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UNITED STATES
  SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB

x ANNUAL REPORT UNDER
  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended December 31, 2003

 ̈ TRANSITION REPORT
  UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from _______________ to _______________

0-21777 
  (Commission File Number)

GOLDEN QUEEN MINING CO. LTD.(Name of small business issuer in its charter)

|British Columbia, Canada                                  | 84-1067416         
|--------------------------------------------------------- | -------------------
|(State or other jurisdiction                              | (IRS Employer      
|of incorporation or organization)                         | Identification No.)
|                                                          |                    
|6411 Imperial Avenue, Vancouver, British Columbia, Canada | V7W 2J5            
|(Address of principal executive offices)                  | (Zip Code)         

(604) 921-7570
  (Issuers telephone number)

Securities registered under Section 12(b) of the Exchange Act:
  None

Securities registered under section 12(g) of the Exchange Act:
  Common shares without par value

Check whether the issuer (1) filed all reports required to
  be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
  (or for such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days.   Yes
  x     No  ̈

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained in this form, and no disclosure
  will 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-KSB or any amendment to this Form 10-KSB.  ̈

State issuers revenues for its most recent fiscal year:
  $13,795

State the aggregate market value of the voting and non-voting
  common equity held by non-affiliates computed by reference to the price at which
  the common equity was sold, or the average bid and asked price of such common
  equity, as of a specified date within the past 60 days. (See definition of affiliate
  in Rule 12b-2 of the Exchange Act.): Approximately $21,777,145 as at April 19,
  2004.

State the number of shares outstanding of each of the issuers
  classes of common equity, as of the latest practicable date: 59,967,186 common
  shares as at April 19, 2004.

Transitional Small Business Disclosure Format.   Yes
   ̈       
  No x

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for
  the 2004 annual meeting of stockholders are incorporated by reference into Part
  III of this Form 10-KSB, which definitive proxy statement is to be filed within
  120 days after the end of the registrant's fiscal year ended December 31, 2003.
  If the definitive proxy statement is not filed within the 120 day period, the
  issuer will instead file an amendment to this Form 10-KSB disclosing the omitted
  items under Part III.

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Form 10-KSBTable of Contents

|Part       | Item No. |                                                                                 |   
|---------- | -------- | ------------------------------------------------------------------------------- | --
|           |          |                                                                                 |   
|I          | 1        | Description of Business                                                         | 3 
|           | 2        | Description of Property                                                         | 14
|           | 3        | Legal Proceedings                                                               | 16
|           | 4        | Submission of Matters to a Vote of Security
      Holders                       | 16
|II         | 5        | Market for Common Equity and Related Stockholder
      Matters                  | 16
|           | 6        | Managements Discussion and Analysis
      or Plan of Operation                 | 18
|           | 7        | Financial Statements                                                            | 21
|           | 8        | Changes in and Disagreements With Accountants
      on Accounting and           |   
|           |          | Financial Disclosure                                                            | 21
|           | 8A       | Controls and Procedures                                                         | 21
|III        | 9        | Directors, Executive Officers, Promoters,
      and Control Persons; Compliance |   
|           |          | With Section 16(a) of the Exchange Act                                          | 21
|           | 10       | Executive Compensation                                                          | 21
|           | 11       | Security Ownership of Certain Beneficial
      Owners and Management            | 21
|           | 12       | Certain Relationships and Related Transactions                                  | 21
|IV         | 13       | Exhibits and Reports on Form 8-K                                                | 21
|           | 14       | Principal Accountant Fees and Services                                          | 23
|Signatures |          | 24                                                                             

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PART I

Item 1. Description of Business.

Glossary

Certain terms used in this report are described below.

Advance minimum royalty. Cash royalty payments made
  in advance of production to hold a mining lease. Advance minimum royalties are
  usually but not always credited against production royalties.

Ag.The symbol for silver.

Au.The symbol for gold.

Caldera.A large diameter crater caused by the collapse
  or subsidence of the central part of a volcano, or as the result of a violent
  explosion.

Development stage.Activities related to the preparation
  of a commercially mineable deposit for extraction.

Exploration stage.Activities such as drilling, bulk
  sampling, assaying and surveying related to the search for mineable deposits.

Fault or faulting. A fracture in the earths
  crust accompanied by a displacement of one side of the fracture with respect
  to the other and in a direction parallel to the fracture.

Grade.A term used to assign value to resources and
  reserves, such as troy ounces and troy ounces per ton (oz and oz/ton) or gram
  per tonne (g/t). Grades are reported both in Imperial and SI units in this Form
  10-KSB.

Heap leaching.A gold extraction process involving
  the percolation of cyanide solution through crushed ore heaped on an impervious
  pad or base.

Kriging.A geostatistical method used to determine
  ore reserve grades.

Mineable Ore Reserve. Refers to reserves that are proven
  and probable.

Mineral deposit.A mineral deposit is a mineralized
  body, which has been intersected by a sufficient number of closely-spaced drill
  holes or by underground workings to support a quantity with an average grade(s)
  of metal(s) to warrant further exploration or development activities. A mineral
  deposit is sometimes also referred to as mineralized material or as mineralized
  material inventory. A mineral deposit does not qualify as a commercially
  mineable ore body (reserves) under standards promulgated by the Securities and
  Exchange Commission until a final, comprehensive economic, technical and legal
  feasibility study based upon test results has been concluded.

Ore.A natural aggregate of one or more minerals which,
  at a specified time and place, may be mined and sold at a profit or from which
  some part may be profitably separated.

Reserves.That part of a mineral deposit, which could
  be economically and legally mined at the time of determination. Reserves are
  subcategorized as either proven (measured) reserves, for which (a) quantity
  is computed from dimensions revealed in outcrops, trenches, workings or drill
  holes, and 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 are well-established; or probable (indicated) reserves,
  for which the quantity and grade and/or quality are computed from information
  similar to that used for proven (measured) reserves, yet the sites for inspection,
  sampling and measurement are farther apart.

Resources.The term resources covers mineralization
  and natural material of intrinsic economic interest which has been identified
  and estimated through exploration and sampling and within which reserves may
  subsequently be

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defined by the application of technical, economic, legal,
  environmental, socio-economic and governmental factors. The phrase reasonable
  prospects for economic extraction implies a judgment by a Qualified Person
  in respect of the technical and economic factors likely to influence the possibility
  of economic extraction.

Stripping ratio.The quantity of waste rock in tons
  removed to allow the mining of one ton of ore in an open pit.

Volcanics.Rock composed of clasts or pieces that are
  of volcanic composition.

General Development of Business

Golden Queen Mining Co. Ltd., (the Company) was incorporated
  under the laws of the Province of British Columbia in November 1985 and is engaged
  in the development of its mineral properties (the Property) located
  in the Mojave Mining District, Kern County, California. The Company acquired
  its initial interest in the Property in 1986 and has since acquired additional
  property interests in the area. Work on its Soledad Mountain project (the Project)
  is done by Golden Queen Mining Company, Inc., a California corporation and the
  wholly-owned subsidiary (the Subsidiary) of the Company.

The Company explored for gold and silver on the Property and
  did extensive engineering work on the Project between 1988 and 1999. M3 Engineering
  and Technology Corp. (M3), Tucson completed a feasibility study for the Project
  in 1998 with gold and silver prices of $350/oz and $5.00/oz respectively. The
  mineable ore reserve, prepared as part of the feasibility study, was 48.6million
  tonnes (53.6million tons) with average grades of 0.86 g/t gold (0.025 oz/ton)
  and 12.7 g/t silver (0.371 oz/ton). The Company did additional drilling and
  underground sampling to confirm results and to expand the reserves and resources
  in 1998 and 1999. The feasibility study was revised in-house in 2000.

The most recent mineral resource estimate for the deposit,
  done in 2000, is 122.2million tonnes (134.7million tons) with average grades
  of 0.669 g/t gold (0.020 oz/ton) and 12.213 g/t silver (0.356 oz/ton). The mineable
  ore reserve, also done in 2000, is 57.3million tonnes (63.3million tons) with
  average grades of 0.83 g/t gold (0.024 oz/ton) and 13.5 g/t silver (0.030 oz/ton)
  and this was calculated with gold and silver prices of $300/oz and $5.50/oz
  respectively. This mineable ore reserve is estimated to contain 1,529,000 oz
  gold and 24,870,000 oz silver.

The Company plans to develop the Project as an open pit, heap
  leach operation and cyanide will be used to extract gold and silver from the
  ore. Facilities will be constructed for processing ore at a rate of up to 5.7million
  tonnes (6.3million tons) per year for 11 years, followed by heap detoxification
  and reclamation of the site. It is also expected that a construction aggregate
  business could be developed on the property. The source of raw materials would
  be the finely crushed and rinsed residue from the heap leach operation and rock
  from the waste rock dumps.

The Company had previously reported that it expected to begin
  producing gold and silver from the Project during the second half of 1998, once
  permitting was completed. Because of relatively low gold prices in the late
  1990s and in the early 2000s, however, the Company was not able
  to obtain financing for the Project and the Project was therefore put on hold
  in late 2000. Employees were laid off and costs were reduced to the minimum
  required to maintain rights to the property. The major landowners agreed to
  a 3-year moratorium on property payments or until the price of gold improved.
  The Company recorded an asset impairment loss of $28,547,592 for the year ended
  December 31, 2000. The asset impairment loss reduced the carrying value of fixed
  assets, mineral properties, and other assets to their estimated net realizable
  value.

The Project remained on hold in 2001, 2002 and 2003.

The Company initiated a detailed review of the Project in
  mid-2002 to identify new approaches that would reduce both the capital cost
  to the start of production and future operating costs to ensure a viable mining
  operation at any foreseeable gold and silver prices. Work is also continuing
  on a revised feasibility study and this work is described in the following sections.
  Note that existing designs will be incorporated in the revised feasibility study
  wherever possible.

The registered office of the Company is located at 1200 -
  750 West Pender Street, Vancouver, British Columbia V6C 2T8 and its executive
  offices are located at 6411 Imperial Ave., West Vancouver, BC, V7W 2J5.

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Project Background

The Project is located approximately 8 km (5 miles) south
  of Mojave in Kern County in southern California.

Gold mining on Soledad Mountain dates back to the late 19th
  century. The largest producer was a syndicate managed by Gold Fields America
  Development Co. (Gold Fields), a subsidiary of Consolidated Gold Fields of South
  Africa. This syndicate managed an underground mine and mill on the property
  from 1935 to 1942, when the mine was forced to close by War Production Board
  Order L-208. Production after the war was minimal as costs had increased while
  the price of gold remained fixed at $35/oz until 1973.

The Company was formed in November 1985 to acquire the Subsidiary,
  which had secured, by agreement, a core group of claims on Soledad Mountain.
  The Company has since added to its holdings and currently controls 1,012 hectares
  (2,500 acres) of land.

Exploration & Mineral Resource Estimates

The Soledad Mountain deposit is hosted in a volcanic sequence
  of rhyolite porphyries, quartz latites and bedded pyroclastics that occur on
  a large dome-shaped feature, called Soledad Mountain, along the margins of a
  collapsed caldera. High-grade precious metal mineralization is associated with
  steeply dipping epithermal fissure veins occupying faults and fracture zones
  that cross cut the rock units and generally trend in a north-west direction.
  The veins are contained within siliceous envelopes of lower grade material that
  forms the bulk of the mineral resource.

The primary rock types that will be mined are rhyolite porphyry
  and flow-banded rhyolite, quartz latite porphyry, pyroclastics and siliceous
  vein material. The rock types will be found in different areas and at various
  stages of the life of the mine. Little or no clay occurs in any of the rocks
  and the rocks contain upwards of 80 % Si as SiO2. Rhyolite porphyry
  and flow-banded rhyolite were grouped as a single rock type for the metallurgical
  test work and three primary ore types will therefore be mined and processed
  at various times through the life of the mine.

Extensive programs of mapping, diamond-drilling, reverse-circulation
  drilling and underground diamond-drilling and sampling were carried out between
  1988 and 1999. The information used to develop the geological database has been
  summarized in the table below. This geological database contains 78,194 sample
  intervals.

|Diamond-drilling             | 9,802.1 meter   | 32,127 feet 
|---------------------------- | --------------- | ------------
|Reverse-circulation drilling | 89,912.0 meter  | 294,987 feet
|Old cross-cuts (1930s)       | 6,813.0 meter   | 22,352 feet 
|Underground drilling (1930s) | 4,909.7 meter   | 16,108 feet 
|Recent cross-cuts (1980s)    | 2,156.6 meter   | 7,075 feet  
|TOTAL                        | 113,593.4 meter | 372,649 feet

An initial mineral resource estimate was included in the feasibility
  study done by M3 in 1998. Mineral Resources Development, Inc. (MRDI), San Mateo
  did a detailed due diligence review of the procedures employed and geological
  and deposit models developed by the Company and its consulting engineers and
  submitted a final report in April 2000. This review confirmed that industry-best
  practices were used at each stage.

Mintec, Inc (Mintec), Tucson and Company personnel jointly
  developed the most recent deposit model in March 2000. Linear kriging was used
  to estimate gold and silver grades for all blocks in the model. The mineral
  resource estimate includes all blocks within the limits of the model with no
  assumptions as to economic viability.An independent manual estimate
  of mineralized rock (a cross-sectional, polygonal resource estimate) was also
  done as a check on the block model. It is important to note that the historic
  Gold Fields gold assays were adjusted downwards for this base case
  mineral resource estimate as recommended by MRDI.

The base case mineral resource estimate for three
  gold-equivalent cut-off grades is shown in the table below.

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|Mineral Resource Estimate at Selected Cut-off Grades
|----------------------------------------------------
|Cut-Off Grade g/t                                   
|0.274                                               
|0.686                                               
|1.029                                               
|                                                    
|Cut-Off Grade oz/t                                  
|0.008                                               
|0.020                                               
|0.030                                               

The mineral resource estimate calculated with unadjusted historic Gold Fields gold assays shows an increase in the total gold content of the mineral resource of 9.2 %. This therefore presents an upside case for the Project.

A gold-equivalent grade (AuEq) used for the mineral resource estimate and mine design was calculated as follows:

Gold-equivalent grade or AuEq g/t = Au g/t + {(Ag/R1)*R2}
  g/t 
  R1= Au price in $/oz/Ag price in $/oz; and R2= Ag recovery
  in %/Au recovery in % 
  or R1 = 300/5.50 => 54.545 and R2 = 60.00/78.00 =>
  0.7692

Exploration Potential

Additional geological targets have been identified on Soledad
  Mountain. These targets are generally peripheral (east, south and west) to the
  currently defined mineral resource. In the east, two additional zones of quartz
  stringer veins have been mapped in the hanging wall of the Karma/Ajax vein system.
  Toward the south, an extension of the Silver Queen vein system is open and additional
  vein splits have been mapped on surface. Also, an extension of the Golden Queen
  vein system appears to be offset by an east-west trending fault. Initial drill
  results indicate widths of 8 meters with good gold and silver grades.

The exploration work to date has focused on known fault/vein
  structures central to the mineral resource. The host volcanics associated with
  the mineralization on Soledad Mountain extend further to the south and have
  not been fully evaluated. Further, anomalous gold values have also been found
  in the low volcanic hills protruding from the valley floor and trending north-west
  from Soledad Mountain.

The potential for developing an ore reserve that would be
  mined by underground mining methods is considered to be good and the potential
  at depth remains untested.

A number of areas have been targeted for further exploration
  and this will depend upon the availability of funds.

Mine Design

Mintec and Company personnel also did the most recent mine
  design in 2000. Gold and silver prices of $300/oz and $5.50/oz respectively
  were used to develop an ultimate pit shell with standard modeling techniques.
  A total of seven phases of mine development were defined within this shell.
  Detailed waste rock removal and ore production schedules and a waste rock disposal
  plan were prepared.

The deposit model allows for dilution during mining as Mintec
  believes that the approach used to develop the model was adequate to take dilution
  into account for ore reserve reporting and mine planning purposes.

Seegmiller International, Salt Lake City did slope stability
  analyses and Golder Associates Inc., Denver analyzed the stability of the waste
  rock dumps.

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The ore that will be mined as per the most recent mine design
  is 57.3million tonnes (63million tons) with grades of 0.83 g/t gold (0.024 oz/ton)
  and 13.5 g/t silver (0.39 oz/ton) with an average stripping ratio of 3.5 to
  1.0. This mineable ore reserve is estimated to contain 1,529,000 oz of gold
  and 24,870,000 oz of silver.

It is significant that at gold and silver prices of $300/oz
  and $5.50/oz respectively, only 46.7 % of the mineral resource is included in
  the mineable ore reserve. There is therefore a significant potential for a longer
  mine life at higher gold and silver prices. It is further expected that mineralized
  veins that continue into the walls and floor of the open pits, can be mined
  by underground mining methods and this may add some higher-grade ore at times.

Open Pit Operation

The operation will be an open pit operation.

A contractor will do the mining for the first two years of
  production and proposals will be sought from a number of contractors. The Company
  will purchase the necessary equipment to do the mining from the third year of
  production onwards.

Ore-from-waste separation will require special attention to
  ensure that overall grade projections are met.

Ground water has been reported only in the deeper historic
  underground mine openings and no seepage of water into the open pit is expected.
  Underground mine openings will be encountered from time-to-time during open
  pit mining and this will be allowed for in the detailed mine planning.

Pipe Conveyor

The current mine design accepts a loaded downhill ore haul
  to the crushing-screening plant for the life of the mine. The intent is now
  to replace the trucks with a pipe conveyor for conveying the ore to the crushing-screening
  plant with a possible significant reduction in both mine capital and operating
  costs.

