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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION** Washington, D.C. 20549

FORM 10-KSB

x  ANNUAL
  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended **December 31, 2004**

 ̈  TRANSITION
  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

0-21777
  (Commission File Number)

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

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

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

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

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained in this form, and no disclosure
  will be contained, to the best of registrant’s knowledge, in definitive
  proxy or information statements incorporated by reference in part III of this
  Form 10-KSB or any amendment to this Form 10-KSB ̈

State issuer’s revenues for its most recent fiscal year:
  $0.00

State the aggregate market value of the voting and non-voting
  common equity held by non-affiliates computed by reference to the price at which
  the common equity was sold, or the average bid and asked price of such common
  equity, as of a specified date within the past 60 days. (See definition of affiliate
  in Rule 12b-2 of the Exchange Act.): Approximately $13,559,621 as at April
  7, 2005.

State the number of shares outstanding of each of the issuer’s
  classes of common equity, as of the latest practicable date: 61,190,446 common
  shares as at April 7, 2005.

Transitional Small Business Disclosure Format. Yes ̈  
  Nox

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for
  the 2005 annual meeting of stockholders are incorporated by reference into Part
  III of this Form 10-KSB, which definitive proxy statement is to be filed within
  120 days after the end of the registrant's fiscal year ended December 31, 2004.
  If the definitive proxy statement is not filed within the 120 day period, the
  issuer will instead file an amendment to this Form 10-KSB disclosing the omitted
  items under Part III.

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Form 10-KSB

Table of Contents

|Part       | Item No. |                                                                                                                        |   
|---------- | -------- | ---------------------------------------------------------------------------------------------------------------------- | --
|           |          |                                                                                                                        |   
|I          | 1        | Description of Business                                                                                                | 3 
|           |          |                                                                                                                        |   
|           | 2        | Description of Property                                                                                                | 14
|           |          |                                                                                                                        |   
|           | 3        | Legal Proceedings                                                                                                      | 15
|           |          |                                                                                                                        |   
|           | 4        | Submission of Matters to a Vote of Security
      Holders                                                              | 15
|           |          |                                                                                                                        |   
|II         | 5        | Market for Common Equity and Related Stockholder
      Matters                                                         | 16
|           |          |                                                                                                                        |   
|           | 6        | Management’s Discussion and Analysis
      or Plan of Operation                                                        | 17
|           |          |                                                                                                                        |   
|           | 7        | Financial Statements                                                                                                   | 19
|           |          |                                                                                                                        |   
|           | 8        | Changes in and Disagreements With Accountants
      on Accounting and Financial Disclosure                             | 19
|           |          |                                                                                                                        |   
|           | 8A       | Controls and Procedures                                                                                                | 19
|           |          |                                                                                                                        |   
|III        | 9        | Directors, Executive Officers, Promoters, and Control Persons;
      Compliance With Section 16(a) of the Exchange Act |   
|           |          |                                                                                                                        |   
|           | 10       | Executive Compensation                                                                                                 |   
|           |          |                                                                                                                        |   
|           | 11       | Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters                   |   
|           |          |                                                                                                                        |   
|           | 12       | Certain Relationships and Related Transactions                                                                         |   
|           |          |                                                                                                                        |   
|IV         | 13       | Exhibits                                                                                                               | 20
|           |          |                                                                                                                        |   
|           | 14       | Principal Accountant Fees and Services                                                                                 |   
|           |          |                                                                                                                        |   
|Signatures |          | 22                                                                                                                    

2

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PART I

Item 1. Description of Business.

Glossary

Certain terms used in this report are described below.

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

Ag.The symbol for silver.

Au.The symbol for gold.

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

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

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

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

Heap leaching.A gold extraction process where dilute
  cyanide solution percolate through crushed ore heaped on an impervious pad.

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

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

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

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

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

Resources.The term resources covers mineralization
  and natural material of intrinsic economic interest which has been identified
  and estimated through exploration and sampling and within which reserves may
  subsequently be defined by the application of technical, economic, legal, environmental,
  socio-economic and governmental factors. The phrase ‘reasonable prospects for
  economic extraction’ implies a judgment by a Qualified Person in respect
  of the technical and economic factors likely to influence the possibility of
  economic extraction.

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

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

General Development of Business

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

The Company explored for gold and silver on the Property and
  did extensive engineering work on the Project between 1988 and 1999. M3 Engineering
  and Technology Corp. (M3), Tucson completed a feasibility study for the Project
  in 1998 with gold and silver prices of $350/oz and $5.50/oz respectively.
  The mineral reserve, prepared as part of the feasibility study, was 48.6million
  tonnes (53.6million tons) with average grades of 0.86 g/t gold (0.025 oz/ton)
  and 12.7 g/t silver (0.371 oz/ton). The Company did additional drilling and
  underground sampling to confirm results and to expand the mineral reserves in
  1998 and 1999. The feasibility study was revised in-house in 2000.

The most recent mineral resource estimate for the deposit,
  done in 2000, is 122.2million t (134.7million ton) with average grades of 0.669
  g/t gold (0.020 oz/ton) and 12.213 g/t silver (0.356 oz/ton). The mineral reserve
  estimate, also done in 2000, is 57.3million t (63.3million ton) with average
  grades of 0.83 g/t gold (0.024 oz/ton) and 13.5 g/t silver (0.39 oz/ton) and
  this was calculated with gold and silver prices of $300/oz and $5.50/oz
  respectively. This mineral reserve is estimated to contain 1,529,000 oz gold
  and 24,870,000 oz silver.

The Company plans to develop the Project as an open pit, heap
  leach operation. Facilities will be constructed for processing ore at the design
  rate of 5.7 million tonnes (6.3 million tons) per year for 12 years, followed
  by neutralization of the heap and reclamation of the site. It may also be possible
  to develop a construction aggregate business on the Property. The source of
  raw materials would be the finely crushed and rinsed residue from the heap leach
  operation and rock from the waste rock dumps.

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

The Project remained on hold in 2001, 2002, 2003 and 2004.

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

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

Project Background

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

4

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

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

Exploration & Mineral Resource Estimates

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

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

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

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

A mineral resource estimate was included in the feasibility
  study done by M3 in 1998. Mineral Resources Development, Inc. (MRDI), San Mateo
  did a detailed due diligence review of the procedures used by the Company and
  its consulting engineers and MRDI and the Company developed the deposit model.
  MRDI submitted a final report in April 2000.

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

The “base case” mineral resource for the deposit,
  above a cut-off grade of 0.274 g/t AuEq (0.008 oz/ton AuEq) is 122,163,000 t
  with grades of 0.669 g/t gold (0.020 oz/ton gold) and 12.213 g/t silver (0.356
  oz/ton). This mineral resource is estimated to contain 2,628,000 oz gold and
  47,971,000 oz silver.

The gold equivalent grade (AuEq) for the mineral resources was calculated as follows:

Gold equivalent grade or AuEq g/t = Au g/t + {(Ag/R1)*R2}
  g/t

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R1= Au price in $/oz/Ag price in $/oz;
  and R2 = Ag recovery in %/Au recovery in % 
  or R1 = 325.00/6.00 = 54.167 and R2 = 60.00/78.00 = 0.7692.

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

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 resource. In the east, two additional zones of quartz
  stringer veins have been mapped in the hanging wall of the Karma/Ajax vein system.
  Toward the south, an extension of the Silver Queen vein system is open and additional
  vein splits have been mapped on surface. Also, an extension of the Golden Queen
  vein system appears to be offset by an east-west trending fault. Initial drill
  results indicate widths of 8 m with good gold and silver grades.

The exploration work to date has focused on known fault/vein
  structures central to the mineral resource. The host volcanics associated with
  the mineralization on 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 protruding from the valley floor and trending northwest
  from the Property.

The continuity of mineralization at depth remains untested.

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

Mine Design

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

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

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

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

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

Open Pit Operation

The operation will be an open pit operation and it is expected
  that the Company will do the mining.

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

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

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Pipe Conveyor

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

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

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

Detailed mine planning to confirm the feasibility of using
  a pipe conveyor to convey the ore is being done.

Mineralogy, Process Development & Flow Sheet

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

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

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

HPGR Tests 2003 - 2004

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 full-scale 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 test in July 2003 and in March 2004 respectively. The samples were
  delivered to McClelland Laboratories, Inc. (MLI), Sparks, Nevada who crushed
  the samples to 100 % passing 32 mm and 35 mm respectively. The samples were
  shipped by airfreight to two HPGR manufacturers in Germany where the actual
  HPGR tests were done.

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

Confirmation Leach Test Work & Gold & Silver Recoveries

An extensive program of bottle roll and column leach tests
  has been completed by MLI and the following conclusions can be drawn from the
  test program:

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| | • | Recoveries are higher with longer leach
        times and this confirms the historic findings;                                                                                                                                                                                                                                                                   
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | • | Recoveries increase with an increase
        in fineness of the crushed product and this effect is especially pronounced
        for silver and                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | • | Recoveries for the HPGR products are
        consistently higher and extraction rates are 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 following recoveries have now been projected for the commercial
  operation:

|Primary Rock Types                                        | Proportion         | Gold                         | Silver                     
|--------------------------------------------------------- | ------------------ | ---------------------------- | ---------------------------
|%                                                         | %                  | %                           
|Pyroclastics   Quartz Latite  
      Rhyolite   Undefined | 10.5 21.3 68.1 0.1 | 80.8  91.0 79.5 Not Included | 55.0 65.0 50.0 Not Included
|Total & Average                                           | 100.0              | 82.1                         | 58.2                       

These recoveries are considered to be conservative. Mined
  ore will have a higher proportion of fines than the test samples and extended
  leach times will be available in the commercial operation. Both are key parameters
  in projecting recoveries and thus still higher overall recoveries can reasonably
  be expected.

A test was also done on the residues from one of the column
  leach tests to determine the percolation rates under load and the results of
  this test were used to confirm heap height.

HPGR Circuit Design

The test work shows that the HPGR will have distinct advantages
  over conventional crushing and screening in preparing particles for heap leaching
  in this particular application.

A feasibility-level design for an HPGR-based crushing plant
  has been completed.

