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UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K /A

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

For the fiscal year ended December 31, 2009

[ ] 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. [ ]

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:
94,228,380 common shares as at December 31,  2010.

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, 2009.

EXPLANATORY NOTE

This Amendment on Form 10-K/A constitutes an amendment to our
  annual report on Form 10-K for the fiscal year ended December 31, 2009, which
  was originally filed with the Securities and Exchange Commission on March 31,
  2010.

This amendment is being filed for the purposes of disclosing
  additional and correcting the discussions requested by the Securities and
  Exchange Commission during their review on our annual report previously filed
  and to reflect the restatement discussed below..

On December 7, 2010, we announced that following, a internal
  review by our management, auditors and Audit Committee of our accounting for our
  stock options in accordance with a new adopted accounting pronouncement, ASC
  815-40 (which was effective on January 1, 2009), we would restate our December
  31, 2009 financial statements. This amendment on Form 10-K/A for the year ended
  December 31, 2009, discloses and discusses the impact and effect of a
  restatement of our previously filed financial statements for the l year ended
  December 31, 2009 and the related consolidated statements of operations,
  stockholders equity (capital deficit) and cash flows for the l year then ended,
  for the effects of the accounting error on the adoption of the accounting
  pronouncement ASC 815-40. Accordingly, management concluded, and our Audit
  Committee agreed, that our financial statements and the related report of our
  independent registered public accounting firm and all earnings press releases
  and similar communications issued by us relating to the fiscal year December 31,
  2009 should no longer be relied upon.

As a result of the review, management has concluded, and the
  Board of Directors concur that the new accounting pronouncement of ASC 815-40-15
  was not properly adopted on January 1, 2009. Therefore, we are restating
  previously issued financial statements to properly record the year end amount of
  the derivative liability on the consolidated balance sheet, the amounts of net
  loss for the year and loss per share and the opening deficit for the fiscal year
  2009, the amounts of common shares and additional paid-in capital on the
  consolidated statement of shareholders equity (capital deficit). These
  adjustments result in an increase in net loss of $2,095,300 for the year ended
  December 31, 2009, a decrease in the opening deficit by $ 464,255 and an
  increase of ending deficit by $1,631,045, a decrease in additional paid in
  capital by $1,064,557 and an increase in liabilities by $2,695,602. This
  restatement has no effect on our cash flows.

The combined effect of the restated figures is an increase in
  our basic and diluted loss per share by $0.02 to $0.05 per share for the year
  ended December 31, 2009.

As a result of the restatement noted above, we have also
  amended our disclosures regarding the controls and procedures as disclosed in
  Item 9A(T) of the 10-K/A.

2

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As required by Rule 12b-15 under the Securities Exchange Act of
1934, new certifications of our principal executive officer and principal
financial officer are being filed as exhibits to this amendment.

This amended Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2009 amends and restates only those items of the previously
filed annual report on Form 10-K which have been affected by the internal review
by the Securities Exchange Commissions, the restatement and controls and
procedures in item 9A(T) . In order to preserve the nature and character of the
disclosures set forth in such items as originally filed, no attempt has been
made in this amendment (i) to modify or update such disclosures except as
required to reflect the effects of the restatement or (ii) to make revisions to
the Notes to the Consolidated Financial Statements except for those which are
required by or result from the effects of the restatement and comments raised by
the Securities Exchange Commissions. For additional information regarding the
restatement, see Note 11 to our Consolidated Financial Statements included in
Part II - Item 8. No other information contained in our previously filed Form
10-K for the year ended December 31, 2009 has been updated or amended.

It is also the Companys intention to restate its financial
statements and amend its Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 2010 and June 30, 2010 as soon as the reviews are
completed.

3

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Form 10-K

Table of Contents

|Part       | Item No. |                                                                                                             |   
|---------- | -------- | ----------------------------------------------------------------------------------------------------------- | --
|           |          |                                                                                                             |   
|I          | 1        | Business                                                                                                    | 5 
|           | 1A       | Risk
      Factors                                                                                          | 23
|           | 1B       | Unresolved
      Staff Comments                                                                             | 25
|           | 2        | Properties                                                                                                  | 25
|           | 3        | Legal
      Proceedings                                                                                     | 29
|           | 4        | Reserved                                                                                                    | 29
|II         | 5        | Market
      for Common Equity, Related Stockholder Matters and Issuer Purchases of
      Equity Securities | 29
|           | 6        | Selected
      Financial Data                                                                               | 31
|           | 7        | Managements
      Discussion and Analysis of Financial Condition and Results of Operation                  | 31
|           | 7A       | Quantitative
      and Qualitative Disclosures About Market Risk                                            | 39
|           | 8        | Financial
      Statements and Supplementary Data                                                           | 39
|           | 9        | Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure            | 39
|           | 9A(T)    | Controls
      and Procedures                                                                               | 40
|           | 9B       | Other
      Information                                                                                     | 42
|III        | 10       | Directors,
      Executive Officers and Corporate Governance                                                | 42
|           | 11       | Executive
      Compensation                                                                                | 42
|           | 12       | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters  | 42
|           | 13       | Certain
      Relationships and Related Transactions and Director Independence                              | 42
|           | 14       | Principal
      Accountant Fees and Services                                                                | 42
|IV         | 15       | Exhibits,
      Financial Statement Schedules                                                               | 42
|Signatures |          | 44                                                                                                         

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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.

Faultor 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 SI 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
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 Corp. (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 prices in the late 1990s and in the
early 2000s 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 price of gold 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.

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The Project remained on hold in 2009 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 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.

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. The mineral resource estimates were confirmed as set out in
more detail 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 as set out in more detail below.

There are a number of risks associated with the Project and
readers are urged to consider the risks set out below and possible other risks,
in order to obtain an understanding of the Project.

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 (5mi) south of Mojave
in Kern County in southern California. See Figure 1, property location map under
below.

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.

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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 results of exploration done on the Property by Rosario Exploration
and Shell/Billiton and the crosscut assay data recorded on linens by Gold Fields
between 1933 and 1942. 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.

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. MRDI submitted a final
report with recommendations in May 2000.

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.

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

|                |            |            | Grade
|--------------- | ---------- | ---------- | -----
|                |            |            | AuEq 
|Category        | t          | ton        | g/t  
|Measured        | 39,720,000 | 43,692,000 | 1.118
|Indicated       | 50,774,000 | 55,851,000 | 0.789
|Total & Average | 90,494,000 | 99,543,000 | 0.912

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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

|         |            |            | Grade
|-------- | ---------- | ---------- | -----
|         |            |            | AuEq 
|Category | t          | ton        | g/t  
|Inferred | 32,073,000 | 35,280,000 | 0.634

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.                                                                                                      

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 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 commenced an infill drill program in October of 2010,
and proposes additional  infill drilling  once the mine is in production.

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
      Grades
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------- | ---------- | --------------------
|                                                                                                                                                                                            |            |            | Gold                
|Reserve Category                                                                                                                                                                            | t          | ton        | g/t                 
|Proven *                                                                                                                                                                                    | 27,705,500 | 30,476,000 | 0.819               
|Probable *                                                                                                                                                                                  | 18,861,800 | 20,748,000 | 0.535               
|Total & Average                                                                                                                                                                             | 46,567,300 | 51,224,000 | 0.703               
|*Indicated recoveries for gold and silver
      based upon extensive test work are 85.0% and 52.5% as discussed in detail
    in section Mineralogy, Process Development & Flow Sheetbelow.

9

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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., of 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.

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 are 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 has 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) is $66.5million with discount rate of 5.0% and the
undiscounted, cumulative, net cash flow is $120million. The contribution of gold
and silver to gross revenues is 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. To provide a comparison, the same mining scenario without the 10%
contingency on operating costs has an IRR of 23% before taxes, a NPV of
$93.3million with a discount rate of 5% and an undiscounted, cumulative net cash
flow of $158million.

Technical information is provided in the following
sections.

10

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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 55owith 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
55ofor 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. The 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 pjt
perimeter. 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 51.2million tons. Total
waste rock mined is 108.4million tons of which 19.0 million tons is expected to
be processed and 15.0million tons sold as aggregate and 89.4million is expected
to be managed on site as set out above. The average stripping ratio is
2.12:1.0.

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.

11

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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. Gold and silver recoveries of
78.0% and 60.0% respectively and 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 developed for
the Project in late 2002, based upon the use of a high-pressure grinding roll
(HPGR). The Company, in consultation with an independent engineering firm
experienced in HPGR design, prepared a detailed flow sheet for the Project based
on an HPGR in the third comminution 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.

12

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

Primary Rock Types
    Proportion
    Gold
    Silver%
    %
    %Pyroclastics
    10.5
    85.4
    52.5Quartz Latite
    21.3
    89.9
    52.5Rhyolite
    68.1
    83.4
    52.5Undefined
    0.1
    Average
    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;
- 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 and this design was
revised in detail in 2008.

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 to 250MPa. The unconfined
compressive strengths of Soledad Mountain ores range from 2.2MPa to 118.9MPa 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.

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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
for the Merrill-Crowe plant and this includes the refinery and for an analytical
laboratory.

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 alternative is to receive
delivery of the cyanide in dry form and the facilities for the Project have been
designed to accept delivery of cyanide in either form.

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 dedicated pad, i.e. ore
will be stacked, leached, rinsed and left in place on the pad for final
reclamation. 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 is 1.36t/m3(85.0lb/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 sides;
- Nominal capacity of the pad is 46.5million t (51.2million ton) and
- The heap is to be constructed in 3 stages and each stage is to be divided
  into 2 hydraulically isolated zones, i.e. Zone 1 and Zone 2 for a total of 6
  zones

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 pumped to the
heap with vertical turbine pumps 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 for construction has been completed.

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.

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Water Supply

A water supply will be required for the mining 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. Development of well PW-3 remains to be 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

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 possibility of water
banking is also being discussed.

The Company is in discussion with a local agency to determine
the availability and feasibility of using recycled water for the Project and
initial engineering studies are underway.

Power Supply

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

A main power line with two sets of conductors currently reaches
the eastern property boundary. The top set of conductors carries 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. 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.

SCE is doing an in-house study to determine the most effective
way of providing power for the Project.

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 barren and recycle solution pumps in case of a SCE power failure.

An independent consulting engineering firm prepare a detailed
motor list and estimated the power consumption for the heap leach
operation..

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Assay Laboratory, Offices &
Workshop/Warehouse

The initial designs for all services required for a mining
operation such as an assay laboratory, office, workshop and warehouse and diesel
fuel and gasoline storage have been completed.

Project Management & Operating Manpower

A management team will be assembled in Mojave to manage the
Project. Manpower is expected to average 27 salaried and 129 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 byproduct 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 Company
has received an expression of interest from an aggregate producer with
experience in southern California markets and this is being actively
pursued.

