..
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

        [ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                EXCHANGE ACT OF 1934

                   For the Fiscal Year ended December 31, 2005
                         Commission file number 1-12284

                           GOLDEN STAR RESOURCES LTD.
             (Exact Name of Registrant as Specified in Its Charter)

           Canada                                         98-0101955
(State or other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)


        10901 West Toller Drive, Suite 300
                Littleton, Colorado                     80127-6312
      (Address of Principal Executive Office)           (Zip Code)


       Registrant's telephone number, including area code (303) 830-9000
Securities registered or to be registered pursuant to Section 12 (b) of the Act:

        Title of Each Class     Name of each exchange on which registered
           Common Shares                 American Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:
                          Warrants Issued February 2003

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes _X__ No ___

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ___ No _X__

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 (the
"Act")  during the  preceding  12 months (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.  Yes _X__  No ___

Indicate by check mark if disclosure of delinquent  filers  pursuant to item 405
of Regulation  S-K (ss.  229.405 of this chapter) is not contained  herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form l0-K. ___

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a non-accelerated  filer. (See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act).

(Check one):    Large accelerated filer: ___      Accelerated filer: _X__
                Non-accelerated filer: ___

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).  Yes ___    No _X_

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates of the Registrant was  approximately  $437 million as of June 30,
2005, based on the closing price of the shares on the American Stock Exchange of
$3.10 per share.

Number of Common Shares outstanding as at March 27, 2006: 207,265,758


                                       1
<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Definitive  Proxy  Statement to be filed with the Securities and
Exchange  Commission  pursuant to  Regulation  14A in  connection  with the 2006
Annual Meeting of Shareholders are incorporated by reference to Part III of this
Report on Form 10-K.

REPORTING CURRENCY, FINANCIAL AND OTHER INFORMATION

All amounts in this Report are expressed in United States ("US") dollars, unless
otherwise  indicated.  Canadian currency is denoted as "Cdn$." Euros are denoted
as "(euro)".

Financial  information  is presented in accordance  with  accounting  principles
generally  accepted  in Canada  ("Cdn  GAAP" or  "Canadian  GAAP").  Differences
between accounting principles generally accepted in the US ("US GAAP") and those
applied in Canada, as applicable to Golden Star Resources Ltd., are explained in
Note 28 to the Consolidated Financial Statements.

Information in Parts I and II of this report  includes data expressed in various
measurement  units and contains  numerous  technical  terms commonly used in the
gold mining industry.  To assist readers in understanding  this  information,  a
conversion table and glossary are provided below.

References to "Golden  Star," the  "Company,"  "we," "our," and "us" mean Golden
Star Resources Ltd., its predecessors and consolidated subsidiaries,  or any one
or more of them, as the context requires.

NON-GAAP FINANCIAL MEASURES

In this Form  10-K,  we use the terms  "total  cash  cost per  ounce"  and "cash
operating cost per ounce" which are considered  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.
See Item 7  Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations  for a definition  of these  measures as used in this Form
10-K.

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Form 10-K and the  documents  incorporated  by  reference in this Form 10-K
contain  forward-looking  statements,  within the  meaning of Section 27A of the
Securities  Act  and  Section  21E of the  Exchange  Act,  with  respect  to our
financial  condition,  results  of  operations,   business,   prospects,  plans,
objectives,  goals,  strategies,   future  events,  capital  expenditures,   and
exploration and development  efforts.  Words such as  "anticipates,"  "expects,"
"intends,"   "forecasts,"  "plans,"  "believes,"  "seeks,"  "estimates,"  "may,"
"will," and similar expressions identify forward-looking statements.

Although we believe that our plans,  intentions  and  expectations  reflected in
these forward-looking statements are reasonable, we cannot be certain that these
plans, intentions or expectations will be achieved. Actual results,  performance
or achievements  could differ materially from those  contemplated,  expressed or
implied by the forward-looking statements contained or incorporated by reference
in this Form 10-K.