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 extraction rates;                                                                                                      
| | • | Stronger agglomerates due to a more favourable
        overall particle size distribution;                                    
| | • | Substantially lower capital costs than
        a conventional crushing - screening plant;                                     
| | • | Manageable dust control as fewer pieces
        of equipment are required for the duty;                                       
| | • | 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.                                                                                                      

Merrill-Crowe Plant & Assay Laboratory

Gold and silver are typically recovered in a heap leach operation
  by dissolution in a dilute cyanide solution and then by precipitation with zinc
  or adsorption on activated carbon. The zinc precipitation process, referred
  to as the Merrill-Crowe process after its developers, is used to recover gold
  and silver when the silver to gold ratio in solution is greater than 10 to 1.
  The silver to gold ratio is expected to average 15:1 for the Project and a Merrill-Crowe

8

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precipitation plant will therefore be required. The process
  is highly efficient and recoveries in the plant typically range upwards of 98%.

A detailed design for a Merrill-Crowe plant with detailed
  capital and operating costs was completed.

The detailed design of an analytical laboratory was also completed.

Heap Leach Pad & Solution Management

The detailed pad design will be completed in the second quarter
  of 2005.

The system will be designed for zero discharge. The first
  pad to be constructed will be located on the northern slope of Soledad Mountain.
  A second pad will be located on the western slope if required. Pad 1 will be
  designed as a dedicated pad, i.e. ore will be stacked, leached, rinsed and left
  in place on the pad for final reclamation unless the rinsed sand can be sold
  as aggregate.

| | • | Pad 1 will be designed to receive 46.2million
        t of ore;                  
| | - | ---------------------------------------------------------------------------------
| | • | Pad 1 will have an area of 829,200 m2with 4 Zones to be constructed in 2 Stages; 
| | • | Lifts will be 10 m in height and                                                 
| | • | The heap will be constructed to an ultimate
        height of up to 60 m and     
| | • | The design of Pad 2 has been deferred
        until required at some future date.

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

The pads will be lined with a composite liner consisting of
  a compacted soil liner and a geomembrane. The geomembrane will in turn be covered
  and protected by 45 cm of a crushed liner protection fill that will act as a
  drainage layer. A network of perforated pipes will be installed in the liner
  protection fill. Solution will drain by gravity to a pump box and will be pumped
  to the Merrill-Crowe plant. The barren solution will be pumped to the heap with
  vertical turbine pumps.

The design of Pad 1 will meet all regulatory requirements.

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

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

The heap leach stacking study and capital and working cost
  estimates for the conveyors and the stacker were completed.

Services

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

Water Supply

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

A detailed evaluation of the available groundwater was done
  by WZI Inc., Bakersfield in 1996. As many as 35 wells have been drilled in the
  greater Project area in the past. Records for some of these wells plus step
  rate test data

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from production well #1 drilled by the Company indicate that,
  initially, two production wells can provide the maximum estimated water requirement
  of 147.6 m3/h (650 gal/min). Production well #1 is located approximately
  2 km north of the Project. A second production well has been drilled approximately
  300 m (1,000 ft) north of well #1 and equipped and a third well can be drilled
  and equipped in the future if required.

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

Drip emitters will be used on the heap to limit evaporation
  losses.

Power Supply

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

Offices & Workshop/Warehouse

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

Project Management & Operating Manpower

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

The total manpower complement is expected to reach 153 once
  the mine is in full production. Skilled personnel will be available locally
  as two heap leach operations have recently closed in the area.

Aggregate

It is expected that a construction aggregate business can
  be developed based on the location of the Project in southern California with
  close proximity to major highways and railway lines. The source of raw materials
  would be the finely crushed and rinsed residue or sand from the heap leach operation
  and rock from the waste rock dumps. The waste rock can be classified into a
  range of products such as riprap, crushed stone and gravel. Test work to confirm
  the suitability of these materials for use as aggregate was done in 1998 and
  1999.

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

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

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

Environmental Issues & Permits

The Project is located on private and federally controlled
  lands in an unincorporated area of Kern County, California. The proposed mining
  activities on these lands are subject to federal, state and local regulations.
  Annual site inspections are conducted to verify the Company’s compliance
  with regulations. For the year ended December 31, 2004, the Company was in compliance
  with regulations.

10

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Environmental issues and the status of permits are summarized
  below.

CEQA/NEPA

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

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

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

Air Quality

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

The Area is designated as unclassified for 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 probably responsible for the high PM10
  background levels recorded at several nearby monitoring stations. On-site air
  sampling was conducted for approximately one year with high background PM10
  levels found.

Fugitive dust, when combined with the background dust,
  may cause unacceptable levels of PM10 emissions off-site and may
  represent the greatest potential environmental issue. A PM10
  level of 44 micrograms per cubic meter is projected

by computer modeling for a mining rate of 27 million tonnes
  (30 million tons) per year of ore and waste. This level is below the California
  attainment standard of 50 micrograms per cubic meter and the Federal standard
  of 150 micrograms per cubic meter. However, the Company believes that it will
  achieve compliance with applicable standards by a greater margin, as the modeling
  methodology assumes worst case conditions, which are considered unlikely to
  be encountered in actual operations and based on the use by the Company of commonly-accepted
  dust control techniques in all phases of mining and crushing and screening.
  The Company will have to submit applications to the Kern County Air Pollution
  Control District for authority to construct the Project once a production decision
  is made.

Water Quality

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

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

11

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

Closure, Reclamation and Financial Assurance

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

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

The reclamation plan provides that reclamation of the leached
  residues will continue for approximately three years after mining has ended.
  Closure requires four steps: first, a fresh water rinse is periodically applied
  to the leached residues to aid the natural degradation of the cyanide in solution;
  next, the leach solution is sequentially moved from one active Zone to the next
  to minimize the total volume of solution required for the operation; once leaching
  has ended, any remaining solution is chemically neutralized with hydrogen peroxide
  and sprinkled on the surfaces of waste dumps that have been re-sloped. The leached
  residues will finally be covered with a growth-medium and re-vegetated. Small
  volumes of seepage that will continue to collect will be sprinkled on surfaces
  that have been re-vegetated.

The Company is required to provide financial assurance for
  the Project:

| | • | Financial assurance to be held by Kern
        County designed to cover the general reclamation on site.                                                          
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | • | Financial assurance to be held by the
        Board to cover neutralization and disposal of leach solutions and                                                   
| | • | “Unforeseen events financial assurance”
        to be held by the Board designed cover an unforeseen event that could
        contaminate surface or ground water.

The Company expects to provide reclamation financial assurance
  of approximately $572,260 to cover the reclamation of all historic disturbances
  in the second quarter of 2005. The funds were placed on deposit with Union Bank
  of California, San Bernardino branch, in December 2004.

The regulatory authorities will determine the level of the
  additional financial assurance required once a production decision is made.

Environmental, Safety and Health Policy

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

Offices and Employees

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

Miscellaneous

12

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

Risk Factors

The following are some of the risk factors that apply to an
  investment in the Company.

The Likelihood Of Continued Losses From Operations

The Company has no revenue from operations and has incurred
  losses from inception through December 31, 2004 of $36,339,864. This is
  expected to continue for at least the next eighteen months and is expected to
  change only if and when gold and silver are produced and sold from the Project.
  At December 31, 2004, the Company held $1,350,356 in cash and cash equivalents.

Property Interests Are Not In Good Standing

In October 2000, the Company ceased making property payments
  and advance, minimum royalty payments after successfully concluding moratorium
  agreements with a number of the landowners. The moratorium agreements typically
  had a term of three years and these have now expired. After the expiration of
  the moratorium agreements, the Company reached agreement with various landowners
  and is making lease payments of $10,000 per year to one landowner, is making
  payments of $9,275 per month to a second landowner under an agreement to
  purchase real property and is also making advance minimum royalty payments of
  $100,000 per year to a third landowner. The Company is technically in default
  of certain non-material agreements but is not currently in litigation with any
  landowner.

The Company will continue to work with its landowners in 2005.
  While the Company has successfully reached agreement with its landowners in
  the past, there can be no assurance that such agreement will continue into the
  future.

Ability To Continue As A Going Concern

The Company has had no revenues from operations since inception
  and has a deficit of $36,965,077 accumulated during the exploration stage.
  Management plans to control current costs and it is not expected that additional
  funds will be required to complete the feasibility study and for general corporate
  purposes to the end of 2005.

The ability of the Company to obtain financing for its ongoing
  activities and thus maintain solvency or to finance the construction of the
  Project once the feasibility study has been completed and a production decision
  has been made, will depend on equity market conditions, the market for precious
  metals, the willingness of other parties to lend the Company money or the ability
  to find a joint venture partner. While the Company has been successful at certain
  of these efforts in the past, there can be no assurance that future efforts
  will be successful. This raises substantial doubt about the Company’s
  ability to continue as a going concern.

The Need for Significant Additional Financing

The Company will need significant additional financing to
  construct the Project and estimates that this could range as high as $50million.
  The Company expects to finance the construction and to secure the necessary
  working capital from additional sales of common stock, from bank or other borrowings
  or, alternatively, through a joint venture. However, the Company has no commitment
  for bank financing or for the underwriting of additional stock, and it is not
  a party to any agreement or arrangement providing for a joint venture. Whether
  and to what extent Project financing can be secured will depend on a number
  of factors, not the least of which are gold and silver prices. Gold and silver
  prices fluctuate widely and are affected by numerous factors beyond the Company's
  control, such as the

13

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strength of the United States dollar and foreign currencies,
  global and regional demand, and the political and economic conditions of major
  gold producing countries. Gold and silver prices have recently traded in the
  $420/oz and $7.00/oz range and the Company believes that financing for
  the Project can be secured if gold and silver prices remain firmly above $400/oz
  and $7.00/oz respectively. It may however not be economical for the Company
  to construct the Project at lower gold and silver prices.

Risks and Contingencies Associated with the Mining Industry
  Generally

In addition to the risks noted above, the Company is subject
  to all of the risks inherent in the mining industry, including environmental
  risks, fluctuating metals prices, industrial accidents, labor disputes, unusual
  or unexpected geologic formations, cave-ins, flooding, 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. Were the Company subjected
  to environmental liabilities, the payment of such liabilities would reduce the
  funds available to the Company. Were the Company unable to fund fully the cost
  of remedying an environmental problem, it might be required to suspend operations
  or enter into interim compliance measures pending completion of remedial activities.