Wind Power

A large number of wind turbines are located in an area between
the Project and a range of mountains to the northwest of the Project.

A company based in Mojave has investigated the feasibility of
using Soledad Mountain as a base for a commercial installation of wind turbines
and has had discussions with the Company. Initial indications are that Soledad
Mountain would be a good site and could accommodate a number of wind turbines
without interfering with the mining operation.

Wind power could only be a supplemental source of power for the
Project as it would still be necessary for SCE to provide power during periods
when there is little or no wind.

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, which follow below under this Environmental Issues
& Permits heading.

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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 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.

17

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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 S EIR. 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 S EIR to
the public was then late July or early August 2009.

The following two items are of note:

- The Company completed a number of studies and did significant work on site
  between 2005 and 2009 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 with project concerns, 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.

18

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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 and as a result
the SEIR certification was then 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 PM10 levels 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 a mining rate of 27million t (30million ton) 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.

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 S EIR. 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 Authority to Construct permits
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 have completed the revised
Applications for Authority to Construct permits and it is now expected that
these will be submitted to Eastern Kern Air Pollution Control District in
November 2010. ECAPCD can now prepare and issue Authority to Construct permits
as the SEIR has been certified.

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

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 KCAPCD 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 KCAPCD.

19

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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 6m (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.

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 for the Project. The Regional
Board will wait for confirmation from the Planning Department that SEIR has been
certified before adopting a revised Board Order and setting Waste Discharge
Requirements for the Project.

The Regional Board unanimously approved Waste Discharge
Requirements and a Monitoring and Reporting Program (WDRs) for the Soledad
Mountain 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. 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. The Board Order was
signed by the Executive Officer of the Board on July 23, 2010.

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.

20

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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;
- Leached residues will be rinsed and reclaimed on a single heap leach pad.
  (The Company is also evaluating the feasibility of selling the leached and
  rinsed residues for a variety of uses; 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.

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

21

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- 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:

- By the State of California and Kern County for general reclamation on
  site;
- By the Regional Board for rinsing and 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. The financial
assurance is reassessed annually.

Cleanup On Site

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

|             |           | Amount  |      
|------------ | --------- | ------- | -----
|Payable To   | Years     | U.S.$   | Loads
|Contractor A | 2006      | 13,077  | 6.0  
|             | 2007      | 41,946  | 48.5 
|             | 2008      | 138,336 | 160.0
|             | 2009      | 15,425  | 17.5 
|Total        | 2006-2009 | 208,784 | 232.0
|Contractor B | 2008      | 128,000 | 141.0
|Grand Total  |           | 336,784 | 373.0

Some work remains to be done and cleanup is continuing at a
reduced pace in 2010.

The work was done at a significant cost to the Company and
demonstrates that the Company is committed to envioronmental 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.

22

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Item 1A. Risk Factors.

The following is a brief discussion of those 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.

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, 2009 of $ 53,244,225 .
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 $ 53,468,071  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 substantial doubt
regarding the Companys ability to continue as a going concern. The Companys
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.

The Need for Significant Additional Financing

If 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 and estimates that this
could range as high as $100 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.

23

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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.

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

|Date            | Gold      | Silver
|--------------- | --------- | ------
|January 2, 2010 | $1,121.50 | $17.17
|January 2, 2009 | $874.50   | $11.08
|January 2, 2008 | $840.75   | $14.93
|January 2, 2007 | $640.75   | $13.01
|January 3, 2006 | $530.00   | $9.04 
|January 4, 2005 | $427.75   | $6.39 
|January 2, 2004 | $415.25   | $5.98 
|January 3, 2000 | $281.50   | $5.30 

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.

24

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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.
If the Company is unable to fund fully the cost of remedying an environmental
problem, the Company might be required to suspend operations or enter into
interim compliance measures pending completion of remedial activities.

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 $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 and 12 unpatented millsites,
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.

25

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Figure 1 below provides a property location map.

Figure 1



The Company holds the properties either directly through a
subsidiary, or  under mining lease agreements with 63 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.

26

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

Figure 2



The Company owns or controls 792.13 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 four residential properties with buildings north
of Silver Queen Road and four 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 the title questions.
The effect of the 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
properties.

27

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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 is planning to file a Record of Survey with
Kern County in 2010.

Royalties

The Company is required to make advance, minimum royalty
payments under the mining lease agreements. With one exception, 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 payable to be paid to the remaining
rightful landholders in 2009. The Company is continuing to pay advance minimum
royalties to landholders and had paid a total of $174,196 in 2009. 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 has prepared a new mining lease agreement for discussion
with the group of landholders and these discussions are ongoing. Note that this
group of landholders has mineral rights only and no surface rights in the area.
Further, the recoverable gold and silver on the group of landholders property
amount to approximately 3% of the total recoverable gold and silver in the
mineral reserves reported in the section titled Mineral Reservesabove and accordingly is not considered material by the Company.
Discussions with the group of landholders is ongoing and, while the Company is
interested in concluding an agreement, such an agreement is not critical to the
success of the Project.

A number of mining lease agreements expire in 2010 and the
Company has prepared or is preparing extension agreements. Of these expiring
lease agreements, one group of leases that together comprise a 50% interest in a
claim group is considered material by the Company. The Company is in the process
of negotiating renewal leases with this group, maintains a good relationship
with the landowners involved, and anticipates that it will be able to reach
agreements for renewal leases.

While the Company is not in default of any current lease,
leases that are individually not material are currently being renegotiated as
they approach expiry, or have expired and are in the process of renegotiation.
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 are allowed to
expire.

The current 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 of 2015, 2021 and April 2026
respectively. All leases become non-expiring once the mine commences
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.

Item 4. Reserved.

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
    Low2009
    Fourth Quarter
    $1.17
    $0.77Third Quarter
    $0.84
    $0.55Second Quarter
    $0.72
    $0.40First Quarter
    $0.50
    $0.232008
    Fourth Quarter
    $0.39
    $0.15Third Quarter
    $0.96
    $0.30Second Quarter
    $1.11
    $0.82First Quarter
    $1.29
    $0.75


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. As of December 31, 2008, the
Federal Reserve Bank of New York discontinued the publication of foreign
exchange rates. On March 1, 2010, the exchange rate was US$1.00 per CDN$1.04.
The high and low exchange rates for each month during the previous six months
were as follows:

High
    LowFebruary 2010
    $1.07
    $1.04January 2010
    $1.07
    $1.03December 2009
    $1.07
    $1.04November 2009
    $1.08
    $1.05October 2009
    $1.08
    $1.03September 2009
    $1.11
    $1.06


Exchange rate information (from US$ to CDN$) as at each of the
years ended December 31, 2008 and 2009 is set out in the table below:

Year Ended December 312008
    
    
    2009Rate at end of Period
    $
    1.224
    
    $
    1.0510Low
    $
    0.9717
    
    $
    1.0292High
    $
    1.2935
    
    $
    1.3000


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As of March 1, 2010, there were 253 registered holders of
record of the Companys common shares and an undetermined number of beneficial
holders.

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
    Low2009
    Fourth Quarter
    $1.08
    $0.69Third Quarter
    $0.78
    $0.48Second Quarter
    $0.67
    $0.33First Quarter
    $0.44
    $0.222008
    Fourth Quarter
    $0.35
    $0.10Third Quarter
    $0.92
    $0.28Second Quarter
    $1.10
    $0.80First Quarter
    $1.30
    $0.76


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,
2009 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
    3,850,000
    C$0.44
    3,350,000Equity compensation plans not approved by security holders
    Nil
    Nil
    NilTotal
    3,850,000
    --
    3,350,000


Sales of Unregistered Securities

On July 29, 2009, the Company completed a non-brokered private
placement of 2,337,500 common shares of the Company at a price of C$0.65 per
share for proceeds of $1,396,646 (C$1,519,375). The shares were offered and sold
to accredited investors pursuant to the provisions of Rule 106 of Regulation D
under the U.S. Securities Act of 1933and to non-U.S. investors pursuant
to Regulation S under the Securities Act of 1933.

The shares are subject to a four-month hold period and may not
be resold or transferred until November 30, 2009 under Canadian securities laws.
The shares are also restricted pursuant to Rule 144 promulgated under the U.S.
Securities Actof 1933.

30

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Net proceeds of this offering are allocated to 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, 2009.

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, 2010
and should be read in conjunction with the audited consolidated financial
statements of the Company for the year ended December 31, 2009 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, 2009.

The Company had no revenue from operations.

The Company incurred general and administrative expenses of
$2,246,953 for the year ended December 31, 2009 (2008 - $2,817,429).

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

- $174,196 for advance minimum royalties owing to landholders (2008 -
  $735,333 ). The advance minimum royalties owing to landholders from the end of
  the three year moratorium period from 2000 to 2003 were brought current in
  2008 as more fully described in the section titled Property Interests Are
  In Good Standingabove;
- $362,050 for the Air Quality and Health Risk Assessment and for ongoing
  maintenance of and data recovery from the meteorological station (2008 -
  $109,007 ). The increase was primarily due to the fact that 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 delivered to the
  Planning Department and EKAPCD on July 21, 2009. The study was prepared by
  consulting engineers;
- $15,355 for a study to confirm that there are no desert tortoise found on
  the property (2008 - $0);
- $35,354 for quarterly water sampling and analysis (2008 - $37,837);
- $172,114 for detailed engineering for the Phase 1 heap leach pad, for the
  associated site drainage plan and general support for the approvals and
  permitting process (2008 - $428,012 ). The Company is proceeding with detailed
  engineering designs of the key facilities for construction as described in
  more detail in the section titled Outlook.The foregoing costs were
  incurred for this particular design. Design costs may recur if changes are
  made to the heap leach pad, however the extent of any recurring costs is not
  known at this time;

