shall rental  payments be refunded in the           event of termination.  21.     ROYALTIES:       (a)  The  Company  shall  pay to "the  Government"  royalty  prescribed  by           legislation.                                          16        (b)  The Company  shall pay  royalties  to "the  Government"  each  quarter           through the  Commissioner of Internal  Revenue based on the production           for that  quarter,  within  30 days from the end of the  quarter.  Any           necessary adjustments shall be made annually within 60 days of the end           of each  Financial  Year,  except that any  over-payment  of royalties           shall  not be  refunded  by "the  Government"  but  shall be  credited           against royalties due and payable in the next quarter.       (c)  In the event of a dispute  with  respect  to the  amount of  royalties           payable hereunder the Company shall first make payment of the lower of           the disputed  amounts and shall pay any further royalty which shall be           found to be payable  forthwith  upon the amount  being  agreed upon or           determined by arbitration in accordance with paragraph 35 hereof. Such           further royalty shall carry interest at the ruling prime rate in Ghana           at the time of the  award  or  agreement  from the date on which  such           amount was originally payable.       (d)  The  Company  shall also pay  royalties  on all  timber  felled by the           Company in accordance with existing legislation.  22.     LATE PAYMENTS:       (a)  Anything herein to the contrary notwithstanding, the Company shall pay           as penalty for any late payment to "the Government" of any amounts due           hereunder,  an  additional  amount  calculated  at the  Bank of  Ghana           re-discount rate for every  thirty-day  period or part thereof for the           period of the delay in paying  the  amounts  that is to say the period           between  the  actual  payment  date and the date on  which  each  such           payment should have been made.                                          17        (b)  In  the  event  the  Company  shall  fail  to  make  payment  to  "the           Government"  of any amount due  hereunder,  "the  Government"  without           prejudice  to  any  other  rights  and  remedies  to  which  it may be           entitled,  may, after giving 30 days notice in writing, enter into and           upon the Mining Area and seize and distrain and sell as landlords  may           do for rent in  arrears,  all or any of the  stocks  of gold  produced           therefrom,  and  the  plant  and  equipment,  materials  and  supplies           belonging to the Company  which shall be thereon and out of the monies           obtained  from the sale of such distress may retain and pay all of the           arrears  of any  amounts  due  hereunder  and the costs  and  expenses           incidental  to any such  distress  and sale and deliver up the surplus           (if any) to the Company.  23.     TAXATION:          The Company shall pay tax in accordance with the laws of Ghana.  24.     FOREIGN EXCHANGE:          All foreign exchange transactions shall be in accordance with the laws         of Ghana.  25.     SURRENDER:       (a)  The Company may surrender at any time and from time to time, by giving           not less than three months'  notice to "the  Secretary" all its rights           hereunder  in respect of any part of the Mining Area not larger in the           aggregate  than 20% of said Area.  The Company may  surrender a larger           part of the Mining Area by giving not less than twelve  months' notice           to "the  Secretary".  The Company shall be relieved of all obligations           in  respect  of the part or parts of the  Mining  Area so  surrendered           except those  obligations which accrued prior to the effective date of           surrender.                                          18        (b)  The Company  shall leave the part of the Mining Area  surrendered  and           everything  thereon in a good and safe  condition,  provided,  however           that the Company shall have no such obligations for areas  surrendered           on which the  Company has not  undertaken  any works or which have not           been  affected  by the  operations  of the  Company.  In  addition  to           complying  with the  provisions  of paragraph  29 hereof,  the Company           shall take all  reasonable  measures,  in accordance  with good mining           practices  to  leave  the  surface  of such  part of the  Mining  Area           surrendered in good and usable condition having regard to the ecology,           drainage,  reclamation and environmental protection. In the event that           the Company fails to do so, "the  Secretary"  shall make such part and           everything  thereon safe and in good,  usable condition at the expense           of the  Company.  The  provisions  of  sub-paragraphs  (a)  and (c) of           Paragraph 28 hereof shall apply.       (c)  The Company shall,  on such terms and conditions as may be agreed upon           between the Government and the Company, be entitled to such wayleaves,           easements or other rights  through or across the  surrendered  part or           parts as may be necessary for its operations and such wayleaves  shall           not form part or be included in the  calculation  of the amount of the           retained part.       (d)  "The  Government"  may require  that there be  reserved  over any part           surrendered such wayleaves,  easements or other rights as shall in its           opinion be  necessary  or  convenient  for the benefit of any party to           whom  "the  Government"  may  subsequently  grant  a Gold  Prospecting           Licence or Gold Mining Lease.                                          19   26      EXTENSION:          If the  Company,  not less than six months  before  expiration  of this         Agreement  applies  to "the  Secretary"  for an  extension  of the term         hereof and if the  Company  shall not be in default at that time in the         performance of any of its obligations  hereunder,  the Company shall be         entitled  to  an  extension  of  the  Agreement  upon  such  terms  and         conditions as the parties may then agree.  27      COMPANY'S RIGHT TO TERMINATE AGREEMENT:          The  Company  may,  if in  its  opinion  the  Mine  can  no  longer  be         economically  worked,  terminate this Agreement by giving not less than         nine (9) months' notice to "the Government".  Such termination shall be         without  prejudice  to any  obligation  or  liability  incurred  by the         Company hereunder prior to the effective date of such termination.  28.     GOVERNMENT'S RIGHT TO TERMINATE AGREEMENT:       (a)  "The  Government"  may,  subject to the provisions of this  paragraph,           terminate this Agreement if any of the following events shall occur:-            (i)  The Company  shall fail to make any of the payments  described in                this Agreement on the payment date;            (ii) The  Company  shall  contravene  or fail to comply with any other                conditions of this Agreement; or            (iii) The Company shall become insolvent or bankrupt to enter into any                agreement or composition  with its creditors or take advantage of                any  law for  the  benefit  of  debtors  or go into  liquidation,                whether  compulsory  or  voluntary,  except for the  purposes  of                reconstruction or amalgamation; or                                          20             (iv) The Company makes a written  statement to "the Government" on any                material  matter  in  connection  with this  Agreement  which the                Company knows is false or makes recklessly  without due regard as                to whether it was true or false.       (b)  If and whenever the Government  decides there are grounds to terminate           this  Agreement   pursuant  to  clauses  (i)  and  (ii)  of  preceding           sub-paragraph,   "the  Government"   shall  give  the  Company  notice           specifying  the  particular  contravention  or failure  and permit the           Company to remedy the same within three months of such notice, or such           longer  period as the  Secretary  may  specify in such notice as being           reasonable in the circumstances.       (c)  If the Company shall fail to remedy any event specified in clauses (i)           and (ii) of  sub-paragraph  (a) of this  Paragraph  within  the stated           period,  or an event  specified in clauses  (iii) and (iv) of the said           sub-paragraph  shall  occur  "the  Government"  may by  notice to "the           Company"  terminate  this  Agreement,  provided  that  if the  Company           disputes whether there has been any contravention or failure to comply           with  the  conditions   hereof   (including  any  dispute  as  to  the           calculation of payments by the Company to the  Government  hereunder),           and the  Company  shall,  within such  period as  aforesaid  refer the           dispute to  arbitration  in accordance  with  Paragraph 35 hereof and,           thereafter,   diligently   prosecute   its  claim   thereunder,   "the           Government"  shall not terminate this Agreement except as the same may           be consistent with the terms of the arbitration award.                                          21        (d)  No delay or  omission or course of dealing by "the  Government"  shall           impair any of its rights  hereunder  or be construed to be a waiver of           any event  specified  in  sub-paragraph  (a) of this  Paragraph  or an           acquiescence therein.       (e)  Upon termination of this Agreement by "the Government"  every right of           the Company  hereunder  shall cease  (save as  otherwise  specifically           provided hereunder) but subject  nevertheless and without prejudice to           any  obligation or liability  imposed or incurred under this Agreement           prior to the effective date of termination  and to such rights as "the           Government" may have under law.  29      ASSETS ON TERMINATION OR EXPIRATION:       (a)  Upon the termination or expiration of this Agreement, immovable assets           of the Company in the Mining Area and all other  appurtenances,  pits,           trenches and boreholes  shall become the property of "the  Government"           without charge on the effective date of the termination or expiration.       (b)  All  materials,  supplies,  vehicles and other  movable  assets of the           Company  in the  Mining  Area  which  are  fully  depreciated  for tax           purposes,  shall become the property of the Government  without charge           on the effective date of termination or expiration.  Any such property           which is not then fully  depreciated for tax purposes shall be offered           for sale to The  Government  within sixty days from the effective date           of such  termination  or  expiration at the  depreciated  cost. If the           Government  shall not accept such offer within sixty days, the Company           may sell,  remove or otherwise  dispose of all such property  during a           period of one  hundred and eighty  days after the  expiration  of such           offer.  All such property not sold,  removed or otherwise  disposed of           shall become the property of "the Government" without charge.                                          22        (c)  Notwithstanding  the foregoing,  the  Secretary,  may by notice to the           Company  require  the  removal  or  destruction  of any  assets of the           Company  in the  Mining  Area and if the  Company  does not  remove or           destroy  such  assets  within a period of thirty days from the date of           the Secretary's  notice to that effect, the Secretary shall cause such           removal or destruction at the expense of the Company.       (d)  The Company shall take all  reasonable  measures to ensure that all of           the assets to be offered for sale to "the  Government"  or transferred           to "the  Government"  in  accordance  with  this  Paragraph  shall  be           maintained in  substantially  the same condition in which they were at           the  date  of the  termination  or  the  date  on  which  the  Company           reasonably knew that such termination  would occur and any such assets           shall  not  be  disposed  of,   dismantled  or  destroyed   except  as           specifically provided for in this Paragraph.       (e)  Upon the  termination  or  expiration of this  Agreement,  The Company           shall  leave  the  Mining  Area  and  everything  thereon  in  a  good           condition,  having regard to the ecology,  conservation,  reclamation,           environmental  protection,  drainage and safety provided  however that           the  Company  shall have no  obligation  in respect of areas where the           Company has not undertaken any work or which have not been affected by           the  Company's  operations.  In  this  connection,  unless  the  Chief           Inspector  of  Mines  otherwise  directs,   "The  Company"  shall,  in           accordance with good mining  practice,  fill up or fence and make safe           all holes and excavations to the reasonable  satisfaction of the Chief                                          23             Inspector of Mines.  In addition the Company shall take all reasonable           measures to leave the surface of the Mining Area in useable  condition           and to restore all structures  thereon not the property of the Company           to their original condition. In the event that the Company fails to do           so,  "the  Secretary"  shall  restore  and  make the  Mining  Area and           everything there safe at the expense of the Company.       (f)  The Company shall have the right to enter upon the Mining Area for the           aforesaid purposes, subject to the rights of surface owners or others,           for a period of six months from the effective date of the  termination           or such longer period as the Secretary may decide.  30.     FORCE MAJEURE:       (a)  All  obligations  on the part of the Company to comply with any of the           conditions hereof (except the obligation to make payment of monies due           to the Government) shall be suspended during the period the Company is           prevented  by force  majeure from  fulfilling  such  obligations,  the           Company  having  taken  all  reasonable  precautions,   due  care  and           reasonable  alternative  measures  with the objective of avoiding such           non-compliance  and of carrying  out its  obligations  hereunder.  The           Company shall take all  reasonable  steps to remove such causes of the           inability to fulfill the terms and conditions  hereof with the minimum           of delay.       (b)  For the purpose of this paragraph,  force majeure includes  government           restraints not arising from the non-compliance by the Company with the           conditions  herein,  acts of God, war, strikes,  insurrection,  riots,           earthquakes,  storm,  flood or other adverse weather conditions or any           other  event  which the Company  could not  reasonably  be expected to           prevent  or  control,  but shall  not  include  any event  caused by a           failure to observe good mining  practices or by the  negligence of the           Company or any of its employees or contractors.                                          24        (c)  The Company shall notify the "Secretary"  within  forty-eight hours of           any  event of force  majeure  affecting  its  ability  to  fulfil  the           conditions  hereof or of any events  which may  endanger  the  natural           resources  of  Ghana  and  similarly  notify  the  Government  of  the           restoration of normal  conditions  within  forty-eight  hours thereof.           This provision shall be in addition to the  requirements of the Mining           Regulations.       (d)  The terms of this  Agreement  shall be  extended  for a period of time           equal to the period or periods  during  which the Company was affected           by conditions set forth in paragraph (a) and (b) of this sub-paragraph           or for such period as may be agreed by the parties.  31.     POLITICAL ACTIVITY:          The Company shall not engage in political activity of any kind in Ghana         or make a donation,  gift or grant to any political  party. The Company         shall make it a condition of employment that no employee,  other than a         citizen of Ghana shall engage in political  activity and shall not make         donations,  gifts or grants to any political party. In the event of any         such  employee  acting  in  disregard  to this  condition,  he shall be         dismissed forthwith.  32.     ADVERTISEMENTS, PROSPECTUSES, ETC.          Neither "the  Company" nor any  affiliated  Company shall in any manner         claim  or  suggest,  whether  expressly  or by  implication  that  "the         Government"  or any  agency or  official  thereof,  has  expressed  any         opinion with respect to gold in the Mining Area and a statement to this         effect shall not be included in or endorsed on any  prospectus  notice,         circular,  advertisement,  press release or similar  document issued by         the  Company or any  Affiliated  Company for the purpose of raising now         capital.                                          25   33.     CO-OPERATION OF THE PARTIES:          Each of the parties hereto  undertake that it will from time to time do         all such acts and make, enter into, execute, acknowledge and deliver at         the  request  of the  other  party,  such  supplemental  or  additional         instruments,  documents,  agreements,  consents or  otherwise as may be         reasonably  required  for the purpose of  implementing  or assuring the         rights and obligations of the other party under this Agreement.  34.     NOTICE:          Any application,  notice, consent, approval, direction,  instruction or         waiver  hereunder shall be in writing and shall be served by hand or by         registered  mail.  Delivery by hand shall be deemed to be  effective at         such  time as it would in the  ordinary  course of  registered  mail be         delivered to the addressee.  35.     ARBITRATION AND SETTLEMENT OF DISPUTES:       (a)  Any dispute or  differences  between the parties  arising out of or in           connection with this Agreement or any agreed  variation  thereof or in           respect of the interpretation or enforcement of the provisions of this           document  or any  agreed  variation  or as to the  rights,  duties  or           liabilities  of either party shall unless the parties  agree to submit           to any  procedures  available  in  Ghana  for the  settlement  of such           dispute be submitted at the instance of any party to the  jurisdiction           of the International  Centre for the Settlement of Investment Disputes           for  settlement  by  reconciliation  or  arbitration  pursuant  to the           Convention on the Settlement of Investment Disputes between States and           Nationals of other States.                                          