These statements include comments regarding:  the establishment and estimates of
mineral  reserves  and  resources,   recovery  rates,   production,   production
commencement  dates,  production costs, cash operating costs,  total cash costs,
grade, processing capacity, potential mine life, feasibility studies, permitting
and  licensing,  development  costs,  expenditures,  exploration  activities and
expenditures,  funding for EURO Ressources S.A.,  recovery of deferred stripping
charges at Bogoso/Prestea,  equipment  replacement,  anticipated benefits of the
acquisition  of St. Jude Resources  Ltd.,  ability to announce  Mineral  Reserve
estimates  as  the  St.  Jude  properties  in  2006,  our  expansion  plans  for
Bogoso/Prestea,  related permitting and capital costs and anticipated production
and other estimates at  Bogoso/Prestea  in 2006 and 2007, cash  requirements and
sources,  production  capacity,  operating costs and gold recoveries,  estimated
capital spending in 2006, effectiveness of and anticipated provisions of the new
Ghanaian Minerals and Mining Bill.

The following, in addition to the factors described under "Risk Factors" in Item
1 below are  among  the  factors  that  could  cause  actual  results  to differ
materially from the forward-looking statements:

o    unexpected changes in business and economic conditions;

o    significant increases or decreases in gold prices;



                                       2
<PAGE>

o    changes in interest and currency exchange rates;

o    timing and amount of gold production;

o    failure to realize the anticipated benefits of the acquisition of St. Jude;

o    failure to develop reserves on the St. Jude properties;

o    unanticipated grade changes;

o    unanticipated recovery or production problems;

o    effects of illegal miners on our properties;

o    changes in mining and processing  costs  including  changes to costs of raw
     materials, supplies, services and personnel;

o    changes in metallurgy and processing;

o    availability  of skilled  personnel,  materials,  equipment,  supplies  and
     water;

o    changes in project parameters;

o    costs and timing of development of new reserves;

o    results of current and future exploration activities;

o    results of pending and future feasibility studies;

o    joint venture relationships;

o    political or economic  instability,  either globally or in the countries in
     which we operate;

o    local and community impacts and issues;

o    timing of receipt of and maintenance of government approvals and permits;

o    accidents and labor disputes;

o    environmental costs and risks;

o    competitive factors, including competition for property acquisitions; and

o    availability of capital at reasonable rates or at all.

These  factors are not intended to  represent a complete  list of the general or
specific  factors  that could  affect us. Your  attention is drawn to other risk
factors  disclosed and discussed in Item 1 below.  We undertake no obligation to
update forward-looking statements.



                                       3
<PAGE>

CONVERSION FACTORS AND ABBREVIATIONS
<TABLE>
<CAPTION>
<S>                              <C>                        <C>                     <C>

For ease of reference, the following conversion factors are provided:

1 acre                         = 0.4047 hectare             1 mile                = 1.6093 kilometers
1 foot                         = 0.3048 meter               1 troy ounce          = 31.1035 grams
1 gram per metric tonne        = 0.0292 troy ounce/short    1 square mile         = 2.59 square kilometers
                               ton
1 short ton (2000 pounds)      = 0.9072 tonne               1 square kilometer    = 100 hectares
1 tonne                        = 1,000 kg or 2,204.6 lbs    1 kilogram            = 2.204 pounds or 32.151 troy oz
1 hectare                      = 10,000 square meters       1 hectare             = 2.471 acres

The following abbreviations may be used herein:

Au             = gold                                        m(2)                  = square meter
g              = gram                                        m(3)                  = cubic meter
Au g/t         = grams of gold per tonne                     Mg or mg              = milligram
ha             = hectare                                     mg/m(3)               = milligrams per cubic meter
km             = kilometer                                   T or t                = tonne
km(2)          = square kilometers                           oz                    = troy ounce
kg             = kilogram                                    ppb                   = parts per billion
m              = meter                                       Ma                    = million years

</TABLE>

Note:  All  units in this  report  are  stated  in  metric  measurements  unless
otherwise noted.

GLOSSARY OF TERMS

We report our reserves to two separate  standards to meet the  requirements  for
reporting  in both  Canada  and the United  States  ("US").  Canadian  reporting
requirements  for  disclosure  of mineral  properties  are  governed by National
Instrument  43-101 ("NI 43-101").  The definitions in NI 43-101 are adopted from
those given by the Canadian  Institute of Mining,  Metallurgy and Petroleum.  US
reporting  requirements for disclosure of mineral properties are governed by SEC
Industry  Guide 7. These  reporting  standards  have  similar  goals in terms of
conveying an appropriate  level of confidence in the disclosures being reported,
but embody differing approaches and definitions.

