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UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2010

[ ] TRANSITION REPORT PURSUANT TO 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 registrant in its charter)

|British Columbia, Canada                                             | Not Applicable     
|-------------------------------------------------------------------- | -------------------
|(State or other jurisdiction                                         | (IRS Employer      
|of incorporation or organization)                                    | Identification No.)
|                                                                     |                    
|6411 Imperial Avenue, West Vancouver, British
      Columbia, Canada | V7W 2J5            
|(Address of principal executive offices)                             | (Zip Code)         

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

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically
  and posted on its corporate Web site, if any, every Interactive 
  Data File required to be submitted and posted pursuant to Rule 405 of Regulation
  S-T during the preceding 12 months (or for such 
  shorter period that the registrant was required to submit and post such files).
  Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained herein, and will not be
  contained, to the best of registrants knowledge, in definitive proxy or
  information statements incorporated by reference in part III of this 
  Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated
  filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
  company. 
  Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filed [ ]
  Smaller reporting company [X]

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

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 the last business day of the registrants most recently
  completed 
  second fiscal quarter: $72,956,250 as at June 30, 2010.

Indicate the number of shares outstanding of each of the registrants
  classes of common equity, as of the latest
  practicable date: 94,228,383 common shares as at February 28, 2011.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for the Annual Meeting
  of Stockholders are incorporated by reference into Part III of this Form 10-K,
  
  which Proxy Statement is to be filed within 120 days after the end of the registrant's
  fiscal year ended December 31, 2010.

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Form 10-K

Table of Contents

|Part       | Item No. |                                                                                                      
|---------- | -------- | -----------------------------------------------------------------------------------------------------
|           |          |                                                                                                      
|I          | 1        | Business                                                                                             
|           | 1A       | Risk Factors                                                                                         
|           | 1B       | Unresolved Staff Comments                                                                            
|           | 2        | Properties                                                                                           
|           | 3        | Legal Proceedings                                                                                    
|           | 4        | (Removed and Reserved)                                                                               
|II         | 5        | Market for Common Equity,
      Related Stockholder Matters and Issuer Purchases of Equity Securities
|           | 6        | Selected Financial Data                                                                              
|           | 7        | Managements Discussion and
      Analysis of Financial Condition and Results of Operation           
|           | 7A       | Quantitative and Qualitative
      Disclosures About Market Risk                                     
|           | 8        | Financial Statements and
      Supplementary Data                                                    
|           | 9        | Changes in and Disagreements
      With Accountants on Accounting and Financial Disclosure           
|           | 9A       | Controls and Procedures                                                                              
|           | 9B       | Other Information                                                                                    
|III        | 10       | Directors, Executive Officers
      and Corporate Governance                                         
|           | 11       | Executive Compensation                                                                               
|           | 12       | Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder Matters 
|           | 13       | Certain Relationships and
      Related Transactions and Director Independence                       
|           | 14       | Principal Accountant Fees and
      Services                                                         
|IV         | 15       | Exhibits, Financial Statement
      Schedules                                                        
|Signatures |         

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PART I

FORWARD-LOOKING STATEMENTS

ALL STATEMENTS IN THIS DISCUSSION THAT ARE NOT HISTORICAL ARE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. STATEMENTS PRECEDED BY, FOLLOWED BY OR THAT
OTHERWISE INCLUDE THE WORDS "BELIEVES", "EXPECTS", "ANTICIPATES", "INTENDS",
"PROJECTS", "ESTIMATES", "PLANS", "MAY INCREASE", "MAY FLUCTUATE" AND SIMILAR
EXPRESSIONS OR FUTURE OR CONDITIONAL VERBS SUCH AS "SHOULD", "WOULD", "MAY" AND
"COULD" ARE GENERALLY FORWARD-LOOKING IN NATURE AND NOT HISTORICAL FACTS. THESE
FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED
UTILIZING NUMEROUS IMPORTANT ASSUMPTIONS AND OTHER IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE THE INFORMATION CONCERNING OUR
FUTURE FINANCIAL PERFORMANCE, BUSINESS STRATEGY, PROJECTED PLANS AND OBJECTIVES.
THESE FACTORS INCLUDE, AMONG OTHERS, THE FACTORS SET FORTH BELOW UNDER THE
HEADING "RISK FACTORS." ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN
THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE
RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. MOST OF THESE FACTORS
ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. WE ARE
UNDER NO OBLIGATION TO PUBLICLY UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-K,
UNLESS ANOTHER DATE IS STATED, ARE TO DECEMBER 31, 2008. AS USED HEREIN, THE
"COMPANY," "GOLDEN QUEEN MINING" "WE," "US," "OUR" AND WORDS OF SIMILAR MEANING
REFER TO GOLDEN QUEEN MINING CO. LTD.

Item 1. Business.

Glossary

Certain terms used in this Form 10-K are described below. Note
that Golden Queen Mining Co. Ltd. (the Company) uses Canadian Institute of
Mining, Metallurgy and Petroleum definitions for the terms reserves, measured
resources, indicated resources and inferred resources, and U.S. investors
are cautioned that while these terms are recognized and required by Canadian
regulations, the U.S. Securities and Exchange Commission does not recognize
them.

Advance minimum royalty - Payment made before the start
of commercial production under a mining lease agreement with landholders.

Ag The chemical symbol for silver.

Au The chemical symbol for gold.

Exploration stage A mining company engaged in the
search for or exploration of mineral deposits, which is not in either the
development or production stage.

Development stage A mining company engaged in the
preparation of a mineral deposit with reserves for production and which is not
in the production stage.

Production stage A mining company engaged in the
exploitation of a mineral deposit with reserves.

Fault or faulting - A fracture in the earths
crust caused by tectonic forces with displacement along the fracture.

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

Heap leaching A process for extracting gold and/or
silver, which typically allows dilute cyanide solutions to percolate through
run-of-mine or crushed ore heaped on an impervious pad to dissolve the gold
and/or silver.

Kriging -A geostatistical method used to assign grades
to mineral resource and mineral reserve model blocks.

Mineral deposit -A mineral deposit is a mineralized
body, which has been intersected by a sufficient number of drill holes or by
underground workings to give an estimate of grade(s) of metal(s) and thus to
warrant further exploration or development. A mineral deposit does not qualify
as a commercially viable mineral deposit with reserves under standards set by
the Securities and Exchange Commission until a final, comprehensive, economic,
technical and legal feasibility study has been completed.

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

Mineral Resource -A mineral resource is a concentration
or occurrence of natural, solid, inorganic or fossilized organic material in or
on the earths crust in such form and quantity and of such a grade or quality
that it has reasonable prospects for economic exploitation. The location,
quantity, grade, geological characteristics and continuity of a Mineral Resource
are known, estimated or interpreted from specific geological evidence and
knowledge. Mineral resources are sub-divided, in order of increasing geological
confidence, into inferred, indicated and measured categories.

Mineral Reserve -A mineral reserve is the economically
mineable part of an indicated or measured mineral resource as demonstrated by at
least a preliminary feasibility study. This study must include adequate
information on mining, metallurgy and processing, economic and other relevant
factors that demonstrate, at the time of reporting, that economic exploitation
can be justified. A mineral reserve includes diluting materials and allowance
for losses that may occur when the material is mined. Mineral reserves are
sub-divided in order of increasing confidence into probable and proven
categories.

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

The Company was incorporated under the laws of the Province of
British Columbia, Canada in November 1985 and has been exploring its mineral
properties (the Property) located just south of Mojave in Kern County in
southern California since that time.

The Company acquired its initial interest in the Property in
1985 and has since added to its holdings in the area. Work on the Property and
on the Soledad Mountain project (the Project) is done by Golden Queen Mining
Co., 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 Corporation (M3), Tucson, Arizona completed a
preliminary feasibility study for the Project in 1998 with gold and silver
prices of $350/oz and $5.50/oz respectively. The Company did additional drilling
and underground sampling in 1998 and 1999.

The Company had previously reported that it expected to begin
producing gold and silver from the Project during the second half of 1998, based
on the M3 preliminary feasibility study and once approvals and permits had been
secured. Because of relatively low gold and silver prices in the late 1990s and
in early 2000 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 landholders agreed to a 3-year moratorium on advance
minimum royalty and other property payments or until the

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

The Project remained on hold in 2010 pending the receipt of
outstanding approvals and permits for the Project.

In order to update the prospects for the economic exploitation
of the Soledad Mountain mineral deposit, 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. The review
was supported and complimented by a substantial amount of work done by
independent engineers and contractors. The review was documented and compiled
into an in-house report to assist management in determining the prospects for
development of the Project at gold and silver prices prevailing in late-2006.
The review indicated reasonable prospects for the development of the Project and
this was the basis for the work on the Project that has continued to date.

The Company retracted the historical mineral reserve estimates,
which were based on the report prepared by M3 in 1998, in 2005 on the basis that
they were out of date and not supported by National Instrument NI 43-101 (NI
43-101), being the Canadian regulation that governs the disclosure of technical
information by natural resource companies. Past disclosure of mineral reserve
estimates should accordingly not be relied upon.

The Company engaged SRK Consulting (U.S.), Inc. (SRK),
Lakewood, Colorado in 2005 to prepare a NI 43-101 compliant technical report
(the Technical Report (SRK)) to validate and confirm the mineral resource
estimates in compliance with NI 43-101. SRK released the Technical Report (SRK)
on March 6, 2006 and this confirmed the mineral resource estimates (see
Exploration & Mineral Resources heading below).

The Company engaged Norwest Corporation (Norwest), Vancouver
in 2007 to prepare a further NI 43-101 compliant technical report (the
Technical Report (Norwest)) to assess mineral reserves for the Project as part
of an independent feasibility study based upon the technical work that had been
completed to the end of 2006. The results of the Norwest study were disclosed in
a press release on December 14, 2007 (see Mineral Reserves heading
below).

The Company engaged Norwest in June 2010 to update the
feasibility study to reflect current market conditions. It is expected that the
results of the updated feasibility study will be released in the second quarter
of 2011.

The Project will produce two different types of materials with
overlapping time frames. Metal mining and heap leach operation as presently
defined is approximately one year of construction, twelve years of mining,
thirteen years of leaching for the production of gold and silver (which overlaps
with the twelve years of mining), and a further two years of rinsing and
drain-down. The production and sale of aggregate is expected to commence fairly
early in the mine life and continue for up to thirty years or until the
stockpile of quality waste rock has been exhausted. The Company also plans to
process and sell leached and rinsed residues from the heap leach operation for a
range of uses to local and regional markets. Reclamation will proceed
concurrently where feasible, but is nonetheless expected to require two years
following cessation of all mining, and a further three years of post-closure
monitoring. Monitoring will continue until the reclamation success criteria are
met.

There are a number of risks associated with the Project and
readers are urged to consider these risks and possible other risks, in order to
obtain an understanding of the Project (see Item 1A. Risk Factors heading
below).

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

The U.S. dollar is used in this Form 10-K and quantities are
reported in Metric units with Imperial units in brackets.

Project Background

The Project is located approximately 8km (5miles) south of
Mojave in Kern County in southern California. See Figure 1, property location
map under below.

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Gold mining on Soledad Mountain dates back to the late
19thcentury. The largest producer in the area was Gold Fields
America Development Co. (Gold Fields), a subsidiary of Consolidated Gold
Fields of South Africa. This syndicate operated 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.

Exploration & Mineral Resources

The Soledad Mountain mineral 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. Higher-grade precious metals mineralization is
associated with steeply dipping, epithermal veins, which occupy faults and
fracture zones that cross cut the rock units and generally trend northwest. The
veins are contained within siliceous envelopes of lower-grade mineralization
that forms the bulk of the mineral resource.

The primary rock types that occur on the Property are rhyolite
porphyry and flow-banded rhyolite, quartz latite porphyry, pyroclastics and
siliceous vein material.  Little or no clay occurs in any of the rocks and
the rocks contain upwards of 60% Si as SiO2.  Rhyolite porphyry
and flow-banded rhyolite were grouped as a single rock type for the
metallurgical test work.

Extensive programs of mapping, diamond drilling,
reverse-circulation drilling and underground diamond drilling and channel
sampling were carried out on the Property between 1985 and 1999. Company
geologists and engineers managed these programs. The geological database today
includes the crosscut assay data recorded on linens by Gold Fields between 1933
and 1942 and the results of exploration done on the Property by Rosario
Exploration and Shell/Billiton. The database contains 71,325 samples, generated
from over 113,593m (372,649ft) of drilling and sampling of underground
crosscuts.

Ore zones were shaped manually by Company geologists to define
continuity with a low-grade cutoff grade of 0.274g/t AuEq (0.008oz/ton AuEq).
Prices for gold and silver of $325.00/oz and $6.00/oz and recoveries for gold
and silver of 78.0% and 60.0% respectively were used to calculate the
gold-equivalent cutoff grade for this purpose.

Note:

AuEq is the gold-equivalent grade, which
  is calculated as follows:
  AuEq g/t = Au g/t + {(Ag/R1)xR2} g/t where 
  R1= Au price in $/oz/Ag price in $/oz; R2 
  = Ag recovery in %/Au recovery in %.

Mineral Resources Development, Inc. (MRDI), San Mateo,
California completed a detailed due diligence review of the procedures used by
the Company between 1998 and 2000. This work involved statistical analyses, the
evaluation of grade capping, the design of appropriate kriging techniques and
setting criteria for the classification of resources. The Company received a
final report with recommendations in May 2000.

The Company engaged SRK Consulting (U.S.), Inc. (SRK),
Lakewood, Colorado in 2005 to prepare a NI 43-101 compliant technical report
(the Technical Report (SRK)) to validate and confirm the mineral resource
estimates in compliance with NI 43-101. SRK and AMEC E&C Services, Inc.
(AMEC acquired MRDI in 2000) did an exhaustive review of the database
information and this included the MRDI recommendations from 2000 and audited the
geological model over a period of five months in late 2005 and early 2006.
Linear kriging was used to estimate gold and silver grades for all blocks in the
model. SRK released the Technical Report (SRK) on March 6, 2006.

Mineral resources were classified as follows:

- Measured  first drill hole or crosscut within 21m (70ft) and
a second drill hole or crosscut within 30m (100ft).

- Indicated - first drill hole or crosscut within 43m (140ft)
and a second drill hole or crosscut within 61m (200ft).

- Inferred  everything beyond measured and indicated, but with
two drill holes or cross-cuts within 91m (300ft) and this is more restrictive
than the MRDI recommendation from 2000.

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Note that mineral resources are not mineral reserves and do not
have demonstrated economic viability.

Cautionary note to U.S. investors concerning estimates of
measured or indicated resources:This section uses the terms measured
resources and indicated resources. We advise U.S. investors that while these
terms are recognized and required by Canadian regulations, the U.S. Securities
and Exchange Commission does not recognize them.

Soledad Mountain Project - Measured & Indicated Mineral
Resources

GradeAuEq
    Gold
    SilverCategory
    t
    ton
    g/t
    oz/ton
    g/t
    oz/ton
    g/t
    oz/tonMeasured Indicated
    39,720,000 50,774,000
    43,692,000 55,851,000
    1.118 0.789
    0.033 0.023
    0.926 0.603
    0.027 0.018
    14.86 11.47
    0.43 0.33Total & Average
    90,494,000
    99,543,000
    0.912
    0.027
    0.744
    0.022
    12.96
    0.38


Cautionary note to U.S. investors concerning inferred
resources:This section uses the term inferred resources. We advise U.S.
investors that while this term is recognized and required by Canadian
regulations, the U.S. Securities and Exchange Commission does not recognize it.
Inferred resources have great uncertainty as to their existence, and great
uncertainty as to the economic feasibility of exploiting these in a mining
operation. Under Canadian rules, estimates of an inferred resource may not form
the basis of pre-feasibility or feasibility studies except in rare cases.
Investors are cautioned not to assume that all of or part of an inferred
resource exists or will be economically exploitable.

Soledad Mountain Project - Inferred Mineral Resources

GradeAuEq
    Gold
    SilverCategory
    t
    ton
    g/t
    oz/ton
    g/t
    oz/ton
    g/t
    oz/tonInferred
    32,073,000
    35,280,000
    0.634
    0.019
    0.497
    0.015
    10.84
    0.32


Note:

|1. | AuEq is the gold-equivalent grade, which is calculated as
      follows: AuEq g/t = Au g/t + {(Ag/R1)xR2} g/t
      where                                                                            
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | R1= Au price in $/oz/Ag price in $/oz;
      R2= Ag recovery in %/Au recovery in %.                                                                                                                  
|   | Prices used in the calculations are $450.00/oz and
      $7.50/oz for gold and silver respectively. Recoveries used in the
      calculations are 78.0% and 60.0% for gold and silver
  respectively.
|2. | Ore zones were shaped manually with a cutoff grade of
      0.274g/t (0.008oz/ton) AuEq.                                                                                                             
|3. | The mineral resources were calculated with a cutoff grade
      of 0.274g/t (0.008oz/ton) AuEq.                                                                                                      

Peter Clarke, P.Eng., SRK Consulting (U.S.), Inc., a Qualified
Person as described in NI 43-101, signed the Technical Report (SRK). The
Technical Report (SRK) is available on the Companys web site at
www.goldenqueen.com.

Infill Drilling Program

The Company has prepared a drilling program with 40 drill holes
and approximately 7,200m (23,500ft) of drilling, designed to test a portion of
the material classified as inferred within pit shells constructed in 2007. SRK
concurred

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in the Technical Report (SRK) that strategically targeted
drilling could upgrade a significant portion of the inferred to the measured or
indicated categories. The Company intends to do extensive infill drilling only
once the mine is in production. The Company is however proceeding with a limited
infill drilling program with targets within the areas of the planned North-West
and East open pits. A total of 15 holes are proposed within the North-West open
pit area with a total length of 1,500m (4,900ft). The North-West open pit is the
planned location of the first phase of mining. A total of 9 holes are proposed
within the East open pit area with a total length of 1,200m (3,900ft). The
program will consist primarily of infill drilling with the objective of
upgrading inferred resources to reserves. In addition the drilling will test
continuity of mineralization, which typically has been excellent in most areas
previously tested.

Mineral Reserves

The Company engaged Norwest in January 2007 to prepare a NI
43-101 compliant technical report (the Technical Report (Norwest)) to assess
mineral reserves for the Project as part of an independent feasibility study
based upon the technical work that had been completed to the end of 2006. The
results of the Norwest study were disclosed in a press release on December 14,
2007 and the Technical Report (Norwest) is dated March 2008.

The mineral reserves as calculated by Norwest are set out in
the table below.

Soledad Mountain Project - Proven and Probable Mineral
Reserves

Diluted GradesGold
    SilverReserve Category
    t
    ton
    g/t
    oz/ton
    g/t
    oz/tonProven* Probable*
    27,705,500 18,861,800
    30,476,000 20,748,000
    0.819 0.535
    0.0239 0.0156
    13.82 11.69
    0.403 0.341Total & Average
    46,567,300
    51,224,000
    0.703
    0.0205
    12.96
    0.378


*Indicated recoveries for gold and silver based upon
extensive test work are 85.0% and 52.5% as discussed in detail in sectionMineralogy, Process Development & Flow Sheetbelow.

Cautionary note to U.S. investors concerning proven or
probable reserves:This section uses the terms proven reserves and
probable reserves. We advise U.S. investors that these terms are defined
strictly in accordance with applicable Canadian regulations. We further advise
U.S. investors that the mineral reserve estimates are not compliant with the
Securities and Exchange Commission Industry Guide 7 as a final bankable
feasibility study has not been completed.

Sean Ennis, P.Eng., Norwest Corporation, a Qualified Person as
described in NI 43-101, signed the Technical Report (Norwest). The Technical
Report (Norwest) is available on the Companys web site at www.goldenqueen.com.

These mineral reserve estimates are included in the Measured
& Indicated Mineral Resources set out in the table in the section
Exploration & Mineral Resourcesabove.

The gold-equivalent cut-off grade for the calculation of
mineral reserves is 0.51g/t (0.015oz/ton) AuEq.

Norwest allowed for ore loss of 2.5% and 15% dilution at a zero
grade in calculating the mineral reserves.

Exploration Potential

Additional geological targets have been identified on the
Property. These targets are generally peripheral (east, south and west) to the
currently defined mineral resources. 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 8m (26ft) with good gold and
silver grades.

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The exploration work to date has focused on known fault/vein
structures central to the deposit. The host volcanics associated with the
mineralization on the Property extend further to the south and have not been
fully evaluated. Further, anomalous gold values have also been found in the low
volcanic hills that protrude from the valley floor to the northwest of the
Property.