31

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- $60,194 for traffic studies and detailed design for the new access road for
  the Project (2008 - $0 ). The Companys consulting engineers completed two
  traffic studies, which were required for the SEIR in 2009;
- $41,869 for the detailed design of the workshop and warehouse for the
  Project (2008 - $0 ). The Company is proceeding with detailed engineering
  designs of the key facilities for construction as described in more detail in
  the section titled Outlook.Significant costs were therefore incurred
  for this particular design. Design costs are non-recurring;
- $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 support required for the approvals
  and permitting process (2008 - $278,914 ). The Companys consulting engineers
  completed work on the studies outlined above at a reduced level of activity in
  2009 and then continued to communicate and liaise with the Regional Board
  leading up to the regular meeting held on July 14, 2010 at which the Waste
  Discharge Requirements and a Monitoring and Reporting Program for the Project
  were approved. Accordingly, the Company additional costs were incurred in 2010
  to complete the consulting services;
- $45,024 for ongoing work done by a registered surveyor on the status of
  mining claims (2008 - $70,958);
- $17,953 to an independent engineer for ongoing site support (2008 -
  $21,710);
- $15,425 to a local contractor for ongoing cleanup and weekly safety checks
  (2008 - $266,034 ). The major cleanup on site was completed in 2008 and work
  continued on a reduced scale in 2009.
- $167,898 for property purchases (2008 - $133,641 ), consisting of land
  adjacent to the Project;
- $20,440 to the Bureau of Land Management for annual assessment work for
  2009 (2008  19,800);
- $26,195 for property taxes for 2009  2010 (2008 -2009 - $24,885) ;
- $31,412 for insurance for 2009-2010 (2008-2009 - $31,431);
- $190,201 for legal fees incurred for ongoing work on the S EIR (2008 -
  $10,000 ). During the fiscal year ended 2009, the Company engaged legal counsel
  to work with the Planning Department on the preparation of the SEIR. We expect
  that additional legal costs for the SEIR will be incurred in 2010;
- $85,448 for general corporate legal fees and work on agreements with
  landholders (2008 - $77,089);
- $20,051 to the Planning Department  for work on the SEIR (2008 - $200,392 ).
  The Company provided advances of $55,000 in February 2008 and $123,800 in
  September 2008 to the Planning Department for work on the SEIR;
- $90,000 for preparing promotional material and seeking public support for
  the Project (2008 - $56,250);
- C$180,184 for ongoing mine design and drafting support (2008  C$124,102);
- C$19,798 to confirm the availability of power for the Project with Southern
  California Edison and for the design of a sub-station for the Project (2008 
  C$0);
- C$26,787 for stock exchange and filing fees (2008  C$18,135);
- C$55,656 for general corporate legal fees (2008 - $43,452)

32

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- C$108,019 for accounting and audit fees and the preparation of tax returns
  (2008  C$77,808 ), in part due to costs associated with consultants engaged to
  provide book-keeping services and to prepare financial statements;

For the year ended December 31, 2009, the Company has also
recorded a change in fair value of derivative liability of $2,095,300. This item
is a non-cash item and was recorded in accordance with the new accounting
pronouncement of ASC 850-40-15. This guidance requires entities to evaluate
whether an equity-linked financial instrument (or embedded feature) is indexed
to its own stock by assessing the instruments contingent exercise provisions
and settlement provisions. Instruments not indexed to their own stock fail to
meet the scope exception of Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities, paragraph 11(a),
now included in the FASB Codification at ASC 815-10-15-74(a), and should be
classified as a liability and marked-to-market. ASC 815-40-15 was effective for
fiscal years beginning after December 15, 2008 and thus, upon its adoption on
January 1, 2009, was applied to the Companys outstanding stock options.

Interest income of $10,070 (2008 - $107,956) was significantly
lower by $97,886 as there was less cash on deposit during the year and interest
rate has been significantly lower compared to prior year. There was no interest
expense during the year.

The Company incurred a net loss of $ 4,514,742 (or $0.05 loss
per share) for the year as compared to a net loss of $3,996,777 (or $0.05 per
share) for 2008 for a difference in the net loss of $517,965.

The following significant and non-recurring costs were incurred
in 2008 and this therefore contributed to the difference in net loss between
2009 and 2008:

- Property purchases of $133,641;
- Costs of $266,034 incurred on a major cleanup program on site;
- Difference in the advance minimum royalties paid of $561,137;
- Advances of $178,800 paid to the Planning Department for work by
    consulting engineers on the SEIR;
- A amount of $163,000 was paid for a study on the right to extract
    groundwater and other issues relating to the availability of water to support
    the Project and
- A production water well was drilled at a cost of $141,000.

Summary of Quarterly Results

Results for the eight most recent quarters are set out in the
table below.

|Results for the quarter ending on: | Dec. 31, 2009 | Sept. 30, 2009 | June 30, 2009 | March 31, 2009
|---------------------------------- | ------------- | -------------- | ------------- | --------------
|Item                               | $             | $              | $             | $             
|Revenue                            | Nil           | Nil            | Nil           | Nil           
|Net 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          

|Results for the quarter ending on: | Dec. 31, 2008 | Sept. 30, 2008 | June 30, 2008 | March 31, 2008
|---------------------------------- | ------------- | -------------- | ------------- | --------------
|Item                               | $             | $              | $             | $             
|Revenue                            | Nil           | Nil            | Nil           | Nil           
|Net loss for the quarter           | 1,223,439     | 923,380        | 1,224,663     | 625,295       
|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 of  stock options or makes end-of-year adjustments.

33

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Selected Annual Information

Results for the year
        ending on:
      Dec. 31,
        2009
      Dec. 31,
        2008
      Dec. 31,
        2007
      **From****Inception**Item
      $
      $
      $
      $General and administrative
        expenses
      (2,246,953)
      (2,817,429)
      (1,907,159)
      (19,727,800)Asset impairment loss
      (167,898)
      (1,270,366)
      (246,283)
      (32,135,592)Change in fair value of
        derivative liabilities
      (2,095,300)
      -
      -
      (2,095,300)Adjustment to asset retirement obligation
        on changes in cash flow estimates
      (6,882)
      275
      (1,485)
      223,583Accretion expense
      (7,779)
      (17,213)
      (11,930)
      (55,381)Sub-total
      (4,524,812)
      (4,104,733)
      (2,166,857)
      (53,790,490)Interest expense
      -
      -
      -
      (913,098)Interest income
      10,070
      107,956
      160,375
      1,599,987Net loss
      (4,514,742)
      (3,966,777)
      (2,006,482)
      (53,103,601)Loss per share
      (0.05)
      (0.05)
      (0.03)


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 will be provided
in the fourth quarter of 2010.

The asset retirement obligation accrual is estimated at
$177,564 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 $174,196 paid in 2009.

A mining lease agreement with one group of landholders expired
in 2004 and the Company has prepared a new mining lease agreement for discussion
with the group of landholders.

Off-balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Stock Option Plan

The Company prepared a new stock option plan (New Plan) to
replace its existing stock option plan. The New Plan provides a fixed number of
7,200,000 common shares of the Company that may be issued pursuant to the grant
of options. The exercise price of all stock options shall be determined by the
Companys Board of Directors, but it shall not be less than the last price at
which the Companys shares were issued prior to the award date or the closing
price on the day immediately preceding the award date. The expiry date of the
option shall be the date so fixed by the Board, unless the option holder dies or
ceases to be employed as a director or as a consultant prior to the date fixed
by the Board.

The Company granted 1,950,000 stock options to directors,
officers and consultants of the Company pursuant to the new plan on January 28,
2009. The options are exercisable at a price of C$0.26 per share for a period of
5 years from the date of grant. The new plan and the stock options were approved
by the shareholders of the Company at the 2009 annual general meeting, which was
held on May 21, 2009.

Transactions With Related Parties

Mr. H. Lutz Klingmann was paid $116,776 (2008 - $136,500) for
services as President of the Company and Mr. Chester Shynkaryk was paid $18,620
(2008 - $17,996) for consulting services to the Company for the year ended December 31, 2009. 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.

34

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Four directors of the Company were paid $1,752 (2008 - $ 1,861)
and two directors were paid $2,000 (2008 -$2,000) in director fees for the year
ended December 31, 2009.

There were no other related party transactions during the year
ended December 31, 2009.

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.

Liquidity and Capital Resources

The Company concluded a non-brokered private placement of
2,337,500 common shares of the Company at a price of C$0.65 per share for
proceeds of $1,396,646 (C$1,519,375) on July 30, 2009.

The Company held $2,433,202 in cash and cash equivalents on
December 31, 2009.

The Company has no long-term debt.

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 bringing current the remaining advance minimum royalties owing to
landholders, for additional property purchases, for ongoing work on site and for
general corporate purposes to the end of 2010.

In January 2010 , the Company issued 700,000 common shares for
proceeds of $233,111 (C$245,000) pursuant to the exercise of stock options.

Outstanding Share Data

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

Item
    No. of
      SharesShares issued and outstanding on Dec. 31, 2008
    85,640,883Shares issued pursuant to a private placement
    2,337,500Shares issued pursuant to the exercise of stock options
    400,000Shares issued and outstanding on Dec. 31, 2009
    88,378,383Shares issued in January 2010
    700,00089,078,383
    Exercise Price
    Expiry DateC$0.35 &
    9/02/10 &Director and employee stock options
    1,200,000
    C$0.77
    20/04/11Director and employee stock options
    1,950,000
    C$0.26
    28/01/14Shares to be issued as a finders fee
    100,000
    Not Applicable
    Not ApplicableBonus shares to be issued
      to H.L. Klingmann
    300,000
    None
    NoneFully diluted on March 31, 2010
    92,628,383


35

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The company's authorized share capital is 100,000,000 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 a rate of
4.5million tonnes (5.0million tons) per year and these have been reduced from
the earlier planned mining rates. Projected life of the open pit heap leach
operation has increased from 7 years to 12 years. The Company also plans to
produce and sell aggregate 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 are being obtained from contractors. These
cost estimates are being incorporated into the feasibility study update, which
is being prepared by Norwest Corporation of Vancouver. The feasibility study
update, once completed, will be considered by management in connection with
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 $972.35/oz and $14.67/oz in
2009 and closing prices on March 19, 2010 were $1,105.50/oz and $16.96/oz
respectively. The Company is targeting a project financing in the first quarter
of 2011. The ability to finance the Project will be subject to market conditions
at the time of financing.

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.

Subsequent Event

Four directors exercised a total of 700,000 options on shares
for proceeds of $233,111 (C$245,000) in January 2010.

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:

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.

36

---

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 $167,898 (2008 - $1,270,366) in mineral property
interests was recorded for the year ended December 31, 2009.

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 $177,564 (2008 - $162,903) as
at December 31, 2009.

Stock-based Compensation

Management has made significant assumptions and estimates in
determining the fair market value of stock-based compensation granted to
directors, officers, employees and consultants. These estimates have an effect
on the stock-based compensation expense recognized and the additional paid-in
capital and share capital balances on the Companys Balance Sheet. The value of
each option award is estimated on the date of grant using the Black-Scholes
option-pricing model. For consultants, such amount is revalued on a quarterly
basis. To date, substantially all of our stock option grants have been to
directors and officers of the Company. Increases in the Companys share price
will likely result in increased stock option compensation expense. The
Black-Scholes option-pricing model requires the input of subjective assumptions,
including the expected term of the option award and stock price volatility. The
expected life used for the purposes of the Black-Scholes calculation is the term
of the award. These estimates involve inherent uncertainties and the application
of management judgment.