We estimate and report our resources and reserves  according to the  definitions
set forth in NI 43-101 and modify and reconcile  them as  appropriate to conform
to Industry Guide 7 for reporting in the U.S. The definitions for each reporting
standard are presented below with supplementary  explanation and descriptions of
the parallels and differences.

NI 43-101 DEFINITIONS

mineral reserve     The  term  "mineral  reserve"  refers  to  the  economically
                    mineable  part of a measured or indicated  mineral  resource
                    demonstrated  by at least a preliminary  feasibility  study.
                    The study  must  include  adequate  information  on  mining,
                    processing,  metallurgical,  economic,  and  other  relevant
                    factors that  demonstrate,  at the time of  reporting,  that
                    economic  extraction  can be  justified.  A mineral  reserve
                    includes  diluting  materials and allowances for losses that
                    might occur when the material is mined.

proven mineral      The term "proven mineral reserve" refers to the economically
 reserve            mineable part of a measured mineral resource demonstrated by
                    at least a preliminary  feasibility  study.  This study must
                    include   adequate   information   on  mining,   processing,
                    metallurgical,  economic,  and other  relevant  factors that
                    demonstrate,   at  the  time  of  reporting,  that  economic
                    extraction is justified.(1)

probable mineral    The  term   "probable   mineral   reserve"   refers  to  the
 reserve            economically  mineable  part  of an  indicated,  and in some
                    circumstances,  a measured mineral resource  demonstrated by
                    at least a preliminary  feasibility  study.  This study must
                    include   adequate   information   on  mining,   processing,
                    metallurgical,  economic,  and other  relevant  factors that
                    demonstrate,   at  the  time  of  reporting,  that  economic
                    extraction can be justified.



                                       4
<PAGE>

mineral resource    The term "mineral  resource"  refers to a  concentration  or
                    occurrence  of  natural,   solid,  inorganic  or  fossilized
                    organic material in or on the Earth's crust in such form and
                    quantity  and  of  such  a  grade  or  quality  that  it has
                    reasonable prospects for economic extraction.  The location,
                    quantity,  grade, geological  characteristics and continuity
                    of a mineral  resource are known,  estimated or  interpreted
                    from specific geological evidence and knowledge.

measured mineral    The term "measured  mineral resource" refers to that part of
 resource           a mineral  resource  for which  quantity,  grade or quality,
                    densities,  shape and physical  characteristics  are so well
                    established  that  they  can be  estimated  with  confidence
                    sufficient to allow the appropriate application of technical
                    and economic parameters,  to support production planning and
                    evaluation  of the economic  viability  of the deposit.  The
                    estimate  is based on  detailed  and  reliable  exploration,
                    sampling   and   testing   information    gathered   through
                    appropriate  techniques  from  locations  such as  outcrops,
                    trenches,  pits,  workings  and drill  holes that are spaced
                    closely   enough  to  confirm  both   geological  and  grade
                    continuity.

indicated mineral   The term "indicated mineral resource" refers to that part of
 resource           a mineral  resource  for which  quantity,  grade or quality,
                    densities,   shape  and  physical   characteristics  can  be
                    estimated with a level of confidence sufficient to allow the
                    appropriate    application   of   technical   and   economic
                    parameters,  to support mine planning and  evaluation of the
                    economic viability of the deposit.  The estimate is based on
                    detailed and reliable  exploration  and testing  information
                    gathered through appropriate  techniques from locations such
                    as outcrops,  trenches,  pits, workings and drill holes that
                    are  spaced   closely   enough  for   geological  and  grade
                    continuity to be reasonably assumed.

inferred mineral    The term "inferred  mineral resource" refers to that part of
 resource           a mineral  resource for which  quantity and grade or quality
                    can be  estimated  on the basis of  geological  evidence and
                    limited sampling and reasonably  assumed,  but not verified,
                    geological  and grade  continuity.  The estimate is based on
                    limited    information   and   sampling   gathered   through
                    appropriate  techniques  from  locations  such as  outcrops,
                    trenches, pits, workings and drill holes.

qualified person(2) The term  "qualified  person" refers to an individual who is
                    an  engineer  or  geoscientist  with at least  five years of
                    experience  in  mineral  exploration,  mine  development  or
                    operation or mineral project assessment,  or any combination
                    thereof,  has  experience  relevant to the subject matter of
                    the project and the technical report and is a member in good
                    standing of a professional association.