The continuity of mineralization at depth remains untested.

Independent Feasibility Study Completed By Norwest
Corporation

Norwest completed a feasibility study and Technical Report
(Norwest) for the Project and the results were released in a press release on
December 14, 2007.

The following were the parameters used in the base case cash
flow projection:

- Gold and silver prices of $600.00/oz and $12.00/oz respectively
- An analysis on an all-equity basis with lease financing of the primary
  mining equipment and
- A 10% contingency on capital and operating costs.

The Project then had a projected internal rate of return
(IRR) on capital employed of 19% before taxes with a payback of approximately
4 years. The net present value (NPV) was $66.5million with discount rate of
5.0% and the undiscounted, cumulative, net cash flow was $120million. The
contribution of gold and silver to gross revenues was projected to be 84% and
16% respectively with an average cash operating cost per ounce of gold produced,
net of silver credits, of $420/oz.

The Company engaged Norwest in June 2010 to update the
feasibility study to reflect current market conditions. It is expected that the
results of the updated study will be released in the second quarter of 2011.

Technical information is provided in the following sections.

Mine Design

Norwest did a detailed mine design in 2007. Gold and silver
prices of $600.00/oz and $12.00/oz respectively were used to develop an
ultimate, open pit shell with standard modeling techniques. A total of five
mining phases were defined within this shell. Detailed waste rock removal and
ore production schedules were prepared. The waste rock management plan
incorporates sequential backfilling of mined-out phases of the open pit as
required by current California regulations.

An independent consulting engineer did open pit slope stability
analyses in 1995 and these included analyses with the ultimate slopes subjected
to a maximum, credible earthquake acceleration of 0.297g. The consulting
engineer recommended an ultimate slope angle of 55o with an
indication that this angle could be safely increased to 63.4 o. The
Company drilled five diamond drill holes in 1997 specifically to obtain rock
strength parameters for further slope stability analyses. An independent
consulting engineer did further slope stability analyses and confirmed the
ultimate slope angle of 55o. Norwest use an inter-ramp slope angle of
55o for the mine design done in 2007.

Disposal of waste rock will be largely in mined-out phases of
the open pit and a single, external waste rock dump will be constructed to
provide a pad for the aggregate operation. Independent consulting engineers did
waste rock dump stability analyses in 1996 and again in 1998 and these were
confirmed by Norwest in 2007. A further dump stability analysis was done in
2010. These analyses concluded that waste rock dumps would be stable under both
static and seismic loading conditions, both during operations and after closure
and reclamation. Some sloughing of the faces of dumps could occur during
significant seismic events in the area.

Waste rock dumps will be constructed at an angle of repose of
37o (1.3:1.0) and a specific volume of 18.1ft 3/ton that
represents a 30% net swell after allowing for partial compaction. Dumps will be
re-sloped to 27o (2.0:1.0) as part of closure and reclamation. The
toes of the re-sloped dumps will also typically remain within the open pit
perimeter or

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within the permit boundary. There is no groundwater in the
areas where waste rock will be disposed of and this will therefore not have an
impact on the stability of the waste rock dumps.

Open Pit Operation

Standard, open pit mining methods will be used to mine ore and
waste rock. Mining operations will include drilling, blasting, loading and
hauling and it is expected that the Company will do the mining. All open pit
mining will occur in dry conditions above the water table.

Norwest determined the open pit equipment requirements and
capital and operating costs for the feasibility study.

Planned mining rates are 13,000 tons of ore and 27,000 tons of
waste rock per day or 4.55million tons of ore and 9.45million tons of waste rock
per year for a combined total of 14.0million tons per year and these have been
reduced from the earlier planned mining rates. Mine life has increased from 7
years to 12 years. The total quantity of ore to be mined, crushed and screened
and stacked on the heap leach pads is estimated to be 48.5 million tonnes (53.3
million tons). Total waste rock to be mined is estimated as 89.7 million tonnes
(98.7 million tons) of which 17.3 million tonnes (19.0 million tons) is expected
to be processed and 13.6 million tonnes (15.0 million tons) sold as aggregate
and 76.1 million tonnes (83.7 million tons) is expected to be managed on site.
The average waste to ore mining ratio has been reduced from 2.12:1.0 in 2008 to
1.85:1.0.

The quantities of both ore and waste rock mined per year will
vary from year to ensure the most efficient disposal of waste rock in mined-out
phases of the open pit.

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

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.

The open pit design done by Norwest assumed a loaded downhill
ore haul to the primary crusher for the life of the mine. The intent is to
replace trucks with a downhill pipe conveyor to convey ore for a number of the
mining phases with a reduction in the number of trucks required. Ore will be
crushed by an in-pit, portable, primary crusher and fed to the pipe conveyor and
conveyed to the coarse ore stockpile. The length of the pipe conveyor will be
approximately 1500ft. Various alternative mine designs are being explored in an
effort to make the best possible use of the pipe conveyor and detailed
engineering for this application remains to be completed.

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
small portion of the power required elsewhere in the Project.

Mineralogy, Process Development & Flow
Sheet

Studies show that gold is present as native gold and electrum
  with particles ranging in size from less than 10 micron to greater than 150
  micron with the silver content of the electrum as high as 25%. Silver is also
  present as the mineral acanthite (Ag2S) with some native silver,
  pyrargyrite (3Ag2S.Sb2S3) and polybasite (9Ag2S.Sb2S3).
  Pyrite (FeS2), galena (PbS) and chalcopyrite (CuFeS2)
  are present in minor amounts with no indicated acid-generating potential. Multi-element
  x-ray fluorescence analyses show only trace quantities of mercury.

Test work done on Soledad Mountain ores from 1989 to 2007 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
rates under load and the consumption of cyanide and other reagents, were
determined.

It was proposed to crush and screen ore to 100% - 8mesh or 100%
- 2.37mm and a four-stage crushing and screening plant using vertical shaft
impact crushers in the third and fourth crushing stages was designed for the
Project in the 1990s. This approach is referred to as conventional crushing in
the following analysis. The Company did a review that provided new insights into
the historical test results in 2002. An alternative flow sheet was

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developed for the Project in late 2002. This was now a
three-stage crushing and screening plant with a high-pressure grinding roll
(HPGR) in the third crushing stage.

Confirmation HPGR tests were 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 commercial operation; and
- Information to finalize the flow sheet, e.g. the need to recycle edge
  material.

Samples of rhyolite ore and quartz latite ore were collected
for the HPGR tests in July 2003 and in March 2004 respectively. The samples were
crushed to 100% passing 32mm and 35mm respectively by McClelland Laboratories,
Inc. (MLI), an independent metallurgical laboratory located in Sparks, Nevada.
The samples were shipped by airfreight to the laboratories of two HPGR
manufacturers in Germany where the actual HPGR tests were done. The crushed
samples were returned to the MLI laboratory in Nevada for confirmation leach
test work. The following conclusions were drawn based upon the results of bottle
roll and column leach tests:

- Recoveries are higher with longer leach times and this confirms the
  historical findings;
- Recoveries increase with a finer crushed product and this effect is
  especially pronounced for silver; and
- Recoveries for the HPGR products are consistently higher and extraction
  rates faster than those obtained from conventional crusher products  the
  evidence is that this is due to penetration of leach solution into
  micro-cracks that are created by the high specific press force applied to the
  ore particles in the HPGR.

The detailed analysis of the leached residues or tails
indicated that tests should be done on a high-grade and a low-grade sample to
obtain data for the complete range of expected head grades. Two rhyolite samples
were taken for this test work in April 2006. The total weight of the two samples
was approximately 2,100kg (4,600lb). The samples were shipped by truck to MLI
for first-stage crushing and then by airfreight to a HPGR manufacturers
laboratory in Germany where the HPGR tests were done. The samples were returned
to MLI and bottle roll tests and column leach tests were started in July and
completed in December 2006. Final test results were received and combined with
the results from earlier tests for a detailed recovery analysis.

The Company now estimates the following recoveries based upon
the tails analysis:

Primary Rock Types
    Proportion
    Gold
    Silver%
    %
    %Pyroclastics Quartz Latite Rhyolite Undefined
    10.5 21.3 68.1 0.1
    85.4 89.9 83.4 Average
    52.5 52.5 52.5 AverageTotal & Average
    100.0
    85.0
    52.5


Tests were done on leached residues from two of the column
leach tests to determine the percolation rates under load and the results of the
tests were used to design the heap and confirm heap height for the heap leach
operation.

The test work shows that the HPGR is expected to have distinct
advantages over conventional crushing and screening to size and prepare
particles for heap leaching in this particular application. The indicated
benefits of using the HPGR will be:

- Higher recoveries in the heap leach operation due to micro-cracks in the
  ore particles;
- Faster gold and silver extraction rates;
- Stronger agglomerates due to a more favorable overall particle size
  distribution and this will also impact the flow rates of solution through the
  heap;
- Substantially lower capital costs than a conventional crushing - screening
  plant;

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- Manageable dust control with fewer transfer points;
- Lower energy consumption and thus lower operating costs; and
- Exceptional circuit flexibility that will readily permit future upgrades
  such as a finer HPGR feed size or the recycle of edge product.

A technical paper entitled Flow Sheet Development And Benefits
Of The HPGR was presented at the RANDOL conference held in Perth, Australia in
late-August 2005.

An independent consulting engineering firm did the design of
the crushing-screening plant including the HPGR in 2006. This design was revised
in 2008 and further updated in 2010. The crushing-screening plant has been
designed to process 650t/h (715ton/h to a possible throughput of 4,650,000
tonnes (5,119,000 tons) of ore per year.

The HPGR consists basically of two counter-rotating rolls  one
a fixed roll and the other a floating roll. The floating roll is mounted on
and can move freely on two slides and the grinding forces are applied to the
floating roll by four hydraulic rams. Ore is choke-fed to the gap between the
rolls and comminution takes place by inter-particle crushing in the bed of
particles. The gap between the rolls is determined by the nip-in characteristics
of the feed and the total grinding force applied, which in turn depends upon
pressures in the hydraulic system. Each roll is driven by an electric motor via
a planetary gear reducer. The total grinding force can range from 750kN to
20,000kN and pressures in the gap can range from 50MPa (approximately
7,000lb/in2) to 250MPa (approximately 36,000lb/in2). The
unconfined compressive strengths of Soledad Mountain ores range from 2.2MPa
(320lb/in2) to 118.9MPa (17,200lb/in2) by comparison.

Comminution in the HPGR is achieved without impact and
essentially without attrition of the wear protection on the surface of the
rolls.

Merrill-Crowe Plant

Gold and silver are typically recovered in a heap leach
operation by dissolution in a dilute sodium-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 10:1. The silver to gold ratio is expected to average
15:1 for the Project and a Merrill-Crowe precipitation plant will therefore be
required. In the Merrill-Crowe process, zinc dust is metered into the deaerated,
pregnant solution and gold and silver are precipitated as micron-sized, metallic
particles. The precipitate is dried, mixed with selected fluxes and melted in an
induction furnace. The molten mix of gold and silver, i.e. the dorè, is poured
into molds. The dorè is cooled, cleaned and shipped to a commercial refinery
where gold and silver bullion are produced for final sale.

The Merrill-Crowe process is highly efficient and recoveries in
a commercial plant typically range upwards of 98%.

Independent consulting engineering firms did detailed designs
and prepared capital and operating costs estimates for the Merrill-Crowe plant
and this includes the refinery in 2010.

The Heap Leach Pad And The Heap

A dilute, sodium-cyanide solution will be used to extract gold
and silver in the heap leach operation. Extensive procedures will be put in
place to protect workers and the environment. The cyanide will be received in a
dissolved form by truck directly from the manufacturer and will be pumped to a
storage tank on site and from there to the process.

An independent consulting engineering firm is responsible for
the design of the heap leach facility, which has been designed for zero
discharge. The design contemplates that the first heap leach pad to be
constructed, the Phase 1 pad, will be located on the northern side of Soledad
Mountain. A second pad, the Phase 2 pad, will be located on the western side of
Soledad Mountain, if required. The Phase 1 pad will be a single-use, dedicated
pad.

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The following are the design criteria for the Phase 1 pad:

- The pad has been designed as a permanent, single-use pad;
- Dry specific weight of agglomerated ore ranges from 1.36t/m3(85lb/ft3) to 1.86t/m3(116lb/ft3);
- Maximum heap height is 60m (200ft);
- Lift height is 10m (33ft);
- The angle of repose of the agglomerated ore is 2.0H:1.0V;
- Slopes are 2.5H:1.0V on the north and west sides and 2.0H:1.0V on the
  south and east side of the heap;
- Nominal capacity of the pad is 55 million tonnes (60 million tons) and
- The heap is to be constructed in 3 stages.

The Phase 1 heap leach pad 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 45cm (18inch) 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. Solution will drain by gravity to a pump
box and will be pumped to the Merrill-Crowe plant where gold and silver will be
extracted from the pregnant solution. The barren solution will be returned to
the heap and drip emitters will be used on the heap to limit evaporation losses.
Drip emitters will be covered. An overflow pond is located east and downstream
of the pump box.

Detailed site investigations were done in the area where the
Phase 1 heap leach pad will be constructed in 2004 and again in 2006. The design
of the Phase 1 pad has been completed for construction. A local contractor has
prepared a construction cost estimate for the Phase 1, Stage 1 portion of the
pad.

The design of the heap leach pad meets all applicable
regulatory requirements.

An equipment manufacturer did the heap leach stacking study for
the conveying and stacking system.

Services

The Project is located approximately 8km (5 miles) south of
Mojave in southern California. The metropolitan areas of Rosamond and Lancaster
lie from 14km (9 miles) to 32km (20 miles) to the south. Access to site is from
State Route 14 and Silver Queen Road, an existing paved County road. Mojave is a
railroad hub for the Burlington Northern/Santa Fe and Union Pacific/Southern
Pacific railroad lines. 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.

Water Supply

A water supply will be required for the operation and it is
expected that groundwater will be used.

A detailed study of the site hydrogeology was completed in 2006
to confirm that groundwater would be a dependable source of water for the
Project. 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 PW-1 drilled by the Company indicate that, initially, two
production wells can provide the maximum estimated water requirement of 147.6m
3/h (650gal/min). Production well PW-1 is located approximately 1km
(3,000ft) north of the Project. A second production well was drilled
approximately 300m (1,000ft) north of well PW-1 and cased and tested and a third
production well, PW-3, was drilled in an area west of the Project in November
2008 and development of the well has just been completed.

Water samples taken from five characterization wells on site
indicate that groundwater can be used in the heap leach process without
pre-treatment.

An independent consulting engineering firm did the design for
the water supply and the process water and firewater distribution systems and
prepared capital and operating cost estimates in 2010.

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The Company filed an application for a water service connection
with Antelope Valley  East Kern Water Agency in February 2008 to provide a
backup water supply. This was mandated as one of the conditions of approval in
the Conditional Use Permits that were issued in 1997.

The Company is in discussion with the Rosamond Community
Services District to determine the availability and feasibility of using
recycled water for the Project and initial engineering studies have been
initiated.

Power Supply

The regional utility, Southern California Edison (SCE), will
supply power.

A main power line with three sets of conductors runs along the
eastern property boundary. The top two sets of conductors carry 66kV while the
bottom set of conductors carries 12,460V and these are the common primary
voltages in SCE territory.

SCE provided a rate for power in 2010. The rate structure is
complex and a mix of consumption and demand charges applies to peak, mid-peak
and off-peak periods.

SCE indicates that the power factor is an absolutely critical
item in SCE territory. SCE requires a minimum operating power factor of 0.95 and
a load-sensitive capacitor bank will be installed to achieve this. SCE may also
limit the number of starts permitted for the major motors per day.

It is expected that the Company will install and own the
utility tie sub-station, which will transform the incoming voltage of 66kV to
4160V and this will be the mine distribution voltage. Overhead transmission
lines will distribute power from the utility tie sub-station to the areas where
power will be required.

A diesel-powered generator will provide standby power and this
will be set beside the Merrill-Crowe plant. Power will be available to operate
the pregnant and barren solution pumps in case of a SCE power failure.

An independent consulting engineering firm prepared a detailed
motor list and estimated the power consumption for the Project. The firm also
prepared a detailed capital cost estimate for the supply of power to the Project
in 2010.

Assay Laboratory, Offices & Workshop/Warehouse

Detailed designs for all services required for a mining
operation such as an office, workshop and warehouse, diesel fuel and gasoline
storage and an assay laboratory have been completed. Detailed capital and
operating cost estimates were prepared for these facilities in 2010.

Project Management & Operating Manpower

A management team will be assembled in Mojave to manage the
Project. Manpower is expected to average 32 salaried and 165 hourly-paid workers
once the mine is in full production with a further 15 hourly-paid workers
required for the aggregate operation. Indications are that skilled workers will
be available locally as there are a number of mines and quarries in production
in the greater Mojave area.

Construction manpower is expected to peak at 200 with an
estimated 141.7 man-years required for construction.

Aggregate

It is expected that a by-product aggregate and construction
materials business can be developed once the heap leach operation is in full
production, 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 quality waste rock specifically stockpiled for this purpose. The waste
rock can be classified into a range of products such as riprap, crushed stone
and sand with little further processing. Test work done in the 1990s confirmed
the suitability of waste rock as aggregate and construction material. The waste
rock could be sold over an extended mine life greater than 30 years. The

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Company also plans to process and sell leached and rinsed
residues from the heap leach operation for a range of uses to local and regional
markets.

Environmental Issues & Permits

Introduction

The Companys Soledad Mountain Project requires three main
permits that will give the Company the right to begin mining and processing
operations. These are:

| | a. | Amended Conditional Use Permits to be issued by Kern
      County (see CEQA/NEPA heading below);                                                                       
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | Authorities to Construct to be issued by the Eastern Kern
      Air Pollution Control District (see Authority to Construct &
      Permit to Operate heading below; and
| | c. | Waste Discharge Requirements to be issued by the Lahontan
      Regional Water Quality Control Board (see Water Quality heading
      below.                           

The environmental issues and the efforts made to secure the
three main permits are described in detail under the subheadings
CEQA/NEPA, Authority to Construct & Permit to Operate, and
Water Quality.

General

The area surrounding Mojave is typical of the western Mojave
Desert. The immediate vicinity of the Project is sparsely populated with
considerable historical and more recent mining activity. The Standard Hill,
Tropico and Cactus mines are located within a radius of 12km (7.5 miles) of the
Property.

The Project and the immediate area surrounding the Project or a
total of approximately 9,600 (3,887 hectares) acres are included in the Specific
Plan (the Plan) for Soledad Mountain - Elephant Butte & Vicinity - south
of Mojave. This Plan was prepared in March 1973 and adopted by the Kern County
Board of Supervisors as Resolution 73-485 on June 18, 1973. Gold and silver
mining operations are recognized in the Plan as important land uses and the
protection of mineral deposits, potentially of commercial value, is included in
the Plan through restriction of incompatible land uses. The Project as presently
defined is consistent with the Plan.

An independent consulting engineering firm reviewed the major
approvals and permits that were issued for the Project in the late 1990s and the
current regulatory environment in California in 2005. Additional work was
indicated due to the time that had passed since the permits were first issued
and changes that had been made in the Project. There have also been changes in
regulations imposed by two levels of government in California. No significant
environmental issues were however identified in the review and furthermore, the
footprint of the Project as presently defined has been reduced in both a
physical and an environmental sense.

Environmental issues and the status of approvals and permits
are summarized in the following sections.

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 environmental setting of the Project was documented in a
number of baseline studies prepared between 1990 and 1997. The Kern County Board
of Supervisors unanimously approved two Conditional Use Permits (CUP) for the
Project in September 1997 (i.e. CUP Case No. 41, Map No. 213 and CUP Case No.
22, Map No. 214). The Bureau of Land Management subsequently issued its Record
of Decision approving the Plan of Operations under NEPA in November 1997.

The State of California introduced backfilling requirements for
certain types of open pit, metal mines in December 2002. The Company contended
that these regulations did not apply to the Project under a grandfathering
provision

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included in the regulation. The Company, therefore, pursued
both a favorable interpretation under the regulation and subsequently an
amendment of the regulation with the State Mining and Geology Board (the
Board) in 2006. These efforts were supported by Kern County officials. Both
approaches were rejected by the Board and the decision was duly recorded by the
Board in January 2007.