Recently Issued Accounting Standards

In January 2010, an accounting standard update on codification,
Fair value Measurements and Disclosures, improving disclosures about fair value
measurements was issued. This update provides amendments that will provide more
robust disclosures about (1) the different classes of assets and liabilities
measured at fair value, (2) the valuation techniques and inputs used, (3) the
activity in Level 3 fair value measurements, and (4) the transfers between
Levels 1, 2, and 3. The standard adds new disclosure and clarifies existing
disclosure requirements. The new standard requires disclosures of the fair value
of financial instruments for interim reporting periods of publicly traded
companies in addition to the annual disclosure required at year-end. The
provisions of the new standard are effective for the interim periods ending
after June 15, 2009. The adoption of this standard did not have a material
effect on the Companys consolidated financial statements.

37

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In June 2008, the Financial Accounting Standards Board (FASB)
issued Emerging Issues Task Force (EITF) Issue 07-5 (EITF 07-5), Determining
Whether an Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock
which is now included in the FASB Accounting Standards Codification at ASC
815-40-15. This guidance requires entities to evaluate whether an equity-linked
financial instrument (or embedded feature) is indexed to its own stock by
assessing the instruments contingent exercise provisions and settlement
provisions. Instruments not indexed to their own stock fail to meet the scope
exception of Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, paragraph 11(a), now included in
the FASB Codification at ASC 815-10-15-74(a), and should be classified as a
liability and marked-to-market. ASC 815-40-15 was effective for fiscal years
beginning after December 15, 2008 and thus, upon its adoption on January 1,
2009, was applied to the Companys outstanding stock options and warrants.

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.

In September 2009, an accounting standard update, Fair Value
Measurement and Disclosures was issued. This amendments to Fair Value
Measurements and DisclosuresOverall for the fair value measurement of
investments in certain entities that calculate net asset value per share (or its
equivalent). The amendments in this Update also require disclosures by major
category of investment about the attributes of investments within the scope of
the amendments in this Update. The amendments in this Update are effective for
interim and annual periods ending after December 15, 2009. Early application is
permitted in financial statements for earlier interim and annual periods that
have not been issued. If an entity elects to early adopt the measurement
amendments in this Update, the entity is permitted to defer the adoption of the
disclosure provisions until periods ending after December 15, 2009. The adoption
of this standard did not have a material effect on the Companys consolidated
financial statements.

In August 2009, Fair Value of Measurements and Disclosure 
Measuring Liabilities at Fair Value was issued. The new guidance provides
clarification that in certain circumstances in which a quoted price in an active
market for the identical liability is not available, a company is required to
measure fair value using one or more of the following valuation techniques: the
quoted price of the identical liability when traded as an asset, the quoted
prices for similar liabilities or similar liabilities when traded as assets, or
another valuation technique that is consistent with the principles of fair value
measurements. The new guidance clarifies that a company is not required to
include an adjustment for restrictions that prevent the transfer of the
liability and if an adjustment is applied to the quoted price used in a
valuation technique, the result is a Level 2 or 3 fair value measurement. The
new guidance is effective for interim and annual periods beginning after August
27, 2009. The adoption of this standard is not expected to have a material
effect on the Companys consolidated financial statements.

In May 2009, Subsequent Events was issued, which establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. The standard sets forth (1) The period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, (2) The circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) The disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. The standard
was effective for interim or annual financial periods ending after June 15,
2009. The Company has evaluated subsequent events through December 14,  2010
which represents the date on which the financial statements were issued.

In April 2009, an accounting standard was issued, which extends
the previous disclosure requirements about fair value of financial instruments
to interim financial statements of publicly traded companies. This standard
requires that disclosures provide quantitative and qualitative information on
fair value estimates for all financial instruments not measured on the balance
sheet at fair value, when practicable, with the exception of certain financial
instruments. This standard is effective prospectively for interim reporting
periods ending after June 15, 2009. The adoption of this standard did not have a
material effect on the Companys consolidated financial statements.

38

---

In June 2009, new guidance relating to the accounting for
transfers of financial assets was issued. The new guidance, which was issued as,
Accounting for Transfers of Financial Assets, has not yet been adopted
into Codification. The new standard eliminates the concept of a qualifying
special-purpose entity, changes the requirements for derecognizing financial
assets, and requires additional disclosures in order to enhance information
reported to users of financial statements by providing greater transparency
about transfers of financial assets, including securitization transactions, and
an entitys continuing involvement in and exposure to the risks related to
transferred financial assets. The new guidance is effective for fiscal years
beginning after November 15, 2009. The Company is evaluating the impact it would
have to the Companys consolidated financial statements.

Recently Issued Accounting Standards For Canadian Public
Companies

In February 2008, the Accounting Standards Board (AcSB)
confirmed that Canadian public companies will have to adopt International
Financial Reporting Standards (IFRS) effective for years beginning on or after
January 1, 2011. The Company is currently evaluating the impact this new
framework will have on its consolidated financial statements.

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.

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.

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.

39

---

Item 9A(T). Controls and Procedures.

Disclosure of  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, 2009 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, 2009, 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:

| | a. | The Company does not review certain expenditures in a
      U.S. bank account on a regular basis; and                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                
| | b. | 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:

| | a. | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                         
| | b. | 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.                                                                

40

---

Restatement

In addition to items noted above, our company has effected a
restatement of its financial results for the year ended December 31, 2009. The
restatement was to correct an error that was made in connection with the
Companys adoption of a new accounting pronouncement, ASC 815-40-15 which came
into effect on January 1, 2009. As a result, the financial statements reflect an
increase in the net loss by $2.095,300 for the year ended December 31, 2009, a
decrease in the opening deficit by $464,255 as at January 1, 2009, an increase
of ending deficit by $1,631,045 at December 31, 2009, a decrease in additional
paid in capital by $1.064,557 as at December 31, 2009 and an increase in
liabilities of $2,695,602 as at December 31, 2009.

The combined effect of the restated figures is a increase in
our basic and diluted loss per share by $0.02 to $0.05 per share for the year
ended December 31, 2009.

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:

| | a. | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                         
| | b. | 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, 2009,
  our disclosure controls and procedures were not effective at the reasonable
  assurance level.

On December 7, 2010, the Company announced that following an
  internal review by our Company and our independent auditors, the Company would
  restate its historical financial statements in our annual report for the year
  ended December 31, 2009. Our conclusion to restate the above period resulted in
  the company recognizing that its disclosure controls and procedures were not
  effective as of the year ended December 31, 2009 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.

41

---

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, 2010 and is incorporated herein by reference.
If the definitive Proxy Statement cannot be filed on or before April 30, 2010,
the issuer will instead file an amendment to this Form 10-K disclosing the
information with respect to Items 10 through 14.

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.                                            |  | Filed herewith                                                                                                              
|        |                                                                                                                                                                                  |  |                                                                                                                             
|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. |  | Filed herewith                                                                                                              

42

---

|10.3 | Mining Lease
      dated April 26, 2001 between the Subsidiary and Virginia Knight.                                                                               |  | Filed herewith                                                                                                              
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                   |  |                                                                                                                             
|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                                                                                                              

43

---

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:   January 13, 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            
|--------------------- |  | ------------------------------------------------------- |  | ----------------
|                      |  |                                                         |  |                 
|                      |  |                                                         |  |                 
|/s/ H. Lutz Klingmann |  | President, Principal Executive Officer,
      Principal |  | January 13, 2011
|                      |  | Accounting  Officer, and Director                       |  |                 
|H. Lutz Klingmann     |  |                                                         |  |                 
|                      |  |                                                         |  |                 
|/s/ Edward Thompson   |  |                                                         |  |                 
|                      |  | Director                                                |  | January 13, 2011
|Edward Thompson       |  |                                                         |  |                 
|                      |  |                                                         |  |                 
|/s/ Chester Shynkaryk |  |                                                         |  |                 
|                      |  | Director                                                |  | January 13, 2011
|Chester Shynkaryk     |  |                                                         |  |                 
|                      |  |                                                         |  |                 
|/s/ Gordon Gutrath    |  |                                                         |  |                 
|                      |  | Director                                                |  | January 13, 2011
|Gordon Gutrath        |  |                                                         |  |                 
|                      |  |                                                         |  |                 
|/s/ Thomas Clay       |  |                                                         |  |                 
|                      |  | Director                                                |  | January 13, 2011
|Thomas Clay           |  |                                                         |  |                 

44

---

| | Tel: 604 688 5421 
      Fax: 604 688 5132 www.bdo.ca | BDO Canada LLP 
      600 Cathedral Place 
      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,
  2009 and 2008, and the consolidated statements of loss, changes in shareholders
  equity (capital deficit) and cash flows for the years then ended. We have also
  audited the statements of loss, changes in shareholders equity (capital
  deficit), and cash flows for the period from inception (November 21, 1985)
  through December 31, 2009, 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, 2009 and 2008, 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, 2009, 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 had a $53,468,071
  deficit accumulated during the exploration stage as of December 31, 2009. 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.

The consolidated financial statements as of December 31, 2009
  and for the year then ended have been restated to correct errors in the adoption
  of a new accounting pronouncement as described in Note 11 to the consolidated
  financial statements.

/s/ BDO Canada LLP

Chartered Accountants 
  Vancouver, Canada 
  December 14,
  2010

---

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

|                                                                                                                                                                                            |   | December 31,     |   |   | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------------- | - | - | ------------ | -
|                                                                                                                                                                                            |   | 2009 (Restated  |   |   |              |  
|                                                                                                                                                                                            |   | Note
      11)   |   |   | 2008         |  
|Assets                                                                                                                                                                                      |   |                  |   |   |              |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Current
      assets:                                                                                                                                                                       |   |                  |   |   |              |  
|Cash and cash
      equivalents                                                                                                                                                             | $ | 2,433,202        |   | $ | 3,033,771    |  
|Receivables                                                                                                                                                                                 |   | 24,604           |   |   | 20,051       |  
|Prepaid expenses
      and other current assets                                                                                                                                             |   | 19,490           |   |   | 19,846       |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Total current assets                                                                                                                                                                        |   | 2,477,296        |   |   | 3,073,668    |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Property and equipment,
      net (Note 2)                                                                                                                                                  |   | 205,916          |   |   | 211,940      |  
|Reclamation financial assurance (Note 3)                                                                                                                                                    |   | 286,653          |   |   | 271,808      |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Total Assets                                                                                                                                                                                | $ | 2,969,865        |   | $ | 3,557,416    |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Liabilities and Shareholders Equity                                                                                                                                                        |   |                  |   |   |              |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Current
      liabilities:                                                                                                                                                                  |   |                  |   |   |              |  
|Accounts payable                                                                                                                                                                            | $ | 150,766          |   | $ | 172,702      |  
|Advance minimum royalties (Note 8)                                                                                                                                                          |   | -                |   |   | 48,034       |  
|Accrued
      liabilities                                                                                                                                                                   |   | 77,821           |   |   | 76,341       |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Total current liabilities                                                                                                                                                                   |   | 228,587          |   |   | 297,077      |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Asset retirement
      obligations (Note 7)                                                                                                                                                 |   | 177,564          |   |   | 162,903      |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Derivative liability
      (Note 11)                                                                                                                                                        |   | 2,695,602        |   |   | -            |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Total liabilities                                                                                                                                                                           |   | 3,101,753        |   |   | 459,980      |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Shareholders equity (capital deficit):                                                                                                                                                     |   |                  |   |   |              |  
|Preferred shares, no par value, 3,000,000 shares 
                     