Pipe conveyor technology is well proven in practice with upwards
  of 200 installations in Europe. Regenerative braking is typically used in all
  loaded downhill applications and the power generated would provide a portion
  of the power required elsewhere in the Project.

Koch Transporttechnik Ges.m.b.H., Vienna, Austria has submitted
  a proposal for a pipe conveyor for the Project based upon a site layout prepared
  in-house in 2003.

Engineering work to confirm the feasibility of using a pipe
  conveyor to convey the ore is currently underway.

Mineralogy, Process Development & Flow Sheet

Studies done show that gold is present as native gold and
  electrum ranging in size from <10 micron to >150 micron. A semi-quantitative
  SEM-EDX analysis of the electrum indicates a silver content of up to 25%. Silver
  is also present as acanthite (Ag2S) with some native silver, pyrargyrite
  (3Ag2S·Sb2S3) and polybasite (9Ag2S·Sb2S3).
  Multi- element x-ray fluorescence analyses show only trace quantities of mercury.

Test work done on Soledad Mountain ores from 1989 to 1999
  shows that these ores are readily amenable to heap leaching provided the ore
  is crushed and/or ground to relatively small sizes. A range of parameters required
  to design a heap leach operation, such as agglomerate strength, percolation
  rate and the use of cyanide and reagents, were also determined.

It was proposed to crush and screen ore to 100 % - 8 mesh
  or 100 % - 2.37 mm and a four-stage crushing and screening plant using vertical
  shaft impact crushers (VSI) in the third and fourth crushing stages was designed
  by M3 for the Project in 1998. An in-house review done in 2002 provided new
  insights into the test results and an alternative flow sheet was developed in
  late 2002 based upon the use of a high-pressure grinding roll (HPGR) as the
  key equipment for sizing the ore. Signet Engineering Pty. Ltd., Perth, Australia
  has extensive experience in the application of the HPGR and has reviewed and
  agrees with the flow sheet concepts.

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Why HPGR?

- Indications are that micro-fracturing of particles in
      the HPGR will give equal or higher recoveries in a heap leach operation.
- Test work also showed that ore crushed in the HPGR gave
      stronger agglomerates than ore crushed in the VSI.
- The HPGR is considerably more energy-efficient than a
      conventional crusher and
- The HPGR can provide dramatically lower capital costs
      than conventional crushers and screens.

HPGR Tests 2003

A confirmation HPGR test was required to provide the following:

- The design parameters to both size the equipment and
      determine the motor sizes for the HPGR;
- The target particle size distributions for the full-scale
      operation and
- Information to finalize the flow sheet, e.g. the need
      to recycle edge material

A sample of rhyolite ore was collected for the HPGR test in
  July 2003. This consisted of a total of eight drums of rock from four different
  locations. In addition, hand specimens were collected for a secondary crusher
  test and for unconfined compressive strength and point load tests. The sample
  was delivered to McClelland Laboratories, Inc. (MLI), Sparks who crushed the
  sample to 100 % passing 32 mm. The sample was shipped by airfreight to two HPGR
  manufacturers in Germany where the actual HPGR tests were done in September
  2003.

The crushed samples were returned to MLI for confirmation
  leach test work.

Confirmation Leach Test Work

Fifteen bottle roll tests were completed by MLI on one set
  of HPGR test samples. The absolute gold and silver recoveries obtained were
  higher by 6.3 % and 5.6 % respectively than the historic recoveries obtained
  using similar test procedures on the same ore type.

MLI has just completed a set of bottle roll tests with higher
  cyanide concentrations to determine the effect of higher cyanide concentrations
  on silver recoveries.

Three column leach tests have also been completed after 104
  days of leaching and final gold and silver recoveries are expected by mid-April.
  One further column leach test is now underway to evaluate the effect of a finer
  particle size distribution on percolation rates and to assess the need for an
  agglomeration drum in the circuit.

A test is being done on the residues from one of the confirmation
  leach tests to determine the percolation rates under load and the results of
  this test will be used to confirm heap height.

Conclusions

The 2002 flow sheet is now being used for the next phase of
  detailed design with only minor changes. A Request For Proposal for a commercial
  HPGR was prepared and submitted to two companies that manufacture the HPGR in
  Germany on February 10, 2004. Both companies have now submitted their detailed
  proposals and these are currently being evaluated.

The crushing-screening circuit has considerable flexibility
  built into it and crusher settings and HPGR operating pressures can be changed
  for different ore types. The adjustments in various settings can be made on
  an as-required basis based upon actual operating experience for optimum leach
  performance.

Work is underway on a detailed site layout and this is compact
  when compared to the site layouts included in previous feasibility studies.
  A more compact layout means that site preparation will be significantly reduced.

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Control of fugitive dust will be a key element in the design
  of the crushing-screening plant. Only a limited number of transfer points need
  to be addressed as indicated in the 2003 flow sheet and this will make dust
  control manageable. Dust will be controlled by a water mist system in the primary
  crushing circuit and collected in a central, dry bag dust collection system
  in the secondary crushing and screening plant. Individual dry dust collectors
  will be used on the cement silo.

Gold & Silver Recoveries

Detailed analysis of the test work done between 1989 and 1999
  shows recoveries for gold and silver of 80% and 65% respectively can be projected
  for the heap leach operation. It is expected that these recoveries will be confirmed
  by the confirmation column leach tests that have just been completed.

Merrill-Crowe Plant & Assay Laboratory

Gold and silver are typically recovered in a heap leach by
  dissolution in a dilute cyanide solution and then by precipitation with zinc
  or adsorption on activated carbon. The zinc precipitation process, referred
  to as the Merrill-Crowe process after its developers, is used to recover gold
  and silver when the silver to gold ratio in solution is greater than 10 to 1.
  The silver to gold ratio is expected to average 15:1 for the Project and a Merrill-Crowe
  precipitation plant will therefore be required. The process is highly efficient
  and recoveries in the plant typically range upwards of 98%.

A detailed design for a Merrill-Crowe plant that will include
  the detailed capital and operating cost estimates is currently being done by
  Summit Valley Equipment & Engineering, Inc., Salt Lake City.

The detailed design of an assay laboratory is also being done
  by an independent consulting engineer.

Heap Leach Pads & Solution Handling & Storage

The detailed pad design, which includes solution storage,
  was done by Golder Associates Inc., Denver.

The system has been designed for zero discharge. Leach solutions
  will be contained within the heaps and the liner protection fill. The first
  pad to be constructed will be located on the northern slope of Soledad Mountain.
  A second pad will be located on the western slope if required. Each pad will
  be constructed as a side hill pad with a perimeter dike to support the toe of
  the heap. The pads have been designed as dedicated pads, i.e. ore will be stacked,
  leached, rinsed and left in place on the pads for final reclamation unless the
  rinsed sand can be sold as aggregate.

- Pads 1 & 2 have been designed to receive 32.3million
      t and 19.5million t of ore respectively;
- Pad 1 will have an area of 585,000 m2with
      4 cells to be constructed in 3 phases;
- Pad 2 will have an area of 372,000 m2with
      3 cells to be constructed in 3 phases;
- Lifts will be 10.7 m in height;
- Heaps will be constructed to an ultimate height of up
      to 61 m and will be constructed with slopes of 2H:1V;
- The design allows for both solution storage and a 100-year,
      24-hour storm event in the heaps and in the liner protection fill.

Drainage ditches will be constructed to divert runoff around
  the pads.

The pads will be lined with a composite liner consisting of
  a compacted soil liner and a geomembrane. The geomembrane will in turn be covered
  and protected by 45 cm of a crushed liner protection fill that will act as a
  drainage layer. A network of perforated pipes will be installed in the liner
  protection fill. Two vertical turbine pumps will be required for each cell to
  pump the pregnant solution to the Merrill-Crowe plant. Access to the pumps will
  be via a 60 cm diameter perforated steel riser pipe. Provision will be made
  for leak detection and leakage recovery systems.

The design of the pads meets all regulatory requirements.

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QA/QC for the construction of the pads will require extra
  care and this will be provided by an independent consulting engineer with prior
  experience in this particular field.

The heaps will be rinsed prior to closure and closing reclamation
  with a combination of fresh water and recycled water treated with peroxide.

Services

The Project is located approximately 8 km (5 miles) south
  of Mojave. The metropolitan areas of Lancaster/Palmdale and Los Angeles lie
  approximately 48 km and 110 km further to the south. Access to site is from
  State Route 14 and Silver Queen Road, an existing paved county road. The Burlington
  Northern/Santa Fe and Union Pacific/Southern Pacific railroad lines run parallel
  to and just east of State Route 14. Services such as a hospital, ambulance,
  fire-protection, garbage and hazardous waste disposal, schools, motels and housing,
  shopping, airport and recreation are available in Mojave and its surroundings.
  Telephone service is currently available on site.

Water Supply

A make-up water supply will be required and groundwater will
  be used.

A detailed evaluation of the available groundwater was done
  by WZI Inc., Bakersfield in 1996. As many as 35 wells have been drilled in the
  greater Project area in the past. Records for some of these wells plus step
  rate test data from production well #1 drilled by the Company indicate that,
  initially, two production wells can provide the maximum estimated water requirement
  of 170 m3/h (748 gallons per minute). Production well #1 is located
  approximately 2 km north of the Project. A second production well will be drilled
  and equipped and a third well can be drilled and equipped in the future if required.

A water sample taken from production well #1 indicated that
  groundwater can be used in the heap leach process without pre-treatment.

Solution storage in the heap is expected to reduce loss of
  water due to evaporation.

Power Supply

Power is currently available on site. Power for the Project
  will be supplied via a 12.5 kV line to be constructed by the local utility.

Offices & Workshop/Warehouse

All services required for a successful mining operation such
  as an office and a workshop and warehouse will be constructed.

Project Management & Operating Manpower

A management team will be assembled in Mojave to manage the
  Project.

The total manpower complement will not exceed 150 once the
  mine is in full production. Skilled personnel will be available locally as two
  heap leach operations have recently closed in the area.

Aggregate

It is expected that a construction aggregate business can
  be developed based on the location of the Project in southern California with
  close proximity to major highways and railway lines. The source of raw materials
  would be the finely crushed and rinsed residue or sand from the heap leach operation
  and rock from the waste rock dumps. The leached residue or sand can find a market
  in "Superpave" asphalt mixtures and as concrete sand. The waste

10

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rock can be classified into a range of products such as riprap,
  crushed stone and gravel. Test work to confirm the suitability of these materials
  for use as aggregate was done in 1998 and 1999.

It is important to note that both the sand and waste rock
  would be produced as by-products from a mining operation. This would give the
  Project an economic advantage as an aggregate producer by comparison to producers
  that have to mine rock to produce aggregate. It has also become increasingly
  difficult to permit new aggregate operations in California in recent years and
  that would be a further advantage for the Project.

The strategy that is being pursued is that the Company will
  not invest directly in or develop an aggregate business as owner/operator but
  expects to participate financially in the production and sale of aggregate via
  royalty payments. Such a stream of royalty payments could have a significant
  impact on operating cash flows and support the Project in times of possibly
  lower gold and silver prices.

The Company is actively seeking a major aggregate producerwith experience in the southern California marketsas a partner for
  developing the aggregate business on the Property.

Environmental Issues & Permits

The Project is located on private and federally controlled
  lands in an unincorporated area of Kern County, California. The proposed mining
  activities on these lands are subject to federal, state and local regulations.
  Annual site inspections are conducted to verify the Companys compliance
  with regulations. For the year ended December 31, 2003, the Company was in compliance
  with regulations and received favorable reviews from each of the reviewing agencies.
  These regulations and the Companys compliance efforts are summarized below.

CEQA/NEPA

The project is subject to the California Environmental Quality
  Act (CEQA) and the National Environmental Policy Act (NEPA),
  each of which requires written analysis of proposed mining activities and their
  effect on the physical, biological, social and economic resources of the area.
  This analysis is known under CEQA as an environmental impact report (EIR),
  and under NEPA as an environmental impact statement (EIS).

The Company submitted its combined EIR/EIS to the Kern County
  Planning and Development Department in February 1996, in accordance with a memorandum
  of understanding between Kern County and the Bureau of Land Management (BLM),
  which gave Kern County primary responsibility for the review. The EIR/EIS took
  the form of a combined conditional use permit application, environmental information
  statement, surface mining reclamation plan and plan of operation.

Comments were received in response to the submission on ground
  water quality and quantity, air quality, the effect of development on native
  species of plants and animals, the visual impact of the project and the potential
  hazards associated with transporting supplies and chemicals to the project site.
  These comments were incorporated into a revised EIR/EIS released for public
  comment in June 1997. In September 1997, the Company received a favorable notice
  of determination regarding the EIR/EIS, as well as approval of its conditional
  use permit application and surface mining reclamation plan (required by the
  California Surface Mining and Reclamation Act and applicable Kern County zoning
  ordinances). This was followed in November 1997 by a record of decision from
  the BLM approving the Companys plan of operation under NEPA.

Air Quality

The project lies within the Southeast Desert Air Basin, which
  is under the jurisdiction of the Kern County Air Pollution Control District.
  The district is empowered to regulate stationary sources of air pollution within
  the basin, pursuant to authority granted under the federal Clean Air Act.

The Area is designated as unclassified for PM10
  emissions (that portion of the total suspended particulates less than 10 microns in size) and as a non-attainment area for ozone. The
  typically windy conditions and very dry nature of the area are probably responsible for the high PM10
  background levels recorded at several nearby monitoring stations. On-site air
  sampling was conducted for approximately one year with high background PM10levels found.

11

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Fugitive dust, when combined with the background dust, may
  cause unacceptable levels of PM10 emissions off-site and may represent
  the greatest potential environmental issue. A PM10 level of 44 micrograms
  per cubic meter is projected by computer modeling for a mining rate of 27 million
  tonnes (30 million tons) per year of ore and waste. This level is below the
  California attainment standard of 50 micrograms per cubic meter and the Federal
  standard of 150 micrograms per cubic meter. However, the Company believes that
  it will achieve compliance with applicable standards by a greater margin, as
  the modeling methodology assumes worst case conditions, which are considered
  unlikely to be encountered in actual operations and based on the use by the
  Company of commonly-accepted dust control techniques in all phases of mining
  and crushing and screening. The Company submitted an application to the Kern
  County Air Pollution Control District for authority to construct the project,
  and based upon the dispersion modeling discussed above, the application was
  approved in February 1998.

Water Quality

The Project is situated in the northern portion of the Antelope
  Valley ground water basin and experiences an average annual rainfall of less
  than 14.5 cm (5.7 in.). There are no surface waters of any kind, other than
  the periodic runoff that follows the rare heavy rains that typically occur during
  the winter months. Drainage in the area is controlled by a series of deeply
  incised gullies and channels that ultimately drain to the northwest into the
  Chaffee hydrologic area. The water that does not evaporate will raise the ground
  water levels. No water quality data is available for surface runoff. Ground
  water in the bedrock underlying Soledad Mountain is almost certainly very modest
  in quantity and is restricted to fractures. Groundwater is typically at depths
  of 55 to 61 m (180 to 200 feet).

Water quality data shows that groundwater quality is adequate
  for the process with no pre-treatment.

The Lahontan Water Quality Control Board (the Board) is responsible
  for ensuring compliance with the federal Clean Water Act and Californias
  Porter-Cologne Water Quality Act. The Company submitted an application to the
  Board in June 1997 with all necessary information. The application was reviewed
  and approved at the March 1998 meeting of the Board.

Closure, Reclamation and Bonding

The Company commissioned an independent consulting engineer
  to prepare a closure and reclamation plan for the Project in 1996. This plan
  was submitted to the Kern County Planning and Development Department as part
  of the Companys conditional use permit application. The plan meets the
  requirements of Californias Surface Mining and Reclamation Act, the applicable
  Kern County zoning ordinances and federal requirements designed to prevent degradation
  of federal lands.

The objective of the reclamation plan is to return the site
  to its pre-mining status as wildlife habitat and open space. Under the plan,
  the Company is required to remove all structures, neutralize and dispose of
  leach solutions, re-contour the overburden dumps and leached residue piles,
  rip up or otherwise reclaim access roads, prepare disturbed surfaces for seeding
  and re-plant with native species. Reclaimed slopes must be stable and there
  is no requirement to demonstrate growth. Growth media (generally the top 5 cm
  or 2 inches of cover) will be removed from the waste dump and pad areas during
  construction and stockpiled for closing reclamation. It is expected that the
  growth media will contain most of the seeds necessary and native species will
  self-propagate.

The reclamation plan provides that reclamation of the leached
  residues will begin in the sixth year of the life of the mine and continue for
  approximately four years after mining has ended. Closure requires four steps:
  first, a fresh water rinse is periodically applied to the leached residues to
  aid the natural degradation of the cyanide in solution; next, the leach solution
  is sequentially moved from one active cell to the next to minimize the total
  volume of solution required for the operation; once leaching has ended, any
  remaining solution is chemically neutralized with hydrogen peroxide and sprinkled
  on the surfaces of waste dumps that have been re-sloped. The leached residues
  will finally be covered with a growth-medium and re-vegetated. Small volumes
  of seepage will continue to collect in the low point of each cell and these
  will be pumped out periodically during the post-closure monitoring period and
  sprinkled on surfaces that have been re-vegetated. The pad liners may eventually
  be perforated to allow seepage to the groundwater and this will be done only
  in full agreement with the regulatory authorities.