The Company completed an Application for a revised Surface
Mining and Reclamation Plan, which was submitted to the Kern County Planning
Department (the Planning Department) in April 2007. The Planning Department
completed its review of the Application and deemed the Application complete in
July 2007. The Planning Department noted that changes proposed for the Project
constituted new information that required evaluation of potential impacts and
mitigation in a supplemental EIR (SEIR). The Planning Department issued a
Request for Proposal to prepare the SEIR to a total of 17 qualified consultants
in October 2007. The Chambers Group was awarded the contract to prepare the
SEIR. The Company signed an agreement with the Planning Department in February
2008 and made a payment of $55,000 which was 50% of the cost of preparing the
SEIR. This agreement was approved by the Kern County Board of Supervisors at its
regular meeting on March 11, 2008.

The kickoff meeting with the Chambers Group was held on the
afternoon of March 12, 2008. The Chambers Group completed the initial review of
information provided by the Planning Department and issued a draft Notice of
Preparation by mid-June. The Planning Department then terminated the agreement
with the Chambers Group due to a conflict of interest related to another
project. The Planning Department mailed the Notice of Preparation and the
supporting reports to agencies on the mailing list on August 18 with a deadline
for responses by September 17. A total of 66 sets of information were mailed by
the Planning Department directly plus a further 15 sets were mailed by the State
Clearinghouse.

The State Office of Mine Reclamation (OMR), accompanied by
the Planning Department and Company management, met on site for a due diligence
review on September 16, 2008. The OMR indicated that it would require additional
time beyond the September 17, 2008 deadline to prepare comments on the Project.

The Planning Department received nine comment letters by
September 17, 2008 and two additional comment letters at the end of September
plus a twelfth comment letter thereafter. The OMR submitted comments to the
Planning Department on September 30, 2008.

The County selected RGP Planning and Development Services
(RGP) to continue with the preparation of the SEIR. The agreement with RGP was
approved by the Kern County Board of Supervisors at its regular meeting on
October 14, 2008. The estimated cost of the work to be done by RGP was $123,800
and the Company paid this amount on September 25, 2008.

A scoping meeting was held on site attended by RGP, the
Planning Department, and Company management.

The Company submitted responses to ten of the comment letters
referred to above to the Planning Department on November 27, 2008 and responses
to the OMRs comment letter on December 16, 2008.

RGP prepared a Progress Report, which the Planning Department
released to the public, on December 30, 2008.

The Companys consulting engineers did extensive studies to
confirm the possibility of backfilling mined-out phases of the open pit in
January and February 2009. The studies were presented to the Planning Department
in a meeting in Bakersfield on March 11, 2009. The Planning Department requested
that the Project Description be revised to include the backfilling studies and
this was done and submitted to the Planning Department on March 24. The
Application for the revised Surface Mining and Reclamation Plan was also revised
and submitted to the Planning Department on April 5. A further revision of the
Application was requested by the Planning Department on May 5 and this was
completed and submitted on May 25. The Company recognizes that the reviews by
the Planning Department have added to the overall quality of the
Application.

The Planning Departments target for the release of the SEIR to
the public was then late July or early August 2009.

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The following two items are of note:

- The Company completed a number of studies and did significant work on site
  between 2005 and 2010 to document that the environmental setting for the
  Project had not changed since 1997. The studies have been submitted to the
  Planning Department.
- The Bureau of Land Management has confirmed that its Record of Decision
  approving the Plan of Operations under NEPA in November 1997 remains valid and
  that no additional reviews or approvals are required before the Company can
  proceed with the Project.

There are 87 conditions of approval listed in Exhibit E to
the CUPs and this includes a requirement to reclaim historical disturbances on
the Property. Site inspections are conducted annually to verify that the Company
is in compliance with the conditions of approval.

The SEIR was distributed by the Planning Department, as lead
agency under the provisions of CEQA to approximately 430 recipients and
notification of release to 985 recipients on January 11, 2010. At the conclusion
of the review period, the Planning Department had received 26 responses,
including letters supporting the Project, letters that had concerns with the
Project, and letters from regulatory agencies designated as responsible agencies
under CEQA. Comments were also received from the State of California on the
reclamation plan provisions. The lead agency responded in writing to the
comments received by February 25, 2010. The Company supported the lead agencys
effort by supplying additional information that was requested. As required by
CEQA, the lead agency provided written responses to those who commented no later
than 14 days prior to the projects consideration by the Kern County Planning
Commission Commission. The Commission was scheduled to consider this case at
its regularly scheduled April 8, 2010, hearing.

The Commission formally considered the Project on April 8,
2010. At the meeting, the Commission, consisting of a panel of three
commissioners, unanimously approved the Project. Two appeals to the
certification were filed but subsequently withdrawn. Accordingly, the
Commissions actions became final on May 24, 2010. The thirty-day period for
filing a lawsuit challenging the SEIR expired on June 23, 2010. The Commission
certified the SEIR and adopted a Mitigation Measures Monitoring Program and a
set of Conditions of Approval for the Project. The Mitigation Measures
Monitoring Program and Conditions of Approval for the Project were amended by
Commission Resolution No. 171-10 adopted on October 28, 2010 and are now
final.

Air Quality

Background Information

The Project lies within the Southeast Desert Air Basin, which
falls under the jurisdiction of the Eastern Kern Air Pollution Control District
(EKAPCD). The district is charged to regulate sources of air pollution within
the basin, pursuant to authority granted under the federal Clean Air Act.

The area is designated as unclassified for
PM10emissions (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 responsible for
high background PM10levels recorded at several nearby
meteorological monitoring stations.

Fugitive dust from a mining operation on the Property, combined
with background dust, may result in unacceptable levels of
PM10 emissions in the surrounding areas, especially downwind,
and this may present the greatest potential environmental issue for the
Project.  A PM10 level of 44 micrograms per cubic meter was
projected by computer modeling for an annual mining rate of 27 million tonnes
(30 million tons) in 1996. 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 the actual operation based on the planned use of commonly
accepted dust control techniques in all phases of the operation.

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The Planning Department requested that the Air Quality
Assessment and Health Risk Assessment for the Project be redone in February 2009
to provide current information for the SEIR. This study was completed and in the
hands of the Planning Department and EKAPCD on July 21, 2009.

EKAPCD transferred an Emission Reduction Credit Certificate
from Cactus Gold Mines Company to the Project in February 1999 and this remains
valid.

Authority To Construct & Permit To Operate

The Company had obtained seven Authorities to Construct dated
March 16, 2002. These permits expired on March 16, 2004 and were not renewed due
to changes anticipated in the Project.

The Companys consulting engineers completed the revised
Applications for Authorities to Construct and these were submitted to EKAPCD in
February 2011. EKAPCD can now prepare and issue Authorities to Construct as the
SEIR has been certified.

The Authorities to Construct are converted to a Permit To
Operate after construction has been completed and subject to inspection by the
EKAPCD.

Meteorological Monitoring Station

The Company was required to install both upwind and downwind
meteorological monitoring stations before the start of production and
decided to proceed with the upwind monitoring station in May 2006 to add to the
background database.  The station was designed by Air Sciences Inc.,
Golden, Colorado and commissioned in September 2006.  The EKAPCD approved
the design of the station in October 2006.  Data is being recorded on a
continuous basis and quarterly reports are being issued to the EKAPCD.

The equipment for the downwind meteorological monitoring
station has been purchased and is in storage in Mojave.

Water Quality

The Project is located in the northern portion of the Antelope
Valley Groundwater Basin. The mean recorded annual rainfall in the surrounding
area is approximately 156mm (6.14in) . Typical patterns of precipitation are
winter rains and summer thunderstorms and these tend to be short-lived and of
high intensity. The site is dominated by Soledad Mountain and surface drainage
patterns in the area are largely influenced by local topography. This varies
from steep, rugged hillsides at the upper elevations to a gently sloping desert
floor around the toe of Soledad Mountain. Runoff on the northern side of Soledad
Mountain is via a series of gullies or channels, which direct surface flows to
the north, northeast and northwest and eventually to the east to the Gloster and
Chaffee Hydrologic Areas of the Antelope Hydrologic Unit.

There are no springs or intermittent streams in the immediate
area. The closest intermittent stream is approximately 5km (3 miles) to the
west. Evaporation rates are high. Groundwater is typically found at depths of
55m to 60m (180ft to 200ft) in the area north of the Project.

The Lahontan Regional Water Quality Control Board (Regional
Board) is responsible for ensuring compliance with the federal Clean Water Act
and Californias Porter-Cologne Water Quality Act. The Company submitted a
Report of Waste Discharge (ROWD), prepared by a company based in Bakersfield
to the Regional Board in June 1997. The Regional Board adopted Board Order No.
6-98-9 in March 1998 at a meeting held in Lancaster and this set the Waste
Discharge Requirements for the Project.

19

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Revised Report Of Waste Discharge

The ROWD submitted in 1997 included a design for the heap leach
facility done before and in 1997. The Company and its consulting engineers
prepared an engineering review that set out significant differences between the
layout and designs prepared for the heap leach facility in 1997 and in 2005 and
made a presentation to the Regional Board in Victorville in May 2006. The
Regional Board requested that the Company submit a revised ROWD to reflect these
changes. The Company and its consulting engineers prepared and submitted a
revised ROWD to the Regional Board in March 2007.

The Regional Board completed its assessment of the revised ROWD
and prepared draft Waste Discharge Requirements (WDRs) for the Project. The
Regional Board waited for confirmation from the Planning Department that the
SEIR had been certified before adopting a revised Board Order and setting
revised WDRs for the Project.

The Regional Board unanimously approved WDRs and a Monitoring
and Reporting Program for the Project at the joint, regular meeting held on July
14, 2010 in South Lake Tahoe, NV and Victorville, CA. The Board recommended
adopting an order approving the WDRs subject only to locating an additional
ground water monitoring well. This well was drilled and tested in November 2010.
The Board Order was signed by the Executive Officer of the Regional Board on
July 23, 2010.

The order approving the WDRs is a critical authorization for
the construction and operation of, and establishes the discharge and monitoring
standards for, the heap leach pads, rock stockpiles and other activities that
have the potential to affect surface and ground waters.

Closure, Reclamation and Financial Assurance

Closure and reclamation will be done in accordance with the
requirements set out in the CUPs and an approved Surface Mining and Reclamation
Plan and as set out in the Board Order issued by the Regional Board.

The following general principles apply:

- Considerable experience gained in reclamation of other heap leach
  operations in the California deserts since the mid-1990s shows that
  reclamation can be completed successfully.
- The Surface Mining and Reclamation Plan will be an active plan with
  concurrent reclamation on one hand and alternative reclamation concepts to be
  sought and evaluated during the mine life on the other hand.
- Reclamation will proceed concurrently where feasible, but is nonetheless
  expected to require two years following ending of all mining and the
  processing and sale of aggregate and construction materials.
- The site drainage plan will be re-assessed to direct and thus control
  runoff to minimize erosion.
- Public safety will be a concern to be addressed both while mining is
  underway and as part of closure, and
- Post-closure monitoring will continue until revegetation targets are met
  with the ultimate goal of establishing a productive and self-staining
  eco-system.

The following points will have an impact on closure and
reclamation costs:

- The footprint required for Project facilities has been significantly
  reduced from the earlier concepts;
- A road to the top of Soledad Mountain will remain for access to public
  facilities and will not be reclaimed;
- Waste rock will be disposed of in mined-out phases of the open pit as part
  of a comprehensive waste rock management plan;
- A planned major waste rock dump to the south of Soledad Mountain has been
  eliminated and this will significantly reduce the total disturbed area that
  must be reclaimed;
- The Company is committed to neutralizing, rinsing and then selling the
  leached residues; and
- The size and complexity of the crushing & screening plant has been
  significantly reduced with fewer structures that have to be dismantled and
  fewer concrete footings that have to be broken up or buried.

20

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The following two items will require future consideration:

- The workshop and warehouse building and wash slab, security and human
  resources units, bulk fuel storage tanks, septic tank and leach field and the
  parking lot will find an approved, alternative industrial use and may not be
  dismantled and the site where these facilities are constructed may not have to
  be reclaimed.
- Two (or three) water supply wells may remain for future industrial or
  municipal use. The water supply infrastructure may be turned over to the
  Mojave Public Utility District to become part of the permanent facilities in
  the area.

Revegetation

Sites have been revegetated successfully elsewhere in the
California deserts, for example at the Castle Mountain Mine in San Bernardino
County, and it is expected that revegetation can be completed successfully for
the Project as per the detailed revegetation plan that has been prepared by the
Companys consulting engineers.

A summary of the proposed revegetation procedures is given
below:

- Two revegetation test plots were prepared and seeded north and south of
  Soledad Mountain in 2006 and 2007 respectively to demonstrate that seed
  collected locally can be an effective source of seed;
- Seed is being collected locally and a seed library has been established;
- Seed collected locally will be supplemented by seed contained in growth
  media that has been stockpiled;
- Surfaces will be prepared to provide textures suitable for desert plants
  and micro-basins will be created to trap seed and moisture;
- Hand seeding has been found to be effective and aerial (crop duster or
  helicopter) seeding can be used in areas that are inaccessible by vehicle or
  foot;
- Seeded areas will not require fertilizer and watering;
- Reclamation of disturbed areas will occur as soon as possible throughout
  the mine life;
- Control of runoff to minimize erosion will be a key to successful
  revegetation and
- Quantifiable goals for density and diversity of perennial species have
  been proposed..

Financial Assurances

The Company will be required to provide the following financial
assurances for the Project:

- To the State of California and Kern County for general reclamation on
  site;
- To the Regional Board for rinsing and closing reclamation of the leached
  residues on the heap and
- Unforeseen events financial assurance required by the Regional Board to
  provide for an unforeseen event that could contaminate surface or groundwater.

The Company provided reclamation financial assurance in the
form of a Payment Bond Certificate backed by a Certificate Of Deposit with Union
Bank of California in the amount of $286,653 on October 21, 2009 and this is
being maintained with no change to October 2011.

21

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Cleanup On Site

The Company has done extensive cleanup on site over the past
four years as summarized in the table below.

AmountPayable To
    Years
    USD$
    No. of LoadsContractor 1
    2006
    13,077.93
    6.02007
    41,946.50
    48.52008
    138,336.00
    160.02009
    15,425.00
    17.52010
    20,310.00
    19.5Total
    2006-2010
    229,095.43
    251.5Contractor 2
    2008
    128,000.00
    141.0Contractor 3
    2010
    18,644.60
    5.0Grand Total
    Five Years
    357,095.43
    392.5


Some work remains to be done and cleanup is continuing in 2011.

The work was done at a significant cost to the Company and
demonstrates that the Company is committed to environmental stewardship and good
housekeeping in its operations.

Environmental, Safety and Health Policy

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

The Company expects to sign the International Cyanide
Management Code. The Code was developed under the auspices of the United Nations
Environment Program and the International Council on Metals and the Environment.
The International Cyanide Management Institute, a non-profit organization,
administers the Code. Signatories to the Code commit to follow the Principles
set out in Code and to follow the Standards of Practice. Companies are expected
to design, construct, operate and decommission their facilities consistent with
the requirements of the Code and must have their operations audited by an
independent third party. Audit results are made public.

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 currently has no employees. The Company utilizes an
accounting firm, which is independent from our auditors, on a contract basis for
the preparation of its financial statements, and engages various part-time
consultants and contractors as needed for administrative services. Technical
services related to Project permitting, development and land matters are
performed by consultants and contractors on an as-needed basis.

Item 1A. Risk Factors.

The following is a brief discussion of distinctive or special
characteristics of the Companys operations and the industry in which it
operates, which may have a material impact on, or constitutes risk factors in
respect of, the Companys future financial performance and in respect of an
investment in the Company. These risk factors should be read in conjunction with
disclosure on business and risks appearing in this Form 10-K and elsewhere.

22

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The Likelihood Of Continued Losses From Operations

The Company has had no revenue from operations and has incurred
cumulative losses from inception through December 31, 2010 of $63,451,997.
Losses are expected to continue until such time as the Company can economically
produce and sell gold and silver, aggregate and construction materials from the
Project. Continued losses will require that the Company raise additional funds
by equity or debt financing, failing which the Company will not be able to
continue operations.

Ability To Continue As A Going Concern

The Company has had no revenues from operations since inception
and has a deficit of $63,451,997 accumulated during the exploration stage. In
addition we have significant costs associated with ongoing operations and
advancing the Project that we are presently funding primarily through the sale
of our common shares.

The continuation of the Company as a going concern is dependent
upon the continued financial support from our shareholders, the ability of the
Company to obtain the necessary financing to achieve its operating objectives,
and the attainment of profitable operations. Management cannot provide
assurances that such plans will occur. These factors raise doubts about the
Companys ability to continue as a going concern.

The Need for Significant Additional Financing

If a production decision is made, the Company will need
significant additional financing to develop the Project into an operating mine
and estimates that this could range as high as $85 million plus working capital.
The Company expects to finance the construction and to secure the necessary
working capital from either additional sales of common shares, from bank or
other borrowings or, alternatively, through a joint venture. However, the
Company has no commitment for the underwriting of additional shares or for bank
financing and it is not a party to any agreement or arrangement providing for a
joint venture. Whether or not and to what extent project financing can be
secured will depend on a number of factors, including 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 US dollar and foreign
currencies, global and regional demand, and global or regional political or
economic events. If financing is not obtained, the Company will not be able to
develop the Project and would be forced to seek alternatives to its current
business plan, including disposing of its interests in the Property.

Passive Foreign Investment Company

The Company may be classified as a passive foreign investment
company. U.S. investors should seek independent advice from tax advisors to
discuss any tax consequences.

We must secure approvals and permits.

The Company must secure all approvals and permits as set out
above. The Company has been persistent in its efforts to secure approvals and
permits, however, there is no assurance that these can ultimately be secured and
this remains a significant risk.

Our ability to obtain mine financing is likely dependant
on the price of gold and silver remaining at current levels, which, given
historical fluctuations, can vary significantly.

Financing to develop the Project will depend upon current price
levels for gold and silver being sustained for the foreseeable future. The
current price levels of gold and silver have not been attained since the early
1980s and there is no guarantee that prices will remain at the current high
levels. Gold and silver prices historically have fluctuated widely and are
affected by numerous factors outside of our control including industrial and
retail demand, central bank lending, forward sales of gold by producers and
speculators, levels of gold production, short-term changes in supply and demand
because of speculative hedging activities, confidence in the global monetary
system, expectations of the future rate of inflation, the strength of the US
dollar (the currency in which the price of gold is generally quoted), interest
rates and global or regional political or economic events.

23

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Historical U.S. dollar prices for gold and silver based on the
London pm fix as at the closing dates noted, are set out in the table below.

Date
    Gold
    SilverJanuary 2, 2011
    $1388.50
    $30.67January 2, 2010
    $1,121.50
    $17.17January 2, 2009
    $874.50
    $11.08January 2, 2008
    $840.75
    $14.93January 2, 2007
    $640.75
    $13.01January 3, 2006
    $530.00
    $9.04January 4, 2005
    $427.75
    $6.39January 2, 2004
    $415.25
    $5.98January 2, 2003
    $343.80
    $4.66


The agreements with landholders need ongoing
monitoring.

The Company monitors the status of agreements with landholders
on a regular basis in order to protect the Companys interests in the Property
that it does not own. There can be no assurance that the Company will continue
to be able to retain all of its interests in the Property through negotiations
with landowners, or that the cost of retaining its interests will not increase
significantly as a result of future negotiations. The value of the Project may
be significantly reduced if the Company cannot access or mine areas of the
Property that are material to the Project, due to its inability to retain its
interests in the Property. While each and every property has its own value and
unique purpose in the overall mine plan, the feasibility of the Project will
depend on the Companys ability to maintain control of the portions of the
Property that are material to the Project. Failure to keep property agreements
in good standing may result in a loss of control of the corresponding interest
in the Property, which, if material to the Project, would prevent the Company
from developing the Project.

We rely extensively on the services of our President, Mr.
H. Lutz Klingmann, P.Eng., who has considerable current knowledge of our
operations, including the Soledad Mountain Project, and the loss of his services
would likely result in delay and cost associated with acquiring and training
additional management.

Since 2002, Mr. Lutz Klingmann has been largely responsible for
most of the operations of the Company, including work on the Project. The
successful development of the Project as currently envisioned by management is
dependent to a significant extent on the efforts and abilities of Mr. Klingmann.
Investors must be willing to rely to a significant extent on managements
discretion and judgment. We do not maintain key employee insurance on Mr.
Klingmann and the loss of his services would likely have an adverse affect on
Company operations and plans, until such time as a replacement can be located
and brought current on Company plans and operations.