Item 2. Description of Property

Land Ownership and Mining Rights

The Company acquired its initial interest in the Property
  in 1986 and has since acquired additional property interests in the area.

The Property is located west of California State Highway 14
  and largely south of Silver Queen Road in Kern County, California, covering
  all of section 6 and portions of sections 5, 7 and 8 in Township 10 North, Range
  12 West; portions of sections 1 and 12 in Township 10 North, Range 13 West;
  portions of section 18 in Township 9 North, Range 12 West and portions of section
  32 in Township 11 North, Range 12 West, all from the San Bernardino Baseline
  and Meridian. The Project facilities will be located in Section 6 in Township
  10 North, Range 12 West. The area that will be disturbed by the Project is a
  497-hectare (1,228 acre) contiguous block within an area of approximately 1,012
  hectare (2,501 acres) held by the Company. The Property is comprised of 33 patented
  lode mining claims, 123 unpatented lode mining claims, one unpatented placer
  mining claim, one patented mill site claim, six unpatented mill site claims
  and 379 hectare (937 acres) of fee land.

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

The Company commissioned a formal title summary covering the
  Property in 1996. It was updated in February 1998 and again in March 1999. With
  such a complicated ownership history, as is common in historic mining districts;
  it is typical for title problems to exist. On May 15, 1999 the Company obtained
  a quiet title judgment, which resolved a majority of the title questions. The
  Company also determined that the remaining title questions do not present a
  material threat to the Project. A further title summary was completed in 2004.

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

The Company is required to make advance, minimum royalty payment
  under a number of the property agreements. With one exception, the Company will
  receive a credit for the advance minimum royalty payments once production has
  started. Most of the royalties are of the net smelter return (“NSR”)
  type and are based on a sliding scale, with the

14

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percentage amount of the royalty a function of the ore grade
  on the particular property to which the royalty relates. Typically, the royalties
  are 5 % NSR or less, with an expected average of 3.1 %. A number of the agreements
  provide for an additional royalty if non-mineral commodities, such as aggregates,
  are produced and sold.

In October 2000, the Company ceased making property payments
  and advance, minimum royalty payments after successfully concluding moratorium
  agreements with a number of the landowners. The moratorium agreements typically
  had a term of three years and these have now expired. After the expiration of
  the moratorium agreements, the Company reached an agreement with a landowner
  and is making lease payments of $10,000 per year to this landowner. The
  Company is also making advance minimum royalty payments of $100,000 per
  year to another landowner and these advance payments will be applied against
  any future production royalties. The Company is technically in default of certain
  non-material agreements but is not currently in litigation with any landowner.

The Company will continue to work with its landowners in 2005.
  While the Company has successfully reached agreement with its landowners in
  the past, there can be no assurance that such agreement will continue into the
  future.

The future of the Project is dependant upon maintaining control
  of the Property. Without land and mineral rights, the Company has no basis for
  continuing with its activities. 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 ability of the Company to maintain control of the Property
  as a whole.

On April 1, 1995, the Company acquired, through its Subsidiary,
  an option to purchase all of the issued and outstanding shares of a privately
  held California corporation, which holds an interest in tract of land immediately
  adjoining the Property. The option agreement was successively renegotiated and
  a second amendment was signed on August 10, 2001. This amendment suspends all
  terms and obligations of the Company as set forth in the original agreement
  and the first amendment. A payment of $750,000 is due to conclude the stock
  purchase under the second amendment on or before July 1 of any one year for
  a period of five years from July 1, 2001 onwards. The second amendment also
  requires the Company to recognize a liability of $35,000 on or before July
  1, 2001 and on each successive anniversary date for up to five years. In order
  to extend the termination date of the agreement, $10,000 of the liability
  is to be paid in cash and the balance of $25,000 is to be accrued, without
  interest, payment of which is deferred until the final stock purchase payment
  is made. Each July, beginning in 2001, the Company has made the required cash
  payment of $10,000, accrued the liability balance of $25,000 and extended
  the termination date of the agreement by one year, each year, with the current
  termination date of the agreement being July 1, 2005. The Company has no legal
  obligation to continue making payment and cannot perfect its rights, as a shareholder
  of the corporation, until full payment under the option is made. Upon commencement
  of commercial production, the Company 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.

On August 1, 1996, the Company concluded an agreement to purchase
  29.18 acres of real property immediately adjoining the Property. The purchase
  price was $950,000 of which $100,000 was paid in cash and $850,000
  was secured by a promissory note with a term of 180 months. The note is payable
  in monthly instalments of $9,275, including interest at prime rate plus
  2 %. A balloon payment of all remaining and unpaid principal, if any, and accrued
  but unpaid interest, if any, is due on September 1, 2011. The principal amount
  owing, recorded as long-term debt in the financial statements, was $718,594
  as at December 31, 2004.

Total land and advance minimum royalty payments for the years
  ending December 31, 2000, 2001, 2002, 2003 and 2004 were $344,000, $69,000,
  $58,000, $65,195 and $223,500 respectively. The estimated total
  of various land and advance, minimum royalty payments is $231,000 in 2005.

Item 3. Legal Proceedings

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

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

No matters were submitted to a vote of the Company’s
  shareholders during the fourth quarter of 2004.

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PART II

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

Market and Trading Price

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

|Year ended December 31 | High           | Low  
|---------------------- | -------------- | -----
|2004                   | Fourth Quarter | $0.54
|                       | Third Quarter  | 0.51 
|                       | Second Quarter | 0.86 
|                       | First Quarter  | 1.04 
|2003                   | Fourth Quarter | $0.76
|                       | Third Quarter  | 0.77 
|                       | Second Quarter | 0.61 
|                       | First Quarter  | 0.95 

As of December 31, 2004 there were 265 holders of record of
  the Company’s common shares and an undetermined number of beneficial holders.

Dividends

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

Securities Authorized for Issuance Under Compensation Plans

The following table sets forth information as at December
  31, 2004 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     | 1,040,000                                                                                       | C$0.47 (Approx. US$0.38)                                                        | 1,960,000                                                                                                                                      
|Equity compensation plans   not approved by security 
       holders | N/a                                                                                             | N/a                                                                             | N/a                                                                                                                                            
|Total                                                                | 1,040,000                                                                                       | --                                                                              | 1,960,000                                                                                                                                      

Sales of Unregistered Securities

In January 2004, the Company issued 8,000,000 units to 10
  placees at a price of C$0.50 per unit for gross proceeds of C$4,000,000.
  Each unit is comprised of one common share and one non-transferable share purchase
  warrant. Each share purchase warrant entitles the holder to purchase one additional
  common share of the company for a two year term at an exercise price of C$0.62
  in the first year and C$0.75 in the second year. The units were issued pursuant

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to Rule 506 of Regulation D under the U.S. Securities Act
  of 1933. The common shares and warrants are subject to restrictions on resale
  pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933.

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

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

Purchases of Equity Securities by the Company and Affiliated
  Purchasers

Neither the Company nor an affiliate of the Company purchased
  common shares of the Company in the year ending December 31, 2004.

Item 6. Management’s Discussion and Analysis And
  Plan of Operations

Results of Operations

The Company had no revenue from operations in 2004 and the
  Project remained on hold.

The Company initiated a detailed review of the Project in
  mid-2002 to identify new approaches that would reduce both the capital cost
  to the start of production and future operating costs to ensure a viable mining
  operation at foreseeable gold and silver prices. Work is continuing on a detailed
  feasibility study and it is expected that this will be concluded in the second
  quarter of 2005.

Variations in the level of expenses from period to period
  are a result of the nature, timing and cost of activities undertaken during
  these periods.

The following is a summary of the operating results:

|                 |   | Year Ended        |  |   | Year Ended        |  |   | Year Ended        |   |   | Cumulative Since
|---------------- | - | ----------------- |  | - | ----------------- |  | - | ----------------- | - | - | ----------------
|                 |   | December 31, 2004 |  |   | December 31, 2003 |  |   | December 31, 2002 |   |   | Inception       
|                 |   |                   |  |   |                   |  |   |                   |   |   |                 
|Asset Impairment | $ | 345,766           |  | $ | -                 |  | $ | -                 |   | $ | 28,893,358      
|General and      |   |                   |  |   |                   |  |   |                   |   |   |                 
|administrative   |   |                   |  |   |                   |  |   |                   |   |   |                 
|expense          | $ | 1,163,069         |  | $ | 493,657           |  | $ | 287,665           |   | $ | 7,618,088       
|Interest expense | $ | 294,677           |  | $ | 250,904           |  | $ | 60,192            |   | $ | 800,774         
|Interest income  | $ | 31,262            |  | $ | 45                |  | $ | 254               |   | $ | 1,112,980       
|Net loss         | $ | 1,772,250         |  | $ | 744,516           |  | $ | (347,603          | ) | $ | 36,339,864      

An item, Asset Impairment, of $345,766 was recorded in
  2004. This is the estimated present value of the cost of reclaiming historic
  disturbances on the property in the future as set out in more detail in 10.
  Asset Retirement Obligations of the Notes to Consolidated Financial Statements.

The Company incurred general and administrative expenses of
  $1,163,069 for the year ended December 31, 2004, as compared to $493,657
  for the year ended December 31, 2003. These costs were higher in 2004 and this
  was

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primarily due to increased spending to complete various studies,
  process development and detailed engineering for the feasibility study.. Interest
  expense of $294,677 for the year ended December 31, 2004, increased from
  $250,904 for the year ended December 31, 2003 as a result of interest accrued
  for the convertible promissory notes and the amortization of debt discount.
  Interest income for the year ended December 31, 2004 was $31,262 as compared
  to $45 for the year ended December 31, 2003. The increase is due to the
  deposit of funds from a private placement, which was concluded in January 2004.
  The Company incurred a net loss of $1,772,250 (or $0.03 per share) for
  the year ended December 31, 2004, as compared to a net loss of $744,516
  (or $0.01 per share) for the year ended December 31, 2003.

Liquidity and Capital Resources

The Company has no revenue from operations and the Project
  remains on hold, pending the completion of the feasibility study.