12

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The Company is required to obtain three bonds for the Project:

- A bond to be held by Kern County designed to cover the
      general reclamation on site.
- A bond to be held by the Board designed to cover the
      neutralization and ultimate disposal of leach solutions.
- An unforeseen events bond to be held by the
      Board designed cover an unforeseen event that could contaminate surface
      or ground water.

The regulatory authorities will determine the value of these
  bonds once the Project proceeds. The Company expects to meet these bonding requirements
  by purchasing surety bonds from one or more insurers. Alternatively, the Company
  may post money market securities such as a certificate of deposit or a bank
  letter of credit in lieu of, or in addition to, such surety bonds.

The Company estimates that the cost of complying with environmental
  requirements will be approximately $3,000,000 at the start of production and
  this will increase to $5,410,000 at the end of the life of the mine.

Environmental, Safety and Health Policy

The Company has prepared an Environmental, Safety and Health
  Policy and a management system to implement this Policy.

Offices and Employees

The Companys principal executive offices are located
  in Vancouver at 6411 Imperial Ave., West Vancouver, BC, V7W 2J5, Canada. The
  Company employs a part-time accountant in Mojave.

Miscellaneous

All of the Companys directors, Edward G. Thompson, Chester
  Shynkaryk, Gordon C. Gutrath, and H. Lutz Klingmann are residents of Canada.
  Consequently, it may be difficult for United States investors to effect service
  of process within the United States upon these directors, or to realize in the
  United States upon judgments of United States courts predicated upon civil liabilities
  under the United States securities laws. A judgment of a U.S. court predicated
  solely upon such civil liabilities would probably be enforceable in Canada by
  a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction,
  as determined by the Canadian court, in the matter. There is substantial doubt
  whether an original action could be brought successfully in Canada against any
  of such directors predicated solely upon such civil liabilities.

Risk Factors

The following are some of the risk factors that apply to an
  investment in the Company. These risk factors should be read in conjunction
  with disclosure on business and risks appearing in this document and elsewhere.

The Likelihood of Continued Losses from Operations

The Company has no revenue from mining operations and has
  incurred losses from inception through December 31, 2003 of approximately $34,568,000.
  This trend is expected to continue for at least the next year and is expected
  to reverse only if, and when gold is produced from the Soledad Mountain Project.
  At December 31, 2003, the Company held $110,871 in cash and cash equivalents.

Property Interests are not in Good Standing

The Company ceased making payments to landowners in October
  of 2000, and negotiated moratorium agreements with various landowners. In the
  meantime, the Company is technically in default under the payment provisions
  of the agreements with landowners and sellers in cases where no moratorium has
  been negotiated.

Ability to Continue as a Going Concern

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The Company has had no revenues from operations since inception,
  has a deficit accumulated during the development stage of $35,153,852 and has
  been unable to successfully renegotiate payment schedules with all landowners.
  The Company has recently obtained the necessary financing to complete current
  work programs. Substantial doubt remains however about the Companys ability
  to continue as a going concern. Our auditors have made reference to the substantial
  doubt about the Companys ability to continue as a going concern in their
  audit report on our financial statements.

The ability of the Company to obtain financing and adequately
  manage its expenses, and thus maintain solvency, is dependent on equity market
  conditions, the ability to find a joint venture partner, the market for precious
  metals or the willingness of other parties to lend the Company money. While
  the Company has been successful at certain of these efforts in the past, there
  can be no assurance that future efforts will be successful. These financial
  statements do not reflect the outcome of these uncertainties.

The Need for Significant Additional Financing

The Company estimates that it will need approximately $44,000,000
  in additional financing to put the Project into production; an anticipated $36,000,000
  will be used for capital expenditures and $8,000,000 will be used as working
  capital. These estimates are based on certain assumptions contained in the Project
  Summary & Cash Flow Projections, which was prepared by the Company in January
  2003 and, which is more fully discussed in Part I, Item 1 of this report. The
  Company expects to finance development from additional sales of common stock,
  from bank or other borrowings or, alternatively, through a joint venture with
  another mining company. However, the Company has no commitment for bank financing
  or for the underwriting of additional stock, and it is not a party to any agreement
  or arrangement providing for a joint venture. Whether and to what extent Project
  financing can be secured will depend on a number of factors, not the least of
  which are gold and silver prices. Gold and silver prices fluctuate widely and
  are affected by numerous factors beyond the Company's control, such as the strength
  of the United States dollar and foreign currencies, global and regional demand,
  and the political and economic conditions of major gold producing countries.
  Gold and silver prices have recently traded in the $420/oz and $8.00/oz range
  and the Company believes that financing for the Project can be secured if gold
  and silver prices remain firmly above $400/oz and $7.50/oz respectively. It
  may however not be economical for the Company to take the Project to production
  at lower gold and silver prices.

Risks and Contingencies Associated with the Mining Industry
  Generally

In addition to the risks noted above, the Company is subject
  to all of the risks inherent in the mining industry, including environmental
  risks, fluctuating metals prices, industrial accidents, labor disputes, unusual
  or unexpected geologic formations, cave-ins, flooding and periodic interruptions
  due to inclement weather. These risks could result in damage to, or destruction
  of, mineral properties and production facilities, personal injury, environmental
  damage, delays, monetary losses and legal liability. Although the Company maintains
  or can be expected to maintain insurance within ranges of coverage consistent
  with industry practice, no assurance can be given that such insurance will be
  available at economically feasible premiums. Insurance against environmental
  risks (including pollution or other hazards resulting from the disposal of waste
  products generated from exploration and production activities) is not generally
  available to the Company or other companies in the mining industry. Were the
  Company subjected to environmental liabilities, the payment of such liabilities
  would reduce the funds available to the Company. Were the Company unable to
  fund fully the cost of remedying an environmental problem, it might be required
  to suspend operations or enter into interim compliance measures pending completion
  of remedial activities.

Item 2. Description of Property

Land Ownership and Mining Rights

The Property is located west of California State Highway 14
  and largely south of Silver Queen Road in Kern County, California, covering
  all of section 6 and portions of sections 5, 7 and 8 in Township 10 North, Range
  12 West; portions of sections 1 and 12 in Township 10 North, Range 13 West;
  portions of section 18 in Township 9 North, Range 12 West and portions of section
  32 in Township 11 North, Range 12 West, all from the San Bernardino Baseline
  and Meridian. The Project facilities will be located in Section 6 in Township
  10 North, Range 12 West. The area that will be disturbed by the Project is a
  497-hectare (1,228 acres) contiguous block within an area of approximately 1,012

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hectares (2,501 acres) held by the Company. The Property is
  comprised of 33 patented lode mining claims, 123 unpatented lode mining claims,
  one unpatented placer mining claim, one patented mill site claim, six unpatented
  mill site claims and 379 hectares (937 acres) of fee land.

The Company holds the Property under a variety of agreements
  with 60 property owners. These agreements include 56 mining leases, two exploration
  agreements with options to purchase and two purchase agreements that are in
  various stages of completion. These agreements were entered into during a six-year
  period from 1990 - 1996, at a total cost to the Company of approximately $3,800,000.

The Company ceased making payments to landowners, according
  to the terms of the various agreements, in October 2000 and has since been in
  the process of negotiating moratorium agreements with its landowners. The Company
  is technically in default on the agreements, which have not been paid or re-negotiated.
  While the Company has successfully negotiated moratorium agreements with these
  landowners in the past and has reached new agreements with many of the landowners,
  there can be no assurance that the remaining agreements will be successfully
  renegotiated in the future.

The basis of the moratorium agreements is a suspension of
  advance minimum royalty payments and all other payments for a period of three
  years, or until the Company secures production financing, whichever is sooner.
  As of December 31, 2003, 54% of the agreements, constituting approximately 86%
  of the mineral rights of the project, were successfully re-negotiated. Based
  on personal contacts with each landowner from October 2000 through February
  2001, management believes that a variety of factors, other than non-approval
  of the moratorium request, are the cause for a lack of response from the remaining
  landowners. Landowners will be contacted in 2004.

The costs to the Company for all land agreements for the years
  ending December 31, 2000, 2001, 2002 and 2003 were $344,000, $69,000, $58,000
  and $65,195 respectively. The estimated cost for all land agreements is $419,000
  in 2004.

The future of the Company is dependant upon maintaining control
  of the Property. Without land and mineral rights, the Company has no basis for
  continuing. While each and every property on Soledad Mountain has its own value
  and unique purpose in the overall mine plan, the feasibility of the Project
  depends on the Companys ability to maintain control of the Property as
  a whole.

The Company commissioned a formal title summary covering the
  Property, which was received in August and September 1996. It was updated in
  February 1998 and again in March 1999. With such a complicated ownership history,
  as is common in historic mining districts, it is typical for title problems
  to exist with respect to properties within the project area. On May 15, 1999
  the Company obtained a quiet title judgment, which resolved a majority of the
  title questions. The Company has determined that the remaining title questions
  do not present a material threat to the Project, however the Company is attempting
  to resolve the title issues through its California counsel, a law firm with
  experience in title matters relating to properties in the Mojave Mining District.

A comprehensive land survey of the Property has not yet been
  undertaken. Since 1993, the whole of the Property and much of the immediate
  surrounding area has been segregated from appropriation under the United States
  General Mining Law of 1872.

The various property purchase agreements to which the Company
  is a party to, typically require payment by the Company of the purchase price
  over an extended period of time. In most cases, a somewhat larger advance payment
  was made at the time the agreement was entered into and, in some instances,
  a larger payment is due at the time the purchase is completed. Certain of the
  property purchase agreements require the payment by the Company of royalties
  upon the commencement of commercial production. As of December 31, 2003, $761,602
  remained to be paid by the Company under these various property purchase agreements;
  $751,542 of this amount is due in 2004.

The Company is party to a number of leases, which typically
  require an advance minimum royalty payment. With one exception, the Company
  will receive a credit for the advance minimum royalty payments once production
  has started. Most of the royalties are of the net smelter return (NSR)
  type and are based on a sliding scale, with the percentage amount of the royalty
  a function of the ore grade on the particular property to which the royalty
  relates. Typically, the royalties are 5% NSR or less, with an expected average
  of 3.1%. A number of the agreements provide for an additional royalty if non-mineral
  commodities, such as aggregates, are produced and sold.

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In addition to these agreements, the Company is also obligated
  under the terms of an April 1, 1995 option agreement. The Company acquired,
  through its Subsidiary, an option to purchase all of the issued and outstanding
  shares of a privately held California corporation, which holds an interest in
  a previously non-contracted tract of land located in the area. The option called
  for an initial, non-refundable, payment of $100,000 in exchange for access to
  the property, to evaluate the presence of mineral reserves, for a period of
  nine months. At the end of the nine-month period, the Company chose to exercise
  its option to purchase the shares of the corporation, by making the initial
  purchase payment of $250,000. This was followed by a second payment of $500,000
  on July 1, 1997. An additional $750,000 was due upon reaching sustained production
  or July 1, 1999, whichever came first. In June 1999, the Subsidiary and the
  shareholders of the private corporation signed an amendment to the original
  stock purchase agreement. The amendment provides that if the full purchase price
  of $1,600,000 was not made on or before July 1, 1999, all rights of the Subsidiary
  to purchase the stock would terminate, unless the Subsidiary paid $75,000, which
  would extend the termination date to July 1, 2000. If, on or before July 1,
  2000, the Subsidiary paid an additional $75,000, the termination date would
  be extended to July 1, 2001. These additional payments are to extend the option
  period and will not apply to the balance of the $1,600,000 purchase price. In
  addition, the amendment provides for the payment of the balance of the purchase
  price upon the earlier of a determination of sustained production, or the termination
  date, which may be extended to July 1, 2001. On July 7, 2000, the Subsidiary
  made the required $75,000 payment to extend the termination date to July 1,
  2001. The Company anticipated its inability to make the extension payment
  scheduled for July 1, 2001 and on August 10, 2001, a second amendment to the
  original stock purchase agreement was signed. This amendment suspends all terms
  and obligations of the Company as set forth in the original agreement and the
  first amendment. Further, the second amendment requires the Company to recognize
  a liability of $35,000, on or before July 1, 2001 and on each successive anniversary
  date for up to five years. In order to extend the termination date of the agreement,
  $10,000 of the liability is to be paid in cash, and the balance of $25,000 is
  to be accrued, without interest, payment of which is deferred until the final
  stock purchase payment is made. On July 11, 2001, July 1, 2002 and July 1, 2003
  the Company made the required payments of $10,000, accrued liabilities of $25,000,
  and extended the termination dates of the agreement to July 1, 2002, July 1,
  2003 and July 1, 2004 respectively. The Company has no legal obligation to continue
  making payment and cannot perfect its rights, as a shareholder of the corporation,
  until full payment under the option is made. Upon commencement of commercial
  production, the Company will pay a royalty of 1% of gross smelter returns for
  a period of up to 60 years, not to exceed $60,000,000.

Item 3. Legal Proceedings

To the best of our knowledge, there are no legal actions pending,
  threatened or contemplated against us.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Companys
  shareholders during the fourth quarter of 2003.

PART II

Item 5. Market for Common Equity, Related Stockholder Matters
  and Small Business Issuer Purchases of Equity Securities.

Market and Trading Price

The common shares of the Company are listed and traded on
  The Toronto Stock Exchange under the trading symbol GQM. The high
  and low sales prices of the common stock as reported by The Toronto Stock Exchange
  for the calendar periods indicated are set out in the table below. All prices
  are reported in Canadian dollars.

|Year ended December 31 | High           |       | Low |       | 
|---------------------- | -------------- | ----- | --- | ----- | 
|2003                   | Fourth Quarter | $0.76 |     | $0.45 | 
|                       | Third Quarter  | 0.77  |     | 0.34  | 
|                       | Second Quarter | 0.61  |     | 0.25  | 
|                       | First Quarter  | 0.95  |     | 0.55  | 
|2002                   | Fourth Quarter | 0.39  |     | 0.13  | 
|                       | Third Quarter  | 1.12  |     | 0.26  | 
|                       | Second Quarter | 0.90  |     | 0.55  | 
|                       | First Quarter  | 0.90  |     | 0.35  | 

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As of December 31, 2003 there were 263 holders of record of
  the Companys common shares and an undetermined number of beneficial holders.

Dividends

The Company has not declared dividends on its common shares
  in the last two fiscal years.

Securities Authorized for Issuance Under Compensation Plans

The following table sets forth information as at December
  31, 2003 respecting our compensation plans under which shares of our common
  stock are authorized to be issued.

|Plan Category                                              | Number of securities to be issued upon
        exercise of outstanding options, warrants and rights(a) | Weighted-average exercise price of outstanding
      options, warrants and rights
        
      (b) | Number of securities remaining available
      for future issuance under equity compensation plans (excluding securities
      reflected in column (a))
        
      (c)
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     | 1,540,000                                                                                              | CAD$0.45 (approx. USD$0.34)                                                                          | 1,660,000                                                                                                                                                                 
|Equity compensation plans not approved by security holders | N/a                                                                                                    | N/a                                                                                                  | N/a                                                                                                                                                                       
|Total                                                      | 1,540,000                                                                                              | --                                                                                                   | 1,660,000                                                                                                                                                                 

Sales of Unregistered Securities

On July 8, 2003, the Company issued convertible promissory
  notes to three placees, namely Landon Clay, Jonathan Schwartz and David Lu,
  for proceeds of $375,000. The convertible promissory notes are due on demand
  made on or after July 9, 2004 and bear interest at the rate of 6.5 per cent
  per annum payable on demand. The notes are convertible into 1,630,435 units
  each consisting of one common share and one non-transferable detachable share
  purchase warrant entitling the holder to purchase one additional common share
  of the issuer at an exercise price of $0.32 per share, exercisable up to and
  including July 9, 2005. Interest will be waived on conversion. The notes were
  issued pursuant to Rule 506 of Regulation D, which provides a safe harbour from
  the requirement to register the securities under the U.S. Securities Act
  of 1933. The notes, and the common shares and warrants underlying the notes,
  are subject to restrictions on resale pursuant to Rule 144 promulgated under
  the U.S. Securities Act of 1933.

In April 2002, the two shareholders, namely Landon Clay and
  Harris Clay, exercised warrants to acquire 1,520,836 common shares at $0.16
  per share netting $243,334 for the Company. These transactions were exempt from
  registration pursuant section 4(2) of the U.S. Securities Act of 1933,
  as the Company believes the offer and sale did not involve any public offering.
  In particular, the purchasers were at all relevant times affiliates of the Company
  as a result of holding over 10% of the voting shares of the Company.

Purchases of Equity Securities by the Company and Affiliated
  Purchasers

No purchases of the Companys common shares were made
  in the quarter ending December 31, 2003 by either the Company or an affiliated
  purchaser of the Company.

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Item 6. Managements Discussion and Analysis or Plan of Operations

Results of Operations

The Company has not received any revenues from the Project
  and this has been on care and maintenance since 2000. Variations in the level
  of expenses from period to period are a result of the nature, timing and cost
  of activities undertaken during these periods. Financing for the 2001, 2002
  and 2003 expenses was obtained by the sale of common stock of the Company and
  through borrowings. See also Plan of Operations below.