      authorized; no shares outstanding                                                                             |   |                  |   |   |              |  
|Common shares, no par value, 100,000,000 shares 
                     
      authorized; 88,378,383 (2008  85,640,883) shares issued 
                     
      and outstanding (Note 6) |   | 50,205,634       |   |   | 48,677,903   |  
|Additional paid-in capital                                                                                                                                                                  |   | 3,130,549        |   |   | 3,837,117    |  
|Deficit
      accumulated during the exploration stage                                                                                                                                      |   | (53,468,071      | ) |   | (49,417,584  | )
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Total shareholders
      equity (capital deficit)                                                                                                                                          |   | (131,888         | ) |   | 3,097,436    |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Total liabilities and shareholders equity (capital
      deficit)                                                                                                                          | $ | 2,969,865        |   | $ | 3,097,436    |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|                                                                                                                                                                                            |   |                  |   |   |              |  
|Financial Condition and Ability
      to Continue as a Going Concern (Note 1)                                                                                                               |   |                  |   |  
|Commitments and Contingencies (Notes 4, 7 and 8)                                                                                                                                            |   |                  |   |   |              |  
|Subsequent Event (Note 6)                                                                                                                                                                   |   |                  |   |   |              |  

Approved by the Directors:

|/s/ H. Lutz
      Klingmann |  | /s/ Chester Shynkaryk      
|--------------------------- |  | ---------------------------
|H. Lutz Klingmann, Director |  | Chester Shynkaryk, Director

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

2

---

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

|                                                                                           |   |                  |   |   |              |   |   | Cumulative        |  
|------------------------------------------------------------------------------------------ | - | ---------------- | - | - | ------------ | - | - | ----------------- | -
|                                                                                           |   |                  |   |   |              |   |   | Amounts From Date |  
|                                                                                           |   |                  |   |   |              |   |   | of Inception      |  
|                                                                                           |   | Year Ended       |   |   |              |   |   | (November 21,     |  
|                                                                                           |   | December 31,     |   |   |              |   |   | 1985) through     |  
|                                                                                           |   | 2009             |   |   | Year Ended   |   |   | December 31, 2009 |  
|                                                                                           |   | (Restated  Note |   |   | December 31, |   |   | (Restated  Note  |  
|                                                                                           |   | 11)              |   |   | 2008         |   |   | 11)               |  
|                                                                                           |   |                  |   |   |              |   |   |                   |  
|General and administrative expenses                                                        | $ | (2,246,953       | ) | $ | (2,817,429   | ) | $ | (19,727,800       | )
|Asset impairment loss (Note 3)                                                             |   | (167,898         | ) |   | (1,270,366   | ) |   | (32,135,592       | )
|Adjustment to asset retirement obligation
      on changes in cash flow estimates (Note 7) |   | (6,882           | ) |   | 275          |   |   | 223,583           |  
|Accretion expense (Note 7)                                                                 |   | (7,779           | ) |   | (17,213      | ) |   | (55,381           | )
|Change in fair value of derivative
      liability (Note 11)                               |   | (2,095,300       | ) |   | -            |   |   | (2,095,300        | )
|Gain on settlement of debt                                                                 |   | -                |   |   | -            |   |   | 136,627           |  
|Abandoned mineral property interests                                                       |   | -                |   |   | -            |   |   | (277,251          | )
|                                                                                           |   |                  |   |   |              |   |   |                   |  
|                                                                                           |   | (4,524,812       | ) |   | (4,104,733   | ) |   | (53,931,114       | )
|                                                                                           |   |                  |   |   |              |   |   |                   |  
|Interest expense                                                                           |   | -                |   |   | -            |   |   | (913,098          | )
|Interest income                                                                            |   | 10,070           |   |   | 107,956      |   |   | 1,599,987         |  
|                                                                                           |   |                  |   |   |              |   |   |                   |  
|Net loss                                                                                   | $ | (4,514,742       | ) | $ | (4,104,733   | ) | $ | (53,244,225       | )
|                                                                                           |   |                  |   |   |              |   |   |                   |  
|Loss per share - basic and diluted                                                         | $ | (0.05            | ) | $ | (0.05        | ) |   |                   |  
|                                                                                           |   |                  |   |   |              |   |   |                   |  
|Weighted average number of common shares outstanding                                       |   | 86,738,897       |   |   | 85,539,184   |   |   |                   |  

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 Changes in Shareholders
      Equity (Capital Deficit)
|(US dollars)                                                                      

|                                                     |  |            |  |   |            |  |   |              |  |   |            |  |   | Deficit           |   |   | Total           |  
|---------------------------------------------------- |  | ---------- |  | - | ---------- |  | - | ------------ |  | - | ---------- |  | - | ----------------- | - | - | --------------- | -
|                                                     |  |            |  |   |            |  |   |              |  |   | Additional |  |   | Accumulated       |   |   | Shareholders   |  
|From the Date of Inception (November                 |  | Common     |  |   |            |  |   | Stock        |  |   | Paid-in    |  |   | During the        |   |   | Equity (Capital |  
|21, 1985)
      through December 31, 2009            |  | Shares     |  |   | Amount     |  |   | Subscription |  |   | Capital    |  |   | Exploration Stage |   |   | Deficit)        |  
|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      |  

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 Changes in Shareholders
      Equity (Capital Deficit)
|(US dollars)                                                                      

|                                                                     |  |            |  |   |            |  |   |              |   |   |                 |   |   | Deficit           |   |   | Total           |  
|-------------------------------------------------------------------- |  | ---------- |  | - | ---------- |  | - | ------------ | - | - | --------------- | - | - | ----------------- | - | - | --------------- | -
|                                                                     |  |            |  |   |            |  |   |              |   |   |                 |   |   | Accumulated       |   |   | Shareholders   |  
|From the Date of Inception (November                                 |  | Common     |  |   |            |  |   | Stock        |   |   | Additional      |   |   | During the        |   |   | Equity (Capital |  
|21, 1985)
      through December 31, 2009                            |  | Shares     |  |   | Amount     |  |   | Subscription |   |   | Paid-in Capital |   |   | Exploration Stage |   |   | Deficit)        |  
|Balance, carried forward from previous page                          |  | 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      |  
|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         |  

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 Changes in Shareholders
      Equity (Capital Deficit)
|(US dollars)                                                                      

|                                                                                          |  |            |  |   |            |  |   |              |  |   |                 |   |   | Deficit           |   |   | Total           |  
|----------------------------------------------------------------------------------------- |  | ---------- |  | - | ---------- |  | - | ------------ |  | - | --------------- | - | - | ----------------- | - | - | --------------- | -
|                                                                                          |  |            |  |   |            |  |   |              |  |   |                 |   |   | Accumulated       |   |   | Shareholders   |  
|From the Date of Inception (November 21,                                                  |  | Common     |  |   |            |  |   | Stock        |  |   | Additional      |   |   | During the        |   |   | Equity (Capital |  
|1985) through
      December 31, 2009                                                     |  | Shares     |  |   | Amount     |  |   | Subscription |  |   | Paid-in Capital |   |   | Exploration Stage |   |   | Deficit)        |  
|                                                                                          |  |            |  |   |            |  |   |              |  |   |                 |   |   |                   |   |   |                 |  
|Balance, carried forward from previous page                                               |  | 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         | )
|                                                                                          |  |            |  |   |            |  |   |              |  |   |                 |   |   |                   |   |   |                 |  
|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 (Note 11)                       |  | -          |  |   | -          |  |   | -            |  |   | (863,402        | ) |   | 464,255           |   |   | (399,147        | )
|Issuance of common shares through private placement (Note
      6)                        |  | 2,337,500  |  |   | 1,396,646  |  |   | -            |  |   | -               |   |   | -                 |   |   | 1,396,646       |  
|Issuance of common shares through exercise
      of options (Note 6)                      |  | 400,000    |  |   | 131,085    |  |   | -            |  |   | -               |   |   | -                 |   |   | 131,085         |  
|Reclassification of derivative liability on the exercise of
      stock options (Note 11) |  | -          |  |   | -          |  |   | -            |  |   | 156,834         |   |   | -                 |   |   | 156,834         |  
|Net loss for the year, restated (Note 11)                                                 |  | -          |  |   | -          |  |   | -            |  |   | -               |   |   | (4,514,742        | ) |   | (4,514,742      | )
|                                                                                          |  |            |  |   |            |  |   |              |  |   |                 |   |   |                   |   |   |                 |  
|Balance, December 31, 2009 (restated)                                                     |  | 88,378,383 |  | $ | 50,205,634 |  | $ | 0            |  | $ | 3,130,549       |   | $ | (53,468,071       | ) | $ | (131,888        | )

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 Cash Flows
|(US dollars)                         