SEC INDUSTRY GUIDE 7 DEFINITIONS

reserve             The term "reserve"  refers to that part of a mineral deposit
                    which  could  be  economically  and  legally   extracted  or
                    produced at the time of the reserve determination.  Reserves
                    must be  supported by a  feasibility  study done to bankable
                    standards  that   demonstrates   the  economic   extraction.
                    ("Bankable  standards" implies that the confidence  attached
                    to the  costs  and  achievements  developed  in the study is
                    sufficient  for the project to be eligible for external debt
                    financing.) A reserve  includes  adjustments  to the in-situ
                    tonnes  and  grade  to  include   diluting   materials   and
                    allowances  for losses that might occur when the material is
                    mined.

proven reserve      The term "proven  reserve"  refers to reserves for which (a)
                    quantity is computed from  dimensions  revealed in outcrops,
                    trenches,  workings or drill holes; grade and/or quality are
                    computed  from the results of detailed  sampling and (b) the
                    sites for inspection, sampling and measurement are spaced so
                    closely and the  geologic  character is so well defined that
                    size,  shape  depth and  mineral  content  of  reserves  are
                    well-established.



                                       5
<PAGE>

probable reserve    The term  "probable  reserve"  refers to reserves  for which
                    quantity  and  grade  and/or   quality  are  computed   from
                    information  similar  to that  used  for  proven  (measured)
                    reserves,  but  the  sites  for  inspection,  sampling,  and
                    measurement   are  farther  apart  or  are  otherwise   less
                    adequately spaced.  The degree of assurance,  although lower
                    than  that for  proven  reserves,  is high  enough to assume
                    continuity between points of observation.

mineralized         The term  "mineralized  material" refers to material that is
  material(3)       not  included  in the reserve as it does not meet all of the
                    criteria  for adequate  demonstration  for economic or legal
                    extraction.

non-reserves        The term "non-reserves"  refers to mineralized material that
                    is not  included  in the  reserve as it does not meet all of
                    the  criteria  for  adequate  demonstration  for economic or
                    legal extraction.

exploration stage   An  "exploration  stage"  prospect  is one  which  is not in
                    either the development or production stage.

development stage   A  "development  stage"  project is one which is  undergoing
                    preparation of an established  commercially mineable deposit
                    for its extraction but which is not yet in production.  This
                    stage occurs after completion of a feasibility study.

production stage    A  "production  stage"  project is  actively  engaged in the
                    process of extraction and  beneficiation of mineral reserves
                    to produce a marketable metal or mineral product.

1.   For Industry Guide 7 purposes this study must include adequate  information
     on mining, processing, metallurgical,  economic, and other relevant factors
     that  demonstrate,  at the time of reporting,  that economic  extraction is
     justified.
2.   Industry Guide 7 does not require designation of a qualified person.
3.   This category is  substantially  equivalent  to the combined  categories of
     measured and indicated mineral resources specified in NI 43-101.

ADDITIONAL DEFINITIONS

alteration - any change in the mineral  composition  of a rock brought  about by
physical or chemical means

ancillary  equipment - service  equipment not directly  associated  with primary
process

artisanal  -  current  or  historic  informal  mining  typically  of a low tech,
manually intensive nature

assay - a measure of the valuable mineral content

Au - gold

bio-oxidation  or BIOX(R) - a  processing  method that uses  bacteria to oxidize
refractory  sulfide  ore to make it  amenable  to normal  oxide  ore  processing
techniques such as carbon-in-leach

Birimian - a thick and  extensive  sequence  of  Proterozoic  age  metamorphosed
sediments and volcanics first identified in the Birim region of southern Ghana

cash  operating cost per ounce - is equal to total cash cost for the period less
production  royalties and production  taxes,  divided by the number of ounces of
gold sold  during the  period.  (This  definition  is  consistent  with the Gold
Institute's definition)

CIL or  carbon-in-leach  - an ore processing method involving the use of cyanide
where activated carbon which has been added to the leach tanks is used to absorb
gold as it is leached by cyanide

craton - a stable relatively immobile area of the earth's crust

cut-off grade - when  determining  economically  viable  mineral  reserves,  the
lowest grade of  mineralized  material  that  qualifies as ore, i.e. that can be
mined and processed at a profit