Operating results of the Company are summarized as follows:

|                 | Year Ended        |         | Year Ended        |   | Year Ended        |   | Cumulative Since |         
|---------------- | ----------------- | ------- | ----------------- | - | ----------------- | - | ---------------- | --------
|                 | December 31, 2003 |         | December 31, 2002 |   | December 31, 2001 |   | Inception        |         
|Asset Impairment | $                 | -       |                   | $ | -                 |   | $                | -       
|General and      |                   |         |                   |   |                   |   |                  |         
|administrative   |                   |         |                   |   |                   |   |                  |         
|expense          | $                 | 507,407 |                   | $ | 315,097           |   | $                | 363,809 
|Interest expense | $                 | 250,904 |                   | $ | 60,192            |   | $                | 67,516  
|Interest income  | $                 | 45      |                   | $ | 254               |   | $                | 6,753   
|Net loss         | $                 | 744,516 |                   | $ | (347,603          | ) | $                | (262,059

The Company recorded an asset impairment loss of $28,547,592
  for the year ended December 31, 2000. The asset impairment loss reduced the
  carrying value of fixed assets, mineral properties, and other assets to their
  estimated net realizable value.

The Company incurred general and administrative expenses of
  $507,407 for the year ended December 31, 2003, as compared to $315,097 for the
  year ended December 31, 2002. Interest expense for the year ended December 31,
  2003 of $250,904 increased from $60,192 for the year ended December 31, 2002
  as a result of interest accrued for convertible promissory notes and the amortization
  of debt discount. Previously, interest on these borrowings was capitalized.
  Interest income for the year ended December 31, 2003 was $45 as compared to
  $254 for the year ended December 31, 2002. The decrease is due to the Companys
  lower average cash balance and lower interest rates. The Company incurred a
  net loss of $744,516 for the year ended December 31, 2003, as compared to a
  net loss of $347,603 for the year ended December 31, 2002.

Liquidity and Capital Resources

The Company has had no reported revenues from operations since
  inception, has not completed the development stage and the Project currently
  remains on care and maintenance. During the period from inception through December
  31, 2003, the Company has used $4,909,480 in operating activities, primarily
  as a result of cumulative losses of $34,567,614. During the same period, the
  Company has used $29,948,094 in investing activities; these consisted of $28,681,409
  in expenditures related to the Project and fixed asset purchases of $1,266,685.
  These operating and investing activities were financed by net borrowings of
  $3,013,884 under various long-term debt arrangements and from the sale of $31,954,559
  of common stock. The Company recorded an asset impairment loss of $28,547,592
  for the year ended December 31, 2000. The asset impairment loss reduced the
  carrying value of fixed assets, mineral properties and other assets to their
  estimated net realizable value.

The Company held $110,871 in cash and cash equivalents at
  December 31, 2003.

As discussed below under Plan of Operations, significant
  additional funds will be needed to take the Project to production. These funds
  are expected to come from additional sales of common stock and from bank or
  other borrowings. Alternatively, the Company may decide to enter into a joint
  development or other similar arrangement with another mining company to develop
  the Project. The Company does not have a commitment for bank financing or for
  the underwriting of additional shares of its common stock and is not party to
  any agreement or arrangement providing for the joint development of the Project.
  Whether and to what extent additional or alternative financing options are pursued
  by the Company will depend on a number of important factors such as the results
  of

18

---

current technical studies, managements assessment of
  the financial markets, the overall capital requirements for development of the
  Project and gold and silver prices. Gold and silver prices fluctuate widely
  and are affected by a number of factors beyond the Companys control, such
  as inflation, the strength of the United States dollar and foreign currencies,
  global and regional demand for gold and silver and the political and economic
  conditions of major gold producing countries. Indications are that the Project
  will be viable at current gold and silver prices.

Some of the conditions noted above raise substantial doubt
  about the Companys ability to continue as a going concern. As noted above,
  the ability of the Company to obtain financing and adequately manage its expenses,
  and thus maintain solvency, is dependent on equity market conditions, the ability
  to find a joint venture partner, the markets for gold and silver and/or the
  willingness of other parties to lend the Company money. While the Company has
  been successful at certain of these efforts in the past, there can be no assurance
  that current efforts will be successful.

Our auditors have made reference to a substantial doubt about
  the Companys ability to continue as a going concern in their audit report
  on our financial statements.

Year ended December 31, 2003. During the year ended
  December 31, 2003, the Company used $366,535 in operating activities, primarily
  as a result of a $744,516 net loss during the year. Due to the issuance of convertible
  promissory notes and the exercise of options by Directors, the Company received
  $393,900 from financing activities. The Companys cash balance increased
  by $27,365 to $110,871 at December 31, 2003 as the net result of the foregoing.

Year Ended December 31, 2002. During the year ended
  December 31, 2002, the Company used $277,489 in operating activities, primarily
  as a result of a $347,603 net loss during the year. Due to the conversion of
  warrants noted above and the exercise of options by Directors, the Company received
  $271,642 from financing activities. The Companys cash balance decreased
  by $6,147, to $83,506 at December 31, 2002 as a result of the foregoing.

Subsequent to the year ended December 31, 2002, the Company
  raised an additional $4,000,000 in an equity based financing. The proceeds of
  this financing will be applied to the preparation of an updated independent
  feasibility study, completing property acquisitions and working capital.

Plan of Operations

The Company plans to develop the Project as an open pit mine
  and use a cyanide heap leach recovery process. This will include the construction
  of facilities capable of processing ore at a rate of up to 5.76 million tonnes
  (6.35 million tons) per year for a minimum of eleven years, followed by heap
  detoxification and reclamation of the site.

The Company estimates that it will need approximately $44,000,000
  in additional financing to put the Project into production; an anticipated $36,000,000
  will be used for capital expenditures and $8,000,000 will be used as working
  capital. These estimates are based on certain assumptions contained in the Project
  Summary & Cash Flow Projections, which was prepared by the Company in January
  2003. The Company believes that financing for the Project can be secured if
  gold and silver prices remain firmly above $400/oz and $7.50/oz respectively.

The Company estimates that total average operating cost will
  be $5.93/t ($5.39/ton) of ore processed with a stripping ratio of 3.5 to 1.
  The Company also estimates that average annual production rates of 110,000 ounces
  of gold and 1,466,000 ounces of silver can be maintained for eleven years at
  an average cash cost of $204 per ounce of gold after royalty payments and net
  of silver credits.

The Company is also pursuing the development of an aggregate
  construction business based on the location of the Project in southern California
  with close proximity to major highways and railway lines. The source of raw
  materials will be the finely crushed and rinsed residue or sand from the heap
  leach operation and rock from the waste rock dumps. It is important to note
  that both the sand and rock will be produced as byproducts from a mining operation.
  In addition to gold and silver extraction, the Project would have an economic
  advantage in the production of aggregate when compared with other aggregate
  operations that require mining rock to produce aggregate.

At December 31, 2003, the Company had a deferred tax asset
  of approximately $12,490,000, from which the

19

---

Company has provided a 100% valuation allowance as management
  cannot determine that it is more likely than not that the Company will receive
  the benefit of the asset.

Critical Accounting Policies

There are no production, sales or inventory in the conventional
  sense for the Companys development activities. The Companys financial
  position will be dependent upon the extent to which it can develop its properties.
  Such development may take yeas to complete and the amount of resulting income,
  if any, is difficult to determine with any certainty. The sales value of any
  gold and silver produced will largely depend upon factors beyond the Companys
  control such as the future market prices of gold and silver.

As the carrying value and amortization of the mineral properties
  and capital assets is, in part, related to the Companys mineral reserves,
  the estimation of such reserves will have a significant impact on the Companys
  financial position and results of operations.

New Accounting Pronouncements

Statement of Financial Accounting Standards No. 146, Accounting
  for Costs Associated with Exit or Disposal Activities (SFAS No.
  146) provides guidance on the recognition and measurement of liabilities
  for costs associated with exit or disposal activities. The provisions of this
  Statement are effective for exit or disposal activities that are initiated after
  December 31, 2002.

In November 2002, the FASB issued FASB Interpretation (FIN)
  No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees,
  Including Indirect Guarantees of Indebtedness of Others, which addressed
  the accounting for and disclosure of guarantees. Interpretation 45 requires
  a guarantor to recognize a liability for the fair value of a guarantee at inception.
  The recognition of the liability is required even if it is not probable that
  payments will be required under the guarantee. The disclosure requirements are
  effective for interim and annual financial statements ending after December
  15, 2002. The initial recognition and measurement provisions are effective for
  all guarantees within the scope of Interpretation 45 issued or modified after
  December 31, 2002.

The implementation of these new standards did not have a material
  effect on the Companys financial statements . In January 2003, the FASB
  issued FIN No. 46, Consolidation of Variable Interest Entities, an Interpretation
  of ARB 51. The primary objectives of FIN No. 46 are to provide guidance
  on the identification of entities for which control is achieved through means
  other than voting rights (variable interest entities or VIEs) and
  how to determine when and which business enterprise should consolidate the VIE.
  This new model for consolidation applies to an entity for which either: (1)
  the equity investors do not have a controlling financial interest; or (2) the
  equity investment at risk is insufficient to finance that entitys activities
  without receiving additional subordinated financial support from other parties.
  In addition, FIN No. 46 requires that both the primary beneficiary and all other
  enterprises with a significant variable interest in a VIE make additional disclosures.
  As amended in December 2003, the effective dates of FIN No. 46 for public entities
  that are small business issuers, as defined (SBIs), are as follows:
  (a) For interests in special-purpose entities; periods ended after December
  15, 2003; (b) For all VIEs created before January 31, 2003: periods ending after
  December 15, 2004; and (c) For all VIEs created after January 31, 2003. FIN
  46 is applicable immediately. The December 2003 amendment of FIN No. 46 also
  includes transition provisions that govern how an SBI which previously adopted
  the pronouncement (as it was originally issued) must account for consolidated
  VIEs.

On May 15, 2003, the FASB issued Statement of Financial Accounting
  Standard ("SFAS") No. 150, "Accounting for Certain Financial Instruments with
  Characteristics of both Liabilities and Equity". SFAS No. 150 changes the accounting
  for certain financial instruments that, under previous guidance, could be classified
  as equity or "mezzanine" equity, by now requiring those instruments to be classified
  as liabilities (or assets in some circumstances) in the statement of financial
  position. Further, SFAS No. 150 requires disclosure regarding the terms of those
  instruments and settlement alternatives. SFAS No. 150 affects an entity's classification
  of the following freestanding instruments: a) Mandatorily redeemable instruments
  b) Financial instruments to repurchase an entity's own equity instruments c)
  Financial instruments embodying obligations that the issuer must or could choose
  to settle by issuing a variable number of its shares or other equity instruments
  based solely on (i) a fixed monetary amount

20

---

known at inception or (ii) something other than changes in
  its own equity instruments d) SFAS No. 150 does not apply to features embedded
  in a financial instrument that is not a derivative in its entirety. The guidance
  in SFAS No. 150 is generally effective for all financial instruments entered
  into or modified after May 31, 2003, and is otherwise effective at the beginning
  of the first interim period beginning after June 15, 2003.

Emerging Issue Task Force (EITF) No. 04-3 
  Mining Assets  Impairment and Business Combinations sets the standard
  for mining companies to include value attributable to value beyond proven and
  probable reserves (VBPP) and anticipated fluctuations in the future
  market price of minerals in their consideration when an entity allocates the
  purchase price of a business combination to mining assets and when an entity
  performs the cash flow analysis used to test mining assets for impairment under
  SFAS No. 144 Accounting for the Impairment or Disposal of Long-live Assets.

The implementation of these new standards is not expected
  to have a material effect on the Companys financial statements.

Item 7. Financial Statements.

The Consolidated Financial Statements of the Company and the
  notes thereto are attached to this report following the signature page and Certifications.

Item 8. Changes in and Disagreements with Accountants on
  Accounting and Financial Disclosure.

None.

Item 8A. Controls and Procedures

The Company maintains disclosure controls and procedures that
  are designed to ensure that information required to be disclosed in its reports
  filed pursuant to the Securities Exchange Act of 1934 is recorded, processed,
  summarized and reported within the time periods specified in the rules and forms
  promulgated under such Act, and that such information is accumulated and communicated
  to management, including its President and principal financial officer, as appropriate,
  to allow timely decisions regarding required disclosure.

In connection with this annual report, management carried
  out an evaluation, under the supervision and with the participation of the management,
  including the President and principal accounting officer, of the effectiveness
  of the design and operation of the Companys disclosure controls and procedures
  pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the President
  and principal accounting officer concluded that the Companys disclosure
  controls and procedures are effective in connection with the filing of this
  Annual Report on Form 10-KSB for the year ended December 31, 2003.

There were no significant changes in our internal controls
  or in other factors that could significantly affect these controls subsequent
  to the date of their evaluation, including any significant deficiencies or material
  weaknesses of internal controls that would require corrective action.

PART III

Items 9  12

Information with respect to Items 9 through 12 is set forth
  in the definitive Proxy Statement to be filed with the Securities and Exchange
  Commission on or before April 29, 2004 and is incorporated herein by reference.
  If the definitive Proxy Statement cannot be filed on or before April 29, 2004,
  the issuer will instead file an amendment to this Form 10-KSB disclosing the
  information with respect to Items 9 through 12.

Item 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

21

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|Exhibit | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                  |  | Manner of Filing                                                                                                                                                            
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|3.1     | Certificate of Incorporation, Articles
        of Incorporation, Memorandum, and all current amendments thereto of the
        registrant under the Company Act of British Columbia, as amended.                                                                                                                                                                                        |  | Incorporated by reference to Exhibit
        3.1 to the Form 10-SB of the Company, filed with the SEC on November 21,
        1996 and amendments thereto (the Form 10-SB)
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|10.1    | Lease dated October 20, 1994 between
        the Subsidiary and William J. Warner with respect to certain property
        within the project area.                                                                                                                                                                                                                                     |  | Incorporated by reference to Exhibit
        10.5 to the Form 10-SB                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|10.2    | Lease dated September 19, 1994 between
        the Subsidiary and Western Centennials, Inc., with respect to certain
        property within the project area.                                                                                                                                                                                                                          |  | Incorporated by reference to Exhibit
        10.6 to the Form 10-SB                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|10.3    | Stock option purchase agreement dated
        April 1, 1995 between the Subsidiary and Grace W. Meehl, Madge W. Wolff,
        Stephen G. Wegmann, Michael L. Wegmann, John G. Hodgson, Virginia L. Sigl,
        Patrick L. Wolff and George P. Wolff with respect to the acquisition by
        the Subsidiary of an option to purchase all of the outstanding shares
        of KWC. |  | Incorporated by reference to Exhibit
        10.8 to the Form 10-SB                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|10.4    | Purchase agreement dated March 29, 1996
        between the Subsidiary and the Meehl Family Trust and others with respect
        to the acquisition by the Subsidiary of certain property within the project
        area.                                                                                                                                                             |  | Incorporated by reference to Exhibit
        10.10 to the Form 10-SB                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|10.5    | Mineral exploration agreement and option
        to lease or purchase dated January 25, 1996 between the Soledad-Mojave
        Mining Syndicate and the Subsidiary with respect to the potential acquisition
        by the Subsidiary of 129.5 hectares of fee land within the project area.                                                                                          |  | Incorporated by reference to Exhibit
        10.11 to the Form 10-SB                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|10.6    | Purchase agreement dated August 1, 1996
        between the Subsidiary and Southwestern Refining Corporation with respect
        to the acquisition by the Subsidiary of certain property and mill tailings
        within the project area.                                                                                                                                           |  | Incorporated by reference to Exhibit
        10.12 to the Form 10-SB                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|10.7    | Stock option plan of the registrant,
        as amended.                                                                                                                                                                                                                                                                                                                                |  | Incorporated by reference to Exhibit
        10.13 to the Form 10-SB                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|10.8    | Forms of debentures issued by the registrant
        to Landon T. Clay Charitable Lead Trust II and Landon T. Clay Charitable
        Lead Trust dated November 30, 1983.                                                                                                                                                                                                               |  | Incorporated by reference to Exhibit
        10.15 to the Form 10-SB                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|21.1    | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                                         |  | Incorporated by reference to Exhibit
        24.0 to the Form 10-SB                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|23.1    | Consent of BDO Dunwoody,
        LLP                                                                                                                                                                                                                                                                                                                                                    |  | Filed herewith                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|31.1    | Rule 13a-14(a)/15(d)-14(a)
        Certification                                                                                                                                                                                                                                                                                                                                        |  | Filed herewith                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                             
|32.1    | Section 1350 Certification                                                                                                                                                                                                                                                                                                                                                              |  | Filed herewith                                                                                                                                                              

(b) Reports on Form 8-K

No reports on Form 8-K were filed by the registrant during the fourth quarter of 2003.

22

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Item 14. Principal Accountant Fees and Services

Information with respect to Item 14 is set forth in the Proxy
  Statement to be filed with the Securities and Exchange Commission on or before
  April 29, 2004 and is incorporated herein by reference. If the definitive Proxy
  Statement cannot be filed on or before April 29, 2004, the issuer will instead
  file an amendment to this Form 10-KSB disclosing the information with respect
  to this Item 14.

23

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GOLDEN QUEEN MINING CO. LTD.

By: /s/ H. Lutz Klingmann 
  H. Lutz Klingmann 
  President and Chief Executive Officer

Date: April 19, 2004

In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on the dates indicated.

|Signature             | Title                                           | Date          
|--------------------- | ----------------------------------------------- | --------------
|                      |                                                 |               
|/s/ H. Lutz Klingmann | President, Chief Executive Officer and Director | April 19, 2004
|H. Lutz Klingmann     |                                                 |               
|                      |                                                 |               
|/s/ Edward Thompson   | Chairman of the Board and Director              | April 19, 2004
|Edward Thompson       |                                                 |               
|                      |                                                 |               
|/s/ Chester Shynkaryk | Secretary and Director                          | April 19, 2004
|Chester Shynkaryk     |                                                 |               
|                      |                                                 |               
|/s/ Gordon Gutrath    | Director                                        | April 19, 2004
|Gordon Gutrath        |                                                 |               

24

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FINANCIAL STATEMENTS OF

GOLDEN QUEEN MINING CO. LTD.

