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SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 FORM 10-K
  þ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the Fiscal Year ended December 31, 2004
Commission file number 1-12284 GOLDEN STAR RESOURCES LTD.  Canada
    
    98-0101955(State or other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)10901 West Toller Drive, Suite 300Littleton, 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 registeredCommon 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 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 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 þ
No o Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation
S-K 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.
o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act).
Yes þ No
o The aggregate market value of the voting and non-voting common equity held by non-affiliates
of the Registrant was approximately $609.4 million as of June 30, 2004, based on the closing
price of the shares on the American Stock Exchange of $4.64 per share. Number of Common Shares
outstanding as at January 31, 2005: 142,346,703.




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TABLE OF CONTENTS  PART IITEM 1. DESCRIPTION OF BUSINESSITEM 2. DESCRIPTION OF PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART II  OTHER INFORMATIONITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A CONTROLS AND PROCEDURESPART IIIITEMS 10, 11, 12, 13 AND 14PART IVITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBITSSecond Amended and Restated 1997 Stock Option PlanAmended and Restated Employment Agreement with Mr. Peter BradfordAmended and Restated Employment Agreement with Mr. Allan J. MarterAmended and Restated Employment Agreement with Mr. Douglas JonesAmended and Restated Employment Agreement with Mr. Bruce Higson-SmithAmended and Restated Employment Agreement with Richard Q. GrayMining Lease, dated September 17, 1992Mining Lease, dated June 29, 2001Letter Agreement between the Company and Guyanor Resource S.A. dated September 30, 2004Subsidiaries of the CompanyConsent of PricewaterhouseCoopers LLPConsent of Colin JonesCertification of Principal Executive Officer - Section 302Certification of Principal Financial Officer - Section 302Certification of Principal Executive Officer - Section 906Certification of Principal Financial Officer - Section 906    Table of Contents  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 2005 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$ and the
Euro is denoted as . Financial information is presented in accordance with accounting principles generally accepted in
Canada (Cdn 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 21 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 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, 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 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, development
costs, expenditures, exploration, our expansion plans for Bogoso/Prestea and the commencement of
commercial production at Wassa. The following, in addition to the factors described under Risk Factors in this Form 10-K, are
among the factors that could cause actual results to differ materially from the forward-looking
statements:  
    unexpected changes in business and economic conditions;
    significant increases or decreases in gold prices;
    changes in interest and currency exchange rates;
    timing and amount of production;
    unanticipated grade changes;
    unanticipated recovery or production problems;
    changes in mining and processing costs;
    changes in metallurgy and processing;




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
    availability of skilled personnel, materials, equipment, supplies and water;
    changes in project parameters;
    costs and timing of development of new reserves;
    results of current and future exploration activities;
    results of pending and future feasibility studies;
    joint venture relationships;
    political or economic instability, either globally or in the countries in which we operate;
    local and community impacts and issues;
    timing of receipt of government approvals;
    accidents and labor disputes;
    environmental costs and risks;
    competitive factors, including competition for property acquisitions; and
    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 elsewhere
in this Form 10-K. We undertake no obligation to update forward-looking statements. 2




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CONVERSION FACTORS AND ABBREVIATIONS For ease of reference, the following conversion factors are provided: 1 acre
    
    = 0.4047 hectare
    
    1 mile
    
    = 1.6093 kilometers1 foot
    
    = 0.3048 meter
    
    1 troy ounce
    
    = 31.1035 grams1 gram per metric tonne
    
    = 0.0292 troy
ounce/short ton
    
    1 square mile
    
    = 2.59 square kilometers1 short ton (2000 pounds)
    
    = 0.9072 tonne
    
    1 square kilometer
    
    = 100 hectares1 tonne
    
    = 1,000 kg or 2,204.6 lbs
    
    1 kilogram
    
    = 2.204 pounds or 32.151 troy oz1 hectare
    
    = 10,000 square meters
    
    1 hectare
    
    = 2.471 acres
 The following abbreviations could be used herein: Au
    
    = gold
    
    m2
    
    = square meterg
    
    = gram
    
    m3
    
    = cubic meterAu g/t
    
    = grams of gold per tonne
    
    Mg or mg
    
    = milligramha
    
    = hectare
    
    mg/m3
    
    = milligrams per cubic meterkm
    
    = kilometer
    
    T or t
    
    = tonnekm2
    
    = square kilometers
    
    Oz
    
    = troy ouncekg
    
    = kilogram
    
    Ppb
    
    = parts per billionm
    
    = meter
    
    Ma
    
    = million years
 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 (U.S.). Canadian reporting requirements for disclosure of mineral
properties are governed by National Instrument 43-101 (NI 43-101). The definitions given in NI
43-101 are adopted from those given by the Canadian Institute of Mining Metallurgy and Petroleum.
U.S. 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 reserve1.
    
    The term proven mineral reserve
refers to the economically mineable
part of a measured mineral resource
demonstrated by at least a preliminary
feasibility study.
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probable mineral reserve
    
    The term probable mineral reserve
refers to the 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.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 resource
    
    The term measured mineral resource
refers to that part of 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 resource
    
    The term indicated mineral resource
refers to that part of 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 resource
    
    The term inferred mineral resource
refers to that part of 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 person2.
    
    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, production
activities and project assessment, or
any combination thereof, including
experience relevant to the subject
matter of the project or report and is
a member in good standing of a
self-regulating organization.SEC Industry Guide 7 Definitionsreserve
    
    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
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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.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 material3.
    
    The term mineralized material refers
to 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.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 abrasion index- measure by a standard test of how abrasive a rock type is with respect to wear and
tear on grinding equipment acid rock drainage- the result of rainwater reacting with sulfides in broken rock i.e. waste dumps 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 Archaean- the older time division of the Precambrian; applying to rocks older than 2,500 million
years artisanal- current or historic informal mining typically of a primitive nature (see also galamsey) assay- a measure of the valuable mineral content Au- gold bio-oxidation or BIOX®-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 5




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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 containing solutions craton- a stable relatively immobile area of the earths crust cross-section- a diagram or drawing that shows features transected by a vertical plane drawn at
right angles to the longer axis of a geologic feature 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 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 dip- the angle that a structural surface, a bedding or fault plane, makes with the horizontal,
measured perpendicular to the strike of the structure disseminated- where minerals occur as scattered particles in the rock dor- 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 fold- a curve or bend of a planar structure such as rock strata, bedding planes, foliation, or
cleavage footwall- a geological or mining term meaning the rock below a fault or vein, or underlying a
natural feature, or the mining floor formation- a distinct layer of sedimentary rock of similar composition graphitic phyllite- a low-grade metamorphic rock with graphitic carbon galamsey- an informal and usually unauthorized miner or miners (Ghana) typically using primitive
methods 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 - surveysa 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 hanging wall- a geological or mining term meaning the rock above a fault or vein, or overlying a
natural feature (as opposed to footwall) 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 containing a mineral or an ore body hydrothermal- the products of the actions of heated water, such as a mineral deposit precipitated
from a hot solution igneous- a rock formed by the solidification of mineral-rich molten liquid which is intruded into
bedrock or erupted from a volcano in-situ- in its natural position kriging- a method of block grade interpolation which takes into account the statistical and
spatial characteristics of the mineralization lithology- the physical characteristic of a rock life-of-mine- a term commonly used to refer to all aspects of a given mining project which covers
the time period necessary to extract all of the current reserves mapped or geological mapping- the recording of geologic information including rock units and the
occurrence of structural features, and mineral deposits on maps 6




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metamorphic -term applied to pre-existing sedimentary and igneous rocks which have been altered in
composition, texture, or internal structure by processes involving pressure, heat and/or the
introduction of new chemical substances 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 mineralogy- the science of minerals 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- 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, 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 plunge- the angle from the horizontal of a linear geological feature on a plane pre-feasibility study- the initial stage of the feasibility study in which the accuracy of the
factors involved such as engineering achievements costs and revenues is ± 25% 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. 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 tonnage and grade of ore delivered to the processing plant reef- general term that typically refers to a tabular ore body 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 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, 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 7




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synform- bent or folded downwardstailings- fine ground wet waste material produced from ore after economically recoverable metals
or minerals have been extracted Tarkwaian- a scattered group of mainly shallow water sedimentary rocks of Proterozoic age named
after the town of Tarkwa in southern Ghana where they were found to be gold bearing tonnemetric 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 variogram/semi-variogram- graphical representation of the rate of change of grade with distance
which is used to define parameters for controlling sample layout and resource modeling 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 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 8




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PART I 
 
 ITEM 1. DESCRIPTION OF BUSINESS OVERVIEW OF GOLDEN STAR Golden Star Resources Ltd. was established under the Canada Business Corporations Acton 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 Acton March 7, 1984 as
Southern Star Resources Ltd. We are a Canadian international gold mining and exploration company
producing gold in Ghana, West Africa. Our principal office is located at 10901 West Toller Drive,
Suite 300, Littleton, Colorado 80127, and our registered office is located at 19th Floor, 885 West
Georgia Street, Vancouver, British Columbia, Canada V6C 3H4. Our records office is 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 three significant gold
properties in southern Ghana in West Africa: the Bogoso/Prestea property (Bogoso/Prestea), the
Wassa property (Wassa) and the Prestea Underground property (Prestea Underground). Bogoso and
Prestea are adjoining mining concessions, operating as a single operation and referred to as
Bogoso/Prestea. Bogoso/Prestea and the Prestea Underground are owned by our 90% owned subsidiary
Bogoso Gold Limited (BGL). In 2004 we sold 147,875 ounces of gold from Bogoso/Prestea for an
average gold price of approximately $410 per ounce having a cash operating cost of approximately
$250 per ounce. Essentially all of our gold production to date has come from Bogoso/Prestea. Through another 90% owned subsidiary, Wexford Goldfields Limited (WGL), we own the Wassa gold
property, located some 35 kilometers east of Bogoso/Prestea. A newly constructed ore processing
plant at Wassa is now in its commissioning and testing phase, processing heap leach materials left
by a former owner. We expect that the new plant will achieve its full design capacity of 10,000
tonnes per day in the first quarter of 2005. During 2005 plant feed is expected to consist of a
mixture of heap leach material and newly mined ore from the open pit mine. The open pit is
expected to become the sole source of plant feed in 2006 when all of the heap leach material has
been processed. The Prestea Underground is located on the Prestea property and consists of a currently inactive
underground gold mine and associated support facilities. As of December 31, 2004, BGL, our 90%
owned subsidiary, owned a 90% operating interest in this mine. We are currently carrying out
exploration and technical studies to determine if the underground mine can be reactivated on a
profitable basis. We hold interests in exploration joint ventures, managed by joint venture partners, in Mali and
Sierra Leone in West Africa and hold active exploration properties in Ghana, Suriname and French
Guiana. We hold interests in gold exploration properties in Peru and Chile through our affiliate
Goldmin Holdings, and in the Democratic Republic of the Congo through an investment in Moto
Goldmines Limited. During 2004 we received $3.0 million from a participation right on the Rosebel gold mine in
Suriname which was sold to our 53% owned subsidiary Guyanor Ressources S.A. (Guyanor) in December
2004. We are a reporting issuer or the equivalent in all provinces and territories of Canada and the
United States and file disclosure documents with the Canadian securities regulatory authorities and
the United States Securities and Exchange Commission. Our corporate headquarters is located in Littleton, Colorado. In addition to the Bogoso/Prestea
and Wassa employees, we have a small administrative office and staff in Accra, the capital of
Ghana, and a small staff in French Guiana. Our accounting records are kept in accordance with
Canadian GAAP and all of our operations, except for the French Guiana office, transact business in
US dollars and keep financial records in US dollars. Gold Sales and Production Ghana has been a significant gold producing country for the last 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 9




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also produced significant amounts of gold. The gold industry in Ghana is currently experiencing
growth in exploration and development and gold production. Gold production in Ghana exceeded 2
million ounces in each year from 1998 through 2004 and is projected to increase as planned
developments and expansions now underway reach the production stage. All of our gold is sold to a South African gold refinery to which it is sent in the form of doré
bars which average approximately 91% gold 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, global and
regional demand, and the political and economic conditions of major gold-producing countries
throughout the world. The following table presents the high, low and average afternoon fixed prices for gold per ounce on
the London Bullion Market over the past ten years:  Average PriceReceived byYear
    
    
    
    High
    
    
    
    Low
    
    
    
    Average
    
    
    Golden Star1995
    
    
    $
    396
    
    
    $
    372
    
    
    $
    384
    
    
    N/A1996
    
    


    415
    
    

    367
    
    

    388
    
    
    N/A1997
    
    

    362
    
    

    283
    
    

    331
    
    
    N/A1998
    
    

    313
    
    

    273
    
    

    294
    
    
    N/A1999
    
    

    326
    
    

    253
    
    

    279
    
    
    2932000
    
    

    313
    
    

    264
    
    

    279
    
    
    2802001
    
    

    293
    
    

    256
    
    

    271
    
    
    2712002
    
    

    349
    
    

    278
    
    

    310
    
    
    3112003
    
    

    416
    
    

    320
    
    

    363
    
    
    3642004
    
    

    454
    
    

    375
    
    

    410
    
    
    410To January 31, 2005
    
    

    428
    
    

    420
    
    

    424
    
    
    422
 Data Source : www.Kitco.com 10




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The following diagram depicts the organizational structure of Golden Star and its significant
subsidiaries: (FLOW CHART) 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. We also explore for gold. Since 1999 our exploration efforts have
been focused on Ghana, other West African countries and South America. We are currently carrying
out technical and environmental studies to expand production at Bogoso/Prestea. We commenced
development at Wassa in mid-2003, and expect it to be fully operational in early 2005. If the
above mentioned expansion and development plans at Bogoso/Prestea are approved and permitted as
expected, our annualized production is expected to range between 375,000 and 425,000 ounces of gold
by 2007. Achievement of this target is subject to numerous risks. See the discussion of risk
factors below. Our overall objective is 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) over the next
few years. As part of the effort to achieve our goal, we are actively investigating potential
acquisition and merger candidates. However, we presently have no agreement or understanding with
respect to any specific potential transaction. 11




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##### Table of Contents



We conduct gold exploration in West Africa and South America. Spending on these activities totaled
approximately $18.2 million and $13.6 million in 2004 and 2003 respectively. We employ a number of
different strategies to achieve our exploration goals including the following:  
    We maintain a staff of full-time geologists at Bogoso and Wassa responsible for
exploring and developing areas around the existing operations;
    We contract with geologic consultants who seek to identify new exploration
opportunities;
    We have purchased equity ownership in gold exploration companies who use the equity
funds provided by us to explore in their areas of expertise;
    We provide funding to joint venture partners who use our funding to conduct active
exploration efforts; and
    We maintain a small international exploration group who carry out work on various
properties in the Guiana Shield area of South America and in other areas of Africa. IAMGold Tender Offer In 2004, we made an unsolicited tender offer to the shareholders of IAMGold Corporation. On August
11, 2004, IAMGold announced that it had agreed to combine IAMGolds mining assets with certain gold
mining assets of another international gold mining company to form a new gold mining company.
IAMGolds management and board subsequently recommended acceptance of this plan to their
shareholders. After analyzing this development we concluded that it was not in the best interests
of our shareholders to continue our offer for IAMGold and our board of directors elected not to
extend our tender offer which expired on August 16. No shares of IAMGold were acquired. We
incurred approximately $4.1 million of direct, incremental acquisition costs resulting from the
tender offer which were expensed in the third quarter. The majority of these costs were for legal,
financial advisory, printing and accounting services. OUR ASSETS Bogoso/Prestea- 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 from the Prestea mine site to the Bogoso processing plant where the ore
is processed. The nominal capacity of the Bogoso processing plant ranges between approximately
4,000 and 6,000 tonnes-per-day depending on the type of ore being processed. 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 and administrative offices. We also own
infrastructural support facilities at Bogoso including a medical center, cafeteria, store,
recreation facility and golf course. Capacity of the processing plant at Bogoso is expected to vary between 4,200 and 4,500 tonnes per
day in 2005 while processing transition and primary sulfide ores from the Plant-North pit at
Prestea. Historical gold output at the Bogoso plant has typically ranged between 130,000 and
175,000 ounces per year. In 2004 we produced and sold 147,875 ounces, approximately 15% less than
the 174,315 ounces sold in 2003 due primarily to lower plant throughput and, as expected, lower
recoveries from processing refractory transitional and primary sulfide ores. Historical and
projected production from Bogoso/Prestea is shown on the Gold Production and Cash Costs table
below. Wassa The physical plant at Wassa is similar to Bogoso/Prestea including an open-pit surface
mine, a CIL processing plant, mining equipment and a residential site with associated facilities.
Wassa was under development during 2004 and is in its commissioning phase at the date of this
report. Projected 2005 production from Wassa is shown on the Gold Production and Cash Costs
table below. 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 12




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of approximately nine million ounces of gold prior to its closure
in early 2002. We are now performing engineering, geological and economic analysis of the mine to
determine if it can be reopened on a profitable basis. The mine includes two useable shafts and
several kilometers of underground workings on numerous levels extending as deep as 1,400 meters
below the surface. Mampon The
Mampon project, located approximately 35 kilometers north of the
Bogoso processing plant 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 allowed us to establish a
probable reserve at the Mampon
property as of year-end 2004. Moto Gold Mines In October 2004 we acquired a 9.5% interest in Moto Goldmines Limited (Moto)
for $4.1 million. Moto controls the approximate 4,700 square kilometer Moto concessions located in
the north east of the Democratic Republic of Congo. The Moto concessions form part of the Kilo-Moto
gold belt which has historical production in excess of 11 million ounces with over two million
ounces mined from ten small mines within the central 35 square kilometers on the Moto concessions. Rosebel Royalty We began receiving royalty payments in early 2004 from Cambior Inc. (Cambior)
related to our participation right in Cambiors Rosebel mine. Royalty income totaled $3.0 million
during 2004. On December 31, 2004 we sold the Rosebel interest to our 53% owned subsidiary
Guyanor for $12.0 million, of which $6.0 million was paid on January 8, 2005 and the balance is due
to Golden Star prior to June 30, 2005. Additionally, Golden Star will receive up to $2.50 per
ounce of Rosebel production for all production in excess of 2 million ounces but less than 4
million ounces and up to $5.00 per ounce when production exceeds 4 million ounces up to 7 million ounces. Exploration Assets We have interests in numerous gold exploration properties in Ghana, Sierra
Leone, Mali, and South America. Most of the exploration properties in Ghana are within trucking or
conveying distance of Bogoso/Prestea or Wassa. We have a staff of geologists in Ghana actively
investigating the mineral resource potential of the various exploration properties, and we
anticipate that such exploration effort will continue in 2005. 13




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##### Table of Contents



GOLD PRODUCTION AND UNIT COSTS The following table shows historical and projected gold production and unit costs. The 2005
projected unit costs are based on a gold price of $400 per ounce. 2005PRODUCTION AND CASH COST PER OUNCE(1)
    
    
    2002
    
    
    
    2003
    
    
    
    2004
    
    
    
    ProjectedBOGOSO/PRESTEAOunces (thousands)
    
    
    
    124.4
    
    
    
    
    174.3
    
    
    
    
    147.9
    
    
    
    
    140 - 170Total Production Cost ($/oz)
    
    
    
    235
    
    
    
    
    216
    
    
    
    
    323
    
    
    
    
    250 - 270Cash Operating Cost ($/oz)
    
    
    
    193
    
    
    
    
    166
    
    
    
    
    250
    
    
    
    
    190-210Total Cash Cost ($/oz)
    
    
    
    215
    
    
    
    
    184
    
    
    
    
    264
    
    
    
    
    202-212WASSA(2)Ounces (thousands)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100 - 120Total Production Cost ($/oz)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    380 - 400Cash Operating Cost ($/oz)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280 - 300Total Cash Cost ($/oz)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292 - 312CONSOLIDATEDTotal Ounces(3) (thousands)
    
    
    
    124.4
    
    
    
    
    174.3
    
    
    
    
    147.9
    
    
    
    
    240 - 290Consolidated Total Production Cost ($/oz)
    
    
    
    235
    
    
    
    
    216
    
    
    
    
    323
    
    
    
    
    304 - 324Consolidated Cash Operating Cost ($/oz)
    
    
    
    193
    
    
    
    
    166
    
    
    
    
    250
    
    
    
    

230 -
250Consolidated Total Cash Cost ($/oz)
    
    
    
    215
    
    
    
    
    184
    
    
    
    
    264
    
    
    
    
    240 - 259
  (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)
    
    In late 2004 during its commissioning phase, Wassa began production by processing through its
CIL plant heap leach materials left on heap leach pads by a former owner blended with newly mined
ore from the open pit mine.(3)
    
    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.
 14




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MINERAL RESERVES Our proven and probable mineral reserves are estimated in conformance with definitions set out in
Canadas National Instrument 43-101(NI 43-101). Technical Reports on our mineral reserves for
Bogoso/Prestea and Wassa have been filed as required in NI 43-101. We filed Technical Reports on
our mineral reserves for Bogoso/Prestea and Wassa as of December 31, 2003 during the first quarter
of 2004. 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 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. The estimates of our mineral reserves are prepared by Golden Star based on information compiled
and/or validated by Mr. Dave Alexander, our employee and Projects Planning Manager. Mr. Alexander
is a qualified mining engineer with 20 years of experience, a member of the Institute of Materials,
Minerals and Mining, and a Chartered Engineer under the auspices of the Engineering Council of the
United Kingdom. Mr. Alexander is considered a qualified person under NI 43-101. The proven and probable mineral reserves as of December 31, 2004 have been estimated at an economic
cut-off grade based on a gold price of $360 per ounce. This compares to $325 per ounce used for

the estimate of our mineral reserves at December 31, 2003. 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 Bogoso/Prestea and Wassa reserves, owned by our 90%-owned subsidiaries BGL and WGL,
respectively, are shown in the following table on a 100% basis, which represents our current
beneficial interest in these reserves, gold production and revenues. Once all capital has been
repaid, the Government of Ghana, which owns 10% of BGL and WGL, would receive 10% of any dividends
paid by the subsidiaries. 15




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The following table
summarizes our estimated proven and probable mineral
reserves as of December 31, 2004 and December 31, 2003: PROVEN AND PROBABLE MINERALRESERVES
    
    As of December 31, 2004
    
    
    As of December 31, 2003Property
    
    Tonnes (1)
    
    
    Gold Grade
    
    
    Ounces (2)
    
    
    Tonnes (1)
    
    
    Gold Grade
    
    
    Ounces (2)Mineral Reserve Category
    
    (millions)
    
    
    (g/t)
    
    
    (millions)
    
    
    (millions)
    
    
    (g/t)
    
    
    (millions)Bogoso/Prestea (3)Proven Mineral Reserves:Non-refractory
    
    
    3.0
    
    
    
    4.20
    
    
    
    0.41
    
    
    
    1.2
    
    
    
    2.61
    
    
    
    0.10Refractory
    
    
    11.5
    
    
    
    2.97
    
    
    
    1.09
    
    
    
    7.0
    
    
    
    3.43
    
    
    
    0.7814.5
    
    
    
    3.23
    
    
    
    1.51
    
    
    
    8.3
    
    
    
    3.31
    
    
    
    0.88Probable Mineral Reserves:Non-refractory
    
    
    7.3
    
    
    
    2.34
    
    
    
    0.55
    
    
    
    8.5
    
    
    
    3.22
    
    
    
    0.88Refractory
    
    
    9.0
    
    
    
    2.60
    
    
    
    0.76
    
    
    
    9.6
    
    
    
    3.13
    
    
    
    0.9716.4
    
    
    
    2.48
    
    
    
    1.31
    
    
    
    18.2
    
    
    
    3.17
    
    
    
    1.85Total Proven and Probable:Non-refractory
    
    
    10.4
    
    
    
    2.89
    
    
    
    0.96
    
    
    
    9.7
    
    
    
    3.14
    
    
    
    0.99Refractory
    
    
    20.5
    
    
    
    2.81
    
    
    
    1.85
    
    
    
    16.7
    
    
    
    3.25
    
    
    
    1.74Total Bogoso/Prestea Proven and Probable

    
    
    30.9
    
    
    
    2.83
    
    
    
    2.81
    
    
    
    26.4
    
    
    
    3.21
    
    
    
    2.73Mampon (4)Probable Mineral Reserves:Non-refractory
    
    
    0.3
    
    
    
    4.63
    
    
    
    0.04
    
    
    
    0.2
    
    
    
    4.94
    
    
    
    0.04Refractory
    
    
    0.7
    
    
    
    5.35
    
    
    
    0.12
    
    
    
    0.6
    
    
    
    5.86
    
    
    
    0.12Total Mampon Probable
    
    
    1.0
    
    
    
    5.16
    
    
    
    0.16
    
    
    
    0.9
    
    
    
    5.59
    
    
    
    0.16Wassa (5)Probable Mineral Reserves:Non-refractory
    
    
    19.3
    
    
    
    1.31
    
    
    
    0.81
    
    
    
    16.2
    
    
    
    1.28
    
    
    
    0.67Total Wassa Probable
    
    
    19.3
    
    
    
    1.31
    
    
    
    0.81
    
    
    
    16.2
    
    
    
    1.28
    
    
    
    0.67TotalProven Mineral Reserves:Non-refractory
    
    
    3.0
    
    
    
    4.20
    
    
    
    0.41
    
    
    
    1.2
    
    
    
    2.61
    
    
    
    0.10Refractory
    
    
    11.5
    
    
    
    2.97
    
    
    
    1.09
    
    
    
    7.0
    
    
    
    3.43
    
    
    
    0.7814.5

    
    
    
    3.23
    
    
    
    1.51
    
    
    
    8.3
    
    
    
    3.31
    
    
    
    0.88Probable Mineral Reserves:Non-refractory
    
    
    26.9
    
    
    
    1.62
    
    
    
    1.40
    
    
    
    25.0
    
    
    
    1.98
    
    
    
    1.59Refractory
    
    
    9.7
    
    
    