The Company held $1,350,356 in cash and cash equivalents
  at December 31, 2004. It is not expected that additional funds will be required
  to complete the feasibility study and for general corporate purposes to the
  end of 2005.

During the period from inception through December 31, 2004,
  the Company has used $6,107,895 in operating activities. The Company has
  incurred from inception cumulative losses of $36,339,864. During the same
  period, the Company has used $30,520,354 in investing activities; these
  consisted of $28,681,409 in expenditures related to the Project and fixed
  asset purchases of $1,266,685. As discussed under “Plan of Operations”
  below, the Company will need significant additional financing to put the Project
  into production and estimates that this could range as high as $50million.
  The Company expects to finance the construction and to secure the necessary
  working capital from additional sales of common stock, from bank or other borrowings
  or by finding a joint venture partner. However, the Company has no commitment
  for the underwriting of additional stock or for bank financing and it is not
  party to any agreement or arrangement providing for a joint venture. Whether
  and to what extent Project financing can be secured will depend on a number
  of factors such as the results of the feasibility study, management’s
  assessment of the financial markets for both equity and debt and gold and silver
  prices. Gold and silver prices have recently traded in the $420/oz and $7.50/oz
  range and the Company believes that financing for the Project can be secured
  if gold and silver prices remain firmly above $400/oz and $7.00/oz respectively.
  It may however not be economical to go to production at lower gold and silver
  prices.

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

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

Plan of Operations

Work is continuing on a detailed feasibility study and it
  is expected that this will be concluded and the results released to shareholders
  and the public in the second quarter of 2005.

The Company plans to put the Project into production as an
  open pit, heap leach operation and to construct facilities to process ore at
  the design rate of 5.7million t (6.3million ton) per year for 12 years. The
  heap will ultimately be neutralized and the site reclaimed. The estimates for
  the annual gold and silver production and the operating costs have yet to be
  completed.

The Company will need significant additional financing to
  put the Project into production and estimates that this could range as high
  as $50million. The Company believes that financing for the Project can be
  secured if gold and silver prices remain firmly above $400/oz and $7.00/oz
  respectively.

18

---

It is expected that a construction aggregate business can
  also be developed on the Property. The source of raw materials would be the
  finely crushed and rinsed residue or sand from the heap leach operation and
  rock from the waste rock dumps. The strategy that is being pursued is that the
  Company will not invest directly in or develop an aggregate business as owner/operator
  but expects to participate financially in the production and sale of aggregate
  via royalty payments. Such a stream of royalty payments could have an impact
  on operating cash flows and support the Project in times of possibly lower gold
  and silver prices. The Company is seeking a major aggregate producer with experience
  in the southern California markets as a partner for developing the aggregate
  business on the Property.

At December 31, 2004, the Company had Canadian and US deferred
  tax assets of approximately $10,039,000 for which the Company has provided
  a 100 % valuation allowance as management cannot determine that it is more likely
  than not that the Company will receive the benefit of the asset.

Critical Accounting Policies

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

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

Effective January 1, 2003, the Company retroactively adopted
  SFAS No. 143, “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.

Item 7. Financial Statements.

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

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

None.

Item 8A. Controls and Procedures

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

In connection with this annual report, management carried
  out an evaluation, under the supervision and with the participation of the management,
  including the President and principal accounting officer, of the effectiveness
  of the design and operation of the Company’s disclosure controls and procedures
  pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the President
  and principal accounting officer concluded that the Company’s disclosure

19

---

controls and procedures are effective in connection with the
  filing of this Annual Report on Form 10-KSB for the year ended December 31,
  2004.

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

PART III

Information with respect to Items 9 through 12 and Item 14
  is set forth in the definitive Proxy Statement to be filed with the Securities
  and Exchange Commission on or before April 30, 2005 and is incorporated herein
  by reference. If the definitive Proxy Statement cannot be filed on or before
  April 30, 2005, the issuer will instead file an amendment to this Form 10-KSB
  disclosing the information with respect to Items 9 through 12.

Item 13. EXHIBITS

(a) Exhibits

|Exhibit | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                  |  | Manner of Filing                                                                                                                                                             
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|3.1     | Certificate of Incorporation,
        Articles of Incorporation, Memorandum, and all current amendments thereto
        of the registrant under the Company Act of British Columbia, as amended.                                                                                                                                                                                        |  | Incorporated by
        reference to Exhibit 3.1 to the Form 10- SB of the Company, filed with
        the SEC on November 21, 1996 and amendments thereto (the “Form 10-SB”)
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|10.1    | Lease dated October 20,
        1994 between the Subsidiary and William J. Warner with respect to certain
        property within the project area.                                                                                                                                                                                                                                     |  | Incorporated by
        reference to Exhibit 10.5 to the Form 10-SB                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|10.2    | Lease dated September 19,
        1994 between the Subsidiary and Western Centennials, Inc., with respect
        to certain property within the project area.                                                                                                                                                                                                                          |  | Incorporated by
        reference to Exhibit 10.6 to the Form 10- SB                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|10.3    | Stock option purchase agreement
        dated April 1, 1995 between the Subsidiary and Grace W. Meehl, Madge W.
        Wolff, Stephen G. Wegmann, Michael L. Wegmann, John G. Hodgson, Virginia
        L. Sigl, Patrick L. Wolff and George P. Wolff with respect to the acquisition
        by the Subsidiary of an option to purchase all of the outstanding shares
        of KWC. |  | Incorporated by
        reference to Exhibit 10.8 to the Form 10- SB                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|10.4    | Purchase agreement dated
        March 29, 1996 between the Subsidiary and the Meehl Family Trust and others
        with respect to the acquisition by the Subsidiary of certain property
        within the project area.                                                                                                                                                             |  | Incorporated by
        reference to Exhibit 10.10 to the Form 10- SB                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|10.5    | Mineral exploration agreement
        and option to lease or purchase dated January 25, 1996 between the Soledad-Mojave
        Mining Syndicate and the Subsidiary with respect to the potential acquisition
        by the Subsidiary of 129.5 hectares of fee land within the project area.                                                                                          |  | Incorporated by
        reference to Exhibit 10.11 to the Form 10- SB                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|10.6    | Purchase agreement dated
        August 1, 1996 between the Subsidiary and Southwestern Refining Corporation
        with respect to the acquisition by the Subsidiary of certain property
        and mill tailings within the project area.                                                                                                                                           |  | Incorporated by
        reference to Exhibit 10.12 to the Form 10- SB                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                              
|10.7    | Stock option plan of the
        registrant, as amended.                                                                                                                                                                                                                                                                                                                                |  | Incorporated by
        reference to Exhibit 10.13 to the Form 10-SB                                                                                                         

20

---

|10.8 | Forms of debentures issued by the registrant
        to Landon T. Clay Charitable Lead Trust II and Landon T. Clay Charitable
        Lead Trust dated November 30, 1983. |  | Incorporated by
        reference to Exhibit 10.15 to the Form 10- SB
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------
|     |                                                                                                                                                                           |  |                                                                      
|21.1 | Subsidiaries of the Registrant.                                                                                                                                           |  | Incorporated by
        reference to Exhibit 24.0 to the Form 10- SB 
|     |                                                                                                                                                                           |  |                                                                      
|23.1 | Consent of
        BDO Dunwoody, LLP                                                                                                                                      |  | Filed herewith                                                       
|     |                                                                                                                                                                           |  |                                                                      
|31.1 | Rule 13a-14(a)/15(d)-14(a)
        Certification                                                                                                                          |  | Filed herewith                                                       
|     |                                                                                                                                                                           |  |                                                                      
|32.1 | Section 1350
        Certification                                                                                                                                        |  | Filed herewith                                                       

21

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SIGNATURES

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

GOLDEN QUEEN MINING CO. LTD.

|By: | /s/ H. Lutz Klingmann                 | 
|--- | ------------------------------------- | 
|    | H. Lutz Klingmann                     | 
|    | President and Chief Executive Officer | 
|    |                                       | 
|    | Date: April 15, 2005                  | 

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

|Signature             |  | Title                                           | Date          
|--------------------- |  | ----------------------------------------------- | --------------
|                      |  |                                                 |               
|                      |  |                                                 |               
|/s/ H. Lutz Klingmann |  | President, Chief Executive Officer and Director | April 15, 2005
|H. Lutz Klingmann     |  |                                                 |               
|                      |  |                                                 |               
|                      |  |                                                 |               
|/s/ Edward Thompson   |  | Chairman of the Board and Director              | April 15, 2005
|Edward Thompson       |  |                                                 |               
|                      |  |                                                 |               
|                      |  |                                                 |               
|/s/ Chester Shynkaryk |  | Secretary and Director                          | April 15, 2005
|Chester Shynkaryk     |  |                                                 |               
|                      |  |                                                 |               
|                      |  |                                                 |               
|/s/ Gordon Gutrath    |  | Director                                        | April 15, 2005
|Gordon Gutrath        |  |                                                 |               

22

---





FINANCIAL STATEMENTS OF

GOLDEN QUEEN MINING CO. LTD.

For the Fiscal Year ended

December 31, 2004





---

|                      | BDO Dunwoody LLP              | 600 Cathedral Place     
|--------------------- | ----------------------------- | ------------------------
|Chartered Accountants | 925 West Georgia Street      
|                      | Vancouver, BC, Canada V6C 3L2
|                      | Telephone: (604) 688-5421    
|                      | Telefax: (604) 688-5132      
|                      |                               | E-mail: vancouver@bdo.ca
|                      |                               | www.bdo.ca              

Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying consolidated balance sheets
  of Golden Queen Mining Co. Ltd. (an exploration stage company), as of December
  31, 2004 and 2003, 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, 2004, 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, 2004 and 2003, 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, 2004, in conformity with accounting principles
  generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in Note 1 to
  the consolidated financial statements, the Company has had no revenues since
  inception and has been unable to obtain the necessary financing to complete
  current exploration activities or exit the exploration stage. Also, the Company
  has a $36,965,077 deficit accumulated during the exploration stage as of
  December 31, 2004. These conditions raise substantial doubt about the Company’s
  ability to continue as a going concern. Management’s plans in regard to
  these matters are also described in Note 1. The financial statements do not
  include any adjustments that might result from the outcome of this uncertainty.