For the Fiscal Year ended

December 31, 2003

F-1

---

|                      | BDO Dunwoody LLP              | 600 Park Place
|--------------------- | ----------------------------- | --------------
|Chartered Accountants | 666 Burrard Street           
|                      | Vancouver, BC, Canada V6C 2X8
|                      | Telephone: (604) 688-5421    
|                      | Telefax: (604) 688-5132      
|                      | E-mail: vancouver@bdo.ca     
|                      | www.bdo.ca                   

Report of Independent Accountants

To the Shareholders of 
  Golden Queen Mining Co. Ltd. 
  (a development stage company) 
  Vancouver, B.C.

We have audited the accompanying consolidated balance sheets
  of Golden Queen Mining Co. Ltd. (a development stage company), as of December
  31, 2003 and 2002, and the consolidated statements of loss, changes in shareholders
  equity (capital deficit), and cash flows for the years then ended. We have also
  audited the statements of loss, changes in shareholders equity, and cash
  flows for the period from inception (November 21, 1985) through December 31,
  2003, except that we did not audit these financial statements for the period
  from inception (November 21, 1985) through May 31, 1996; those statements were
  audited by other auditors whose report dated July 12, 1996, expressed an unqualified
  opinion on those statements. These financial statements are the responsibility
  of the Companys management. Our responsibility is to express an opinion
  on these consolidated financial statements based on our audits. Our opinion,
  insofar as it relates to the amounts for the period from inception (November
  21, 1985) through May 31, 1996, is based solely on the report of the other auditors.

We conducted our audits in accordance with auditing standards
  generally accepted in the United States of America. Those standards require
  that we plan and perform the audits to obtain reasonable assurance about whether
  the consolidated 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. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other
  auditors, the consolidated financial statements referred to above present fairly,
  in all material respects the financial position of Golden Queen Mining Co. Ltd.,
  as of December 31, 2003 and 2002, and the results of its operations and its
  cash flows for the years then ended and for the period from inception (November
  21, 1985) through December 31, 2003, in conformity with accounting principles
  generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in Note 1 to
  the consolidated financial statements, the Company has had no revenues since
  inception, has a deficit accumulated during the development stage of $35,153,852
  and has been unable to obtain the necessary financing to complete current development
  activities or exit the development stage. These conditions raise substantial
  doubt about the Companys ability to continue as a going concern. Managements
  plans in regard to these matters are also described in Note 1. The financial
  statements do not include any adjustments that might result from the outcome
  of this uncertainty.

/s/ BDO Dunwoody LLP

Chartered Accountants 
  March 19, 2004 
  Vancouver, British Columbia

F-2

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GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Consolidated Balance Sheets
  (U.S. dollars)

|                                                          |   | December 31, |   |   | December 31, |  
|--------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                          |   | 2003         |   |   | 2002         |  
|Assets (Note 1)                                           |   |              |   |   |              |  
|                                                          |   |              |   |   |              |  
|Current assets:                                           |   |              |   |   |              |  
|Cash and cash equivalents                                 | $ | 110,871      |   | $ | 83,506       |  
|Receivables                                               |   | 4,868        |   |   | 3,425        |  
|Prepaid expenses and other current
      assets           |   | 24,032       |   |   | 22,407       |  
|                                                          |   |              |   |   |              |  
|Total current assets                                      |   | 139,771      |   |   | 109,338      |  
|                                                          |   |              |   |   |              |  
|Property and equipment, net (Note
      2)                |   | 262,469      |   |   | 276,772      |  
|Mineral properties (Notes 3, 4, 6
      and 10)           |   | 682,687      |   |   | 682,687      |  
|                                                          | $ | 1,084,927    |   | $ | 1,068,797    |  
|Liabilities and Shareholders Equity (Capital Deficit)    |   |              |   |   |              |  
|                                                          |   |              |   |   |              |  
|Current liabilities:                                      |   |              |   |   |              |  
|Accounts payable                                          | $ | 66,632       |   | $ | 43,179       |  
|Royalty and mining
      rights payable (Note 4)          |   | 147,484      |   |   | 122,484      |  
|Accrued liabilities                                       |   | 11,987       |   |   | 20           |  
|Current maturities
      of long-term debt (Note 6)       |   | 751,542      |   |   | 5,480        |  
|Convertible notes payable, net of
      unamortized       |   |              |   |   |              |  
|discount
      of $196,000 (2002 - $Nil) (Note 7)         |   | 179,000      |   |   | -            |  
|Total current liabilities                                 |   | 1,156,645    |   |   | 171,163      |  
|                                                          |   |              |   |   |              |  
|Long-term debt, less current maturities
      (Note 6)    |   | 10,060       |   |   | 761,601      |  
|                                                          |   |              |   |   |              |  
|Total liabilities                                         |   | 1,166,705    |   |   | 932,764      |  
|                                                          |   |              |   |   |              |  
|Commitments and contingencies (Notes 4 and 10)            |   |              |   |   |              |  
|                                                          |   |              |   |   |              |  
|Shareholders equity (capital deficit):                   |   |              |   |   |              |  
|Preferred shares, no par, 3,000,000
      shares          |   |              |   |   |              |  
|authorized; no shares outstanding                         |   | -            |   |   | -            |  
|Common shares, no par, 100,000,000
      shares           |   |              |   |   |              |  
|authorized; 51,902,189 and 51,802,189
      shares issued |   |              |   |   |              |  
|and outstanding
      (Note 8)                            |   | 34,548,292   |   |   | 34,523,913   |  
|Additional paid-in capital                                |   | 523,782      |   |   | 21,456       |  
|Deficit accumulated during the development
      stage    |   | (35,153,852  | ) |   | (34,409,336  | )
|                                                          |   |              |   |   |              |  
|Total shareholders equity (capital deficit)              |   | (81,778      | ) |   | 136,033      |  
|                                                          | $ | 1,084,927    |   | $ | 1,068,797    |  

See Accompanying Summary of Accounting Policies and Notes to
  Consolidated Financial Statements.

F-3

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Consolidated Statements of Loss
  (U.S. dollars)

|                                       |   |                         |   |   |                         |   |   | Cumulative              |  
|-------------------------------------- | - | ----------------------- | - | - | ----------------------- | - | - | ----------------------- | -
|                                       |   |                         |   |   |                         |   |   | Amounts From Date       |  
|                                       |   |                         |   |   |                         |   |   | of Inception            |  
|                                       |   |                         |   |   |                         |   |   | (November 21,           |  
|                                       |   | Year Ended              |   |   | Year Ended              |   |   | 1985) through           |  
|                                       |   | December
      31, 2003 |   |   | December
      31, 2002 |   |   | December
      31, 2003 |  
|                                       |   |                         |   |   |                         |   |   |                         |  
|General and administrative expense     | $ | 507,407                 |   | $ | 315,097                 |   | $ | 6,264,388               |  
|Interest expense                       |   | 250,904                 |   |   | 60,192                  |   |   | 702,097                 |  
|Interest income                        |   | (45                     | ) |   | (254                    | ) |   | (1,081,718              | )
|Other income, net                      |   | (13,750                 | ) |   | (27,432                 | ) |   | (5,369                  | )
|Asset impairment loss                  |   | -                       |   |   | -                       |   |   | 28,547,592              |  
|Abandoned mineral interests            |   | -                       |   |   | -                       |   |   | 277,251                 |  
|                                       |   | 744,516                 |   |   | 347,603                 |   |   | 34,704,241              |  
|                                       |   |                         |   |   |                         |   |   |                         |  
|Gain on settlement of debt             |   | -                       |   |   | -                       |   |   | (136,627                | )
|Net loss                               | $ | 744,516                 |   | $ | 347,603                 |   | $ | 34,567,614              |  
|                                       |   |                         |   |   |                         |   |   |                         |  
|Net loss per share  basic and diluted | $ | 0.01                    |   | $ | 0.01                    |   |   |                         |  
|                                       |   |                         |   |   |                         |   |   |                         |  
|Weighted average shares outstanding    |   | 51,893,856              |   |   | 51,491,944              |   |   |                         |  

See Accompanying Summary of Accounting Policies and Notes to
  Consolidated Financial Statements.

F-4

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)Consolidated Statements of Changes in Shareholders Equity
  (Capital Deficit)
  (U.S. dollars)

|                                   |           |  |   |           |  |   |              |  |   |            |  |   | Deficit     |   |   | Total         |  
|---------------------------------- | --------- |  | - | --------- |  | - | ------------ |  | - | ---------- |  | - | ----------- | - | - | ------------- | -
|                                   |           |  |   |           |  |   |              |  |   |            |  |   | Accumulated |   |   | Shareholders |  
|From the Date of Inception         |           |  |   |           |  |   |              |  |   | Additional |  |   | During the  |   |   | Equity        |  
|(November 21, 1985) through        | Common    |  |   |           |  |   | Stock        |  |   | Paid-in    |  |   | Development |   |   | (Capital      |  
|December 31,
      2003            | Shares    |  |   | Amount    |  |   | Subscription |  |   | Capital    |  |   | Stage       |   |   | Deficit)      |  
|                                   |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|November 21, 1985                  |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|Issuance of common shares for cash | 1,425,001 |  | $ | 141,313   |  | $ | -            |  | $ | -          |  | $ | -           |   | $ | 141,313       |  
|Net loss for
      the year        | -         |  |   | -         |  |   | -            |  |   | -          |  |   | (15,032     | ) |   | (15,032       | )
|Balance, May 31, 1986              | 1,425,001 |  |   | 141,313   |  |   | -            |  |   | -          |  |   | (15,032     | ) |   | 126,281       |  
|                                   |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|Issuance of common shares for cash | 550,000   |  |   | 256,971   |  |   | -            |  |   | -          |  |   | -           |   |   | 256,971       |  
|Issuance of common shares for      |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|mineral property                   | 25,000    |  |   | 13,742    |  |   | -            |  |   | -          |  |   | -           |   |   | 13,742        |  
|Net loss for
      the year        | -         |  |   | -         |  |   | -            |  |   | -          |  |   | (58,907     | ) |   | (58,907       | )
|Balance, May 31, 1987              | 2,000,001 |  |   | 412,026   |  |   | -            |  |   | -          |  |   | (73,939     | ) |   | 338,087       |  
|                                   |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|Issuance of common shares for cash | 1,858,748 |  |   | 1,753,413 |  |   | -            |  |   | -          |  |   | -           |   |   | 1,753,413     |  
|Net income for
      the year      | -         |  |   | -         |  |   | -            |  |   | -          |  |   | 38,739      |   |   | 38,739        |  
|Balance, May 31, 1988              | 3,858,749 |  |   | 2,165,439 |  |   | -            |  |   |            |  |   | (35,200     | ) |   | 2,130,239     |  
|                                   |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|Issuance of common shares for cash | 1,328,750 |  |   | 1,814,133 |  |   | -            |  |   | -          |  |   | -           |   |   | 1,814,133     |  
|Issuance of common shares for      |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|mineral property                   | 100,000   |  |   | 227,819   |  |   | -            |  |   | -          |  |   | -           |   |   | 227,819       |  
|Net loss for
      the year        | -         |  |   | -         |  |   | -            |  |   | -          |  |   | (202,160    | ) |   | (202,160      | )
|Balance, May 31, 1989              | 5,287,499 |  |   | 4,207,391 |  |   | -            |  |   | -          |  |   | (237,360    | ) |   | 3,970,031     |  
|                                   |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|Issuance of common shares for cash | 1,769,767 |  |   | 2,771,815 |  |   | -            |  |   | -          |  |   | -           |   |   | 2,771,815     |  
|Issuance of common shares for      |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|Mineral property                   | 8,875     |  |   | 14,855    |  |   | -            |  |   | -          |  |   | -           |   |   | 14,855        |  
|Net loss for
      the year        | -         |  |   | -         |  |   | -            |  |   | -          |  |   | (115,966    | ) |   | (115,966      | )
|Balance, May 31, 1990              | 7,066,141 |  |   | 6,994,061 |  |   | -            |  |   | -          |  |   | (353,326    | ) |   | 6,640,735     |  
|                                   |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|Net income for
      the year      | -         |  |   | -         |  |   | -            |  |   | -          |  |   | 28,706      |   |   | 28,706        |  
|Balance, May 31, 1991              | 7,066,141 |  |   | 6,994,061 |  |   | -            |  |   | -          |  |   | (324,620    | ) |   | 6,669,441     |  
|                                   |           |  |   |           |  |   |              |  |   |            |  |   |             |   |   |               |  
|Net loss for
      the year        | -         |  |   | -         |  |   | -            |  |   | -          |  |   | (157,931    | ) |   | (157,931      | )
|Balance, May 31, 1992              | 7,066,141 |  |   | 6,994,061 |  |   | -            |  |   | -          |  |   | (482,551    | ) |   | 6,511,510     |  

See Accompanying Summary of Accounting Policies and Notes to
  Consolidated Financial Statements.

F-5

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)Consolidated Statements of Changes in Shareholders Equity
  (Capital Deficit)
  (U.S. dollars)

|                                       |            |  |           |  |              |  |            |  | Deficit     |   | Total         |  
|-------------------------------------- | ---------- |  | --------- |  | ------------ |  | ---------- |  | ----------- | - | ------------- | -
|                                       |            |  |           |  |              |  |            |  | Accumulated |   | Shareholders |  
|From the Date of Inception             |            |  |           |  |              |  | Additional |  | During the  |   | Equity        |  
|(November 21, 1985)                    | Common     |  |           |  | Stock        |  | Paid-in    |  | Development |   | (Capital      |  
|through December 31, 2003              | Shares     |  | Amount    |  | Subscription |  | Capital    |  | Stage       |   | Deficit)      |  
|                                       |            |  |           |  |              |  |            |  |             |   |               |  
|Net loss for
      the year            | -          |  | -         |  | -            |  | -          |  | (285,391    | ) | (285,391      | )
|Balance, May 31, 1993                  | 7,066,141  |  | 6,994,061 |  | -            |  | -          |  | (767,942    | ) | 6,226,119     |  
|                                       |            |  |           |  |              |  |            |  |             |   |               |  
|Issuance of common shares for cash     | 5,834,491  |  | 1,536,260 |  | -            |  | -          |  | -           |   | 1,536,260     |  
|Share issue costs                      | -          |  | -         |  | -            |  | -          |  | (18,160     | ) | (18,160       | )
|Issuance of common shares              |            |  |           |  |              |  |            |  |             |   |               |  
|for mineral property                   | 128,493    |  | 23,795    |  | -            |  | -          |  | -           |   | 23,795        |  
|Net loss for
      the year            | -          |  | -         |  | -            |  | -          |  | (158,193    | ) | (158,193      | )
|Balance, May 31, 1994                  | 13,029,125 |  | 8,554,116 |  | -            |  | -          |  | (944,295    | ) | 7,609,821     |  
|                                       |            |  |           |  |              |  |            |  |             |   |               |  
|Issuance of common                     |            |  |           |  |              |  |            |  |             |   |               |  
|shares for cash                        | 648,900    |  | 182,866   |  | -            |  | -          |  | -           |   | 182,866       |  
|Net loss for
      the year            | -          |  | -         |  | -            |  | -          |  | (219,576    | ) | (219,576      | )
|Balance, May 31, 1995                  | 13,678,025 |  | 8,736,982 |  | -            |  | -          |  | (1,163,871  | ) | 7,573,111     |  
|                                       |            |  |           |  |              |  |            |  |             |   |               |  
|Issuance of common shares for cash     | 2,349,160  |  | 2,023,268 |  | -            |  | -          |  | -           |   | 2,023,268     |  
|Issuance of common shares for debt     | 506,215    |  | 662,282   |  | -            |  | -          |  | -           |   | 662,282       |  
|Issuance of 5,500,000 special warrants | -          |  | 9,453,437 |  | -            |  | -          |  | -           |   | 9,453,437     |  
|Special warrants issue cost            | -          |  | -         |  | -            |  | -          |  | (100,726    | ) | (100,726      | )

F-6

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)Consolidated Statements of Changes in Shareholders Equity
  (Capital Deficit)
  (U.S. dollars)

|                                       |            |  |            |  |              |  |            |  | Deficit     |   | Total         |  
|-------------------------------------- | ---------- |  | ---------- |  | ------------ |  | ---------- |  | ----------- | - | ------------- | -
|                                       |            |  |            |  |              |  |            |  | Accumulated |   | Shareholders |  
|From the Date of Inception             |            |  |            |  |              |  | Additional |  | During the  |   | Equity        |  
|(November 21, 1985)                    | Common     |  |            |  | Stock        |  | Paid-in    |  | Development |   | (Capital      |  
|through December
      31, 2003        | Shares     |  | Amount     |  | Subscription |  | Capital    |  | Stage       |   | Deficit)      |  
|                                       |            |  |            |  |              |  |            |  |             |   |               |  
|Net loss for
      the year            | -          |  | -          |  | -            |  | -          |  | (426,380    | ) | (426,380      | )
|Balance, May 31, 1996                  | 16,533,400 |  | 20,875,969 |  | -            |  | -          |  | (1,690,977  | ) | 19,184,992    |  
|                                       |            |  |            |  |              |  |            |  |             |   |               |  
|Issuance of common shares              |            |  |            |  |              |  |            |  |             |   |               |  
|for cash                               | 18,000     |  | 10,060     |  | -            |  | -          |  | -           |   | 10,060        |  
|Issuance of common shares              |            |  |            |  |              |  |            |  |             |   |               |  
|for special warrants                   | 5,500,000  |  | -          |  | -            |  | -          |  | -           |   | -             |  
|Special warrants issue cost            | -          |  | -          |  | -            |  | -          |  | (123,806    | ) | (123,806      | )
|                                       |            |  |            |  |              |  |            |  |             |   |               |  
|Net loss for
      the period          | -          |  | -          |  | -            |  | -          |  | (348,948    | ) | (348,948      | )
|                                       |            |  |            |  |              |  |            |  |             |   |               |  
|Balance, December 31, 1996             |            |  |            |  |              |  | -          |  |             |   |               |  
|                                       | 22,051,400 |  | 20,886,029 |  | -            |  |            |  | (2,163,731  | ) | 18,722,298    |  
|Issuance of common shares for cash     | 157,000    |  | 157,050    |  | -            |  | -          |  | -           |   | 157,050       |  
|Issuance of 3,500,000 special warrants | -          |  | 5,287,315  |  | -            |  | -          |  | -           |   | 5,287,315     |  
|Issuance of common shares for special  |            |  |            |  |              |  |            |  |             |   |               |  
|warrants                               | 3,500,000  |  | -          |  | -            |  | -          |  | -           |   | -             |  
|Options to non-employee directors      | -          |  | -          |  | -            |  | 70,200     |  | -           |   | 70,200        |  
|Special warrants issue cost            | -          |  | -          |  | -            |  | -          |  | (163,313    | ) | (163,313      | )
|Net loss for
      the year            | -          |  | -          |  | -            |  | -          |  | (1,047,869  | ) | (1,047,869    | )
|Balance, December 31, 1997             | 25,708,400 |  | 26,330,394 |  | -            |  | 70,200     |  | (3,374,913  | ) | 23,025,681    |  

See Accompanying Summary of Accounting Policies and Notes to
  Consolidated Financial Statements.