    2.60
    
    
    
    0.88
    
    
    
    10.3
    
    
    
    3.13
    
    
    
    1.0936.6
    
    
    
    1.94
    
    
    
    2.28
    
    
    
    35.3
    
    
    
    2.36
    
    
    
    2.68Total Proven and Probable:Non-refractory
    
    
    29.9
    
    
    
    1.89
    
    
    
    1.82
    
    
    
    26.2
    
    
    
    2.00
    
    
    
    1.69Refractory
    
    
    21.2
    
    
    
    2.89
    
    
    
    1.97
    
    
    
    17.3
    
    
    
    3.35
    
    
    
    1.86Total
Proven and Probable (6)
    
    
    51.1
    
    
    
    2.30
    
    
    
    3.78
    
    
    
    43.5
    
    
    
    2.54
    
    
    
    3.55
 Notes to Proven and Probable Mineral Reserves Table   16




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##### Table of Contents



(2) Calculation of contained ounces includes adjustments due to rounding. (3) Approximately 67% of the 2004 Bogoso/Prestea mineral reserves are refractory ore. We are
currently planning to add a bio-oxidation circuit to the Bogoso processing plant to process the
refractory mineral reserves. The estimated recovery rates utilized in our mineral reserve
calculations in 2004 ranged from 65% to 85% for oxides and other non-refractory ores, and from 78%
to 85% for refractory ore. The estimated cut-off grades utilized in mineral reserve calculations
in 2004 ranged from 0.7 g/t to 1.9 g/t for oxide ore and other non-refractory ores and from 1.35
g/t to 1.74 g/t for refractory ore. (4) The Mampon property mineral reserves of 1.0 million tonnes of ore at an average grade of
approximately 5.16 g/t containing approximately 160,000 ounces of gold are reported separately for
the December 31, 2004 reserves. These mineral reserves were included in the total for
Bogoso/Prestea in the reserve totals for December 31, 2003. Mampon was purchased as part of the
Dunkwa properties acquisition in June 2003 and represents the northern extension of the
Bogoso/Prestea deposits. (5) All of the Wassa mineral reserves are non-refractory and should be treatable in the Wassa CIL
processing plant. The estimated recoveries utilized in mineral reserve calculations in 2004 ranged
from 92% to 93%. The estimated cut-off grades utilized in mineral reserve calculations in 2004
range from 0.5 g/t to 0.6 g/t. The mineral reserves include 4.2 million tonnes of material grading
0.7 g/t remaining on the leach pads established by the previous operator of the Wassa mine. (6) The attributable share of tonnes and ounces for the year-ended 2004 and 2003 were 46.0 and
39.2 million tonnes and 3.41 and 3.20 million ounces, respectively. Included in Bogoso/Presteas proven mineral reserves for the year-end 2004 and 2003 are stockpiled
ore of 0.3 and 0.8 million tonnes at an average grade of 2.69
g/t and 2.40 g/t, respectively. The table below
summarizes the stockpiled ore tonnage and grade: STOCKPILES INCLUDED IN RESERVES
    
    As of December 31, 2004
    
    As of December 31, 2003Tonnes
    
    
    
    
    
    TonnesProperty
    
    (1)
    
    Gold Grade
    
    Ounces (2)
    
    (1)
    
    Gold Grade
    
    Ounces (2)Mineral Reserve Category
    
    (millions)
    
    (g/t)
    
    (millions)
    
    (millions)
    
    (g/t)
    
    (millions)Bogoso/Prestea(3)Proven Stockpiles:Non-refractory
    
    0.1
    
    2.74
    
    0.01
    
    0.8
    
    2.40
    
    0.06Refractory
    
    0.2
    
    2.64
    
    0.02
    
    
    
    
    
    Total Proven Stockpiles
    
    0.3
    
    2.69
    
    0.03
    
    0.8
    
    2.40
    
    0.06
 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 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, the NI 43-101
has a minimum requirement that reserves be supported by
a pre-feasibility study, whereas the Industry Guide 7 requires support from a full feasibility
study done to bankable standards. For the mineral reserves at
December 31, 2004 and 2003, there is no difference between the mineral reserves
as disclosed under NI 43-101 and those disclosed under SEC Industry Guide 7, and therefore we do
not provide reconciliation. 17




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##### Table of Contents



Reconciliation of Proven and Probable Mineral Reserves(1)(In millions of ounces of contained gold) PROPERTY
    
    December 31, 2003
    
    2004 Depletion(2)
    
    Increase(3)
    
    December 31, 2004Bogoso/Prestea
    
    2.73
    
    (0.19)
    
    0.27
    
    2.81Mampon
    
    0.16
    
    
    
    
    
    0.16Wassa
    
    0.67
    
    
    
    0.15
    
    0.81Total
    
    3.55
    
    (0.19)
    
    0.42
    
    3.78
 Notes to Reconciliation of Proven and Probable Mineral Reserves Table (1) Reconciliations are important for monitoring accuracy in grade estimation, the
effectiveness of grade control strategies and mining efficiency. The results of reconciliation
programs are typically used to identify areas where improvements may be made, and to measure the
impact of such improvements. (2) Depletion represents contained ounces of mineral reserves processed during 2004 before
considering recovery losses and therefore does not equal 2004 gold production. (3) Increases and decreases in mineral reserves can result from the discovery of new
mineralization, conversion of mineral resources to mineral reserves, changes in price assumptions,
unit costs and recoveries or any combination of these factors. The increases in mineral reserves
during 2004 were due primarily to the exploration successes at Bogoso/Prestea and Wassa, and an
increase in the estimated gold price used to calculate reserves to $360 per ounce from $325 per
ounce. NON-RESERVES  MEASURED AND INDICATED MINERAL RESOURCES Measured and Indicated Mineral Resources 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, 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 in 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 $430 per ounce for December 31, 2004 and $375 per
ounce for December 31, 2003 and on economic constraints that we believe 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 Bogoso/Prestea and Wassa resources, owned by our 90%-owned subsidiaries BGL and WGL,
respectively, are shown on a 100% basis, which represents our current beneficial interest in these
resources, gold production and revenues. Once all capital has been repaid, the Government of
Ghana, which owns 10% of BGL and WGL, would receive 10% of any dividends paid by the subsidiaries. The following table summarizes our estimated non-reserves  (measured and
indicated mineral resources) as of December 31, 2004 and December 31, 2003: 18




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NON-RESERVES
 MEASURED AND INDICATED MINERAL RESOURCES
    
    As of December 31, 2004
    
    As of December 31, 2003Property
    

Tonnes
    
    Gold Grade (g/t)
    

Tonnes
    
    Gold Grade (g/t)Mineral Resource Category
    
    (millions)
    
    
    
    (millions)Bogoso/Prestea(2)Measured
    
    7.8
    
    1.55
    
    11.3
    
    2.44Indicated
    
    26.1
    
    2.12
    
    15.9
    
    2.5433.9
    
    1.99
    
    27.2
    
    2.50Wassa(3)Measured
    
    
    
    
    
    
    
    Indicated
    
    1.7
    
    2.44
    
    9.4
    
    0.961.7
    
    2.44
    
    9.4
    
    0.96TotalMeasured
    
    7.8
    
    1.55
    
    11.3
    
    2.44Indicated
    
    27.8
    
    2.14
    
    25.3
    
    1.95Total Measured and
Indicated
    
    35.6
    
    2.01
    
    36.6
    
    2.10
 Notes to Non-Reserves  Measured and Indicated Mineral Resources Table (1) See Glossary Of Terms for definitions of non-reserves  mineral resources, measured mineral
resources and indicated mineral resources. The estimation of the Bogoso/Prestea, Dunkwa and Wassa measured and indicated mineral resources are
based on information compiled and/or validated by Mr. S. Mitchell Wasel, our employee and
Exploration Manager. 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. Mr.
Wasel is considered a qualified person under NI 43-101. (2) Approximately 81% of the 2004 Bogoso/Prestea measured and indicated mineral resources are
refractory. The estimated cut-off grades utilized in mineral resource calculations in 2004 ranged
from 0.7 g/t to 1.8 g/t for non-refractory material and from 0.9 g/t to 2.1 g/t for refractory
material. (3) All of the 2004 Wassa measured and indicated mineral resources are non-refractory. The
estimated cut-off grades utilized in mineral resource calculations in 2004 ranged from 0.4 g/t to
0.6 g/t. (4) The attributable share of
tonnes for the year-ended 2004 and 2003 were 32.0 and 32.9 million
tonnes, respectively. 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 an 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. 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, 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 in NI 43-101. See our Glossary of Terms. 19




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The inferred mineral resources for our properties have been estimated at economic cut-off grades
based on gold prices of $430 and $375 per ounce as of December 31, 2004 and December 31, 2003,
respectively, and economic constraints that we believe are realistic. The Bogoso/Prestea and Wassa resources, owned by our 90%-owned subsidiaries BGL and WGL,
respectively, are shown on a 100% basis, which represents our current beneficial interest in these
resources, gold production and revenues. Once all capital has been repaid, the Government of
Ghana, which owns 10% of BGL and WGL, would receive 10% of any dividends.
The Prestea Underground resources, 90%-owned by BGL and 10% by the Government of Ghana, are shown
on a 100% basis, which represents our current beneficial interest in these resources. Once all
capital has been repaid, the Government of Ghana, which owns 10% of BGL in addition to its 10%
direct interest, would receive 10% of any dividends paid by BGL. The Paul Isnard resources are
shown on a 100% basis. Paul Isnard is owned by our 53%-owned subsidiary, Guyanor, and Golden Star
has a joint venture with Guyanor on Paul Isnard under which Golden Star can earn a 100% interest in
the property. The following table summarizes our estimated non-reserves  inferred mineral
resources as of December 31, 2004 and December 31, 2003: NON-RESERVES
 INFERRED MINERAL RESOURCES
    
    As of December 31, 2004
    
    As of December 31, 2003Tonnes(1)
    
    Gold Grade (g/t)
    

Tonnes(1)
    
    Gold Grade (g/t)Property
    
    (millions)
    
    
    
    (millions)Bogoso/Prestea (2)
    
    47.4
    
    2.23
    
    29.7
    
    2.43Wassa (3)
    
    13.2
    
    1.32
    
    30.8
    
    1.27Prestea Underground (4)
    
    1.6
    
    8.58
    
    1.6
    
    8.58Paul Isnard (5)
    
    8.2
    
    1.78
    
    8.2
    
    1.78Total Inferred
    
    70.4
    
    2.15
    
    70.3
    
    1.99
 Notes to Non-Reserves  Inferred Mineral Resources Table (1) See Glossary of Terms for definitions of non-reserves  mineral resources and inferred mineral
resources. The estimation of the Bogoso/Prestea, Wassa, and Prestea Underground inferred mineral resources are
based on information compiled and/or validated by Mr. S. Mitchell Wasel, our employee and
Exploration Manager. 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 primary qualified person responsible for the estimation of the inferred mineral resource for
the Paul Isnard property is Mr. Colin Jones, who is a professional geologist with 22 years of
experience. Mr. Jones is a Partner and Manager (Audits) of RSG Global Pty Ltd and a member of the
Australasian Institute of Mining and Metallurgy. The amount of the mineral resource at the Paul
Isnard property that might have been removed by illegal mining is not known but could be material. We did not provide
information on non-reserves  inferred mineral resources for Yaou
and Dorlin since they were sold during 2004. (2) Approximately 84% of the 2004 Bogoso/Prestea inferred mineral resources are refractory. The
estimated cut-off grades utilized in inferred mineral resource calculations in 2004 ranged from 0.7
g/t to 1.8 g/t for non-refractory material and from 0.9 g/t to 2.1 g/t for refractory material. (3) All of the Wassa inferred mineral resources are non-refractory. The estimated cut-off grades
utilized in mineral resource calculations in 2004 ranged from 0.5 g/t to 0.6 g/t. (4) All of the Prestea Underground inferred mineral resources are refractory. Golden Star owns
approximately a 81% beneficial interest in the property. The estimated cut-off grade utilized in
mineral resource calculations in 2004 was 4.2 g/t. 20




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(5) Paul Isnard is located in French Guiana, South America, and is owned by our 53% owned
subsidiary Guyanor. Through a joint venture agreement, Golden Star has the right to earn a 100%
ownership position in this property. The estimated cut-off grade utilized in mineral resource
calculations in 2004 was 0.4 g/t. The property is undeveloped and has been on a care and
maintenance basis in recent years. (6) The attributable share of
tonnes for the year-ended 2004 and 2003 were 60.2 and 61.4 million
tonnes, respectively. EMPLOYEE RELATIONS As of December 31, 2004 Golden Star, including our majority owned subsidiaries, had approximately
1,150 employees and contract employees, a 15% increase from the approximately 1,000 people employed
at the end of 2003. Employees hired at the new Wassa operations made up the increase. The total
includes 14 employees and two part-time or contract employees at our principal office in Littleton,
Colorado and three people in South America. A review of staffing needs at the end of 2004
indicated that there were redundant staff in certain areas of our African operations and a
reduction in workforce is now underway. 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 upon delivery to the refinery
unless we decide to retain title and hold the gold as inventory. During 2004 we sold all of the
gold shipped in the normal course of delivery. 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 We compete with major 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. 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 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. 21




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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 extended decline in gold prices would have a material adverse effect on our
company. 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 extended 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:  
    cause suspension of our mining operations at Bogoso-Prestea or at Wassa, if such operations become uneconomic at
the then-prevailing gold price, thus further reducing revenues;
    cause us to be unable to fulfill our obligations under our 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;
    halt or delay the development of new projects; and
    reduce funds available for exploration, with the result that depleted reserves are not replaced. 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 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, $14.9 million and $24.4 million in 2001,
2000 and 1999, respectively. Numerous factors, including declining gold prices, lower than
expected ore grades or higher than expected operating costs, and impairment write-offs of mine
property and/or exploration property costs, could cause us to become unprofitable in the future.
Any future operating losses could make financing our operations and our business strategy, 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 have total debts and
liabilities as of December 31, 2004 of $27.8 million, including $3.0
million payable to financial institutions, $16.2 million of current trade payables and accrued
current liabilities and an $8.7 million accrual for environmental rehabilitation liabilities. For
additional information on our environmental rehabilitation
liabilities, see note 12 to our
Consolidated Financial Statements. 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:  
    increasing our vulnerability to general adverse economic and industry conditions; 22




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
    limiting our ability to obtain additional financing to fund future working capital, capital expenditures, operating and
exploration costs and other general corporate requirements;  
    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;  
    limiting our flexibility in planning for, or reacting to, changes in our business and the industry; and  
    placing us at a disadvantage when compared to our competitors that have less debt relative to their market
capitalization. Our estimates of mineral reserves and non-reserves could be inaccurate, which could cause
production and costs to differ from estimates. There are numerous uncertainties inherent in estimating proven and probable mineral reserves and
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 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
estimate. 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 one major source of operational cash flows, which will likely be
insufficient to fund our continuing exploration and development activities. While we have recently received significant infusions of cash from sales of equity, our only
current significant internal source of funds is operational cash flows from Bogoso/Prestea. We
expect to have a second source of operational cash flow when our newly constructed Wassa mine and
plant reaches design capacity. This new operation is currently in a commissioning phase, and we
expect it to achieve full design capacity in the first quarter of 2005, processing through the
plant material from the prior owners heap leach pads. However, our Wassa production goals may not
be achieved. The anticipated continuing exploration and development of our properties will require
significant expenditures over the next several years. We expect that these expenditures will
exceed free cash flows generated by Bogoso/Prestea during that period, and therefore we expect to
use our excess cash and in the future to require additional outside capital. 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, 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 hedging program might be unsuccessful and incur losses. We continue to review whether or not, in light of the potential for gold prices to fall, it would
be appropriate to establish a hedging program. To date, we have not decided to implement a hedging
program, although we have purchased and expect to continue to purchase puts from time to time,
which give us the right to sell gold in the future at a fixed price. The implementation of a
hedging program might not, however, protect adequately against declines in the price of gold. In addition, although a hedging program could protect us from a decline in the price of gold, it
might also prevent us from benefiting fully from price increases. For example, as part of a
hedging program, we could be obligated to sell gold at a price lower than the then-current market
price. In addition, the costs of any hedging program could further deplete our financial
resources. 23




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We are subject to fluctuations in currency exchange rates, which could materially adversely affect
our financial position. Our revenues are in US dollars, and we maintain most of our working capital in US dollars or US
dollar-denominated securities. We convert our US funds to foreign currencies as payment
obligations become due. Accordingly, we are subject to fluctuations in the rates of currency
exchange between the US dollar and these currencies, and such 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 such sales proceeds into
Cedis in the future. In addition, we currently have future obligations that are payable in 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 US dollar or the Cedi, the
South African Rand or other currencies such as the recent decrease in the value of the US dollar
relative to other currencies. In addition such changes may increase the salary costs of expatriate employees who are
currently being paid in US dollars. Consequently, the operation and development of our
properties might be more costly than we anticipate. 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 are actively pursuing the acquisition of producing, development and advanced stage exploration
properties and companies, and have recently completed the acquisition and joint venture of
exploration and development properties in Ghana, Sierra Leone and Mali. 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, as was
our 2004 bid for IAMGold. As our operations to date have focused on a single property in Ghana,
any acquisition that we may choose to complete may change the scale of our business and operations,
and may expose us to new geographic, political, operating, financial and geological risks. 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 our company. 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
our 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. We believe it
is unlikely that the final outcome of these legal proceedings will have a material adverse effect
on our financial position or results of operation. However, 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. 24




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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 study in 2001 and its
subsequent review by Dave Alexander, a qualified person under NI 43-101, the refractory material at
Bogoso/Prestea, which is ore that cannot be satisfactorily processed by basic gravity concentration
or simple cyanidation, has been included in our proven and probable mineral reserves. 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 upgrade the Bogoso processing plant
with a bio-oxidation or BIOX ® circuit
to process refractory ore, together with
related mining equipment and facilities, is significant. While the processing technology envisioned in the feasibility study has been successfully
utilized at other mines and in spite of 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. 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:  
    environmental hazards;  
    discharge of pollutants or hazardous chemicals;  
    industrial accidents;  
    labor disputes and shortages;  
    illegal miners and illegal mining;  
    community relocation issues;  
    community related delays;  
    shortage of trained managers and professionals;  
    supply and shipping problems and delays;  
    shortage of equipment and contractor availability;  
    difficulty in applying technology such as bio-oxidation processing;  
    unusual or unexpected geological or operating conditions including ore losses and dilution;  
    slope failures;  
    cave-ins of underground workings;  
    failure of pit walls or dams;  
    fire;  
    changes in the regulatory environment; and  
    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. 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 25




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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, conversion of the existing
Bogoso/Prestea processing plant to process refractory sulfides 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. We have, for example, experienced delay in
obtaining environmental permits at Bondaye. Such permitting issues could adversely affect our
projected production commencement dates, production amounts and costs. 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 anticipated expansion at
Bogoso/Prestea, 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:  
    estimation of mineral reserves and mineral resources;  
    anticipated metallurgical recovery rates;  
    environmental and community considerations and permitting;  
    future gold prices; and  
    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 has occurred at Wassa. Any of the following events, among
others, could affect the profitability or economic feasibility of a project:  
    unanticipated changes in grade, mining dilution and tonnage of ore to be mined and processed;  
    unanticipated adverse geotechnical conditions;  
    incorrect data on which engineering assumptions are made;  
    costs of constructing and operating a mine in a specific environment;  
    availability and cost of processing and refining facilities;  
    availability of economic sources of power;  
    adequacy of water supply;  
    adequate access to the site including competing land uses (such as agriculture and illegal mining);  
    unanticipated transportation costs; 26




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
    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);  
    fluctuations in gold prices; and  
    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 Risk Factors, our production estimates at Bogoso/Prestea
and Wassa may not be achieved. We need to continually obtain 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 over ten years of mine life and Wassa has approximately
five years of mine life, however 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, 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:  
    the identification of potential gold mineralization based on superficial analysis;  
    availability of prospective land;  
    availability of government-granted exploration permits;  
    the quality of our management and our geological and technical expertise; and  
    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. 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 secure claim to individual mineral properties or mining
concessions could be severely constrained. We generally do not conduct surveys of 27




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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 as well as
managers, professionals and skilled personnel associated with our operating and exploration
activities. 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 the depletion in 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 Golden
Star. Our insurance coverage could be insufficient. Our business is subject to a number of risks and hazards generally, including:  
    adverse environmental conditions;  
    industrial accidents;  
    labor disputes;  
    unusual or unexpected geological conditions;  
    ground or slope failures;  
    cave-ins;  
    changes in the regulatory environment;  
    natural phenomena such as inclement weather conditions, floods and earthquakes; and  
    political risks including expropriation, anarchy, terrorism and civil war. Such occurrences could result in:  
    damage to mineral properties or production facilities;  
    personal injury or death;  
    loss of legitimate title to properties;  
    environmental damage to our properties or the properties of others;  
    delays in mining;  
    monetary losses; and  
    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. 28




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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. Any such limitations, or the perception that such limitations might exist
now or in the future, could have an adverse impact on 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:  
    licensing  
    production  
    taxes  
    water disposal  
    toxic substances  
    development and permitting  
    exports  
    imports  
    labor standards  
    occupational health and safety  
    mine safety  
    environmental protections Compliance with these regulations increases the costs of the following:  
    planning  
    designing  
    drilling  
    operating  
    developing  
    constructing  
    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 is currently our only source of internally generated operating cash flows. 29




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The Government of Ghana has the right to increase its ownership and control of certain
subsidiaries. The Government of Ghana currently has a 10% carried interest in our subsidiaries that own our
Bogoso/Prestea mine, Wassa mine and Prestea Underground property. The Government of Ghana also
has: (a) the right to acquire up to an additional 20% equity interest in each of these subsidiaries
for a price to be determined by agreement or arbitration; (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 and/or reduce our
anticipated income or cash flows from 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. Our assets and operations are affected by various political and economic uncertainties, including:  
    the risks of war, civil unrest, coups or other violent or unexpected changes in government;  
    political instability and violence;  
    expropriation and nationalization;  
    renegotiation or nullification of existing concessions, licenses, permits, and contracts;  
    illegal mining;  
    changes in taxation policies;  
    restrictions on foreign exchange and repatriation; and  
    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 have experienced a significant increase in illegal mining activity in recent months on the
Prestea property involving an estimated 3,000 or more illegal miners. Most of this activity is in
the Beta Boundary area south of Prestea and includes areas where we have established reserves.
While it is difficult to quantify the exact impact of this activity on our reserves and non-reserve
mineral resources, it now appears, based on a survey completed in September 2004 that between
40,000 and 50,000 ounces of gold may have been removed by the illegal mining activity. The impact
of this illegal mining to the extent known at this time, on our reported reserve and non-reserve
mineral resources has been included in our year-end 2004 reserve estimates. 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 reserve and non-reserve 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. While illegal miners work on other of our properties from time to
time, they may in the future increase their presence and have increased negative impacts such as
those described above on such other properties. 30




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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. Failure to achieve and maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act could have a material adverse effect on our business and share price. We are in the process of testing our internal control procedures in order to satisfy the
requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments
of the effectiveness of our internal controls over financial reporting and a report by our
independent auditor addressing these assessments. Any failure to implement, improve and expand our
systems, processes, or controls efficiently could have a material adverse effect on our business
and our ability to achieve and maintain an effective internal control environment. During the
course of our testing we may identify deficiencies which we may not be able to remediate in time to
meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section
404. In addition, if we fail to maintain the adequacy of our internal controls, as such standards
are modified, supplemented or amended from time to time, we may not be able to ensure that we can
conclude on an ongoing basis that we have effective internal controls over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act. Failure 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 and the Toronto Stock Exchange.
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:  
    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;  
    the trading volume and general market interest in our securities
could affect an investors ability to trade significant numbers of
common shares;  
    the relatively small size of the public float will limit the
ability of some institutions to invest in our securities; and  
    a substantial decline in our stock price that persists for a
significant period of time could cause our securities to be
delisted from the American Stock Exchange and the Toronto Stock
Exchange, 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. 31




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You could have difficulty or be unable to enforce certain civil liabilities on us, certain of our
directors and our experts. We are a Canadian corporation. Substantially all of our assets are located outside of Canada and
the US, and our head office is located in the US. Additionally, a number of our directors and the
experts named in this prospectus are residents of Canada. Although we have appointed Koffman
Kalef, Suite 1900, 885 West Georgia Street, Vancouver, British Columbia as our agents for service
of process in the Province of British Columbia, it might not be possible for investors to collect
judgments obtained in Canadian courts predicated on the civil liability provisions of securities
legislation. It could also be difficult for you to effect service of process in connection with
any action brought in the US upon such directors and experts. Execution by US courts of any
judgment obtained against us or, any of the directors, executive officers or experts named in this
prospectus in US courts would be limited to the assets of Golden Star Resources Ltd. or the assets
of such persons or corporations, as the case might be, in the US. The enforceability in Canada of
US judgments or liabilities in original actions in Canadian courts predicated solely upon the civil
liability provisions of the federal securities laws of the US is doubtful. There may be certain tax risks associated with investments in our company. 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. The existence of outstanding rights to purchase common shares could impair our ability to raise
capital. As of December 31, 2004 approximately 14.1 million common shares are issuable on exercise of
warrants, options or other rights to purchase common shares at prices ranging from Cdn$1.02 to
Cdn$9.07. During the life of the warrants, options and other rights, the holders are given an
opportunity to profit from a rise in the market price of our 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 and other rights can be expected to exercise them at a time when we would, in all
likelihood, be able to obtain any needed capital by new offering of securities on terms more
favorable than those provided by the outstanding rights. 32




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ITEM 2.        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) (AFRICAN OPERATIONS AND PROPERTIES MAP) (SOUTH AMERICAN PROPERTIES MAP) 33




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PROPERTY STATUS TABLE The chart below summarizes information regarding certain of our properties, which
are described in further detail below: 2004Property
    