/s/ BDO Dunwoody LLP

Chartered Accountants
  Vancouver, Canada 
  March 16, 2005

---

|                      | BDO Dunwoody LLP              | 600 Cathedral Place     
|--------------------- | ----------------------------- | ------------------------
|Chartered Accountants | 925 West Georgia Street      
|                      | Vancouver, BC, Canada V6C 3L2
|                      | Telephone: (604) 688-5421    
|                      | Telefax: (604) 688-5132      
|                      |                               | E-mail: vancouver@bdo.ca
|                      |                               | www.bdo.ca              



|                
|----------------
|Auditors’ Report
|                

To the Shareholders of 
  Golden Queen Mining Co. Ltd. 
  (An Exploration Stage Company)

We have audited the Consolidated Balance Sheets of Golden
  Queen Mining Co. Ltd. (an exploration stage company) as of December 31, 2004
  and 2003 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 Consolidated Statements of Loss, Changes in Shareholders’
  Equity (Capital Deficit) and Cash Flows from inception (November 21, 1985) through
  December 31, 2004. 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.

We conducted our audits in accordance with Canadian generally
  accepted auditing standards. Those standards require that we plan and perform
  the audits to obtain reasonable assurance whether the financial statements are
  free of material misstatement. An audit includes examining, on a test basis,
  evidence supporting the amounts and disclosures in the financial statements.
  An audit also includes assessing the accounting principles used and significant
  estimates made by management, as well as evaluating the overall financial statement
  presentation.

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  December 31, 2004 and 2003 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, 2004, in accordance with United States generally accepted
  accounting principles.

/s/ BDO Dunwoody LLP

Chartered Accountants

Vancouver, Canada 
  March 16, 2005

---

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

|                                                       |   | December 31, |   |   | December 31, |  
|------------------------------------------------------ | - | ------------ | - | - | ------------ | -
|                                                       |   | 2004         |   |   | 2003         |  
|Assets (Note 1)                                        |   |              |   |   |              |  
|                                                       |   |              |   |   |              |  
|Current assets:                                        |   |              |   |   |              |  
|Cash and cash equivalents                              | $ | 1,350,356    |   | $ | 110,871      |  
|Receivables                                            |   | 20,332       |   |   | 4,868        |  
|Prepaid expenses and
      other current assets        |   | 23,815       |   |   | 24,032       |  
|                                                       |   |              |   |   |              |  
|Total current assets                                   |   | 1,394,503    |   |   | 139,771      |  
|                                                       |   |              |   |   |              |  
|Property and equipment,
      net (Note 2)             |   | 250,282      |   |   | 262,469      |  
|Mineral properties
      (Notes 3, 4, 6, 10 and 11)    |   | 682,687      |   |   | 682,687      |  
|Reclamation Bond (Note
      3)                        |   | 572,260      |   |   | -            |  
|                                                       |   |              |   |   |              |  
|                                                       | $ | 2,899,732    |   | $ | 1,084,927    |  
|                                                       |   |              |   |   |              |  
|Liabilities and Shareholders’ Equity (Capital Deficit) |   |              |   |   |              |  
|(Note 11)                                              |   |              |   |   |              |  
|                                                       |   |              |   |   |              |  
|Current liabilities:                                   |   |              |   |   |              |  
|Accounts payable                                       | $ | 62,476       |   | $ | 66,632       |  
|Royalty and mining
      rights payable (Note 4)       |   | 172,484      |   |   | 147,484      |  
|Accrued liabilities                                    |   | 26,272       |   |   | 11,987       |  
|Current maturities
      of long-term debt (Note 6)    |   | 30,222       |   |   | 751,542      |  
|Convertible notes (Note
      7)                       |   | 150,000      |   |   | 179,000      |  
|Total current liabilities                              |   | 441,454      |   |   | 1,156,645    |  
|                                                       |   |              |   |   |              |  
|Long-term debt, less current maturities (Note 6)       |   | 688,372      |   |   | 10,060       |  
|Asset retirement obligations (Note 10)                 |   | 345,766      |   |   | -            |  
|                                                       |   |              |   |   |              |  
|Total liabilities                                      |   | 1,475,592    |   |   | 1,166,705    |  
|                                                       |   |              |   |   |              |  
|Commitments and contingencies (Notes 4, 10 and 11)     |   |              |   |   |              |  
|                                                       |   |              |   |   |              |  
|Shareholders’ equity (capital deficit):                |   |              |   |   |              |  
|Preferred shares, no
      par, 3,000,000 shares       |   |              |   |   |              |  
|authorized; no shares outstanding                      |   | -            |   |   | -            |  
|Common shares, no par,
      100,000,000 shares        |   |              |   |   |              |  
|authorized; 61,080,449 and 51,902,189 shares issued    |   |              |   |   |              |  
|and outstanding (Note 8)                               |   | 37,865,435   |   |   | 34,548,292   |  
|Additional paid-in capital                             |   | 523,782      |   |   | 523,782      |  
|Deficit accumulated
      during the exploration stage |   | (36,965,077  | ) |   | (35,153,852  | )
|                                                       |   |              |   |   |              |  
|Total shareholders’
      equity (capital deficit)     |   | 1,424,140    |   |   | (81,778      | )
|                                                       |   |              |   |   |              |  
|                                                       | $ | 2,899,732    |   | $ | 1,084,927    |  

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

---

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

|                                       |   |              |   |   |              |   |   | Cumulative    |  
|-------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------- | -
|                                       |   |              |   |   |              |   |   | Amounts From  |  
|                                       |   |              |   |   |              |   |   | Date of       |  
|                                       |   |              |   |   |              |   |   | Inception     |  
|                                       |   | Year Ended   |   |   | Year Ended   |   |   | (November 21, |  
|                                       |   | December 31, |   |   | December 31, |   |   | 1985) through |  
|                                       |   | 2004         |   |   | 2003         |   |   | December 31,  |  
|                                       |   |              |   |   |              |   |   | 2004          |  
|                                       |   |              |   |   |              |   |   |               |  
|General and administrative expense     | $ | (1,163,069   | ) | $ | (493,657     | ) | $ | (7,618,088    | )
|Asset impairment loss (Note 10)        |   | (345,766     | ) |   | -            |   |   | (28,893,358   | )
|Gain on settlement of debt             |   | -            |   |   | -            |   |   | 136,627       |  
|Abandoned mineral interests            |   | -            |   |   | -            |   |   | (277,251      | )
|                                       |   | (1,508,835   | ) |   | (493,657     | ) |   | (36,652,070   | )
|                                       |   |              |   |   |              |   |   |               |  
|Interest expense                       |   | (294,677     | ) |   | (250,904     | ) |   | (800,774      | )
|Interest income                        |   | 31,262       |   |   | 45           |   |   | 1,112,980     |  
|Net loss                               | $ | (1,772,250   | ) | $ | (744,516     | ) | $ | (36,339,864   | )
|                                       |   |              |   |   |              |   |   |               |  
|Net loss per share – basic and diluted | $ | (0.03        | ) | $ | (0.01        | ) |   |               |  
|                                       |   |              |   |   |              |   |   |               |  
|Weighted average shares outstanding    |   | 59,895,891   |   |   | 51,893,856   |   |   |               |  

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

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company)Consolidated Statements of Changes in Shareholders’ Equity (Capital
  Deficit)
  (U.S. dollars)

|From the Date of Inception (November   | Common     |  |   | Amount    |  |   | Stock        |  |   | Additional |  |   | Deficit           |   |   | Total           |  
|-------------------------------------- | ---------- |  | - | --------- |  | - | ------------ |  | - | ---------- |  | - | ----------------- | - | - | --------------- | -
|21, 1985) through December 31, 2004    | Shares     |  |   |           |  |   | Subscription |  |   | Paid-in    |  |   | Accumulated       |   |   | Shareholders’   |  
|                                       |            |  |   |           |  |   |              |  |   | Capital    |  |   | During the        |   |   | Equity (Capital |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   | Exploration Stage |   |   | Deficit)        |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|November 21, 1985                      |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares for cash     | 1,425,001  |  | $ | 141,313   |  | $ | -            |  | $ | -          |  | $ | -                 |   | $ | 141,313         |  
|Net loss for the year                  | -          |  |   | -         |  |   | -            |  |   | -          |  |   | (15,032           | ) |   | (15,032         | )
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Balance, May 31, 1986                  | 1,425,001  |  |   | 141,313   |  |   | -            |  |   | -          |  |   | (15,032           | ) |   | 126,281         |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares for cash     | 550,000    |  |   | 256,971   |  |   | -            |  |   | -          |  |   | -                 |   |   | 256,971         |  
|Issuance of common shares for mineral  |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|property                               | 25,000     |  |   | 13,742    |  |   | -            |  |   | -          |  |   | -                 |   |   | 13,742          |  
|Net loss for the year                  | -          |  |   | -         |  |   | -            |  |   | -          |  |   | (58,907           | ) |   | (58,907         | )
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Balance, May 31, 1987                  | 2,000,001  |  |   | 412,026   |  |   | -            |  |   | -          |  |   | (73,939           | ) |   | 338,087         |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares for cash     | 1,858,748  |  |   | 1,753,413 |  |   | -            |  |   | -          |  |   | -                 |   |   | 1,753,413       |  
|Net income for the year                | -          |  |   | -         |  |   | -            |  |   | -          |  |   | 38,739            |   |   | 38,739          |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Balance, May 31, 1988                  | 3,858,749  |  |   | 2,165,439 |  |   | -            |  |   |            |  |   | (35,200           | ) |   | 2,130,239       |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares for cash     | 1,328,750  |  |   | 1,814,133 |  |   | -            |  |   | -          |  |   | -                 |   |   | 1,814,133       |  
|Issuance of common shares for mineral  |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|property                               | 100,000    |  |   | 227,819   |  |   | -            |  |   | -          |  |   | -                 |   |   | 227,819         |  
|Net loss for the year                  | -          |  |   | -         |  |   | -            |  |   | -          |  |   | (202,160          | ) |   | (202,160        | )
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Balance, May 31, 1989                  | 5,287,499  |  |   | 4,207,391 |  |   | -            |  |   | -          |  |   | (237,360          | ) |   | 3,970,031       |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares for cash     | 1,769,767  |  |   | 2,771,815 |  |   | -            |  |   | -          |  |   | -                 |   |   | 2,771,815       |  
|Issuance of common shares for mineral  |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|property                               | 8,875      |  |   | 14,855    |  |   | -            |  |   | -          |  |   | -                 |   |   | 14,855          |  
|Net loss for the year                  | -          |  |   | -         |  |   | -            |  |   | -          |  |   | (115,966          | ) |   | (115,966        | )
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Balance, May 31, 1990                  | 7,066,141  |  |   | 6,994,061 |  |   | -            |  |   | -          |  |   | (353,326          | ) |   | 6,640,735       |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Net income for the year                | -          |  |   | -         |  |   | -            |  |   | -          |  |   | 28,706            |   |   | 28,706          |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Balance, May 31, 1991                  | 7,066,141  |  |   | 6,994,061 |  |   | -            |  |   | -          |  |   | (324,620          | ) |   | 6,669,441       |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Net loss for the year                  | -          |  |   | -         |  |   | -            |  |   | -          |  |   | (157,931          | ) |   | (157,931        | )
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Balance, May 31, 1992                  | 7,066,141  |  |   | 6,994,061 |  |   | -            |  |   | -          |  |   | (482,551          | ) |   | 6,511,510       |  
|                                       |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|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  | 128,493    |  |   | 23,795    |  |   | -            |  |   | -          |  |   | -                 |   |   | 23,795          |  
|property                               |            |  |   |           |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|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        | )