F-7

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)Consolidated Statements of Changes in Shareholders Equity
  (Capital Deficit)
  (U.S. dollars)

|                                                    |            |  |            |  |              |   |            |   | Deficit     |   | Total         |  
|--------------------------------------------------- | ---------- |  | ---------- |  | ------------ | - | ---------- | - | ----------- | - | ------------- | -
|                                                    |            |  |            |  |              |   |            |   | Accumulated |   | Shareholders |  
|From the Date of Inception                          |            |  |            |  |              |   | Additional |   | During the  |   | Equity        |  
|(November 21, 1985)                                 | Common     |  |            |  | Stock        |   | Paid-in    |   | Development |   | (Capital      |  
|through December
      31, 2003                     | Shares     |  | Amount     |  | Subscription |   | Capital    |   | Stage       |   | Deficit)      |  
|                                                    |            |  |            |  |              |   |            |   |             |   |               |  
|Issuance of common shares upon exercise of          |            |  |            |  |              |   |            |   |             |   |               |  
|warrants                                            | 1,834,300  |  | 857,283    |  | -            |   | -          |   | -           |   | 857,283       |  
|Issuance of common shares through                   |            |  |            |  |              |   |            |   |             |   |               |  
|conversion of debt                                  | 2,017,941  |  | 1,000,000  |  | -            |   | -          |   | -           |   | 1,000,000     |  
|Share issuance cost                                 | -          |  | -          |  | -            |   | -          |   | (6,060      | ) | (6,060        | )
|Issuance of common shares for cash                  | 5,236,000  |  | 2,439,753  |  | -            |   | -          |   | -           |   | 2,439,753     |  
|Options and re-priced options to non-               |            |  |            |  |              |   |            |   |             |   |               |  
|employee directors                                  | -          |  | -          |  | -            |   | 107,444    |   | -           |   | 107,444       |  
|Net loss for
      the year                         | -          |  | -          |  | -            |   | -          |   | (971,595    | ) | (971,595      | )
|Balance, December 31, 1998                          | 34,796,641 |  | 30,627,430 |  | -            |   | 177,644    |   | (4,352,568  | ) | 26,452,506    |  
|                                                    |            |  |            |  |              |   |            |   |             |   |               |  
|Issuance of 13,250,000 special warrants             | -          |  | 3,350,915  |  | -            |   | -          |   | -           |   | 3,350,915     |  
|Special warrants issue cost                         | -          |  | -          |  | -            |   | -          |   | (166,620    | ) | (166,620      | )
|                                                    |            |  |            |  |              |   |            |   |             |   |               |  
|Issuance of common shares for                       |            |  |            |  |              |   |            |   |             |   |               |  
|special warrants                                    | 13,250,000 |  |            |  | -            |   | -          |   | -           |   | - -           |  
|Net loss for
      the year                         | -          |  |            |  | -            |   | -          |   | (564,657    | ) | (564,657      | )
|Balance, December 31, 1999                          | 48,046,641 |  | 33,978,345 |  | -            |   | 177,644    |   | (5,083,845  | ) | 29,072,144    |  
|                                                    |            |  |            |  |              |   |            |   |             |   |               |  
|Cumulative effect of change in accounting for stock |            |  |            |  |              |   |            |   |             |   |               |  
|options                                             |            |  | -          |  | -            |   | (177,644   | ) | -           |   | (177,644      | )
|Stock subscription                                  | -          |  | -          |  | 200,000      |   | -          |   | -           |   | 200,000       |  
|Net loss for
      the year                         | -          |  | -          |  | -            |   | -          |   | (28,708,276 | ) | (28,708,276   | )
|Balance, December 31, 2000                          | 48,046,641 |  | 33,978,345 |  | 200,000      |   | -          |   | (33,792,121 | ) | 386,224       |  
|                                                    |            |  |            |  |              |   |            |   |             |   |               |  
|Issuance of common shares through                   |            |  |            |  |              |   |            |   |             |   |               |  
|conversion of debt                                  | 406,250    |  | 65,000     |  | -            |   | -          |   | -           |   | 65,000        |  
|Issuance of common shares for                       |            |  |            |  |              |   |            |   |             |   |               |  
|conversion of stock subscription                    | 1,538,462  |  | 200,000    |  | (200,000     | ) | -          |   | -           |   | -             |  
|Share issuance cost                                 | -          |  | -          |  | -            |   | -          |   | (3,337      | ) | (3,337        | )

F-8

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)Consolidated Statements of Changes in Shareholders Equity
  (Capital Deficit)
  (U.S. dollars)

|                                       |            |  |   |            |  |   |              |  |   |            |  | Deficit               |   |   | Total         |  
|-------------------------------------- | ---------- |  | - | ---------- |  | - | ------------ |  | - | ---------- |  | --------------------- | - | - | ------------- | -
|                                       |            |  |   |            |  |   |              |  |   |            |  | Accumulated           |   |   | Shareholders |  
|From the Date of Inception             |            |  |   |            |  |   |              |  |   | Additional |  | During the            |   |   | Equity        |  
|(November 21, 1985)                    | Common     |  |   |            |  |   | Stock        |  |   | Paid-in    |  | Development           |   |   | (Capital      |  
|through December
      31, 2003        | Shares     |  |   | Amount     |  |   | Subscription |  |   | Capital    |  | Stage                 |   |   | Deficit)      |  
|                                       |            |  |   |            |  |   |              |  |   |            |  |                       |   |   |               |  
|Net loss for
      the year            | -          |  |   |            |  |   | -            |  |   | -          |  | (262,059              | ) |   | (262,059      | )
|Balance, December 31, 2001             | 49,991,353 |  |   | 34,243,345 |  |   | -            |  |   | -          |  | (34,057,517           | ) |   | 185,828       |  
|                                       |            |  |   |            |  |   |              |  |   |            |  |                       |   |   |               |  
|Issuance of common shares              |            |  |   |            |  |   |              |  |   |            |  |                       |   |   |               |  
|through exercise of options            | 290,000    |  |   | 37,234     |  |   | -            |  |   | -          |  | -                     |   |   | 37,234        |  
|Issuance of common shares              |            |  |   |            |  |   |              |  |   |            |  |                       |   |   |               |  
|through exercise of warrants           | 1,520,836  |  |   | 243,334    |  |   | -            |  |   | -          |  | -                     |   |   | 243,334       |  
|Stock option compensation (Note 9)     | -          |  |   | -          |  |   | -            |  |   | 21,456     |  | -                     |   |   | 21,456        |  
|Share issuance costs                   | -          |  |   | -          |  |   | -            |  |   | -          |  | (4,216                | ) |   | (4,216        | )
|Net loss for
      the year            | -          |  |   | -          |  |   | -            |  |   | -          |  | (347,603              | ) |   | (347,603      | )
|Balance, December 31, 2002             | 51,802,189 |  |   | 34,523,913 |  |   | -            |  |   | 21,456     |  | (34,409,336           | ) |   | 136,033       |  
|                                       |            |  |   |            |  |   |              |  |   |            |  |                       |   |   |               |  
|Issuance of common shares through      |            |  |   |            |  |   |              |  |   |            |  |                       |   |   |               |  
|exercise of options (Note 8)           | 100,000    |  |   | 24,379     |  |   | -            |  |   | -          |  | -                     |   |   | 24,379        |  
|Beneficial conversion feature (Note 7) | -          |  |   | -          |  |   | -            |  |   | 375,000    |  | -                     |   |   | 375,000       |  
|Stock option compensation (Note 9)     | -          |  |   | -          |  |   | -            |  |   | 127,326    |  | -                     |   |   | 127,326       |  
|Net loss for
      the year            | -          |  |   | -          |  |   | -            |  |   | -          |  | (744,516              | ) |   | (744,516      | )
|Balance, December
      31, 2003       | 51,902,189 |  | $ | 34,548,292 |  | $ | -            |  | $ | 523,782    |  | $
      ( 35,153,852) |   | $ | (81,778       | )

See Accompanying Summary of Accounting Policies and Notes to
  Consolidated Financial Statements.

F-9

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Consolidated Statements of Cash Flows
  (U.S. dollars)

|                                    |   |              |   |   |              |   |   | Cumulative Amounts      |  
|----------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------------------- | -
|                                    |   |              |   |   |              |   |   | From Date of            |  
|                                    |   | Year Ended   |   |   | Year Ended   |   |   | Inception (November     |  
|                                    |   | December 31, |   |   | December 31, |   |   | 21, 1985) through       |  
|                                    |   | 2003         |   |   | 2002         |   |   | December
      31, 2003 |  
|                                    |   |              |   |   |              |   |   |                         |  
|Operating activities                |   |              |   |   |              |   |   |                         |  
|Net loss                            | $ | (744,516     | ) | $ | (347,603     | ) | $ | ( 34,567,614)           |  
|Adjustments to reconcile net        |   |              |   |   |              |   |   |                         |  
|loss to cash used in operating      |   |              |   |   |              |   |   |                         |  
|activities:                         |   |              |   |   |              |   |   |                         |  
|Asset impairment
      loss         |   | -            |   |   | -            |   |   | 28,547,592              |  
|Abandoned mineral
      interests   |   | -            |   |   | -            |   |   | 277,251                 |  
|Amortization and
      depreciation |   | 14,303       |   |   | 14,239       |   |   | 405,248                 |  
|Amortization of
      debt discount |   |              |   |   |              |   |   |                         |  
|(Note
      7)                      |   | 179,000      |   |   | -            |   |   | 179,000                 |  
|Gain on disposition
      of        |   |              |   |   |              |   |   |                         |  
|property
      and equipment        |   | -            |   |   | -            |   |   | (10,032                 | )
|Stock option compensation           |   |              |   |   |              |   |   |                         |  
|(Note
      9)                      |   | 127,326      |   |   | 21,456       |   |   | 148,782                 |  
|Changes in assets and liabilities:  |   |              |   |   |              |   |   |                         |  
|Receivables                         |   | (1,443       | ) |   | 1,304        |   |   | (4,868                  | )
|Prepaid expenses
      and other    |   |              |   |   |              |   |   |                         |  
|current
      assets                |   | (1,625       | ) |   | 2,133        |   |   | (110,942                | )
|Accounts payable
      and accrued  |   |              |   |   |              |   |   |                         |  
|liabilities                         |   | 35,420       |   |   | 5,982        |   |   | 78,619                  |  
|Royalty and mining
      rights     |   |              |   |   |              |   |   |                         |  
|payable                             |   | 25,000       |   |   | 25,000       |   |   | 147,484                 |  
|                                    |   |              |   |   |              |   |   |                         |  
|Cash used in operating activities   |   | (366,535     | ) |   | (277,489     | ) |   | (4,909,480              | )
|Investment activities:              |   |              |   |   |              |   |   |                         |  
|Deferred exploration and            |   |              |   |   |              |   |   |                         |  
|development expenditures            |   | -            |   |   | -            |   |   | (22,395,449             | )
|Purchase of mineral properties      |   | -            |   |   | -            |   |   | (5,268,409              | )
|Deposits on mineral properties      |   | -            |   |   | -            |   |   | (1,017,551              | )
|Purchase of property and            |   |              |   |   |              |   |   |                         |  
|Equipment                           |   | -            |   |   | -            |   |   | (1,313,838              | )
|Proceeds from sale of property      |   |              |   |   |              |   |   |                         |  
|and equipment                       |   | -            |   |   | -            |   |   | 47,153                  |  
|                                    |   |              |   |   |              |   |   |                         |  
|Cash used in investment activities  |   | -            |   |   | -            |   |   | (29,948,094             | )
|Financing activities:               |   |              |   |   |              |   |   |                         |  
|Borrowing under long-term debt      |   | -            |   |   | -            |   |   | 3,766,502               |  
|Payment of long-term debt           |   | (5,479       | ) |   | (5,010       | ) |   | (1,192,618              | )
|Proceeds from convertible debt      |   | 375,000      |   |   | -            |   |   | 440,000                 |  

See Accompanying Summary of Accounting Policies and Notes to
  Consolidated Financial Statements.

F-10

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Consolidated Statements of Cash Flows
  (U.S. dollars)

|                                      |   |              |  |   |              |   |   | Cumulative Amounts      |  
|------------------------------------- | - | ------------ |  | - | ------------ | - | - | ----------------------- | -
|                                      |   |              |  |   |              |   |   | From Date of            |  
|                                      |   | Year Ended   |  |   | Year Ended   |   |   | Inception (November     |  
|                                      |   | December 31, |  |   | December 31, |   |   | 21, 1985) through       |  
|                                      |   | 2003         |  |   | 2002         |   |   | December
      31, 2003 |  
|                                      |   |              |  |   |              |   |   |                         |  
|Issuance of common shares for cash    |   |              |  |   |              |   |   |                         |  
|and stock subscriptions               |   | 24,379       |  |   | 280,518      |   |   | 13,591,849              |  
|Share issuance costs                  |   | -            |  |   | (4,216       | ) |   | (586,238                | )
|Issuance of special warrants          |   | -            |  |   | -            |   |   | 18,091,667              |  
|Issuance of common shares upon        |   |              |  |   |              |   |   |                         |  
|exercise of warrants                  |   | -            |  |   | -            |   |   | 857,283                 |  
|Cash provided by financing activities |   | 393,900      |  |   | 271,342      |   |   | 34,968,445              |  
|                                      |   |              |  |   |              |   |   |                         |  
|Net change in cash and cash           |   |              |  |   |              |   |   |                         |  
|equivalents                           |   | 27,365       |  |   | (6,147       | ) |   | 110,871                 |  
|                                      |   |              |  |   |              |   |   |                         |  
|Cash and cash equivalents,            |   |              |  |   |              |   |   |                         |  
|beginning balance                     |   | 83,506       |  |   | 89,653       |   |   | -                       |  
|                                      |   |              |  |   |              |   |   |                         |  
|Cash and cash equivalents,            |   |              |  |   |              |   |   |                         |  
|ending balance                        | $ | 110,871      |  | $ | 83,506       |   | $ | 110,871                 |  
|                                      |   |              |  |   |              |   |   |                         |  
|Supplemental disclosures of cash      |   |              |  |   |              |   |   |                         |  
|flow information:                     |   |              |  |   |              |   |   |                         |  
|                                      |   |              |  |   |              |   |   |                         |  
|Cash paid during period for:          |   |              |  |   |              |   |   |                         |  
|Interest                              | $ | 59,716       |  | $ | 60,186       |   | $ | 965,576                 |  
|Income taxes                          | $ | -            |  | $ | -            |   | $ | -                       |  
|                                      |   |              |  |   |              |   |   |                         |  
|Non-cash financing and                |   |              |  |   |              |   |   |                         |  
|investing activities:                 |   |              |  |   |              |   |   |                         |  
|Stock option compensation (Note 9)    | $ | 127,326      |  | $ | 21,456       |   | $ | 148,782                 |  
|Exchange of notes for common          |   |              |  |   |              |   |   |                         |  
|shares                                | $ | -            |  | $ | -            |   | $ | 1,727,282               |  
|                                      |   |              |  |   |              |   |   |                         |  
|Exchange of note for future           |   |              |  |   |              |   |   |                         |  
|royalty payments                      | $ | -            |  | $ | -            |   | $ | 150,000                 |  
|Common shares issued for mineral      |   |              |  |   |              |   |   |                         |  
|property                              | $ | -            |  | $ | -            |   | $ | 280,211                 |  
|Mineral property acquired             |   |              |  |   |              |   |   |                         |  
|through the issuance of long-         |   |              |  |   |              |   |   |                         |  
|term
      debt                       | $ | -            |  | $ | -            |   | $ | 1,084,833               |  

See Accompanying Summary of Accounting Policies and Notes to
  Consolidated Financial Statements.