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, earth quakes and periodic
interruptions due to inclement weather. These risks could result in damage to,
or destruction of, 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 production activities) is not generally available to the
Company or other companies in the mining industry. If subjected to environmental
liabilities, the costs incurred would reduce funds available for other purposes.

24

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Most of our directors are ordinarily resident outside of
the United States and accordingly it may be difficult to effect service of
process on them, or to enforce any legal judgment against them.

With the exception of Thomas Clay, our directors namely Edward
G. Thompson, Chester Shynkaryk, Gordon C. Gutrath, and H. Lutz Klingmann are
residents of Canada. Consequently, it may be difficult for U.S. investors to
effect service of process within the U.S. upon these directors, or to realize in
the U.S. upon judgments of U.S. courts predicated upon civil liabilities under
the U.S. 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.

Because our common shares will likely trade at prices
below $5.00 per share, and because we will not be listed on a national U.S.
exchange, there are additional regulations imposed on U.S. broker-dealers
trading in our shares that may make it more difficult for you to resell our
shares through a U.S. broker-dealer.

Because of U.S. rules that apply to shares with a market price
of less than U.S.$5.00 per share, known as the penny stock rules, investors
will find it more difficult to sell their securities in the U.S. through a U.S.
broker dealer. The penny stock rules will probably apply to trades in our
shares. These rules in most cases require a broker-dealer to deliver a
standardized risk disclosure document to a potential purchaser of the
securities, along with additional information including current bid and offer
quotations, the compensation of the broker-dealer and its salesperson in the
transaction, monthly account statements showing the market value of each penny
stock held in the customers account, and to make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchasers written agreement to the transaction.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Land Ownership and Mining Rights

The Company acquired its initial property interests in 1985 and
has since acquired additional properties in the area. The Company holds directly
or controls via agreement a total of 33 patented lode mining claims, 134
unpatented lode mining claims, 1 patented millsite, 12 unpatented millsites, 1
unpatented placer claim and 907 acres of fee land, which together comprise the
Property. The Property is located west of California State Highway 14 and lies
largely south of Silver Queen Road 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.

Figure 1 below provides a Property location map.

25

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Figure 1



The Company holds the properties either directly through a
subsidiary, or under mining lease agreements with 53 individual landholders, two
groups of landholders and three incorporated entities. The land required for the
Project has therefore either been secured under one of these agreements or is
controlled by the Company through ownership of the land in fee or where the
Company holds patented and unpatented mining claims or millsites. The mining
lease agreements were entered into from 1986 onwards.

Figure 2 below provides a map of the various claims groups
comprising the Property.

26

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Figure 2



The Company owns or controls 709 acres of fee land in the area
surrounding Section 6. The land is required for the construction of the
ancillary facilities required for a mining operation, for the construction of
the heap leach pads and for waste rock disposal. The area that will be disturbed
by the Project is a 369 hectare-block (912 acres) within the total area of
approximately 366 hectares (3,500 acres) owned, held or controlled by the
Company. The Company also owns six residential properties with buildings north
of Silver Queen Road and six residential properties west of Soledad Mountain.

The Company is continuing with its efforts to purchase
additional land that will secure its land position in the area.

Title Review

The Company commissioned a formal title review of the Property
by a firm familiar with title matters in California in 1996. This title review
was updated in February 1998 and again in March 1999. A further title review was
completed by an independent landman in 2004 and no particular title problems
were identified.

Quiet Title Judgment

The ownership history is typically complex in historic mining
districts and title problems will exist. The Company obtained a Quiet Title
Judgment on May 15, 1999 and this resolved a majority of title questions. The
effect of the

27

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Judgment was to clear the title to the interests in the
patented claims listed in the action and to cure the title defects of record,
providing security of title and thus greatly enhancing the value of the
Property.

The Company has determined that any remaining title questions
would not present a threat to the Project.

Land Survey

A U.S. mineral surveyor licensed in California has completed a
survey of the patented and unpatented lode mining claims in Section 6, T10N, R2W
and Section 32, T11N, R12W. A claim status map and Royalty Map have been
prepared. The Company has confirmed that there are no gaps in its land holdings
in the project area. The Company has filed a Record of Survey with Kern County
and this is currently under review by County staff.

Royalties

The Company is required to make advance, minimum royalty
payments under the mining lease agreements. In some instances, the Company will
receive a credit for the advance minimum royalty payments on commencement of
commercial production. 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 depending upon the ore grades on the particular property to which the
royalty relates. Weighted average royalty rates will range from a low of 2.0 %
to a high of 5.0% depending upon the area being mined and gold and silver
prices. The agreements also typically provide for an additional royalty if
non-mineral commodities, such as aggregates, are produced and sold.

Property Interests Are In Good Standing

The Company had disclosed in its Form 10-K for the fiscal year
ended December 31, 2007 that not all property interests were in good standing.
The total advance minimum royalty owing to landholders was $714,137. The Company
contacted all landholders and paid $666,103 in the second, third and fourth
quarters of 2008 with a further $48,034 paid to the remaining rightful
landholders in 2009. The Company is continuing to pay advance minimum royalties
to landholders and incurred a total of $185,276 in 2010. The Company believes it
is in compliance with the requirements.

A mining lease agreement with one group of landholders expired
in 2004 and the Company had proposed that the mining lease agreement be
extended, subject to some revised terms. The Company has now reached agreement
with this group of landholders and it is expected that an extension agreement
will be signed in April 2011.

A number of mining lease agreements expired in 2010. Of these
expired lease agreements, one set of lease agreements that together comprises a
50% interest in a claim group, is considered material by the Company. The
Company is in the process of negotiating renewed leases with the landholders,
maintains a good relationship with the landholders involved, and anticipates
that it will be able to reach agreements for new leases in 2011.

While the Company is not in default of any current lease, the
Company is negotiating renewal terms for leases that are approaching expiry, as
well as for leases that have expired. The Company does not consider any of those
leases to be individually material. However leases that are individually not
material may become part of a material group of leases if more than one of the
leases in the group cannot be renewed.

Leases have expiry dates ranging from 2011 to 2045. Of these,
no single lease is considered material with the exception of four leases which
expire in September 2014, April 2015, April 2021 and April 2026 respectively.
All leases become non-expiring once the mine commences commercial production.

While each and every part of the Property has its own value and
unique purpose in the overall mine plan, the feasibility of the Project will
depend on the ability of the Company to maintain the rights to access and use of
the material portions of the Property. A failure to keep property agreements in
good standing may result in a loss of control, which, if material to the
Project, would prevent the Company from developing the Project.

28

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Item 3. Legal Proceedings.

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

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 shares as traded on 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
    Low2010
      Fourth Quarter
      $2.80
      $2.02Third Quarter
    $2.06
    $1.29Second Quarter
      $1.54
      $0.95First Quarter
    $1.06
    $0.782009
      Fourth Quarter
      $1.17
      $0.77Third Quarter
    $0.84
    $0.55Second Quarter
      $0.72
      $0.40First Quarter
    $0.50
    $0.23


Exchange Rates

The following table sets forth, for the periods indicated,
certain exchange rates based on the noon buying rate in New York City for cable
transfers in Canadian dollars. Such rates are the number of Canadian dollars per
one (1) U.S. dollar quoted by the Bank of Canada. On March 1, 2011, the exchange
rate was USD$1.00 per CAD$0.97. The high and low exchange rates for each month
during the previous six months were as follows:

High
    LowFebruary 2011
      $1.00
      $0.97January 2011
    $1.00
    $0.99December 2010
      $1.02
      $0.99November 2010
    $1.03
    $1.00October 2010
      $1.03
      $1.00September 2010
    $1.05
    $1.02


Exchange rate information (from USD$ to CAD$) as at each of the
years ended December 31, 2009 and 2010 is set out in the table below:

Year Ended December 312009
    2010Rate at end of Period
      $1.0466
      $0.9946Low
    $1.0292
    $0.9946High
      $1.3000
      $1.0778


As of March 1, 2011, there were 238 registered holders of
record of the Companys common shares and an undetermined number of beneficial
holders.

29

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The common shares of the Company are also traded on the Pink
Sheets under the trading symbol GQMNF. The high and low sales prices of the
common stock as traded on the Pink Sheets for the calendar periods indicated are
set out in the table below. All prices are reported in U.S. dollars. Such
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not necessarily represent actual
transactions. The Pink Sheets has a limited and sporadic trading market and does
not constitute an established trading market.

Year ended December 31
    High
    Low2010
      Fourth Quarter
      $2.82
      $1.95Third Quarter
    $2.00
    $1.25Second Quarter
      $1.46
      $0.95First Quarter
    $1.07
    $0.702009
      Fourth Quarter
      $1.08
      $0.69Third Quarter
    $0.78
    $0.48Second Quarter
      $0.67
      $0.33First Quarter
    $0.44
    $0.22


Dividends

The Company has not declared dividends on its common shares
since inception.

Securities Authorized for Issuance Under Compensation Plans

The following table sets forth information as at December 31,
2010 respecting the compensation plans under which shares of the Companys
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
    3,050,000
    CAD$0.48
    4,150,000Equity compensation plans not approved by security
      holders
    Nil
    Nil
    NilTotal
    3,050,000
    --
    4,150,000


Sales of Unregistered Securities

On June 1, 2010, Golden Queen completed a private placement of
5,000,000 units at a price of $1.60 per unit for total proceeds of $8,000,000.
Each unit consisted of one common share, one quarter of one Class A Warrant, and
one quarter of one Class B Warrant. Each Class A Warrant entitles the subscriber
to purchase a common share of Golden Queen at a price of $1.75 for a period of
18 months from the closing date. Each Class B Warrant entitles the subscriber to
purchase one common share of Golden Queen at a price of $2.00 for a period of 18
months from the closing date.

The units were offered and sold pursuant to the provisions of
Regulation S under the United States Securities Act of 1933, as the
purchaser is located outside of the United States.

30

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The shares were subject to a four-month hold period and may not
  be resold or transferred until October 2, 2010 under Canadian securities laws.
  The shares were also restricted pursuant to Rule 144 promulgated under the U.S.
  Securities Act of 1933.

Net proceeds of this offering are allocated to the ongoing
development of the Companys Soledad Mining project and for general working
capital.

Purchases of Equity Securities by the Company and Affiliated
Purchasers

Neither the Company nor an affiliated purchaser of the Company
purchased common shares of the Company in the year ended December 31, 2010.

Item 6. Selected Financial Data.

Not Applicable.

Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operation.

The following discussion of the operating results and financial
position of Golden Queen Mining Co. Ltd. (the Company) is dated March 31, 2011
and should be read in conjunction with the audited consolidated financial
statements of the Company for the year ended December 31, 2010 and the notes
thereto.

All amounts herein are in US$ unless otherwise noted.

Results of Operations

Following are the results of operations for the year ended
December 31, 2010.

The Company had no revenue from operations.

The Company incurred general and administrative expenses of $
3,290,736 for the year ended December 31, 2010 (2009 - $2,246,953).

The following significant costs were incurred in general and
administrative expenses during the year:

- $173,072 (2009 - $362,050) for engineering support required for the
  preparation of the SEIR and for ongoing maintenance of and data recovery from
  the meteorological station.
- $246,559 (2009 - $172,114) for detailed engineering for the Phase 1, Stage
  1 heap leach pad and the associated site drainage plans and this work was
  completed in 2010. A sixth water quality assessment well was also drilled and
  tested and a foundation investigation was completed for the footings for the
  crushing- screening plant.
- $205,055 (2009 - $202,883) for ongoing work on the occurrence of arsenic in
  groundwater, a review of the use of cyanide in heap leaching, a study of the
  occurrence of mercury and capture of mercury and general liaison with the
  Regional Board in preparation for the public hearing, which was held in July
  2010 . Work on the studies outlined above was completed in 2010.
- To maintain our relationship with local residences, we spent approximately
  $120,000 in the year
- $431,862 for legal fees incurred for ongoing work on the SEIR (2009 -
  $190,201). The Company engaged legal counsel to work with the Kern County
  Planning Department on preparation of the SEIR in 2009. Costs increased by
  $241,661 in 2010 in connection with a number of public hearings held in 2010.
  No further public hearings are scheduled for the Project in 2011 and it is
  therefore not expected that these will be recurring costs.

31

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- $128,979 to the Kern County Planning and Engineering & Survey Services
  Departments for work on the SEIR (2009 - $20,051). Costs increased by $109,928
  in 2010 as preparations were made for public hearings held in 2010. No further
  public hearings are scheduled for the Project in 2011 and it is therefore not
  expected that these will be recurring costs.
- $186,249 for ongoing mine design and drafting support (2009 $180,184).
  Costs increased marginally by CAD$6,065 as work on mine design and work on the
  feasibility study for the Project continued in 2010.
- $481,222 for detailed costs estimates for the crushing-screening plant and
  for detailed engineering for the power and water supply for the Project (2009
  - $19,798).
- $152,805 for accounting and audit fees and the preparation of tax returns
  (2009 $108,019). Costs increased by $66,659 in 2010 due in part to costs
  associated with a restatement and refiling of annual and quarterly reports.

For the year ended December 31, 2010, the Company has also
recorded a change in fair value of derivative liability of $6,575,406 compared
to $2,095,300 in 2009. The increase was due to the fact that increase of share
price over the year and issuance of warrants in connection with the private
placement in June 2010. This item is a non-cash item and was recorded in
accordance with the new accounting pronouncement of ASC 850-40-15.

Interest income of $31,633 (2009 - $10,070) was higher by
$21,563 as there was more cash on deposit during the year although interest
rates remained low during the year. There was no interest expense during the
year.

The Company incurred a net loss of $ 9,983,926 (or $0.11 loss
per share) for the year as compared to a net loss of $4,514,742 (or $0.05 per
share) for 2009 for a difference in net loss of $5,469,184.

Summary of Quarterly Results

Results for the quarter ended on:
    Dec. 31, 2010
    Sept. 30, 2010
    June 30, 2010
    March 31, 2010Item
    $
    $
    $
    $Revenue
      Nil
      Nil
      Nil
      NilNet loss for the quarter
    (4,126,127)
    (3,125,127)
    (2,406,367)
    (326,305)Net loss per share
      (0.04)
      (0.03)
      (0.03)
      0Results for the quarter ended on:
    Dec. 31, 2009
    Sept. 30, 2009
    June 30, 2009
    March 31, 2009Item
    $
    $
    $
    $Revenue
      Nil
      Nil
      Nil
      NilNet loss for the quarter
    (1,239,360)
    (1,057,149)
    (1,230,829)
    (987,404)Net loss per share
      (0.02)
      (0.01)
      (0.01)
      (0.01)


The results of operations can vary from quarter to quarter
depending upon the nature, timing and cost of activities undertaken during the
quarter and whether or not the Company incurs gains or losses on foreign
exchange, grants stock options or makes end-of-year adjustments.

32

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Selected Annual Information

Results for the
      year ended on:
    Dec.
      31, 2010
    Dec.
      31, 2009
    From
      InceptionItem
    $
    $
    $General and administrative expenses
    (3,290,736)
    (2,246,953)
    (23,018,536)Asset impairment loss
    (133,436)
    (167,898)
    (32,269,028)Adjustment of asset retirementobligation
    -
    (6,882)
    223,583on changes in cash flow estimatesAccretion expense
    (15,981)
    (7,779)
    (71,362)Change in fair value of derivativeliability
    (6,575,406)
    (2,095,300)
    (8,670,706)Gain on settlement of debt
    -
    -
    136,627Mineral interests written off
    -
    -
    (277,251)Sub-total
    (10,015,559)
    (4,524,812)
    (63,946,673)Interest expense
    -
    -
    (913,098)Interest income
    31,633
    10,070
    1,631,620Net loss
    (9,983,926)
    (4,514,742)
    (63,228,151)Net loss per share
    (0.11)
    (0.05)


Reclamation Financial Assurance and Asset Retirement
Obligation

The Company provided reclamation financial assurance in the
form of an Irrevocable Payment Bond Certificate with Union Bank of California in
the amount of $286,653 on October 21, 2009. The financial assurance is
reassessed annually and the estimate for reclamation of historical disturbances
on the property is $283,809 for 2010. The financial assurance was maintained at
$286,653 for 2011. The estimate for 2012 is $289,593 and this estimate is
currently being reviewed by Kern County staff.

The asset retirement obligation accrual is estimated at
$193,545 and this is shown as a liability on the consolidated balance sheet. The
actual obligation could differ materially from these estimates.

Advance Minimum Royalties

The Company is continuing to pay advance minimum royalties to
landholders with a total of $185,276 incurred in 2010.

Off-balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Stock Option Plan

The Companys current stock option plan (the Plan) was
adopted by management of the Company in 2008 and approved by shareholders of the
Company in 2009. The Plan provides a fixed number of 7,200,000 common shares of
the Company that may be issued pursuant to the grant of stock options. The
exercise price of stock options granted under the Plan shall be determined by
the Companys Board of Directors, but shall not be less than the volume weighted
average trading price of the Companys shares on the Toronto Stock Exchange for
the five trading days immediately prior to the date of the grant. The expiry
date of a stock option shall be the date so fixed by the Board subject to a
maximum term of five years. The Plan provides that stock options will terminate
on the earlier of the expiry of the term and (i) 12 months from the date an
option holder dies, (ii) 90 days from the date from the date the option holder
ceases to act as a director or officer of the Company, or (iii) 60 days from the
date the option holder ceases to be employed, or engaged as a consultant, by the
Company.

33

---

The Company granted 1,950,000 stock options to directors,
officers and consultants of the Company pursuant to the Plan on January 28,
2009. The options are exercisable at a price of CAD$0.26 per share for a period
of 5 years from the date of grant. The Company also granted 50,000 stock options
to a consultant of the Company pursuant to the Plan on April 19, 2010. The
options are exercisable at a price of CAD$1.24 per share for a period of 5 years
from the date of grant.

Transactions With Related Parties

Mr. H. Lutz Klingmann was paid $141,293 (2009 - $116,776) for
services as President of the Company and Mr. Chester Shynkaryk was paid $17,769
(2009 - $18,620) for consulting services to the Company for the year ended
December 31, 2010. 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.

Four directors of the Company were paid $1,974 (2009 - $1,752)
and one director was paid $2,000 (2009 - $2,000) in directors fees for the year
ended December 31, 2010.

The Company amended a consulting services agreement originally
entered into in 2004 with Mr. H. Lutz Klingmann, the President of the Company,
in May of 2010. Under the original agreement, upon receipt by the Company of a
bankable feasibility study and the decision to proceed to production, a bonus of
150,000 common shares would be issued and upon commencement of commercial
production, a bonus of 150,000 common shares would be issued. Pursuant to the
amended agreement, an alternative 300,000 bonus shares would be issuable upon a
change of control transaction or upon a sale of all or substantially all of the
Companys assets, having a value at or above CAD$1.00 per share of the Company,
with a further 300,000 bonus shares being issuable in the event the change of
control transaction or asset sale occurred at a value at or above CAD$1.50 per
share. As at December 31, 2010, the milestones had not been reached and no
accrual was made in connection with these arrangements.

There were no other related party transactions during the year
ended December 31, 2010.

Fair Value of Financial Instruments

The carrying amount reported in the balance sheets for cash and
cash equivalents, receivables, accounts payable and accrued expenses
approximates fair value because of the immediate or short-term maturity of these
financial instruments. The company does not hold any bank or non-bank
asset-backed commercial paper. The fair value of the reclamation financial
assurance approximates carrying value because the stated interest rate reflects
recent market conditions. It is the opinion of management that the Company is
not exposed to significant interest, currency or credit risk arising from the
use of these financial instruments.

Private Placement

The Company completed a non-brokered private placement with
Gammon Gold Inc. on June 1, 2010, whereby Gammon Gold purchased 5,000,000 units
of the Company at a price of CAD$1.60 per unit for total proceeds of $7,634,316
(CAD$8,000,000). Each unit consists of one common share, one quarter of one
Class A Warrant, and one quarter of one Class B Warrant. Each Class A Warrant
entitles Gammon Gold to purchase a common share at a price of CAD$1.75 for a
period of 18 months from the closing date. Each Class B Warrant entitles Gammon
Gold to purchase one common share at a price of CAD$2.00 for a period of 18
months from the closing date. The aggregate fair value of the Class A and B
purchase warrants was $1,726,518 and the amount has been recorded as derivative
liability and the Company allocated the remaining proceeds of $5,907,798 to the
common shares.

Subject to certain conditions, Gammon Gold Inc. was granted the
right to participate in future financings to maintain its equity position in the
Company.