    
    Type of Interest
    
    
    Expiration Date
    
    
    Property size
    
    
    Status
    
    
    CommentsBogoso
(Ghana)
    
    
    Government granted mining
leases held by a 90% owned
subsidiary
    
    
    8/21/2017
8/16/2018
    
    
    95km2
    
    
    Active
    
    
    Mining stagePrestea(1)
(Ghana)
    
    
    Government granted mining lease
held by a 90% owned subsidiary
    
    
    7/6/2031
    
    
    129 km2
    
    
    Active
    
    
    Mining stageWassa
(Ghana)
    
    
    Government granted mining lease
held by a 90% owned subsidiary
    
    
    9/16/2022
    
    
    102 km2,
another 172 km2 applied
for
    
    
    Active
    
    
    Mining stagePrestea
Underground
(Ghana)
    
    
    Government granted mining lease,
81% (2)
beneficial
interest
    
    
    7/6/2031
    
    
    129km2
lies directly below
Prestea surface lease
    
    
    Active
    
    
    Exploration
stageDunkwa-Mampon
(Ghana)


    

Prospecting
License


    

12/19/04
Renewals pending
    
    

66km2
    
    
    Active
    
    
    Development
stageDunkwa-Mansiso(Ghana)


    
    Exploration Leases
    
    
    Various
    
    

56 km2
    
    
    Active
    
    
    Exploration
stageAkropong Trend (Ghana)
    
    
    Option agreements
    
    
    Various
    
    
    697 km2
    
    
    Active
    
    
    Exploration
stageObuom
(Ghana)
    
    
    52%interest in joint venture
    
    

Renewals
pending
    
    

44 km2 another 101 km2
applied for
    
    
    Inactive
    
    
    Exploration
stageOther Africa
    
    
    Various
    
    
    Various
    
    
    approximately 750
km2
    
    
    Active
    
    
    Exploration
stageSaramacca
(Suriname)
    
    
    Government granted right of
exploration and option
agreements
    
    
    Renewals
Pending
    
    
    871 km2
    
    
    Active
    
    
    Exploration
stageBon Espoir
(French Guiana)
    
    
    PER (Permit Exclusif de
Recherches). 100% ownership
    
    
    10/31/2006
    
    
    466 km2
    
    
    Active
    
    
    Exploration
stagePaul Isnard
(French Guiana)
    
    
    8 Concessions. 53% ownership
    
    
    12/31/2018
    
    
    150km2
    
    
    Inactive
    
    
    Exploration
stagePER (Permit Exclusif de
Recherches). 53% ownership
    
    

12/1/2002
Renewals pending
    
    
    283 km2
    
    
    Inactive
    
    
    Exploration
stage
    (2) The Prestea Underground Joint Venture, which owns Prestea Underground, is owned
90% by BGL, our 90% owned subsidiary. 34




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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 20.7 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 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 mining law since 1994 requires that any person who intends to acquire a
controlling share of the equity of any mining company that has been granted a mineral right 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. Consequently, any person who intends to acquire
20% or more of the total equity of BGL or WGL shall first seek the prior consent of the Government. In accordance with the mining law, the Government of Ghana has a 10% carried interest in BGL and
WGL, and is entitled to acquire up to an additional 20% interest in each of BGL and WGL. The
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 $82.3 million and $86.6 million, respectively, to Golden Star or its subsidiaries as of
December 31, 2004 for past advances and debts and such amounts would be repaid to us before payment
of any dividends. If the Government of Ghana wishes to exercise its right to acquire an additional
20% interest, it must first give reasonable notice, and pay a mutually agreed price. If there is
no agreement, the purchase price would be the fair market value of such interest at such time as
determined by arbitration conducted by the International Centre for the Settlement of Investment
Disputes or any similar international arbitration institution as may be mutually agreed to. The
Government of Ghana could also acquire further interests in BGL and/or WGL on terms mutually
acceptable to the Government and BGL or WGL. To date the Government has indicated no intent to
obtain additional ownership in any of our properties. 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:  
    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;  
    the special share could only be issued to, held by, or transferred
to the Government or a person acting on behalf of the Government;  
    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 35




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
    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 such price as the Government of Ghana and BGL and WGL
might agree on, 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
such 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 is currently under review to make it more
competitive and bring it in line with international best practice. To this end a new mining bill
was placed before the Ghanaian parliament in late 2004. It is expected that the bill will be
considered by parliament and passed into law during 2005. 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. 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% at an operating ratio of 70%. In 2004, 2003 and 2002 the royalty rate for
BGL was 3% of revenues, and the amounts paid were $1.8 million, $1.9 million and $1.2 million,
respectively. The royalty payments from BGL have not exceeded 3% per annum in any year. Ghanaian Environmental Regulations Golden Star acquired a 90%
beneficial interest in the Bogoso mine in 1999 and has maintained continuous operations of the pits and the
processing plant since that time. As required by environmental regulations, an environmental
management plan (EMP) was prepared in 2000 and submitted to the EPA. The EMP was due for renewal
in 2003, but with the interim acquisition of the Prestea property this renewal was deferred, and
BGL technically became out of compliance with Ghanaian regulations. After discussions with the
EPA, we decided to combine Bogoso and Prestea into a single EMP for the whole operation, as the
consolidation of the Bogoso and Prestea properties in 2003 led to the opportunity for significant
synergies in environmental management. Consequently a new EMP was submitted to the EPA in the
third quarter of 2004. Acceptance of the EMP by the EPA will allow BGL to apply for an
Environmental Certificate, which will bring the company back into full compliance with regulations.
As an integral part of this process we are negotiating with the EPA regarding the posting of a reclamation bond for the combined
Bogoso/Prestea properties, and it is expected that agreement on the bonding arrangements will be
completed during second quarter of 2005. The environmental reclamation bonds for Bogoso/Prestea
and Wassa are expected to be for approximately $9.0 million and $3.9 million respectively. We plan
to fund these obligations with a combination of cash on hand and letters of credit. Wassa is
fully permitted and in compliance with all environmental requirements. 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
during 2002, 2003 and 2004 to advance this plan and to reduce the outstanding historic reclamation
liability. Expenditures for ongoing rehabilitation work, including the capping of sulfide
material, backfilling of worked out pits, and the contouring and re-vegetation of waste dumps, were
approximately $0.7 million, $0.8 million, and $0.5 million for 2004, 2003, and 2002, respectively.
As at December 31, 2004 BGL had $3.3 million of restricted cash set aside for environmental
reclamation of the Bogoso mine. Community Development Programs and Sustainability 36




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It is our policy and our intent to be a responsible corporate citizen of Ghana. 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 overall well being of the communities
around our operations. During 2004 we organized and funded a Community Relations department at BGL. The Community
Relations department is charged with overseeing community assistance programs, alternative
livelihood programs and with establishing effective and open communications with the local
communities both at Bogoso/Prestea and at Wassa. In mid-2001 we initiated an Alternative Livelihood and Sustainable Development Program (ALSD)
in the Bogoso/Prestea area. During 2004 we expanded the program to Wassa. The goals of the
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. A demonstration farm has been established at one of the backfilled
pits at Prestea where we now have a fish farm, a mulberry plantation and a silk production and
processing facility. We added demonstration plots of citrus crops and
ginger in 2004. Studies
have shown that Chinese silk production has fallen in recent years, providing an opportunity for
new supply centers, and the climate of western Ghana appears to be well suited to sericulture. The farm facility is used for training and assistance to the 150 local farmers who have signed up
to participate in the program. In addition, the farm is providing participants with seed stock and
fish and silk worms for use on their own farms. Working with local Ghanaian government agencies, we have encouraged formation of agricultural
cooperatives, the first of which has recently obtained a plot of ground in the Prestea area to
initiate a silk operation. We have also made contact with various non-governmental developmental
groups in hopes of facilitating availability of micro-project financing for the Bogoso/Prestea
communities. The ALSD program was expanded in 2004 to provide assistance to a diverse range of community
self-help groups including a womens batik printing association and a dress-making school. During 2005 we are investigating the feasibility of providing two new oil-palm/palm kernel
processing facilities in the local area to more efficiently process the palm oil production already
existing in the area. We also plan to test cultivate new cash crops such as mushrooms and other
food sources for the local and regional markets. In addition to the alternative livelihood projects, we are involved in the ongoing funding of
several community assistance projects. We have provided funding and assistance for school
improvements and equipment, libraries, a day care center, community centers, potable water systems,
sports facilities and toilet facilities. We plan to spend approximately $1.0 million during 2005
to assist with electrification projects, potable water wells, library support, health facilities,
road improvements and hospital equipment. The majority of this expenditure is in conformity with
the provisions of existing permits and agreements with the communities involved regarding our
access to mine certain areas. OPERATING PROPERTIES The Bogoso/Prestea Gold Mine Overview of the Bogoso/Prestea Operation Bogoso/Prestea consists of a gold mining/processing operation located along the Ashanti Trend in
western Ghana, approximately 35 kilometers northwest of the town of Tarkwa from which it can be
reached by paved roads 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 Trend gold trend. 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 37




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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. Underground mining has been conducted at Prestea for more
than 130 years. 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. Bogoso was acquired in 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 from Barnato Exploration Limited (Barnex) and Prestea Gold
Resources Limited in mid-2001. Barnex retained a royalty interest in Prestea which we purchased
from them in 2003 for $12.0 million. Operating Results for Bogoso/Prestea The following table displays historical operating results at Bogoso/Prestea. Bogoso/Prestea Operating Results
    
    
    2004

    
    
    2003

    
    
    2002Ore milled (t)
    
    
    
    1,650,412
    
    
    
    
    2,093,600
    
    
    
    
    2,271,747Rate (t/day)
    
    
    
    4,526
    
    
    
    
    5,736
    
    
    
    
    6,223Grade milled (g/t)
    
    
    
    4.09
    
    
    
    
    3.29
    
    
    
    
    2.31Recovery %
    
    
    
    67.3
    
    
    
    
    81.2
    
    
    
    
    74.4Total gold production(oz)(l)
    
    
    
    147,875
    
    
    
    
    174,315
    
    
    
    
    124,400Cash operating cost ($/oz)
    
    
    
    250
    
    
    
    
    166
    
    
    
    
    193Total cash cost ($/oz)
    
    
    
    264
    
    
    
    
    184
    
    
    
    
    215
    We expect production in 2005 of 140,000 to 170,000 ounces of gold at a cash operating cost of
between $190 and $210 per ounce. Bogoso/Prestea Expansion Project The known mineral reserves at Bogoso/Prestea can be grouped into two general ore categories based
on the metallurgy of the ore and are known as non-refractory and refractory. Non-refractory ores
can be processed through the Bogoso processing plant as currently configured. This category
includes oxide ore, non-refractory sulfide ore and non-refractory transition ore. Refractory ores
are classified as either sulfide or transition, and these ores cannot be successfully processed by
the existing Bogoso plant without first pre-oxidizing the ore. 38




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The oxide ores are found at surface, down to the general level of the water table, while refractory
and non refractory sulfide ores are located at depth and between these two distinct zones lays the
transition ore, a zone of partially oxidized ore. Bogoso/Prestea reserves at the end of 2004 are
comprised of approximately 33% non-refractory ore and 67% refractory ore on a gold content basis.
As a percentage of total Bogoso/Prestea reserves, the non-refractory ore can be categorized as 12%
oxide ore, 19% non-refractory sulfide ores, and 3% transition ores. The refractory ore can be
categorized as either 54% refractory sulfide ore or 12% refractory transition ore. The existing Bogoso processing plant was configured to process primarily oxide ores, but in recent
years additions to the processing plant equipment have made it possible to treat non-refractory
transition ores and non-refractory sulfide ores. By mid-2004 most of the oxide ores within the
current operational pits at Bogoso/Prestea had been processed and since that time all of the ore
processed has been transition and non-refractory sulfide ores. Gold recovery from oxide ores was
typically around 80% to 85% but when processing non-refractory transition and sulfide ores the
recovery rate drops to approximately 60% to 65% due to the more complex chemical nature of the
non-refractory ores. To facilitate efficient processing of the refractory sulfide ore and certain of the more refractory
transition ores, major modifications are required to the existing Bogoso processing plant. At its
January 2005 meeting, our Board of Directors approved in principle the upgrading of the Bogoso plant to process
3.5 million tonnes per annum and the installation of a BIOX® circuit. The approval is
subject to the formalization of the necessary environmental approvals
which is expected in the
second quarter of 2005. Construction of the BIOX® circuit is timed to coincide with
the depletion of the remaining non-refractory ores at Prestea in the second half of 2006. We
expect construction of the expanded processing plant and the BIOX® circuit to be
completed in 2006 following an approximately 15 to 18 month construction period after which Bogoso
would process refractory sulfide, transition and non-refractory sulfide ores from Bogoso. Upon completion of the BIOX® upgrade, the Bogoso processing plant is expected to have a
nominal capacity of 3.5 million tonnes per annum to process refractory ores from our Bogoso and
northern Prestea pits, where we currently have proven and probable refractory reserves of
approximately 20.5 million tonnes at an average grade of 2.81 grams per tonne. Gold production
from the Bogoso processing plant, following the expansion and installation of the BIOX®
circuit and the expansion of the mining fleet, is expected to average approximately 270,000 ounces
per annum and to vary between 260,000 to 290,000 ounces per annum at an average cash operating cost
between $250 to $270 per ounce after commercial production is achieved. We estimate the capital
cost for the BIOX® upgrade at the Bogoso plant to fall between $80 and $85 million,
excluding the $20 million cost to expand the existing mining fleet. The BIOX® process is designed to treat refractory gold ores prior to cyanidization by
utilizing naturally occurring bacteria capable of oxidizing gold-bearing sulfide concentrates under
controlled conditions. Prior to the BIOX® processing, the ore will be crushed and
ground utilizing existing equipment. A combination of flotation and gravity circuits, including
circuits already in-place, will then separate a sulfide concentrate from the ore slurry with the
gold locked in the matrix of the sulfide minerals. The bacteria used in the BIOX®
process oxidize the sulfide minerals in the concentrate thereby liberating the gold particles which
are then recovered by cyanidation. The bacteria used in the BIOX® process are
non-pathogenic and pose no health risks. The proprietary BIOX® process has been used to treat refractory gold ores and
concentrates for over 18 years. A total of six BIOX® operations have been successfully
commissioned since commercialization of the process of which four are still operating. Two new
BIOX® plants are currently under construction, the Suzdal plant in Kazahstan and the
Fosterville plant in Australia, which are scheduled for commissioning during 2005. Four additional
BIOX® plants are now in various stages of development and are currently scheduled for
commissioning during 2005 and 2006. One of the larger bio-oxidation plants which were built by GRD Minproc in the mid-1990s, is located
at AngloGold Ashantis Obuasi mine, which is also located on the Ashanti gold trend, 130 kilometers
northeast of Bogoso/Prestea. We believe that the sulfide mineralization at Obuasi is similar to the
Bogoso/Prestea material. Our metallurgical assessment of the suitability of the bio-oxidation
process for Bogoso/Prestea ores has been a four-year project. The work has involved metallurgical
assessments on some 32 samples representative of the current sulfide reserves, including a
flotation, BIOX® and neutralization pilot plant program on a nine-tonne bulk sample
compiled by the blending of approximately 90 diamond drill hole cores. 39




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BIOX® bench and pilot scale tests on Bogoso sulfide ores have consistently yielded gold recoveries
averaging in excess of 86% that vary between 78% and 88%. This compares to 55% achievable by direct cyanide
treatment. The Bogoso expansion plan outlined above is subject to the completion of technical studies now
underway, subsequent final board approval, obtaining all requisite environmental permits and
successful resolution of potential technical difficulties that could be encountered during the
construction and start-up of the new facilities. Geology at Bogoso/Prestea The Bogoso/Prestea property lies within the Eburnean Tectonic Province in the West African
Precambrian Shield along a 40 kilometers 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 world
class 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 of 30.9 million tonnes with a grade of
2.83 g/t containing approximately 2.81 million ounces of gold (before a reduction for the 10% minority
interest). Total measured and indicated mineral resources total 33.9 million tonnes with a grade
of 1.99 g/t before a reduction for the 10% minority interest. The current proven and probable
mineral reserves should support mining operations for approximately ten 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 during 2004 concentrated on drilling beneath the
previously mined open pits along a southern six kilometer portion of the Ashanti trend. The
drilling had two purposes in that we were determining whether we had additional potential for
economic unweathered mineralization beneath the old pits or whether we could back fill and
rehabilitate them. The drilling was initiated from the southern boundary of the concession to the
Main Chujah unweathered planned open pits. Past exploration in this area had concentrated on the
weathered mineralization with limited drilling testing the unweathered mineralization potential.
Drilling was conducted on 100 meter spaced fences and involved approximately 10,700 meters of RC
drilling with diamond drill core tails and 800 meters of RAB drilling. Results of this drilling
has indicated that approximately two kilometers of this trend in the southern most portion has not
intersected significant gold grades and the pits in this area can be back filled and rehabilitated.
The 2004 drilling has also indicated there are several areas where higher grade mineralization
exists and further drilling will be required to confirm these zones. The new drilling has been
incorporated into the drill hole database and will be used for the 2004 year end mineralized
material and reserve estimates. Optimized pit shells created on the non  reserve portion of the
estimate will be used to determine where additional drilling for 2005 will be conducted, areas
where estimated grades support an optimized pit will be tested further to determine the viability
of a minable reserve. Drilling for 2005 has also been planned to test for unweathered refractory
mineralization north of the areas tested in 2004. Surface exploration drilling on the Prestea property during 2004 focused on further delineation
drilling at Tuappim, Bondaye, Beta Boundary and Buesichem. The Tuappim and Bondaye drilling tested
the down dip and along strike extensions of these developing zones that were initially RAB drilled
in 2003. Delineation drilling totaled approximately 3,400 meters of RAB and 23,500 meters of RC
drilling with deeper holes having diamond core tails. Results of this drilling have confirmed the
continuation of mineralization both along strike and down dip. The new drilling has been
incorporated in the database and has been used for updating the mineralized material and reserves
for the 2004 year end. Definition drilling on approximate 25 meter spacing is planned for the
Bondaye and Tuappim targets during 2005. During 2004, 25 meter spaced infill drilling was initiated over the Beta Boundary resource focusing
on the proposed southern pit area. In order to determine the continuity of mineralization between
the old underground mining areas 40




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and the bottom of planned open pits at Beta Boundary we drilled
below these proposed pits. This deeper drilling indicates that the zones of mineralization below
the proposed pits are narrowing or have been partially exploited by historical under ground mining.
Infill drilling in the areas of the proposed pits has confirmed the zones previously interpreted,
however several zones have been depleted by the illegal mining activity. The areas of illegal
mining activity have been surveyed and these areas will be removed from the mineralized material
and reserve estimates for the 2004 year end statement. Drilling at Beta Boundary totaled
approximately 8,300 meters during 2004. Drilling at the northern Beta Boundary pit has been hindered
by the illegal miners operating in the area. We are currently conferring with the government on a
plan to remove the illegal miners and will initiate the infill drilling of the Northern Beta
Boundary pits when they have been removed. Buesichem exploration during 2004 involved infill drilling to collect additional samples for
metallurgical sampling as well as infill drilling to a nominal 25 meter spacing. This drilling
confirmed the mineralization previously tested but did show that grades and thickness of the
mineralized zones does vary between the existing drill holes. Deeper drilling conducted in the
central part of the Buesichem deposit showed that grades tended to increase slightly at depth. If
the optimized pits using the non  reserve (Inferred resources) indicate this deeper, higher grade
mineralization is economic then further drilling at depth will be required in 2005. Drilling
completed in 2004 involved 33 diamond drill holes totaling 4,700 meters of core. A magnetic and radiomagnetic helicopter-borne geophysical survey was carried out over the
Bogoso/Prestea and Akropong concessions. The survey was flown at 50m line spacing using a
horizontal gradient array and totalled 9,000 line km for a cost of $0.2 million. The Bogoso/Prestea
survey encompassed 5,500 line km while the Akropong area was flown with 3,500 line km. The
Bogoso/Prestea survey has led to a better definition of the underlying geology in particular the
Birimian  Tarkwaian boundary. Due to its high resolution subtle features such as potential
alteration halos have become apparent. Additional data gained from this survey which will aid the
company in the long run are radiometrics and a detailed DTM. DEVELOPMENT STAGE PROJECTS The Wassa Gold Mine Overview of the Wassa Gold Mine The Wassa gold mine was initially developed in the late 1990s by a consortium of European mining
companies and consisted of an open pit mine 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. In September 2002 our 90% owned subsidiary WGL acquired the Wassa gold property located 35
kilometers east of our Bogoso/Prestea gold operations in Ghana. As with Bogoso/Prestea, the
Government of Ghana holds a 10% carried interest and is not required to contribute any development
capital. Any future dividends (none have been declared to date) would be split 90% and 10% between
us and the Government of Ghana, respectively. Dividend payments would not be made until WGL has
repaid all capital. Immediately following acquisition we began a drilling program and engineering studies designed to
evaluate the economic viability of the property as a conventional 10,000 tonne per day CIL gold
operation. Based on initial drill results and engineering data, a feasibility study was begun
shortly after acquisition and was completed in July 2003. In July 2003 we announced that the
project would proceed and construction of the CIL processing plant would commence immediately. The
feasibility study was prepared by our staff supported by a team of independent consultants led by
Metallurgical Design and Management (Pty) Ltd. (MDM) of South Africa. In July 2003 we also
awarded a fixed-price contract to MDM to construct the new CIL plant and associated processing
facilities. While we experienced significant construction delays during 2004, the construction phase of the Wassa project
was substantially complete by December 31, 2004 except for the power line which is now under
construction and which we expect to complete by mid-year 2005.
Following discussions in November 2004, our contract with MDM was
terminated on November 29, 2004. All of the required power line permits have been obtained, and all of
the material power line construction equipment has been delivered and staged for construction or is
on order. While the power line is still under construction, the existing 41




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powerhouse at Wassa should generate all of the power needed to fully operate the plant and associated facilities until
the connection to the local power grid is completed. As of December 31, 2004 acquisition and development costs totaled $66.5 million including
feasibility study costs, development drilling and geology, operating equipment and plant and site
construction costs. The remaining project costs at December 31, 2004 are estimated to be $7.0
million, consisting of $5.0 million for completion of the power line and $2.0 million for
completion of miscellaneous items at the plant site. An additional $14 million is also budgeted in
2005 for purchase of additional mining equipment. During 2004 while testing and commissioning the
mine we poured 5,292 ounces of gold resulting in $2.3 million of preproduction revenues which were
credited against mine development costs. Our 2005 mining plan involves processing most of the heap leach material left on the pads by the
former owner which will furnish a low cost ore feed to the new plant during its first year of
operations and will also clear the pad area for use as a tailings dam site. Mining will be
performed initially using a mixture of equipment transferred from Bogoso/Prestea and contract
equipment until new equipment is procured. During 2005 we anticipate feeding the Wassa plant
with approximately 45% heap leach material and 55% open pit ore. Recoveries are expected to
average between 87% and 90% with recoveries from heap leach material and open pit ore ranging from
80% to 90% and 83% to 95%, respectively. During 2005 we expect to produce between 100,000 and
120,000 ounces of gold at Wassa at an average cash operating cost between $280 and $300 per ounce.
We expect production costs to be higher than this in the first half of 2005 due to the higher costs
of operating the power house. In the second half of 2005 cash
operating costs are expected to fall by $50 to $80
per ounce following completion of the power line and the acquisition of new mining equipment.
After 2005 we expect annual gold production to exceed 140,000 ounces per year, at an
average cash operating cost of between $200 and $220 per ounce. 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 south eastern limb include Goldfields Tarkwa and Abosso mines, while
Birimian hosted gold occurrences include St. Judes Hwini-Butre property and Wassa. Mineral Reserves and Mineral Resources at Wassa Wassa has a probable mineral reserve of 19.3 million tonnes with a grade of 1.31 g/t containing
approximately 0.81 million ounces of gold before the reduction for the 10% minority interest. Total
indicated mineral resources consist of 1.7 million tonnes with a
grade of approximately 2.44 g/t
before a reduction for the 10% minority interest. The current mineral reserves should support
mining operations for approximately five years at planned mining rates. 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 2004 concentrated on completion of in-fill drilling of
inferred mineral resources. Drilling results indicated that the mineralized corridors continue at
depth with variable grade as  has been observed closer to surface. The
new drilling results have been incorporated into the database and will be used for the estimation
of the Wassa mineralized materials and reserves. Grass roots exploration activities during 2004 concentrated on further delineation of the two
mineralized corridors extending southwest from the known gold mineralization. Gold in soil
geochemical anomalies in the southern portion of the mining lease are located in the Subri Forest
Reserve. We were successful in obtaining the appropriate 42