|                                                                                                  |   |                |   |   |              |   |   | Cumulative        |  
|------------------------------------------------------------------------------------------------- | - | -------------- | - | - | ------------ | - | - | ----------------- | -
|                                                                                                  |   |                |   |   |              |   |   | Amounts From Date |  
|                                                                                                  |   |                |   |   |              |   |   | of Inception      |  
|                                                                                                  |   | Year Ended     |   |   |              |   |   | (November 21,     |  
|                                                                                                  |   | December 31,   |   |   |              |   |   | 1985) through     |  
|                                                                                                  |   | 2009           |   |   | Year Ended   |   |   | December 31, 2009 |  
|                                                                                                  |   | (Restated     |   |   | December 31, |   |   | (Restated  Note  |  
|                                                                                                  |   | Note
      11) |   |   | 2008         |   |   | 11)               |  
|Operating activities:                                                                             |   |                |   |   |              |   |   |                   |  
|Net loss                                                                                          | $ | (4,514,742     | ) | $ | (3,996,777   | ) | $ | (53,244,225       | )
|Adjustments to reconcile net loss to non-
      cash items and cash used in operating activities: |   |                |   |   |              |   |   |                   |  
|Asset impairment loss                                                                             |   | 167,898        |   |   | 1,270,366    |   |   | 32,135,592        |  
|Abandoned mineral property
      interests                                                        |   | -              |   |   | -            |   |   | 277,251           |  
|Amortization and depreciation                                                                     |   | 6,024          |   |   | 6,127        |   |   | 461,801           |  
|Amortization of debt discount                                                                     |   | -              |   |   | -            |   |   | 375,000           |  
|Adjustment to asset retirement obligation
      based on changes in cash flow estimates           |   | 6,882          |   |   | (275         | ) |   | (223,583          | )
|Accretion expense                                                                                 |   | 7,779          |   |   | 17,213       |   |   | 55,381            |  
|Change in fair value of derivative liability                                                      |   | 2,095,300      |   |   | -            |   |   | 2,095,300         |  
|Gain on disposition of
      property and equipment                                               |   | -              |   |   | -            |   |   | (10,032           | )
|Stock option compensation                                                                         |   | 357,989        |   |   | -            |   |   | 1,370,173         |  
|Financing charges related to
      modification of warrants                                       |   | -              |   |   | -            |   |   | 889,117           |  
|Mineral property expenditures                                                                     |   | -              |   |   | -            |   |   | (22,395,449       | )
|Changes in assets and liabilities:                                                                |   |                |   |   |              |   |   |                   |  
|Receivables                                                                                       |   | (4,553         | ) |   | 23,492       |   |   | (24,604           | )
|Prepaid expenses and other
      current assets                                                   |   | 356            |   |   | 1,599        |   |   | (106,400          | )
|Accounts payable and accrued liabilities                                                          |   | (20,456        | ) |   | 31,343       |   |   | 268,504           |  
|Royalty and mining rights
      payable                                                           |   | (48,034        | ) |   | (24,450      | ) |   | -                 |  
|                                                                                                  |   |                |   |   |              |   |   |                   |  
|Cash used in operating activities                                                                 |   | (1,897,523     | ) |   | (2,646,912   | ) |   | (38,076,174       | )
|                                                                                                  |   |                |   |   |              |   |   |                   |  
|Investing activities:                                                                             |   |                |   |   |              |   |   |                   |  
|Purchase of mineral properties                                                                    |   | (167,898       | ) |   | (1,270,366   | ) |   | (7,803,356        | )
|Deposits on mineral properties                                                                    |   | -              |   |   | -            |   |   | (1,017,551        | )
|Purchase of reclamation financial assurance                                                       |   | (14,845        | ) |   | (5,116       | ) |   | (286,653          | )
|Purchase of property and
      equipment                                                          |   | -              |   |   | -            |   |   | (1,313,838        | )
|Proceeds from sale of property and equipment                                                      |   | -              |   |   | -            |   |   | 47,153            |  
|                                                                                                  |   |                |   |   |              |   |   |                   |  
|Cash used in investing activities                                                                 |   | (182,743       | ) |   | (1,275,482   | ) |   | (10,374,245       | )

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 (Continued)
|(US dollars)                                     

|                                                               |   |                |   |   |              |  |   | Cumulative        |  
|-------------------------------------------------------------- | - | -------------- | - | - | ------------ |  | - | ----------------- | -
|                                                               |   |                |   |   |              |  |   | Amounts From Date |  
|                                                               |   |                |   |   |              |  |   | of Inception      |  
|                                                               |   | Year Ended     |   |   |              |  |   | (November 21,     |  
|                                                               |   | December 31,   |   |   |              |  |   | 1985) through     |  
|                                                               |   | 2009           |   |   | Year Ended   |  |   | December 31, 2009 |  
|                                                               |   | (Restated     |   |   | December 31, |  |   | (Restated  Note  |  
|                                                               |   | Note
      11) |   |   | 2008         |  |   | 11)               |  
|                                                               |   |                |   |   |              |  |   |                   |  
|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                       |   | 1,396,646      |   |   | -            |  |   | 21,237,302        |  
|Share issuance costs                                           |   | -              |   |   | -            |  |   | (688,101          | )
|Issuance of special warrants                                   |   | -              |   |   | -            |  |   | 18,091,667        |  
|Issuance of common shares upon exercise of
      stock options |   | 131,085        |   |   | -            |  |   | 289,590           |  
|Issuance of common shares upon
      exercise of warrants      |   | -              |   |   | 4,184,425    |  |   | 9,700,881         |  
|                                                               |   |                |   |   |              |  |   |                   |  
|Cash provided by financing activities                          |   | 1,527,731      |   |   | 4,184,425    |  |   | 50,883,621        |  
|                                                               |   |                |   |   |              |  |   |                   |  
|Net change in cash and cash equivalents                        |   | (600,569       | ) |   | 237,581      |  |   | 2,433,202         |  
|                                                               |   |                |   |   |              |  |   |                   |  
|Cash and cash equivalents, beginning
      balance             |   | 3,033,771      |   |   | 2,796,190    |  |   | -                 |  
|                                                               |   |                |   |   |              |  |   |                   |  
|Cash and cash equivalents, ending balance                      | $ | 2,433,202      |   | $ | 3,033,771    |  | $ | 2,433,202         |  

Supplementary Disclosures of Cash Flows Information (Note 10)

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

8

---

|GOLDEN QUEEN MINING CO. LTD.  
|------------------------------
|(an exploration stage company)
|Summary of Accounting Policies
|(US dollars)                  

Nature of BusinessGolden Queen Mining Co. Ltd. (
  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 Consolidation.These
  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 4).

Generally Accepted Accounting Principles
  (GAAP). The consolidated financial statement has been prepared in
  accordance with accounting principles generally accepted in the US.

In June 2009, The FASB Accounting Standards Codification and
  the Hierarchy of Generally Accepted Accounting Principles was issued. The FASB
  Accounting Standards Codification (Codification) will become the source of
  authoritative US GAAP to be applied by nongovernmental entities. Rules and
  interpretive releases of the Securities and Exchange Commission SEC under
  authority of federal securities laws are also sources of authoritative GAAP for
  SEC registrants. On the effective date of this statement, the Codification will
  supersede all then-existing non-SEC accounting and reporting standards. All
  other non-grandfathered non-SEC accounting literature not included in the
  Codification will become non-authoritative. This statement is effective for
  financial statements issued for interim and annual periods ending after
  September 30, 2009. Effective January 1, 2009, references made to FASB guidance
  throughout this consolidated financial statements have been updated for the
  Codification.

Cash and Cash Equivalents. For purposes of
  balance sheet classification and the statements of cash flows, the Company
  considers all highly liquid investments purchased with an original maturity of
  three months or less to be cash equivalents. In response to the global financial
  crisis of 2008, the Emergency Economic Stabilization Act of 2008 (Act) was
  created in the US. The Act temporarily increased the federal deposit insurance
  coverage (FDIC) from $100,000 to $250,000 per depositor until December 31,
  2013.

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 5 to
  30 years, as follows:

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


Mineral Properties. Mineral properties
  includes the cost of advance minimum royalty payments, the cost of capitalized
  mineral property leases, and the cost of property acquired either by cash
  payment, the issuance of term debt or common shares. Expenditures for
  exploration on specific properties with no proven reserves are written off as
  incurred. Mineral property costs will be amortized against future revenues or
  charged to operations at the time the related property is determined to have an
  impairment in value.

9

---

|GOLDEN QUEEN MINING CO. LTD   
|------------------------------
|(an exploration stage company)
|Summary of Accounting Policies
|(US dollars)                  

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 (Note 3).

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
  standard requires recognition of impairment of long-lived assets in the event
  the net book value of such assets exceeds the estimated undiscounted future cash
  flows attributable to such assets. It requires that those long-lived assets to
  be disposed of by sale are to be measured at the lower of carrying amount or
  fair value less cost of sale whether reported in continuing operations or in
  discontinued operations. 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
  has adopted the US dollar as its reporting currency for its financial statements
  prepared after May 21, 1996 as the US dollar is the currency of the primary
  economic environment in which Golden Queen and the Subsidiary conduct business
  and is considered the appropriate functional currency for the Companys
  operations. Balances held in Canadian dollars are re-measured into the
  functional currency in accordance with accounting standard, Foreign Currency
  Translation. Assets and liabilities in foreign currencies are generally
  translated into US dollars at the rates ruling at the balance sheet date.
  Revenues and expenses are translated at average rates for the year. Where
  amounts denominated in a foreign currency are converted into dollars by
  remittance or repayment, the realized exchange differences are included in other
  income. The exchange rates prevailing at December 31, 2009 and December 31, 2008
  were $1.05 and $1.22 stated in Canadian dollars per one US dollar respectively.
  The average rates of exchange during the years ended December 31, 2009 and
  December 31, 2008 were $1.14 and $1.07 stated in Canadian dollars per one US
  dollar, respectively.

Loss per Share. The Company computes and
  discloses loss per share in accordance with accounting standard, 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 3,850,000 (2008  2,300,000) and nil (2008  nil) common
  shares were issuable pursuant to such stock options and warrants at December 31,
  2009 and 2008, respectively.

Asset Retirement Obligations. The Company
  follows the requirements of accounting standard, Accounting for Asset
  Retirement Obligations. The 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 depreciated on the same basis as the related asset
  and the discount accretion of the liability is included in determining the
  results of operations.

10

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US dollars)                              

Estimates.The 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 Instruments. The
  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.

Income Taxes.The Company follows the asset and
  liability method of accounting for income taxes whereby 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 bases. 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 1996,
  the Company adopted the 1996 stock option plan (the 1996 Plan) reserving
  3,300,000 shares for issuance on exercise of options granted under that plan.
  The exercise price of stock options granted under the 1996 Plan is determined by
  the Board of Directors of the Company (the Board), or a committee established
  by the Board in accordance with the 1996 Plan, but shall not be less than the
  closing price on the day immediately preceding the award date. Options issued to
  directors who are not employees can vest immediately. For all other options
  granted under the 1996 Plan, the right to exercise vests over a two year period
  in equal increments on the date of grant and on each of the first two
  anniversaries of such date. All stock options granted under the 1996 Plan and
  outstanding as at December 31, 2009 expire at a date determined by the Board,
  not exceeding five years from the date of grant, or after 39 months from the
  date of grant if not specified.

In 2009, the Company adopted a second stock option plan
  referred to as the 2008 stock option plan (the 2008 Plan). Pursuant to the
  2008 stock option 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, 2009 expire at a
  date determined by the Board, not exceeding five years from the date of
  grant.

11

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|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US dollars)                              

Derivative Financial Instruments.The Company
  reviews the terms of its equity instruments and other financing arrangements to
  determine whether 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 initially 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 value
  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
  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 or not net-cash settlement of the derivative instrument could be
  required within 12 months of the balance sheet date.

New Accounting Pronouncements.In
  January 2010, an accounting standard update on codification, Fair value
  Measurements and Disclosures, improving disclosures about fair value
  measurements was issued. This update provides amendments that will provide more
  robust disclosures about (1) the different classes of assets and liabilities
  measured at fair value, (2) the valuation techniques and inputs used, (3) the
  activity in Level 3 fair value measurements, and (4) the transfers between
  Levels 1, 2, and 3. The standard adds new disclosure and clarifies existing
  disclosure requirements. The new standard requires disclosures of the fair value
  of financial instruments for interim reporting periods of publicly traded
  companies in addition to the annual disclosure required at year-end. The
  provisions of the new standard are effective for the interim periods ending
  after June 15, 2009. The adoption of this standard did not have a material
  effect on the Companys consolidated financial statements.