Liquidity and Capital Resources

The Company held $6,967,465 in cash and cash equivalents on
December 31, 2010.

34

---

Cash from Financing Activities

Cash was received from financing activities in 2010 and in
2009 as follows:

An increase of $6,332,976 from 2009 was primarily due to
issuances of additional common shares of the Company. During the year the
Company received aggregate receipts of 7,860,707 during 2010, of which
$7,588,551(net of share issuance costs) was from a private placement of
$7,634,316 and the remaining was from the exercise of 850,000 stock options
during the year. In 2009, there was no private placement and the Company
received $1,527,731 from the exercise of stock options only.

Cash Used in Operating Activities

Cash was used mainly for the ongoing development of the Project
with major costs in two areas:

- Legal fees were incurred in support of ongoing efforts to secure approvals
  and permits for the Project, and
- Consulting engineering fees were higher due to the significant amount of
  detailed engineering completed for Project facilities. The detailed
  engineering allows contractors to provide cost estimates for construction of
  the facilities.

Cash Used in Investing Activities

The Company purchased a building for approximately $ 120,500
and mineral properties for approximately $133,000 compared to $167,800 in 2009.
Further increases in our land position in areas are required for the
construction of facilities for the Project upon the completion of financing and
decision of completion is made.

Working Capital

Management plans to control costs and does not expect that
additional cash will be required (prior to securing production financing) beyond
cash currently on hand for ongoing work on approvals and permits for the
Project, for advance minimum royalty payments to landholders,, for additional
property purchases, for ongoing work on site and for general corporate purposes
to the end of 2011 (see Outlook heading below).

Outstanding Share Data

The number of shares issued and outstanding and the fully
diluted share position are set out in the table below.

Golden Queen Mining Co. Ltd.

No. ofItem
    SharesShares issued and outstanding on Dec. 31, 2009
    88,378,383Shares issued pursuant to the exercise of stock options
    700,000Gammon Gold Inc. private placement
    5,000,000Shares issued pursuant to the exercise of stock options
    150,000Exercise PriceShares issued and outstanding on December 31, 2010
    94,228,383
    (CAD$)
    Expiry DateGammon Gold Inc. warrants
    2,500,000
    1.75 & 2.00
    1/12/2011Director and employee stock options
    1,200,000
    0.77
    20/04/1128/01/14 &Director and employee stock options
    1,850,000
    0.26 & 1.24
    19/04/15Shares to be issued as a finders fee
    100,000
    Not Applicable
    Not ApplicableBonus shares to
      H.L. Klingmann
    600,000
    Not
      Applicable
    Not
      ApplicableFully diluted on March 31, 2011
    100,478,383


35

---

The Companys authorized share capital is 150,000,000 common
shares with no par value.

Outlook

The Company plans to put the Project into production as an open
pit heap leach operation and to construct facilities to process ore at rates of
up to 4,650,000 tonnes (5,119,000 tons) per year. Projected life of the open pit
heap leach operation is 12 years. The Company also plans to produce and sell
aggregate and leached and rinsed residues for an extended period after gold and
silver production from the heap leach operation has ended. The Company has
completed or is proceeding with detailed engineering designs for each of the key
facilities to be constructed. The Company is also securing approvals such as
building permits and other approvals for these facilities. Cost estimates for
construction of the key facilities have been and are being obtained from
contractors. These cost estimates are being incorporated into the feasibility
study update, which is being prepared by Norwest. The feasibility study update,
once completed, will be the key document to be considered by management in
making a production decision.

If all approvals and permits are secured for the Project and a
production decision is made, the Company will need significant additional
financing to develop the Project into an operating mine. The Company believes
that financing for the Project can be secured if gold and silver prices remain
at or above $600.00/oz and $12.50/oz respectively and these are the prices used
for the feasibility study base case cash flow projections that were released on
December 14, 2007. Gold and silver prices averaged $1,224.53/oz and $20.19/oz in
2010 and closing prices on March 23, 2011 were $1,439.50/oz and $36.58/oz
respectively. The Company is targeting Project financing in 2011. The ability to
finance the Project will be subject to market conditions.

The following are possible financing options that the Company
will evaluate, and that may be combined:

| | a. | An equity financing;                        
| | -- | --------------------------------------------
| | b. | A combination of equity and debt;           
| | c. | A silver-stream financing and               
| | d. | A merger with an established mining company.

It is not expected that the Company will hedge any of its gold
or silver production.

The ability of the Company to put the Project into production
is subject to numerous risks (see Item 1A. Risk Factorsheading above).
Readers should evaluate the Companys prospects in light of these and other risk
factors.

Special Meeting of Shareholders

The Company held a special meeting of shareholders on September
1, 2010 at which the Company adopted new corporate Articles and increased its
authorized capital to 150,000,000 common shares.

Subsequent Event

None

Application of Critical Accounting Estimates

The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United States.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful judgment.

The financial statements have, in managements opinion, been
properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:

36

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Mineral Property and Exploration Costs

Exploration costs are expensed as incurred. Development costs
are expensed until it has been established that a mineral deposit is
commercially mineable and a production decision has been made by the Company to
implement a mining plan and develop a mine, at which point the costs
subsequently incurred to develop the mine on the property prior to the start of
mining operations are capitalized.

The Company capitalizes the cost of acquiring mineral property
interests, including undeveloped mineral property interests, until the viability
of the mineral interest is determined. Capitalized acquisition costs are
expensed if it is determined that the mineral property has no future economic
value. Exploration stage mineral interests represent interests in properties
that are believed to potentially contain (i) other mineralized material such as
measured, indicated or inferred resources with insufficient drill hole spacing
to qualify as proven and probable mineral reserves and (ii) other mine-related
or green field exploration potential that are not an immediate part of measured
or indicated resources. The Companys mineral rights are generally enforceable
regardless of whether or not proven and probable reserves have been established.
The Company has the ability and intent to renew mineral rights where the
existing term is not sufficient to recover undeveloped mineral interests.

Capitalized amounts (including capitalized development costs)
are also written down if future cash flows, including potential sales proceeds,
related to the mineral property are estimated to be less than the propertys
total carrying value. Management reviews the carrying value of each mineral
property periodically, and, whenever events or changes in circumstances indicate
that the carrying value may not be recoverable, makes the necessary adjustments.
Reductions in the carrying value of a property would be recorded to the extent
that the total carrying value of the mineral property exceeds its estimated fair
value. A write-down of $133,436 (2009 - $167,898) in mineral property interests
was recorded for the year ended December 31, 2010

Asset Retirement Obligations

In accordance with the Accounting for Asset Retirement
Obligations, the fair value of an asset retirement cost, and corresponding
liability, should be recorded as part of the cost of the related long-lived
asset and subsequently allocated to expense using a systematic and rational
method. The Company has recorded an asset retirement obligation to reflect its
legal obligations related to future abandonment of its mineral property using
estimated expected cash flow associated with the obligation and discounting the
amount using a credit-adjusted, risk-free interest rate. At least annually, the
Company reassesses the obligation to determine whether or not a change in any
estimated obligation is necessary. The Company has evaluated whether or not
there are indicators that suggest the estimated cash flows underlying the
obligation have materially changed. The asset retirement obligation recorded as
a liability on the Consolidated Balance Sheet is $193,545 (2009 - $177,564) as
at December 31, 2010.

Derivative Liabilities

Our stock options and warrants are denominated in a currency
other than our functional currency and the instruments were required to be
accounted for as separate derivative liabilities. These liabilities were
required to be measured at fair value. These instruments were adjusted to
reflect fair value at each period end. Any increase or decrease in the fair
value was recorded in results of operations as change in fair value of
derivative liabilities. In determining the appropriate fair value, we used the
Black-Scholes pricing model.

Recently Issued Accounting Standards

| | (i) | In January 2010, the FASB issued Accounting Standards
      Update (ASU) No. 2010-06, Improving Disclosures about Fair Value
      Measurements, which requires additional disclosures about the amounts of
      and reasons for significant transfers in and out of Level 1 and Level 2
      fair value measurements. This standard also clarifies existing disclosure
      requirements related to the level of disaggregation of fair value
      measurements for each class of assets and liabilities and disclosures
      about inputs and valuation techniques used to measure fair value for both
      recurring and non-recurring Level 2 and Level 3 measurements. This
      standard is effective for the Companys interim and annual periods
      commencing
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

37

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| |       | January 1, 2011 and will require additional disclosure
      such as disaggregated information about activity in Level 3 fair value
      measurements on a gross basis, rather than one net amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (ii)  | In January 2010, an accounting standard update on stock
      compensation was issued. This accounting standards update codifies
      Escrowed Share Arrangements and the Presumption of Compensation. When
      evaluating whether presumption of compensation has been overcome,
      registrants should consider the substance of the arrangement, including
      whether the arrangement was entered into for purposes unrelated to, and
      not contingent upon, continued employment. An escrowed share arrangement
      in which the shares are automatically forfeited if employment terminates
      is compensation. The adoption of this standard is not expected to have a
      material effect on the Companys consolidated financial
  statements..                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (iii) | In April 2010, the FASB issued ASU 2010-13, Compensation
       Stock Compensation (Topic 718). The objective of this update is to
      address the classification of an employee share-based payment award with
      an exercise price denominated in the currency of a market in which the
      underlying equity security trades. It provides guidance on the
      classification of a share-based payment award as either equity or a
      liability. A share-based payment award that contains a condition that is
      not a market, performance or service condition is required to be
      classified as a liability. The amendments in this update are effective for
      fiscal years, and interim periods within those fiscal years, beginning on
      or after December 15, 2010. The amendments in this update should be
      applied by recording a cumulative-effect adjustment to the opening balance
      of retained earnings. The cumulative-effect adjustment should be
      calculated for all awards outstanding as of the beginning of the fiscal
      year in which the amendments are initially applied, as if the amendments
      had been applied consistently since the inception of the award. The
      adoption of this standard is not expected to have a material effect on the
      Companys consolidated financial statements as the Company does not have
      any employees.

Qualified Person and Caution With Respect to
Forward-looking Statements

Mr. H. Lutz Klingmann, P.Eng., the president of the Company, is
a qualified person for the purposes of National Instrument 43-101 and has
reviewed and approved the technical information in this report.

This report contains certain forward-looking statements, which
relate to the intent, belief and current expectations of the Companys
management. These forward-looking statements are based upon numerous assumptions
that involve risks and uncertainties and other factors that may cause actual
results to differ materially from those indicated by such forward-looking
statements. Such factors include among other things the receipt of required
approvals and permits, the costs of and availability of sufficient capital to
fund the projects to be undertaken by the Company, commodity prices and other
factors. Readers are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date the statements were
made.

Caution to U.S. Investors

Management advises U.S. investors that while the terms
measured resources, indicated resources and inferred resources are
recognized and required by Canadian regulations, the U.S. Securities and
Exchange Commission does not recognize these terms. U.S. investors are cautioned
not to assume that any part or all of the material in the mineral resource
categories will be converted into mineral reserves. We further advise U.S.
investors that the mineral reserve estimates are not compliant with the
Securities and Exchange Commission Industry Guide 7 as a final bankable
feasibility study has not been completed.

Additional Information

Further information on Golden Queen Mining Co. Ltd. is
available on the SEDAR web site at www.sedar.com and on the Companys web site at www.goldenqueen.com.

Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.

Not applicable.

38

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Item 8. Financial Statements and Supplementary Data.

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

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Managements Evaluation of Disclosure Controls and
Procedures

Management, including the principal executive officer who is
also our principal financial officer, evaluated the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e))
as of the end of the period covered by this report. Based on that evaluation,
management concluded that as of the end of the period covered by this report,
our disclosure controls and procedures were not effective. This includes those
controls and procedures necessary to ensure that information required to be
disclosed in reports filed or submitted with the SEC (i) is recorded, processed,
and reported within the time periods specified by the SEC, and (ii) is
accumulated and communicated to management, including our principal executive
officer and principal financial officer, as appropriate to allow for timely
decisions regarding required disclosure. The conclusion that our disclosure
controls and procedures were not effective was due to the inherent limitation of
a lack of segregated duties, items and restatement noted below.

There have been no changes in our internal controls over
financial reporting that occurred during this period that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.

Managements Report on Internal Control over Financial
Reporting

Management is responsible for establishing and maintaining
effective internal control over financial reporting as defined in Rule 13a-15(f)
under the Securities Exchange Act of 1934. The Companys internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with US generally accepted
accounting principles.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Therefore, even
those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Companys internal
control over financial reporting as at December 31, 2010 using the criteria set
forth in Internal Control  Integrated Frameworkissued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management believes that, as of December 31, 2010, the Companys
internal control over financial reporting was not effective based on those
criteria. Based on the assessment, management has noted the following in regards
to its internal controls:

| | 1. | The Company does not review certain expenditures in a
      U.S. bank account on a regular basis; and                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                
| | 2. | The Company does not have the proper procedure for
      recording and reporting changes in the US dollar to Canadian
  dollar.

The deficiencies noted above had no material effect on the
Company, however the Company has implemented the following changes in its
internal controls to avoid recurrence of the deficiencies in future periods:

| | 1. | The Companys President, Principal Executive Officer and
      Principal Accounting Officer now has sole signing authority on checks
      drawn on the U.S. bank account and no other person has access to this
      account.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39

---

| |    | A record of transactions and bank balances are reviewed
      via internet access on a regular basis to ensure accuracy.                                                                                                                                                            
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                     
| | 2. | Every foreign exchange transaction is recorded in exact
      detail and reported to the Companys principal bank in Vancouver on the
      day the transaction takes place. The information is provided to the
      Companys independent accountants at the end of every
  month.

Restatement

In addition to items noted above, our company effected a
restatement of its financial results for the year ended December 31, 2009 as
well as for the first three quarters of the unaudited interim financial
statements for 2010.

Evaluation of disclosure controls and procedures and
remediation

In connection with the weaknesses noted above for signing
authority and foreign exchange, the Company has implemented the following
changes in its internal controls to avoid recurrence of the deficiencies in
future periods:

| | 1. | The Companys President, Principal Executive Officer and
      Principal Accounting Officer now has sole signing authority on checks
      drawn on the U.S. bank account and no other person has access to this
      account. A record of transactions and bank balances are reviewed via
      internet access on a regular basis to ensure accuracy.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                         
| | 2. | Every foreign exchange transaction is recorded in exact
      detail and reported to the Companys principal bank in Vancouver on the
      day the transaction takes place. The information is provided to the
      Companys independent accountants at the end of every
  month.                                                                    

If the Project is financed and proceeds to the production
stage, a production management team will be required to oversee the operations
of the Project, and internal controls would be reviewed and updated at that
time.

In connection with the restatement, under the direction of the
companys management, we have re-evaluated certain disclosure controls and
procedures. In connection with the restatement, we identified a material
weakness in our disclosure controls and procedures relating to the recognition
of new accounting pronouncements and assessment of their potential impact on our
consolidated financial statements.

A material weakness is a control deficiency (within the meaning
of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No.
5) or combination of control deficiencies that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. We have identified the following
material weakness which has caused us to conclude that, as of December 31, 2010,
our disclosure controls and procedures were not effective at the reasonable
assurance level.

Our conclusion to restate the above periods resulted in the
company recognizing that its disclosure controls and procedures were not
effective as of the year ended December 31, 2010 and constituted a material
weakness.

To address this material weakness, we performed additional
analyses and other procedures to ensure that the financial statements included
herein fairly present, in all material respects, our financial position, results
of operations and cash flows for the period presented.

To remediate the material weakness in our disclosure controls
and procedures identified above, in addition to working with our independent
auditors, we have continued to refine our internal procedures to alleviate this
weakness and have added human resources with experience in generally accepted
accounting principles (GAAP) and are committed to ongoing education in this area
as a well as a defined process to prepare such calculations. Management has and
continues to take action to correct the known deficiencies and it plans to
remain vigilant and to implement improvements, as needed to ensure that its
internal control over financial reporting is effective. These efforts include
formalizing the assessment process by identifying and scheduling periodic
internal testing of the various systems and processes involved in its internal
control over financial reporting.

40

---

The Companys annual report does not include an attestation
report of the Companys registered public accounting firm regarding internal
control over financial reporting. Managements report was not subject to
attestation by the Companys registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only managements report in the annual report.

Limitations on the effectiveness of disclosure controls
and procedures

A control system, no matter how well conceived or operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that judgments, in
decision making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of internal control is based
in part upon certain assumptions above the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of the inherent limitations
in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.

The Companys annual report does not include an attestation
report of the Companys registered public accounting firm regarding internal
control over financial reporting. Managements report was not subject to
attestation by the Companys registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only managements report in the annual report.

Item 9B. Other Information

None.

PART III

Information with respect to Items 10 through 14 is set forth in
the definitive Proxy Statement to be filed with the Securities and Exchange
Commission on or before April 30, 2011 and is incorporated herein by reference.
If the definitive Proxy Statement cannot be filed on or before April 30, 2011,
the issuer will instead file an amendment to this Form 10-K disclosing the
information with respect to Items 10 through 14.

41

---

PART IV

Item 15. Exhibits

|Exhibit | Description of Exhibit                                                                                                                                                     |  | Manner of Filing                                                                                                               
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|No.     |                                                                                                                                                                            |  |                                                                                                                                
|        |                                                                                                                                                                            |  |                                                                                                                                
|3.1     | Notice of Articles                                                                                                                                                         |  | Incorporated by reference to Exhibit
      3.1 to the Form 8-K of the Company, filed with the SEC on September 2, 2010         
|3.2     | Articles                                                                                                                                                                   |  | Incorporated by reference to Exhibit 3.2 to the
      Form 8-K of the Company, filed with the SEC on September 2, 2010         
|10.1    | Management Agreement dated March
      11, 2004 between the Registrant and H. Lutz Klingmann, and amendment dated
      May 31, 2010.                                      |  | Incorporated by reference to Exhibit
      10.1 to the Form 10-K/A of the Company, filed with the SEC on January 14,
      2011
|10.2    | Mining Lease dated April 22, 1986 between the
      Registrant, Southwestern Refining Corporation, and Claude and Mary J.Birtle,
      and amendment dated March 23, 2007. |  | Incorporated by reference to Exhibit 10.2 to the
      Form 10-K/A of the Company, filed with the SEC on January 14, 2011      
|10.3    | Mining Lease dated April 26, 2001
      between the Subsidiary and Virginia Knight.                                                                                        |  | Incorporated by reference to Exhibit
      10.3 to the Form 10-K/A of the Company, filed with the SEC on January 14,
      2011
|10.4    | 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                                                              
|10.5    | Mining 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                                                              
|10.6    | 1996 Stock option plan of the registrant, as amended.                                                                                                                      |  | Incorporated by reference to Exhibit 10.13 to
      the Form 10-SB                                                             
|10.7    | 2008 Stock option plan of the
      registrant.                                                                                                                            |  | Incorporated by reference to Exhibit
      10.1 to the Form S-8 of the Company filed with the SEC on February 17, 2010         
|21.1    | Subsidiaries of the Registrant.                                                                                                                                            |  | Incorporated by reference to Exhibit 24.0 to the
      Form 10-SB                                                              
|23.1    | Consent
      of BDO Canada LLP                                                                                                                                            |  | Filed
      herewith                                                                                                           
|31.1    | Rule 13a-14(a)/15(d)-14(a)
      Certification                                                                                                                             |  | Filed herewith                                                                                                                 
|32.1    | Section
      1350 Certification                                                                                                                                           |  | Filed
      herewith                                                                                                           

42

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

GOLDEN QUEEN MINING CO. LTD.

|By: | /s/ H. Lutz Klingmann                        
|--- | ---------------------------------------------
|    | H. Lutz Klingmann                            
|    | President, Principal Executive
      Officer,
|    | and Principal
      Accounting Officer       
|    |                                              
|    | Date: March 31, 2011                         

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|Signature             |  | Title                                             | Date          
|--------------------- |  | ------------------------------------------------- | --------------
|                      |  |                                                   |               
|                      |  |                                                   |               
|                      |  | President, Principal Executive Officer, Principal | March 31, 2011
|/s/ H. Lutz Klingmann |  | Accounting Officer, and Director                  |               
|H. Lutz Klingmann     |  |                                                   |               
|                      |  |                                                   |               
|                      |  |                                                   |               
|/s/ Edward Thompson   |  | Director                                          | March 31, 2011
|Edward Thompson       |  |                                                   |               
|                      |  |                                                   |               
|                      |  |                                                   |               
|/s/ Chester Shynkaryk |  | Director                                          | March 31, 2011
|Chester Shynkaryk     |  |                                                   |               
|                      |  |                                                   |               
|                      |  |                                                   |               
|/s/ Gordon Gutrath    |  | Director                                          | March 31, 2011
|Gordon Gutrath        |  |                                                   |               
|                      |  |                                                   |               
|                      |  |                                                   |               
|/s/ Thomas Clay       |  | Director                                          | March 31, 2011
|Thomas Clay           |  |                                                   |               

43

---



Golden Queen Mining Co. Ltd. 
  (An Exploration Stage Company) 
  Consolidated Financial Statements 
  December 31, 2010 
  (US Dollars)



---

|                  | Tel: 604 688 5421           | BDO Canada LLP
|----------------- | --------------------------- | --------------
|Fax: 604 688 5132 | 600 Cathedral Place        
|**www.bdo.ca**    | 925 West Georgia Street    
|                  | Vancouver BC V6C 3L2 Canada

Report of Independent Registered Public Accounting
  Firm

To the Shareholders of 
  Golden Queen Mining Co. Ltd. 
  (An exploration stage company)

We have audited the accompanying consolidated balance sheets
  of Golden Queen Mining Co. Ltd. (an exploration stage company), as of December
  31, 2010 and 2009, and the consolidated statements of loss and comprehensive
  loss, changes in shareholders equity (capital deficit) and cash flows
  for the years then ended. We have also audited the statements of loss and comprehensive
  loss, changes in shareholders equity (capital deficit), and cash flows
  for the period from inception (November 21, 1985) through December 31, 2010,
  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 the standards of the
  Public Company Accounting Oversight Board (United States). 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. The
  Company is not required to have, nor were we engaged to perform, an audit of
  its internal control over financial reporting. Our audits included consideration
  of internal control over financial reporting as a basis for designing audit
  procedures that are appropriate in the circumstances, but not for the purpose
  of expressing an opinion on the effectiveness of the Companys internal
  control over financial reporting. Accordingly, we express no such opinion. 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, 2010 and 2009, 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, 2010, 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 incurred recurring operating
  losses and had a deficit accumulated during the exploration stage as of December
  31, 2010. 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 Canada LLP

Chartered Accountants

Vancouver, Canada 
  March 29, 2011

BDO Canada LLP, a Canadian limited liability partnership,
  is a member of BDO International Limited, a UK company limited by guarantee,
  and forms part of the international BDO network of independent firms.