26        (b)  The Parties  acknowledge and agree that this Agreement was made on the           basis of the laws and  conditions  prevailing at the date of effective           conclusion of the  negotiation  of this  Agreement and  accordingly if           thereafter, new laws and conditions come into existence which unfairly           affect the interest of either party to this  Agreement  then the party           so unfairly affected shall be entitled to request a re-negotiation and           the parties shall thereupon re-negotiate. The parties hereby undertake           and  covenant   with  each  other  to  make  every  effort  to  agree,           co-operate,  negotiate  and to take such action as may be necessary to           remove the causes of unfairness or disputes.  36.     ASSIGNMENT AND TRANSFER OF STOCK:       (a)  This  Agreement  shall  not be  assignable  in whole or in part by the           Company without the consent of "the Government".       (b)  "The Government" may impose such conditions precedent to the giving of           such  consent  as it may deem  appropriate  in the  circumstances.  No           assignment,  however, may relieve the Company of its obligations under           this Agreement except to the extent that such obligations are actually           assumed by the Assignee.       (c)  During the term of this  Agreement,  no shares of the capital stock of           the Company may be transferred without the prior consent in writing of           "the Government" unless such a transfer will not result in a change in           control of the Company.                                          27   37.     HEADINGS:          The headings given to paragraphs in this Agreement are for  convenience         only and shall not affect the  construction or  interpretation  of this         Agreement.  38.     GOVERNING LAWS:          This Agreement  shall be governed and construed in accordance  with the         Laws for the time being in force in Ghana.                                          28                            THE SCHEDULE ABOVE REFERRED TO            All that  area  covering  approximately  50  square  kilometres  lying           between  latitutde  5 32' 30"  West  and  latitude  5 37' 30" West and           longitude  2 05' North and 1 58' 30" North in Bogosu - Western  Region           of Ghana which piece of land is more  particularly  delineated  on the           plan  annexed  hereto  for the  purpose of  identification  and not of           limitation.  IN WITNESS  WHEREOF  the party of the first part has  hereunto  set his hand and affixed the seal of the  Ministry of Lands and Natural  Resources  and the party hereto of the second part has hereunto  caused its common Seal to be affixed the day and year first above written.  SIGNED, SEALED AND DELIVERED:  THE REPUBLIC OF GHANA  BY:     Richard Kwame Peprah         -----------------------------------------         Secretary responsible for and         on behalf of the Government of         Ghana who by his execution         warrants to the other  parties           [illegible  signature]         that he is duly authorized and           -------------------------------         empowered to enter into         this Agreement.          In the presence of:                      [illegible signature]                                                  -------------------------------         Name:    Fred Ohene-Kena         Address: Ministry of Lands and         Natural Resources                                          29   CANADIAN BOGOSU RESOURCES LIMITED.                                                   [illegible signature]                                                  -------------------------------                                                  Director   In the Presence of                               [illegible signature]                                                  -------------------------------  Name: Benoni [illegible]  Address: P.O. Box 16075, Airport, Accra                                     OATH OF PROOF  I,  FRED.  OHENE-KENA  of ACCRA make oath and say that on the 21st day of August 1987 I was present and saw RICHARD KWAME PEPRAH duly execute the  Instrument now produced to me and marked "A" and that the said  RICHARD  KWAME  PEPRAH can read and write.  SWORN at Accra, this 30th day               )             [illegible signature]  of September One Thousand                   )             D E P O N E N T  Nine Hundred and Eighty-Seven (1987)        )                 BEFORE ME                 [illegible signature]                 REGISTRAR OF LANDS                                 CERTIFICATE OF PROOF  On the  30th  day of  September  1987  at  11:30  o'clock  in the  morning  this Instrument was proved before me by the Oath of the within-named FRED. OHENE-KENA to have been duly executed by the  within-named  RICHARD KWAME PAPRAH for and on behalf of "the Government" of the Republic of Ghana the Lessor herein.                                                           [illegible signature]                                                          REGISTRAR OF LANDS                                          30                                GOLD MINING LEASE AREA                       FOR CANADIAN BOGOSU RESOURCES LIMITED                                 SITUATE AT BOGOSU                                  SHEWN EDGED PINK                        AREA = 50 SQUARE KILOMETRES APPROX.                                          [MAP]                                 [graphic omitted]    EX-10.23 6 a5110399ex1023.txt EXHIBIT 10.23                                                                     Exhibit 10.23                            EXECUTIVE EMPLOYMENT AGREEMENT  THIS AGREEMENT dated for reference the 1st day of July, 2002.  BETWEEN:         ST. JUDE RESOURCES LTD., of Suite 200, 5405 - 48th Avenue, Delta, British        Columbia, V4K 1W6         (herein referred to as the "Company")                                                               OF THE FIRST PART  AND:         BLUESTAR MANAGEMENT INC., of 5667 Timber Valley Road, Tsawwassen, British        Columbia, V4L 2H8         (herein referred to as the "Executive")                                                              OF THE SECOND PART  WHEREAS:       A. The  principal of the Executive is Michael A. Terrell  ("Terrell"),  who has been the  president  and a director of the Company  since its  inception  in 1987;       B. The Executive has expertise in  administration  and management of public mining  companies,  which it has been  providing  to the  Company  and which the Company wishes to continue utilizing;       C. The Company acknowledges that the development and success of the Company to date is  largely  due to the  efforts  of the  Executive  (and  prior  to the Executive,  Terrell) and recognizes the valuable services that the Executive has rendered and is continuing to provide to the Company and its  subsidiaries,  and considers it essential to the best  interest of its  shareholders  to foster the continuous employment of the Executive;       D. The  Company  also  considers  that it is in the best  interests  of the Company and its shareholders that appropriate steps should be taken to reinforce and encourage the Executive's  continued attention,  dedication and availability to the Company, including in the event of a Change in Control (as defined below) so that the  Executive  will not be distracted  by the  uncertainties  which can arise from any possible changes in control of the Company;       E. Both the Company  and the  Executive  wish to  formally  agree as to the terms and  conditions  that will, in the  circumstances  hereinafter  set forth, govern the Executive's employment by the Company;          NOW,  THEREFORE,  THIS AGREEMENT  WITNESSETH that in  consideration  of the premises and of the mutual covenants hereinafter  contained,  and other good and valuable consideration, the receipt of which is acknowledged, the parties hereto agree as follows:       1.  Definitions.  For the purposes of this  Agreement,  the following terms will have the meanings set out below.            (a) "Base  Salary"  means the annual  base  salary,  as referred to in section 5 and as adjusted from time to time in accordance with section 6 of this Agreement.            (b)  "Benefit  Payment"  has the meaning set out in section 14 of this Agreement.            (c) "Board" means the Board of Directors of the Company.            (d) "Business" means the business carried on by the Company,  directly or  indirectly,  whether under an agreement  with or in  collaboration  with any other  party,  with  regard  to  the  exploration  and  development  of  mineral properties in Ghana, Africa.            (e) "Cause" has the meaning set out in section 15 of this Agreement.            (f) "Change in Control" means:                (i) any change in the holding,  direct or  indirect,  of shares of        the Corporation as a result of which a person, or a group of persons,  or        persons acting jointly or in concert, or persons associated or affiliated        with any such person or group  within the meaning of the Canada  Business        Corporations Act, are in a position to exercise  effective control of the        Corporation, provided that for the purposes of this Agreement a person or        group of persons holding shares and/or other  securities in excess of the        number that, directly or following conversion thereof,  would entitle the        holders  thereof  to cast  more than 20% of the  votes  attaching  to all        shares  of the  Corporation  that may be cast to elect  directors  of the        Corporation  shall be deemed to be in a position  to  exercise  effective        control of the Corporation; or                (ii) Incumbent  Directors  ceasing to constitute a majority of the        Board.            (g) "Good Reason" means the occurrence of any of the following without the Executive's express written consent:                (i) the Company  assigning to the  Executive  duties  inconsistent        with its position,  duties,  responsibilities and status with the Company        immediately  prior  to  the  Change  in  Control,  or  a  change  in  the        Executive's  position,  duties  (including  any  position  or duties as a        director  of  the   Company),   responsibilities   (including   reporting        responsibilities),  titles or offices in effect  immediately prior to the        Change in Control, or any removal of the Executive from or any failure to        re-elect  or  re-appoint  it to any such  positions,  duties or  offices,        except in connection with the termination of its employment for Cause;                                         -2-                  (ii) a  reduction  by the Company of the Base Salary or any change        in the basis upon which the Base Salary is determined;                (iii) any  failure  by the  Company  to  continue  in  effect  any        benefit,  bonus or other compensation plan,  including without limitation        any stock ownership or purchase plan,  stock option plan, life insurance,        disability plan,  pension plan or retirement plan, in which the Executive        is  participating  or entitled to  participate  immediately  prior to the        Change in Control,  or the  Company  taking any action or failing to take        any action that would adversely  affect the Executive's  participation in        or reduce its rights or benefits under or pursuant to any such plan;                (iv) the Company  relocating the Executive to any place other than        the location at which it performed its duties for the Company immediately        prior to the Change in Control;                (v) any failure by the Company to provide the  Executive  with the        number of paid vacation days to which it was entitled  immediately  prior        to the Change in Control or the  Company  failing to  increase  such paid        vacation on a basis  consistent  with  practices  in effect  prior to the        Change in Control with respect to the senior  executives  of the Company,        whichever is more favourable to the Executive;                (vi) the Company taking any action to deprive the Executive of any        material  fringe  benefit it enjoyed  immediately  prior to the Change in        Control or the  Company  failing to  increase  or improve  such  material        fringe  benefits on a basis  consistent with practices in effect prior to        the Change in Control or with  practices  implemented  subsequent  to the        Change in Control with respect to the senior  executives  of the Company,        whichever is more favourable to the Executive;                (vii)  any  breach  by  the  Company  of  any  provision  of  this        Agreement; or                (viii) any failure by the Company to obtain the assumption of this        Agreement by any successor or assign of the Company.            (h)  "Incumbent  Director"  means  any  member  of the Board who was a member of the Board prior to the occurrence of the transaction,  transactions or elections  giving rise to a Change in Control and any  successor to an Incumbent Director by the affirmative  vote of a majority of the Incumbent  Directors then on the Board.       2.  Terrell to Perform.  The  parities  acknowledge  and agree that certain covenants  and  obligations  of the  Executive  herein can only be  performed by Terrell,  in his  capacity as principal of the  Executive.  Accordingly,  if the terms of this Agreement  require or imply that the Executive  perform a covenant or obligation  that can only be performed by Terrell,  the  Executive  agrees to cause Terrell to perform such covenant or obligation.       3. Position and Duties. The Company agrees to employ the Executive, and the Executive agrees to serve, as its President and Chief Executive Officer,  having the duties and functions  customarily performed by, and all the responsibilities customary to, a president and chief executive  officer of a corporation  engaged in a  business  similar  to that of the  Company,  including  those  duties  and                                        -3-    functions particularly  described in Schedule A attached to this Agreement.  The Executive  will report  directly to the Board,  and will  continue to serve as a director of the Company.  The duties and functions of the  Executive  pertain to the Company and any of its  subsidiaries  from time to time and may be varied or added  to  from  time  to  time  by  the  Board,  at its  discretion,  exercised reasonably.       4. Term.  This Agreement will be effective as of and from July 1, 2002 (the "Effective  Date") and, except as otherwise  provided for herein,  will continue for a period of five years from the Effective Date.       5. Base  Salary.  The Company  will pay the  Executive a base salary in the amount of $17,500 per month (the "Base Salary"),  payable semi-monthly,  subject to the withholding of all applicable  statutory deductions from such Base Salary in  respect of the Base  Salary and any  taxable  benefits  received  under this Agreement or in respect of the Executive's employment.       6. Annual Review.  The Board, or if applicable any  compensation  committee which may be  established  by the Board from time to time,  will review the Base Salary  and  any  other  compensation  which  may be  payable  pursuant  to this Agreement on an annual  basis.  This review will not result in a decrease of the Base Salary or other compensation, and any increase will be in the discretion of the Board or compensation committee, as the case may be.       7. Benefits. The Company will arrange for the Executive to be provided with health, medical, dental, disability,  accident and life insurance and such other benefits as are reasonable and appropriate for an executive level benefits plan, as  determined  by the  Board  from  time to  time,  in  consultation  with  the Executive.       8.  Vacation.  The Executive will be entitled to an annual paid vacation as determined by the Board from time to time,  such vacation  entitlement not to be less than four weeks per calendar year. The Company  reserves the right,  acting reasonably,  to request that  vacations be scheduled so as not to conflict  with critical business operations.       9.  Reimbursement  for Expenses.  The Company will  promptly  reimburse the Executive for reasonable  travelling  and other  expenses  actually and properly incurred by the Executive in connection  with the  performance of its duties and functions  hereunder,  such  reimbursement  to be made in accordance  with,  and subject  to, the  policies of the Company as may be in effect from time to time. The  Executive  will keep  proper  accounts  and furnish  statements,  receipts, vouchers and/or other  supporting  documents to the Company within 30 days after the date the expenses are incurred.       10. Stock Options.  The Executive will be entitled to such incentive  stock options as the Board may grant to the Executive  from time to time on such terms as the Board may determine at the time of grant.       11.  Directors'  & Officers'  Liability  Insurance.  The  Company  will use commercially  reasonable  efforts to provide the Executive  with  directors' and officers' liability insurance coverage in an amount of at least $2,000,000 under the policies for such insurance arranged by the Company from time to time.                                        -4-         12.  Service to Company.  During the terms of its  employment the Executive will:            (a) Well and  faithfully  serve the Company,  at all times act in, and promote,  the best interests of the Company,  and devote substantially the whole of its working  time,  attention and energies to the business and affairs of the Company.            (b) Comply with all rules, regulations, policies and procedures of the Company.       13. Termination By Executive.  Subject to sections 15 and 17, the Executive may resign as  President  and Chief  Executive  Officer and as a director of the Company and terminate this Agreement at any time, but only by giving the Company at  least  one  month's  prior  written  notice  of the  effective  date  of the Executive's resignation. On the giving of any such notice, the Company will have the right to elect,  in lieu of the notice  period,  to pay the Executive a lump sum  equal to one  month's  Base  Salary,  as  referred  to in  section 5 and as adjusted  from time to time in  accordance  with section 6, plus other sums owed for  arrears of salary and  vacation  pay and if the  Company  elects to pay the Executive  such lump sum in lieu of the one month  notice  period,  the  Company will,  subject to the terms and  conditions  of any benefit plans in effect from time to time,  maintain  the  benefits and payments set out in section 7 for one month after the date of the  Executive's  notice,  but in all other respects the Executive's  resignation and the termination of the Executive's employment shall be effective immediately upon the Executive's receipt of the lump sum.       14. Termination by the Company Without Cause.            (a) The Company may terminate the Executive's  employment as President and Chief Executive  Officer and require that the Executive resign as a director of the  Company  at any time  without  Cause (as  defined  below) by giving  the Executive  written notice of the effective date of such  termination  and in all respects,  except  as  set  out  below,  the  Executive's  resignation  and  the termination of the Executive's employment will be effective immediately.  