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company)Consolidated Statements of Changes in Shareholders’ Equity (Capital
  Deficit)
  (U.S. dollars)

|From the Date of Inception (November    | Common     |  |  | Amount     |  |  | Stock        |   |  | Additional      |   |  | Deficit           |   |  | Total           |  
|--------------------------------------- | ---------- |  |  | ---------- |  |  | ------------ | - |  | --------------- | - |  | ----------------- | - |  | --------------- | -
|21, 1985) through December 31, 2004     | Shares     |  |  |            |  |  | Subscription |   |  | Paid-in Capital |   |  | Accumulated       |   |  | Shareholders’   |  
|                                        |            |  |  |            |  |  |              |   |  |                 |   |  | During the        |   |  | Equity (Capital |  
|                                        |            |  |  |            |  |  |              |   |  |                 |   |  | Exploration Stage |   |  | Deficit)        |  
|                                        |            |  |  |            |  |  |              |   |  |                 |   |  |                   |   |  |                 |  
|Balance, May 31, 1996                   | 16,533,400 |  |  | 20,875,969 |  |  | -            |   |  | -               |   |  | (1,690,977        | ) |  | 19,184,992      |  
|                                        |            |  |  |            |  |  |              |   |  |                 |   |  |                   |   |  |                 |  
|Issuance of common shares for cash      | 18,000     |  |  | 10,060     |  |  | -            |   |  | -               |   |  | -                 |   |  | 10,060          |  
|Issuance of common shares for special   | 5,500,000  |  |  | -          |  |  | -            |   |  | -               |   |  | -                 |   |  | -               |  
|warrants                                |            |  |  |            |  |  |              |   |  |                 |   |  |                   |   |  |                 |  
|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   | 3,500,000  |  |  | -          |  |  | -            |   |  | -               |   |  | -                 |   |  | -               |  
|warrants                                |            |  |  |            |  |  |              |   |  |                 |   |  |                   |   |  |                 |  
|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          | 1,834,300  |  |  | 857,283    |  |  | -            |   |  | -               |   |  | -                 |   |  | 857,283         |  
|exercise of warrants                    |            |  |  |            |  |  |              |   |  |                 |   |  |                   |   |  |                 |  
|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          | -          |  |  | -          |  |  | -            |   |  | (177,644        | ) |  | -                 |   |  | (177,644        | )
|accounting for stock options            |            |  |  |            |  |  |              |   |  |                 |   |  |                   |   |  |                 |  
|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       | 406,250    |  |  | 65,000     |  |  | -            |   |  | -               |   |  | -                 |   |  | 65,000          |  
|conversion of debt                      |            |  |  |            |  |  |              |   |  |                 |   |  |                   |   |  |                 |  
|Issuance of common shares for           | 1,538,462  |  |  | 200,000    |  |  | (200,000     | ) |  | -               |   |  | -                 |   |  | -               |  
|conversion of stock subscription        |            |  |  |            |  |  |              |   |  |                 |   |  |                   |   |  |                 |  
|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         |  

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company)Consolidated Statements of Changes in Shareholders’ Equity (Capital
  Deficit)
  (U.S. dollars)

|From the Date of Inception (November  | Common     |  |   | Amount     |  |   | Stock        |  |   | Additional |  |   | Deficit           |   |   | Total           |  
|------------------------------------- | ---------- |  | - | ---------- |  | - | ------------ |  | - | ---------- |  | - | ----------------- | - | - | --------------- | -
|21, 1985) through December 31, 2004   | Shares     |  |   |            |  |   | Subscription |  |   | Paid-in    |  |   | Accumulated       |   |   | Shareholders’   |  
|                                      |            |  |   |            |  |   |              |  |   | Capital    |  |   | During the        |   |   | Equity (Capital |  
|                                      |            |  |   |            |  |   |              |  |   |            |  |   | Exploration Stage |   |   | Deficit)        |  
|                                      |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares through     | 290,000    |  |   | 37,234     |  |   | -            |  |   | -          |  |   | -                 |   |   | 37,234          |  
|exercise of options                   |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares through     | 1,520,836  |  |   | 243,334    |  |   | -            |  |   | -          |  |   | -                 |   |   | 243,334         |  
|exercise of warrants                  |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|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     | 100,000    |  |   | 24,379     |  |   | -            |  |   | -          |  |   | -                 |   |   | 24,379          |  
|exercise of options (Note 8)          |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Equity component of convertible notes | -          |  |   | -          |  |   | -            |  |   | 375,000    |  |   | -                 |   |   | 375,000         |  
|(Note 7)                              |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Stock option compensation (Note 9)    | -          |  |   | -          |  |   | -            |  |   | 127,326    |  |   | -                 |   |   | 127,326         |  
|Net loss for the year                 | -          |  |   | -          |  |   | -            |  |   | -          |  |   | (744,516          | ) |   | (744,516        | )
|Balance, December 31, 2003            | 51,902,189 |  |   | 34,548,292 |  |   | -            |  |   | 523,782    |  |   | ( 35,153,852      | ) |   | (81,778         | )
|                                      |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares for cash    | 8,000,000  |  |   | 3,036,282  |  |   | -            |  |   | -          |  |   | -                 |   |   | 3,036,282       |  
|Issuance of common shares for         | 978,260    |  |   | 225,000    |  |   | -            |  |   | -          |  |   | -                 |   |   | 225,000         |  
|convertible notes (Note 7)            |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|Issuance of common shares through     | 200,000    |  |   | 55,861     |  |   | -            |  |   | -          |  |   | -                 |   |   | 55,861          |  
|exercise of options (Note 8)          |            |  |   |            |  |   |              |  |   |            |  |   |                   |   |   |                 |  
|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       |  

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

---

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

|                                     |   |              |   |   |              |   |   | Cumulative Amounts     |  
|------------------------------------ | - | ------------ | - | - | ------------ | - | - | ---------------------- | -
|                                     |   |              |   |   |              |   |   | From Date of Inception |  
|                                     |   | Year Ended   |   |   | Year Ended   |   |   | (November 21, 1985)    |  
|                                     |   | December 31, |   |   | December 31, |   |   | through December 31,   |  
|                                     |   | 2004         |   |   | 2003         |   |   | 2004                   |  
|Operating activities                 |   |              |   |   |              |   |   |                        |  
|Net loss                             | $ | (1,772,250   | ) | $ | (744,516     | ) | $ | (36,339,864            | )
|Adjustments to reconcile net         |   |              |   |   |              |   |   |                        |  
|loss to
      cash used in operating |   |              |   |   |              |   |   |                        |  
|activities:                          |   |              |   |   |              |   |   |                        |  
|Asset impairment loss                |   | 345,766      |   |   | -            |   |   | 28,893,358             |  
|Abandoned mineral interests          |   | -            |   |   | -            |   |   | 277,251                |  
|Amortization and depreciation        |   | 12,187       |   |   | 14,303       |   |   | 417,435                |  
|Amortization of debt discount        |   | 196,000      |   |   | 179,000      |   |   | 375,000                |  
|Gain on disposition of               |   |              |   |   |              |   |   |                        |  
|property and equipment               |   | -            |   |   | -            |   |   | (10,032                | )
|Stock option compensation            |   |              |   |   |              |   |   |                        |  
|(Note 9)                             |   | -            |   |   | 127,326      |   |   | 148,782                |  
|Changes in assets and liabilities:   |   |              |   |   |              |   |   |                        |  
|Receivables                          |   | (15,464      | ) |   | (1,443       | ) |   | (20,332                | )
|Prepaid
      expenses and other     |   |              |   |   |              |   |   |                        |  
|current
      assets                 |   | 217          |   |   | (1,625       | ) |   | (110,725               | )
|Accounts payable and accrued         |   |              |   |   |              |   |   |                        |  
|liabilities                          |   | 10,129       |   |   | 35,420       |   |   | 88,748                 |  
|Royalty and mining rights            |   |              |   |   |              |   |   |                        |  
|payable                              |   | 25,000       |   |   | 25,000       |   |   | 172,484                |  
|                                     |   |              |   |   |              |   |   |                        |  
|Cash used in operating activities    |   | (1,198,415   | ) |   | (366,535     | ) |   | (6,107,895             | )
|                                     |   |              |   |   |              |   |   |                        |  
|Investing activities:                |   |              |   |   |              |   |   |                        |  
|Deferred exploration and             |   |              |   |   |              |   |   |                        |  
|development expenditures             |   | -            |   |   | -            |   |   | (22,395,449            | )
|Purchase of mineral properties       |   | -            |   |   | -            |   |   | (5,268,409             | )
|Deposits on mineral properties       |   | -            |   |   | -            |   |   | (1,017,551             | )
|Purchase of reclamation bonds        |   | (572,260     | ) |   | -            |   |   | (572,260               | )
|Purchase of property and             |   |              |   |   |              |   |   |                        |  
|equipment                            |   | -            |   |   | -            |   |   | (1,313,838             | )
|Proceeds from sale of property       |   |              |   |   |              |   |   |                        |  
|and equipment                        |   | -            |   |   | -            |   |   | 47,153                 |  
|                                     |   |              |   |   |              |   |   |                        |  
|Cash used in investing activities    |   | (572,260     | ) |   | -            |   |   | (30,520,354            | )
|                                     |   |              |   |   |              |   |   |                        |  
|Financing activities:                |   |              |   |   |              |   |   |                        |  
|Borrowing under long-term debt       |   | -            |   |   | -            |   |   | 3,766,502              |  
|Payment of long-term debt            |   | (43,008      | ) |   | (5,479       | ) |   | (1,235,626             | )
|Proceeds from convertible debt       |   | -            |   |   | 375,000      |   |   | 440,000                |  