F-11

---

GOLDEN QUEEN MINING CO. LTD(a development stage company)
  Summary of Accounting Policies

Nature of Business and Principles of Consolidation.
  Golden Queen Mining Co. Ltd. (Golden Queen or the Company)
  is engaged in acquiring and maintaining gold mining properties for exploration,
  future development and production. The Company was formed on November 21, 1985.
  Since its inception, the Company has been in the development stage. Planned
  activities involve bringing to operation a precious metals mine located in Kern
  County, California. These consolidated financial statements include the accounts
  of Golden Queen, a British Columbia corporation, and its wholly-owned subsidiary,
  Golden Queen Mining Company, Inc. (the Subsidiary), a United States
  (State of California) corporation. The underlying value of the Companys
  mineral properties and related deferred exploration and development expenditures
  is dependent on the existence and economic recovery of ore reserves, confirmation
  of the Companys interest in the underlying mineral claims, the ability
  to obtain necessary financing to complete the development, and future profitable
  production or proceeds from the disposition thereof.

Generally Accepted Accounting Principles. The consolidated
  financial statements have been prepared in accordance with accounting principles
  generally accepted in the United States of America.

Cash and Cash Equivalents.For purposes of balance
  sheet classification and the statements of cash flows, the Company considers
  all highly liquid investments purchased with an original maturity of three months
  or less to be cash equivalents.

Property and Equipment.Property and equipment are
  stated at the lower of cost or net realizable value. Depreciation is provided
  by the straight-line method over the estimated service lives of the respective
  assets, which range from 5 to 29 1⁄2 years.

Mineral Properties. Exploration costs pertaining to
  individual resource prospects are charged to income as incurred except for expenditures
  on specific properties having indications of the presence of a mineral resource
  with the potential of being developed into a mine. In this case, acquisition,
  exploration and development costs relating to mineral properties are deferred
  until such time as it is determined that the costs are not likely to be recouped
  or mineral properties are brought into production, abandoned, or sold, at which
  time they are amortized on the unit of production basis over the estimated life
  of the property or written off to earnings. Mineral properties include the cost
  of advance minimum royalty payments, the cost of capitalized property leases,
  share payments, and the cost of property acquired either by cash payment or
  the issuance of term debt.

Valuation of Long-lived Assets. Statement of Financial
  Accounting Standards ("SFAS") No. 144 requires recognition of impairment of
  long-lived assets in the event the net book value of such assets exceeds the
  estimated undiscounted future cash flows attributable to such assets. It requires
  that those long-lived assets to be disposed of by sale are to be measured at
  the lower of carrying amount or fair value less cost of sale whether reported
  in continuing operations or in discontinued operations. The statement is applied
  prospectively. In accordance with the provisions of SFAS No. 144, management
  of the Company reviews the carrying value of its mineral properties on a regular
  basis. Estimated undiscounted future cash flow from the mineral properties is
  compared with the current carrying value in order to determine if an impairment
  exists. Reductions to the carrying value, if necessary, are recorded to the
  extent the net book value of the property exceeds the estimate of future discounted
  cash flow or liquidation value.

Foreign Currency Translation.Golden Queen has adopted
  the United States dollar as its reporting currency for its financial statements
  prepared after May 21, 1996 as the United States dollar is the currency of the
  primary economic environment in which Golden Queen and the Subsidiary conduct
  business and is considered the appropriate functional currency for the Companys
  operations. Balances held in Canadian dollars are re-measured into the functional
  currency in accordance with SFAS No. 52, Foreign Currency Translation,
  (SFAS 52). Assets and liabilities in foreign currencies are generally
  translated into dollars at the rates in effect at the balance sheet date. Revenues
  and expenses are translated at average rates for the year. Where amounts denominated
  in a foreign currency are converted into dollars by remittance or repayment,
  the realized exchange differences are included in other income. The exchange
  rates prevailing at December 31, 2003 and December 31, 2002 were $1.30 and $1.58,
  respectively stated in Canadian dollars per one U.S. dollar. The average rates
  of exchange during both years ended December 31, 2003 and December 31, 2002
  were $1.40 and $1.57 respectively.

F-12

---

GOLDEN QUEEN MINING CO. LTD(a development stage company)
  Summary of Accounting Policies

Net Loss Per Share.The Company computes and discloses
  earnings and loss per share in accordance with SFAS No. 128, Earnings
  per Share (SFAS 128), which requires dual presentation of
  basic earnings per share and diluted earnings per share on the face of all income
  statements presented for all entities with complete capital structures. Basic
  earnings per share is computed as net income divided by the weighted average
  number of common shares outstanding for the period. Diluted earnings per share
  reflects the potential dilution that could occur from common shares issuable
  through stock options, warrants and convertible debt. Since the Companys
  convertible debt, stock options and warrants are antidilutive for all periods
  presented, only basic earnings per share is presented. A total of 4,800,870
  and 1,225,414 common shares were issuable pursuant to such stock options, warrants
  and convertible notes payable at December 31, 2003 and 2002 respectively.

Environmental and Reclamation Costs. The Company currently
  has no active reclamation projects, but expenditures relating to ongoing environmental
  and reclamation programs would either be expensed as incurred or capitalized
  and depreciated depending on the status of the related mineral property and
  their future economic benefits. The recording of provisions generally commences
  when a reasonably definitive estimate of cost and remaining project life can
  be determined.

Estimates.The preparation of financial statements
  in conformity with generally accepted accounting principles requires management
  to make estimates and assumptions that effect the reported amounts of assets
  and liabilities and disclosure of contingent assets and liabilities at the date
  of the financial statements and the reported amounts of revenues and expenses
  during the reporting period. Significant estimates have been made by management
  in several areas including the ability to realize mineral properties and certain
  other assets. Actual results could differ from those estimates.

Fair Value of Financial Instruments.The carrying amount
  reported in the balance sheets for cash and cash equivalents, receivables, accounts
  payable and accrued liabilities and royalty and mining rights payable approximate
  fair value because of the immediate or short-term maturity of these financial
  instruments. The fair values of long-term debt and the convertible notes payable
  approximate their carrying values because the stated rates of the debt reflect
  recent market conditions or because the rates are variable in nature.

Convertible Notes Payable.Emerging Issues Task Force
  (EITF) issue No. 00-27 requires the value of a beneficial conversion
  feature associated with convertible instruments to be recorded as a discount
  and to be amortized over the term of the related convertible instrument using
  the effective interest rate method. When a company issues a convertible instrument
  that is convertible into common stock, the value of the beneficial conversion
  feature is computed by comparing the proceeds of the convertible instrument
  allocated to the common stock portion of the conversion option and the fair
  value at the commitment date of the common stock to be received by the holder
  upon conversion. Upon conversion of the underlying convertible instrument into
  common stock, the unamortized discount is recorded as interest expense. For
  the convertible notes payable issued during 2003, a beneficial conversion feature
  of $375,000 was recorded and $179,000 was amortized in 2003 as interest expense.

Stock Based Compensation. The Company has adopted the
  disclosure only provisions of SFAS No. 123, Accounting for Stock-Based
  Compensation and has elected to continue to measure compensation cost
  for employees under Accounting Principles Board (APB) Opinion No.
  25, including interpretations provided in Interpretation (FIN) No.
  44. Generally, under APB No. 25 compensation expense is recognized for the difference
  between the market price of the underlying common stock and the exercise price
  of the stock options. Effective from the date of the modification, the Company
  regularly remeasures compensation expense for the options where there has been
  a substantive change or modification to such options.

SFAS No. 123 requires the Company to provide pro-forma information
  regarding net loss as if compensation cost for the stock options granted to
  the Companys employees had been determined in accordance with the fair
  value based method prescribed in SFAS No. 123. The value of stock options granted
  to non-employees is recognized in these financial statements as compensation
  expense under SFAS No. 123 using the Black-Scholes option pricing model. Related
  pro-forma information as required by SFAS No. 123 (see Note 9 for further information)
  has been disclosed in accordance with SFAS No. 148 as follows:

F-13

---

GOLDEN QUEEN MINING CO. LTD(a development stage company)
  Summary of Accounting Policies

|                                          | Years Ended |         
|----------------------------------------- | ----------- | --------
|                                          | December 31 |         
|                                          |             | 2003    
|                                          |             |         
|Net loss, as reported                     | $           | (744,516
|Deduct: Stock-based employee compensation |             |         
|expense determined under fair-value       |             |         
|based method for all awards not included  |             |         
|in net loss                               |             | (152,791
|                                          |             |         
|Pro-forma net loss                        | $           | (897,307
|Loss per share:                           |             |         
|Basic and diluted  as reported           | $           | (0.01   
|Basic and diluted  pro-forma             | $           | (0.02   

Gain on Settlement of Debt.During 2002, the Company
  early adopted Financial Accounting Standards Board Statement (FASB)
  No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of
  FASB No. 13 and Technical Corrections (SFAS No. 145). SFAS No. 145
  requires any gain or loss on early extinguishment of debt to be included in
  income from continuing operations instead of being classified as an extraordinary
  item. Any gain or loss on extinguishment of debts from the period prior to adoption
  must be reclassified into income (loss) from continuing operations.

New Accounting Pronouncements. Statement of Financial
  Accounting Standards No. 146, Accounting for Costs Associated with Exit
  or Disposal Activities (SFAS No. 146) provides guidance on
  the recognition and measurement of liabilities for costs associated with exit
  or disposal activities. The provisions of this Statement are effective for exit
  or disposal activities that are initiated after December 31, 2002.

In November 2002, the FASB issued FASB Interpretation (FIN)
  No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees,
  Including Indirect Guarantees of Indebtedness of Others, which addressed
  the accounting for and disclosure of guarantees. Interpretation 45 requires
  a guarantor to recognize a liability for the fair value of a guarantee at inception.
  The recognition of the liability is required even if it is not probable that
  payments will be required under the guarantee. The disclosure requirements are
  effective for interim and annual financial statements ending after December
  15, 2002. The initial recognition and measurement provisions are effective for
  all guarantees within the scope of Interpretation 45 issued or modified after
  December 31, 2002.

The implementation of these new standards did not have a material
  effect on the Companys financial statements.

F-14

---

GOLDEN QUEEN MINING CO. LTD(a development stage company)
  Summary of Accounting Policies

In January 2003, the FASB issued FIN No. 46, Consolidation
  of Variable Interest Entities, an Interpretation of ARB 51. The primary
  objectives of FIN No. 46 are to provide guidance on the identification of entities
  for which control is achieved through means other than voting rights (variable
  interest entities or VIEs) and how to determine when and which business
  enterprise should consolidate the VIE. This new model for consolidation applies
  to an entity for which either: (1) the equity investors do not have a controlling
  financial interest; or (2) the equity investment at risk is insufficient to
  finance that entitys activities without receiving additional subordinated
  financial support from other parties. In addition, FIN No. 46 requires that
  both the primary beneficiary and all other enterprises with a significant variable
  interest in a VIE make additional disclosures. As amended in December 2003,
  the effective dates of FIN No. 46 for public entities that are small business
  issuers, as defined (SBIs), are as follows: (a) For interests in
  special-purpose entities; periods ended after December 15, 2003; (b) For all
  VIEs created before January 31, 2003: periods ending after December 15, 2004;
  and (c) For all VIEs created after January 31, 2003. FIN 46 is applicable immediately.
  The December 2003 amendment of FIN No. 46 also includes transition provisions
  that govern how an SBI which previously adopted the pronouncement (as it was
  originally issued) must account for consolidated VIEs.

On May 15, 2003, the FASB issued Statement of Financial Accounting
  Standard ("SFAS") No. 150, "Accounting for Certain Financial Instruments with
  Characteristics of both Liabilities and Equity". SFAS No. 150 changes the accounting
  for certain financial instruments that, under previous guidance, could be classified
  as equity or "mezzanine" equity, by now requiring those instruments to be classified
  as liabilities (or assets in some circumstances) in the statement of financial
  position. Further, SFAS No. 150 requires disclosure regarding the terms of those
  instruments and settlement alternatives. SFAS No. 150 affects an entity's classification
  of the following freestanding instruments: a) Mandatorily redeemable instruments
  b) Financial instruments to repurchase an entity's own equity instruments c)
  Financial instruments embodying obligations that the issuer must or could choose
  to settle by issuing a variable number of its shares or other equity instruments
  based solely on (i) a fixed monetary amount known at inception or (ii) something
  other than changes in its own equity instruments d) SFAS No. 150 does not apply
  to features embedded in a financial instrument that is not a derivative in its
  entirety. The guidance in SFAS No. 150 is generally effective for all financial
  instruments entered into or modified after May 31, 2003, and is otherwise effective
  at the beginning of the first interim period beginning after June 15, 2003.

Emerging Issue Task Force (EITF) No. 04-3 Mining
  Assets  Impairment and Business Combinations sets the standard for
  mining companies to include value attributable to value beyond proven and probable
  reserves (VBPP) and anticipated fluctuations in the future market
  price of minerals in their consideration when an entity allocates the purchase
  price of a business combination to mining assets and when an entity performs
  the cash flow analysis used to test mining assets for impairment under SFAS
  No. 144 Accounting for the Impairment or Disposal of Long-live Assets.

The implementation of these new standards is not expected
  to have a material effect on the Companys financial statements.

F-15

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Notes to Consolidated Financial Statements

1. Financial Condition and Ability to Continue as a Going Concern.

The Company has had no revenues from operations since inception,
  has a deficit accumulated during the development stage of $35,153,852 unable
  to successfully renegotiate payment schedules with all landowners and debt holders,
  and has been unable to obtain the necessary financing to complete current development
  activities or exit the development stage. These conditions continue to raise
  substantial doubt about the Companys ability to continue as a going concern.

Management plans to control current costs and continue with
  its efforts to obtain equity based financing to sustain care and maintenance
  and provide sufficient cash to fund Company activities over the next 12 months.
  In addition, management plans to secure debt, equity, or joint venture financing
  to fund construction of the operating facility at the Soledad Property (Soledad)
  (see Note 12).

The ability of the Company to obtain financing and adequately
  manage its expenses, and thus maintain solvency, is dependent on equity market
  conditions, the ability to find a joint venture partner, the market for precious
  metals, and the willingness of other parties to lend the Company money, While
  the Company has been successful at certain of these efforts in the past, there
  can be no assurance that current efforts will be successful. These financial
  statements do not reflect the outcome of these uncertainties.

|2. Property and Equipment.          |   |                         |  |   |                         | 
|----------------------------------- | - | ----------------------- |  | - | ----------------------- | 
|                                    |   |                         |  |   |                         | 
|Property and equipment consists of: |   |                         |  |   |                         | 
|                                    |   | December
      31, 2003 |  |   | December
      31, 2002 | 
|                                    |   |                         |  |   |                         | 
|Building                            | $ | 26,360                  |  | $ | 26,360                  | 
|                                    |   |                         |  |   |                         | 
|Furniture and fixtures              |   | 56,090                  |  |   | 56,090                  | 
|                                    |   |                         |  |   |                         | 
|Equipment                           |   | 170,027                 |  |   | 170,027                 | 
|                                    |   |                         |  |   |                         | 
|Automobiles                         |   | 21,401                  |  |   | 21,401                  | 
|                                    |   |                         |  |   |                         | 
|Rental properties                   |   | 313,635                 |  |   | 313,635                 | 
|                                    |   |                         |  |   |                         | 
|Property and equipment, gross       |   | 587,513                 |  |   | 587,513                 | 
|                                    |   |                         |  |   |                         | 
|Less accumulated depreciation       |   | 325,044                 |  |   | 310,741                 | 
|                                    |   |                         |  |   |                         | 
|Property and equipment, net         |   | 262,469                 |  |   | 276,772                 | 

F-16

---

GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Notes to Consolidated Financial Statements

3. Mineral Properties.

The Company has capitalized the amounts which have been paid
  to acquire property rights and for professional services rendered in the exploration,
  drilling, sampling, engineering and other related technical, managerial and
  professional services toward the evaluation and development of certain mining
  claims known as Soledad, in the Mojave Mining District, Kern County, California.
  The Companys investment in mineral properties consisted of the following:

|                                                  | December
      31, 2003 |   | December
      31, 2002 |  
|------------------------------------------------- | ----------------------- | - | ----------------------- | -
|                                                  |                         |   |                         |  
|Deferred exploration and development expenditures | $21,015,506             |   | $21,015,506             |  
|                                                  |                         |   |                         |  
|Properties                                        | 4,113,738               |   | 4,113,738               |  
|                                                  |                         |   |                         |  
|Advance minimum royalty                           | 2,387,574               |   | 2,387,574               |  
|                                                  |                         |   |                         |  
|Asset impairment loss                             | (26,834,131             | ) | (26,834,131             | )
|                                                  |                         |   |                         |  
|Total                                             | $682,687                |   | $682,687                |  
|                                                  |                         |   |                         |  
|4. Other Assets.                                  |                         |   |                         |  

On April 1, 1995, the Company acquired, through the Subsidiary,
  an option to purchase all of the issued and outstanding shares of a privately
  held California corporation holding an interest in a previously uncontracted
  tract of land located near the Soledad site. The option called for an initial
  non-refundable payment of $100,000 in exchange for access to the property to
  evaluate the presence of mineral reserves for a period of nine months. At the
  end of the nine-month period, the Company chose to exercise its option to purchase
  the shares of the corporation by making the initial purchase payment of $250,000.
  This was followed by a second payment of $500,000 on July 1, 1997. An additional
  $750,000 was due upon reaching sustained production or July 1, 1999, whichever
  came first. In June 1999, the Subsidiary and the private corporation amended
  the original agreement to allow for a one year extension in exchange for $75,000
  which was paid by the Subsidiary on June 30, 1999. The Company extended the
  amended agreement to July 2001 with another extension payment on July 7, 2000
  of $75,000. These extension payments do not apply to the overall purchase price.