In June 2008, the Financial Accounting Standards Board (FASB)
  issued Emerging Issues Task Force (EITF) Issue 07-5 (EITF 07-5), Determining
  Whether an Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock
  which is now included in the FASB Accounting Standards Codification at ASC
  815-40-15. This guidance requires entities to evaluate whether an equity-linked
  financial instrument (or embedded feature) is indexed to its own stock by
  assessing the instruments contingent exercise provisions and settlement
  provisions. Instruments not indexed to their own stock fail to meet the scope
  exception of Statement of Financial Accounting Standards No. 133, Accounting for
  Derivative Instruments and Hedging Activities, paragraph 11(a), now included in
  the FASB Codification at ASC 815-10-15-74(a), and should be classified as a
  liability and marked-to-market. ASC 815-40-15 was effective for fiscal years
  beginning after December 15, 2008 and thus, upon its adoption on January 1,
  2009, was applied to the Companys outstanding stock options and warrants. (Note
  11).

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.

12

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US dollars)                              

New Accounting Pronouncements (continued).In September 2009, an accounting standard update, Fair Value
  Measurement and Disclosures was issued. This amendments to Fair Value
  Measurements and DisclosuresOverall for the fair value measurement of
  investments in certain entities that calculate net asset value per share (or its
  equivalent). The amendments in this Update also require disclosures by major
  category of investment about the attributes of investments within the scope of
  the amendments in this Update. The amendments in this Update are effective for
  interim and annual periods ending after December 15, 2009. Early application is
  permitted in financial statements for earlier interim and annual periods that
  have not been issued. If an entity elects to early adopt the measurement
  amendments in this Update, the entity is permitted to defer the adoption of the
  disclosure provisions until periods ending after December 15, 2009. The adoption
  of this standard did not have a material effect on the Companys consolidated
  financial statements.

In August 2009, Fair Value of Measurements and Disclosure 
  Measuring Liabilities at Fair Value was issued. The new guidance provides
  clarification that in certain circumstances in which a quoted price in an active
  market for the identical liability is not available, a company is required to
  measure fair value using one or more of the following valuation techniques: the
  quoted price of the identical liability when traded as an asset, the quoted
  prices for similar liabilities or similar liabilities when traded as assets, or
  another valuation technique that is consistent with the principles of fair value
  measurements. The new guidance clarifies that a company is not required to
  include an adjustment for restrictions that prevent the transfer of the
  liability and if an adjustment is applied to the quoted price used in a
  valuation technique, the result is a Level 2 or 3 fair value measurement. The
  new guidance is effective for interim and annual periods beginning after August
  27, 2009. The adoption of this standard is not expected to have a material
  effect on the Companys consolidated financial statements.

In May 2009, Subsequent Events was issued, which establishes
  general standards of accounting for and disclosure of events that occur after
  the balance sheet date but before financial statements are issued or are
  available to be issued. The standard sets forth (1) The period after the balance
  sheet date during which management of a reporting entity should evaluate events
  or transactions that may occur for potential recognition or disclosure in the
  financial statements, (2) The circumstances under which an entity should
  recognize events or transactions occurring after the balance sheet date in its
  financial statements and (3) The disclosures that an entity should make about
  events or transactions that occurred after the balance sheet date. The standard
  was effective for interim or annual financial periods ending after June 15,
  2009. The Company has evaluated subsequent events through December 14, 2010
  which represents the date on which the financial statements were issued.

In April 2009, an accounting standard was issued, which extends
  the previous disclosure requirements about fair value of financial instruments
  to interim financial statements of publicly traded companies. This standard
  requires that disclosures provide quantitative and qualitative information on
  fair value estimates for all financial instruments not measured on the balance
  sheet at fair value, when practicable, with the exception of certain financial
  instruments. This standard is effective prospectively for interim reporting
  periods ending after June 15, 2009. The adoption of this standard did not have a
  material effect on the Companys consolidated financial statements.

Accounting Standards Not Yet Effective

In June 2009, new guidance relating to the accounting for
  transfers of financial assets was issued. The new guidance, which was issued as, Accounting for Transfers of Financial Assets, has not yet been adopted
  into Codification. The new standard eliminates the concept of a qualifying
  special-purpose entity, changes the requirements for derecognizing financial
  assets, and requires additional disclosures in order to enhance information
  reported to users of financial statements by providing greater transparency
  about transfers of financial assets, including securitization transactions, and
  an entitys continuing involvement in and exposure to the risks related to
  transferred financial assets. The new guidance is effective for fiscal years
  beginning after November 15, 2009. The Company is evaluating the impact it would
  have to the Companys consolidated financial statements.

13

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US dollars)                              

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

These financial statements have been prepared on a going
  concern basis, which assumes 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 an accumulated deficit of $53,468,071
  at December 31, 2009 and is unlikely 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, 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:

|                              |   | 2009     |   |   | 2008     |  
|----------------------------- | - | -------- | - | - | -------- | -
|Buildings                     | $ | 26,360   |   | $ | 26,360   |  
|Furniture and fixtures        |   | 56,090   |   |   | 56,090   |  
|Automobiles                   |   | 21,401   |   |   | 21,401   |  
|Rental properties             |   | 313,635  |   |   | 313,635  |  
|Property and equipment, cost  |   | 417,486  |   |   | 417,486  |  
|Less accumulated depreciation |   | (211,570 | ) |   | (205,546 | )
|Property and equipment, net   | $ | 205,916  |   | $ | 211,940  |  

3. Mineral Properties

The Company formerly capitalized amounts which 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 until the fiscal year 2000. The Companys investment in mineral
  properties in the amount of $30,616,348 (2008 - $30,267,372) was fully provided
  for by the year ended December 31, 2009.

|                                         |   | 2009        |   |   | 2008        |  
|---------------------------------------- | - | ----------- | - | - | ----------- | -
|Exploration and development expenditures | $ | 21,015,506  |   | $ | 21,015,506  |  
|Mineral Properties                       |   | 5,937,952   |   |   | 5,770,054   |  
|Advance minimum royalty                  |   | 3,297,103   |   |   | 3,122,907   |  
|Asset retirement obligations             |   | 365,787     |   |   | 358,905     |  
|Asset impairment loss                    |   | (30,616,348 | ) |   | (30,267,372 | )
|Total                                    | $ | -           |   | $ | -           |  

14

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US dollars)                              

3. Mineral Properties - Continued

As at December 31, 2009, the Company had provided reclamation
  financial assurance to the Bureau of Land Management, the State and Kern County
  totaling $286,653 (2008 - $271,808). This deposit earns interest at 0.4% per
  annum and is not available for working capital purposes.

4. Other Assets

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 Golden Queen Mining Co. Inc. 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 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, 2009, the Company has not incurred any
  royalty as the property has not been in production.

5.Income Taxes

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

|                                                        |   | 2009        |   |   | 2008        |  
|------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                        |   |             |   |   |             |  
|Net operating and capital losses                        | $ | 8,848,000   |   | $ | 8,777,000   |  
|Property, plant and equipment                           |   | 317,000     |   |   | 321,000     |  
|Mineral properties and deferred exploration
      costs |   | 1,456,000   |   |   | 1,539,000   |  
|Asset retirement obligations                            |   | 58,000      |   |   | 60,000      |  
|Undeducted financing costs                              |   | 4,000       |   |   | 9,000       |  
|Valuation allowance                                     |   | (10,683,000 | ) |   | (10,706,000 | )
|                                                        |   |             |   |   |             |  
|Deferred tax assets (liabilities)                       | $ | -           |   | $ | -           |  

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

|                                                           |   | 2009       |   |   | 2008       |  
|---------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                           |   |            |   |   |            |  
|Income benefit at Canadian statutory rate                  | $ | (1,354,000 | ) | $ | (1,239,000 | )
|Foreign income taxes at other than Canadian statutory rate |   | (64,000    | ) |   | (92,000    | )
|Change in fair value of derivative
      liability         |   | 681,000    |   |   | -          |  
|Expiry of losses carried forward                           |   | 699,000    |   |   | -          |  
|Effect of reduction in statutory rate                      |   | 61,000     |   |   | 163,000    |  
|Increase (decrease) in valuation allowance                 |   | (23,000    | ) |   | 1,168,000  |  
|                                                           |   |            |   |   |            |  
|Deferred tax recovery                                      | $ | -          |   | $ | -          |  

15

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US dollars)                              

5.Income Taxes - Continued

The Companys deferred tax assets include approximately $14,000
  (2008 - $29,000) 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 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, 2009 and December 31, 2008.

As at December 31, 2009, the Company had net operating loss
  carry-forwards available to reduce taxable income in future years as follows:

Country
      
      Amount
      
      
      Expiration DatesUS  Federal
      $
      22,309,000
      
      
      2010  2029Canada (C$)
      $
      5,505,000
      
      
      2010  2029


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, 2009 and 2008 and
  determined that it has no uncertain tax positions requiring financial statement
  recognition.

The impact of an uncertain income tax position on income tax
  expense must be recognized at the largest amount that is more likely than not to
  be sustained. An uncertain income tax position will not be recognized if it has
  less than a 50% likelihood of being sustained. 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.

6. Share capital

Common shares

In January 2008, warrants were exercised and the Company issued
  7,200,000 common shares at C$0.60 per share for proceeds of $4,184,425
  (C$4,320,000).

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 November of
  2009, 400,000 stock options were exercised and the Company issued 400,000 common
  shares at C$0.35 per share for cash proceeds of $131,085 (C$140,000).

16

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US Dollars)                              

6. Share capital - Continued

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 re-measured on each balance sheet date using the
  Black-Scholes option pricing model.

The expected volatility of options granted has been determined
  using the method described under the accounting standard using the historical
  stock price. The Company uses historical data to estimate option exercise,
  forfeiture and employee termination within the valuation model. For
  non-employees, the expected term of the options approximates the full term of
  the options. The risk-free interest rate is based on a treasury instrument whose
  term is consistent with the expected term of the stock options. The Company has
  not paid and does not anticipate paying dividends on its common stock;
  therefore, the expected dividend yield is assumed to be zero. In addition,
  accounting standard requires companies to utilize an estimated forfeiture rate
  when calculating the expense for the reporting period. Based on its best
  estimate, management applied the estimated forfeiture rate of nil in determining
  the expense recorded in the accompanying Consolidated Statements of Loss.