                                       6
<PAGE>

cyanidation - the process of introducing cyanide to ore to recover gold

diamond  drilling - rotary  drilling using  diamond-set  or  diamond-impregnated
bits, to produce a solid continuous core of rock sample

dip - the angle that a structural  surface, a bedding or fault plane, makes with
the horizontal, measured perpendicular to the strike of the structure

diorite - a group of intrusive rocks intermediate in composition  between acidic
and  basic,   characteristically   composed  of  dark-colored  amphibole,   acid
plagioclase, pyroxene and sometimes a small amount of quartz.

disseminated - where minerals occur as scattered particles in the rock

dore - unrefined gold bullion bars containing various impurities such as silver,
copper and mercury, which will be further refined to near pure gold

fault  - a  surface  or zone  of  rock  fracture  along  which  there  has  been
displacement

feasibility  study - a definitive  engineering and economic study addressing the
viability  of  a  mineral  deposit  taking  into  consideration  all  associated
technical  factors,  costs,  revenues and risks.  We  recognize  three levels of
feasibility studies; (i) a directional  feasibility study or scoping study; (ii)
a pre-feasibility study; and (iii) a feasibility study. A feasibility study that
satisfies  the  requirements  for  external  financing  is known  as a  bankable
feasibility study.

fold - a curve  or bend  of a  planar  structure  such as rock  strata,  bedding
planes, foliation, or cleavage

formation - a distinct layer of sedimentary rock of similar composition

gabbro - a group of dark-colored  basic intrusive  igneous rocks, (the intrusive
equivalent to basalt)

gabbroic - rock masses made up of gabbro and other  similar  dark-colored  basic
igneous rock

geochemistry  - the  study  of the  distribution  and  amounts  of the  chemical
elements in minerals, ores, rocks, solids, water, and the atmosphere

geochemical  prospecting - a prospecting technique which measures the content of
certain metals in soils and rocks used to define anomalies for further testing

geophysics - the study of the mechanical,  electrical and magnetic properties of
the earth's crust

geophysical  surveys - a survey method used primarily in the mining  industry as
an  exploration  tool,  applying the methods of physics and  engineering  to the
earth's surface

geotechnical - the study of ground stability

grade - quantity of metal per unit weight of host rock

greenstone  - a sequence  of  usually  metamorphosed  volcanic-sedimentary  rock
assemblages

granodiorite  -  a  group  of  coarse-grained  plutonic  rocks  intermediate  in
composition  between  quartz  diorite and quartz  monzonite  containing  quartz,
plagioclase, potassium feldspar with biotite and hornblende

heap leach - a mineral  processing method involving the crushing and stacking of
an ore on an  impermeable  liner upon which  solutions  are  sprayed to dissolve
metals i.e.  gold/copper  etc.;  the  solutions  containing  the metals are then
collected and treated to recover the metals

host rock - the rock in which a mineral or an ore body may be contained

hydrothermal  - the products of the actions of heated  water,  such as a mineral
deposit precipitated from a hot solution

in-situ - in its natural position



                                       7
<PAGE>

life-of-mine  - a term  commonly  used to refer to the  likely  term of a mining
operation and normally  determined by dividing the tonnes of mineral  reserve by
the annual rate of mining and processing

mapped or geological mapping - the recording of geologic  information  including
rock units and the occurrence of structural  features,  and mineral deposits on
maps

metasediment - a sedimentary  rock which shows evidence of having been subjected
to metamorphism

metavolcanic  - a volcanic rock which shows evidence of having been subjected to
metamorphism

mineral - a naturally occurring inorganic crystalline material having a definite
chemical composition

mineralization - a natural accumulation or concentration in rocks or soil of one
or more potentially  economic  minerals,  also the process by which minerals are
introduced or concentrated in a rock

National  Instrument 43-101 or NI 43-101 - Canadian  standards of disclosure for
mineral projects

non-refractory  - ore containing  gold that can be  satisfactorily  recovered by
basic gravity concentration or simple cyanidation

outcrop - that part of a geologic  formation  or  structure  that appears at the
surface of the earth

open pit or open cut - surface  mining in which the ore is extracted  from a pit
or quarry, the geometry of the pit may vary with the  characteristics of the ore
body

ore -  mineral  bearing  rock  that can be mined and  treated  profitably  under
current or immediately foreseeable economic conditions

ore body - a mostly solid and fairly continuous mass of mineralization estimated
to be economically mineable

ore grade - the average weight of the valuable  metal or mineral  contained in a
specific weight of ore i.e. grams per tonne of ore