On the giving of any such notice, and subject to the Executive's prior resignation as a director of the Company,  the Company will pay the Executive a lump sum equal to 12 months' Base Salary, as referred to in section 5 and as adjusted from time to time in  accordance  with  section  6, plus all other  sums owed for  arrears of salary and vacation pay.            (b) To the  extent  permitted  by law and  subject  to the  terms  and conditions  of any benefit  plans in effect from time to time,  the Company will maintain the benefits and payments set out in section 7 (the "Benefit  Payment") for a period of six months from the effective date of termination. If either the Executive or Terrell obtains a new source of remuneration for personal services, whether through an office,  new employment,  a contract to provide consulting or other personal services, or any position analogous to any of the foregoing,  the Benefit  Payment  will  terminate  on the date of  commencement  of such office, employment, contract or position.            (c) The  payments of Base Salary and  benefits set out in this section 14 will be in lieu of any applicable notice period.                                        -5-              (d) The Company  will arrange for the  Executive  to be provided  with such outplacement career counselling services as are reasonable and appropriate, to assist the Executive in seeking new executive level employment.            (e) The  Executive  will not be required to mitigate the amount of any payment  provided  for  in  this  section  14 by  seeking  other  employment  or otherwise, nor will any sums actually received be deducted therefrom.       15. Termination by the Company for Cause.  Notwithstanding  sections 13, 14 or 16, the  Company may  terminate  the  Executive's  employment  hereunder  and require that the Executive  resign as a director of the Company for Cause at any time  without any notice or  severance.  In this  Agreement,  "Cause"  means the following:            (a) the commission of theft,  embezzlement,  fraud, obtaining funds or property under false pretences or similar acts of misconduct with respect to the property  of  the  Company  or  its  employees  or the  Company's  customers  or suppliers;            (b) the Executive  entering into a guilty plea or being  convicted for any crime  involving  fraud,  misrepresentation  or breach of trust,  or for any serious criminal offence that impacts adversely on the Company; or            (c) any other matter constituting just cause at common law;  any of which will entitle the Company to terminate  the  Executive's  employment under this section 15.       16. Termination  Following Change in Control.  In the event the Executive's employment is terminated within 24 months after a Change in Control, the Company agrees to pay to the Executive,  and the Executive agrees to accept,  subject to the Executive's  prior  resignation as a director of the Company,  the following payments in full  satisfaction  of any and all claims the  Executive  has or may have against the Company, for remuneration,  fees, salary, benefits,  bonuses or severance,  arising out of or in connection with the  Executive's  employment by the Company or the termination of the Executive's employment:            (a) If the  Executive's  employment  is  terminated by the Company for Cause or by the Executive  other than for Good Reason,  the respective  terms of sections 13 or 15 will govern and the Company  will have no further  obligations to the Executive under this Agreement.            (b) If the  Executive's  employment is terminated by the Executive for Good Reason or,  notwithstanding  section 14, by the Company without Cause, then the Executive will be entitled to the following payments and benefits:                (i)  subject  to  the  withholding  of  all  applicable  statutory        deductions, the Company will pay the Executive the amount of compensation        accrued pursuant to this Agreement as of the date of termination together        with an amount equal to 12 months' Base Salary, as referred to in section        5 and as  adjusted  from  time to  time in  accordance  with  section  6,        multiplied  by a fraction,  the numerator of which will be 6 plus one for        each year  either the  Executive  or  Terrell  has been  employed  by the        Company since its inception in 1987 and the  denominator of which will be        12;                                        -6-                  (ii) to the extent  permitted  by law and subject to the terms and        conditions of any benefit plans in effect from time to time,  the Company        will  maintain  the  Benefit  Payment for a period of six months from the        effective date of termination. If either the Executive or Terrell obtains        a new source of remuneration  for personal  services,  whether through an        office,  new  employment,  a  contract  to  provide  consulting  or other        personal services, or any position analogous to any of the foregoing, the        Benefit  Payment  will  terminate  on the  date of  commencement  of such        office, employment, contract or position.                (iii) the Company  will  arrange for the  Executive to be provided        with such outplacement career counselling  services as are reasonable and        appropriate,  to assist the  Executive  in seeking  new  executive  level        employment;                (iv) all incentive  stock options  granted to the Executive by the        Company under any stock option agreement that is entered into between the        Executive and the Company and is  outstanding  at the time of termination        of the Executive's employment, which incentive stock options have not yet        vested,  will  immediately  vest upon the  termination of the Executive's        employment  and will be fully  exercisable by the Executive in accordance        with the terms of the  agreement or  agreements  under which such options        were granted; and                (v) the  Executive  will not be required to mitigate the amount of        any payment  provided for in this section 16 by seeking other  employment        or otherwise, nor will any sums actually received be deducted therefrom.       17. Executive to Continue  Employment.  In the event of a Change in Control the  Executive  agrees  to  continue  to  diligently  carry out its  duties  and obligations hereunder for a minimum period of six months following the effective date of the Change in Control,  notwithstanding section 13 herein but subject to the  Executive's  right to terminate  for Good Reason as provided for in section 16.       18. No Additional Compensation Upon Termination.  It is agreed that neither the  Executive  nor the Company  shall,  as a result of the  termination  of the Executive's employment, be entitled to any notice, fee, salary, bonus, severance or other  payments,  benefits  or  damages  arising  by virtue of, or in any way relating  to, the  Executive's  employment  or any other  relationship  with the Company (including the termination of such employment or relationship) in excess of what is specified or provided for in sections 13, 14, 15, or 16, whichever is applicable.  Payment of any amount whatsoever pursuant to sections 13, 14, 15 or 16 shall be subject to the withholding of all applicable statutory deductions by the Company.       19.  Disclosure of Conflicts of Interest.  During its  employment  with the Company, the Executive will promptly,  fully and frankly disclose to the Company in writing:            (a) The  nature  and  extent  of any  interest  the  Executive  or its Associates (as hereinafter defined) have or may have, directly or indirectly, in any contract or transaction  or proposed  contract or transaction of or with the Company or any subsidiary or affiliate of the Company.                                        -7-              (b) Every office the Executive may hold or acquire, and every property the  Executive or its  Associates  may possess or acquire,  whereby  directly or indirectly a duty or interest might be created in conflict with the interests of the Company or the Executive's duties and obligations under this Agreement,  and the nature and extent of any such conflict.  In this Agreement the expression  "Associate" will include all those persons and entities that are included  within the  definition or meaning of  "associate" as set forth in section 2 of the Canada Business  Corporations Act, as amended,  or any successor legislation of similar force and effect, and any director, officer or shareholder of the Executive.       20. Provisions Reasonable. It is acknowledged and agreed that:            (a) both before and since the Effective  Date the Company has operated and competed and will operate and compete with respect to the Business;            (b) during the course of the  Executive's  employment  by the Company, both  before  and after the  Effective  Date,  on  behalf  of the  Company,  the Executive has acquired and will acquire  knowledge of, and has come into contact with,  initiated and established  relationships  with and will come into contact with,  initiate  and  establish   relationships  with,  both  existing  and  new competitors,  customers,  suppliers,  principals,  contacts and prospects of the Company,  and  that in some  circumstances  the  Executive  has been or may well become  the  senior or sole  representative  of the  Company  dealing  with such persons; and            (c) in light of the foregoing,  the provisions of section 21 below are reasonable and necessary for the proper protection of the business, property and goodwill of the Company and the Business.       21.  Restrictive  Covenant.  The  Executive  will not,  either  alone or in partnership  or in  conjunction  with any person,  firm,  company,  corporation, syndicate,  association  or any other  entity or group,  whether  as  principal, agent, employee, director, officer,  shareholder,  consultant or in any capacity or  manner  whatsoever,  whether  directly  or  indirectly,  for the term of the Executive's  employment hereunder and continuing for a period of six months from the lawful  termination of its employment,  unless the termination was for Cause pursuant to section 15 in which event the provisions of this section 21 will not be applicable:            (a)  Carry on or be  engaged  in,  concerned  with,  interested  in or employed by, or advise, invest in or give financial assistance to, any business, enterprise  or  undertaking  that is involved in the Business or is  competitive with the  Business  unless the  Executive  became  engaged in,  concerned  with, interested  in or employed  by, or  commenced  advising,  investing in or giving financial  assistance to, such business,  enterprise or undertaking prior to the termination of its  employment  provided,  however,  that the foregoing will not prohibit the  Executive  from  acquiring,  solely as an  investment  and through market  purchases,  securities of any such  business,  enterprise or undertaking which are publicly  traded,  so long as the Executive is not part of any control group of such entity and such securities,  which if converted, do not constitute more than 20% of the outstanding voting power of that entity.                                        -8-              (b)  Divert,  entice or take away from the Company or attempt to do so or solicit for the  purpose of doing so, any  business  of the  Company,  or any person,  firm,  corporation  or  other  entity  that  was an  employee,  client, customer, supplier, principal,  shareholder,  investor, collaborator,  strategic partner,  licensee,  contact or prospect  of the Company  during the time of the Executive's  employment with the Company,  whether before or after the Effective Date.       22.  Remedies.  The  Executive  acknowledges  and agrees that any breach or threatened  breach of any of the provisions of sections 12, 19 or 21 could cause irreparable  damage to the Company or its partners,  subsidiaries or affiliates, that such harm could not be adequately  compensated by the Company's recovery of monetary  damages,  and  that in the  event  of a breach  or  threatened  breach thereof,  the  Company  will  have  the  right to seek an  injunction,  specific performance or other equitable relief as well as any equitable accounting of all the  Executive's  profits or  benefits  arising  out of any such  breach.  It is further  acknowledged  and agreed that the remedies of the Company  specified in this  section 22 are in  addition to and not in  substitution  for any rights or remedies  of the  Company  at law or in  equity  and that all  such  rights  and remedies  are  cumulative  and not  alternative  and that the  Company  may have recourse to any one or more of its available  rights or remedies as it shall see fit.       23. Enurement. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.       24.  Agreement  Confidential.  The  parties  hereto will keep the terms and conditions of this Agreement  confidential  except as may be required to enforce any  provision  of this  Agreement  or as may  otherwise be required by any law, regulation or other regulatory requirement.       25.  Governing Law. This  Agreement will be governed by and  interpreted in accordance with the laws of the Province of British Columbia and applicable laws of Canada and the parties  hereto  attorn to the exclusive  jurisdiction  of the provincial and federal courts of such province.       26. Entire  Agreement.  The terms and  conditions of this  Agreement are in addition  to  and  not  in  substitution   for  the   obligations,   duties  and responsibilities  imposed by law on employees of corporations generally, and the Executive agrees to comply with such obligations,  duties and  responsibilities. Except as otherwise provided in this Agreement,  this Agreement  constitutes the entire agreement  between the parties with respect to the subject matter hereof, and may only be  varied  by  further  written  agreement  signed  thereby.  This Agreement supersedes any previous communications,  understandings and agreements between the Executive and the Company regarding the Executive's  employment.  It is  acknowledged  and agreed that this  Agreement is mutually  beneficial and is entered into for fresh and valuable  consideration  with the intent that it will constitute a legally binding agreement.       27. Further Assurances. The parties hereto will execute and deliver to each other such further instruments and assurances and do such further acts as may be required to give effect to this Agreement.                                        -9-         28. Surviving Obligations.  The Executive's obligations and covenants under sections 21 and 22 will survive the termination of this Agreement.       29.  Notice.  Any notice or other  communication  required or  contemplated under this  Agreement  to be given by one party to the other shall be  delivered sent by facsimile or mailed by prepaid  registered  post to the party to receive same at the address as set out below:            To the Company:            St.  Jude Resources           Suite 200, 5405 - 48th Avenue,           Delta, British Columbia           V4K 1W6           Attention:  Chairman of the Board           Facsimile no.:  (604) 940-6566            To Bluestar Management Inc.:            5667 Timber Valley Road           Tsawwassen, British Columbia,           V4L 2H8           Attention:  Michael Terrell           Facsimile no.:  (604) 943-1819  Any notice  delivered or sent by facsimile will he deemed to have been given and received on the first  business day following  the date of delivery.  Any notice mailed will be deemed to have been given and received on the third  business day following the date it was posted,  unless between the time of mailing and actual receipt of the notice there is a mail strike,  slow-down or other labour dispute which might affect delivery of the notice by mail, in which case the notice will be effective only if actually delivered.       30. Assignment to Terrell.  The Executive will be entitled,  upon notice to the Company, to assign directly to Terrell any of the benefits it is entitled to hereunder.       31. Severability. If any provision of this Agreement or any part thereof is for any reason held to be invalid or  unenforceable  in any  respect,  then such invalid or  unenforceable  provision or part will be severable  and severed from this Agreement and the other  provisions of this Agreement will remain in effect and be construed as if such invalid or unenforceable provision or part had never been contained herein.       32.  Waiver.  Any waiver of any breach or default under this Agreement will only be effective if in writing  signed by the party  against whom the waiver is sought to be enforced, and no waiver will be implied by any other act or conduct or by any  indulgence,  delay or  omission.  Any  waiver  will only apply to the specific matter waived and only in the specific instance in which it is waived.                                        -10-         33.  Counterparts.  This  Agreement  may  be  executed  in  any  number  of counterparts,  each of which so executed  will be deemed to be an original,  and such counterparts will together constitute but one Agreement.       IN WITNESS  WHEREOF the parties  hereto have executed this  Agreement as of the day and year first above written.   ST. JUDE RESOURCES LTD.   Per:  [signature illegible]      ------------------------------------    BLUESTAR MANAGEMENT INC.   Per:  /s/ Michael Terrell      ------------------------------------                                         -11-                                       SCHEDULE A                       Description Of The Duties And Functions                   Of The President And Chief Executive Officer  o    Formulate long-range strategic plan, set goals and objectives  o    Set operating policies  o    Oversee  all  corporate  functions  and direct the Company so as to achieve      corporate goals and objectives and maximize shareholder value  o    Analyze  operating  results in the light of goals and  objectives  and take      corrective action, when required  o    Plan human resource development to ensure continuity of Company operations  o    Hire or develop a strong team of second tier managers  o    Strengthen the business  development  department in line with the Company's      need to develop attractive partnerships or joint ventures  o    Create a stimulating  environment which empowers and inspires  employees to      achieve corporate goals  o    Represent  the  Company in the  business  and  non-business  community  and      nurture relationships with associates and partners  o    Serve as a member of the Board  o    Keep the Board apprised of corporate developments and activities such as:       o    performance compared to the operational business plan      o    economic, industry and business matters that may impact the Company      o    other matters of relevance    EX-10.24 7 a5110399ex10_24.txt EXHIBIT 10.24                                                                     Exhibit 10.24                              L I C E N C E  A G R E E M E N T                                           BETWEEN                                  BIOMIN TECHNOLOGIES S.A.                             ------------------------                                             and                                     BOGOSO GOLD LIMITED                                -------------------                                           TABLE OF CONTENTS                                                                              Page  1.   DEFINITIONS AND INTERPRETATION............................................1       1.1  Definitions..........................................................1       1.2  Interpretation.......................................................6  2.   GRANT OF LICENCE..........................................................7  3.   TERM......................................................................9  4.   IMPROVEMENTS AND DEVELOPMENTS.............................................9  5.   LICENCE FEE..............................................................10  6.   CONSTRUCTION OF PLANT....................................................11  7.   COMMISSIONING OF PLANT...................................................13  8.   OPERATIONAL SUPPORT AND TRAINING.........................................14  9.   GENERAL OBLIGATIONS OF BOTH PARTIES......................................15  10.  CONCENTRATE NOT OF FEEDSTOCK QUALITY.....................................15  11.  BREACH...................................................................16  12.  TERMINATION OF AGREEMENT AND DISMANTLING OF PLANT........................16  13.  EXCLUSION OF WARRANTIES..................................................17  14.  CONFIDENTIALITY..........................................................20  15.  FORCE MAJEURE............................................................21  16.  WARRANTY OF AUTHORITY....................................................21  17.  RELATIONSHIP OF PARTIES..................................................21  18.  ASSIGNMENT...............................................................22  19.  PROTECTION OF PROCESS....................................................22  20.  NOTICES..................................................................23  21.  MISCELLANEOUS ...........................................................24       21.1 Variation...........................................................24       21.2 Waivers.............................................................24       21.3 Rights of Third Parties Act.........................................24       21.4 Payments............................................................24       21.5 Proper Law..........................................................25       21.6 Arbitration of Disputes.............................................25       21.7 Severability........................................................25       21.8 Costs...............................................................25       21.9 Successors Bound....................................................26                                         -i-                                    TABLE OF CONTENTS                                    (continued)                                                                             Page        21.10 Entire Agreement...................................................26       21.11 Interest...........................................................26                                   SCHEDULES ATTACHED   Schedule 1               BIOX(R) Battery Limits   Schedule 2               Confidentiality Deed   Schedule 3               Feedstock Quality   Schedule 4               Process Performance Guarantees   Schedule 5               Tests and Procedures   Schedule 6               Schedule of Rates   Schedule 7               Deed of Power of Attorney   Schedule 8               Estimated Time and Cost of Consulting   Schedule 9               Address for Service   Schedule 10              Licencees of the BIOX(R) Process                                        ANNEXURES  Annexure A               Testwork Agreement dated 30 October 2000  Annexure B               Licence Area Map                                        -ii-   THIS LICENCE AGREEMENT is made this 28th day of June 2004.  BETWEEN:  BIOMIN  TECHNOLOGIES  S.A.,  a  company  incorporated  in  Switzerland           and having its registered  office there at c/o  Progressia  Societe de           Gestion SA, rue St-Pierre 18, 1700 Fribourg,  Switzerland (hereinafter           with its successors and assigns known as "BIOMIN")   AND:      BOGOSO  GOLD  LIMITED,  a  company  incorporated  in Ghana and  having           its registered office there at 12 Akosombo Road,  Airport  Residential           Area, Accra, Ghana. (hereinafter with its successors and assigns known           as "BGL")  WHEREAS:  A.   BIOMIN is the proprietor of a process known as the BIOX(R)  Process whereby      micro-organisms are used in the oxidation of certain gold bearing sulphidic      minerals in order to  facilitate  gold recovery and BIOMIN is in possession      of and has access to technology and know-how pertaining to such a process.  B.   BGL is the owner and  operator of the Bogoso  Gold Mine  situated at Bogoso      and also the Prestea,  Mansiso,  Obuom and Asikuma Gold Mines, all situated      in Ghana.  C.   BGL wishes to use the BIOX(R) Process at the Bogoso Gold Mine and BIOMIN is      willing to allow such use and the parties have  accordingly  entered into a      Testwork  Agreement  attached as Annexure  "A" ("the  Testwork  Agreement")      which deals in principle with some of the matters  relating to such use. If      any  provision  of this  Agreement  conflicts  with  any  provision  of the      Testwork Agreement, the relevant provision of this Agreement will prevail.  D.   BIOMIN and BGL (hereinafter  referred to as "the parties") are now entering      into this Agreement to record in more detail and  comprehensively the terms      and conditions  upon which the use of the BIOX(R)  Process will be allowed,      using Inoculum provided by BIOMIN.  E.   Notwithstanding their efforts pursuant to this Agreement, the parties shall      remain separate and distinct  entities,  involved in businesses and efforts      independent  hereof and of each other.  The parties wish to provide for and      record the basis of their relationship.   THE PARTIES ACCORDINGLY AGREE THAT:  1.   DEFINITIONS AND INTERPRETATION       1.1  Definitions            In this  Agreement  (which term  includes the Recitals and  Schedules)           unless the context requires otherwise:            1.1.1         "Affiliates"            in relation to a person, means                                                 any person, partnership, limited                                                 liability company,joint venture,                                                 corporation, entity or other                                                 form of enterprise which                                                 controls, is controlled by, or                                                 is under common control with                                                 that party. As used herein,                                                 "control" means the ability,                                                 directly or indirectly, to                                                 direct or cause the direction                                                 of management and policies of a                                                 person or entity through                                                 (i)   the legal or beneficial                                                       ownership of voting                                                       securities or membership                                                       interests;                                                 (ii)  the right to appoint                                                       managers, directors or                                                       corporate management;                                                 (iii) contracts;                                                 (iv)  operating voting trusts;                                                 (v)   family relationship;                                                 (vi)  agency; or                                                 (vii) otherwise.            1.1.2         "Ancillary Costs"       means the reasonable costs of                                                 accommodation, meals and local                                                 and international travel on a                                                 business class basis, which have                                                 not been supplied by BGL in                                                 terms of Clause 6.7.            1.1.3         "Approved Contractor"   means the contractor appointed                                                 by BGL for the construction of                                                 the BIOX(R) Plant, as approved                                                 by BIOMIN pursuant to Clause                                                 6.3.            1.1.4         "BGL Material"          means the concentrate produced                                                 by the processing through a                                                 flotation plant of run of mine                                                 ore extracted by BGL from its                                                 Bogoso, Prestea, Mansiso, Obuom                                                 and Asikuma Mines, as shown on                                                 the Licence Area Map annexed as                                                 Annexure B.                                          2             1.1.5         "BIOX(R) Battery                         Limits"                 means all areas of the BIOX(R)                                                 Plant:                                                  (a)   that fall within the bund                                                       walls and vertical                                                       projections thereof                                                       surrounding each of the                                                       surge/stock tanks and                                                       nutrient make up facility,                                                       BIOX(R) reactors,                                                       countercurrent decantation                                                       thickeners and                                                       neutralisation units; and;                                                  (b)   where the BIOX(R)                                                       compressors/blowers and                                                       cooling towers are                                                       situated;                                                  all of which are shown on the                                                 flow chart annexed as Schedule                                                 1.            1.1.6         "BIOX(R) Plant"         means all components and                                                 equipment of the processing                                                 plant to be constructed in                                                 accordance with the Process                                                 Design Package within the                                                 BIOX(R) Battery Limits set out                                                 in Schedule 1, at the Bogoso                                                 Mine in Ghana.            1.1.7         "BIOX(R) Process"       means the know-how and                                                 technology in respect of the                                                 biological process pursuant to                                                 which microorganisms are used in                                                 the oxidation of certain gold                                                 bearing sulphidic minerals to                                                 facilitate gold recovery.                                          3             1.1.8         "BIOX(R) Proprietary                         items"                  means the impellers, air                                                 dispersers and cooling coils of                                                 the BIOX(R) Plant.            1.1.9         "Business Day"          means a day on which the main                                                 branch of Barclays Bank in Ghana                                                 is open for business.            1.1.10        "Competitive Supplier"  means any supplier of a tank                                                 bacterial process for the                                                 processing of gold bearing                                                 minerals (or its Affiliates) or                                                 any person engaged in research                                                 on such technology (or its                                                 Affiliates) other than BIOMIN                                                 and its Affiliates.            1.1.11        "Confidentiality Deed"  means a deed substantially in                                                 the form of Schedule 2.            1.1.12        "Date of Commence-                         ment of Operations"     means the date on which oxidized                                                 ore slurry is first received                                                 into the carbon-in-leach ("CIL")                                                 Plant from the final thickener                                                 underflow from the BIOX(R)                                                 Plant.            1.1.13        "Deemed Capital Cost"   means US$ 15 million, as stated                                                 in Clause 5.4.            1.1.14        "Dollars" and "$" sign  means the lawful currency the                                                 United States of America.            1.1.15        "Effective Date"        means the date of this Agreement                                                 as stated in its heading.            1.1.16        "Event of Force                         Majeure"                means any occurrence occurring                                                 beyond the reasonable control of                                                 the party affected by it and,                                                 without limiting the generality                                                 of the aforegoing, includes:                                          4                                                   (a)   was (declared or                                                       undeclared), civil                                                       commotion, riot, political                                                       unrest, military action or                                                       an act of sabotage or                                                       terrorism;                                                  (b)   strike, lockout and                                                       industrial action, dispute                                                       or any other kind of                                                       disturbance;                                                  (c)   an act or failure to act                                                       of government or a                                                       governmental agency, in                                                       either case whether de                                                       jure or de facto;                                                  (d)   a storm, tempest, fire,                                                       flood, earthquake or other                                                       calamity;                                                  (e)   delay in obtaining or                                                       inability to obtain any                                                       governmental permit,                                                       consent or authority                                                       necessary to implement any                                                       material aspect of this                                                       Agreement.            1.1.17        "Feedstock Quality"     means the quality parameters set                                                 out in Schedule 3.            1.1.18        "Inoculum"              means the microorganisms used in                                                 the oxidation of certain gold                                                 bearing sulphidic minerals in                                                 accordance with the BIOX(R)                                                 Process.            1.1.19        "Licence Fee"           means the fee payable by BGL in                                                 terms of Clause 5.1 or any part                                                 of such fee payable as an                                                 installment in terms of Clause                                                 5.2.                                          5             1.1.20        "Manuals"               means the BIOX(R) Operating                                                 Manual and the BIOX(R) Inoculum                                                 Build-up Manual, developed,                                                 prepared and issued by BIOMIN,                                                 or any of them, as the same may                                                 be revised, replaced or                                                 supplemented from time to time                                                 by BIOMIN.            1.1.21        "Performance Test"      means the performance test for                                                 the BIOX(R) Plant set out in                                                 Schedule 4.            1.1.22        "Performance Acceptance                         Date"                   means the first day on which the                                                 operational parameters, as set                                                 out in Schedule 4, are met or                                                 are deemed to have been met in                                                 accordance with Clause 7.3.            