2

---

|GOLDEN QUEEN MINING CO. LTD.  
|------------------------------
|(an exploration stage company)
|Consolidated Balance Sheets   
|(US dollars)                  

|                                                               |   | December
      31, 2010 |   |   | December
      31, 2009 |  
|-------------------------------------------------------------- | - | ----------------------- | - | - | ----------------------- | -
|Assets                                                         |   |                         |   |   |                         |  
|                                                               |   |                         |   |   |                         |  
|Current assets:                                                |   |                         |   |   |                         |  
|Cash and cash equivalents                                      | $ | 6,967,465               |   | $ | 2,433,202               |  
|Receivables                                                    |   | 42,796                  |   |   | 24,604                  |  
|Prepaid expenses and other
      current assets                |   | 40,103                  |   |   | 19,490                  |  
|                                                               |   |                         |   |   |                         |  
|Total current assets                                           |   | 7,050,364               |   |   | 2,477,296               |  
|                                                               |   |                         |   |   |                         |  
|Property and equipment, net (Note 2)                           |   | 318,326                 |   |   | 205,916                 |  
|Reclamation financial assurance
      (Note 3)                 |   | 286,653                 |   |   | 286,653                 |  
|                                                               |   |                         |   |   |                         |  
|Total Assets                                                   | $ | 7,655,343               |   | $ | 2,969,865               |  
|                                                               |   |                         |   |   |                         |  
|Liabilities and Capital Deficit                                |   |                         |   |   |                         |  
|                                                               |   |                         |   |   |                         |  
|Current liabilities:                                           |   |                         |   |   |                         |  
|Accounts payable                                               | $ | 319,675                 |   | $ | 150,766                 |  
|Accrued liabilities                                            |   | 62,839                  |   |   | 77,821                  |  
|Advance minimum royalties
      (Note 7)                       |   | 17,108                  |   |   | -                       |  
|                                                               |   |                         |   |   |                         |  
|Total current liabilities                                      |   | 399,622                 |   |   | 228,587                 |  
|                                                               |   |                         |   |   |                         |  
|Asset retirement obligations (Note 6)                          |   | 193,545                 |   |   | 177,564                 |  
|Derivative liability (Note
      10)                           |   | 10,389,768              |   |   | 2,695,602               |  
|                                                               |   |                         |   |   |                         |  
|Total liabilities                                              |   | 10,982,935              |   |   | 3,101,753               |  
|                                                               |   |                         |   |   |                         |  
|Capital deficit:                                               |   |                         |   |   |                         |  
|Preferred shares, no par
      value, 3,000,000 shares         |   |                         |   |   |                         |  
|authorized;
      no shares outstanding                        |   |                         |   |   |                         |  
|Common shares, no par value,
      150,000,000 shares          |   |                         |   |   |                         |  
|authorized;
      94,228,383 (2009  88,378,383) shares issued |   |                         |   |   |                         |  
|and outstanding (Note
      5)                                 |   | 56,339,823              |   |   | 50,205,634              |  
|Additional
      paid-in capital                               |   | 3,784,582               |   |   | 3,130,549               |  
|Deficit accumulated during
      the exploration stage         |   | (63,451,997             | ) |   | (53,468,071             | )
|                                                               |   |                         |   |   |                         |  
|Total capital deficit                                          |   | (3,327,592              | ) |   | (131,888                | )
|                                                               |   |                         |   |   |                         |  
|Total liabilities and capital deficit                          | $ | 7,655,343               |   | $ | 2,969,865               |  

Financial Condition and Ability to Continue as a Going Concern
  (Note 1)

Commitments and Contingencies (Notes 3, 5 and 7)

Approved by the Directors:

|H. Lutz Klingmann         | Chester Shynkaryk        
|--------------------------- | ---------------------------
|H. Lutz Klingmann, Director | Chester Shynkaryk, Director

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

3

---

|GOLDEN QUEEN MINING CO. LTD.                          
|------------------------------------------------------
|(an exploration stage company)                        
|Consolidated Statements of Loss and Comprehensive Loss
|(US dollars)                                          

|                                                   |   |                         |   |   |                         |   |   | Cumulative From         |  
|-------------------------------------------------- | - | ----------------------- | - | - | ----------------------- | - | - | ----------------------- | -
|                                                   |   |                         |   |   |                         |   |   | Date of Inception       |  
|                                                   |   |                         |   |   |                         |   |   | (November 21, 1985)     |  
|                                                   |   | Year Ended              |   |   | Year Ended              |   |   | through                 |  
|                                                   |   | December
      31, 2010 |   |   | December
      31, 2009 |   |   | December
      31, 2010 |  
|                                                   |   |                         |   |   |                         |   |   |                         |  
|General and administrative expenses                | $ | (3,290,736              | ) | $ | (2,246,953              | ) | $ | (23,018,536             | )
|Impairment loss (Note 3)                           |   | (133,436                | ) |   | (167,898                | ) |   | (32,269,028             | )
|Adjustment to asset retirement obligation on       |   |                         |   |   |                         |   |   |                         |  
|changes in cash flow estimates (Note 6)            |   | -                       |   |   | (6,882                  | ) |   | 223,583                 |  
|Accretion expense (Note 6)                         |   | (15,981                 | ) |   | (7,779                  | ) |   | (71,362                 | )
|Change in fair value of derivative liability (Note |   |                         |   |   |                         |   |   |                         |  
|10)                                                |   | (6,575,406              | ) |   | (2,095,300              | ) |   | (8,670,706              | )
|Gain on settlement of debt                         |   | -                       |   |   | -                       |   |   | 136,627                 |  
|Mineral interests written off                      |   | -                       |   |   | -                       |   |   | (277,251                | )
|                                                   |   |                         |   |   |                         |   |   |                         |  
|                                                   |   | (10,015,559             | ) |   | (4,524,812              | ) |   | (63,946,673             | )
|                                                   |   |                         |   |   |                         |   |   |                         |  
|Interest expense                                   |   | -                       |   |   | -                       |   |   | (913,098                | )
|Interest income                                    |   | 31,633                  |   |   | 10,070                  |   |   | 1,631,620               |  
|                                                   |   |                         |   |   |                         |   |   |                         |  
|Net loss and comprehensive loss                    | $ | (9,983,926              | ) | $ | (4,514,742              | ) | $ | (63,228,151             | )
|                                                   |   |                         |   |   |                         |   |   |                         |  
|Loss per share - basic and diluted                 | $ | (0.11                   | ) | $ | (0.05                   | ) |   |                         |  
|                                                   |   |                         |   |   |                         |   |   |                         |  
|                                                   |   |                         |   |   |                         |   |   |                         |  
|Weighted average number of common shares           |   |                         |   |   |                         |   |   |                         |  
|outstanding                                        |   | 91,990,821              |   |   | 86,738,897              |   |   |                         |  

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

4

---

|GOLDEN QUEEN MINING CO. LTD.                                           
|-----------------------------------------------------------------------
|(an exploration stage company)                                         
|Consolidated Statements of Shareholders Equity (Capital
      Deficit)
|(US dollars)                                                           

|                                       |  |            |  |   |            |  |   |              |  |   |            |  |   | Deficit           |   |   | Total         |  
|-------------------------------------- |  | ---------- |  | - | ---------- |  | - | ------------ |  | - | ---------- |  | - | ----------------- | - | - | ------------- | -
|From the Date of Inception             |  |            |  |   |            |  |   |              |  |   | Additional |  |   | Accumulated       |   |   | Shareholders |  
|(November 21, 1985)                    |  | Common     |  |   |            |  |   | Stock        |  |   | Paid-in    |  |   | During the        |   |   | Equity        |  
|through December
      31, 2010        |  | Shares     |  |   | Amount     |  |   | Subscription |  |   | Capital    |  |   | Exploration Stage |   |   | (Deficiency)  |  
|                                       |  |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |               |  
|Balance, November 21, 1985             |  |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |               |  
|                                       |  |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |               |  
|Issuance of common shares for cash     |  | 1,425,001  |  | $ | 141,313    |  | $ | -            |  | $ | -          |  | $ | -                 |   | $ | 141,313       |  
|Net loss for the period                |  | -          |  |   | -          |  |   | -            |  |   | -          |  |   | (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     |  
|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 issuance 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 issuance costs        |  | -          |  |   | -          |  |   | -            |  |   | -          |  |   | (100,726          | ) |   | (100,726      | )
|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 issuance costs        |  | -          |  |   | -          |  |   | -            |  |   | -          |  |   | (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    |  

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

5

---

|GOLDEN QUEEN MINING CO. LTD.                                           
|-----------------------------------------------------------------------
|(an exploration stage company)                                         
|Consolidated Statements of Shareholders Equity (Capital
      Deficit)
|(US dollars)                                                           

|                                        |  |            |  |   |            |  |   |              |   |   |                 |   |   | Deficit           |   |   | Total         |  
|--------------------------------------- |  | ---------- |  | - | ---------- |  | - | ------------ | - | - | --------------- | - | - | ----------------- | - | - | ------------- | -
|From the Date of Inception              |  |            |  |   |            |  |   |              |   |   |                 |   |   | Accumulated       |   |   | Shareholders |  
|(November 21, 1985)                     |  | Common     |  |   |            |  |   | Stock        |   |   | Additional      |   |   | During the        |   |   | Equity        |  
|through December
      31, 2010         |  | Shares     |  |   | Amount     |  |   | Subscription |   |   | Paid-in Capital |   |   | Exploration Stage |   |   | (Deficiency)  |  
|                                        |  |            |  |   |            |  |   |              |   |   |                 |   |   |                   |   |   |               |  
|Balance, carried forward from previous  |  |            |  |   |            |  |   |              |   |   |                 |   |   |                   |   |   |               |  
|page                                    |  | 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 issuance costs         |  | -          |  |   | -          |  |   | -            |   |   | -               |   |   | (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    |  
|                                        |  |            |  |   |            |  |   |              |   |   |                 |   |   |                   |   |   |               |  
|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 costs                    |  | -          |  |   | -          |  |   | -            |   |   | -               |   |   | (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 issuance costs         |  | -          |  |   | -          |  |   | -            |   |   | -               |   |   | (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 costs                    |  | -          |  |   | -          |  |   | -            |   |   | -               |   |   | (3,337            | ) |   | (3,337        | )
|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               |  | -          |  |   | -          |  |   | -            |   |   | 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                     |  | 100,000    |  |   | 24,379     |  |   | -            |   |   | -               |   |   | -                 |   |   | 24,379        |  
|Equity component of convertible notes   |  | -          |  |   | -          |  |   | -            |   |   | 375,000         |   |   | -                 |   |   | 375,000       |  
|Stock option compensation               |  | -          |  |   | -          |  |   | -            |   |   | 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

6

---

|GOLDEN QUEEN MINING CO. LTD.                                           
|-----------------------------------------------------------------------
|(an exploration stage company)                                         
|Consolidated Statements of Shareholders Equity (Capital
      Deficit)
|(US dollars)                                                           

|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   | Deficit           |   |   | Total         |  
|------------------------------------------- |  | ---------- |  | - | ---------- | - | - | ------------ |  | - | --------------- | - | - | ----------------- | - | - | ------------- | -
|From the Date of Inception                  |  |            |  |   |            |   |   |              |  |   |                 |   |   | Accumulated       |   |   | Shareholders |  
|(November 21, 1985)                         |  | Common     |  |   |            |   |   | Stock        |  |   | Additional      |   |   | During the        |   |   | Equity        |  
|through December
      31, 2010             |  | Shares     |  |   | Amount     |   |   | Subscription |  |   | Paid-in Capital |   |   | Exploration Stage |   |   | (Deficiency)  |  
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Balance, carried forward from previous      |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|page                                        |  | 51,902,189 |  | $ | 34,548,292 |   | $ | -            |  | $ | 523,782         |   | $ | (35,153,852       | ) | $ | (81,778       | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Issuance of common shares for cash          |  | 8,000,000  |  |   | 3,036,282  |   |   | -            |  |   | -               |   |   | -                 |   |   | 3,036,282     |  
|Issuance of common shares for               |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|convertible notes                           |  | 978,260    |  |   | 225,000    |   |   | -            |  |   | -               |   |   | -                 |   |   | 225,000       |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|exercise of options                         |  | 200,000    |  |   | 55,861     |   |   | -            |  |   | -               |   |   | -                 |   |   | 55,861        |  
|Share issuance costs                        |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (38,975           | ) |   | (38,975       | )
|Net loss for the year                       |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (1,772,250        | ) |   | (1,772,250    | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Balance, December 31, 2004                  |  | 61,080,449 |  |   | 37,865,435 |   |   | -            |  |   | 523,782         |   |   | (36,965,077       | ) |   | 1,424,140     |  
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|exercise of options                         |  | 110,000    |  |   | 21,049     |   |   | -            |  |   | -               |   |   | -                 |   |   | 21,049        |  
|Stock option compensation                   |  | -          |  |   | -          |   |   | -            |  |   | 48,592          |   |   | -                 |   |   | 48,592        |  
|Net loss for the year                       |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (1,476,324        | ) |   | (1,476,324    | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Balance, December 31, 2005                  |  | 61,190,449 |  |   | 37,886,484 |   |   | -            |  |   | 572,374         |   |   | (38,441,401       | ) |   | 17,457        |  
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|private placement                           |  | 7,200,000  |  |   | 1,614,716  |   |   | -            |  |   | 1,520,899       |   |   | -                 |   |   | 3,135,615     |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|exercise of options                         |  | 100,000    |  |   | 30,853     |   |   | -            |  |   | -               |   |   | -                 |   |   | 30,853        |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|exercise of warrants                        |  | 8,978,260  |  |   | 4,659,173  |   |   | -            |  |   | -               |   |   | -                 |   |   | 4,659,173     |  
|Issuance of common shares for               |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|convertible notes                           |  | 652,174    |  |   | 150,000    |   |   | -            |  |   | 39,917          |   |   | -                 |   |   | 189,917       |  
|Stock option compensation                   |  | -          |  |   | -          |   |   | -            |  |   | 814,810         |   |   | -                 |   |   | 814,810       |  
|Modification of warrants                    |  | -          |  |   | -          |   |   | -            |  |   | 889,117         |   |   | -                 |   |   | 889,117       |  
|Share issuance costs                        |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (62,888           | ) |   | (62,888       | )
|Net loss for the year                       |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (4,910,036        | ) |   | (4,910,036    | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Balance, December 31, 2006                  |  | 78,120,883 |  |   | 44,341,226 |   |   | -            |  |   | 3,837,117       |   |   | (43,414,325       | ) |   | 4,764,018     |  
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Issuance of common shares for exercise      |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|of options                                  |  | 290,000    |  |   | 127,652    |   |   | -            |  |   | -               |   |   | -                 |   |   | 127,652       |  
|Issuance of common shares for property      |  | 30,000     |  |   | 24,600     |   |   | -            |  |   | -               |   |   | -                 |   |   | 24,600        |  
|Net loss for the year                       |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (2,006,482        | ) |   | (2,006,482    | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Balance, December 31, 2007                  |  | 78,440,883 |  |   | 44,493,478 |   |   | -            |  |   | 3,837,117       |   |   | (45,420,807       | ) |   | 2,909,788     |  
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|exercise of warrants                        |  | 7,200,000  |  |   | 4,184,425  |   |   | -            |  |   | -               |   |   | -                 |   |   | 4,184,425     |  
|Net loss for the year                       |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (3,996,777        | ) |   | (3,996,777    | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Balance, December 31, 2008                  |  | 85,640,883 |  |   | 48,677,903 |   |   | -            |  |   | 3,837,117       |   |   | (49,417,584       | ) |   | 3,097,436     |  
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Cumulative effect of change in              |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|accounting principle                        |  | -          |  |   | -          |   |   | -            |  |   | (863,402        | ) |   | 464,255           |   |   | (399,147      | )
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|private placement (Note 5)                  |  | 2,337,500  |  |   | 1,396,646  |   |   | -            |  |   | -               |   |   | -                 |   |   | 1,396,646     |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|exercise of options (Note 5)                |  | 400,000    |  |   | 131,085    |   |   | -            |  |   | -               |   |   | -                 |   |   | 131,085       |  
|Reclassification of derivative liability on |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|the exercise of stock options (Note 10)     |  | -          |  |   | -          |   |   | -            |  |   | 156,834         |   |   | -                 |   |   | 156,834       |  
|Net loss for the year,                      |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (4,514,742        | ) |   | (4,514,742    | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Balance, December 31, 2009                  |  | 88,378,383 |  |   | 50,205,634 |   |   | -            |  |   | 3,130,549       |   |   | (53,468,071       | ) |   | (131,888      | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|exercise of options (Note 5)                |  | 850,000    |  |   | 272,156    |   |   | -            |  |   |                 |   |   | -                 |   |   | 272,156       |  
|Reclassification of derivative liability on |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|the exercise of stock options (Note 10)     |  | -          |  |   | -          |   |   | -            |  |   | 654,033         |   |   | -                 |   |   | 654,033       |  
|Issuance of common shares through           |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|private placement (Note 5)                  |  | 5,000,000  |  |   | 5,907,798  |   |   |              |  |   |                 |   |   |                   |   |   | 5,907,798     |  
|Share issuance costs (Note 5)               |  | -          |  |   | (45,765    | ) |   | -            |  |   | -               |   |   | -                 |   |   | (45,765       | )
|Net loss for the year                       |  | -          |  |   | -          |   |   | -            |  |   | -               |   |   | (9,983,926        | ) |   | (9,983,926    | )
|                                            |  |            |  |   |            |   |   |              |  |   |                 |   |   |                   |   |   |               |  
|Balance, December 31, 2010                  |  | 94,228,383 |  | $ | 56,339,823 |   | $ | -            |  | $ | 3,784,582       |   | $ | (63,451,997       | ) | $ | (3,327,592    | )