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

---

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

|                                         |   |              |   |   |              |  |   | Cumulative Amounts  |  
|---------------------------------------- | - | ------------ | - | - | ------------ |  | - | ------------------- | -
|                                         |   |              |   |   |              |  |   | From Date of        |  
|                                         |   | Year Ended   |   |   | Year Ended   |  |   | Inception (November |  
|                                         |   | December 31, |   |   | December 31, |  |   | 21, 1985) through   |  
|                                         |   | 2004         |   |   | 2003         |  |   | December 31, 2004   |  
|                                         |   |              |   |   |              |  |   |                     |  
|Issuance of common shares
      for cash |   | 3,092,143    |   |   | 24,379       |  |   | 16,683,992          |  
|Share issuance costs                     |   | (38,975      | ) |   | -            |  |   | (625,213            | )
|Issuance of special warrants             |   | -            |   |   | -            |  |   | 18,091,667          |  
|Issuance of common shares upon           |   |              |   |   |              |  |   |                     |  
|exercise
      of warrants               |   | -            |   |   | -            |  |   | 857,283             |  
|                                         |   |              |   |   |              |  |   |                     |  
|Cash provided by financing activities    |   | 3,010,160    |   |   | 393,900      |  |   | 37,978,605          |  
|                                         |   |              |   |   |              |  |   |                     |  
|Net change in cash and cash              |   |              |   |   |              |  |   |                     |  
|equivalents                              |   | 1,239,485    |   |   | 27,365       |  |   | 1,350,356           |  
|                                         |   |              |   |   |              |  |   |                     |  
|Cash and cash equivalents,               |   |              |   |   |              |  |   |                     |  
|beginning balance                        |   | 110,871      |   |   | 83,506       |  |   | -                   |  
|                                         |   |              |   |   |              |  |   |                     |  
|Cash and cash equivalents,               |   |              |   |   |              |  |   |                     |  
|ending balance                           | $ | 1,350,356    |   | $ | 110,871      |  | $ | 1,350,356           |  
|                                         |   |              |   |   |              |  |   |                     |  
|Supplemental disclosures of cash         |   |              |   |   |              |  |   |                     |  
|flow information:                        |   |              |   |   |              |  |   |                     |  
|                                         |   |              |   |   |              |  |   |                     |  
|Cash paid during period for:             |   |              |   |   |              |  |   |                     |  
|Interest                                 | $ | 98,677       |   | $ | 59,716       |  | $ | 1,064,253           |  
|Income taxes                             | $ | -            |   | $ | -            |  | $ | -                   |  
|                                         |   |              |   |   |              |  |   |                     |  
|Non-cash financing and                   |   |              |   |   |              |  |   |                     |  
|investing activities:                    |   |              |   |   |              |  |   |                     |  
|Stock option compensation (Note
      9) | $ | -            |   | $ | 127,326      |  | $ | 148,782             |  
|Exchange of notes for common             |   |              |   |   |              |  |   |                     |  
|shares                                   | $ | -            |   | $ | -            |  | $ | 1,727,282           |  
|Exchange of note for future              |   |              |   |   |              |  |   |                     |  
|royalty
      payments                   | $ | -            |   | $ | -            |  | $ | 150,000             |  
|Common shares issued for mineral         |   |              |   |   |              |  |   |                     |  
|property                                 | $ | -            |   | $ | -            |  | $ | 280,211             |  
|Mineral property acquired                |   |              |   |   |              |  |   |                     |  
|through
      the issuance of long-      |   |              |   |   |              |  |   |                     |  
|term debt                                | $ | -            |   | $ | -            |  | $ | 1,084,833           |  
|Common shares issued upon                |   |              |   |   |              |  |   |                     |  
|conversion of convertible debt           |   |              |   |   |              |  |   |                     |  
|(Note 7)                                 | $ | 225,000      |   | $ | -            |  | $ | 225,000             |  
|Asset retirement obligations             | $ | 345,766      |   | $ | -            |  | $ | 345,766             |  

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

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company)Summary of Accounting Policies(U.S. dollars)

Nature of Business. Golden Queen Mining Co. Ltd. (“Golden
  Queen” or the “Company”) is engaged in acquiring and maintaining
  gold mining properties for exploration, future development and production. The
  Company was formed on November 21, 1985. Since its inception, the Company has
  been in the exploration stage. Planned activities involve bringing to production
  a precious metals mine located in Kern County, California.

Principles of Consolidation.These consolidated financial
  statements include the accounts of Golden Queen, a British Columbia corporation,
  and its wholly-owned subsidiary, Golden Queen Mining Company, Inc. (the “Subsidiary”),
  a United States (State of California) corporation. The underlying value of the
  Company’s mineral properties and related deferred exploration and development
  expenditures is dependent on the existence and economic recovery of mineral
  reserves, confirmation of the Company’s interest in the underlying mineral
  claims, the ability to obtain necessary financing to complete the development,
  and future profitable production or proceeds from the disposition thereof.

Generally Accepted Accounting Principles. The consolidated
  financial statements have been prepared in accordance with accounting principles
  generally accepted in the United States of America. Differences from Canadian
  generally accepted accounting principles are disclosed in Note 13.

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

Property and Equipment.Property and equipment are
  stated at the lower of cost or net realizable value. Depreciation is provided
  by the straight-line method over the estimated service lives of the respective
  assets, which range from 5 to 30 years, as follows:

|Buildings              | 5%      
|---------------------- | --------
|Furniture and Fixtures | 20%     
|Equipment              | 20%     
|Automobiles            | 20 – 33%
|Rental Properties      | 3.3%    

Mineral Properties.Mineral properties includes the
  cost of advance minimum royalty payments, the cost of capitalized property leases,
  payments in shares, and the cost of property acquired either by cash payment
  or the issuance of term debt. Expenditures for exploration and development on
  specific properties with proven reserves are also capitalized. These 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.

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

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company)Summary of Accounting Policies(U.S. dollars)

Foreign Currency Translation.Golden Queen has adopted
  the United States dollar as its reporting currency for its financial statements
  prepared after May 21, 1996 as the United States dollar is the currency of the
  primary economic environment in which Golden Queen and the Subsidiary conduct
  business and is considered the appropriate functional currency for the Company’s
  operations. Balances held in Canadian dollars are re-measured into the functional
  currency in accordance with SFAS No. 52, “Foreign Currency Translation,”
  (“SFAS 52”). Assets and liabilities in foreign currencies are generally
  translated into dollars at the rates 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, 2004 and December 31, 2003 were $1.20 and
  $1.30, respectively stated in Canadian dollars per one U.S. dollar. The
  average rates of exchange during the years ended December 31, 2004 and December
  31, 2003 were $1.30 and $1.40 respectively.

Net Loss Per Share.The Company computes and discloses
  earnings and loss per share in accordance with SFAS No. 128, “Earnings
  per Share” (“SFAS 128”), which requires dual presentation
  of basic earnings per share and diluted earnings per share on the face of all
  income statements presented for all entities with complex capital structures.
  Basic earnings per share is computed as net income (loss) divided by the weighted
  average number of common shares outstanding for the period. Diluted earnings
  per share reflects the potential dilution that could occur from common shares
  issuable through stock options, warrants and convertible debt. Since the Company’s
  convertible debt, stock options and warrants are antidilutive for all periods
  presented, only basic earnings per share is presented. A total of 11,322,610
  and 4,800,870 common shares were issuable pursuant to such stock options, warrants,
  and convertible debt at December 31, 2004 and 2003, respectively.

Asset Retirement Obligations: Effective January 1,
  2003, the Company retroactively adopted SFAS No. 143, “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.

Estimates.The preparation of financial statements
  in conformity with generally accepted accounting principles 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. Actual
  results could differ from those estimates.

Fair Value of Financial Instruments.The carrying amount
  reported in the balance sheets for cash and cash equivalents, receivables, accounts
  payable and accrued expenses approximates fair value because of the immediate
  or short-term maturity of these financial instruments. The fair value of the
  reclamation bond and the long-term debt approximate carrying value because the
  stated interest rates reflect recent market conditions or because the rates
  are variable in nature. The fair value of the convertible notes is note practical
  to determine.

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company)Summary of Accounting Policies(U.S. dollars)

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

SFAS No. 123 requires the Company to provide pro-forma information
  regarding net income (loss) as if compensation cost for the stock options granted
  to the Company’s employees had been determined in accordance with the
  fair value based method prescribed in SFAS No. 123. The value of stock options
  granted to non-employees is recognized in these financial statements as compensation
  expense under SFAS No. 123 using the Black-Scholes option pricing model.