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government permits and
permissions for conducting exploration within the forest reserve this year and we progressed with
deep auger drilling which outlined several anomalies. A high resolution helicopter
borne geophysical survey was carried out over the Wassa mining lease
and surrounding prospecting and reconnaissance licenses. We identified several exploration targets
which were prioritized on the basis of coincidental geophysical and geochemical anomalies as well
as favorable geological characteristics. We initiated follow up of these targets in the last
quarter of 2004 and have planned soil geochemistry and RAB drilling programs to test these further
in 2005. The 2005 exploration programs will involve; infill RC drilling along the strike extents of the
known mineralized zones in proximity to the planned open pits; RAB drilling of geophysical and
geochemistry targets delineated south of the mining area; and initial target testing of geophysical
targets delineated on the surrounding mineral leases around the Wassa
mining lease. Bondaye Project In addition to the BIOX® expansion described above, we are in the process of
investigating the addition of a second processing plant at Bogoso/Prestea to process oxide,
non-refractory sulfide and transition ores from the southern areas of the Prestea property. In
July 2003 we purchased a used 4,500 tonne per day conventional CIL processing plant, associated
stores inventory, and a six-megawatt powerhouse from an inactive mine site in Ghana. This facility
was dismantled in during 2003 and the plant was moved to Prestea in 2004 where it was refurbished.
The power plant is currently being used at Wassa. With the appropriate modifications the plant
should be able to process oxide, non-refractory sulfide and transition ores found at Prestea. This project is referred to as the Bondaye project. We had originally planned to begin development
of this new operation during 2005, but unanticipated delays in obtaining necessary environmental
permits and the impact of the socio-economic aspects of the project have now led to a review of the
optimal plant location. We plan to continue the evaluation of the potential of this expansion
option during 2005. The Mampon Project (See also Dunkwa Properties) The Mampon project, which is located within the Dunkwa properties, is approximately 35 kilometers
north of the Bogoso 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 allowed us to
establish a probable reserve at the Mampon property of approximately 1.0 million tonnes grading
5.16 grams per tonne or approximately 160,000 ounces of gold as of year-end 2004 which is
accessible by open pit mining methods. These reserve estimates were determined in accordance with
the policies and procedures set forth in the reserves section. The geology of the Mampon deposit
is similar to the geology at Bogoso/Prestea. Our current plan is to haul the Mampon ore by truck
to the Bogoso plant to supplement ores from the Bogoso/Prestea deposits. EXPLORATION STAGE PROPERTIES IN GHANA The following is a summary of 2004 activity at each of the major exploration projects. Prestea Underground (81% Golden Star) Overview The Prestea Underground is an inactive underground gold operation located directly beneath our
Prestea property consisting of several 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 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 during the last 100
years, 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 43




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kilometers to the southwest. Underground operation sceased in early 2002, following an extended period of low gold prices. In March 2002 our
subsidiary BGL entered in to 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.
This event resulted in our partner relinquishing its rights under the joint venture agreement and
the transfer of the partners remaining ownership position to our subsidiary, Bogoso Gold Limited,
(BGL), thereby giving BGL 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. Mineral Resources at Prestea Underground As of December 31, 2004 total inferred mineral resources consist of 1.6 million tonnes with a grade
of 8.58 g/t before a reduction for the 19% minority interest. Exploration Activities at Prestea Underground Underground exploration drilling was hampered late in 2004 by a higher than usual influx of water
from surface, the result of a higher than average rainfall during the third quarter, and galamsey
mining activities exacerbated the situation. Despite this we were able to continue testing the
down-dip extensions of the West Reef confirming that the structure continues below the last drilled
intersections with grades ranging from one to 12 grams gold per tonne over approximately one meter
widths. Other drilling identified narrow zones of mineralization down-dip of the mined-out Main Reef.
Historical mining has not exploited the Main Reef between levels 17 and 24 in this area and the
recent drill results indicate the potential for additional resources. Further drilling is budgeted
for 2005. A deep surface hole was initiated during 2004 to test the down plunge extension of the high grade
mineralization below the Bondaye Main shoot. Drilling problems late in the year have delayed
completion of the hole. The depth of the hole at the end of the year was just over 1,300 meters.
The estimated depth to intersect the projected target is between 1,500 and 1,600 meters,
approximately 200 to 250 meters below the lowest underground mining in this area. We now expect to
reach the target zone in early 2005. Several daughter holes are planned off the initial hole, once
it is completed, to test the structure along strike. Spending at the Prestea Underground project totaled $7.1 million in 2004 and $3.7 million during
2003, including facility maintenance, engineering, drilling, geologic activities and equipment
purchases. Support crews continue to maintain the underground and surface facilities in good
working order and assist our underground drilling teams. Prestea Underground exploration programs in 2005 will continue the programs begun in 2004. Akropong Trend Properties During 2004 we continued working on the Akropong Trend properties located approximately 10 to 20
kilometers to the west of the 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 or planned Bondaye
processing plants. All the Akropong Trend projects are at an early stage of exploration and to
date they do not have, and ultimately might not have, proven and probable mineral reserves. 44




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We spent approximately $0.4 million on Akropong projects during 2004 compared to $1.0 million in
2003. Most of the Akropong spending was related to RAB and RC drilling. While property access
issues slowed down the 2004 efforts most of these were resolved by the end of the year and we plan
to continue with solid sampling and drilling of more promising areas in 2005. 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. It is 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 after 2005. 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 Exploration activities were minimal at Dunkwa during 2004 but exploration plans for 2005 include
drilling over the known occurrences as well as follow up drilling of any new targets generated. We
also plan to drill an unexplored nine kilometer section of the property covered by Opon river
valley sediments. We expect to spend approximately $1.0 million on exploration activities at
Dunkwa during 2005. Other Active Properties in Africa Mininko, Mali (may earn up to 82.5% interest) In 2003 we entered into a joint venture to explore the 250 square kilometer Mininko area of Mali in
West Africa. Drilling in late 2003 and 2004 identified a broad zone of low grade gold
mineralization along an 800 meter trend at the Nampala prospect but subsequent analysis of the data
indicated the gold mineralization to be sub-economic given the relatively limited resource base.
Work on the Mininko license was suspended in late 2004. The joint venture agreement with our
partner at Mininko was renegotiated and the partner has now turned attention to regional soil
sampling on two new licenses which are contiguous with the Mininko license, seeking additional
resources that could be added to the Nampala resource. Subject to agreement to modify the terms of
the joint venture agreement, we expect to spend approximately $0.4 million on this work in 2005. Mano River Joint Venture, Sierra Leone (may earn up to 85% interest) In late 2003 we entered into a joint venture agreement with Mano River Resources Inc., which holds
several gold prospects in Sierra Leone totaling approximately 700 square kilometers. A diamond
core drilling program commenced in mid-March at the Yirisen prospect on the North Pampana license,
and 26 holes were completed. Grades and gold mineralization proved to be variable and
discontinuous. Due to the prospective nature of the local area, as evidenced by numerous artisanal
workings and favorable geology, a wide-area surface sampling program was initiated in late 2004
which will continue into 2005. Any additional drilling in 2005 will depend on the results of the
surface sampling project. If good targets are generated, we have budgeted up to $1.7 million for
drilling during 2005. 45




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Moto Goldmines Investment In October 2004 we acquired a 9.5% equity interest in Moto Goldmines Limited (Moto) for $4.1
million and became Motos single largest shareholder. In addition to the common shares, we
received warrants, which if exercised will raise our interest to 13.3%. At Motos annual general
meeting in November 2004, shareholders elected Dr. Doug Jones, Golden Stars Vice President,
Exploration, as a director. Moto controls the approximate 4,700 square kilometer Moto concessions located in the north east of
the Democratic Republic of Congo. The Moto concessions form part of the Kilo-Moto gold belt which
has historical production in excess of 11 million ounces with over two million ounces mined from
ten small mines within the central 35 square kilometers on the Moto concessions. After securing
control of the property in late 2003, Moto began a drilling program in February 2004 to confirm and
expand the gold resource around the areas previously mined. Based upon this work Motos
independent resource consultants have estimated an indicated resource of 7 million tonnes grading
2.7 grams per tonne and inferred resources of 36 million tonnes grading 3.2 grams per tonne. During 2005 Moto plans to use the funds provided by our share purchase, along with other funding,
for further exploration and development at the Moto concessions included additional drilling of the
known targets and regional soil sampling and a pre-feasibility study. THE SOUTH AMERICAN PROPERTIES We hold one exploration property in Suriname known as the Saramacca property, and we currently hold
two properties in French Guiana. The Paul Isnard property is held through Guyanor, our 53% owned
subsidiary. A new 100% owned subsidiary, also located in French Guiana, known as Golden Star
Ressources Minière S.A.R.L. (GSRM) holds exploration permits for the Bon Espoir property located
near Guyanors Paul Isnard property. Guyanors Yaou and Dorlin properties in French Guiana were
sold late in 2004. A total of $0.75 million was spent on the French Guiana properties during 2004,
all related to acquisition of the properties or for care and maintenance. Saramacca Property The Saramacca property is located in Suriname and is owned 100% by Golden Star. Two successive
soil auger sampling programs were completed in late 2003 and early 2004 to evaluate a series of
stream sediment gold anomalies. Field work through 2003 established an 18 kilometer long by 4 to 7
kilometer wide auger grid, with 154 kilometers of cut lines. Additional augering during 2004
focused on a 5 kilometer long soil anomaly forming a series of enechelon zones of gold
mineralization. The deep augering in 2004 confirmed the anomaly with a 200 parts per billion
contour extending for some 2,500 meters northwest-southeast and a 300 parts per billion contour
extending over 1,600 meters with widths of 150 to 300 meters. Individual spot values ranged up to
100 grams per tonne. Trenching and diamond core drilling is planned for 2005 and we have budgeted
approximately $0.3 million for the project. Approximately $0.2 million of direct field related
costs were spent in each of the 2004 and 2003 field programs. Bon Espoir Property Acquisition In October 2004 we acquired a 100% interest in the 466 square kilometer Bon Espoir exploration
property in French Guiana from Gold Fields Exploration B.V. for a purchase price of $0.3 million
paid in common shares of Golden Star plus $0.1 million in transaction costs. The Bon Espoir property is located north of our Paul Isnard
Property in a geological setting interpreted by us as having many similarities to the Ashanti Trend
area of Ghana including a sheared contact between sediments and volcanic formations. The area is covered by the Bon Espoir exclusive exploration permit, dated October 24, 2001 and
valid until October 31, 2006. This permit covers an area of 466 square kilometers. Our plan for
2005 includes a $0.75 million budget to conduct regional soil sampling along much of the 40
kilometer long sediment-volcanic contact shear zone. Paul Isnard Property The Paul Isnard property is located in the western part of French Guiana, approximately 180
kilometers west of Cayenne. The Paul-Isnard exploration permit covers an area of 283 square
kilometers, and we are waiting for the 46




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granting of its first renewal for a reduced surface area.
Paul Isnard remained on care and maintenance during 2004 and total maintenance costs incurred were
less than $0.1 million. An additional $0.2 million of acquisition costs were incurred. In conjunction with the Guyanor restructuring plan, Golden Star acquired the right to earn-in to
the Paul Isnard property by spending certain amounts performing exploration work on the property.
Provisions of the agreement allow Golden Star to eventually earn up to a 100% ownership position in
the property. Also in 2004 as part of the earn-in agreement, Golden Star acquired the Guiana
Shield geologic data base from Guyanor for $6 million, which was paid by reducing the inter-company
loan balance Guyanor owed Golden Star by a similar amount. During 2005 we plan to review past exploration results at Paul Isnard and the surrounding areas and
possibly commence limited exploration of any targets identified by the review. A budget of $0.15
million has been set for this work. 
 ITEM 3. LEGAL PROCEEDINGS We are not currently subject to any material pending legal proceedings. We are, however, 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. 
 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 2004. 
 PART II  OTHER INFORMATION 
 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
January 31, 2005, 142,346,703 common shares
were outstanding and we had 954 shareholders of record. On January 31, 2005, the closing price
per share for our common shares as reported by the TSX was Cdn$4.51 and as reported by the American
Stock Exchange was $3.68. The following table sets forth, for the periods indicated, the high and low market closing prices
per share of our common shares as reported by the TSX and the American Stock Exchange: Toronto Stock Exchange
    
    
    American Stock ExchangeCdn$
    
    Cdn$
    
    $
    
    $2004
    
    High
    
    Low

    
    High

    
    LowFirst Quarter
    
    
    9.43
    
    
    
    7.00
    
    
    
    7.25
    
    
    
    5.29Second Quarter
    
    
    9.20
    
    
    
    5.90
    
    
    
    7.07
    
    
    
    4.27Third Quarter
    
    
    6.73
    
    
    
    4.91
    
    
    
    5.27
    
    
    
    3.71Fourth Quarter
    
    
    7.10
    
    
    
    4.32
    
    
    
    5.61
    
    
    
    3.50
 Toronto Stock Exchange
    
    
    American Stock ExchangeCdn$
    
    
    Cdn$
    
    
    $
    
    
    $2003
    
    High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    
    3.49
    
    
    
    2.25
    
    
    
    2.29
    
    
    
    1.54
 47




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Second Quarter
    
    
    3.77
    
    
    
    2.43
    
    
    
    2.80
    
    
    
    1.68Third Quarter
    
    
    6.15
    
    
    
    3.42
    
    
    
    4.53
    
    
    
    2.46Fourth Quarter
    
    
    10.77
    
    
    
    5.10
    
    
    
    8.30
    
    
    
    3.77
 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. 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 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 thereunder 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 cannot access any of the benefits of the
Treaty as described in the paragraphs below. 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 48




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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. 49




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##### Table of Contents



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, 2004, 2003, 2002, 2001 and 2000, and should be read in
conjunction with those financial statements and the footnotes 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 footnote 21
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) As of Dec.
    
    
    As of Dec.
    
    
    As of Dec.
    
    
    As of Dec.
    
    
    As of Dec.Canadian GAAP
    
    31, 2004
    
    
    31, 2003
    
    
    31, 2002
    
    
    31, 2001
    
    
    31, 2000Working capital
    
    $
    61,366
    
    
    $
    96,784
    
    
    $
    21,963
    
    
    $
    (5,149
    )
    
    $
    4,452Current assets
    
    
    78,846
    
    
    
    104,935
    
    
    
    32,843
    
    
    
    9,636
    
    
    
    12,960Total assets
    
    
    252,160
    
    
    
    222,391
    
    
    
    74,135
    
    
    
    36,552
    
    
    
    49,469Current liabilities
    
    
    17,480
    
    
    
    8,151
    
    
    
    10,880
    
    
    
    14,785
    
    
    
    8,508Long-term liabilities
    
    
    10,367
    
    
    
    8,402
    
    
    
    8,973
    
    
    
    7,765
    
    
    
    10,477Shareholders equity
    
    
    217,960
    
    
    
    198,362
    
    
    
    49,384
    
    
    
    12,342
    
    
    
    26,040
 For the Year Ended
    
    
    For the Year Ended
    
    
    For the Year Ended
    
    
    For the Year Ended
    
    
    For the Year EndedCanadian GAAP
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Revenues
    
    $
    65,029
    
    
    $
    64,370
    
    
    $
    38,802
    
    
    $
    24,658
    
    
    $
    31,171Net income/(loss)
    
    
    2,642
    
    
    
    21,956
    
    
    
    4,856
    
    
    
    (20,584
    )
    
    
    (14,881
    )Net
income/(loss) per share - basic
    
    
    0.019
    
    
    
    0.198
    
    
    
    0.067
    
    
    
    (0.488
    )
    
    
    (0.400
    )For the            For the            For the            For the            For the
 US GAAP
    
    As of Dec.
    
    
    As of Dec.
    
    
    As of Dec.
    
    
    As of Dec.
    
    
    As of Dec.31, 2004
    
    
    31, 2003
    
    
    31, 2002
    
    
    31, 2001
    
    
    31, 2000Working capital
    
    $
    61,366
    
    
    $
    96,784
    
    
    $
    22,262
    
    
    $
    (5,149
    )
    
    $
    4,452Current assets
    
    
    78,846
    
    
    
    104,935
    
    
    
    33,391
    
    
    
    9,636
    
    
    
    12,960Total assets
    
    
    219,972
    
    
    
    200,337
    
    
    
    62,644
    
    
    
    24,232
    
    
    
    24,020Current liabilities
    
    
    17,480
    
    
    
    8,151
    
    
    
    10,880
    
    
    
    14,785
    
    
    
    8,508Long-term liabilities
    
    
    10,367
    
    
    
    8,402
    
    
    
    8,973
    
    
    
    7,818
    
    
    
    11,173Shareholders equity
    
    
    188,226
    
    
    
    180,417
    
    
    
    41,069
    
    
    
    1,533
    
    
    
    (478
    )
 For the
    
    
    For the
    
    
    For the
    
    
    For the
    
    
    For theYear Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year EndedUS GAAP
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Revenues
    
    $
    65,029
    
    
    $
    64,370
    
    
    $
    38,802
    
    
    $
    24,658
    
    
    $
    31,171Net income/(loss)
    
    
    (9,146
    )
    
    
    13,357
    
    
    
    6,752
    
    
    
    (5,352
    )
    
    
    (12,465
    )Net
income/(loss) per share - basic
    
    
    (0.066
    )
    
    
    0.120
    
    
    
    0.093
    
    
    
    (0.126
    )
    
    
    (0.330
    )
 50




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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 21 to the consolidated financial statements. In this Form 10-K, we use the terms total production cost per ounce, total cash cost per ounce
and cash operating cost per ounce. 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 expenses, 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. 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 period. Cash operating cost per ounce 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 following table shows the derivation of these measures and a reconciliation of total cash cost
per ounce and cash operating cost per ounce. 2004
    
    
    
    2003
    
    
    
    2002Ounces sold
    
    
    
    147,875
    
    
    
    
    74,315
    
    
    
    
    124,400(in thousands of $)Mining operation expense
    
    
    $
    39,095
    
    
    
    $
    32,125
    
    
    
    $
    26,747Depreciation, depletion & amortization
    
    
    
    8,096
    
    
    
    
    4,993
    
    
    
    
    2,459Accretion of asset retirement obligations
    
    
    
    645
    
    
    
    
    578
    
    
    
    
    Total production costs  GAAP
    
    
    $
    47,836
    
    
    
    $
    37,696
    
    
    
    $
    29,206(in $  per ounce)Total production cost per ounce  GAAP
    
    
    $
    323
    
    
    
    $
    216
    
    
    
    $
    235Less depreciation, depletion & amortization
    
    
    
    55
    
    
    
    
    29
    
    
    
    
    20Less accretion of asset retirement obligation
    
    
    
    4
    
    
    
    
    3
    
    
    
    
    Total cash cost per ounce
    
    
    $
    264
    
    
    
    $
    184
    
    
    
    $
    215Total cash cost per ounce
    
    
    $
    264
    
    
    
    $
    184
    
    
    
    $
    215Less royalties and production taxes
    
    
    
    14
    
    
    
    
    18
    
    
    
    
    22Cash operating cost per ounce
    
    
    $
    250
    
    
    
    $
    166
    
    
    
    $
    193
 These calculations of cash operating cost per ounce and total cash costs per ounce are in
compliance with an industry standard for such measures as established in 1996 by the Gold
Institute, a non-profit industry group. 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 51




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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 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 7 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 from the subsidiaries owning the
Bogoso/Prestea and Wassa mines. OUR BUSINESS Through our subsidiaries and joint ventures we own a controlling interest in three significant gold
properties in southern Ghana in West Africa: the Bogoso/Prestea property (Bogoso/Prestea), the
Wassa property (Wassa) and the Prestea Underground property (Prestea Underground). Bogoso and
Prestea are adjoining properties, operating as a single operation and referred to as
Bogoso/Prestea. Bogoso/Prestea and the Prestea Underground are owned by our 90% owned subsidiary
Bogoso Gold Limited (BGL). In 2004 we sold 147,875 ounces of gold from Bogoso/Prestea for an
average gold price of approximately $410 per ounce having a cash operating cost of approximately
$250 per ounce. Essentially all of our gold production to date has come from Bogoso/Prestea. Through another 90% owned subsidiary, Wexford Goldfields Limited (WGL), we own the Wassa gold
property, located some 35 kilometers east of Bogoso/Prestea. A newly constructed ore processing
plant at Wassa is now in its commissioning and testing phase, processing heap leach materials left
by a former owner. We expect that the new plant will achieve its full design capacity of 10,000
tonnes per day in the first quarter of 2005. The Prestea Underground is located on the Prestea property and consists of a currently inactive
underground gold mine and associated support facilities. As of December 31, 2004, BGL, our 90%
owned subsidiary, owned a 90% operating interest in this mine. We are currently seeking to
determine if the underground mine can be reactivated on a profitable basis. We hold interests in exploration joint ventures, managed by joint venture partners, in Mali and
Sierra Leone in West Africa and hold active exploration properties in Ghana, Suriname and French
Guiana. We hold interests in gold exploration properties in Peru and Chile through our affiliate
Goldmin Holdings, and in the Democratic Republic of the Congo through an investment in Moto
Goldmines Limited. 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 the French Guiana office,
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. We also explore for gold. Since 1999 our exploration efforts have
been focused on Ghana, other West African countries and South America. We are currently carrying
out technical and environmental studies to expand production at Bogoso/Prestea. We commenced
development at Wassa in mid-2003, and expect it to be fully operational in early 2005. If the
above mentioned expansion and development plans at Bogoso/Prestea are approved and permitted as
expected, our annualized production is expected to range between 375,000 and 425,000 ounces of 52




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gold by 2007. Achievement of this target is subject to numerous risks. See the discussion of Risk
Factors in Item 1 above. Our overall objective is 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) over the next
few years. As part of the effort to achieve our goal, we are actively investigating potential
acquisition and merger candidates. However, we presently have no agreement or understanding with
respect to any specific potential transaction. TRENDS AND EVENTS 2004 Operational Summary Gold production totaled 147,875 ounces in 2004, down from 174,315 ounces in 2003. Production
during 2004 was adversely affected by mining and processing difficulties experienced in the latter
part of the year as the Bogoso/Prestea processing plant transitioned from oxide ores to transition
and non-refractory sulfide ores which are not as well suited for processing in the Bogoso plant as
were the oxide ores milled earlier in the year. Start-up difficulties with the new flotation
circuit and unusually high rainfall during the second and third quarters also reduced mine output
and hampered efficient plant operations. To compensate for the ore shortage, the Bogoso plant
supplemented the pit ore with stockpiled ores which were also not very well suited for processing
in the Bogoso plant. The net result was a lower processing rate and reduced gold recovery which in
turn reduced gold output and sales revenues as compared to 2003. Additional information on 2004
operations is contained below in the Result of Operations section. The lower revenues resulted in earnings of $2.6 million during 2004, down from $22.0 million in
2003. Earnings were also reduced by $4.1 million of expenses related to the IAMGold tender offer. Guyanor and Guiana Shield Restructuring Work continued throughout the year on the restructuring plan for Guyanor Ressources S.A.
(Guyanor, a 53% owned subsidiary) and our other Guiana Shield assets in South America. The goal
of the restructuring plan is to establish Guyanor as an independent and economically viable entity
which will no longer be dependent on Golden Star for funding and which will at the same time bring
new value to Golden Stars investment in Guyanor. The August 2004 Guyanor Restructuring Agreement provided for, among other things, a new business
model for Guyanor as a metals royalty entity, restructuring of the inter-company debt owed by
Guyanor to Golden Star and an opportunity for Golden Star to acquire a direct interest in certain
French Guiana exploration assets. The restructuring plan accomplished the following during the year:  
    New management - Guyanors managing director resigned and a new managing director was appointed. The new management
acquired nine million of Guyanors common shares from Golden Star for a nominal amount reducing Golden Stars ownership
of Guyanor to approximately 53%.
    New business plan - Guyanor changed its business focus from gold exploration to metals royalties.
    In line with the new focus, Guyanor and Golden Star each transferred their 50% ownership in the Yaou and Dorlin
properties to a newly formed private company (managed by Guyanors former management). The new owner has agreed to pay
a 0.5% production royalty to Guyanor and a 0.5% production royalty to Golden Star from any future gold production from
Yaou and Dorlin.
    The Class A and Class B shares were merged into a single class of stock which continues to trade on the Toronto Stock
Exchange and the Nouveau Marché of the Paris Bourse.
    Guyanors office in French Guiana was closed and all local French Guiana employees were terminated or transferred to
Golden Star by year-end.
    Exploration rights to Guyanors Paul Isnard property were optioned to Golden Star in an earn-in agreement that provides
Golden Star the right to acquire up to 100% of the 433 square kilometer property via a series of option payments and
exploration spending. Golden Stars earn-in payments will be netted against the loan owed to Golden Star by Guyanor as
of the date of the agreement.
    Golden Star also purchased Guyanors French Guiana geologic data base, the $6.0 million price also being netted against
the loan Guyanor owed to Golden Star.   53




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
    Further provisions of the restructuring agreement resulted in Golden Stars forgiveness of the remaining balance of the
loan. In December 2004 an agreement was closed which transferred ownership of the Rosebel royalty from
Golden Star to Guyanor for a price of $12.0 million. Upon closure of the sale, Guyanor recorded a
new $12 million inter-company payable due to Golden Star. In January 2005, Guyanor drew down $6.0
million under a credit facility from a bank and paid the funds to Golden Star as the first
installment on the sale price. The bank loan is repayable in nine equal payments of $666,667
beginning July 29, 2005 and every three months thereafter. The interest rate is set at LIBOR plus
2.5%. Interest is payable at the end of each 1, 2 or 3 month period as the borrower may choose. Guyanor is now in the process of seeking additional funding, some or all of which is expected to be
equity funding, to pay the second $6.0 million installment due Golden Star by June 30, 2005 on the
Rosebel royalty and to allow Guyanor to fund its ongoing activities. Covenants in the January 2005
loan agreement preclude Guyanor from acquiring any additional debt without the banks approval. If
Guyanor is successful in obtaining equity funding, it is possible that Golden Stars ownership
position could be diluted below 50% and at that point we would expect that Guyanor would no longer
be consolidated with Golden Star. As required by the loan agreement, Guyanor entered into a cash-settled forward sales agreement in
January 2005 with a financial institution which obligates Guyanor to sell 5,700 ounces of gold to
the financial institution at the end of each three month period, beginning April 20, 2005 and every
three months thereafter until July 20, 2007. When the average gold price for the prior three month
period is less than $421 per ounce, the financial institution will pay an amount to Guyanor equal
to the difference between the average price and $421 times 5,700 ounces. If the prior three month
average price exceeds $421 per ounce Guyanor will pay the financial institution an amount equal to
the difference between the average price and $421 per ounce times 5,700 ounces. The hedge is
structured to offset the floating price nature of the Rosebel royalty by tying the royalty payments
to a gold price of $421 per ounce. Bon Espoir Property Acquisition In October 2004 we acquired a 100% interest in the 466 square kilometer Bon Espoir exploration
property in French Guiana from Gold Fields Exploration B.V. for a purchase price of $0.3 million
paid in Golden Star common shares and $0.1 million of transaction costs. The Bon Espoir property is located north of our Paul Isnard Property in a geological setting
interpreted by us as having many similarities to the Ashanti Trend area of Ghana. IAMGold Tender Offer In 2004, we made an unsolicited tender offer to the shareholders of IAMGold Corporation. On August
11, 2004, IAMGold announced that it had agreed to combine IAMGolds mining assets with certain gold
mining assets of another international gold mining company to form a new gold mining company.
IAMGolds management and board subsequently recommended acceptance of this plan to their
shareholders. After analyzing this development we concluded that it was not in the best interests
of our shareholders to continue our offer for IAMGold, and our board of directors elected not to
extend our tender offer which expired on August 16. No shares of IAMGold were acquired. We
incurred approximately $4.1 million of direct, incremental acquisition costs resulting from the
tender offer which were expensed in the third quarter. The majority of these costs were for legal,
financial advisory, printing and accounting services. Gold Prices Gold prices have generally trended upward during most of the last three and a half years, from a
low of just under $260 per ounce in early 2001 to a high of $454 in late 2004. Much of the price
increase has been attributed to a decrease in the value of the US dollar versus other major foreign
currencies. Our realized gold price for shipments during 2004 averaged $410 per ounce,
substantially above the $364 per ounce average price received in 2003. Change in Ore Type The Bogoso processing plant completed processing Plant-North oxide ore during the second quarter of
2004 and subsequently processed exclusively transition and non-refractory sulfide ores from the
Plant-North pit and from 54