oxide - gold  bearing  ore which  results  from the  oxidation  of near  surface
sulfide ore

pH - a measure on a scale of 1 to 14 of the acidity or  alkalinity of a solution
where 7 is neutral, greater than 7 is basic and less than 7 is acidic

plunge - the angle from the horizontal of a linear geological feature on a plane

Proterozoic  - the more recent  time  division  of the  Precambrian;  rocks aged
between 2,500 million and 550 million years old

put - a financial instrument that provides the right, but not the obligation, to
sell a specified number of ounces of gold at a specified price

pyrite - common sulfide of iron

QA/QC - Quality  Assurance/Quality  Control is the  process of  controlling  and
assuring data quality for assays and other exploration and mining data

quartz - a mineral composed of silicon dioxide, SiO2 (silica)

RAB (rotary air blast) drilling - relatively  inexpensive and quick  exploration
drilling method returning rock chips from the drill hole using high pressure air

RC (reverse  circulation)  drilling - a drilling  method  using a tri-cone  bit,
during  which rock  cuttings are pushed from the bottom of the drill hole to the
surface  through an outer tube, by liquid and/or air pressure  moving through an
inner tube

run-of-mine  - usually  refers  to the  average  ore  material  being  mined and
processed, i.e. run-of-mine grade of ore delivered to the processing plant

reef - general term that typically refers to a tabular ore body



                                       8
<PAGE>

refractory  - ore  containing  gold that cannot be  satisfactorily  recovered by
basic gravity concentration or simple cyanidation

rock - indurated naturally occurring mineral matter of various compositions

SAG - semi-autogeneous grinding

sampling  and  analytical  variance/precision  - an  estimate of the total error
induced by sampling, sample preparation and analysis

sediment - particles transported by water, wind or ice

sedimentary  rock - rock formed at the  earth's  surface  from solid  particles,
whether mineral or organic,  which have been moved from their position of origin
and re-deposited

sericitic  - a rock with  abundant  amounts of  sericite,  a white fine  grained
potassium  mica  occurring as an alteration  product of various  aluminosilicate
minerals

shear - a form of strain  resulting  from  stresses  that cause or tend to cause
contiguous  parts  of a body of rock to  slide  relatively  to each  other  in a
direction parallel to their plane of contact

shield - a large area of exposed  basement  rocks  often  surrounded  by younger
rocks, e.g. Guiana Shield

stratigraphic  or  stratigraphically  - geology  that  deals with the origin and
succession of strata

strike - the  direction  or trend that a structural  surface,  e.g. a bedding or
fault plane, takes as it intersects the horizontal

strip - to remove overburden in order to expose ore

sulfide  - a  mineral  including  sulfur  (S) and  iron  (Fe)  as well as  other
elements;   metallic   sulfur-bearing   mineral  often   associated   with  gold
mineralization

syncline  -  a  concave   downward   fold,   the  core  of  which  contains  the
stratigraphically younger rocks

tailings - fine ground wet waste material  produced from ore after  economically
recoverable metals or minerals have been extracted

Tarkwaian - a group of sedimentary rocks of Proterozoic age named after the town
of Tarkwa in southern Ghana where they were found to be gold bearing

tonne - metric tonne, equal to 1,000 kilograms or 2,204.6 pounds

total cash cost per ounce - is equal to total  production  costs as found on our
consolidated statement of operations less depreciation,  depletion, amortization
and asset  retirement  obligation  accretion  divided by the number of ounces of
gold sold during the applicable period.  (This definition is consistent with the
Gold Institute's definition).

total production cost per ounce - is equal to total production costs as found on
our consolidated  statement of operations  divided by the ounces of gold sold in
the period;  total  production  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,
depreciation,   depletion,   amortization,   asset  retirement  obligations  and
by-product credits,  but does not include  exploration costs,  corporate general
and administrative expense,  impairment charges,  corporate business development
costs, gains and losses on asset sales, interest expense, foreign currency gains
and losses, gains and losses on investments and income tax

transition ore - is an ore zone lying between the oxide ore and the sulfide ore;
ore material that is partially weathered and oxidized

vein - a thin,  sheet like  crosscutting  body of  hydrothermal  mineralization,
principally quartz

volcanics - those  originally  molten rocks,  generally fine grained,  that have
reached or nearly reached the earth's surface before solidifying