1.1.23        "Process Design                         Package"                means a set of documents                                                 prepared by BIOMIN consisting of                                                 a process description, process                                                 flow diagram, detailed mass and                                                 heat balances, process                                                 instrumentation and valve                                                 diagrams, detailed equipment                                                 lists, process design                                                 specification and a process                                                 control philosophy all of which                                                 were or will be developed with                                                 a view to procuring performance                                                 of the BIOX(R) Plant.       1.2  Interpretation            In this Agreement, unless the context requires otherwise:                                          6             1.2.1         words  importing  any one  gender  include the other two                         genders,  the  singular  includes  the  plural  and vice                         versa, and references to natural persons include created                         entities  (whether   or  not  having  a corporate  legal                         personality);            1.2.2         headings  are used for convenience  only  and  shall not                         be used in the interpretation of this Agreement;            1.2.3         words or  phrases  defined  in  Clause  1.1 shall, where                         they  appear  in  any  other  grammatical  form, have  a                         meaning  corresponding  to  the  defined meaning.  2.   GRANT OF LICENCE       2.1  BIOMIN hereby grants to BGL a  non-exclusive  right and license to use           the BIOX(R) Process for the term of this Agreement at its Bogoso Mine,           situated at Bogoso in Ghana, solely for the purpose of:            2.1.1         erecting and commissioning the BIOX(R) Plant;            2.1.2         treating  BGL  Material or (subject to clause 2.4) other                         material  (for  itself  or  on  a  toll  basis for third                         parties) through the BIOX(R) Plant.       2.2  BGL shall not use or allow the use of the BIOX(R) Process at any other           place or for any other  purpose than as stated in Clause 2.1.  Without           derogating from the generality of the aforegoing, BGL shall not:            2.2.1         upgrade,  extend  or  expand  the  BIOX(R)  Plant beyond                         the nominal design  capacity of 349 (three  hunderd  and                         forty  nine)  metric tons per day of  BGL  Material,  as                         specified  in  the  Process Design Package  without  the                         prior consent of BIOMIN (not to be unreasonably withheld                         or delayed); or            2.2.2         replace any components  which would result in anincrease                         in  capacity  of  the BIOX(R)  Plant  beyond the  design                         capacity   specified  in  the  Process  Design   Package                         without   the  prior  consent  of  BIOMIN (not   to  be                         unreasonably   withheld  or delayed).       2.3  If BGL desires an  extension,  expansion or  replacement  or wishes to           build an entirely new BIOX(R) Plant, for the purpose of processing BGL           Material,  whether or not such new BIOX(R) Plant would be based on the           Process Design  Package,  the parties shall in good faith endeavour to           negotiate  a new  licensing  agreement  based  on  similar  terms  and           conditions as agreed in this licensing agreement, provided that:                                          7             2.3.1         neither  party  shall  have  any  liability  if  such an                         agreement    cannot   be  successfully   negotiated  for                         whatever reason;            2.3.2         if  the  parties  are unable to reach  agreement on such                         extension, expansion, replacement or new  BIOX(R) Plant,                         BGL  shall  not commence construction thereof.       2.4  Should BGL wish to use the  BIOX(R)  Process at the  BIOX(R)  Plant to           treat  material  other than BGL  Material  on a toll basis for a third           party, or treat material other than BGL Material for BGL itself,  then           such material  shall be tested by both parties to ensure that it is of           Feedstock  Quality as  described in Schedule 3. If the material is not           of Feedstock Quality, then the provisions of Clause 10 shall apply. In           addition,  BGL shall pay BIOMIN a tolling fee of US$ 1.50 per ounce of           gold sold  containing  material other than BGL Material which has been           treated at the BIOX(R) Plant.       2.5  BIOMIN  undertakes to cause BGL to be entered as a registered  user of           the registered  "BIOX(R)"  trade mark in respect of the BIOX(R) Plant,           for the duration of this Agreement.       2.6  The registered  user  agreement  being entered into pursuant to Clause           2.5 shall include terms  providing for the automatic  cancellation  of           such agreement upon termination of this Agreement.       2.7  Subject  to  clause  18.1,  BGL  shall  not,  during  the term of this           Agreement  or at any time  thereafter  without  the prior  consent  of           BIOMIN, in any country whatsoever:            2.7.1         assign   or  otherwise  provide  to  any third  party  a                         sublicense,  grant,  or  use of any right granted to BGL                         herein;            2.7.2         apply  to  patent  the  BIOX(R) Process or the bacterial                         strain  used  in  the BIOX(R) Process or to register the                         term BIOX(R) as a trade mark;            2.7.3         attack the  validity  of the  patents granted in respect                         of the BIOX(R) Process or the  registration of the trade                         mark BIOX(R) or BIOMIN's common law rights in and to the                         trade mark  BIOX(R) and the BIOX(R) Process.            2.7.4         attack BIOMIN's title to the patents  granted in respect                         of  the  BIOX(R)  Process,  or any of its registered and                         common law rights to the BIOX(R) Process.       2.8  BGL shall use the term "BIOX(R)" whenever it makes written reference ,           and the term  "BIOX(R)"  wherever  it  makes  oral  reference,  to the           BIOX(R)  Process  or the  BIOX(R)  Plant  and  shall not use any other           trademark,  term,  name or  description  in  relation  to the  BIOX(R)           Process or BIOX(R) Plant.                                          8        2.9  Upon termination of this Agreement,  BGL shall join with BIOMIN in any           application which may be necessary to cancel the registration, if any,           of BGL as a registered user in respect of the BIOX(R) trade mark.       2.10 For the purpose of Clause  2.9,  BGL shall,  simultaneously  with this           Agreement,   execute  a  Power  of   Attorney  in  favour  of  BIOMIN,           substantially in the form of Part A of Schedule 7.       2.11 The licence  granted to BGL pursuant to Clause 2.1 and this  Agreement           shall not include the right to grant any  sub-license to any person or           entity.  3.   TERM       3.1  This Agreement shall commence on the Effective Date and shall continue           until terminated:            3.1.1         by unanimous agreement of the parties;            3.1.2         pursuant to Clauses 6.9 or 11.1 or 15.3;            3.1.3         upon written  notice to BGL from BIOMIN if  construction                         of  the BIOX(R)  Plant shall not have been  completed on                         or before a date two years after the Effective Date;            3.1.4         upon  written  notice  to BGL  from  BIOMIN if,following                         its construction, the BIOX(R)  Plant is not  operated to                         process  BGL  Material  for  any continuous period of at                         least twelve months,            whichever is the earliest.       3.2  The  termination  of this  Agreement  shall not in any way  affect the           parties'   respective   continuing   obligations   in   terms  of  the           Confidentiality  Deed  attached  hereto as Schedule 2 or any covenants           signed  pursuant to the  Confidentiality  Deed or any  confidentiality           undertakings  which have been signed by third parties pursuant to this           Agreement.       3.3  BGL  undertakes  to notify  BIOMIN in writing  where  possible  of any           intended permanent or temporary  cessation of operations  scheduled to           last for more than a quarter at the BIOX(R) Plant and the  anticipated           dates thereof as well as the date of resumption of any operations.  4.   IMPROVEMENTS AND DEVELOPMENTS       4.1  BGL shall  promptly  disclose  in writing  to BIOMIN  all  inventions,           improvements  and  developments  made by its employees  contractors or           agents of which it is aware in respect of the  BIOX(R)  Process or the           BIOX(R) Plant.                                          9        4.2  All such inventions,  improvements or developments, whether patentable           or not, shall belong to BIOMIN and BGL shall,  at BIOMIN's  reasonable           request  and  cost,  procure  the  signing  of all  documents  and the           performance of all acts which may be necessary to prove BIOMIN's title           thereto and to enable  BIOMIN to apply for and obtain  patent or other           protection in respect thereof throughout the world.       4.3  BIOMIN  shall  inform  BGL  of  all   inventions,   improvements   and           developments  in  respect of the  BIOX(R)  Process in which it obtains           proprietary rights after the Effective Date.       4.4  Any  information  disclosed  in terms of Clause 4.1 shall,  after such           disclosure, and any inventions, improvements and developments referred           to in Clause 4.3 shall,  be included in the definition of the "BIOX(R)           Process" for purposes of this Agreement.       4.5  BGL  shall  be  entitled  to  use  all  inventions,   improvements  or           developments  referred to in Clauses  4.1, 4.2 and 4.3 pursuant to the           terms  of this  Agreement  and no  additional  consideration  shall be           payable to BIOMIN in respect of such use.  5.   LICENCE FEE       5.1  In  consideration  for the grant of the rights  referred  to in Clause           2.1, BGL shall pay to BIOMIN in cash or by  telegraphic  transfer to a           bank account designated by BIOMIN, and without deduction or set-off, a           licence fee equal to 10 % (ten per centum) of the Deemed  Capital Cost           of the BIOX(R) Plant.       5.2  The  amount  due to BIOMIN in terms of Clause  5.1 shall be payable in           installments, as follows:            5.2.1         25 % of  the  fee  upon  notification of a  decision  by                         BGL to proceed with the construction  of a BIOX(R) Plant                         at the Bogoso Mine;            5.2.2         25  %  of  the  fee   on the  Date  of  Commencement  of                         Operations;            5.2.3         50 % of the fee after  completion of a  Performance Test                         as  per Schedule  5  demonstrating  the  achievement  of                         the  operational parameters  set  out  in Schedule 4, or                         twelve  (12) months after  the Date of  Commencement  of                         Operations, if through no fault of its own,BIOMIN cannot                         complete a  Performance  Test within twelve months after                         the Date of  Commencement  of Operations, whichever date                         occurs first.                                         10        5.3  Each  installment  payable  in terms of  Clause  5.2  shall be paid in           accordance with Clauses 21.4 and 21.12.       5.4  The  Deemed  Capital  Cost  referred  to in  Clause  5.1  shall be US$           15,000,000 (Fifteen Million Dollars).  6.   CONSTRUCTION OF PLANT       6.1  It is hereby  recorded that BIOMIN  provided BGL with a Process Design           Package for the  construction  of the BIOX(R) Plant at the Bogoso Mine           on 3 April 2001.       6.2  After  execution  of this  Agreement,  BGL  shall  design,  erect  and           commission  the BIOX(R)  Plant in accordance  with the Process  Design           Package  within a period of 60 (sixty)  months after the date referred           to in Clause 6.1.       6.3  It is recorded  that BGL will  appoint one or more  contractors  ("the           Approved Contractors") for the engineering, design and construction of           the BIOX(R) Plant,  which  appointment shall be subject to the written           approval of BIOMIN, provided that such approval shall not unreasonably           be  withheld  or delayed for more than  fifteen  days after  notice of           appointment is given by BGL to BOMIN.  Approval of BIOMIN shall not be           required  for any of  Minproc,  MDM,  Bateman or  Lycopodium  to be an           Approved Contractor.       6.4  BIOMIN shall:            6.4.1         within   one   month   of  a   request  by  BGL,  supply                         metallurgical   and   process   engineering  consultancy                         services   as   required   by  BGL  to  BGL  during  the                         construction  and  commissioning  of the  BIOX(R) Plant;            6.4.2         within  two  weeks of submission  by BGL,  consider and,                         if  deemed fit, verify final process  engineering design                         drawings  pertaining  to  the  BIOX(R)  Plant  (provided                         that  BGL shall give  BIGMIN at least one month's notice                         of the intended submission).       6.5  BGL shall not allow any person access to the Process Design Package if           such  person  has  not  entered   into  a   Confidentiality   Covenant           substantially in the form of Schedule 2.       6.6  BIOMIN shall be compensated by BGL for any services  rendered pursuant           to Clause 6.4 in terms of the rates set out in Schedules 6 and 8, plus           Ancillary Costs.       6.7  BGL shall provide,  at no charge to BIOMIN,  food,  accommodation  and           transport  for no more than four people at a time as may be reasonably           available   at  the  Bogoso  Mine  for  any  of  BIOMIN's   accredited           representatives  or employees  rendering  services as  contemplated in           Clauses 6.4, 7 and 8.                                         11        6.8  Subject to Clause  6.10,  BGL shall not commence  construction  of the           BIOX(R)  Plant  unless  and  until it has  received  BIOMIN's  written           approval  of the final  process  engineering  plans in respect of such           Plant, such approval not to be unreasonably withheld or delayed beyond           the timeframe  mentioned in Clause 6.4.2.  Construction of the BIOX(R)           Plant shall be only in accordance with the plans as so approved.       6.9  If BIOMIN has not  approved  such plans and design  within a period 60           (sixty)  months after the Effective  Date through no fault of its own,           then  BIOMIN  may,  at its sole  option  and  discretion,  at any time           thereafter:            6.9.1         terminate  this   Agreement  by  7 (seven) days' written                         notice to BGL; or            6.9.2         extend  such 60 (sixty)  month  period for such  further                         period which it may, in its discretion, determine.       6.10 If BIOMIN has not  approved  such plans and design  within a period of           30(thirty)  days after  submission by BGL, then BGL may give notice to           BIOMIN stating that it will commence construction of the BIOX(R) Plant           after a further  period  of 15  (fifteen)  days and if BIOMIN  has not           approved  such plans and design  within  such  period of 15  (fifteen)           days, then BGL may commence construction of the BIOX(R) Plant.       6.11 BGL shall allow BIOMIN to conduct  regular  inspections of and general           supervision over the planning,  process design and construction of the           BIOX(R)  Plant during normal  business  hours of BGL and with at least           two weeks' prior written  notice without any undue  interference  from           BGL  or  its  contractors  and  provided  that  such  inspections  and           supervision do not unduly interfere with such planning, process design           and construction.       6.12 Without the prior  written  consent of BIOMIN,  BGL shall install only           new equipment in the BIOX(R)  Plant,  which consent may be withheld by           BIOMIN in its sole discretion.       6.13 BGL  shall,  at its own cost,  solely  be  responsible  to obtain  all           approvals,  consents  and permits (if any) which may be  necessary  to           enable it to construct the BIOX(R) Plant.       6.14 Notwithstanding any other provision in this Agreement, the engineering           (other than process engineering),  design,  construction and operation           of the BIOX(R)  Plant,  including all costs thereof and risks relating           thereto or arising therefrom,  shall be the sole responsibility of BGL           and no approval or verification  thereof by BIOMIN shall render BIOMIN                                         12             liable for any defects, faults,  shortcomings or any other problems or           injuries including,  without limitation,  personal injury or death, in           respect  of,  relating  to or  arising  out of the  BIOX(R)  Plant  or           implementation  of any aspect of this Agreement  without  prejudice to           BIOMIN's liability under Clause 13.2 and Schedule 4.  7.   COMMISSIONING OF PLANT       7.1  As soon as practical after the approval by BIOMIN of the final process           engineering  and design  drawings,  BIOMIN shall, at BGL's request and           cost,  assist in and  supervise  the Inoculum  build-up at the BIOX(R)           Plant.       7.2  As soon as is reasonably practicable after the Date of Commencement of           Operations,  Performance  Tests will be carried out in the presence of           designated  representatives  of both  parties in  accordance  with the           procedures  set out in  Schedules  4 and 5 to  determine  whether  the           operational parameters as set out in Schedule 4 can be met.       7.3  The said operational parameters will be deemed as having been met:            7.3.1         on agreement between the  designated  representatives of                         the  parties after  mutual observation and consideration                         of day to day operating data; or            7.3.2         on successful completion of a Performance Test; or            7.3.3         12  (twelve)  months  after the  Date of Commencement of                         Operations  if  the  Performance  Test   has   not  been                         completed  successfully  as  a  result  of  the  matters                         mentioned  in  Clauses  7.4.1,  7.4.2 or 7.4.3.,            whichever occurs first.       