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stockpiles during the balance
of the year, resulting in lower production and increased production
costs. The Bogoso processing plant is scheduled to continue processing
transition and non-refractory sulfide ores until 2006 when construction of a BIOX®
bio-oxidation circuit is scheduled for completion, after which the Bogoso plant is expected to
process refractory sulfide and transition ores. In anticipation of the transition from oxide to transition and non-refractory sulfide ore in
mid-2004, the Bogoso processing plant flotation circuit was redesigned, re-built and commissioned in the
second quarter of 2004 and is now being used to assist in obtaining higher recoveries from the more
complex transition ores. The total capital cost for the upgraded flotation circuit, which was
managed in-house and which will become a component of the future BIOX® project, was
approximately $4 million. Based on metallurgical test work completed in 2003 the combination of
gravity, flotation and intensive cyanide leaching of transition material was forecast to increase
gold recoveries from Plant-North transition ores to a range of 60% to 70% compared to recoveries in
the range of 42% to 50% for carbon-in-leach alone. Since commissioning the flotation plant, gold
recovery from the Bogoso processing plant has averaged approximately 60%. We are working to optimize the
milling process and to achieve higher recoveries in 2005. Deferred Stripping Policy We initiated a deferred waste stripping policy at the Plant-North pit on the Prestea property in
the third quarter of 2004. In the past, most of our pits have been relatively shallow and
short-lived because the Bogoso plant could effectively process only near surface ores that had been
naturally oxidized by relatively shallow ground water. With recent processing plant modifications
we are now able to process certain deeper ores found at Prestea. As a result we anticipate deeper
pits with longer lives than in the past. As such, a continuation of our current policy of
expensing waste costs as incurred would result in a misallocation of stripping costs and associated
revenues between accounting periods. 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. Engineering
forecasts indicate that the Plant-North pit should continue to strip waste in excess of the
Plant-North average strip rate for the first nine months of 2005 followed by approximately three
months of stripping below the average rate which will continue
through the end of the pits life. At
July 1, 2004, the date of the deferred stripping policy implementation, we estimated there were
17.9 million tonnes of waste remaining in the Plant-North pit and 3.9 million tonnes of ore. The amount of stripping costs to be capitalized is determined each quarter by determining the
tonnes of waste moved in excess of the life-of-pit average and valuing them 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. We have included capitalized waste cost with mining properties on our consolidated balance
sheets. 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. Illegal Mining We experienced a significant increase in illegal mining activity on the Prestea property during
2004 involving an estimated 3,000 or more illegal miners. Most of this activity is in the Beta
Boundary area south of Prestea and includes areas where we have established reserves. While it is
difficult to quantify the exact impact of this activity on our reserves and mineral resources, it
now appears, based on a preliminary survey completed in September 2004 that between 40,000 and
50,000 ounces may have been removed by the illegal activity. The impact of this illegal mining, to
the extent known, on our reserves and mineral resources has been taken into account in calculating
year-end 2004 reserve figures. We continue to work with local, regional and national governmental authorities and have requested
that they take a more active role in protecting our property rights on a more timely basis. The
preferred solution to this situation is the establishment of a separate small-scale mining area,
away from our mining licenses, where the illegal miners can operate officially under the control of
the relevant governmental agencies. Plans to provide such an area and to 55




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provide independent funding to effect this relocation are underway. In addition to the operational
and economic impact, we are concerned about the environmental degradation and safety issues where
the illegal miners are operating. Prestea Underground Restructuring In late 2003, our Ghanaian partner in the Prestea Underground joint venture filed for bankruptcy.
This event resulted in our partner relinquishing its rights under the joint venture agreement and
transferring its remaining ownership position to BGL thereby giving BGL 90% ownership in the
Prestea Underground. The Government of Ghana continues to hold a 19% ownership in Prestea
Underground, resulting in 81% beneficial ownership by Golden Star. Royalty Income During 2004 we began receiving royalty payments from the Rosebel mine in Suriname that we sold to
Cambior Inc. in 2001. Royalty income of approximately $3.0 million was recorded in 2004. The
Rosebel mine did not begin operations until early 2004 and thus there were no comparable royalty
revenues for 2003. As mentioned above, effective December 31, 2004 we sold our rights in the
Rosebel royalty to our 53% owned subsidiary, Guyanor, for $12 million. The first $6.0 million
installment was paid in January 2005 and we expect the remaining $6.0 million to be paid to us
before the end of June 2005. RESULTS OF OPERATIONS 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 were more than offset by decreased gold production, higher costs per ounce and $4.5 million of
corporate development expenses mostly related to the tender offer for IAMGold. 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. As explained in the Trends and Events section above, 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 dropped to 3,884 tonnes
per day in the second half. Unusually high rainfall also impeded ore availability and plant
efficiency in the third quarter due to flooding in the pit and wet ore handling problems at the
processing plant. FINANCIAL RESULTS
    
    
    2004
    
    
    
    2003
    
    
    
    2002Gold
sold (ounces)
    
    
    
    147,875
    
    
    
    
    174,315
    
    
    
    
    124,400Average price realized
    
    
    $
    410
    
    
    
    $
    364
    
    
    
    $
    311Revenues (in thousands)
    
    
    $
    65,029
    
    
    
    $
    64,370
    
    
    
    $
    38,802Net income (in thousands)
    
    
    $
    2,642
    
    
    
    $
    21,956
    
    
    
    $
    4,856Net income per share  basic
    
    
    $
    0.019
    
    
    
    $
    0.198
    
    
    
    $
    0.067
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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 also 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. 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 Ghanaian 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. BOGOSO/PRESTEA OPERATIONS
    
    
    2004
    
    
    
    2003
    
    
    
    2002Ore mined (t)
    
    
    
    1,411,243
    
    
    
    
    2,001,905
    
    
    
    
    2,222,767Waste mined (t)
    
    
    
    8,065,915
    
    
    
    
    6,791,926
    
    
    
    
    5,211,335Ore milled (t)
    
    
    
    1,650,412
    
    
    
    
    2,093,600
    
    
    
    
    2,271,747Grade milled (g/t)
    
    
    
    4.09
    
    
    
    
    3.29
    
    
    
    
    2.31Recovery (%)
    
    
    
    67.3
    
    
    
    
    81.2
    
    
    
    
    74.4Cash
operating cost per ounce
    
    
    $
    250
    
    
    
    $
    166
    
    
    
    $
    193Royalties
per ounce
    
    
    $
    14
    
    
    
    $
    18
    
    
    
    $
    22Total
cash cost per ounce
    
    
    $
    264
    
    
    
    $
    184
    
    
    
    $
    215
 The Bogoso processing plant processed an average of 4,509
tonnes per day in 2004, down from 5,736 tonnes per day in 2003. All of the ore processed in 2004
came from the Plant-North ore body and from old Bogoso transition ore stockpiles. The average ore
grade processed in 2004 was 4.09 grams per tonne, up from 3.29 grams per tonne in 2003, but gold
recovery dropped to 67.3% from 81% in 2003. Lower recovery was directly related to the
non-refractory sulfide ores and to the transition ores which typically have lower recoveries than
the oxide ores milled in 2003. 2003 Compared to 2002 Net income totaled $22.0 million or $0.198 per share on revenues of $64.4 million for 2003, versus
net income of $4.9 million or $0.067 per share on revenues of $38.8 million during 2002. Higher
gold prices, increased gold production, a $2.3 million gain on currency exchange rates and a $1.9
million gain on the sale of marketable securities were the major factors contributing to the
earnings improvement. Realized gold prices averaged $364 per ounce for the year, a 17% increase
from the $311 per ounce realized in 2002. A weakened US dollar in 2003 versus most other major
world currencies is thought to be responsible for much of the increased gold price during 2003. 57




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Gold revenues for 2003 were based on sales of 174,315 ounces, a 49,915 ounce increase from 124,400
ounces in 2002. Increases in the grade milled and in gold recoveries were the major factors
responsible for higher gold production in 2003 as compared to 2002. While Prestea property oxides
were the main feed source to the Bogoso processing plant in both 2002 and in 2003, start-up of the
higher grade Plant-North mine at Prestea at the end of 2002 yielded a much higher grade during 2003
than did the other Prestea oxide pits mined during 2002. As a result, the milled head grade
increased from 2.31 grams per tonne in 2002 to 3.39 grams per tonne in 2003, and yielded higher
recoveries. Higher depreciation, depletion and amortization costs are related to higher gold production versus
2002. General and administrative costs rose by $1.7 million from 2002 due to increases in
compensation expense, including stock option expense, purchase of gold puts, travel and tax and
other professional services related to an expanded scope of corporate activities. The increase in
foreign exchange gains is mostly related to the effect of a weakening US dollar offset by the
associated impact on the value of cash equivalents invested in Canadian dollar instruments. We did not record a tax expense or benefit during 2003. While we have substantial tax assets in
Canada, France and Ghana from past losses, capital allowances and tax pools, a tax valuation
allowance has been provided in an amount equal to our net tax assets. During 2003, Bogoso/Prestea processed an average of 5,736 tonnes per day of Plant North ore at an
average grade of 3.29 grams per tonne. This compares to 6,223 tonnes per day at 2.31 grams per
tonne in 2002. The lower processing plant throughput was related to increased amounts of
transition ores versus 2002. Mechanical difficulties with a long lead-time component of the
processing plant conveyor system during the second quarter of 2003 and other processing plant
maintenance projects during the year also contributed to the reduced processing plant through-put.
Recoveries rose to 81%, up from 74% in 2002. The improved grade and better recoveries combined to
yield a 40% increase in gold production versus 2002. Bogoso/Prestea sold 174,315 ounces of gold in
2003, up from 124,400 ounces in 2002. Cash operating costs of $166 per ounce were 14% better than
the $193 per ounce costs during 2002. Similarly, total cash costs fell from $215 per ounce in 2002
to $184 per ounce in the current year. EXPANSION PROJECTS Bogoso Plant Upgrade Planning and engineering
continued during 2004 for the proposed Bogoso processing plant BIOX®
bio-oxidation conversion project. Current plans as approved in principle by our Board of Directors in January 2005, call for conversion
of the Bogoso processing plant to a
bio-oxidation process to treat 3.5 million tonnes per year of refractory sulfide and other ores from the Bogoso/Prestea property.
In 2004 we issued a letter of intent to GRD Minproc Limited for the detailed design of the
BIOX®circuit and to carry out the construction under a project management contract.
Completion of detailed engineering is expected in the second quarter of 2005. We estimate that the
total capital cost for the
BIOX®
upgrade at the Bogoso processing plant to fall between $80 to
$85 million, plus an additional $20 million for mining equipment. Separately, work on an
environmental impact assessment is underway and we expect to present it to the authorities in the
first quarter of 2005 and would expect to receive the environmental permits as early as the second
quarter of 2005. Recent engineering studies have indicated that a larger-scale operation than was
originally envisioned would add to the profitability of the project. The proprietary BIOX® bio-oxidation process has been used to treat refractory gold
ores and concentrates for over 18 years. A total of six BIOX® operations have been
successfully commissioned since commercialization of the process, of which four are still
operating. Two new BIOX® plants are currently under construction, the Suzdal plant in
Kazahstan and the Fosterville plant in Australia, which are scheduled for commissioning during
2005. Four additional BIOX® plants are now in various stages of development and are
currently scheduled for commissioning during 2005 and 2006. One of the larger bio-oxidation plants which was built by GRD Minproc in the mid-1990s, is located
at AngloGold Ashantis Obuasi mine, which is also located on the Ashanti gold trend, 130 kilometers
northeast of Bogoso/Prestea. We believe that the sulfide mineralization at Obuasi is similar to the
Bogoso/Prestea material. Our metallurgical assessment of the suitability of the bio-oxidation
process for Bogoso/Prestea ores has been a four-year project. The work has involved metallurgical
assessments on some 32 samples representative of the current sulfide reserves, including a
flotation, BIOX® and neutralization pilot plant program on a nine-tonne bulk sample
compiled by the blending of approximately 90 diamond drill hole cores. 58




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Upon completion of the BIOX® upgrade, the Bogoso processing plant is expected to have
a nominal capacity of 3.5 million tonnes per annum to process refractory sulfide ores from our
Bogoso and northern Prestea pits, where we currently have proven and probable refractory reserves
of approximately 20.5 million tonnes at an average grade of 2.81 grams per tonne. Gold production
from the Bogoso mill, following a mining fleet upgrade and
installation of the Bogoso
BIOX®
circuit, is expected to average approximately 270,000 ounces per annum and to vary between 260,000
to 290,000 ounces per annum at an average cash operating cost between $250 to $270 per ounce after
commercial production is achieved in 2006. Estimated gold recoveries from the BIOX®
process are expected to average 86% and vary between 78% and 88%. Wassa Gold Mine While we experienced significant construction delays during 2004, the construction phase of the Wassa project
was substantially complete by December 31, 2004 except for the power line which is now under
construction and which we expect to complete by mid-year 2005.
Following discussions in November 2004, our contract with MDM was
terminated on November 29, 2004. All of the required power line permits have been obtained, and all of
the material power line construction equipment has been delivered and staged for construction or
are on order. While the power line is still under construction, the existing powerhouse at Wassa
should generate all of the power needed to fully operate the plant and associated facilities until
the connection to the local power grid is completed. As of December 31, 2004 acquisition and development costs totaled $66.5 million including
feasibility study costs, development drilling and geology, operating equipment and plant and site
construction costs. The remaining project costs at December 31, 2004 are estimated to be $7.0
million, consisting of $5.0 million for completion of the power line and $2.0 million for
completion of miscellaneous items at the plant site. An additional $14 million is also budgeted in
2005 for purchase of additional mining equipment. During 2004 while testing and commissioning the
mine we poured 5,292 ounces of gold resulting in $2.3 million of preproduction revenues which were
credited against mine development costs. Commissioning and testing of the new Wassa processing plant began in late 2004. By December Wassa
had poured 5,292 ounces of gold resulting in $2.3 million of preproduction revenues which were
credited against mine development costs. We expect Wassa will achieve commercial production during
the first quarter of 2005, processing at its design capacity of approximately 10,000 tonnes per
day. Our 2005 mining plan involves processing most of the heap leach material left on the pads by the
former owner which will furnish a low cost ore feed to the new plant during its first year of
operations and will also clear the pad area for use as a tailings dam site. Mining will be
performed initially using a mixture of equipment transferred from Bogoso/Prestea and contract
equipment until new equipment is procured. During 2005 we anticipate feeding the Wassa plant
with approximately 45% heap leach material and 55% open pit ore. Recoveries are expected to
average between 87% and 90% with recoveries from heap leach material and open pit ore ranging from
80% to 90% and 83% to 95%, respectively. During 2005 we expect to produce between 100,000 and
120,000 ounces of gold at Wassa at an average cash operating cost between $280 and $300 per ounce.
We expect production costs to be higher than this in the first half of 2005 due to the higher costs
of operating the power house. In the second half of 2005 costs are expected to fall by $50 to $80
per ounce following completion of the power line and the acquisition of new mining equipment.
After 2005 production we expect annual gold production to exceed 140,000 ounces per year, at an
average cash operating cost of between $200 and $220 per ounce. Bondaye Project In addition to the BIOX® expansion described above, we are in the process of
investigating the addition of a second processing plant at Bogoso/Prestea to process oxide,
non-refractory sulfide and transition ores from the southern areas of the Prestea property. In
July 2003 we purchased a used 4,500 tonne per day conventional CIL processing plant, associated
stores inventory, and a six-megawatt powerhouse from an inactive mine site in Ghana. This facility
was dismantled in during 2003 and the plant was moved to Prestea in 2004 where it was refurbished.
The power plant is currently being used at Wassa. With the appropriate modifications the plant
should be able to process oxide, non-refractory sulfide and transition ores found at Prestea. This project is referred to as the Bondaye project. We had originally planned to begin development
of this new operation during 2005, but unanticipated delays in obtaining necessary environmental
permits and the impact of the 59




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socio-economic aspects of the project have now led to a review of the
optimal plant location. We plan to continue the evaluation of the potential of this expansion
option during 2005. EXPLORATION Ghana- We spent
approximately $14.8 million on exploration activities in Ghana during 2004
including $2.5 million at Wassa establishing mineral reserves in the existing pits and in areas
outside the pits; $7.1 million at the Prestea Underground including underground care and
maintenance costs, $1.9 million on sulfide targets at Bogoso, $2.8 million on Prestea area targets
and approximately $0.5 million on exploration projects outside the immediate Wassa and
Bogoso/Prestea areas. We plan to spend approximately $14.8 million on exploration activities in Ghana during 2005 to
delineate additional sulfide mineralization which would be a feed source to the planned new
BIOX® plant at Bogoso; to further delineate, evaluate and expand the oxide and other
gold resources on the southern end of the Prestea property; and to advance our understanding of the
Prestea Underground potential. During 2005 we expect to initiate RAB drilling in the forest reserve on the southern end of the
Wassa property to further delineate the gold-in-soil geochemical anomaly discovered during the past
two years. Other African Projects- In October 2004 we acquired a 9.5% equity interest in Moto Goldmines
Limited (Moto) for $4.1 million and became Motos largest shareholder. We received common shares
and warrants, which if exercised, would raise our interest to 13.3%. At Motos annual general
meeting in November 2004, shareholders elected Dr. Doug Jones, Golden Stars Vice President,
Exploration, as a director. Moto controls the approximate 4,700 square kilometer Moto concessions
located in the north east of the Democratic Republic of Congo. The Moto concessions form part of
the Kilo-Moto gold belt which has historical production in excess of 11 million ounces with over
two million ounces mined from ten small mines within the central 35 square kilometers on the Moto
concessions. After securing control of the property in 2003, Moto began a drilling program in
February 2004 to confirm and expand the gold resource around the areas previously mined. Based
upon this work Motos independent resource consultants have estimated indicated resources at Moto
of 7 million tonnes grading 2.7 grams per tonne and inferred resources of 36 million tonnes grading
3.2 grams per tonne. While 2004 results from the Mano River project in Sierra Leone and the Mininko project in Mali were
disappointing, we expect, subject to renegotiating the respective joint venture agreements, to
continue funding the projects in both areas by refocusing on wide-area soil sampling to
identify new targets in these prospective areas. South American Projects Two years of surface sampling has identified a fairly extensive
gold-in-soil anomaly at the Saramacca property in Suriname. We are planning to initiate core
drilling at this project in 2005 and have budgeted $0.75 million for the work program. We spent
approximately $0.2 million in 2004 to expand on the surface sampling initiated in the prior year. In 2004 we acquired the 466 square kilometer Bon Espoir exploration property in French Guiana for
$0.4 million. Bon Espoir is located in French Guiana north of our Paul Isnard Property in a
geological setting interpreted by us as having many similarities to the Ashanti Trend area of
Ghana. Paul Isnard remained on care and maintenance in 2004 with expenditures of less than $0.1
million. An additional $0.2 million of acquisition costs were
incurred. We plan to spend approximately $0.9 million at Bon Espoir and Paul Isnard in 2005
conducting a wide-area soil sampling programs and assessing past work. LIQUIDITY AND CAPITAL RESOURCES Our cash and cash equivalent balance stood at $51.7 million at December 31, 2004, down from
approximately $90 million at the end of 2003. Even though
operations generated $13.9 million of
new cash during the year and options and warrants contributed $15.5 million, spending on Wassa and
other capital projects including deferred exploration projects were the major factors contributing
to the lower cash balance at the end of the year. Cash flow from operations
totaled $13.9 million in 2004, down from $29.1 million in 2003. Lower
gold output, higher operating costs and costs of the IAMGold tender offer were the major factors
contributing to the decrease. Gold sales were lower due to the difficulties experienced during the
transition from oxide ores in the early part of the year to transition and non-refractory sulfide
ores in the latter part of the year. The $4.1 million of costs 60




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associated with the IAMGold tender
offer also contributed to the lower cash flow. See Trends and Events Section above for additional
discussion. Investing activities consumed
a net $69.6 million of cash in 2004. Investing activities included the following: CAPITAL SPENDING
    
    
    For the Year Ended December 31, 2004(in millions)Bogoso/Prestea
                  equipment and mine property
    
    
    $
    21.2Wassa property, plant & equipment and development
    
    
    
    24.5Prestea Underground exploration and development
    
    
    
    7.5Deferred exploration and other development projects
    
    
    
    12.0Other
    
    
    
    4.4Total
    
    
    $
    69.6
 Stock option exercises provided $1.2 million of cash during 2004 and warrant exercises provided an
additional $14.3 million. New debt contributed a net $2.1 million. At December 31, 2004, working
capital was $61.4 million, versus $96.8 million at the end of 2003. In June 2004, an equipment financing credit facility was established between Caterpillar Financial
Services Corporation and certain of our subsidiaries, with Golden Star as the guarantor of all
amounts borrowed. The facility provides up to a maximum of $25 million of credit for a mixture of
new and used mining equipment. The facility can be renewed but expires on April 30, 2005, bears
interest at a rate equal to the Five Year US$ Swap Rate plus 2.28% for new equipment, is repayable
over five years and requires monthly payments. The facility can also be applied to used equipment
for which the interest rate is negotiable and must be repaid monthly over two years. As of
December 31, 2004 the amount drawn on this facility was $2.3 million. We anticipate drawing
additional amounts in 2005 as we purchase mining equipment for Wassa and Bogoso/Prestea. In addition to the capital spending shown in the table, liquidation of debt consumed $0.2 million
of cash leaving $3.0 million of debt on the balance sheet at year-end. Shareholders equity stood
at $218.0 million at December 31, 2004, up from $198.4 million at the end of December 2003. Outlook We expect that Bogoso/Prestea will continue
  generating positive operating cash flows in 2005, but will require additional
  cash for the expansion projects described above. It is anticipated that
Wassa will also generate a positive operational cash flow once in 2005 but will
  need additional
funds in 2005 for the purchase of the mining fleet. At December 31, 2004 there was $51.7 million of cash and cash equivalents on hand. We anticipate
capital spending of approximately $111 million in 2005 on the following projects: AmountCAPITAL SPENDING BY PROJECT
    
    
    (millions)
    
    
    
    Nature of ExpendituresBogoso/Prestea
    
    
    $
    9
    
    
    
    Mining equipment and plant sustaining capitalBiox Upgrade
  
  
  
  58
  
  
  
  Bogoso plant BIOX conversionMampon
    
    
    
    1
    
    
    
    Feasibility studies, metallurgical testingPrestea Underground
    
    
    
    8
    
    
    
    Exploration Drilling and mine maintenanceWasssa
    
    
    
    25
    
    
    
    Power line construction, mining equipment, exploration and sustaining capitalOther
    
    
    
    10
    
    
    
    Deferred exploration and sustaining capitalTotal
    
    
    $
    111
 61




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If additional cash is needed in connection with the projects described above or in connection with
future acquisitions, we may seek external debt or equity financing, although we may not be able to
obtain the funds required on acceptable terms if at all. In addition to the equipment financing
facility, we have mandated a group of banks and are seeking debt under a revolving credit
agreement. LOOKING AHEAD Our main objectives in 2005 are:  
    Orderly and efficient mining of Prestea Plant-North ores to allow an
adequate flow of transition and non-refractory sulfide ores to the Bogoso plant;
    Commencement of commercial production at Wassa in the first
quarter, followed by orderly and efficient operations;
    Completion of permitting and reassessment/optimization of the Bondaye
project;
    Completion of permitting, planning, engineering and design work and
initiation of construction of the Bogoso BIOX® conversion project;
    Continued evaluation of the Prestea Underground potential;
    A continued high level of exploration efforts; and
    Continuation of efforts to identify and pursue acquisition and growth
opportunities in Ghana and elsewhere. We expect gold production at Bogoso/Prestea of approximately 140,000 to 170,000 ounces in 2005 at a
projected cash operating cost of $190 to $210 per ounce and production of approximately 100,000 to
120,000 ounces at Wassa at a cash operating cost of $280 to $300 per ounce bringing total 2005
production to approximately 240,000 to 290,000 ounces at an average cash operating cost of $230 to
$250 per ounce. As more fully disclosed in Item 1 Risk Factors, numerous factors could cause our estimates and
expectations to be wrong or could lead 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 understand that these companies now have in place plans to make
significant investments in gold exploration and development. 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 federal governmental
authorities as well as with the local citizens in the areas adjacent to our operations. 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, this mining is illegal and
typically results in uncontrolled environmental damage and is often conducted in an unsafe manner.
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 and by
establishing a security presence. The governmental 62