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

7

---

|GOLDEN QUEEN MINING CO. LTD.         
|-------------------------------------
|(an exploration stage company)       
|Consolidated Statements of Cash Flows
|(US dollars)                         

|                                                |   |              |   |   |              |   |   | Cumulative From         |  
|----------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------------------- | -
|                                                |   |              |   |   |              |   |   | Date of Inception       |  
|                                                |   | Year Ended   |   |   | Year Ended   |   |   | (November 21, 1985)     |  
|                                                |   | December 31, |   |   | December 31, |   |   | through                 |  
|                                                |   | 2010         |   |   | 2009         |   |   | December
      31, 2010 |  
|                                                |   |              |   |   |              |   |   |                         |  
|                                                |   |              |   |   |              |   |   |                         |  
|Operating activities:                           |   |              |   |   |              |   |   |                         |  
|Net loss for period                             | $ | (9,983,926   | ) | $ | (4,514,742   | ) | $ | (63,228,151             | )
|Adjustments to reconcile net loss to cash       |   |              |   |   |              |   |   |                         |  
|used in operating activities:                   |   |              |   |   |              |   |   |                         |  
|Asset impairment loss                           |   | 133,436      |   |   | 167,898      |   |   | 32,269,028              |  
|Mineral interests written off                   |   | -            |   |   | -            |   |   | 277,251                 |  
|Amortization and depreciation                   |   | 8,119        |   |   | 6,024        |   |   | 469,920                 |  
|Amortization of debt discount                   |   | -            |   |   | -            |   |   | 375,000                 |  
|Adjustment to asset retirement
      obligation |   |              |   |   |              |   |   |                         |  
|based on changes in cash flow estimates         |   | -            |   |   | 6,882        |   |   | (223,583                | )
|Accretion expense                               |   | 15,981       |   |   | 7,779        |   |   | 71,362                  |  
|Change in fair value of derivative liability    |   | 6,575,406    |   |   | 2,095,300    |   |   | 8,670,706               |  
|Gain on disposition of property
      and       |   |              |   |   |              |   |   |                         |  
|equipment                                       |   | -            |   |   | -            |   |   | (10,032                 | )
|Stock option compensation                       |   | 46,275       |   |   | 357,989      |   |   | 1,416,448               |  
|Financing charges related to modification       |   |              |   |   |              |   |   |                         |  
|of warrants                                     |   | -            |   |   | -            |   |   | 889,117                 |  
|Mineral property expenditures                   |   | -            |   |   | -            |   |   | (22,395,449             | )
|Changes in assets and liabilities:              |   |              |   |   |              |   |   |                         |  
|Receivables                                     |   | (18,192      | ) |   | (4,553       | ) |   | (42,796                 | )
|Prepaid expenses and other current
      assets |   | (20,613      | ) |   | 356          |   |   | (127,013                | )
|Accounts payable and accrued liabilities        |   | 153,927      |   |   | (20,456      | ) |   | 422,431                 |  
|Royalty and mining rights payable               |   | 17,108       |   |   | (48,034      | ) |   | 17,108                  |  
|                                                |   |              |   |   |              |   |   |                         |  
|Cash used in operating activities               |   | (3,072,479   | ) |   | (1,945,557   | ) |   | (41,148,653             | )
|                                                |   |              |   |   |              |   |   |                         |  
|Investing activities:                           |   |              |   |   |              |   |   |                         |  
|Purchase of mineral properties                  |   | (133,436     | ) |   | (167,898     | ) |   | (7,936,792              | )
|Deposits on mineral properties                  |   | -            |   |   | -            |   |   | (1,017,551              | )
|Purchase of reclamation financial               |   |              |   |   |              |   |   |                         |  
|assurance                                       |   | -            |   |   | (14,845      | ) |   | (286,653                | )
|Purchase of property and equipment              |   | (120,529     | ) |   | -            |   |   | (1,434,367              | )
|Proceeds from sale of property
      and        |   |              |   |   |              |   |   |                         |  
|equipment                                       |   | -            |   |   | -            |   |   | 47,153                  |  
|                                                |   |              |   |   |              |   |   |                         |  
|Cash used in investing activities               |   | (253,965     | ) |   | (182,743     | ) |   | (10,628,210             | )

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

8

---

|GOLDEN QUEEN MINING CO. LTD.                     
|-------------------------------------------------
|(an exploration stage company)                   
|Consolidated Statements of Cash Flows (Continued)
|(US dollars)                                     

|                                         |   |              |   |   |              |   |   | Cumulative From         |  
|---------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------------------- | -
|                                         |   |              |   |   |              |   |   | Date of Inception       |  
|                                         |   | Year Ended   |   |   | Year Ended   |   |   | (November 21, 1985)     |  
|                                         |   | December 31, |   |   | December 31, |   |   | through                 |  
|                                         |   | 2010         |   |   | 2009         |   |   | December
      31, 2010 |  
|                                         |   |              |   |   |              |   |   |                         |  
|Financing activities:                    |   |              |   |   |              |   |   |                         |  
|Borrowing under long-term debt           |   | -            |   |   | -            |   |   | 3,918,187               |  
|Payment of long-term debt                |   | -            |   |   | -            |   |   | (2,105,905              | )
|Proceeds from convertible debt           |   | -            |   |   | -            |   |   | 440,000                 |  
|Issuance of common shares for
      cash |   | 7,634,316    |   |   | 1,396,646    |   |   | 28,871,618              |  
|Share issuance costs                     |   | (45,765      | ) |   | -            |   |   | (733,866                | )
|Issuance of special warrants             |   | -            |   |   | -            |   |   | 18,091,667              |  
|Issuance of common shares upon exercise  |   |              |   |   |              |   |   |                         |  
|of stock options                         |   | 272,156      |   |   | 131,085      |   |   | 561,746                 |  
|Issuance of common shares upon exercise  |   |              |   |   |              |   |   |                         |  
|of warrants                              |   | -            |   |   | -            |   |   | 9,700,881               |  
|                                         |   |              |   |   |              |   |   |                         |  
|Cash provided by financing activities    |   | 7,860,707    |   |   | 1,527,731    |   |   | 58,744,328              |  
|                                         |   |              |   |   |              |   |   |                         |  
|Net change in cash and cash              |   |              |   |   |              |   |   |                         |  
|equivalents                              |   | 4,534,263    |   |   | (600,569     | ) |   | 6,967,465               |  
|                                         |   |              |   |   |              |   |   |                         |  
|Cash and cash equivalents,               |   |              |   |   |              |   |   |                         |  
|beginning balance                        |   | 2,433,202    |   |   | 3,033,771    |   |   | -                       |  
|                                         |   |              |   |   |              |   |   |                         |  
|Cash and cash equivalents,               |   |              |   |   |              |   |   |                         |  
|ending balance                           | $ | 6,967,465    |   | $ | 2,433,202    |   | $ | 6,967,465               |  

Supplementary Disclosures of Cash Flow Information (Note 9)

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

9

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

Nature of BusinessGolden Queen Mining Co. Ltd.
  (Golden Queen or the Company) is engaged in acquiring
  and maintaining gold and silver 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 exploration stage. Planned activities involve bringing
  to production a precious metals mine located in the Mojave Mining District,
  Kern County, California.

Principles of ConsolidationThese consolidated
  financial statements include the accounts of Golden Queen Mining Co. Ltd., a
  British Columbia corporation, and its wholly-owned subsidiary, Golden Queen
  Mining Co., Inc. (the Subsidiary), a US (State of California) corporation
  and, until its dissolution on August 27, 2007, the Karma Wegmann Corporation
  (see Note 3).

Generally Accepted Accounting Principles (GAAP)The consolidated financial statements have been prepared in accordance
  with accounting principles generally accepted in the United States.

In June 2009, The Financial Accounting Standards Board (FASB)
  issued Accounting Standards Codification (ASC) 105, Generally
  Accepted Accounting Principles. The FASB Accounting Standards Codification
  (Codification) is the source of authoritative US GAAP to be applied
  by non-government entities for Securities and Exchange Commission (SEC)
  registrants. On the effective date of this statement, the Codification superseded
  all the then-existing non-SEC accounting and reporting standards. This statement
  became effective for the Companys consolidated financial statements for
  the year ended December 31, 2009.

Cash and Cash EquivalentsFor 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.

The Company places its cash and cash equivalents with high quality
  financial institutions and, by policy, limits the amount of credit exposure
  to any one financial institution. At times, such investments may be in excess
  of FDIC insurance limits. To date, the Company has not experienced a loss or
  lack of access to its invested cash and cash equivalents. However, no assurance
  can be provided that access to the Companys invested cash and cash equivalents
  will not be impacted by adverse economic conditions in the financial markets.

Property and Equipment Property and equipment are
  stated at the lower of cost or net realizable value less accumulated depreciation.
  Depreciation is provided by the straight-line method over the estimated service
  lives of the respective assets, which range from 3 to 30 years, as follows:

Buildings
      20 yearsFurniture and Fixtures
      5 yearsAutomobiles
      3 to 5 yearsRental Properties
      30 years


Mineral PropertiesMineral properties include
  the cost of advance minimum royalty payments, the cost of capitalized mineral
  property leases, and mineral property acquisition costs. Expenditures for exploration
  and development on specific mineral properties with no proven reserves are expensed
  as incurred. Mineral property costs will be amortized against future revenues
  or charged to operations at the time the related mineral property is determined
  to have an impairment in value.

Carrying Value of Mineral Property Interests.The cost of acquiring mineral property interests is capitalized. Capitalized
  acquisition costs are expensed in the period in which it is determined that
  the mineral property has no future economic value. Capitalized amounts may also
  be written down if future cash flows, including potential sales proceeds related
  to the property, are estimated to be less than the carrying value of the property.
  The Company reviews the carrying value of mineral property interests periodically,
  and whenever events or changes in circumstances indicate that the carrying value
  may not be recoverable, reductions in the carrying value of each property would
  be recorded to the extent the carrying value of the investment exceeds the propertys
  estimated fair value.

10

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

Exploration and Development Expenditures.
  Exploration and development expenditures are expensed as incurred. Once a mineral
  reserve has been established, all future development costs will be capitalized
  and charged to operations on a unit-of-production method based on estimated
  recoverable reserves.

Valuation of Long-lived Assets.Accounting standards
  require recognition of impairment of long-lived assets in the event the carrying
  value of such assets may not be recoverable. 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. In accordance with the provisions of the accounting
  standard, 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 The Companys
  functional and reporting currency, the US dollar, is the primary economic currency.
  Assets and liabilities in foreign currencies are generally translated into US
  dollars at the exchange rates on the balance sheet date. Revenues and expenses
  are translated at exchange rates on the date of the transaction. Where amounts
  denominated in a foreign currency are converted into US dollars by remittance
  or repayment, the realized exchange differences are included in other income.
  The exchange rates prevailing at December 31, 2010 and 2009 were $0.99 and $1.05
  stated in Canadian dollars per one US dollar, respectively. The average rates
  of exchange during the years ended December 31, 2010 and 2009 were $1.02 and
  $1.14 stated in Canadian dollars per one US dollar, respectively.

Loss Per ShareThe Company computes and discloses
  loss per share in accordance with ASC 260, Earnings per Share, which
  requires dual presentation of basic loss per share and diluted loss per share
  on the face of all income statements presented for all entities with complex
  capital structures. Basic loss per share is computed as net loss divided by
  the weighted average number of common shares outstanding for the period. Diluted
  loss per share reflects the potential dilution that could occur from common
  shares issuable through stock options and warrants. Since the Companys
  stock options and warrants are anti-dilutive for all periods presented, there
  is no difference between basic and diluted loss per share as presented. A total
  of 5,550,000 (2009  3,850,000) common shares were issuable pursuant to
  such stock options and warrants at December 31, 2010.

Asset Retirement ObligationsThe Company records
  the fair value of an asset retirement obligation as a liability in the period
  in which it incurs a legal obligation associated with the retirement of tangible
  long-lived assets that result from the acquisition, construction, development
  and/or normal use of the assets. The obligation is measured initially at fair
  value using present value methodology, and the resulting costs capitalized into
  the carrying amount of the related asset. In subsequent periods, the liability
  will be adjusted for any changes in the amount or timing of the underlying future
  cash flows. Capitalized asset retirement costs are amortized on the same basis
  as the related asset and the discount accretion of the liability is included
  in determining the results of operations.

EstimatesThe preparation of financial statements
  in conformity with GAAP requires management to make estimates and assumptions
  that affect 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 recoverability
  of mineral properties, reclamation reserves and valuation of stock options.
  Actual results could differ from those estimates.

Fair Value of Financial InstrumentsThe
  carrying amounts reported in the balance sheets for cash and cash equivalents,
  receivables, accounts payable and accrued liabilities approximates fair value
  because of the immediate or short-term maturity of these financial instruments.
  The fair value of the reclamation financial assurance approximates the carrying
  value because the stated interest rates reflect recent market conditions or
  because the rates are variable in nature.

11

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

Income TaxesThe Company follows the asset and
  liability method of accounting for income taxes whereby the deferred tax assets
  and liabilities are recognized for the future tax consequences of differences
  between the financial statement carrying amounts of existing assets and liabilities
  and their respective tax basis. If it is determined that the realization of
  the future tax benefit is not more likely than not, the Company establishes
  a valuation allowance.

Stock Option Plan In 2009, the Companys Board
  of Directors adopted a second stock option plan referred to as the 2008 stock
  option plan (the 2008 Plan). Pursuant to the 2008 Plan, a further
  7,200,000 shares were reserved for issuance on exercise of options granted under
  the new plan. The exercise price of stock options granted under the 2008 Plan
  is determined by the Board, but shall not be less than the volume weighted average
  price for the five trading days immediately prior to the award date. All options
  granted under the 2008 Plan will be subject to such vesting requirements as
  may be prescribed by the Exchange, if applicable, or as may be imposed by the
  Board. All stock options granted under the 2008 Plan and outstanding as at December
  31, 2010 expire at a date determined by the Companys Board of Directors,
  not exceeding five years from the date of grant.

Derivative Financial InstrumentsThe Company reviews
  the terms of its equity instruments and other financing arrangements to determine
  whether or not there are embedded derivative instruments that are required to
  be accounted for separately as a derivative financial instrument. Also, in connection
  with the issuance of financing instruments, the Company may issue freestanding
  options or warrants that may, depending on their terms, be accounted for as
  derivative instrument liabilities, rather than as equity. The Company may also
  issue options or warrants to non-employees in connection with consulting or
  other services.

Derivative financial instruments are measured at their fair value.
  For derivative financial instruments that are accounted for as liabilities,
  the derivative instrument is initially recorded at its fair value and is then
  re-valued at each reporting date, with changes in the fair value reported as
  charges or credits to income. For warrant-based derivative financial instruments,
  the Company uses the Black-Scholes option pricing model to estimate fair value
  of the derivative instruments. To the extent that the initial fair values of
  the freestanding and/or bifurcated derivative instrument liabilities exceed
  the total proceeds received, an immediate charge to income is recognized, in
  order to initially record the derivative instrument liabilities at their fair
  value.

The classification of derivative instruments, including whether
  or not such instruments should be recorded as liabilities or as equity, is reassessed
  at the end of each reporting period. If reclassification is required, the fair
  value of the derivative instrument, as of the determination date, is reclassified.
  Any previous charges or credits to income for changes in the fair value of the
  derivative instrument are not reversed. Derivative instrument liabilities are
  classified in the balance sheet as current or non-current based on whether net-cash
  settlement of the derivative instrument could be required within 12 months of
  the balance sheet date.

New Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update
  (ASU) No. 2010-06, Improving Disclosures about Fair Value
  Measurements, which requires additional disclosures about the amounts
  of and reasons for significant transfers in and out of Level 1 and Level 2 fair
  value measurements. This standard also clarifies existing disclosure requirements
  related to the level of disaggregation of fair value measurements for each class
  of assets and liabilities and disclosures about inputs and valuation techniques
  used to measure fair value for both recurring and non-recurring Level 2 and
  Level 3 measurements. This standard is effective for the Companys interim
  and annual periods commencing January 1, 2011 and will require additional disclosure
  such as disaggregated information about activity in Level 3 fair value measurements
  on a gross basis, rather than one net amount. The Company is currently assessing
  the impact of ASU 2010-6 and does not expect the adoption of this guidance to
  have a material impact on its consolidated financial statements.

12

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

New Accounting Pronouncements  (contd)

In January 2010, the FASB issued ASU 2010 -5 Compensation
   Stock Compensation (Topic 718). This accounting standards update
  codifies EITF Topic D-110, Escrowed Share Arrangements and the Presumption of
  Compensation. When evaluating whether presumption of compensation has been overcome,
  registrants should consider the substance of the arrangement, including whether
  the arrangement was entered into for purposes unrelated to, and not contingent
  upon, continued employment. An escrowed share arrangement in which the shares
  are automatically forfeited if employment terminates is compensation. The adoption
  of this standard is not expected to have a material effect on the Companys
  consolidated financial statements.

In April 2010, the FASB issued ASU 2010-13, Compensation
   Stock Compensation (Topic 718). The objective of this update is
  to address the classification of an employee share-based payment award with
  an exercise price denominated in the currency of a market in which the underlying
  equity security trades. It provides guidance on the classification of a share-based
  payment award as either equity or a liability. A share-based payment award that
  contains a condition that is not a market, performance or service condition
  is required to be classified as a liability. The amendments in this update are
  effective for fiscal years, and interim periods within those fiscal years, beginning
  on or after December 15, 2010. The amendments in this update should be applied
  by recording a cumulative-effect adjustment to the opening balance of retained
  earnings. The cumulative-effect adjustment should be calculated for all awards
  outstanding as of the beginning of the fiscal year in which the amendments are
  initially applied, as if the amendments had been applied consistently since
  the inception of the award. The adoption of this standard is not expected to
  have a material effect on the Companys consolidated financial statements.

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

These financial statements have been prepared on a going concern
  basis, which assumes that the Company will continue to realize its assets and
  discharge its liabilities and commitments in the normal course of business.
  The Company has not generated revenues and has accumulated a deficit of $63,451,997
  at December 31, 2010 (2009 - $53,468,071) since inception and is not expected
  to generate earnings in the immediate or foreseeable future. The continuation
  of the Company as a going concern is dependent upon the continued financial
  support from its shareholders, and the ability of the Company to obtain necessary
  equity and/or debt or joint venture financing to fund construction of the operating
  facility on its Soledad Mountain Property (the Property) in the
  Mojave Mining District, Kern County, California, once a production decision
  has been made.

Management cannot provide assurances that such plans will occur.
  These factors raise substantial doubt regarding the Companys ability to
  continue as a going concern. These financial statements do not include any adjustments
  to the recoverability and classification of recorded asset amounts and classification
  of liabilities that might be necessary should the Company be unable to continue
  as a going concern.

2. Property and Equipment

|Property and equipment consists of: |   |          |   |   |          |  
|----------------------------------- | - | -------- | - | - | -------- | -
|                                    |   | 2010     |   |   | 2009     |  
|Buildings                           | $ | 110,730  |   | $ | 26,360   |  
|Furniture and fixtures              |   | 56,090   |   |   | 56,090   |  
|Automobiles                         |   | 21,401   |   |   | 21,401   |  
|Rental properties                   |   | 349,794  |   |   | 313,635  |  
|Property and equipment, cost        |   | 538,015  |   |   | 417,486  |  
|Less accumulated depreciation       |   | (219,689 | ) |   | (211,570 | )
|Property and equipment, net         | $ | 318,326  |   | $ | 205,916  |  

13

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

3. Mineral Properties

The Company formerly capitalized amounts that were paid to acquire
  mineral 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 its Property.
  The Companys investment in mineral properties in the amount of $30,951,041
  (2009 - $30,616,348) was fully provided for by the year ended December 31, 2010.

2010
      
      
      2009Exploration and development expenditures
      $
      21,015,506
      
      $
      21,015,206Mineral properties
      
      6,071,388
      
      
      5,937,952Advance minimum royalty
      
      3,482,379
      
      
      3,297,103Asset retirement obligations
      
      381,768
      
      
      365,787Impairment loss
      
      (30,951,041
      )
      
      (30,616,348
      )Total
      $
      -
      
      $
      -


As at December 31, 2010, the Company had provided reclamation
  financial assurance to the Bureau of Land Management, California and Kern County
  totaling $286,653 (2009 - $286,653). This deposit earns interest at 0.4% per
  annum and is not available for working capital purposes.

In July 2006, the Company acquired through the purchase of the
  Karma Wegmann Corporation a tract of land contiguous to the Property; in consideration
  of $875,000 paid to the vendors. The mineral properties owned by Karma Wegmann
  Corporation were transferred to the Company and management determined that a
  write-down of $875,000 was necessary in 2006. The Karma Wegmann Corporation
  was wound-up on August 27, 2007.