                                       9
<PAGE>

volcano-sedimentary   -  rocks  composed  of  materials  of  both  volcanic  and
sedimentary origin

wall rock - the rock adjacent to a vein

weathering  - near  surface  alteration  and  oxidation of minerals and rocks by
exposure to the atmosphere or ground water

wire  frame  - a mesh of  triangles  used  to  define  a  volume  in  generating
computerized geological models



                                       10
<PAGE>

ITEM 1.  DESCRIPTION OF BUSINESS


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
<PAGE>

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:
<TABLE>
<CAPTION>
<S>        <C>                     <C>                  <C>                  <C>

                                                                                           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
</TABLE>



                                       12
<PAGE>

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
<PAGE>

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
<PAGE>

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.
<TABLE>
<CAPTION>
<S>                                                                  <C>            <C>           <C>           <C>

                                                                                                             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

</TABLE>

(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
<PAGE>

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
<PAGE>

<TABLE>
<CAPTION>
<S>                                                  <C>         <C>         <C>           <C>       <C>         <C>

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
----------------------------------------------------------------------------------------------------------------------
</TABLE>


(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
<PAGE>

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.
<TABLE>
<CAPTION>
<S>                             <C>           <C>       <C>               <C>         <C>         <C>

----------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------
</TABLE>


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
<PAGE>

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:

<TABLE>
<CAPTION>
<S>                                 <C>            <C>           <C>            <C>             <C>           <C>
------------------------ ------------------------------- ---------------------------- -----------------------------
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
------------------------ --------------- --------------- ------------- -------------- --------------- -------------
</TABLE>

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
<PAGE>

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
<PAGE>

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.


ITEM 1A.          RISK FACTORS

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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.

ITEM 1B.            UNRESOLVED STAFF COMMENTS

None



                                       33
<PAGE>

ITEM 2.           DESCRIPTION OF PROPERTIES

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
<PAGE>

WEST AFRICAN OPERATIONS AND EXPLORATION PROPERTIES MAP

                                       35
<PAGE>


SOUTH AMERICAN PROPERTIES MAP


PROPERTY STATUS TABLE

The chart below summarizes information regarding our more significant
properties, which are described in further detail below:
<TABLE>
<CAPTION>
<S>                                                 <C>  <C>       <C>  <C>
-------------------- ------------------------------ -------------- ---------------- --------- ----------------------
     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
-------------------- ------------------------------ -------------- ---------------- --------- ----------------------
</TABLE>



                                       36
<PAGE>

<TABLE>
<CAPTION>
<S>                                                 <C>  <C>       <C>  <C>
-------------------- ------------------------------ -------------- ---------------- --------- ----------------------
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
-------------------- ------------------------------ -------------- ---------------- --------- ----------------------
</TABLE>


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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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.
<TABLE>
<CAPTION>
<S>                                             <C>                    <C>                <C>

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
</TABLE>

(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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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.


ITEM 3.           LEGAL PROCEEDINGS

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
<PAGE>

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of 2005.



                                       50
<PAGE>

ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS

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:
<TABLE>
<CAPTION>
<S>                                 <C>                   <C>                  <C>                   <C>
                                      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
</TABLE>

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
<PAGE>

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
<PAGE>

ITEM 6.           SELECTED FINANCIAL DATA

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)

<TABLE>
<CAPTION>
<S>                                  <C>        <C>        <C>        <C>        <C>

          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)
-----------------------------------------------------------------------------------------
</TABLE>



                                       53
<PAGE>

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

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."

<TABLE>
<CAPTION>
<S>                                                      <C>              <C>              <C>

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
---------------------------------------------------------------------------------------------------
</TABLE>
(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
<PAGE>

<TABLE>
<CAPTION>
<S>                                                           <C>         <C>              <C>

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
---------------------------------------------------------------------------------------------------
</TABLE>
(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
<PAGE>

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
<PAGE>

<TABLE>
<CAPTION>
<S>                                         <C>        <C>        <C>           <C>        <C>           <C>

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
---------------------------------------------------------------------------------------------------------------
</TABLE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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.