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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 2004 we obtained legal
services from a legal firm to which our Chairman is of
counsel. Total value of all services purchased during 2004 was
$1.7 million. Our Chairman did
not personally perform any legal services for us during 2004 nor did he benefit directly or
indirectly from payments for the services performed by the firm. 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 Canadian
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, and site reclamation/closure accruals are subject to estimates and assumptions regarding
reserves, gold recoveries, future gold prices 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 2003 and 2004. 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.  
    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 tons 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 removed at
the average cost per recoverable ounce of gold in the stockpile. 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 $0.3 million and change operating costs by the same amount.
    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 asset. The determination 63




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
    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 Bogeso/Presteas expected future cash flows
as of December 31, 2004 indicated that there is no impairment at gold
prices in excess of $355 per once and at Wassa there is no impairment
at gold prices greater than $320 per once.
    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 $0.75
million annual change in amortization expense.
    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 and regulations. 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
$1.4 million increase in our asset retirement obligations. RECENT ACCOUNTING PRONOUNCEMENTS Impact of new pronouncements effective in 2004 In November 2003, the CICA amended CICA 3870  Stock-based Compensation and Other Stock-based
Payments to require recognition at the date of grant, of expense for stock option grants after
December 31, 2003 in an amount equal to the fair value of the option. We opted for an early
adoption of this new guidance and began expensing stock options during 2003. The impact of this
election resulted in recognition of approximately $1.0 million of stock option expense in 2003 and
approximately $1.4 million in 2004. In December 2001, the CICA issued Accounting Guideline 13 (AcG-13), Hedging Relationships. The
guideline establishes requirements for the identification, documentation and effectiveness of
hedging relationships, which would have been effective for fiscal years beginning on or before July
1, 2003. Since we had no hedging instruments there was no impact on our financial results from the
adoption of the guidance. New pronouncements effective in 2005 AcG 15  Consolidations of variable interest entities In November 2004, the CICA issued Accounting Guideline Consolidation of Variable Interest
Entities (AcG-15) to provide guidance for determining when an enterprise includes assets,
liabilities and results of activities of variable interest entities in its consolidated financial
statements. Variable interest entities are those in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial support from other
parties. We do not anticipate any material impact on our consolidated financial statements or
financial results from the adoption of AcG-15. For a discussion of recent accounting pronouncements under US GAAP, see Note 21 to the Consolidated
Financial Statements. OFF BALANCE SHEET ARRANGEMENTS We have no off balance sheet arrangements. 64




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TABLE OF CONTRACTUAL OBLIGATIONS Contractual Obligations



Payments
due by period (thousands)
 Less
    
    
    
    
    
    
    
    
    
    
    
    
    
    Morethan
    
    
    
    1-3
    
    
    
    3-5
    
    
    
    Than(as of December 31, 2004)
    
    
    Total
    
    
    
    1 year
    
    
    
    years
    
    
    
    years
    
    
    
    5 yearsLong term debt
    
    
    $
    2,974
    
    
    
    $
    1,267
    
    
    
    $
    1,527
    
    
    
    $
    180
    
    
    
    $
    Interest on long term debt
    
    
    
    229
    
    
    
    
    140
    
    
    
    
    83
    
    
    
    
    6
    
    
    
    
    Operating lease obligations
    
    
    
    582
    
    
    
    
    140
    
    
    
    
    291
    
    
    
    
    151
    
    
    
    
    Purchase obligations
    
    
    
    200
    
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long term
liabilities reflected on
the balance sheet under
GAAP (1)
    
    
    
    15,945
    
    
    
    
    3,726
    
    
    
    
    2,976
    
    
    
    
    2,306
    
    
    
    
    6,937
  (1)
    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 $8.7 million as of
December 31, 2004. The amounts shown above are undiscounted to show full expected cash requirements. This MANAGEMENTS
DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION includes
information available to Februay 2, 2005. As of January 31, 2005 we had
142,346,703 common shares outstanding. 
 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, changes in foreign currency exchange rates, commodity
price fluctuations and equity price risk. Interest Rate Risk We currently have minimal debt and thus no material interest rate exposure related to debt.
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 2005, a 1% change in interest rates would
result in a $0.3 to $0.5 million change in annual interest income. We 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 significant portions of our operating expenses and some of our capital
purchases are incurred in currenciesother 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 would 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 fluctuate
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. We do not currently utilize market risk sensitive instruments to manage our exposure to
foreign currency exchange rates, although we may do so in the future. 65




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Commodity Price Risk We are engaged in gold mining and related activities, including exploration, extraction, processing
and reclamation. 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 change in the price of gold would result in a $2 million to $3 million change in pre-tax
earnings and cash flows during 2005. We have in the past purchased puts to lock in minimum prices
for portions of our annual gold sales but we have no puts outstanding at the end of 2004. We may
in the future more actively manage our exposure through hedging programs. 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. 
 ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements of
Golden Star Resources Ltd. Managements Responsibility for Financial Information
    
    67Auditors Report
    
    68Consolidated Balance Sheets as of December 31, 2004 and 2003
    
    69Consolidated Statements of Operations for the years ended
December 31, 2004, 2003 and 2002
    
    70Consolidated Statement of Changes in Shareholders Equity for the years ended
December 31, 2004, 2003 and 2002
    
    71Consolidated Statements of Cash Flows for the years ended
December 31, 2004, 2003 and 2002
    
    72Notes to the Consolidated Financial Statements
    
    73-92
 66




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MANAGEMENTS RESPONSIBILITY FOR FINANCIAL INFORMATION To the Shareholders of
Golden Star Resources Ltd.: The consolidated financial statements and all information in the Annual Report are the
responsibility of the Board of Directors and management. The consolidated financial statements
have been prepared by management based on information available to February 2, 2005, and are in
accordance with accounting principles generally accepted in Canada. A system of internal accounting and administrative controls is maintained by management in order to
provide reasonable assurance that financial information is accurate and reliable, and that our
assets are safeguarded. Limitations exist in all cost effective systems of internal controls. Our
systems have been designed to provide reasonable but not absolute assurance that financial records
are adequate to allow for the completion of reliable financial information and the safeguarding of
our assets. We believe that the systems are adequate to achieve the stated objectives. The Audit Committee of the Board of Directors is comprised of three outside directors, operates in
accordance with its charter and meets quarterly with management and the independent auditors to
ensure that management is maintaining adequate internal controls and systems and to approve the
annual and quarterly consolidated financial statements of the Company. The Committee also reviews
the audit plan of the independent auditors and discusses the results of their audit and their
report prior to submitting the consolidated financial statements to the Board of Directors for
approval. As of the date of filing this Form 10-K we are in the process of testing our internal control
procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which
requires an annual management report of the effectiveness of our internal controls over financial
reporting and for our Independent Registered Public Accounting Firm to attest to this report.
Golden Star is eligible for the 45 day extension of time allowed by the SEC for companies of a
certain size to file this report and the attestation. We have elected to utilize this 45 day
extension, and therefore, this Form 10-K does not include these reports. We anticipate completing
this process and filing these reports in an amended Form 10-K, which we intend to file in April
2005. Currently, we are not aware of any material weakness in our internal controls over financial
reporting and related disclosures. The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, Chartered
Accountants, who were appointed by the shareholders. The auditors report outlines the scope of
their examination and their opinion on the consolidated financial statements. /s/ Peter J. Bradford
    
    /s/ Allan J. MarterPeter J. Bradford
    
    Allan J. MarterPresident and
    
    Senior Vice President andChief Executive Officer
    
    Chief Financial OfficerFebruary 2, 2005
    
    February 2, 2005
 67




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AUDITORS REPORT To the Shareholders of
Golden Star Resources Ltd.: We have audited the consolidated balance sheets of Golden Star Resources Ltd.as of December 31,
2004 and 2003 and the consolidated statements of operations, changes in shareholders equity and
cash flows for each of the three years in the period ended December 31, 2004. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Canada and in
accordance with 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 includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Company as of December 31, 2004 and 2003, and the
consolidated results of its operations and cash flows for each of the three years in the period
ended December 31, 2004, in accordance with accounting principles generally accepted in Canada. /s/ PricewaterhouseCoopers LLP     February 2, 2005 68




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GOLDEN STAR RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of US dollars except shares issued and outstanding)   As of December 31,2004
    
    
    2003ASSETSCURRENT ASSETSCash and
cash equivalents (Note 1)
    
    $
    51,727
    
    
    $
    89,970Accounts receivable
    
    
    3,592
    
    
    
    790Inventories (Note 1 and 3)
    
    
    15,366
    
    
    
    12,661Due from sale of property (Note 4)
    
    
    1,000
    
    
    
    1,000Tax asset (Note 16)
    
    
    1,542
    
    
    
    Deposits (Note 5)
    
    
    5,102
    
    
    
    Prepaids
    
    
    517
    
    
    
    514Total Current Assets
    
    
    78,846
    
    
    
    104,935RESTRICTED CASH (Note 13)
    
    
    3,351
    
    
    
    3,317DUE FROM SALE OF PROPERTY (Note 4)
    
    
    
    
    
    
    1,000LONG TERM INVESTMENTS (Note 6)
    
    
    5,528
    
    
    
    888DEFERRED
EXPLORATION AND DEVELOPMENT COSTS (Note 7)
    
    
    7,452
    
    
    
    9,108PROPERTY, PLANT AND EQUIPMENT (Note 8)
    
    
    28,653
    
    
    
    18,202MINING PROPERTIES (Note 9)
    
    
    75,554
    
    
    
    56,808MINE CONSTRUCTION-IN-PROGRESS (Note 10)
    
    
    51,159
    
    
    
    27,376OTHER ASSETS
    
    
    1,617
    
    
    
    757Total Assets
    
    $
    252,160
    
    
    $
    222,391LIABILITIESCURRENT LIABILITIESAccounts payable
    
    $
    7,010
    
    
    $
    9,203Construction retention payable
    
    
    
    
    
    
    1,350Other accrued liabilities
    
    
    9,203
    
    
    
    2,859Current debt (Note 11)
    
    
    1,267
    
    
    
    142Total Current Liabilities
    
    
    17,480
    
    
    
    8,151LONG TERM DEBT (Note 11)
    
    
    1,707
    
    
    
    657ASSET RETIREMENT OBLIGATIONS (Note 12)
    
    
    8,660
    
    
    
    7,745Total Liabilities
    
    
    27,847
    
    
    
    16,553MINORITY INTEREST
    
    
    6,353
    
    
    
    7,476COMMITMENTS AND CONTINGENCIES (Note 13)SHAREHOLDERS EQUITYSHARE CAPITALFirst Preferred Shares, without par value, unlimited shares authorized. Noshares issued
    
    
    
    
    
    
    Common shares, without par value, unlimited shares authorized. Shares issued
and outstanding: 142,244,112 at December 31, 2004; 132,924,278 at
December 31, 2003
    
    
    342,494
    
    
    
    326,623CONTRIBUTED SURPLUS
    
    
    2,040
    
    
    
    955DEFICIT
    
    
    (126,574
    )
    
    
    (129,216
    )Total Shareholders Equity
    
    
    217,960
    
    
    
    198,362Total Liabilities and Shareholders Equity
    
    $
    252,160
    
    
    $
    222,391
 The accompanying notes are an integral part of these consolidated financial statements. By:
    
    /s/ David K. Fagin  Director
    
    By:
    
    /s/ Peter J. Bradford   Director
 69




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GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of US dollars except per share amounts) For the years ended December 31,2004
    
    
    2003
    
    
    2002REVENUEGold sales
    
    $
    60,690
    
    
    $
    63,512
    
    
    $
    38,091Royalty income
    
    
    3,049
    
    
    
    
    
    
    
    Interest and other
    
    
    1,290
    
    
    
    858
    
    
    
    71165,029
    
    
    
    64,370
    
    
    
    38,802EXPENSESMining operations
    
    
    39,095
    
    
    
    32,125
    
    
    
    26,747Depreciation, depletion and amortization
    
    
    8,096
    
    
    
    4,993
    
    
    
    2,459Accretion of asset retirement amortization
    
    
    645
    
    
    
    578
    
    
    
    Total production costs
    
    
    47,836
    
    
    
    37,696

    
    
    
    29,206Exploration
expense (Note 1)
    
    
    895
    
    
    
    594
    
    
    
    485General and administrative expense
    
    
    6,811
    
    
    
    5,153
    
    
    
    3,886Corporate development expense
    
    
    4,504
    
    
    
    10
    
    
    
    Option expense (Note 15)
    
    
    1,386
    
    
    
    403
    
    
    
    Loss on equity investment
    
    
    331
    
    
    
    
    
    
    
    Abandonment and impairment of mineral
properties
    
    
    470
    
    
    
    175
    
    
    
    Loss on sale of assets
    
    
    
    
    
    
    
    
    
    
    (425
    )Interest
    
    
    139
    
    
    
    42
    
    
    
    265Foreign exchange (gain)/loss
    
    
    280
    
    
    
    (2,331
    )
    
    
    (139
    )Total expenses
    
    
    62,652
    
    
    
    41,742
    
    
    
    33,278INCOME BEFORE THE UNDERNOTED
    
    
    2,377
    
    
    
    22,628
    
    
    
    5,524Gain on sale of marketable securities
    
    
    
    
    
    
    1,905
    
    
    
    Omai preferred share redemption premium
    
    
    
    
    
    
    
    
    
    
    170Income before minority interest
    
    
    2,377
    
    
    
    24,533
    
    
    
    5,694Minority interest
    
    
    (1,277
    )
    
    
    (2,577
    )
    
    
    (838
    )NET INCOME BEFORE TAX
    
    
    1,100
    
    
    
    21,956
    
    
    
    4,856Income tax recovery (Note 16)
    
    
    1,542
    
    
    
    
    
    
    
    NET INCOME
    
    $
    2,642
    
    
    $
    21,956
    
    
    $
    4,856NET INCOME PER COMMON SHARE  BASIC (Note 17)
    
    $
    0.019
    
    
    $
    0.198
    
    
    $
    0.067NET INCOME PER COMMON SHARE  DILUTED (Note
17)
    
    $
    0.018
    
    
    $
    0.186
    
    
    $
    0.063WEIGHTED AVERAGE SHARES OUTSTANDING
(millions of shares)
    
    
    138.3
    
    
    
    111.0
    
    
    
    72.4
 The accompanying notes are an integral part of these consolidated financial statements. 70




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##### Table of Contents



GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Stated in thousands of United States dollars except share amounts) 
 EquityComponentNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ofCommon
    
    
    Share
    
    
    Contributed
    
    
    
    
    
    
    ConvertibleShares
    
    
    Capital
    
    
    Surplus
    
    
    Warrants
    
    
    Debentures
    
    
    DeficitBalance at December 31, 2001
    
    
    49,259,548
    
    
    $
    167,929
    
    
    $
    
    
    
    $
    410
    
    
    $
    545
    
    
    $
    (156,511
    )Shares issued
    
    
    31,506,000
    
    
    
    27,507
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issue costs
    
    
    
    
    
    
    (2,558
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares issued under options
    
    
    547,916
    
    
    
    520
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares issued under warrants
    
    
    2,535,960
    
    
    
    1,778
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock bonus
    
    
    107,000
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debenture conversions
    
    
    2,994,278
    
    
    
    2,903
    
    
    
    
    
    
    
    
    
    
    
    (545
    )
    
    
    Warrants issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,817
    
    
    
    
    
    
    
    Warrants exercised
    
    
    
    
    
    
    397
    
    
    
    
    
    
    
    (397
    )
    
    
    
    
    
    
    Warrants issued to acquire property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    Other
    
    
    450,000
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,856Balance 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
    )
    
    
    
    
    
    
    Option 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cummulative effect of change in
accounting method
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    483Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,956Balance at December 31, 2003
    
    
    132,924,278
    
    
    
    324,262
    
    
    
    955
    
    
    
    2,361
    
    
    
    
    
    
    
    (129,216
    )Warrants exercised
    
    
    
    
    
    
    755
    
    
    
    
    
    
    
    (755
    )
    
    
    
    
    
    
    Option 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,642Balance at December 31, 2004
    
    
    142,244,112
    
    
    $
    340,888
    
    
    $
    2,040
    
    
    $
    1,606
    
    
    $
    
    
    
    $
    (126,574
    )
 The accompanying notes are an integral part of these consolidated financial statements. 71




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GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of US dollars) 
 For the years ended December 31,2004
    
    
    2003
    
    
    2002OPERATING ACTIVITIES:Net income
    
    $
    2,642
    
    
    $
    21,956
    
    
    $
    4,856Reconciliation of net income to net cash used in operating activities:Depreciation, depletion and amortization
    
    
    8,096
    
    
    
    4,993
    
    
    
    2,459Deferred stripping
    
    
    (1,357
    )
    
    
    
    
    
    
    Loss on equity investment
    
    
    331
    
    
    
    
    
    
    
    Convertible debentures accretion
    
    
    
    
    
    
    
    
    
    
    46Premium on Omai preferred share redemption
    
    
    
    
    
    
    
    
    
    
    (170
    )Non-cash employee compensation
    
    
    1,386
    
    
    
    1,085
    
    
    
    78Abandonment and impairment of mineral properties
    
    
    470
    
    
    
    175
    
    
    
    Tax asset
    
    
    (1,542
    )
    
    
    
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (425
    )Reclamation expenditures
    
    
    (730
    )
    
    
    (841
    )
    
    
    (465
    )Asset retirement obligation
    
    
    645
    
    
    
    578
    
    
    
    Minority interest
    
    
    1,277
    
    
    
    2,577
    
    
    
    83811,218
    
    
    
    30,523
    
    
    
    7,217Changes in assets and liabilities:Accounts receivable
    
    
    (2,802
    )
    
    
    1,187
    
    
    
    (746
    )Inventories
    
    
    (2,705
    )
    
    
    (4,240
    )
    
    
    (424
    )Accounts payable and accrued liabilities
    
    
    8,204
    
    
    
    690
    
    
    
    45Marketable securities
    
    
    
    
    
    
    906
    
    
    
    (906
    )Other
    
    
    (5
    )
    
    
    10
    
    
    
    (293
    )Net Cash Provided by Operating Activities
    
    
    13,910
    
    
    
    29,076
    
    
    
    4,893INVESTING ACTIVITIES:Expenditures on deferred exploration and development
    
    
    (5,260
    )
    
    
    (4,539
    )
    
    
    (208
    )Expenditures on mining properties
    
    
    (19,302
    )
    
    
    (31,142
    )
    
    
    (12,075
    )Expenditures on property, plant and equipment
    
    
    (12,286
    )
    
    
    (10,691
    )
    
    
    (3,430
    )Expenditures on mine construction-in-progress
    
    
    (23,783
    )
    
    
    (22,833
    )
    
    
    Omai preferred share redemption
    
    
    
    
    
    
    
    
    
    
    310Asset retirement obligation assets
    
    
    1,000
    
    
    
    1,192
    
    
    
    Sale of property
    
    
    1,000
    
    
    
    1,000
    
    
    
    5,425Deposits
    
    
    (5,102
    )
    
    
    
    
    
    
    Investments
    
    
    (4,971
    )
    
    
    (888
    )
    
    
    Other
    
    
    (894
    )
    
    
    (139
    )
    
    
    (392
    )Net Cash Used in Investing Activities
    
    
    (69,598
    )
    
    
    (68,040
    )
    
    
    (10,370
    )FINANCING ACTIVITIES:Issuance of share capital, net of issue costs
    
    
    15,270
    
    
    
    113,408
    
    
    
    29,095Debt repayment
    
    
    (153
    )
    
    
    (5,289
    )
    
    
    (6,502
    )Increase in debt
    
    
    2,328
    
    
    
    799
    
    
    
    2,384Other
    
    
    
    
    
    
    
    
    
    
    7Net Cash Provided by Financing Activities
    
    
    17,445
    
    
    
    108,918
    
    
    
    24,984Increase/(decrease) in cash and cash equivalents
    
    
    (38,243
    )
    
    
    69,954
    
    
    
    19,507Cash and cash equivalents, beginning of period
    
    
    89,970
    
    
    
    20,016
    
    
    
    509Cash and cash equivalents end of period
    
    $
    51,727
    
    
    $
    89,970
    
    
    $
    20,016
 See Note 18 for supplemental
cash flow information. Cash and cash equivalents at December 31, 2004
consisted of $2.8 million in money market funds, $38.9 million of
short-term (less than 90 days) investments and $10.0 million of cash in
checking accounts. The accompanying notes are an integral part of these consolidated financial statements.
 72




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GOLDEN 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 are
quantified and explained in Note 21. The consolidated financial statements include the accounts
of the Company and its majority owned subsidiaries and joint ventures. All material inter-company
balances and transactions have been eliminated. 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, 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 consist of cash deposits and 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, agency notes, auction rate certificates and money market funds. 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, including direct production costs and attributable overhead and depreciation. 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 in the process of being treated 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. 73




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Finished goods inventory is composed of saleable gold in the form of doré 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. 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. 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 asset. An impairment loss is measured and recorded
based on discounted estimated future cash flows. Future cash flows are estimated 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, 2004, apart from production cost and capitalized expenditure assumptions unique to
each operation, included a long-term gold price of $400 per ounce. 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. With the 74




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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 such assets 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 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 In open pit mines with highly variable waste-to-ore stripping ratios over the mine life, it is
appropriate to defer and subsequently recover waste removal costs in a manner that effectively
allocates an equal share of the waste mining costs to each tonne of ore extracted. This practice
is typically referred to as deferred stripping accounting and is widely used in the mining
industry. Deferred stripping matches the cost of production with the sale of such production. Capitalized amounts are determined each period by determining the tonnes of waste moved in excess
of the life-of-pit average stripping ratio and valuing them 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 stripping rate. The estimates required to be made
in establishing and operating a deferred stripping program include the amount and location of ores
reserves yet to be uncovered by stripping and the amount of waste tonnes to be moved. Such
estimates are subject to several uncertainties mainly related to the limited access to a buried ore
body. Factors including fluctuating metal prices, unexpected changes in operating costs, discovery
of additional reserves or discovery that certain areas of the mine thought to be ore bearing are
not and unexpected changes in the geologic environment at depth can all impact the estimates used
in a deferred stripping program. At least annually an engineering study evaluates the remaining
ore and waste tonnages in the pit using the most recent information available and adjustments to
the capitalization and recovery rates are made to insure that the capitalized costs and future
waste costs will be appropriately expensed over ore tonnes remaining in the pit. There are mixed accounting practices in this area and some mining companies expense waste removal
costs as incurred, which may result in reporting greater volatility in period to period results of
operations than would be expected from a company that employs a deferred stripping policy. Mining
companies also use differing mechanisms for determining the amount and cost of the waste tonnages
capitalized and amounts recovered. 75




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We include capitalized waste cost with mining properties on our balance sheet. The cost impact is
included in the statement of operations in the line 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. Canadian currency in these financial statements is denoted as Cdn$, European Common Market
currency is denoted as Euro, and Ghanaian currency is denoted as Cedi or Cedis. Income and Mining Taxes Income and mining taxes comprise the provision (or relief) 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. The calculation of diluted
net income per common share uses the treasury stock method to compute the dilutive effects of stock
options and warrants. 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 doré 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 minimisto date at our existing properties. Stock Based Compensation 76




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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. Reclassifications For comparative purposes, certain prior year amounts have been reclassified to conform to the
current year presentation. Recent Accounting Pronouncements In November 2003, the
CICA amended CICA 3870 - Stock-based Compensation and Other Stock-based
Payments to require recognition at the date of grant, of expense for stock option grants after
December 31, 2003 in an amount equal to the fair value of the option. We opted for an early
adoption of this new guidance and began expensing stock options during 2003. The impact of this
election resulted in recognition of approximately $1.0 million of stock option expense in 2003 and
approximately $1.4 million in 2004. In December 2001, the CICA issued Accounting Guideline 13 (AcG-13), Hedging Relationships. The
guideline establishes requirements for the identification, documentation and effectiveness of
hedging relationships, which would have been effective for fiscal years beginning on or before July
1, 2003. Since we had no hedging instruments there was no impact on our financial results from the
adoption of the guidance. AcG 15  Consolidations of variable interest entities In November 2004, the CICA issued Accounting Guideline Consolidation of Variable Interest
Entities (AcG-15) to provide guidance for determining when an enterprise includes assets,
liabilities and results of activities of variable interest entities in its consolidated financial
statements. Variable interest entities are those in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial support from other
parties. We do not anticipate any material impact on our consolidated financial statements or
financial results from the adoption of AcG-15. For a discussion of recent
accounting pronouncements under US GAAP, see Note 21 to the Consolidated
Financial Statements. 2. Financial Instruments (a) 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 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. (b) Commodity Instruments In the past we have purchased put option contracts (puts). Puts
provide the right, but not the obligation, to sell a specified number of ounces of gold at a
specified price on a specified future transaction date. Put options thereby provide a floor price
for a portion of future production but they do not limit the upside potential of higher gold prices
in excess of the specified price. If we opt to forego exercising a put option, the put expires on
its specified transaction date. We have not entered into a hedging program nor do we currently
otherwise manage exposure to commodity price risk. 77




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##### Table of Contents



3.Inventories As of December 31,2004
    
    
    
    2003Stockpiled ore
    
    
    $
    3,659
    
    
    
    $
    4,167In-process
    
    
    
    2,858
    
    
    
    
    2,821Materials and supplies
    
    
    
    8,849
    
    
    
    
    5,673Total
    
    
    $
    15,366
    
    
    