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

|                                                             |  |           |   |  | Weighted Average         | 
|------------------------------------------------------------ |  | --------- | - |  | ------------------------ | 
|                                                             |  | Shares    |   |  | Exercise Price per Share | 
|                                                             |  |           |   |  |                          | 
|Options outstanding and exercisable,                         |  |           |   |  |                          | 
|January 1, 2008 and December 31, 2008                        |  | 2,300,000 |   |  | C$0.57                   | 
|Granted                                                      |  | 1,950,000 |   |  | C$0.26                   | 
|Exercised                                                    |  | (400,000  | ) |  | C$0.35                   | 
|Options outstanding and exercisable,
      December 31, 2009 |  | 3,850,000 |   |  | C$0.44                   | 

The Company applies the fair value method in accounting for its
  stock options granted to directors, officers and consultants using the
  Black-Scholes option pricing model. The stock-based compensation expense
  recognized on the grant date was $357,989 (2008 - $nil). Subsequent to the grant
  date, such options are revalued to fair value at each period end. (Note 11)

The fair value of stock options granted as above was calculated
  using the following weighted average assumptions:

|                      |  | 2009   |  |  | 2008 | 
|--------------------- |  | ------ |  |  | ---- | 
|                      |  |        |  |  |      | 
|Expected life (years) |  | 5      |  |  | -    | 
|Interest rate         |  | 2.04%  |  |  | -    | 
|Volatility            |  | 112.3% |  |  | -    | 
|Dividend yield        |  | 0%     |  |  | -    | 

Option pricing models require the input of highly subjective
  assumptions including the expected price volatility. Changes in the subjective
  input assumptions can materially affect the fair value estimate.

As at December 31, 2009, the aggregate intrinsic value of the
  outstanding exercisable options was $1,921,979 (2008 - $nil). The total
  intrinsic value of 400,000 options exercised during 2009 was approximately
  $232,160 (2008 - $nil).

17

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US Dollars)                              

6. Share capital - Continued

Stock options- Continued

There is no unamortized compensation expense as at December 31,
  2009 and 2008 as all the outstanding options vested at the grant date.

The following table summarizes information about stock options
  outstanding and exercisable at December 31, 2009:

|                 |                 | Weighted         | Weighted
|---------------- | --------------- | ---------------- | --------
|                 | Number          | Average          | Average 
|Expiry           | Outstanding and | Contractual Life | Exercise
|Date             | Exercisable     | (Years)          | Price   
|February 1, 2010 | 700,000         | 0.09             | C$0.35  
|April 20, 2011   | 1,200,000       | 1.30             | C$0.77  
|January 28, 2014 | 1,950,000       | 4.08             | C$0.26  
|                 | 6,084           | 2.49             | C$0.44  

In January 2010, the Company issued 700,000 common shares for
  proceeds of $233,111 (C$245,000) pursuant to the exercise of stock options.

In April 2010, the Company granted 50,000 stock options to a
  consultant, which are exercisable at C$1.24 per share and expire on April 18,
  2015.

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).

Warrants

|                                                                      |  |            |   |  |                          |  |  | Average          | 
|--------------------------------------------------------------------- |  | ---------- | - |  | ------------------------ |  |  | ---------------- | 
|                                                                      |  |            |   |  | Weighted Average         |  |  | Contractual Life | 
|                                                                      |  | Shares     |   |  | Exercise Price per Share |  |  | (Years)          | 
|                                                                      |  |            |   |  |                          |  |  |                  | 
|                                                                      |  |            |   |  |                          |  |  |                  | 
|Outstanding and exercisable, January 1,
      2008                    |  | 7,200,000  |   |  | C$0.60                   |  |  | 1.07             | 
|Granted                                                               |  | -          |   |  | -                        |  |  |                  | 
|Exercised                                                             |  | (7,200,000 | ) |  | C$0.60                   |  |  | 1.07             | 
|Options outstanding and exercisable, December 31, 2008 and
      2009 |  | -          |   |  | -                        |  |  |                  | 

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). 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.

18

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US Dollars)                              

7. 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 (Note 3).

The Company estimated its asset retirement obligation based on
  its understanding of the requirements to reclaim, and clean up its Property. The
  Company estimated that total payments of approximately $370,414 over three years
  commencing in 2017 would be required to complete the retirement 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 obligation was written off
  in 2004. The asset retirement obligation accrual required management to make
  significant estimates and assumptions. Actual results could materially differ
  from these estimates. The liability for accrued asset retirement obligations is
  comprised as follows:

|                              |   | 2009    |  |   | 2008    |  
|----------------------------- | - | ------- |  | - | ------- | -
|Beginning of the year         | $ | 162,903 |  | $ | 145,965 |  
|Change in cash flow estimates |   | 6,882   |  |   | (275    | )
|Accretion expense             |   | 7,779   |  |   | 17,213  |  
|End of the year               | $ | 177,564 |  | $ | 162,903 |  

20

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US dollars)                              

8. 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.

Agreements are typically subject to sliding scale royalties on
  either gross or net smelter returns ranging from 1% to 7.5% .

The Company ceased making property payments and advance minimum
  royalty payments after successfully concluding moratorium agreements with a
  number of the landowners in 2000. The moratorium agreements expired toward the
  end of 2003. The total advance minimum royalty owing from 2003 to the end of
  2008 was $714,137. The Company contacted all landholders and has paid a total of
  $714,137 during 2008. During the year ended December 31, 2009, the Company paid
  $174,196 to the remaining rightful landholders (2008 - $48,034). The total
  advance minimum royalty owing for 2010 is expected to be approximately $153,000.

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 was granted an extension of twenty years and had to pay $100,000 owing
  from 2005. In addition, the Company was not required to pay any further advance
  royalty until April 23, 2008. Furthermore, the Company will receive a credit
  representing 50% of all advance minimum royalty paid to date, to be used it
  against the future production royalty payments. The Company made advance minimum
  royalty payment, and paid the landowner $100,000 in 2008 and $100,000 in 2009.

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, 2009,
  commercial production has not commenced and no shares have been issued.

In a prior year, the Company entered into an agreement with the
  President of the Company to issue 300,000 bonus shares upon the 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 is to be issued. Upon commencement of commercial
  production on the Property, a bonus of 150,000 common shares is to be issued. As
  at December 31, 2009, the milestones had not been reached and no common shares
  were issued in connection with this agreement.

9. 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, 2009, the Company paid $116,776
  (2008 - $136,500) to the President of the Company for his services, and paid
  $18,620 (2008 - $17,996) to the Director of the Company for his consulting
  services to the Company.

For the year ended December 31, 2009, the Company paid $1,752
  (2008 - 1,861) to each of the four directors and $2,000 (2008 - $2,000) to two
  directors 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.

21

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|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US Dollars)                              

10. Supplementary Disclosures of Cash Flow
  Information

|                                                                           |   |              |  |   |              |  |   | Cumulative        | 
|-------------------------------------------------------------------------- | - | ------------ |  | - | ------------ |  | - | ----------------- | 
|                                                                           |   |              |  |   |              |  |   | Amounts From Date | 
|                                                                           |   |              |  |   |              |  |   | of Inception      | 
|                                                                           |   | Year ended   |  |   | Year ended   |  |   | (November 21,     | 
|                                                                           |   | December 31, |  |   | December 31, |  |   | 1985) through     | 
|                                                                           |   | 2009         |  |   | 2008         |  |   | December 31, 2009 | 
|                                                                           |   |              |  |   |              |  |   |                   | 
|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 | $ | 156,834      |  | $ | -            |  | $ | 156,834           | 
|Stock option
      compensation                                            | $ | 357,989      |  | $ | -            |  | $ | 1,370,173         | 
|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                                               | $ | 14,661       |  | $ | 16,938       |  | $ | 177,564           | 

22

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|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US Dollars)                              

11. Restatement of Prior Financial Statements

Subsequent to the issuance of the Companys December 31, 2009
  consolidated financial statements, management discovered an error in connection
  with the guidance of ASC 815-40-15 in respect of the Companys outstanding stock
  options. As at January 1, 2009, the date on which the guidance of ASC 815-40-15
  became effective for the Company, these 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 do 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 has 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.

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 included 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 $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% .

As of December 31, 2009, the Company had re-measured the
  remaining outstanding options and determined the fair value of the derivative
  liability to be $2,695,602.

23

---

|GOLDEN QUEEN MINING CO. LTD.              
|------------------------------------------
|(an exploration stage company)            
|Notes to Consolidated Financial Statements
|(US Dollars)                              

11. Restatement (continued)

The Consolidated Balance Sheet of the Company as at December
  31, 2009 has been restated for the effect of this change as follows:

|                           |   | As previously |   |   |            |   |   |             |  
|-------------------------- | - | ------------- | - | - | ---------- | - | - | ----------- | -
|                           |   | reported      |   |   | Adjustment |   |   | Restated    |  
|Derivative liability       | $ | -             |   | $ | 2,695,602  |   | $ | 2,695,602   |  
|                           |   |               |   |   |            |   |   |             |  
|Additional paid in capital | $ | 4,195,106     |   | $ | (1,064,557 | ) | $ | 3,130,549   |  
|                           |   |               |   |   |            |   |   |             |  
|Ending accumulated deficit | $ | (51,837,026   | ) | $ | (1,631,045 | ) | $ | (53,468,071 | )

The Consolidated Statement of Loss for the year ended December
  31, 2009 has been restated for the effect of this change as follows:

|                                                          |   | As previously |   |   |            |   |   |             |  
|--------------------------------------------------------- | - | ------------- | - | - | ---------- | - | - | ----------- | -
|                                                          |   | reported      |   |   | Adjustment |   |   | Restated    |  
|Change in fair value of derivative
      liability        | $ | -             |   | $ | (2,095,300 | ) | $ | (2,095,300  | )
|Net loss for the year                                     | $ | (2,419,442    | ) | $ | (2,095,300 | ) | $ | (4,514,742  | )
|Net loss, cumulative amounts from date of
      inception |   |               |   |   |            |   |   |             |  
|(November 21, 1985) through December 31, 2009             | $ | (51,148,925   | ) | $ | (2,095,300 | ) | $ | (53,244,225 | )
|Loss per share                                            | $ | (0.03         | ) | $ | (0.02      | ) | $ | (0.05       | )

The impact of the adoption of ASC 815-40-15 is of a non-cash
  nature. Therefore, there is no change in total operating, investing, and
  financing activities on the Consolidated Statement of Cash Flows.

The fair value of the derivative liability has been determined
  using the Black-Scholes option pricing model using the following assumptions:

|                                      | December 31,  | January 1,      
|------------------------------------- | ------------- | ----------------
|                                      | 2009          | 2009            
|                                      |               |                 
|Risk-free interest rate               | 1.47 to 2.77% | 1.09%           
|Expected life of derivative liability | 1 to 4.1years | 1.1 to 2.3 years
|Expected volatility                   | 60% to 148%   | 116% to 152%    
|Dividend rate                         | 0.00%         | 0.00%           

25

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