The Company is required to pay a royalty of 1% of gross smelter
  returns to the original owners of the Karma Wegmann Corporation for a period
  of up to 60 years, not to exceed $60,000,000, upon commencement of commercial
  production from the property formerly owned by Karma Wegmann Corporation. As
  of December 31, 2010, the Company has not incurred any royalty as the Property
  has not been in production.

4.Income Taxes

The tax effects of the temporary differences that give rise to
  the Company's deferred tax assets and liabilities are as follows:

2010
      
      
      2009Net operating and capital losses
      $
      9,174,000
      
      $
      8,848,000Property, plant and equipment
      
      327,000
      
      
      317,000Mineral properties and deferred exploration
        costs
      
      2,141,000
      
      
      1,456,000Asset retirement obligations
      
      63,000
      
      
      58,000Foreign exchange (gain) loss
      
      (43,000
      )
      
      -Undeducted financing costs
      
      10,000
      
      
      4,000Valuation allowance
      
      (11,672,000
      )
      
      (10,683,000
      )Deferred tax assets (liabilities)
      $
      -
      
      $
      -


14

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

4.Income Taxes  (contd)

The provision for income taxes differ from the amount established
  using the statutory income tax rate as follows:

2010
      
      
      2009Income benefit at Canadian statutory rate
      $
      (2,845,000
      )
      $
      (1,354,000
      )Foreign income taxes at other than Canadian statutory rate
      
      (176,000
      )
      
      (64,000
      )Change in fair value of derivative liability
      
      1,797,000
      
      
      681,000Non-deductible stock based compensation
      
      14,000
      
      
      -Share issuance costs
      
      (7,000
      )
      
      -Non-taxable portion of foreign exchange gain
      
      (43,000
      )
      
      -Expiry of losses carried forward
      
      253,000
      
      
      699,000Effect of reduction in statutory rate
      
      18,000
      
      
      61,000Increase (decrease) in valuation allowance
      
      989,000
      
      
      (23,000
      )Deferred tax recovery
      $
      -
      
      $
      -


The Companys future tax assets include approximately $10,000
  (2009 - $4,000) related to deductions for share issue costs in excess of amounts
  deducted for financial reporting purposes. If and when the valuation allowance
  related to these amounts is reversed, the Company will recognize this benefit
  as an adjustment to share capital as opposed to income tax expense in the consolidated
  statements of loss.

The Company evaluates its valuation allowance requirements based
  on projected future operations. When circumstances change and this causes a
  change in managements judgment about the recoverability of future tax
  assets, the impact of the change on the valuation allowance is reflected in
  current income. 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, 2010 and 2009.

As at December 31, 2010, the Company had net operating loss carry-forwards
  available to reduce taxable income in future years as follows:

Country
      Amount
      Expiration DatesUnited States  Federal
      $22,600,000
      2011  2030Canada (C$)
      $ 5,900,000
      2011  2030


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

Accounting for Uncertainty in Income Taxes was issued,
  which clarifies the accounting for uncertainty in income taxes recognized in
  an enterprises financial statements, and prescribes a recognition threshold
  and measurement attribute for the financial statement recognition and measurement
  of a tax position taken or expected to be taken in a tax return. The Company
  has evaluated its tax positions for the years ended December 31, 2010 and 2009
  and determined that it has no uncertain tax positions requiring financial statement
  recognition.

Because the Companys recent history of operating losses,
  management believes that recognition of the deferred tax assets arising from
  the above-mentioned future tax benefits is currently not likely to be realized
  and, accordingly, has provided a 100% valuation allowance against its net deferred
  tax assets due to the uncertainty surrounding the realization of such assets.

15

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

5. Share Capital

Common shares

In July 2009, the Company issued 2,337,500 common shares at C$0.65
  per share for proceeds of $1,396,646 (C$1,519,375).

During the three-month period from September to December 2009,
  400,000 stock options were exercised and the Company issued 400,000 common shares
  at C$0.35 per share for proceeds of $131,085 (C$140,000).

In January 2010, 700,000 stock options were exercised and the
  Company issued 700,000 common shares at C$0.35 per share for proceeds of $234,113
  (C$245,000).

On June 1, 2010, the Company issued 5,000,000 units at C$1.60
  per unit for gross proceeds of $7,634,316 (C$8,000,000) and incurred professional
  fees of $45,765 as share issuance costs. Each unit consisted of one common share,
  one-quarter of one Class A purchase warrant and one-quarter of one Class B purchase
  warrant. Each whole Class A warrant is exercisable to acquire one additional
  common share of the Company at a price of C$1.75. Each Class B warrant is exercisable
  to acquire one additional common share of the Company at a price of C$2.00.
  Both Class A and Class B warrants expire December 1, 2011. The aggregate fair
  value of the Class A and Class B purchase warrants was $1,726,518 and the Company
  allocated the remaining proceeds of $5,907,798 to the common shares. The fair
  value of the warrants was determined using the Black-Scholes option pricing
  model with assumptions as set out below:

2010Expected life years
      
      1.5Interest rate
      
      1.37%Volatility
      
      114%Dividend yield
      
      Nil


In September 2010, 50,000 stock options were exercised and the
  Company issued 50,000 common shares at C$0.26 per share for proceeds of $12,487
  (C$13,000).

In October 2010, 100,000 stock options were exercised and the
  Company issued 100,000 common shares at C$0.26 per share for proceeds of $25,556
  (C$26,000).

In connection with the guidance of ASC 815-40-15, as the options
  and warrants are exercisable in a currency other than the functional currency
  of the Company, they do not meet the fixed-for-fixed criteria of
  the guidance. As a result, the Company was required to separately account for
  the Class A and Class B warrants issued in connection with the private placement
  noted above as a derivative instrument liability (Note 10).

Stock options

The Company has elected to use the Black-Scholes option pricing
  model to determine the fair value of stock options granted. In accordance with
  the accounting standard for employees, the compensation expense is amortized
  on a straight-line basis over the requisite service period, which approximates
  the vesting period. Compensation expense for stock options granted to non-employees
  is amortized over the contract services period or, if none exists, from the
  date of grant until the options vest. Compensation associated with unvested
  options granted to non-employees is remeasured on each balance sheet date using
  the Black-Scholes option pricing model.

16

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

5. Share Capital  (contd)

Stock options (contd)

The following is a summary of stock option activity during the
  years ended December 31, 2010 and 2009:

WeightedAverage ExerciseShares
      
      
      Price
        per ShareOptions outstanding and exercisable, January
        1, 2009
      
      2,300,000
      
      
      C$0.57Granted
      
      1,950,000
      
      
      C$0.26Exercised
      
      (400,000
      )
      
      C$0.35Options outstanding and exercisable, December
        31, 2009
      
      3,850,000
      
      
      C$0.44Granted
      
      50,000
      
      
      C$1.24Exercised
      
      (850,000
      )
      
      C$0.33Options outstanding and exercisable, December
        31, 2010
      
      3,050,000
      
      
      C$0.48


The stock-based compensation expense recognized on the grant
  date was $46,275 (2009 - $357,989). Subsequent to the grant date, such options
  are revalued to fair value at each period-end (Note 10). The fair value of stock
  options granted as above is calculated using the following weighted average
  assumptions:

2010
      
      
      2009Expected life years
      
      5
      
      
      5Interest rate
      
      1.95%
      
      
      2.04%Volatility
      
      106%
      
      
      112.3%Dividend yield
      
      0%
      
      
      0%


As at December 31, 2010, the aggregate intrinsic value of the
  outstanding exercisable options was approximately $7,124,000 (2009 - $1,921,979).
  The total intrinsic value for options that were exercised during 2010 was approximately
  $438,000 (2009 -$232,160).

There is no unamortized compensation expense as at December 31,
  2010 and 2009 as all the outstanding options vested at the grant date.

The following table summarizes information about stock options
  outstanding and exercisable at December 31, 2010:

WeightedAverage
      
      
      WeightedNumber
      
      
      Contractual
      
      
      AverageExpiry
      
      Outstanding and
      
      
      Remaining Life
      
      
      ExerciseDate
      
      Exercisable
      
      
      (Years)
      
      
      PriceApril 20, 2011
      
      1,200,000
      
      
      0.30
      
      
      C$0.77January 28, 2014
      
      1,800,000
      
      
      3.07
      
      
      C$0.26April 18, 2015
      
      50,000
      
      
      4.29
      
      
      C$1.243,050,000
      
      
      2.01
      
      
      C$0.48


17

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

5. Share Capital  (contd)

Warrants

The following is a summary of warrants activity during the years
  ended December 31, 2010 and 2009:

|                                      |  |           |  |  |                 |  |  | Weighted           |  |  |                        | 
|------------------------------------- |  | --------- |  |  | --------------- |  |  | ------------------ |  |  | ---------------------- | 
|                                      |  |           |  |  | Weighted        |  |  | Average            |  |  |                        | 
|                                      |  |           |  |  | Average         |  |  | Remaining          |  |  |                        | 
|                                      |  |           |  |  | Exercise Price  |  |  | Contractual        |  |  |                        | 
|                                      |  | Shares    |  |  | per
      Share |  |  | Life
      (Years) |  |  | Expiry Date            | 
|Outstanding, January 1, 2009 and 2010 |  | -         |  |  | -               |  |  | -                  |  |  | -                      | 
|Issued:                               |  |           |  |  |                 |  |  |                    |  |  |                        | 
|Class A                               |  | 1,250,000 |  |  | C$1.75          |  |  | 0.92               |  |  | December 1, 2011       | 
|Class B                               |  | 1,250,000 |  |  | C$2.00          |  |  | 0.92               |  |  | December
      1, 2011 | 
|                                      |  |           |  |  |                 |  |  |                    |  |  |                        | 
|Outstanding, December 31, 2010        |  | 2,500,000 |  |  | C$1.88          |  |  |                    |  |  |                        | 

As at December 31, 2010, the aggregate intrinsic value of the
  outstanding warrants was approximately $2,325,000 (2009 - $Nil).

6. Asset Retirement Obligations

The Company is required to provide the Bureau of Land Management,
  the State Office of Mine Reclamation and Kern County with a revised reclamation
  cost estimate once per year. The financial assurance is adjusted once the cost
  estimate is approved (see Note 3).

The Company estimated its asset retirement obligations based
  on its understanding of the requirements to reclaim and clean-up its Property.
  The Company estimated that total payments of approximately $367,000 over three
  years commencing in 2017 would be required to complete the reclamation obligations.
  In determining the estimated initial present value of the obligation, a discount
  factor of 9.0% (the credit-adjusted risk-free rate), and an inflation rate of
  3.0% were used. The asset portion of the retirement obligations were written
  off in 2004. The following is a summary of asset retirement obligations:

2010
      
      
      2009Balance, beginning of the year
      $
      177,564
      
      $
      162,903Change in cash flow estimates
      
      -
      
      
      6,882Accretion expense
      
      15,981
      
      
      7,779Balance, end of the year
      $
      193,545
      
      $
      177,564


7. Commitments and Contingencies

The Company has acquired a number of mineral properties outright
  and has acquired exclusive rights to explore, develop and mine the Property
  under various agreements with landowners.

The Company is required to make advance minimum royalty payments
  related to its mineral properties. The total advance minimum royalty in 2010
  was $185,276 (2009 - $174,196), of which $17,108 was unpaid. The total advance
  minimum royalty owing for 2011 is expected to be approximately $272,000.

18

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

7. Commitments and Contingencies  (contd)

In 2007, the Company reached an agreement with a landowner to
  amend the terms of the lease agreement. Under the terms of the amendment, the
  Company has been granted an extension of twenty years and has paid $100,000
  owed from 2005. In addition, the Company is not required to pay advance royalties
  during the two-year period until April 23, 2008 and the Company will receive
  a credit representing 50% of all advance minimum royalty paid and use it against
  the future production royalties. The Company recommenced the advance minimum
  royalty payment, and paid the landowner $100,000 in 2009 and $100,000 in 2010.

A mining lease agreement with a group of landholders expired
  in 2004. The Company is currently in discussions with this group of landholders
  in an effort to reach a new agreement.

The Company has agreed to issue 100,000 common shares as a finders
  fee upon commencement of commercial production on the Property in connection
  with certain property acquisitions. As of December 31, 2010, commercial production
  has not commenced and no shares have been issued.

In 2004, the Company entered into an agreement with the President
  of the Company to issue 300,000 bonus shares upon completion of certain milestones.
  Upon receipt by the Company of a bankable feasibility study and the decision
  to place the Property into commercial production, a bonus of 150,000 common
  shares would be issued. Upon commencement of commercial production on the Property,
  a bonus of 150,000 common shares would be issued. In May 2010, the Company entered
  into an amendment to the agreement whereby the 300,000 bonus shares would alternatively
  be issuable upon a change of control transaction or upon a sale of all or substantially
  all of the Companys assets, having a value at or above CAD $1.00 per share
  of the Company, with a further 300,000 bonus shares being issuable in the event
  the change of control transaction or asset sale occurred at a value at or above
  CAD $1.50 per share. The agreement is for a term of three years and shall automatically
  renew for two years. As at December 31, 2010, the milestones had not been reached
  and no accrual was made in connection with these arrangements.

8. Related Party Transactions

Except as noted elsewhere in these consolidated financial statements,
  related party transactions are disclosed as follows:

For the year ended December 31, 2010, the Company paid $141,293
  (2009 - $116,776) to Mr. H. L. Klingmann for services as President of the Company
  and paid $17,769 (2009 - $18,620) to Mr. Chester Shynkaryk for his consulting
  services to the Company.

For the year ended December 31, 2010, the Company paid $1,974
  (2009 - $1,752) to each of four directors and $2,000 (2009 - $2,000) to a director
  as directors fees.

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.

19

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

9. Supplementary Disclosures of Cash Flow Information

|                                               |   |              |  |   |              |  |   | Amounts From Date of    | 
|---------------------------------------------- | - | ------------ |  | - | ------------ |  | - | ----------------------- | 
|                                               |   |              |  |   |              |  |   | Inception               | 
|                                               |   | Year ended   |  |   | Year ended   |  |   | (November 21, 1985)     | 
|                                               |   | December 31, |  |   | December 31, |  |   | through                 | 
|                                               |   | 2010         |  |   | 2009         |  |   | December
      31, 2010 | 
|Cash paid during year for:                     |   |              |  |   |              |  |   |                         | 
|Interest                                       | $ | -            |  | $ | -            |  | $ | 1,192,911               | 
|Income taxes                                   | $ | -            |  | $ | -            |  | $ | -                       | 
|Non-cash financing and investing               |   |              |  |   |              |  |   |                         | 
|activities:                                    |   |              |  |   | -            |  |   |                         | 
|Reclassification
      of derivative liability |   |              |  |   |              |  |   |                         | 
|for exercised
      stock options              | $ | 654,033      |  | $ | 156,834      |  | $ | 810,867                 | 
|Stock option compensation                      | $ | 46,275       |  | $ | 357,989      |  | $ | 1,416,448               | 
|Financing charges related to                   |   |              |  |   |              |  |   |                         | 
|modification
      of warrants term            | $ | -            |  | $ | -            |  | $ | 889,117                 | 
|Exchange of notes for common shares            | $ | -            |  | $ | -            |  | $ | 1,727,282               | 
|Exchange of note
      for future royalty      |   |              |  |   |              |  |   |                         | 
|payments                                       | $ | -            |  | $ | -            |  | $ | 150,000                 | 
|Common shares issued
      for mineral         |   |              |  |   |              |  |   |                         | 
|property                                       | $ | -            |  | $ | -            |  | $ | 304,811                 | 
|Mineral property
      acquired through the    |   |              |  |   |              |  |   |                         | 
|issuance of
      long-term debt               | $ | -            |  | $ | -            |  | $ | 1,084,833               | 
|Common shares issued
      upon conversion     |   |              |  |   |              |  |   |                         | 
|of convertible
      debt                      | $ | -            |  | $ | -            |  | $ | 414,917                 | 
|Asset retirement
      obligations             | $ | 15,981       |  | $ | 14,661       |  | $ | 193,545                 | 

10. Derivative Liability

As at January 1, 2009, the date on which the guidance of ASC
  815-40-15 became effective for the Company, the Companys stock options
  met the criteria of a derivative instrument liability because they were exercisable
  in a currency other than the functional currency of the Company and thus did
  not meet the fixed-for-fixed criteria of that guidance. As a result,
  the Company was required to separately account for the stock options as a derivative
  instrument liability recorded at fair value and marked-to-market each period
  with the changes in the fair value each period charged or credited to income.

The transition provisions of ASC 815-40-15 require cumulative
  effect adjustments as of January 1, 2009 to reflect the amounts that would have
  been recognized if derivative fair value accounting had been applied from the
  original issuance date of an equity-linked financial instrument through the
  implementation date of the revised guidance. Thus, the Company calculated the
  value of the derivative liability associated with the stock options at the date
  of their issuances and recorded the change in the fair value of the derivative
  liability from the date of the grant of the options up to January 1, 2009. Additionally,
  in conjunction with the foregoing, the previously calculated amounts in respect
  of the additional paid-in capital were reversed.

The cumulative effect of this change in accounting principle
  of $399,147 had been recognized as a decrease of the opening balance of the
  accumulated deficit of $464,255 and a decrease in the opening balance of additional
  paid-in capital of $863,402 as of January 1, 2009, with corresponding adjustments
  at January 1, 2009 to recognize a derivative liability of $399,147.

20

---

GOLDEN QUEEN MINING CO. LTD. 
  (an exploration stage company) 
  Notes to Consolidated Financial Statements 
  Years Ended December 31, 2010 and 2009 
  (US dollars)

10. Derivative Liability  (contd)

Stock-based compensation of $357,989 in respect of stock options
  granted in 2009, previously recorded as additional paid-in capital, was reclassified
  as derivative liability in connection with the adoption of these pronouncements.

During the year ended December 31, 2009, a total of 400,000 stock
  options treated as a derivative liability were exercised. Upon exercise of these
  options, the portion of the derivative liability that pertained to these options
  was re-measured and recorded at its fair value of $156,834, subsequent to which
  it was reclassified to additional paid-in capital. The Company measured the
  fair value of the derivative liability pertaining to the options exercised using
  the Black-Scholes pricing model with the following range of assumptions: expected
  volatility  100.45% - 108.23%, expected life  0.28  0.44 years,
  risk-free discount rate  1.23% - 1.52%, dividend yield  0.00% .

During the year ended December 31, 2010, a total of 850,000 stock
  options included in the derivative liability were exercised. Upon exercise of
  these options, the portion of the derivative liability that pertained to these
  options was re-measured and recorded at its fair value of $654,033. The Company
  measured the fair value of the derivative liability pertaining to the options
  exercised using the Black-Scholes pricing model with the following range of
  assumptions: expected volatility - 33% - 116%, expected life  0.01 
  3.30 years, risk-free discount rate  1.17% - 1.52%, dividend yield 
  0.00% .

As of December 31, 2010 and 2009, the Company had re-measured
  the remaining outstanding options and determined the fair value of the derivative
  liability to be $7,324,429 and $2,695,602 respectively, using the Black-Scholes
  option pricing model with the following assumptions:

December
        31, 2010
      
      
      December
        31, 2009Risk-free interest rate
      
      1.52% - 2.41%
      
      
      1.47 to 2.77%Expected life of derivative liability
      
      0.30 to 4.30 years
      
      
      1 to 4.1yearsExpected volatility
      
      69.88% - 118.22%
      
      
      60% to 148%Dividend rate
      
      0.00%
      
      
      0.00%


As of December 31, 2010 the Company re-measured outstanding warrants
  and determined the fair value of the derivative liability to be $3,065,339 (2009
  - $Nil) using the Black Scholes option pricing model with the following assumptions:

December 31, 2010Risk-free interest rate
      
      1.67%Expected life of derivative liability
      
      0.92 yearsExpected volatility
      
      73.32%Dividend rate
      
      0.00%


As of December 31, 2010, the changes of derivative liability
  for options and warrants are as follows:

|                                             |   | 2010       |   |   | 2009      |  
|-------------------------------------------- | - | ---------- | - | - | --------- | -
|Balance, beginning of the year               | $ | 2,695,602  |   | $ | 399,147   |  
|Fair value of options granted                |   | 46,275     |   |   | 357,989   |  
|Fair value of warrants issued                |   | 1,726,518  |   |   | -         |  
|Fair value of options exercised              |   | (654,033   | ) |   | (156,834  | )
|Change in fair value of options and warrants |   | 6,575,406  |   |   | 2,095,300 |  
|Balance, end of the year                     | $ | 10,389,768 |   | $ | 2,695,602 |  

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