    $
    12,661
 There were approximately 15,400 and 28,000 recoverable ounces of gold in ore stockpile
inventories at December 31, 2004 and 2003, respectively. These ounces contained in our 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. Guiana Shield transactions In 2001 we sold our 50% interest in the Rosebel exploration property in South America to
Cambior Inc. In addition to a $5.0 million payment received at closing in 2002 and a future
royalty (or participation right) based on future Rosebel production, the terms of the sale
agreement provided that Cambior would make three deferred payments of $1.0 million each and also
pays a royalty on future gold production. The first of the deferred payments was received in the
first quarter of 2003. The second deferred payment was made in the first quarter of 2004, and the
third and final payment is expected in the first quarter of 2005. We began receiving royalty payments in early 2004 from Cambior Inc. related to the participation
right. Royalty income totaled $3.0 million during 2004. On December 31, 2004 we sold the Rosebel
partition right to our 53% owned subsidiary Guyanor Ressources SA for $12.0 million, of which $6.0
million was paid on January 8, 2005 and the balance is due to Golden Star prior to June 30, 2005.
There was no gain recognition on the sale. Additionally, Golden Star will receive up to $2.50 per ounce of Rosebel production for all
production in excess of 2 million ounces but less than 4 million ounces and $5.00 per ounce when
production exceeds 4 million ounces up to 7 million ounces. 5. Deposits Represents cash advances for equipment and materials purchases at WGL and BGL. 6. Long Term Investments Represents a $1.4 million investment in Goldmin Holdings, a private exploration firm with a focus
on South American projects and a $4.1 million investment in the common shares of Moto Gold Mines
Limited (Moto), a publicly traded gold exploration and development firm. We invested an additional $0.8 million in Goldmin Holdings during 2004 bringing our ownership to
30.5%. We carry this investment as an equity investment and recognized $0.3 million of equity
losses in 2004. During 2004 when we acquired a 9.5% equity interest in Moto for $4.1 million. In addition to the
common shares, we received warrants, which if exercised will raise our interest to 13.3%. This
investment is carried as a long-term investment. The fair value of our investment in Moto remained
at $4.1million as of December 31, 2004. 7. Deferred Exploration and Development Costs The consolidated property expenditures on our exploration projects for the year ended December
31, 2004 were as follows: 78




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##### Table of Contents

'

Deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DeferredExploration &
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exploration &Development
    
    
    
    Capitalized
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reclassified
    
    
    
    DevelopmentCosts
    
    
    
    Exploration
    
    
    
    
    
    
    
    
    Impairment
    
    
    
    to Mining
    
    
    
    Costsas of 12/31/03
    
    
    
    Expenditures
    
    
    
    Acquisitions
    
    
    
    Write-offs
    
    
    
    Property
    
    
    
    as of 12/31/04GHANA:Bogoso Sulfide Project
    
    
    $
    5,930
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    (5,930
    )
    
    
    $
    Akropong Trend & Other Ghana
    
    
    
    2,037
    
    
    
    
    406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,443Prestea Property Projects
    
    
    
    
    
    
    
    
    2,537
    
    
    
    
    
    
    
    
    
    (470
    )
    
    
    
    
    
    
    
    
    2,067Beta Boundary
    
    
    
    814
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (814
    )
    
    
    
    MALI:Mininko
    
    
    
    130
    
    
    
    
    903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,033SIERRA LEONEMano River
    
    
    
    
    
    
    
    
    758
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    758FRENCH GUIANA:Bon Espoir
    
    
    
    
    
    
    
    
    
    
    
    
    
    501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    501Paul Isnard
    
    
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256SURINAME:Saramacca
    
    
    
    197
    
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394TOTAL
    
    
    $
    9,108
    
    
    
    $
    4,801
    
    
    
    $
    757
    
    
    
    $
    (470
    )
    
    
    $
    (6,744
    )
    
    
    $
    7,452
 The Bogoso Sulfide Project and the Beta Boundary Project (now referred to as the Bondaye Project)
were reclassified as Mining Properties during 2004. Consolidated property expenditures for our exploration projects for the year ended December
31, 2003 were as follows:  Deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DeferredExploration &
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exploration &Development
    
    
    
    Capitalized
    
    
    
    
    
    
    
    
    
    
    
    
    
    DevelopmentCosts
    
    
    
    Exploration
    
    
    
    
    
    
    
    
    Impairment
    
    
    
    Costsas of 12/31/02
    
    
    
    Expenditures
    
    
    
    Acquisitions
    
    
    
    Write-offs
    
    
    
    as of 12/31/03GHANA:Obuom
    
    
    $
    269
    
    
    
    $
    9
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    278Bogoso Sulfide Project
    
    
    
    3,621
    
    
    
    
    119
    
    
    
    
    2,190
    
    
    
    
    
    
    
    
    
    5,930Akropong Trend & Other Ghana
    
    
    
    787
    
    
    
    
    972
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,759Beta Boundary
    
    
    
    
    
    
    
    
    814
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    814Other Bogoso Area Properties
    
    
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    
    
    (109
    )
    
    
    
    MALI:Mininko
    
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130FRENCH GUIANA:Yaou
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    
    Dorlin
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    
    SURINAME:Saramacca
    
    
    
    
    
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    197TOTAL
    
    
    $
    4,743
    
    
    
    $
    2,350
    
    
    
    $
    2,190

    
    
    
    $
    (175
    )
    
    
    $
    9,108
   8. Property, Plant and Equipment 79




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As of December 31, 2004
    
    
    
    
    
    
    
    
    As of December 31, 2003Property,
    
    
    
    
    
    
    
    
    
    
    
    
    
    Property,Property,
    
    
    
    
    
    
    
    
    Plant and
    
    
    
    Property,
    
    
    
    
    
    
    
    
    Plant andPlant and
    
    
    
    
    
    
    
    
    Equipment
    
    
    
    Plant and
    
    
    
    
    
    
    
    
    EquipmentEquipment at
    
    
    
    Accumulated
    
    
    
    Net Book
    
    
    
    Equipment at
    
    
    
    Accumulated
    
    
    
    Net BookCost
    
    
    
    Depreciation
    
    
    
    Value
    
    
    
    Cost
    
    
    
    Depreciation
    
    
    
    ValueBogoso/Prestea
    
    
    $
    27,722
    
    
    
    $
    5,057
    
    
    
    $
    22,665
    
    
    
    $
    15,765
    
    
    
    $
    4,143
    
    
    
    $
    11,622Prestea Underground
    
    
    
    238
    
    
    
    
    
    
    
    
    
    238
    
    
    
    
    227
    
    
    
    
    
    
    
    
    
    227Guyanor
    
    
    
    1,969
    
    
    
    
    1,951
    
    
    
    
    18
    
    
    
    
    1,985
    
    
    
    
    1,952
    
    
    
    
    33Wassa
    
    
    
    5,460
    
    
    
    
    
    
    
    
    
    5,460
    
    
    
    
    6,259
    
    
    
    
    
    
    
    
    
    6,259Corporate & other
    
    
    
    1,060
    
    
    
    
    788
    
    
    
    
    272
    
    
    
    
    782
    
    
    
    
    721
    
    
    
    
    61Total
    
    
    $
    36,449
    
    
    
    $
    7,796
    
    
    
    $
    28,653
    
    
    
    $
    25,018
    
    
    
    $
    6,816
    
    
    
    $
    18,202
 9. Mining Properties  As of December 31, 2004
    
    
    
    
    
    
    
    
    As of December 31, 2003Mine
    
    
    
    
    
    
    
    
    Mine
    
    
    
    Mine
    
    
    
    
    
    
    
    
    MineProperty at
    
    
    
    Accumulated
    
    
    
    Property, Net
    
    
    
    Property at
    
    
    
    Accumulated
    
    
    
    Property, NetCost
    
    
    
    Amortization
    
    
    
    Book Value
    
    
    
    Cost
    
    
    
    Amortization
    
    
    
    Book ValueBogoso/Prestea
    
    
    $
    43,420
    
    
    
    $
    23,113
    
    
    
    $
    20,307
    
    
    
    $
    41,885
    
    
    
    $
    16,856
    
    
    
    $
    25,029Prestea Underground
    
    
    
    12,984
    
    
    
    
    
    
    
    
    
    12,984
    
    
    
    
    8,560
    
    
    
    
    
    
    
    
    
    8,560Wassa
    
    
    
    9,653
    
    
    
    
    
    
    
    
    
    9,653
    
    
    
    
    9,778
    
    
    
    
    
    
    
    
    
    9,778Bogoso Sulfide
    
    
    
    13,065
    
    
    
    
    
    
    
    
    
    13,065
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mampon
    
    
    
    13,676
    
    
    
    
    
    
    
    
    
    13,676
    
    
    
    
    13,441
    
    
    
    
    
    
    
    
    
    13,441Beta Boundary
    
    
    
    4,512
    
    
    
    
    
    
    
    
    
    4,512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Stripping
    
    
    
    1,357
    
    
    
    
    
    
    
    
    
    1,357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    $
    98,667
    
    
    
    $
    23,113
    
    
    
    $
    75,554
    
    
    
    $
    73,664
    
    
    
    $
    16,856
    
    
    
    $
    56,808
 Some prior period numbers have been adjusted to conform to the 2004 presentation. In June 2004 due to financial difficulties experienced by our joint venture partner, the
portion of the Prestea Underground owned by our joint venture partner reverted to our ownership
per the terms of the original joint venture agreement. As a result, a $2.4 million minority
interest recorded when the partnership was originally organized was reversed and a $2.4 million
reduction was recorded in the carrying value of the Prestea Underground Mining Property assets. The Bogoso Sulfide project, and the Beta Boundary project at Prestea, which is expected to feed
the proposed Bondaye Plant, were deemed sufficiently advanced by early 2004 for
reclassification as Mining Properties rather than as exploration properties. Reclassification
was based upon having defined proven and probable reserves at both projects, completion of a
feasibility study for the Bogoso Sulfide project showing it to be economically viable, and
advanced engineering and design work on the Bondaye/Beta Boundary project which is now awaiting
environmental permits. The Mining Properties costs associated with these two projects will be
amortized over production ounces when gold production begins. We initiated a deferred waste stripping policy at the Plant-North pit at Prestea in the third
quarter of 2004. In the past, most of our pits have been relatively shallow and short-lived
because the Bogoso plant could effectively process only near-surface ores that had been
naturally oxidized by relatively shallow ground water. With recent plant modifications we are
now able to process certain deeper ores from Prestea. As a result we anticipate deeper pits
with longer lives than in the past. Adoption of this policy resulted in deferral of $1.4
million of Plant-North waste stripping costs during the second half of 2004. There were no
recoveries of stripping costs during 2004. We expect that the entire $1.4 million of deferred
stripping costs will be recovered during 2005. The value of capitalized waste costs is
included in the Mining Properties balance on our consolidated balance sheets. The cost impact
is included in the statement of operations in the line titled Mining operations. 80




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10. Mine Construction-in-Progress Mine construction in progress represents costs incurred at the Wassa project subsequent to
acquisition. The balance includes feasibility study costs, equipment purchases and construction
costs, including interim payments to the construction contractor and development costs. 11. Debt  As of
    
    
    
    As ofDecember 31,
    
    
    
    December 31,2004
    
    
    
    2003Current debt:Equipment
financing loans - Bogoso (Note a)
    
    
    $
    1,130
    
    
    
    $
    Equipment financing loans  Wassa (Note b)
    
    
    
    137
    
    
    
    
    142Total current debt
    
    
    $
    1,267
    
    
    
    $
    142Long term debt:Equipment
financing loans - Bogoso (Note a)
    
    
    
    1,198
    
    
    
    
    Equipment financing loans  Wassa (Note b)
    
    
    $
    509
    
    
    
    $
    657Total long term debt
    
    
    $
    1,707
    
    
    
    $
    657
 (a) In June 2004 an equipment financing credit facility of up to $25 million was
established between Caterpillar Financial Services Corporation and BGL and WGL, subsidiaries of
Golden Star, with Golden Star as the guarantor of all amounts borrowed. The facility provides
credit for a mixture of new and used mining equipment and is available until 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 is fixed using the Federal Reserve Bank 2-year or
5-year swap rate plus 2.28% or we can opt for a floating interest rate of LIBOR plus 2.28%. As
of December 31, 2004, $2.3 million had been drawn to purchase used equipment and is repayable
in 24 equal monthly installments beginning December 2004 with an interest rate of 6.01%. (b) Caterpillar Financial Services Corporation  A $0.8 million installment loan was used to
purchase mobile equipment at Wassa and is repayable in 60 equal monthly installments from
December 2003 with an interest rate of 6.25%. 12. Asset Retirement Obligations Effective January 1, 2003, we changed our accounting policy for asset retirement obligations to
comply with CICA Handbook Section 3110, Asset Retirement Obligations. This change was made on a
retroactive basis. Upon the adoption of this new standard, we recognized a $0.5 million reduction
in the carrying value of liabilities related to future reclamation and other asset retirement
obligations. The cumulative effect of the adoption of this new standard totaled $0.5 million and
was recorded as a reduction in the deficit account in shareholders equity. Our Asset Retirement Obligations (ARO) recognize the present value of the ultimate closure cost
associated with reclamation, demolition and stabilization of our mining 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. The changes in the carrying amount of the ARO during 2004 were as follows: 81




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Year endedAsset Retirement Obligations
    
    
    December 31, 2004Balance at beginning of the year as adjusted by the adoption CICA 3110
    
    
    $
    7,745Accretion expense
    
    
    
    645Reclamation work performed
    
    
    
    (730
    )New AROs incurred during the period
    
    
    
    1,000Balance at December 31, 2004
    
    
    $
    8,660
 13. Commitments and Contingencies (a) Environmental Regulations and Asset Retirement Obligations -We are not aware of any
events of material non-compliance with environmental laws and regulations in our operations which
could have a material adverse effect on our operations or financial condition. The exact nature of
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. Asset retirement obligations, which include environmental
rehabilitation liabilities for reclamation and for closure costs, were $6.0 million at
Bogoso/Prestea at December 31, 2004, up from $5.2 million at December 31, 2003. Asset retirement
obligations at Wassa totaled $2.7 million at December 31, 2004, up from $2.5 million at the end of
2003. (b) 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. There have been no agreements for disbursements since 2001. We are
seeking to obtain an amendment to the agreement that would remove the restriction and in its place
establish a reclamation bond to meet Ghanas Environmental Protection Agency reclamation bonding
requirements as discussed below. At December 31, 2004, approximately $3.4 million of restricted
cash was held as a cash provision against future reclamation commitments at Bogoso. (c) Corporate Office Building Lease Effective January 1, 2004, we entered into a five year office
building lease for our corporate headquarters in Littleton, Colorado. The annual initial lease
rate was $19.00 per rentable square foot, which escalates to $21.00 per rentable square foot in the
last year of the lease. (d) Environmental Bonding in
    Ghana- During 2004 the Ghana Environmental Protection Agency
requested that we provide cash collateralized environmental reclamation bonds
    for both
Bogoso/Prestea and Wassa while the Environmental Protection Agency has not specified
    the exact amount of the required bonds, we expect based on our cost estimates
    for required future reclamation spending, that the bonds will be approximately
    $9.0 million for Bogso/Prestea and approximately $3.9 million for
Wassa.
    We plan to fund these obligations with a combination of cash on
hand and letters of credit. (e) 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, excluding any royalty 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 of or below $300 per ounce up to
3.5% for gold prices in excess of $400 per ounce. (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 expect to pay a royalty at a similar rate on
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 a companys operating margin. (f) Wassa Construction Contract -We entered into a contract with Metallurgical Design and
Management (Pty) Ltd. (MDM), a South African company, in July 2003, for the construction of the
CIL processing plant facility and other associated processing facilities at Wassa. By the end of
2004 substantially all construction work had been 82




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completed at Wassa, except for the completion of the power line, and the contract with MDM was
terminated and no further payments are due them. (g) 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 which holds a group of gold exploration properties in Sierra
Leone. The initial $6 million, if fully funded (we can terminate the agreement after spending $1.0
million) 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. The joint venture agreement is subject to completion of documentation. Spending during
2003 was nil. Spending in 2004 totaled $0.8 million leaving $0.2 million left on our minimum
commitment to the project. (h) Mininko Joint Venture In late 2003 we entered into a joint venture agreement, agreeing to
fund exploration work on the Mininko gold property in Mali. Funding of $2.6 million would earn a
51% interest in the joint venture. We can terminate the joint venture after spending $0.4 million
of which $0.1 million was spent in 2003. Spending during 2004 totaled $0.9 million. The joint
venture agreement provides that we can earn up to an 82.5% interest by continued funding of
exploration and development, if warranted. 14. Warrants At December 31, 2004, there were two series of warrants outstanding to purchase a total of 8.8
million common shares. Of the total, 8.4 million were issued during 2003 and 0.4 million were
issued during 2002 as follows: Warrants
    
    
    Exercise
    
    
    
    
    
    ExpirationType :
    
    
    Date issued
    
    
    outstanding
    
    
    price
    
    
    Term
    
    
    dateBroker warrants
    
    
    July 24, 2002
    
    
    
    385,000
    
    
    
    Cdn$2.28
    
    
    2 years (1)
    
    
    July 24, 2005Equity offering
    
    
    February 14, 2003
    
    
    
    8,448,334
    
    
    
    Cdn$4.60
    
    
    4 years
    
    
    February 14, 2007Total
    
    
    
    
    
    

8,833,334
    During 2004, 8.5 million warrants were exercised resulting in cash proceeds of $14.3 million
to Golden Star. The warrants issued in conjunction with the February 14, 2003 equity offering are traded on the
Toronto Stock Exchange under the symbol GSC.WT.A. There is no public market for the broker
warrants. 15. Stock Based Compensation (a) 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: 83




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##### Table of Contents



2004
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    2002Weighted-Average
    
    
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    
    
    Weighted-AverageShares
    
    
    
    Exercise Price
    
    
    
    Shares
    
    
    
    Exercise Price
    
    
    
    Shares
    
    
    
    Exercise PriceGSR Plan
    
    
    (000s)
    
    
    
    (Cdn$)
    
    
    
    (000s)
    
    
    
    (Cdn$)
    
    
    
    (000s)
    
    
    
    (Cdn$)Outstanding at beginning
of year
    
    
    
    5,241
    
    
    
    
    2.41
    
    
    
    
    4,489
    
    
    
    
    1.36
    
    
    
    
    4,595
    
    
    
    
    1.42Granted
    
    
    
    855
    
    
    
    
    6.95
    
    
    
    
    2,354
    
    
    
    
    3.99
    
    
    
    
    640
    
    
    
    
    1.17Exercised
    
    
    
    (767
    )
    
    
    
    2.12
    
    
    
    
    (1,518
    )
    
    
    
    1.73
    
    
    
    
    (548
    )
    
    
    
    1.49Forfeited
    
    
    
    (58
    )
    
    
    
    4.31
    
    
    
    
    (84
    )
    
    
    
    2.92
    
    
    
    
    (198
    )
    
    
    
    1.76Outstanding at end of year
    
    
    
    5,271
    
    
    
    
    3.17
    
    
    
    
    5,241
    
    
    
    
    2.41
    
    
    
    
    4,489
    
    
    
    
    1.36Options vested and
exercisable at year-end
    
    
    
    4,140
    
    
    
    
    2.54
    
    
    
    
    3,803
    
    
    
    
    1.81
    
    
    
    
    4,006
    
    
    
    
    1.40Weighted-average fair
value of options granted
during the year
    
    
    
    
    
    
    
    
    2.45
    
    
    
    
    
    
    
    
    
    1.25
    
    
    
    
    
    
    
    
    
    0.86
 Options Outstanding
   
    
    
    
    
    
    
    
    Options ExercisableGSR Plan
    
    
    Number
    
    
    
    Weighted-
    
    
    
    Weighted-
    
    
    
    Number
    
    
    
    Weighted-Range of
    
    
    Outstanding at
    
    
    
    Average
    
    
    
    Average
    
    
    
    Exercisable at
    
    
    
    AverageExercise
    
    
    December 31,
    
    
    
    Remaining
    
    
    
    Exercise
    
    
    
    December 31,
    
    
    
    ExercisePrices
    
    
    2004
    
    
    
    Contractual Life
    
    
    
    Price
    
    
    
    2004
    
    
    
    Price(Cdn$)
    
    
    (000s)
    
    
    
    (years)
    
    
    
    (Cdn$)
    
    
    
    (000s)
    
    
    
    (Cdn$)1.00 to 2.50
    
    
    
    2,869
    
    
    
    
    5.6
    
    
    
    
    1.39
    
    
    
    
    2,794
    
    
    
    
    1.362.51 to 4.00
    
    
    
    1,162
    
    
    
    
    8.2
    
    
    
    
    3.46
    
    
    
    
    757
    
    
    
    
    3.384.01 to 7.00
    
    
    
    1,026
    
    
    
    
    9.3
    
    
    
    
    6.65
    
    
    
    
    482
    
    
    
    
    6.637.01 to 10.00
    
    
    
    214
    
    
    
    
    8.9
    
    
    
    
    8.83
    
    
    
    
    107
    
    
    
    
    8.835,271
    
    
    
    
    7.1
    
    
    
    
    3.17
    
    
    
    
    4,140
    
    
    
    
    2.54
 Options granted during 2004: Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total FairDate
    
    
    Options
    
    
    
    Strike Price
    
    
    
    Fair Value per
    
    
    
    Value
    
    
    
    OptionGranted
    
    
    (000s)
    
    
    
    (Cdn$)
    
    
    
    option (Cdn$)
    
    
    
    (000s of Cdn$)
    
    
    
    LifeMay 14, 2004
    
    
    
    855
    
    
    
    
    6.95
    
    
    
    
    2.45
    
    
    
    
    2,094
    
    
    

10 yearsTotal
    
    
    
    855
    
    
    
    
    6.95
    
    
    
    
    2.45
    
    
    
    
    2,094
    
    
    

10 years
 Options granted during 2003: Number of
    
    
    
    Strike
    
    
    
    Fair
    
    
    
    Total FairDate
    
    
    Options
    
    
    
    Price
    
    
    
    Value per
    
    
    
    Value
    
    
    
    OptionGranted
    
    
    (000s)
    
    
    
    (Cdn$)
    
    
    
    option (Cdn$)
    
    
    
    (000s of Cdn$)
    
    
    
    LifeJanuary 30, 2003
    
    
    
    1,134
    
    
    
    
    3.14
    
    
    
    
    0.96
    
    
    
    
    1,093
    
    
    
    10 yearsMarch 21, 2003
    
    
    
    225
    
    
    
    
    2.39
    
    
    
    
    0.9
    
    
    
    
    203
    
    
    
    10 yearsJuly 30, 2003
    
    
    
    556
    
    
    
    
    4.00
    
    
    
    
    1.17
    
    
    
    
    648
    
    
    
    10 yearsSeptember 18, 2003
    
    
    
    225
    
    
    
    
    5.25
    
    
    
    
    1.94
    
    
    
    
    436
    
    
    
    10 yearsOctober 30, 2003
    
    
    
    32
    
    
    
    
    7.45
    
    
    
    
    2.21
    
    
    
    
    71
    
    
    
    10 yearsDecember 18, 2003
    
    
    
    182
    
    
    
    
    9.07
    
    
    
    
    2.67
    
    
    
    
    486
    
    
    
    10 yearsTotal
    
    
    
    2,354
    
    
    
    
    3.99
    
    
    
    
    1.25
    
    
    
    
    2,937
    
    
    
    10 years
 84




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##### Table of Contents



The fair value of options granted during 2004, 2003 and 2002 were estimated at the grant dates
using the Black-Scholes option-pricing model with the following weighted average assumptions: 2004
    
    
    
    2003
    
    
    
    2002Expected volatility
    
    
    
    36%
    
    
    
    
    34%
    
    
    


    89% to 102%Risk-free interest rate
    
    
    
    3.72% - 4.06%
    
    
    
    
    3.01% - 4.46%
    
    
    
    
    3.68% - 4.47%Expected lives
    
    
    
    3.5 to 5 years
    
    
    
    
    3.5 to 5 years
    
    
    
    5 yearsDividend yield
    
    
    
    0%
    
    
    
    
    0%
    
    
    
    
    0%
 In November 2003 the Accounting Standards Board of the Canadian Institute of Certified Accountants
amended CICA Handbook CICA 3870,  Stock-based Compensation and other Stock-based Payments to
require expensing of all stock based compensation awards for fiscal years beginning on or after
January 1, 2004. In light of this development we adopted the new provision of CICA 3870 in 2003.
As a result, we recognized stock based compensation expense of approximately $1.4 million and $1.0
million in 2004 and 2003 respectively for stock options granted
during 2004 and 2003. During 2003 approximately $0.5 million of the
total option expense was included in mining operations expense. Prior to 2003 we did not recognize compensation costs related to stock options granted. Had
compensation costs been recognized for options vesting in 2002, our net income and earnings per
share would have been reduced to the pro forma amounts shown below: 2004
    
    
    
    2003
    
    
    
    2002Net income
    
    
    As reported
    
    
    $
    2,642
    
    
    
    $
    21,956
    
    
    
    $
    4,856Pro forma
    
    
    $
    2,633
    
    
    
    $
    21,882
    
    
    
    $
    4,339Net income per share
    
    
    As reported
    
    
    $
    0.019
    
    
    
    $
    0.198
    
    
    
    $
    0.067Pro forma
    
    
    $
    0.019
    
    
    
    $
    0.197
    
    
    
    $
    0.060
 (b) 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 445,820 common shares have been issued as of December 31, 2004. During 2004, 2003 and 2002 a total of nil, 57,200 and 107,000 common shares respectively were
issued to employees pursuant to the Bonus Plan. We recognized compensation expense related to
bonuses under the Bonus Plan during 2004, 2003 and 2002 of nil, $117,800 and $78,000. 16. 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, 2004 and 2003 include the following
components: (in thousands)
    
    
    2004
    
    
    
    2003Future tax assetsOffering costs
    
    
    $
    2,218
    
    
    
    $
    2,835Loss carryovers
    
    
    
    59,795
    
    
    
    
    62,745
 85




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##### Table of Contents



Mine property costs
    
    
    
    18,132
    
    
    
    
    16,366Valuation allowance
    
    
    
    (64,399
    )
    
    
    
    (66,222
    )Future tax assets
    
    
    $
    15,746
    
    
    
    $
    15,724Future tax liabilities:Mine property costs
    
    
    $
    13,805
    
    
    