7.4  If the said operational  parameters are not met during the Performance           Test for reasons other than that:            7.4.1         the  plant  inputs  are  not  of  Feedstock  Quality  as                         described in Schedule 3; or            7.4.2         the  BIOX(R)  Plant  is  not  supplied  uniformly at the                         design rate;            7.4.3         or  the  BIOX(R)  Plant  has  not  been  constructed  in                         accordance  with   the   engineering   design  drawings,                         verified by BIOMIN;                                         13             then up to 100% (one hundred per centum) of the licence fee stipulated           in Clause 5.1 shall, to the extent  necessary to cause the operational           parameters  to be  met,  be  applied  by  BIOMIN  to  supply  services           specified in Schedule 6.       7.5  During the  commissioning  of the BIOX(R) Plant,  BIOMIN shall, at the           request and cost of BGL, render metallurgical  assistance to BGL until           the Date of Commencement  of Operations.  The aforesaid costs shall be           charged at the rates set out in Schedule 6, plus Ancillary Costs.  8.   OPERATIONAL SUPPORT AND TRAINING       8.1  As  soon  as  practical  but no  later  than  four  months  after  the           commencement of the  construction  of the BIOX(R) Plant,  BIOMIN shall           supply BGL with four (4) copies of the Manuals.       8.2  BGL shall use  reasonable  endeavours  to operate the BIOX(R) Plant in           accordance  with the procedures set out in the Manuals,  as revised by           BIOMIN  from  time  to  time  (provided  that  such  revisions  do not           adversely  affect  the  efficiency  of the  operation  of the  BIOX(R)           Plant).       8.3  The Manuals and all documentation  relating to the BIOX(R) Process are           the  proprietary  materials of BIOMIN.  Prior to  distribution  of the           Manuals or such documentation, BGL shall cause all personnel likely to           have access to copies of the Manuals or such documentation, to execute           a covenant  substantially in the form of Annexure 2 to Schedule 2. BGL           shall at its cost  duly  stamp the  originals  of such  covenants  and           thereafter  keep  them  in safe  custody  and  forward  a copy of each           covenant to BIOMIN upon its signature.       8.4  Neither  BGL  nor  any  of  its  employees,   consultants,  agents  or           contractors  shall copy any Manual or  documentation  relating  to the           BIOX(R)  Process or any part thereof  without  BIOMIN's  prior written           consent, not to be unreasonably withheld or delayed.       8.5  During  commissioning  of the  BIOX(R)  Plant,  BIOMIN  shall at BGL's           request and cost,  provide operator  training to BGL's personnel.  The           aforesaid  costs  shall be charged at the rates set out in Schedule 6,           plus Ancillary Costs.       8.6  For  a  period  of  5  (five)  years  commencing  on  the  Performance           Acceptance  Date,  BIOMIN shall,  at BGL's  request and cost,  provide           on-going  technical support in respect of the BIOX(R) Plant,  provided           such support shall not exceed twenty (20) man days per year. The costs           to be charged in respect of such support shall be at the rates set out           in Schedule 6, plus Ancillary Costs.       8.7  Throughout  the term of this  Agreement,  BIOMIN  shall  procure  that           reasonable  endeavours  are made to answer as promptly as possible all           reasonable  enquiries made by BGL in respect of the use of the BIOX(R)           Process at the BIOX(R) Plant.                                         14   9.   GENERAL OBLIGATIONS OF BOTH PARTIES       9.1  BGL  shall  disclose  to BIOMIN  and give  BIOMIN  and its  respective           employees,  agents  and  representatives  access  to all  information,           books,  statements,  vouchers  and records  relating to the  operating           performance  of the BIOX(R) Plant as is reasonably  required to enable           BIOMIN to verify the performance by BGL of its obligations  under this           Agreement or so as to enable  BIOMIN to fulfil its  obligations  under           this  Agreement.  The  information  disclosed  to BIOMIN shall be kept           strictly  confidential  by  BIOMIN  and  shall  be used  only  for the           purposes of verifying the performance by BGL of its obligations  under           this Agreement or enabling BIOMIN to fulfil its obligations under this           Agreement.       9.2  BIOMIN, its employees or its accredited  representatives may visit and           inspect the Bogoso Mine and the BIOX(R) Plant from time to time during           ordinary  business  hours and on at least  two  weeks'  prior  written           notice to monitor and verify the fulfillment by BGL of its obligations           under this  Agreement,  inter alia  regarding  the use of the  BIOX(R)           Process by BGL, provided that such visits and inspections do not cause           unreasonable  interference  with the  operations of BGL or the BIOX(R)           Plant.       9.3  Both parties shall be allowed to invite  visitors to the BIOX(R) Plant           who are not  employees or accredited  representatives  of either party           provided that:            9.3.1         if  the  visitor is an employee or  representative  of a                         gold   mine  operator   or   research   institute,  then                         BIOMIN  shall  be given reasonable  notice of such visit                         and   BGL   shall   comply   with   BIOMIN's  reasonable                         instructions in relation to such visit;            9.3.2         such visits take place  during  ordinary  business hours                         of BGL (and, in  the case of visitors invited by BIOMIN,                         on at least two weeks'  prior  written  notice)  and  do                         not  cause unreasonable interference with its operations                         or those of the BIOX(R) Plant;            9.3.3         such visitors  are not employed by, or associated in any                         way  with a Competitive  Supplier,  and provided further                         that   such  visitors   are  not  Competitive  Suppliers                         themselves.  10.  CONCENTRATE NOT OF FEEDSTOCK QUALITY       The parties  acknowledge that the BIOX(R) Plant was designed to process BGL      Material  of  Feedstock  Quality as  described  in  Schedule 3. BGL further                                         15        acknowledges that the processing of any other material shall, to the extent      permitted  by this  Agreement,  be at the sole risk and expense of BGL.  11.  BREACH       11.1 If a  party  is in  material  breach  of its  obligations  under  this           Agreement,  the non-defaulting party may give notice in writing to the           defaulting  party  specifying  the  default and  requiring  that it be           remedied  forthwith.  If,  with  respect to a default  relating to the           payment of money,  such default has not been remedied  within ten (10)           days  after  service of such  notice,  the  non-defaulting  party may,           without  prejudice  to any  other  remedies  it may  have at law or in           equity, terminate this Agreement forthwith by notice in writing to the           defaulting  party.  If, with respect to a non-monetary  default,  such           default has not been remedied  within sixty (60) days after service of           such notice or, in the case of a  non-monetary  default that cannot be           completely  remedied within sixty (60) days, the defaulting  party has           not diligently started to remedy the same within sixty (60) days after           service of notice and thereafter  succeeded  within a reasonable  time           thereafter in completing such remedy,  the  non-defaulting  party may,           without  prejudice  to any  other  remedies  it may  have at law or in           equity, terminate this Agreement forthwith by notice in writing to the           defaulting party.       11.2 Without in any way  limiting  the  provisions  of Clause  11.1 and the           meaning  of the term  "material  breach" as used in Clause  11.1,  the           parties  agree that it shall be regarded as a material  breach of this           Agreement if a provisional or final winding-up or liquidation order is           issued in respect of a party or if a party becomes insolvent,  files a           petition  in  bankruptcy,  makes an  arrangement  for the  benefit  of           creditors or has a receiver  appointed to manage its affairs,  whether           provisionally or finally.  12.  TERMINATION OF AGREEMENT AND DISMANTLING OF PLANT       12.1 Upon  termination of this  Agreement,  howsoever such  termination may           arise, BGL shall forthwith:            12.1.1        cease to use the BIOX(R) Process and BIOX(R) trade mark;            12.1.2        de-commission the BIOX(R) Plant;            12.1.3        dismantle  the BIOX(R)  Proprietary Items and destroy or                         dispose of them in accordance with BIOMIN's instructions                         provided  that   such  instructions  do  not  result  in                         additional cost to BGL; and            12.1.4        return all  Manuals,  all other  documentation  relating                         to the BIOX(R) Process and all copies thereof to BIOMIN.                                         16        12.2 BGL  shall  not sell the  BIOX(R)  Plant as a whole  unit but may sell           individual  components  of the BIOX(R)  Plant for use in other  plants           provided  such plants are not  bacterial  oxidation  based  processing           plants,  and  provided  further  that  BGL  shall  not sell any of the           BIOX(R) Proprietary Items.       12.3 Upon termination of this Agreement, and without prejudice to any other           rights which the parties may have at law or in equity:            12.3.1        BIOMIN shall retain  all  payments  made by BGL prior to                         such termination,  as consideration  for the performance                         by  BIOMIN  of its obligations prior to such termination            12.3.2        BGL  shall  remain liable for all license fees,  service                         fees and other  payments  that have become payable under                         this  Agreement prior to the date of termination.       12.4 Under no circumstances  shall BIOMIN's  liability to BGL for breach of           this  Agreement  exceed the amount of  payments  actually  received by           BIOMIN from BGL pursuant to Clause 5.1.  13.  EXCLUSION OF WARRANTIES       13.1 To the best of BIOMIN's  knowledge and belief the BIOX(R) Process will           not infringe any patent,  trade mark or other proprietary right of any           other person. BIOMIN warrants that it is the sole and beneficial owner           of the  trade  mark  BIOX(R)  in  Ghana  and  that to the  best of its           knowledge,  information and belief use of the trademark BIOX(R) by BGL           in relation to the BIOX(R) Process will not infringe the  intellectual           property rights of any third party.       13.2 If the use of the BIOX(R)  Process by BGL results in any claim against           BGL or any of its Affiliates, or their respective officers,  directors           or employees for any infringement of any patent, trade mark, design or           any other proprietary right (save for any claim by BIOMIN), then:            13.2.1        if, as a result  of any legal  action, BGL is  prevented                         from using the BIOX(R)  Process  unless a licence fee is                         paid  by it to the plaintiff or claimant in such action,                         then:                          13.2.1.1  BIOMIN shall use its best  endeavours to alter                                   the BIOX(R) Process   at  its  cost  to  avoid                                   any  further infringements  of  the  rights of                                   such  plaintiff  or claimant  (and  BGL  shall                                   give   BIOMIN  reasonable assistance with such                                   alterations); or                          13.2.1.2  if such  alterations  prove  to be  impossible                                   or impractical,  BIOMIN shall pay such licence                                   fee to such plaintiff  or claimant (subject to                                   the provisions  of Clause 12.4), provided that                                   BGL  shall  assign  any  rights of recovery of                                   such  licence  fee  to  BIOMIN  (up the amount                                   actually paid by BIOMIN).                                         17             13.2.2        Subject   to  the  provisions  of  Clause  12.4,  BIOMIN                         shall   indemnify   and   hold  harmless  BGL   and  its                         Affiliates  and their respective officers, directors and                         employees against 50% of such claim  (other than a claim                         for  a  licence  fee as set out in Clause 13.2.1 above),                         including,  without  limitation reasonable lawyers' fees                         and costs of litigation which may be incurred by them or                         for  which  they  may  become  liable  in  respect of or                         arising out of the defence,  settlement  or  compounding                         of any  such claim or any judgement ordered against them                         in respect of any such claim or costs.       13.3 BGL shall inform  BIOMIN of any claim against it referred to in Clause           13.2 and,  without  prejudice to the validity of any such claim or the           liability of BIOMIN, BGL:            13.3.1        shall  not  make  any  admission of liability, agreement                         settlement, or compromise or otherwise take  any  action                         in relation  thereto  without the prior  written consent                         of  BIOMIN,  which shall not be unreasonably withheld or                         delayed;            13.3.2        shall  (if  BIOMIN  so  directs)  allow  BIOMIN  and its                         professional  advisers  to  investigate  the  matter  or                         circumstance  alleged  to give rise to the claim and BGL                         shall   give   all   such   assistance   in  making such                         investigations   as  BIOMIN  may   reasonably   request,                         including  upon reasonable notice and in normal business                         hours  access  to  (and  copies of) any documents or any                         other   information  in the possession of BGL and to all                         employees or officers  having any responsibility for the                         matter giving rise to the claim;            13.3.3        shall  (if BIOMIN so directs) at all times permit BIOMIN                         to take conduct  of the  claim, subject  always  to  BGL                         first  being indemnified to its reasonable  satisfaction                         by BIOMIN against any losses, costs or expenses which it                         may thereby incur.       13.4 Save as provided for in this Agreement,  BIOMIN shall be exempted from           and shall not be liable  under any  circumstances  whatsoever  for any           loss of  profits,  loss of revenue or any  indirect  or  consequential           damages of any nature,  whether in the contemplation of the parties or           not, which BGL or any other person may suffer or incur, arising out of           or in connection with, any act or omission,  whether negligent or not,           of BIOMIN, its employees, sub-contractors or agents.                                         18        13.5 Except as expressly set forth in this  Agreement to the contrary,  BGL           shall  indemnify and hold harmless BIOMIN and its Affiliates and their           respective  officers,  directors  and  employees  from and against any           losses, costs, expenses, liabilities, obligations, claims and actions,           including  without  limitation  reasonable  lawyers' fees and costs of           litigation,  which they or any of them may incur or become  subject to           as a result of or arising out of BGL's use of the  BIOX(R)  Process or           the  construction,  operation,  maintenance,  repair,  dismantling  or           reclamation  of the  BIOX(R)  Plant  or the  property  on  which it is           situated  or any  implementation  of this  Agreement,  save where such           losses,  costs,  expenses,  liabilities,  obligations,  claims  and/or           actions are  attributable  to the fault  and/or  negligence  of BIOMIN           and/or its Affiliates  and/or their  respective  officers,  directors,           employees, shareholders, agents, representatives or subcontractors.       13.6 BIOMIN shall inform BGL of any claim  against it referred to in Clause           13.5 and,  without  prejudice to the validity of any such claim or the           liability of BGL, BIOMIN:            13.6.1        shall not make any admission  of  liability,  agreement,                         settlement or compromise or otherwise take any action in                         relation  thereto  without  the prior written consent of                         BGL,which shall not be unreasonably withheld or delayed;            13.6.2        shall (if BGL so directs) allow BGL and its professional                         advisers  to  investigate  the  matter  or  circumstance                         alleged  to give rise to the claim and BIOMIN shall give                         all such  assistance in making  such  investigations  as                         BGL may reasonably  request, including  upon  reasonable                         notice  and  in  normal  business  hours  access to (and                         copies of) any documents or other  information   in  the                         possession  of  BIOMIN  and to all employees or officers                         having any  responsibility for the matter giving rise to                         the claim;            13.6.3        shall (if BGL so  directs) at all  times  permit  BGL to                         take conduct  of the  claim,  subject  always  to BIOMIN                         first  being indemnified  to its reasonable satisfaction                         by  BGL  against  any losses, costs or expenses which it                         may thereby incur.       13.7 Except as  expressly  set  forth in this  agreement  to the  contrary,           BIOMIN makes no representations,  warranties or covenants  whatsoever,           express or implied,  including without  limitation with respect to any           services,  designs,  documents,  Inoculum  or  other  material  to  be           provided  by it  pursuant  to  this  Agreement  and  BIOMIN  expressly           disclaims  any such  representations,  warranties or covenants and any           and all  warranties  of  merchantability  or fitness for a  particular           purpose.                                         19   14.  