The Company anticipated its inability to make the extension
  payment scheduled for July 1, 2001, and on August 10, 2001, signed a second
  amendment to the original stock purchase agreement. This amendment suspends
  all terms and obligations of the Company as set forth in the original agreement
  and the first amendment. Further, the amendment requires the Company to recognize
  a liability of $35,000, on or before July 1, 2001, and on each successive anniversary
  date for up to five years. To extend the termination date of the agreement,
  $10,000 of the liability is to be paid in cash, and the balance of $25,000 is
  to be accrued, without interest, payment of which is deferred until the final
  stock purchase payment is made. The Company has made the required transfers
  and accruals and has extended the termination date of the agreement to July
  1, 2004.

F-17

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GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Notes to Consolidated Financial Statements

The Company has no legal obligation to continue making payments
  and cannot perfect its rights as a shareholder of the corporation until full
  payment under the option is made. Upon commencement of commercial production,
  if any, the Company would be required to pay a royalty of 1% of gross smelter
  returns for a period of up to 60 years, not to exceed $60,000,000.

5. Income Taxes.

At December 31, 2003 and December 31, 2002, the Company had
  future tax assets of approximately $12,388,000 and $12,320,000, respectively,
  principally arising from net operating loss carry-forwards for income tax purposes
  offset by development costs expended for income tax purposes but capitalized
  for financial reporting purposes. As management of the Company does not currently
  believe that it is more likely than not that the Company will receive the benefit
  of this asset, a valuation allowance equal to the future tax asset has been
  established at both December 31, 2003 and December 31, 2002.

As at December 31, 2003, the Company had net operating loss
  carry-forwards available to reduce taxable income in future years, approximately,
  as follows:

| | Country                       | Amount      |  | Expiration
      Dates |  | 
| | ----------------------------- | ----------- |  | ---------------------- |  | 
| |                               |             |  |                        |  | 
| | United
      States - Federal | $21,700,000 |  | 2004
      - 2022      |  | 
| |                               |             |  |                        |  | 
| | United
      States - AMT     | $18,360,000 |  | 2004
      - 2022      |  | 
| |                               |             |  |                        |  | 
| | Canada                        | $1,837,000  |  | 2004
      - 2009      |  | 

These financial statements do not reflect the potential effect
  on future income taxes of the application of these losses.

Major items causing the Corporations effective tax rate
  to differ from the statutory rate are as follows:

|                                 |   | December
      31, 2003 |   |     |   |   | December
      31, 2002 |   |          |  
|-------------------------------- | - | ----------------------- | - | --- | - | - | ----------------------- | - | -------- | -
|                                 |   |                         |   |     |   |   |                         |   |          |  
|Income benefit at statutory rate | $ | (253,135                | ) | (34 | ) | % |                         | $ | (139,041 | )
|Foreign income taxes at other    |   |                         |   |     |   |   |                         |   |          |  
|than the US statutory rate       |   | 17,370                  |   | 2   |   | % |                         |   | 3,193    |  
|Effect of expiry of tax loss     |   | 57,915                  |   | 8   |   | % |                         |   | 52,672   |  
|Non-deductible expense           |   | 109,014                 |   | 15  |   | % |                         |   | 13,546   |  
|Change in valuation allowance    |   | 68,836                  |   | 9   |   | % |                         |   | 69,630   |  
|Total                            | $ | -                       |   | -   |   | % |                         | $ | -        |  

F-18

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GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Notes to Consolidated Financial Statements

6. Long-Term Debt.

Long-term debt consists of the following:

| |                                                           |   | December
      31, 2003 |   |   | December
      31, 2002 |  
| | --------------------------------------------------------- | - | ----------------------- | - | - | ----------------------- | -
| |                                                           |   |                         |   |   |                         |  
| | Note due to a corporation, payable in monthly             |   |                         |   |   |                         |  
| | installments of
      $9,275, including interest at prime |   |                         |   |   |                         |  
| | plus 2% estimated to mature in July
      2013 and        |   |                         |   |   |                         |  
| | collateralized by
      mineral property. *               | $ | 745,548                 |   | $ | 745,548                 |  
| |                                                           |   |                         |   |   |                         |  
| | Note due an individual, payable in monthly                |   |                         |   |   |                         |  
| | installments of $600 including interest
      at 9%,      |   |                         |   |   |                         |  
| | maturing June 2006,
      collateralized by mineral       |   |                         |   |   |                         |  
| | property.                                                 |   | 16,054                  |   |   | 21,533                  |  
| |                                                           |   |                         |   |   |                         |  
| |                                                           |   | 761,602                 |   |   | 767,081                 |  
| | Current portion                                           |   | (751,542                | ) |   | (5,480                  | )
| |                                                           |   |                         |   |   |                         |  
| | Long-term debt, less current maturities                   | $ | 10,060                  |   | $ | 761,601                 |  

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | In June of 2000, an agreement effective September
        30, 2000 was signed by the note holder which allowed for the deferment
        of principal and interest payments on the note in exchange for monthly
        payments of $4,000 over a period of three years or until the Company obtains
        production financing, whichever is sooner. These payments are reflected
        under interest expense in the financial statements. With the expiration
        of this agreement as of September 30, 2003, the Company has only been
        making $4,000 per month payments and has, accordingly, classified this
        debt as current. The Company has entered into discussion with the landowner
        regarding the purchase of the property. The following schedule shows the
        maturity of the debts under the new agreement:
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| | Year ending December 31, |   | Amount  | 
| | ------------------------ | - | ------- | 
| |                          |   |         | 
| | 2004                     | $ | 751,542 | 
| | 2005                     |   | 6,555   | 
| | 2006                     |   | 3,505   | 
| |                          | $ | 761,602 | 

F-19

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GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Notes to Consolidated Financial Statements

7. Convertible Debt.

In July 2003, the Company issued convertible promissory notes
  for aggregate proceeds of $375,000 to three independent third parties. The notes
  are due on demand 12 months from the date of issuance, bearing interest at the
  rate of 6.5% and convertible into 1,630,435 units at a rate of $0.23. Each unit
  consists of one common share and one non-transferable detachable share purchase
  warrant entitling the holder to purchase one additional common share of the
  Company at an exercise price of $0.32, exercisable for two years. Interest will
  be waived on conversion.

The Company has calculated the fair value of the beneficial
  conversion feature of the convertible promissory notes based upon the fair value
  of the underlying securities. The fair value of the underlying securities was
  estimated on the date of commitment of the contractual obligation, using the
  Black-Scholes option-pricing model, with the following assumptions:

|                                | December
      31, 2003 | 
|------------------------------- | ----------------------- | 
|                                |                         | 
|Expected dividend yield         | 0.00%                   | 
|Expected stock price volatility | 181.02%                 | 
|Risk-free interest rate         | 1.37%                   | 
|Expected life of warrants       | 2 years                 | 

A discount of $375,000 (being the value assigned to the conversion
  feature) has been recorded against the principal of the convertible promissory
  notes. The discount is being amortized to interest expense using the effective
  interest rate method over the original term of the convertible promissory notes.
  Included in operations for the year ended December 31, 2003 is $179,000 in interest
  expense related to the amortization of the debt discount on the convertible
  promissory notes.

The convertible promissory notes are summarized as follows:

|                           |   | Face    |  |   |          |   |   | Carrying | 
|-------------------------- | - | ------- |  | - | -------- | - | - | -------- | 
|                           |   | Amount  |  |   | Discount |   |   | Value    | 
|                           |   |         |  |   |          |   |   |          | 
|Issuance in 2003           | $ | 375,000 |  | $ | (375,000 | ) | $ | -        | 
|Amortization of discount   |   | -       |  |   | 179,000  |   |   | 179,000  | 
|                           |   |         |  |   |          |   |   |          | 
|Balance, December 31, 2003 | $ | 375,000 |  | $ | (196,000 | ) | $ | 179,000  | 

8. Common Shares.

In 2003, two shareholders exercised an aggregate of 100,000
  options for common shares at C$0.50 per share for net proceeds of US$24,379
  (C$50,000).

In December 2000, two shareholders advanced the Company $200,000
  pursuant to a private placement to be completed in January 2001. In January
  2001 the private placement was completed with the issuance of an aggregate of
  1,538,462 shares at $0.13 per share. In addition, an aggregate of 1,656,250
  Common Shares were reserved for issuance as warrants with a fixed price of $0.16
  per share which expired unexercised on January 20, 2003. In April 2002, two
  shareholders exercised an aggregate of 1,520,836 warrants for common shares
  at $0.16 per share for proceeds of $243,334. A balance of 135,414 warrants expired
  as of January 20, 2003.

F-20

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GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Notes to Consolidated Financial Statements

9. Stock Option Plan.

Under its amended 1996 stock option plan, the Company may
  grant options to purchase up to 3,300,000 shares of common stock to officers,
  directors and employees. The exercise price for all stock options is the closing
  price of the Companys common shares in Canadian dollars as traded on the
  Toronto Stock Exchange on the date of grant. Options issued to directors vest
  immediately. For all other options, the right to exercise vests over a two year
  period in equal increments on the date of grant and on each of the first two
  anniversaries of such date. All stock options issued and outstanding as of December
  31, 2003 expire at a date determined by the Companys Board of Directors,
  not exceeding five years from the date of grant, or after 39 months from the
  date of grant if not specified.

On February 4, 2003 stock options to purchase up to 450,000
  shares were granted to four directors. The options are exercisable at C$0.81
  per share and expire February 4, 2006. On October 8, 2003, stock options to
  purchase up to a total of 100,000 shares were granted to two of the Companys
  consultants. These options are exercisable at C$0.81 per share and expire on
  February 4, 2006. On the same date all 550,000 options granted at C$0.81 had
  their exercise prices reduced to C$0.55. .

On March 9, 2002, stock options to purchase up to a total
  of 375,000 shares were granted to four directors. The options are exercisable
  at the price of C$0.50 per share and expire on May 9, 2007.

The following is a summary of stock option activity during
  the years ended December 31, 2003 and 2002:

|                                       | Year Ended        |   | Year Ended        |          
|-------------------------------------- | ----------------- | - | ----------------- | ---------
|                                       | December 31, 2003 |   | December 31, 2002 |          
|                                       | Shares            |   | Price
      Range |          
|Options outstanding, beginning of year | 1,090,000         |   | C$                | 0.13-0.50
|Options granted                        | 550,000           |   | C$                | 0.55     
|Options exercised                      | (100,000          | ) | C$                | 0.50     
|Options expired / cancelled            | -                 |   |                   | -        
|Options outstanding, end of year       | 1,540,000         |   | C$                | 0.13-0.55
|Options exercisable                    | 1,540,000         |   | C$                | 0.13-0.55

The following table summarizes information about stock options outstanding
  at December 31, 2003:

|                      |             |  | Options Outstanding |  | Options Exercisable | 
|--------------------- | ----------- |  | ------------------- |  | ------------------- | 
|                      |             |  | Weighted-           |  | Weighted-           | 
|                      | Number      |  | Average             |  | Average             | 
|                      | Outstanding |  | Contractual Life    |  | Exercise Price      | 
|Range of Prices       |             |  | (Years)             |  |                     | 
|C$0.50                | 675,000     |  | 2.46                |  | C$0.50              | 
|C$0.25                | 65,000      |  | 2.20                |  | C$0.25              | 
|C$0.23                | 110,000     |  | 2.10                |  | C$0.23              | 
|C$0.20                | 50,000      |  | 0.60                |  | C$0.20              | 
|C$0.13                | 90,000      |  | 2.90                |  | C$0.13              | 
|C$0.55                | 450,000     |  | 2.08                |  | C$0.55              | 
|C$0.55                | 100,000     |  | 2.08                |  | C$0.55              | 
|C$0.13 - $
      0.55 | 1,540,000   |  | 2.13                |  | C$0.45              | 

* Subsequent to year end, 75,000 options with an exercise price of $0.50
  per share expired unexercised.

F-21

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GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Notes to Consolidated Financial Statements

The Company accounts for stock-based compensation awarded
  to employees by applying APB Opinion No. 25 Accounting for Stock Issued
  to Employees, and related Interpretations. Under APB Opinion No. 25, because
  the exercise price of the Companys employee stock options approximates
  the market price of the underlying stock at the date of grant, no compensation
  cost is recognized in the period reported. The weighted average market value
  at date of grant for options granted to employees in 2003 and 2002 was US $0.51
  and US$0.17 per option, respectively. The Company applies variable accounting
  to remeasure compensation expense for the options where there has been substantive
  modifications to the terms of such options. Additional compensation costs will
  be recognized when the intrinsic value of the options upon remeasurement exceeds
  the original intrinsic value of the options as measure in accordance with APB
  Opinion No. 25. No additional compensation costs were recorded for the modification
  of the exercise price for the options granted in 2003 as the market value of
  the Company stock on the date of the modification and at year end is less than
  the amended exercise price of the options.

SFAS Statement No. 123, Accounting for Stock-Based Compensation
  (SFAS 123), requires the Company to provide pro forma information
  regarding net income and earnings per share as if compensation cost for the
  Companys stock option plans had been determined in accordance with the
  fair value based method prescribed in SFAS 123. The Company estimates the fair
  value of each stock option at the grant date by using the Black-Scholes option-pricing
  model with the following weighted-average assumptions used for grants in 2003
  and 2002, respectively: no dividend yield and expected option life of 3 years
  (2002  5 years); expected volatility of 227% (2002  199%); and risk-free
  interest rates of 3.81% (2002 - 6.0 %).

Based on the above assumptions, the fair value of options
  issued during 2003 and 2002 was $280,117 ($0.51 per share) and $107,534 ($0.29
  per share), respectively. During 2003, the Company, using the Black-Scholes
  option-pricing model with the above-noted assumptions, estimated the fair value
  of stock options granted for non-directors services as $127,326(2002
  -$21,456) which was recognized as compensation expense in the Statements
  of Operations.

10. Commitments and Contingencies.

The Companys investment in mineral properties includes
  an exclusive lease to explore, develop and mine the Soledad site. The lease
  is for a minimum twenty year period, continuing on as long as the property remains
  in production subject to processing a minimum of 12,000 tons of ore per year.
  The lease is also subject to production royalties of 3% to 7.5% of net smelter
  returns depending on the quality of ore eventually extracted. All advance minimum
  royalties paid, formerly amounting to $100,000 per year, are applied against
  any future production royalties. The Company has agreed to issue 100,000 common
  shares upon commencement of commercial production in connection with certain
  property acquisitions.

The Company has entered into various exploration right, lease
  option and property acquisition agreements on the above claims. In 2001, the
  lease agreement was successfully renegotiated to include a three year moratorium
  of payments. The Company ceased making payments to landowners, according to
  the terms of the various agreements, in October 2000 and has since been in the
  process of negotiating moratorium agreements with its landowners. The Company
  is technically in default on the agreements, which have not been paid or re-negotiated.
  While the Company has successfully negotiated moratorium agreements with these
  landowners in the past and has reached new agreements with many of the landowners,
  there can be no assurance that the remaining agreements will be successfully
  renegotiated in the future.

All are subject to a sliding scale royalty on net smelter
  returns beginning at 3%.

On September 19, 1994, the Company entered into a mining lease
  agreement granting exclusive exploration and development rights on property
  adjacent to claims previously described. The term of the agreement is for 20
  years and consideration included a cash payment of $30,000 and annual minimum
  lease payments of $10,000. In 2001, this lease was successfully renegotiated
  to include a three year moratorium of payments. The Company will pursue further
  negotiations with this landowner in 2004. While the Company has successfully
  negotiated agreements with its landowners in the past, there can be no
  assurance that the agreement will be successfully renegotiated in the future.

F-22

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GOLDEN QUEEN MINING CO. LTD.(a development stage company)
  Notes to Consolidated Financial Statements

On December 30, 1994, the Company signed an amendment to a
  September 25, 1989 agreement of purchase for certain leasehold interests and
  unpatented claims. Under the terms of the amendment, the outstanding balance
  on the $150,000 note was cancelled and a production royalty was granted on all
  products produced from the property up to a maximum payment of $300,000 plus
  simple interest. The outstanding balance on the cancelled note was credited
  to mineral properties.

11. Related Party Transactions.

Jerrold W. Schramm, a director of Golden Queen until January
  22, 2001, is a partner of the law firm of Lawson Lundell Lawson & McIntosh,
  counsel to the Company. During the year ended December 31, 2003 and 2002, the
  Company paid Lawson Lundell Lawson & McIntosh $463 and $26,199, respectively
  for services rendered.

For the year ended December 31, 2003, $NIL (2002 - $14,647)
  was paid to Mr. Edward Thompson, and $68,626 (2002 - $NIL) was paid to Mr. H.
  L. Klingmann for services as President of the Company. No other compensation
  was paid or given during the year for services rendered by the directors in
  such capacity, and no additional amounts were payable at year-end under any
  standard arrangements for committee participation or special assignments.

The above noted transactions were in the normal course of
  operations, and were measured at the exchange amount, which is the amount of
  consideration established and agreed to by the related parties.

12. Subsequent Event

Subsequent to the year ended December 31, 2003, the Company
  entered into private placement agreements with 10 independent investors to issue
  an aggregate of 8,000,000 units at CDN$0.50 per unit for gross proceeds of CDN$4,000,000.
  Each unit is comprised of one share purchase warrant. Each warrant entitles
  the holder to purchase during a two year period one common share at a price
  of CDN$0.62 in the first year and CDN$0.75 in the second year.

[The balance of this page has been left blank intentionally.]

F-23

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