<TABLE>
<CAPTION>
<S>                                          <C>               <C>               <C>

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
----------------------------------------------------------------------------------------------
</TABLE>


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
<PAGE>

      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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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

<TABLE>
<CAPTION>
<S>            <C>                        <C>           <C>          <C>         <C>              <C>

       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
-----------------------------------------------------------------------------------------------------
</TABLE>

          (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
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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
<PAGE>

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
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                   <C>

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

</TABLE>


                                       74
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                       <C>                   <C>

                   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.
</TABLE>

By: /s/ David K. Fagin - Director                By: /s/ Peter J. Bradford - CEO
   ------------------------------                   ----------------------------


                                       78
<PAGE>

<TABLE>
<CAPTION>
<S>                                                           <C>              <C>             <C>

                           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.
</TABLE>



                                       79
<PAGE>

<TABLE>
<CAPTION>
<S>                                  <C>             <C>

                           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.
</TABLE>



                                       80
<PAGE>


<TABLE>
<CAPTION>
<S>                                                                 <C>              <C>            <C>
                           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.
</TABLE>


                                       81
<PAGE>


                               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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<PAGE>

7.       Deferred Exploration and Development Costs

Consolidated  property  expenditures  on our  exploration  projects for the year
ended December 31, 2005 were as follows:

<TABLE>
<CAPTION>
<S>                                      <C>         <C>           <C>     <C>        <C>

                                      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
----------------------------------------------------------------------------------------------------------------

</TABLE>




                                       88
<PAGE>

8.       Property, Plant and Equipment
<TABLE>
<CAPTION>
<S>                       <C>            <C>          <C>           <C>           <C>          <C>
                             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
-------------------------------------------------------------------------------------------------------
</TABLE>

9.       Mining Properties

<TABLE>
<CAPTION>
<S>                           <C>          <C>         <C>        <C>            <C>         <C>

                                 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
-----------------------------------------------------------------------------------------------------
</TABLE>

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
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                                 <C>                     <C>
                                                              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
-----------------------------------------------------------------------------------------------
</TABLE>

     (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
<PAGE>

          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
<PAGE>

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:

<TABLE>
<CAPTION>
<S>                                                                    <C>          <C>             <C>         <C>

                                                      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)
---------------------------------------------------------------------------------------------------------------------
</TABLE>


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
<PAGE>

                                                           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
<PAGE>

          (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
<PAGE>

17.      Warrants

The following warrants were outstanding as of December 31, 2005.

<TABLE>
<CAPTION>
<S>                           <C> <C>        <C>              <C>                <C> <C>

                                          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
-----------------------------------------------------------------------------------------
</TABLE>


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:

<TABLE>
<CAPTION>
<S>                     <C>              <C>     <C>              <C>     <C>              <C>

                                        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
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       95
<PAGE>

<TABLE>
<CAPTION>
<S>      <C>              <C>               <C>            <C>              <C>         <C>

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%
--------------------------------------------------------------------------------------------
</TABLE>


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
<PAGE>

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
<PAGE>

                             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:

<TABLE>
<CAPTION>
<S>                                                 <C>              <C>           <C>

                                                   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)       $     -
-------------------------------------------------------------------------------------------
</TABLE>

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
<PAGE>

<TABLE>
<CAPTION>
<S>                                                   <C>            <C>          <C>
                                                      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)                    -
---------------------------------------------------------------------------------------------------------------
</TABLE>

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
<PAGE>

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
<PAGE>

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.

<TABLE>
<CAPTION>
<S>                                             <C>       <C>        <C>       <C>
                                                  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)
--------------------------------------------------------------------------------------
</TABLE>

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
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                     <C>           <C>

(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
----------------------------------------------------------------------------------------------
</TABLE>


                                      102
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                          <C>          <C>        <C>
(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
-------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
<S>                                                                              <C>        <C>         <C>
(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
-------------------------------------------------------------------------------------------------------------
</TABLE>

(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
<PAGE>

     (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
<PAGE>

               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
<PAGE>

               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

<TABLE>
<CAPTION>
<S>                   <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>

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
------------------------------------------------------------------------------------------
</TABLE>

(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.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

There have been no disagreements with  PricewaterhouseCoopers LLP, our auditors,
regarding  any  matter  of  accounting  principles  or  practices  or  financial
statement disclosure.

ITEM 9A CONTROLS AND PROCEDURES

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.


ITEM 9B.           OTHER INFORMATION

None.



                                      106
<PAGE>

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.

ITEM 15  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

     (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
<PAGE>

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
<PAGE>

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
<PAGE>

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
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                     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
</TABLE>



                                      110
<PAGE>

                                    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
<PAGE>

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
<PAGE>

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