CONFIDENTIALITY       14.1 BGL undertakes:            14.1.1        that   simultaneously   with   the   signature  of  this                         Agreement,  it will sign the Confidentiality Deed in the                         form of Schedule 2;            14.1.2        that  any  confidential information  as  defined  in the                         said  confidentiality agreement (hereafter "Confidential                         Information") will be used by it solely for the purposes                         of this  Agreement and not otherwise;            14.1.3        where disclosure is made by it to any  third  party  for                         the  purposes  of   this  Agreement,  it shall  promptly                         advise  BIOMIN thereof in  writing  and ensure  that the                         third    party    is    under    an    obligation     of                         confidentiality to  it in  respect  of  any Confidential                         Information  so disclosed  and shall ensure that no more                         Confidential  Information is disclosed than is necessary                         in the relevant circumstances;            14.1.4        that  the Confidential Information will be restricted to                         such of its directors and  employees as must necessarily                         have  access  to  the same for the  performance of their                         duties in connection  with this Agreement and BGL agrees                         to take reasonable  steps to ensure that such  directors                         and  employees  are  required  to  maintain   the   same                         confidence  and do not  disclose  to any third party the                         Confidential Information; and            14.1.5        that  no  BIOX(R) Proprietary  Items  will  be shown  to                         any employees or  representatives of gold mine operators                         or research institutes or sold to any  person unless the                         identity  of such person  and  the terms and  conditions                         relating  to  the  same have been first approved  of  in                         writing by BIOMIN;            and BGL  agrees  that  its  obligations  under  this  Clause  14 shall           continue  throughout  the term of this  Agreement  and for a period of           fifteen (15) years thereafter.       14.2 In any dispute  between  the  parties  the burden of proving  that any           information is not Confidential Information shall rest on BGL.       14.3 BGL shall ensure that the Approved  Contractor on the  termination  or           expiration of its contract returns to BGL all Confidential Information           disclosed in writing to such contractor,  all tender documents and all           other contractual documents together with any copies thereof which are           in existence.                                         20        14.4 Where  pursuant  to this  Agreement a third party is required to enter           into a covenant pursuant to a Confidentiality  Deed, BGL shall execute           such covenant as attorney for BIOMIN pursuant to the Power of Attorney           granted to BGL in  substantially  the form of Part B of Schedule 7 and           shall forward to BIOMIN a copy of each covenant  executed  pursuant to           such Power.       14.5 BGL shall ensure that all such covenants and Confidentiality Deeds are           duly and properly  acknowledged and notarised and shall be responsible           for the costs of these. Where such covenant is entered into, BGL shall           use reasonable endeavours where practical and to the extent within its           power to procure that each party signing such  covenant  shall perform           its obligations in terms of that covenant.  15.  FORCE MAJEURE       15.1 If any party is prevented,  hindered or delayed from performing any of           its obligations  under this Agreement (other than an obligation to pay           money) by any Event of Force  Majeure  then so long as that  situation           continues  that party shall be excused  from the  performance  of such           obligation to the extent that it is so prevented,  hindered or delayed           and the time for  performance  of such  obligations  shall be extended           accordingly.       15.2 A party affected by an Event of Force Majeure shall  forthwith  notify           the other  party of its  occurrence  and shall take  reasonable  steps           within its power to minimise the effect of such Event of Force Majeure           or to bring it to an end.       15.3 Should such Event of Force Majeure  endure for a period of longer than           six (6)  months,  the  party  that is not  relying  upon it  shall  be           entitled to terminate this Agreement on notice to the other party.  16.  WARRANTY OF AUTHORITY       16.1 BGL hereby warrants that it is duly authorised to enter into,  perform           and be bound by the provisions of this Agreement.       16.2 BIOMIN  hereby  warrants  that it is duly  authorised  to enter  into,           perform and be bound by the provisions of this Agreement.       16.3 BGL warrants  that BGL  Material of Feedstock  Quality as described in           Schedule 3 is available at its Bogoso and Prestea Mines for processing           through the BIOX(R)  Plant  during  commissioning  thereof and for the           completion of the Performance Test.  17.  RELATIONSHIP OF PARTIES       17.1 This Agreement  does not in any way constitute  BIOMIN as guarantor or           surety of BGL and BIOMIN shall not be obliged to accept responsibility           for any acts or  omissions of BGL or for any  liabilities  incurred by                                         21             BGL or for any failure by BGL  successfully  to render any services or           in respect of any claims of whatever  nature which may be made against           BGL, except as otherwise stated in this Agreement.       17.2 Nothing  contained in this Agreement shall be construed or is intended           to constitute a party as an agent or representative of any other party           or  to  create  any   partnership,   trust  or  mining  or  commercial           partnership  or new or separate  taxable  legal entity for any purpose           whatsoever,   it  being  expressly   understood  that  each  party  is           exercising,  protecting and  developing its own interests.  Nothing in           this  Agreement  shall  be  construed  as  making  BIOMIN  an owner or           operator  of the  BIOX(R)  Plant or any other  facility  on the Bogoso           Mine.  18.  ASSIGNMENT       18.1 No party may assign or transfer any of its rights and interests  under           this Agreement to any third party unless and until it has obtained the           written consent of the other party, which consent will not be withheld           or delayed unreasonably, provided that no consent will be required for           the  assignment  and/or  transfer  by BGL of its rights and  interests           under this Agreement            18.1.1        by  way of  security to a financier  of its  operations,                         to  the  financier on enforcement of such security or by                         such financier to a third party following enforcement of                         such security; or            18.1.2        to  a third party or third parties  acquiring any of the                         Bogoso, Prestea,  Obuom,  Mansiso  or Asikuma Mines from                         BGL or to a third party or third parties acquiring BGL's                         business   generally  (unless  such  third  party  is  a                         Competitive Supplier),  or a portion of its business, or                         to a third party merging with BGL; or            18.1.3        to an Affiliate.       18.2 Notwithstanding  Clause 18.1, BIOMIN shall be entitled to appoint such           contractors  and  sub-contractors  as it may, in its sole  discretion,           deem fit to  perform on behalf of BIOMIN  its  obligations  under this           Agreement,   provided   that  BIOMIN  shall  remain   liable  for  the           performance of such obligations.  19.  PROTECTION OF PROCESS       19.1 During  the  term of this  Agreement  and for a period  of five  years           thereafter,  BGL shall not directly or  indirectly  engage in any tank           bacterial  process for the  processing of gold bearing  minerals.  BGL           shall use reasonable  endeavours to ensure that none of its Affiliates                                         22             engage in such activity. Nothing in Clause 19.1 prevents or limits BGL           or its Affiliates  from entering into, or being party to, an agreement           with a third party  concerning the licensing of intellectual  property           rights or processes  similar to the BIOX(R) Process where such licence           or agreement  does not infringe the  intellectual  property  rights of           BIOMIN.       19.2 BGL shall forthwith advise BIOMIN in writing of any claim,  assertion,           action  or  proceeding,  actual  or  threatened  which  comes  to  its           attention whereby:            19.2.1        any of BIOMIN's rights pertaining to the BIOX(R) Process                         or  the  BIOX(R)  trade mark or patent to be granted are                         infringed; or            19.2.2        any such rights are attacked; or            19.2.3        BGL  is  itself  threatened  with  infringement  of  any                         proprietary  rights  of  a third party due to its use of                         the BIOX(R) Process.       19.3 BIOMIN shall be entitled to institute or defend any proceedings of the           kind  referred  to in  Clause  19.2  and BGL  shall  provide  all such           assistance  and  co-operation  to BIOMIN as may reasonably be required           for the purpose of such proceedings.       19.4 BGL shall not allow any person,  other than either party's  employees,           approved  contractors or their employees,  access to the BIOX(R) Plant           or the BIOX(R)  Process  unless it is in full operation and unless the           provisions of Clause 9.3 are complied with.       19.5 BGL shall not  dispose  of any of the  Inoculum  to any person for any           purpose whatsoever without the prior written consent of BIOMIN.  20.  NOTICES       20.1 All notices and other communications required or permitted to be given           under this  Agreement  shall be in writing  in the  English  language,           shall be addressed to the address of the  applicable  party as set out           in the heading of this  Agreement or at such other address as any such           party may have  submitted  therefor by notice to the other party,  and           shall be  either  delivered  personally  or by  international  courier           service or sent by facsimile communication.       20.2 Notices shall be deemed to be received on the day of actual receipt if           received  between the hours of 09h00 and 15h00 at the place of receipt           on a Business Day, or otherwise on the next following Business Day, at           the place of receipt.            The addressee,  when requested by the sender,  shall promptly  provide           the sender with a facsimile or courier acknowledgement of the receipt,                                         23             but the delay or failure to give or receive  any such  acknowledgement           will not affect the  validity  of the notice in respect of which it is           sought.  21.  MISCELLANEOUS       21.1 Variation            No  variations,  modifications  or  waiver of any  provisions  in this           Agreement,  nor  consent  to any  departure  by any  party  from  such           provision,  shall be of any effect unless the same shall be in writing           and signed by both parties (or, in the case of a waiver,  by the party           giving it); and then such variation,  modification,  waiver or consent           shall be  effective  only to the extent to or for which it may be made           or given.       21.2 Waivers            No failure,  delay,  relaxation or indulgence on the part of any party           in  exercising  any power or right  conferred  upon it by the terms of           this  Agreement  shall  operate as a waiver of such power or right nor           any single  failure to do so,  preclude  any other or future  exercise           thereof,  or the  exercise  of any  other  power or right  under  this           Agreement.       21.3 Rights of Third Parties Act            The English  Contracts  (Rights of Third  Parties)  Act 1999 shall not           apply to this  Agreement  save so as to  confer  rights  on the  third           parties  mentioned in Clauses 13.2 and 13.5.  However,  the consent of           such third  parties  shall not be  required  for the  modification  or           amendment of this Agreement.       21.4 Payments            21.4.1        Except where otherwise expressly  stipulated, any sum of                         money to be paid to or  tendered  by a party  shall only                         be validly and effectively  paid  or  tendered  if  such                         payment  is given  or delivered or made in Dollars or by                         bank  cheque  or by that party's cheque in Dollars or in                         such  other  currency  or  in  such other form as may be                         agreed.            21.4.2        All  amounts  of  money payable  as  stipulated  in this                         Agreement shall be paid without  deduction or set-off in                         respect   of    banking  charges,  duties   or   levies,                         withholding   taxes   or  any   other  currency transfer                         charges.            21.4.3        All  monies  payable  by BGL in terms of this  Agreement                         shall, except  for  payment in terms of Clause 5.1.  and                         Clause 5.2 (which are  due  on  the  dates  specified in                         such   clauses)  or  where  a date  for payment has been                         stipulated  herein,  be paid within  thirty (30) days of                         BIOMIN furnishing an invoice therefor to BGL.                                         24        21.5 Proper Law            This Agreement  shall be governed by and construed in accordance  with           the laws of England.  The parties agree that the choice of English law           is  both  reasonable  and  appropriate,  particularly  in  view of the           international  nature  of this  transaction,  the  different  material           domiciles  of the  parties,  the  status  of  England  as a centre  of           international  commerce,  the well  developed,  refined and understood           nature  of  English  law  and the  parties'  familiarity  and  comfort           therewith.       21.6 Arbitration of Disputes            In the event of any dispute  between the parties  arising out of or in           connection  with  this  Agreement  either  party may give to the other           written  notice  identifying  the  dispute  and,  after the  expiry of           fourteen  (14)  days  from the  giving of that  notice,  that  dispute           (unless  settled) shall be referred to arbitration in accordance  with           the  rules of the  London  Court of  International  Arbitration..  The           arbitration shall be held before one arbitrator in London, England and           be conducted in the English  language.  The costs of the  arbitration,           including without limitation the fees of the arbitrator, shall be paid           by the party that does not prevail in the  arbitration  (as determined           by the  arbitrator).  The decision of the  arbitrator  shall be final,           binding,  enforceable  and  non-appealable  and  may be  entered  as a           judgement in any court or records.  Provided that nothing contained in           this  Agreement  shall be  construed as limiting the ability of either           party from applying to any court of competent  jurisdiction for relief           of an urgent or interim  nature,  the parties  agree that all disputes           arising out of or in connection with this Agreement shall be resolved,           if not by negotiation,  solely by arbitration  pursuant to this Clause           21.6.       21.7 Severability            If:            21.7.1        any part of this Agreement  is  void, voidable,  illegal                         or unenforceable; or            21.7.2        this   Agreement  would  be  void,   voidable,   illegal                         or  unenforceable  unless any part of this Agreement was                         severed from the Agreement,            that part  shall be severed  from and shall not  affect the  continued           operation of the rest of this  Agreement  unless to do so would change           the underlying commercial purpose of this Agreement.       21.8 Costs            Subject to any express  provision  to the  contrary  elsewhere in this           Agreement  contained,  each party shall bear its own costs  (including                                         25             without   limitation   lawyers'   fees)  of  and   incidental  to  the           preparation,  negotiation  and  execution  of this  Agreement  and the           parties  shall share  equally any  liability  for stamp duty,  and all           similar duties, taxes and other imposts and registration fees assessed           hereof, or any document created under the Agreement, in respect of the           transaction  evidenced  in whole or in part by it or in respect of the           performance by the parties of their obligations under it.       21.9 Successors Bound            This Agreement shall be binding upon the parties and their  respective           successors and permitted assigns and shall incur to their benefit.       21.10 Entire Agreement            This Agreement  constitutes the only and entire agreement  between the           parties  relating in any way to the subject  matter hereof (except for           the   Testwork   Agreement)   and  no  oral  or  written   warranties,           representations,  guarantees or other term or conditions of any nature           not contained in this Agreement, including the schedules hereto, shall           be of any  force  unless  they  have been  contained  in the  Testwork           Agreement).       21.11 Interest            If any party  shall  neglect or fail to pay any amount due and payable           under this  Agreement then the amount so due shall as from the date on           which such amount was due bear interest in favour of the party to whom           the money is owed at a rate per annum which is two  percentage  points           greater than the average  LIBOR Dollar six (6) month rate from time to           time.       IN WITNESS  WHEREOF and  intending  to be legally  bound,  the parties have      executed this Agreement effective as of the Effective Date.                                                  For:  BIOMIN TECHNOLOGIES S.A.                                                    --------------------------------                                                 Signatory:                                                 Capacity:                                                 Authority:                                         26          For: BOGOSO GOLD LIMITED         --------------------------------      Signatory:      Capacity:      Authority:                                                       27    EX-14 8 a5110399ex14.txt EXHIBIT 14                                                                        Exhibit 14                             GOLDEN STAR RESOURCES LTD.                                   