    $
    15,724Reclamation costs
    
    
    
    399
    
    
    
    
    Deferred tax liabilities
    
    
    $
    14,204
    
    
    
    $
    15,724Net future tax asset
    
    
    $
    1,542
    
    
    
    $
    0
 The composition of our valuation allowance is summarized as follows: (in thousands)
    
    
    2004
    
    
    
    2003Canada
    
    
    $
    32,756
    
    
    
    $
    31,826France
    
    
    
    26,141
    
    
    
    
    27,065Ghana
    
    
    
    5,502
    
    
    
    
    7,331Total Valuation Allowance
    
    
    $
    64,399
    
    
    
    $
    66,222
 During 2004, we reduced the valuation allowance by $1.5 million. This allowance was related to our net future tax
assets in Ghana. A reconciliation of expected
income tax on net income before income before minority interest at
statutory rates with the actual
expenses (recovery) for income taxes is as follows: 2004
    
    
    
    2003
    
    
    
    2002Net income (loss) before minority interest
    
    
    $
    2,377
    
    
    
    $
    24,533
    
    
    
    $
    5,694Statutory tax rate
    
    
    $
    32.1
    %
    
    
    
    34.1
    %
    
    
    
    36.1
    %Tax
expense (recovery) at statutory rate
    
    
    
    763
    
    
    
    
    8,365
    
    
    
    
    2,057Enacted future tax rate reductions
    
    
    
    
    
    
    
    
    (490
    )
    
    
    
    (228
    )Foreign tax rates
    
    
    
    (152
    )
    
    
    
    (6,489
    )
    
    
    
    (797
    )Change in tax rates
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,870Nondeductable portion of capital losses
    
    
    
    3,174
    
    
    
    
    
    
    
    
    
    Expired loss carryovers
    
    
    
    1,450
    
    
    
    
    2,866
    
    
    
    
    1,861Ghana investment allowance
    
    
    
    (316
    )
    
    
    
    (636
    )
    
    
    
    (339
    )Nondeductable stock option compensation
    
    
    
    445
    
    
    
    
    129
    
    
    
    
    Nondeductable expenses
    
    
    
    119
    
    
    
    
    
    
    
    
    
    Tax loss on sale of Guyanor shares
    
    
    
    (2,898
    )
    
    
    
    
    
    
    
    
    Loss carryover not previoulsy recognized
    
    
    
    4,447
    
    
    
    
    
    
    
    
    
    (9,766
    )Ghana property basis not previously recognized
    
    
    
    (2,733
    )
    
    
    
    716
    
    
    
    
    (5,571
    )Change
in future tax assets due to exchange rates
    
    
    
    (3,919
    )
    
    
    
    (8,283
    )
    
    
    
    (3,214
    )Change in valuation allowance
    
    
    
    (1,922
    )
    
    
    
    3,822
    
    
    
    
    10,127Income
tax expense (recovery)
    
    
    $
    (1,542
    )
    
    
    $
    
    
    
    
    $
    
 During 2004, 2003 and 2002,
we recognized $0.3 million, $6.4 million and $2.6 million,
respectively, of share offering costs.
Shareholders equity has been credited in the amounts of
$0.1 million, $2.1 million and $0.8 million for the tax
benefits of these deductions; however a valuation allowance had been provided against their full amount. The $1.5 million provision
for taxes is a deferred foreign provision. 86




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##### Table of Contents



At December 31, 2004 we had loss carryovers expiring as follows: Canada
    
    
    
    Ghana
    
    
    
    France2005
    
    
    $
    10,187
    
    
    
    $
    
    
    
    
    $
    2006
    
    
    
    2,508
    
    
    
    
    
    
    
    
    
    2007
    
    
    
    344
    
    
    
    
    
    
    
    
    
    2008
    
    
    
    1,837
    
    
    
    
    
    
    
    
    
    2009
    
    
    
    2,265
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    1,134
    
    
    
    
    
    
    
    
    
    2011
    
    
    
    6,723
    
    
    
    
    Indefinite
    
    
    
    39,583
    
    
    
    
    
    
    
    
    
    73,215Total
    
    
    $
    64,582
    
    
    
    $
    65,377
    
    
    
    $
    73,215
 17. Earnings per Common Share The following table provides a reconciliation between basic and diluted earnings per common share: For the years ended December 31,2004
    
    
    
    2003
    
    
    
    2002Net Income/(Loss)
    
    
    $
    2,642
    
    
    
    $
    21,956
    
    
    
    $
    4,856Shares (in millions)Weighted average number of common shares
    
    
    
    138.3
    
    
    
    
    111.0
    
    
    
    
    72.4Dilutive Securities:Options
    
    
    
    2.9
    
    
    
    
    2.7
    
    
    
    
    1.6Warrants
    
    
    
    2.5
    
    
    
    
    4.2
    
    
    
    
    2.7Weighted average number of dilutive common shares
    
    
    
    143.7
    
    
    
    
    117.9
    
    
    
    
    76.7Basic Income/(Loss) Per Common Share
    
    
    $
    0.019
    
    
    
    $
    0.198
    
    
    
    $
    0.067Diluted lncome/(Loss) Per Common Share
    
    
    $
    0.018
    
    
    
    $
    0.186
    
    
    
    $
    0.063
 18. Supplemental Cash Flow Information The following is a summary of non-cash transactions: For the years ended December 31,2004
    
    
    
    2003
    
    
    
    2002Investing:Prestea acquisition costs paid with common shares
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    (400
    )Common shares issued for Prestea acquisition cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    400Receivable on sale of property
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Acquisition, deferred exploration and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Wassa property acquisitionProperty, plant and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,120
    )Reclamation liability assumed
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,302Assumption of bank debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,818Minority interest in Prestea Underground joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,400Mine property Prestea Underground joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,400
    )
 87




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##### Table of Contents



For the years ended December 31,2004
    

    

    
    2003
    

    
    
    2002Warrants issued for Obuom acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    255Obuom property acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    (255
    )Acquisition of properties in French Guiana
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66
    )Guiana Shield transaction property exchange
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Barnex royalty buy-back
    
    
    
    
    
    
    
    
    12,045
    
    
    
    
    Common shares issued for Barnex royalty buy-back
    
    
    
    
    
    
    
    
    (12,045
    )
    
    
    
    Common shares issued to purchase Goldfields Miniere S.A.
    
    
    
    300
    
    
    
    
    
    
    
    
    
    Acquisition of Investment in Goldfields Miniere S.A.
    
    
    
    (300
    )
    
    
    
    
    
    
    
    
    Acquisition of minority interest in Prestea Underground:Minority interest
    
    
    
    (2,400
    )
    
    
    
    
    
    
    
    
    Mining Property
    
    
    
    2,400
    
    
    
    
    
    
    
    
    
    Financing:Equity component of convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    (545
    )Common shares issued upon conversion of convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,903Conversion of convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,358
    )
 There was no cash paid for income taxes during 2004, 2003 and 2002. Cash paid for interest
was $0.1 million in 2004, $0.1 million in 2003 and $0.4 million in 2002. 19. 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 the year
    
    
    Bogoso/
    
    
    
    
    
    
    
    
    
    
    Southended)
    
    
    
    Prestea
    
    
    Wassa
    
    
    Other
    
    
    America
    
    
    Corporate
    
    
    Total2004Revenues
    
    $
    61,002
    
    
    $
    
    
    
    $
    
    
    
    $
    3,145
    
    
    $
    882
    
    
    $
    65,029Net Income/(Loss)
    
    
    12,533
    
    
    
    (168
    )
    
    
    
    
    
    
    1,772
    
    
    
    (11,495
    )
    
    
    2,642Total Assets
    
    
    90,297
    
    
    
    70,681
    
    
    
    31,080
    
    
    
    817
    
    
    
    59,285
    
    
    
    252,1602003Revenues
    
    $
    63,640
    
    
    $
    
    
    
    $
    
    
    
    
    102
    
    
    $
    628
    
    
    $
    64,370Net Income/(Loss)
    
    
    23,253
    
    
    
    (171
    )
    
    
    
    
    
    
    (1,411
    )
    
    
    285
    
    
    
    21,956Total Assets
    
    
    64,828
    
    
    
    44,523
    
    
    
    20,058
    
    
    
    352
    
    
    
    92,630
    
    
    
    222,3912002Revenues
    
    $
    38,199
    
    
    $
    
    
    
    $
    
    
    
    $
    466
    
    
    $
    137
    
    
    $
    38,802Net Income/(Loss)
    
    
    8,089
    
    
    
    
    
    
    
    
    
    
    
    (1,106
    )
    
    
    (2,127
    )
    
    
    4,856Total Assets
    
    
    36,585
    
    
    
    10,434
    
    
    
    3,688
    
    
    
    189
    
    
    
    23,239
    
    
    
    74,135
 20. Related Parties During 2004 we obtained legal
services from a legal firm to which our Chairman is of
counsel. Total cost of all services purchased during 2004 was
$1.7 million. Our Chairman did not
personally perform any legal services for us during 2004 nor did he benefit directly or
indirectly from payments for the services performed by the firm. 21. Generally Accepted Accounting Principles in Canada and the United States 88




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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.  (a) Balance Sheets Under US GAAP
    
    
    As of December 31,2004
    
    
    
    2003ASSETSCurrent
assets:Cash and short term investments
    
    
    $
    51,727
    
    
    
    $
    89,970Accounts receivable
    
    
    
    3,592
    
    
    
    
    790Inventories
    
    
    
    15,366
    
    
    
    
    12,661Due from sale of property
    
    
    
    1,000
    
    
    
    
    1,000Current tax asset
    
    
    
    1,542
    
    
    
    
    Deposits
    
    
    
    5,102
    
    
    
    
    Prepaids
    
    
    
    517
    
    
    
    
    514Total current assets
    
    
    
    78,846
    
    
    
    
    104,935Restricted cash
    
    
    
    3,351
    
    
    
    
    3,317Due from sale of property
    
    
    
    
    
    
    
    
    1,000Long term investments
    
    
    
    4,132
    
    
    
    
    Deferred exploration and development costs (Note 2)
    
    
    
    
    
    
    
    
    Property, plant and equipment, net
    
    
    
    28,653
    
    
    
    
    18,202Mining property (Note 3)
    
    
    
    53,943
    
    
    
    
    46,478Mine construction in progress
    
    
    
    49,430
    
    
    
    
    25,647Other assets
    
    
    
    1,617
    
    
    
    
    758Total Assets
    
    
    $
    219,972
    
    
    
    $
    200,337Current liabilities
    
    
    $
    17,480
    
    
    
    $
    8,151Long term debt
    
    
    
    1,707
    
    
    
    
    657Asset retirement obligations (Note 4)
    
    
    
    8,660
    
    
    
    
    7,745Total Liabilities
    
    
    
    27,847
    
    
    
    
    16,553Minority interest (Notes 2 and 3)
    
    
    
    3,899
    
    
    
    
    3,367Share capital (Note 6)
    
    
    
    339,524
    
    
    
    
    323,654Contributed capital
    
    
    
    2,040
    
    
    
    
    955Accumulated comprehensive income (Note 1)
    
    
    
    1,316
    
    
    
    
    1,316Deficit (Note 4)
    
    
    
    (154,654
    )
    
    
    
    (145,508
    )Total Shareholders Equity
    
    
    
    188,226
    
    
    
    
    180,417Total Liabilities and Shareholders Equity
    
    
    $
    219,972
    
    
    
    $
    200,337
 89




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(b) Statements of Operations under US GAAP
    
    
    For the Years ended December 31,2004
    
    

    
    2003
    

    
    
    2002Net income under Cdn GAAP
    
    
    $
    2,642
    
    
    
    $
    21,956
    
    
    
    $
    4,856Deferred exploration expenditures expensed per US GAAP (Note 2)
    
    
    
    (5,735
    )
    
    
    
    (5,252
    )
    
    
    
    (529
    )Gain on sale of exploration property (Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,066Effect of mining property depletion
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capitalized mine property acquisition costs expensed for US GAAP (Note 3)
    
    
    
    (6,799
    )
    
    
    
    (4,763
    )
    
    
    
    (7,246
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Net income/(loss) under US GAAP before minority interest
    
    
    
    (9,892
    )
    
    
    
    11,941
    
    
    
    
    5,140Minority interest, as adjusted (Notes 2 and 3)
    
    
    
    746
    
    
    
    
    933
    
    
    
    
    1,612Net income/(loss) under US GAAP before cumulative effect of change in
accounting method
    
    
    
    (9,146
    )
    
    
    
    12,874
    
    
    
    
    6,752Cumulative effect of change in accounting method (Note 4)
    
    
    
    
    
    
    
    
    483
    
    
    
    
    Net Income/(loss) under US GAAP
    
    
    
    (9,146
    )
    
    
    
    13,357
    
    
    
    
    6,752Other comprehensive income  gain on marketable securities (Note 1)
    
    
    
    
    
    
    
    
    (548
    )
    
    
    
    548Comprehensive income/(loss)
    
    
    $
    (9,146
    )
    
    
    $
    12,809
    
    
    
    $
    7,300Basic net income/(loss) per share under US GAAP before cumulative effect of
change in
accounting method
    
    
    $
    (0.066
    )
    
    
    $
    0.116
    
    
    
    $
    0.093Cumulative 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
    
    
    $
    (0.066
    )
    
    
    $
    0.120
    
    
    
    $
    0.093Diluted net income/(loss) per share under US GAAP before cumulative effect of
change in
accounting method
    
    
    $
    (0.066
    )
    
    
    $
    0.109
    
    
    
    $
    0.088Cumulative 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
    
    
    $
    (0.066
    )
    
    
    $
    0.113
    
    
    
    $
    0.088
  (c) Statements of Cash Flows under US GAAP
    
    
    For the years ended December 31,2004
    
    

    
    2003
    

    
    
    2002Cash provided by (used in):Operating Activities
    
    
    $
    575
    
    
    
    $
    19,029
    
    
    
    $
    1,040Investing activities
    
    
    
    (56,263
    )
    
    
    
    (57,993
    )
    
    
    
    (6,517
    )Financing activities
    
    
    
    17,445
    
    
    
    
    108,918
    
    
    
    
    24,984Increase/(Decrease) in cash and cash equivalents for the year
    
    
    
    (38,243
    )
    
    
    
    69,954
    
    
    
    
    19,507Cash and cash equivalent beginning of the year
    
    
    
    89,970
    
    
    
    
    20,016
    
    
    
    
    509Cash and cash equivalents end of the year
    
    
    $
    51,727
    
    
    
    $
    89,970
    
    
    
    $
    20,016
   (d) Notes
 (1) Under US GAAP, marketable securities available for sale are marked to market and gains or
losses are recognized in Other Comprehensive Income until the securities are sold. Under Cdn GAAP,
marketable securities are accounted for at the lower of cost or market. (2) 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 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. 90




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(3) 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 mine
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. (4) Under US GAAP the cumulative effect of applying SFAS 143 Accounting for Asset Retirement
Obligations in January 2003 is included in net income for the period. In Cdn GAAP, under CICA
3110 Asset Retirement Obligations, the cumulative effect of the application of this new standard
was recorded as an adjustment to beginning deficit account. (5) The US GAAP basis in the Rosebel deferred exploration had been expensed in prior periods. Thus
under US GAAP the full amount of the sales price was a gain. In Cdn GAAP, this propertys basis
approximated the sales price and thus there was no material impact on the statement of operations
from the sale. (6) Numerous transactions since the Companys organization in 1992 have contributed to the
difference in share capital versus the Canadian 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  under Canadian 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 Canadian GAAP due to the past
write-offs of certain deferred exploration costs; iii.) gains recognized in Canadian GAAP upon
issuances of subsidiaries shares were not allowed under US GAAP; and iv.) Canadian GAAP requires
that convertible debentures be classified into its component parts as liability and equity  under
US GAAP convertible debentures are classified entirely as debt. (e) Impact of Recently Issued Accounting Standards The adoption of the following recent accounting pronouncements did not have any impact on our
results of operations and financial condition:  
    FASB Interpretation No. 46(R) (FIN 46R), Consolidation of Variable Interest
EntitiesAn Interpretation of ARE No. 51.
    EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments. In November 2004, the FASB issued SFAS No. 151, Inventory CostsAn Amendment of ARB No. 43,
Chapter 4 (SFAS 151). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory
Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that
items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be
recognized as current-period charges regardless of whether they meet the criterion of so abnormal
as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production
overheads to the costs of conversion be based on the normal capacity of the production facilities.
SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted
by us in the first quarter of fiscal 2006, beginning on January 1, 2006. We are currently
evaluating the effect that the adoption of SFAS 151 will have on our consolidated results of
operations and financial condition but we do not expect SFAS 151 to have a material impact. In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS
123R), which replaces SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123) and
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R requires all
share-based payments to employees, including grants of employee stock options, to be recognized in
the financial statements based on their fair values beginning with the first interim or annual
period after June 15, 2005, with early adoption encouraged. The pro forma disclosures previously
permitted under SFAS 123 no longer will be an alternative to financial statement 91




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recognition. We adopted a policy of recognizing the cost of stock options at the beginning of
2003 and as a result anticipate no impact on our consolidated results of operations and financial
condition when Share-Based Payment (SFAS 123R) becomes effective. In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary AssetsAn Amendment of
APB Opinion No. 29, Accounting for Nonmonetary Transactions (SFAS 153). SFAS 153 eliminates
the exception from fair value measurement for nonmonetary exchanges of similar productive assets
in paragraph 2 l(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and
replaces it with an exception for exchanges that do not have commercial substance. SFAS 153
specifies that a nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS 153 is effective
for the fiscal periods beginning after June 15, 2005. We will adopt SFAS 153 in the first quarter
of 2006. We are currently evaluating the effect that the adoption of SFAS 153 will have on our
consolidated results of operations and financial condition but do not expect it to have a
material impact. 22. Quarterly Financial Data  Unaudited First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Total2004Net Sales
    
    $
    19,857
    
    
    $
    16,494
    
    
    $
    13,445
    
    
    $
    15,233
    
    
    $
    65,029Gross Profit
    
    
    8,061
    
    
    
    3,975
    
    
    
    1,029
    
    
    
    3,233
    
    
    
    16,298Net Income/(Loss)
    
    
    5,194
    
    
    
    1,115
    
    
    
    (4,258
    )
    
    
    591
    
    
    
    2,642Basic
Earning/(Loss) Per
Common Share
    
    $
    0.039
    
    
    $
    0.008
    
    
    $
    (0.030
    )
    
    $
    0.004
    
    
    $
    0.0192003Net Sales
    
    $
    15,141
    
    
    $
    12,693
    
    
    $
    18,801
    
    
    $
    17,735
    
    
    $
    64,370Gross Profit
    
    
    5,572
    
    
    
    3,434
    
    
    
    7,838
    
    
    
    9,236
    
    
    
    26,080Net Income
    
    
    3,984
    
    
    
    3,993
    
    
    
    6,095
    
    
    
    7,884
    
    
    
    21,956Basic Earning Per
Common Share
    
    $
    0.041
    
    
    $
    0.037
    
    
    $
    0.053
    
    
    $
    0.063
    
    
    $
    0.1982002Net Sales
    
    $
    9,332
    
    
    $
    9,699
    
    
    $
    8,350
    
    
    $
    11,421
    
    
    $
    38,802Gross Profit
    
    
    2,447
    
    
    
    2,954
    
    
    
    1,762
    
    
    
    1,948
    
    
    
    9,111Net Income
    
    
    1,454
    
    
    
    1,557
    
    
    
    834
    
    
    
    1,011
    
    
    
    4,856Basic Earning Per
Common Share
    
    $
    0.024
    
    
    $
    0.024
    
    
    $
    0.010
    
    
    $
    0.009
    
    
    $
    0.067
 92




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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 We carried out an evaluation,
under the supervision and with the participation of our principal
executive officer and principal financial officer, of the
effectiveness of our disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of
the period covered by this report. Based on this evaluation, the
principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures are effective. We periodically conduct an
evaluation, under the supervision and with the participation of our
principal executive officer and principal financial officer as well
as our Audit Committee, of our internal controls and procedures.
There have been no significant changes in our internal controls or in
other factors that could significantly affect our internal controls
subsequent to the date of the most recent evaluation. As of the date of filing this Form 10-K we are in the process of testing our internal control
procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which
requires an annual management report of the effectiveness of our internal controls over financial
reporting and for our Independent Registered Public Accounting Firm to attest to this report.
Golden Star is eligible for the 45 day extension of time allowed by the SEC for companies of a
certain size to file this report and the attestation. We have elected to utilize this 45 day
extension, and therefore, this Form 10-K does not include these reports. We anticipate completing
this process and filing these reports in an amended Form 10-K, which we intend to file in April
2005. Currently, we are not aware of any material weakness in our internal controls over financial
reporting and related disclosures. 
 PART III 
 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. 
 PART IV 
 ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES  (a)
    The following documents are filed as part of this Report:  1.
    Financial Statements  
    Managements Report
    Auditors Report
    Consolidated Balance Sheets as of December 31, 2004 and 2003
    Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002
    Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2004, 2003 and 2002
    Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002
    Notes to the Consolidated Financial Statements  2.
    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.  (c)
    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; 93




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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)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)4.7
    Form of Underwriters Warrants (incorporated by reference to Exhibit 4.3 to the
Companys Registration Statement on Form S-3/A (Reg. 333-91666) filed on July 15, 2002)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)4.10
    Form of Underwriters Warrant, dated February 14, 2003 (incorporated by
reference to Exhibit 4.2 of the Companys Form 8-K filed on February 14, 2003)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,
200410.3
    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
    Summary of Severance Arrangements between the Company and certain executive
officers (incorporated by reference to Exhibit 10.4 of the Companys Form 8-K filed on
January 23, 2003)10.5
    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)10.6
    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)10.7
    Amended and Restated Employment Agreement with Mr. Peter
Bradford dated April 30, 2004 94




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10.8
    Amended and Restated Employment Agreement with Mr. Allan
J. Marter dated April 30, 200410.9
    Amended and Restated Employment Agreement with
Dr. Douglas Jones dated April 30, 200410.10
    Amended and Restated Employment Agreement with Mr. Bruce
Higson-Smith dated April 30, 200410.11
    Amended and Restated Employment Agreement with Mr. Richard Q. Gray dated April 30, 200410.12
    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)10.22
    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)10.24
    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)10.25
    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)10.26
    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 property10.27
    Mining lease dated June 29, 2001, between the Government of the Republic of
Ghana and Prestea Gold Resources, relating to the Prestea underground property10.28
    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)10.29
    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)10.30
    Letter agreement between the Company and Guyanor Ressource S.A. dated
September 30, 2004 relating to sale of Gross Rosebel Participation Right21
    Subsidiaries of the Company23.1
    Consent of PricewaterhouseCoopers LLP 95




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##### Table of Contents



23.2
    Consent of Colin Jones31.1
    Certification of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    Certification of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    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) 96




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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 to be signed on its behalf by the undersigned, thereunto
duly authorized. GOLDEN STAR RESOURCES LTD.RegistrantBy:
    
    /s/ Peter J. BradfordPeter J. BradfordPresident and Chief Executive OfficerDate:
    
    February 2, 2005
 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. MarterName:
    
    Peter J. Bradford
    
    Name:
    
    Allan J. MarterTitle:
    
    President and Chief Executive Officer
    
    Title:
    
    Senior Vice-President and Chief Financial OfficerDate:
    
    February 2, 2005
    
    Date:
    
    February 2, 2005By:
    
    /s/ James E. Askew
    
    By:
    
    /s/ David L. BumsteadName:
    
    James E. Askew
    
    Name:
    
    David L. BumsteadTitle:
    
    Director
    
    Title:
    
    DirectorDate:
    
    February 2, 2005
    
    Date:
    
    February 2, 2005By:
    
    /s/ David K. Fagin
    
    By:
    
    /s/ Ian MacGregorName:
    
    David K. Fagin
    
    Name:
    
    Ian MacGregorTitle:
    
    Director
    
    Title:
    
    DirectorDate:
    
    February 2, 2005
    
    Date:
    
    February 2, 2005By:
    
    /s/ Michael MartineauName:
    
    Michael MartineauTitle:
    
    DirectorDate:
    
    February 2, 2005
 97




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##### Table of Contents



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)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)4.7
    Form of Underwriters Warrants (incorporated by reference to Exhibit 4.3 to the
Companys Registration Statement on Form S-3/A (Reg. 333-91666) filed on July 15, 2002)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)4.10
    Form of Underwriters Warrant, dated February 14, 2003 (incorporated by
reference to Exhibit 4.2 of the Companys Form 8-K filed on February 14, 2003)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,
200410.3
    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
    Summary of Severance Arrangements between the Company and certain executive
officers (incorporated by reference to Exhibit 10.4 of the Companys Form 8-K filed on
January 23, 2003)10.5
    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)




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##### Table of Contents



10.6
    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)10.7
    Amended and Restated Employment Agreement with Mr. Peter Bradford dated April 30, 200410.8
    Amended and Restated Employment Agreement with Mr. Allan J. Marter dated April 30, 200410.9
    Amended and Restated Employment Agreement with Dr. Douglas Jones dated April 30, 200410.10
    Amended and Restated Employment Agreement with Mr. Bruce Higson-Smith dated April 30, 200410.11
    Amended and Restated Employment Agreement with Mr. Richard Q.
Gray dated April 30, 200410.12
    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)10.22
    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)10.24
    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)10.25
    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)10.26
    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 property10.27
    Mining lease dated June 29, 2001, between the Government of the Republic of
Ghana and Prestea Gold Resources, relating to the Prestea underground property10.28
    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)




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##### Table of Contents



10.29
    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).10.30
    Letter agreement between the Company and Guyanor Ressource S.A. dated
September 30, 2004 relating to sale of Gross Rosebel Participation Right21
    Subsidiaries of the Company23.1
    Consent of PricewaterhouseCoopers LLP23.2
    Consent of Colin Jones31.1
    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)