COMPANY POLICY  - ------------------------------------------------------------------------------   CODE OF ETHICS FOR DIRECTORS, SENIOR EXECUTIVE AND FINANCIAL OFFICERS AND OTHER                                EXECUTIVE OFFICERS                            (Updated January 31, 2006)  The  business  of  Golden  Star  Resources  Ltd.  (the  "Corporation")  shall be conducted with honesty and integrity and in accordance  with the highest ethical and legal  standards.  This Code of Ethics (the  "Code") has been adopted by the Corporation  pursuant to Section 406 of the  Sarbanes-Oxley  Act of 2002 and the rules of the American Stock Exchange in order to provide  written  standards and guidance to the Corporation's directors,  principal executive officer, principal financial  officer,   principal   accounting  officer  or  controller  or  those performing  similar  functions,  and any "executive  officers" (as defined under Rule  16a-1(f)  of the  Securities  Exchange  Act of 1934,  as  amended)  of the Corporation not named above (collectively, "Covered Persons") to promote:  1.   Honest and ethical  conduct,  including  the ethical  handling of actual or      apparent   conflicts  of  interest   between   personal  and   professional      relationships;  2.   Compliance with applicable governmental laws, rules and regulations;  3.   Full, fair, accurate,  timely, and understandable disclosure in reports and      documents  that the  Corporation  files with, or submits to, the Securities      and  Exchange  Commission  and in other public  communications  made by the      Corporation;  4.   The prompt  internal  reporting of violations of the Code to an appropriate      person or persons identified in the Code; and  5.   Accountability for adherence to the Code.  This Code is the sole code of ethics adopted by the Corporation for the purposes of Section 406 of the  Sarbanes-Oxley  Act and the rules of the  American  Stock Exchange.  Insofar as other policies or procedures of the Corporation  govern or purport to govern the behavior or activities of Covered  Persons,  such policies and  procedures  are  superseded by this Code to the extent that they overlap or conflict  with the  provisions  of this Code.  In  addition,  such  policies and procedures  shall not be deemed in any way to define or broaden the  obligations of Covered Persons under this Code.  1.       Honest and Ethical Conduct  The Corporation is committed to compliance with the highest ethical standards in pursuing its business  interests,  and expects  Covered Persons to observe those standards.  Stated generally,  the ethical standards to which the Corporation is committed, and for which all Covered Persons are individually  accountable,  are as follows:   GSR 2006 Code of Ethics for Directors and Officers                   Page 1 of 4    A.   Conducting  the  Corporation's   business  in  compliance  with  applicable      governmental laws, rules, and regulations.  B.   Dealing  ethically with employees,  contractors,  suppliers,  customers and      others.  C.   Avoiding  situations  where  personal  interests  are,  or appear to be, in      conflict with the Corporation's interests.  D.   Responsibly  using  and  protecting  the  Corporation's  assets,  including      property, equipment, facilities, funds and information.  E.   Maintaining confidentiality of nonpublic information and not acting on such      information for personal gain.  Some of these ethical standards are discussed in more detail below.  2.       Compliance with Law  The  Corporation  and  all  Covered  Persons  should  respect  and  comply  with applicable  laws,  rules and regulations of Canada and the United States and the other  countries  and  state,  local  and  other   jurisdictions  in  which  the Corporation conducts its business.  The  Corporation  is subject to legal  requirements  that are both  numerous and complex.  All Covered  Persons  should  undertake to understand  those laws that apply to them in the performance of their jobs and take steps to ensure that the Corporation's   operations  with  which  they  are  involved  are  conducted  in conformity  with those  laws.  The  failure of Covered  Persons to adhere to the letter and the spirit of the law could  result in both  personal  and  corporate criminal liability.  Each Covered Person is personally responsible for complying with the law.  3.       Conflicts of Interest  All  Covered  Persons  have  a  duty  to  avoid  business,  financial  or  other relationships  which might either conflict with the  Corporation's  interests or compromise  their loyalty to the  Corporation.  A "conflict of interest"  exists when a  person's  private  interest  interferes  or  conflicts,  or  appears  to interfere or conflict,  with the  interests of the  Corporation  or the person's duties to the  Corporation.  Conflicts of interest may also arise when a person, or members of his or her family, receives improper personal benefits as a result of his or her position in the Corporation.  Covered  Persons  are  prohibited  from (a)  taking  for  themselves  personally opportunities  that properly belong to the Corporation or are discovered through the use of corporate  property,  information  or position;  (b) using  corporate property,  information or position for personal gain; and (c) competing with the Corporation.  4.       Public Reporting  As a public company, it is of critical importance that the Corporation's  public disclosures,  including filings with the Securities and Exchange Commission,  be accurate and timely.  A Covered  Person may be called upon to provide  necessary information to ensure that the  Corporation's  public  disclosures are accurate, fair and  understandable.  The Corporation  expects Covered Persons to take this responsibility seriously and to provide appropriate answers to inquiries related to the Corporation's public disclosure requirements.  GSR 2006 Code of Ethics for Directors and Officers                   Page 2 of 4    All of the Corporation's books, records,  accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Corporation's transactions and must conform both to applicable  legal  requirements and to the Corporation's system of internal controls.  5.       Compliance with this Code  Covered  Persons are expected to comply with all of the provisions of this Code. The Board of Directors will have primary  authority and  responsibility  for the enforcement of this Code. Any suspected violation of this Code shall be promptly reported to the  Chairman of the Board of  Directors  (the  "Board") or Allan J. Marter,  the  Chief  Financial  Officer  of  the  Corporation  (the  "Compliance Officer").  The Chairman of the Board and the Compliance  Officer may be reached as follows:           Chairman of the Board            Compliance Officer          c/o Golden Star Resources Ltd.   c/o Golden Star Resources Ltd.          10901 W. Toller Drive            10901 W. Toller Drive          Suite 300                        Suite 300          Littleton, Colorado 80127        Littleton, Colorado  80217                                            Email :  amarter@gsr.com    The  Compliance  Officer shall  forward all  information  received  concerning a possible violation of this Code to the Board. If the Board receives  information regarding an alleged  violation of this Code, then the Board shall evaluate such information as to gravity and credibility and if necessary, initiate an informal inquiry or a formal investigation with respect thereto.  The Board shall enforce this Code through appropriate  disciplinary  actions. It shall determine whether  violations of this Code have occurred and, if so, shall determine the  disciplinary  actions to be taken against any Covered  Person who has violated the Code. The disciplinary  actions  available to the Board include counseling,  oral or written  reprimands,  warnings,  probations or  suspensions (with  or  without  pay),  demotions,  reductions  in  salary,  terminations  of employment, and restitution.  For the avoidance of doubt,  the  jurisdiction  of the Board shall  include,  in addition  to the Covered  Person that  violated  this Code,  any other  employee involved in the wrongdoing  such as (i) persons who fail to use reasonable  care to  detect  a  material   violation  and  (ii)  persons  who  withhold  material information  about a suspected  violation of this Code when requested to divulge such information.  GSR 2006 Code of Ethics for Directors and Officers                   Page 3 of 4    Situations  that may involve a  violation  of this Code may not always be clear. Covered Persons are encouraged to discuss questions or concerns about violations of laws,  rules or regulations  with the Chairman of the Board or the Compliance Officer.  6.       Amendment and Waiver  This Code may only be  amended  by the  affirmative  vote of a  majority  of the Board,  and any waiver or  implicit  waiver of this Code must be approved by the Board. All amendments or waivers of the Code shall be disclosed promptly, but in no event more than five business days after such amendment or waiver,  if and in the manner  prescribed by the Securities and Exchange  Commission,  the American Stock Exchange, and as otherwise required by law.   GSR 2006 Code of Ethics for Directors and Officers                   Page 4 of 4    EX-31.1 9 a5110399ex311.txt EXHIBIT 31.1                                                                      EXHIBIT 31.1                                  CERTIFICATION   I, Peter J. Bradford, certify that:  1.   I have  reviewed  this  report on Form 10-K of Golden Star  Resources  Ltd.      ("Registrant");  2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue      statement of a material fact or omit to state a material fact  necessary to      make the statements  made, in light of the  circumstances  under which such      statements  were made, not misleading with respect to the period covered by      this annual report;  3.   Based on my  knowledge,  the  financial  statements,  and  other  financial      information included in this annual report,  fairly present in all material      respects the financial  condition,  results of operations and cash flows of      the Registrant as of, and for, the periods presented in this annual report;  4.   The  Registrant's  other  certifying  officer  and  I are  responsible  for      establishing and maintaining disclosure controls and procedures (as defined      in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over      financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and      15d-15(f)) for the Registrant and have:       a)   designed  such  disclosure  controls  and  procedures,  or caused such           disclosure   controls  and   procedures  to  be  designed   under  our           supervision,  to ensure  that  material  information  relating  to the           Registrant,  including its consolidated subsidiaries, is made known to           us by others within those entities,  particularly during the period in           which this annual report is being prepared;       b)   designed such internal  control over  financial  reporting,  or caused           such internal  control over  financial  reporting to be designed under           our  supervision,   to  provide  reasonable  assurance  regarding  the           reliability  of financial  reporting and the  preparation of financial           statements for external purposes in accordance with generally accepted           accounting principles;       c)   evaluated the  effectiveness of the Registrant's  disclosure  controls           and procedures and presented in this report our conclusions  about the           effectiveness of the disclosure controls and procedures, as of the end           of the period covered by this report based on such evaluation; and       d)   disclosed  in this  report  any  change in the  Registrant's  internal           control over financial reporting that occurred during the Registrant's           most recent fiscal quarter (the Registrant's  fourth fiscal quarter in           the case of an annual  report)  that has  materially  affected,  or is           reasonably  likely to materially  affect,  the  Registrant's  internal           control over financial reporting; and  5.   The Registrant's  other certifying  officer and I have disclosed,  based on      our most recent evaluation of internal control over financial reporting, to      the Registrant's  auditors and the audit committee of Registrant's board of      directors (or persons performing the equivalent functions):       a)   all significant  deficiencies and material weaknesses in the design or           operation  of internal  control  over  financial  reporting  which are           reasonably  likely to  adversely  affect the  Registrant's  ability to           record, process, summarize and report financial information; and       b)   any fraud, whether or not material,  that involves management or other           employees who have a  significant  role in the  Registrant's  internal           control over financial reporting.   Date: March 27, 2006  /s/ Peter J. Bradford - -------------------------------------------- Peter J. Bradford President and Chief Executive Officer                                          114    EX-31.2 10 a5110399ex312.txt EXHIBIT 31.2                                                                      EXHIBIT 31.2                                  CERTIFICATION   I, Allan J. Marter, certify that:  1.   I have  reviewed  this  report on Form 10-K of Golden Star  Resources  Ltd.      ("Registrant");  2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue      statement of a material fact or omit to state a material fact  necessary to      make the statements  made, in light of the  circumstances  under which such      statements  were made, not misleading with respect to the period covered by      this annual report;  3.   Based on my  knowledge,  the  financial  statements,  and  other  financial      information included in this annual report,  fairly present in all material      respects the financial  condition,  results of operations and cash flows of      the Registrant as of, and for, the periods presented in this annual report;  4.   The  Registrant's  other  certifying  officer  and  I are  responsible  for      establishing and maintaining disclosure controls and procedures (as defined      in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over      financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and      15d-15(f)) for the Registrant and have:       a)   designed  such  disclosure  controls  and  procedures,  or caused such           disclosure   controls  and   procedures  to  be  designed   under  our           supervision,  to ensure  that  material  information  relating  to the           Registrant,  including its consolidated subsidiaries, is made known to           us by others within those entities,  particularly during the period in           which this annual report is being prepared;       b)   designed such internal  control over  financial  reporting,  or caused           such internal  control over  financial  reporting to be designed under           our  supervision,   to  provide  reasonable  assurance  regarding  the           reliability  of financial  reporting and the  preparation of financial           statements for external purposes in accordance with generally accepted           accounting principles;       c)   evaluated the  effectiveness of the Registrant's  disclosure  controls           and procedures and presented in this report our conclusions  about the           effectiveness of the disclosure controls and procedures, as of the end           of the period covered by this report based on such evaluation; and       d)   disclosed  in this  report  any  change in the  Registrant's  internal           control over financial reporting that occurred during the Registrant's           most recent fiscal quarter (the Registrant's  fourth fiscal quarter in           the case of an annual  report)  that has  materially  affected,  or is           reasonably  likely to materially  affect,  the  Registrant's  internal           control over financial reporting; and  5.   The Registrant's  other certifying  officer and I have disclosed,  based on      our most recent evaluation of internal control over financial reporting, to      the Registrant's  auditors and the audit committee of Registrant's board of      directors (or persons performing the equivalent functions):       a)   all significant  deficiencies and material weaknesses in the design or           operation  of internal  control  over  financial  reporting  which are           reasonably  likely to  adversely  affect the  Registrant's  ability to           record, process, summarize and report financial information; and       b)   any fraud, whether or not material,  that involves management or other           employees who have a  significant  role in the  Registrant's  internal           control over financial reporting.  Date: March 27, 2006  /s/ Allan J. Marter - ----------------------------------------------------- Allan J. Marter Senior Vice President and Chief Financial Officer                                          115     EX-32.1 11 a5110399ex321.txt EXHIBIT 32.1                                                                      EXHIBIT 32.1  Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)   I, Peter J.  Bradford,  President  and Chief  Executive  Officer of Golden  Star Resources Ltd., certify, to the best of my knowledge, based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2005 of Golden Star Resources Ltd. that:  (1) The  Annual  Report on Form 10-K fully  complies  with the  requirements  of Section 13(a) of the Securities Exchange Act of 1934, as amended; and  (2) The information contained and incorporated by reference in the Annual Report on Form 10-K fairly presents, in all material respects,  the financial condition and results of operations of Golden Star Resources Ltd.    /s/ Peter J. Bradford - --------------------- Peter J. Bradford President and Chief Executive Officer March 27, 2006                                          116     EX-32.2 12 a5110399ex322.txt EXHIBIT 32.2                                                                      EXHIBIT 32.2  Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)   I, Allan J. Marter,  Senior Vice President and Chief Financial Officer of Golden Star Resources Ltd., certify,  to the best of my knowledge,  based upon a review of the Annual  Report on Form 10-K for the period  ended  December  31,  2005 of Golden Star Resources Ltd. that:  (1) The  Annual  Report on Form 10-K fully  complies  with the  requirements  of Section 13(a) of the Securities Exchange Act of 1934, as amended; and  (2) The information contained and incorporated by reference in the Annual Report on Form 10-K fairly presents, in all material respects,  the financial condition and results of operations of Golden Star Resources Ltd.    /s/ Allan J. Marter - ------------------- Allan J. Marter Senior Vice President and Chief Financial Officer March 27, 2006                                         117    -----END PRIVACY-ENHANCED MESSAGE-----