Related pro-forma information as required by SFAS No. 123
  (see Note 9 for further information) has been disclosed in accordance with SFAS
  No. 148 as follows:

|                                                           |   | 2004       |   |   | 2003     |  
|---------------------------------------------------------- | - | ---------- | - | - | -------- | -
|                                                           |   |            |   |   |          |  
|Net loss, as reported                                      | $ | (1,722,250 | ) | $ | (744,516 | )
|Add: Stock-based compensation expense included in reported |   |            |   |   |          |  
|net loss                                                   |   | -          |   |   | 127,326  |  
|Deduct: Total stock-based compensation expense determined  |   |            |   |   |          |  
|under fair-value
      based method for all rewards        |   | -          |   |   | (280,117 | )
|                                                           |   |            |   |   |          |  
|Pro-forma net loss                                         | $ | (1,772,250 | ) | $ | (897,307 | )
|Loss per share                                             |   |            |   |   |          |  
|Basis and diluted
      – as reported                      | $ | (0.03      | ) | $ | (0.01    | )
|Basis and diluted
      – pro-forma                        | $ | (0.03      | ) | $ | (0.02    | )

New Accounting Pronouncements. On December 16, 2004,
  the Financial Accounting Standards Board (“FASB”) issued (“SFAS”)
  No. 123 (revised 2004), “Share-Based Payment.” SFAS No. 123(R) requies
  the Company to measure all employee stock-based compensation awards using a
  fair value method and record such expense in its consolidated financial statements.
  In addition, SFAS No. 123(R) requires additional accounting related to the income
  tax effects and additional disclosure regarding the cash flow effects resulting
  from share-based payment arrangements. For public entities that file as a small
  business issuer, SFAS No. 123(R) is effective for the first interim or annual
  reporting period beginning after December 15, 2005.

In December 2004, FASB issued SFAS No. 153 to amend Opinion
  29 by eliminating the exception for non-monetary exchanges of similar productive
  assets and replaces it with a general exception for exchanges of non-monetary
  assets that do not have commercial substance. A non-monetary exchange is defined
  to have commercial substance if the future cash flows of the entity are expected
  to change significantly as a result of the exchange.

In March 2004, the Emerging Issues Task Force issued EITF
  04-02, “Whether Mineral Rights are Tangible or Intangible Assets”
  (EITF 04-2). The Task Force reached a consensus that mineral rights are tangible
  assets. In April 2004, the FASB issued FASB Staff Positions (FSPs) FAS 141-1
  and FAS 142-1, “Interaction of FASB Statements No. 141”, Business
  Combinations (SFAS 141), and No. 142, “Goodwill and Other Intangible Assets”
  (SFAS 142), and EITF Issue No. 04-02, “Whether Mineral Rights are Tangible
  or Intangible Assets.” The FSPs amend SFAS 141 and 142 to conform them
  to the Task Force consensus. The FSP and EITF 04-2 are effective for the first
  reporting period beginning after April 29, 2004.

The Company is assessing the effect the implementation of
  these standards will have on the Company’s financial statements.

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

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

The Company has had no revenues from operations since inception,
  and has a deficit of $36,965,077 accumulated during the exploration stage.

The Company has been unable to successfully renegotiate payment
  schedules with all landowners, and has been unable to obtain the necessary financing
  to complete current development activities or exit the exploration stage.

Management plans to control current costs and does not anticipate
  requiring additional financing to fund Company activities over the next 12 months.
  In addition, management plans to secure equity and/or debt or joint venture
  financing to fund construction of the operating facility at the Soledad Property
  (“Soledad”) once the feasibility study has been concluded and a
  production decision has been made.

The ability of the Company to obtain financing for its ongoing
  activities and thus maintain solvency or to fund construction of the operation
  facility at Soledad, is dependent on equity market conditions, the market for
  precious metals, the willingness of other parties to lend the Company money
  or the ability to find a joint venture partner. While the Company has been successful
  at certain of these efforts in the past, there can be no assurance that current
  efforts will be successful. This raises substantial doubt about the Company’s
  ability to continue as a going concern.

These financial statements do not reflect the outcome of these
  uncertainties.

2. Property and Equipment.

|Property and equipment consists of: |   |                   |   |   |                   |  
|----------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                    |   | December 31, 2004 |   |   | December 31, 2003 |  
|                                    |   |                   |   |   |                   |  
|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, gross       |   | 417,486           |   |   | 417,486           |  
|                                    |   |                   |   |   |                   |  
|Less accumulated depreciation       |   | (167,204          | ) |   | (155,017          | )
|                                    |   |                   |   |   |                   |  
|Property and equipment, net         | $ | 250,282           |   | $ | 262,469           |  

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

3. Mineral Properties.

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

|                                                  |   | December 31, 2004 |   |   | December 31, 2003 |  
|------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                                  |   |                   |   |   |                   |  
|Deferred exploration and development expenditures | $ | 21,015,506        |   | $ | 21,015,506        |  
|                                                  |   |                   |   |   |                   |  
|Properties                                        |   | 4,113,738         |   |   | 4,113,738         |  
|                                                  |   |                   |   |   |                   |  
|Advance minimum royalty                           |   | 2,387,574         |   |   | 2,387,574         |  
|                                                  |   |                   |   |   |                   |  
|Asset retirement obligations                      |   | 345,766           |   |   | -                 |  
|                                                  |   |                   |   |   |                   |  
|Asset impairment loss                             |   | (27,179,897       | ) |   | (26,834,131       | )
|                                                  |   |                   |   |   |                   |  
|Total                                             | $ | 682,687           |   | $ | 682,687           |  

As at December 31, 2004, the Company had a reclamation deposit
  with the County of Kern totaling $572,260 (2003 - $Nil). This deposit
  earns interest at 1.875% per annum and is not available for working capital
  purposes.

4. Other Assets.

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

The Company anticipated its inability to make the extension
  payment scheduled for July 1, 2001, and on August 10, 2001, signed a second
  amendment to the original stock purchase agreement. This amendment suspends
  all terms and obligations of the Company as set forth in the original agreement
  and the first amendment. Further, the amendment requires the Company to recognize
  a liability of $35,000, on or before July 1, 2001, and on each successive
  anniversary date for up to five years. To extend the termination date of the
  agreement, $10,000 of the liability is to be paid in cash, and the balance
  of $25,000 is to be accrued, without interest, payment of which is deferred
  until the final stock purchase payment is made. Each July, beginning in 2001,
  the Company has made the required cash payments of $10,000, accrued the
  liability balances of $25,000, and extended the termination date of the
  agreement by one year, each year, with the current termination date of the agreement
  being July 1, 2006.

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

4. Other Assets. - Continued

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

5. Income Taxes.

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

|                                                  |   | 2004        |   |   | 2003        |  
|------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                  |   |             |   |   |             |  
|Net operating and capital losses                  | $ | 7,330,000   |   | $ | 8,038,000   |  
|Property, plant and equipment                     |   | 308,000     |   |   | 317,000     |  
|Mineral properties and deferred exploration costs |   | 2,507,000   |   |   | 2,678,000   |  
|Asset retirement obligations                      |   | (117,000    | ) |   | -           |  
|Undeducted financing costs                        |   | 11,000      |   |   | -           |  
|Valuation allowance                               |   | (10,039,000 | ) |   | (11,033,000 | )
|                                                  |   |             |   |   |             |  
|Future tax assets (liabilities)                   | $ | -           |   | $ | -           |  

The tax benefit of net operating losses carried forward and
  the associated valuation allowance were reduced by $3,873,000 (2003 - $179,000),
  representing the tax effect of losses which expired in the year.

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

|                                                     |   | 2004     |   |   | 2003       |  
|---------------------------------------------------- | - | -------- | - | - | ---------- | -
|                                                     |   |          |   |   |            |  
|Income benefit at US statutory rate                  | $ | (602,000 | ) | $ | (253,000   | )
|Foreign income taxes at other than US statutory rate |   | (15,000  | ) |   | (7,000     | )
|Permanent differences                                |   | 187,000  |   |   | 64,000     |  
|Non-deductible stock option compensation             |   | -        |   |   | 45,000     |  
|Effect of reduction in statutory rate                |   | -        |   |   | 1,814,000  |  
|Increase (decrease) in valuation allowance           |   | 430,000  |   |   | (1,663,000 | )
|                                                     |   |          |   |   |            |  
|Future income tax recovery                           | $ | -        |   | $ | -          |  

The Company’s future tax assets include approximately
  $40,500 (2003 - $Nil) 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 Statement of Operations.

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

5. Income Taxes. - Continued

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, 2004 and December 31, 2003.

As at December 31, 2004, the Company had net operating loss
  carry-forwards available to reduce taxable income in future years as follows:

|Country                 | Amount      | Expiration Dates
|----------------------- | ----------- | ----------------
|                        |             |                 
|United States - Federal | $19,275,000 | 2005 - 2023     
|                        |             |                 
|United States - AMT     | $19,029,000 | 2005 - 2023     
|                        |             |                 
|Canada ($C)             | $2,836,000  | 2005 - 2014     

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

6. Long-Term Debt.

Long-term debt consists of the following:

|                                                          |   | December 31, 2004 |  |   | December 31, 2003
|--------------------------------------------------------- | - | ----------------- |  | - | -----------------
|Note due to a corporation, payable in monthly             |   |                   |  |   |                  
|installments of $9,275,
      including interest at prime |   |                   |  |   |                  
|plus 2% estimated to mature in July
      2013 and        |   |                   |  |   |                  
|collateralized by mineral property.
      *               | $ | 718,594           |  | $ | 745,548          
|                                                          |   |                   |  |   |                  
|Note due an individual, payable in monthly                |   |                   |  |   |                  
|installments of $600 including
      interest at 9%,      |   |                   |  |   |                  
|maturing June 2006, collateralized
      by mineral       |   |                   |  |   |                  
|property and repaid in 2004.                              |   | -                 |  |   | 16,054           
|                                                          |   |                   |  |   |                  
|Total long-term debt                                      |   | 718,594           |  |   | 761,602          
|Current maturities                                        |   | 30,222            |  |   | 751,542          
|                                                          |   |                   |  |   |                  
|Long-term debt, less current maturities                   | $ | 688,372           |  | $ | 10,060           

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

6. Long-Term Debt. - Continued

|* | In June of 2000, an agreement effective September
        30, 2000 was signed by the note holder which allowed for the deferment
        of principal and interest payments on the note in exchange for monthly
        payments of $4,000 over a period of three years or until the Company
        obtains production financing, whichever is sooner. These payments were
        reflected under interest expense in the financial statements. The Company
        continued making $4,000 per month payments through February 2004.
        In April 2004, the Company made a lump sum payment equal to four monthly
        payments on the original note plus late payment interest charges per the
        agreement, after which the Company was no longer in default in connection
        with its payments. In May 2004, the Company began making principal and
        interest payments of $9,275 per month according to the terms of the
        original agreement. The following schedule shows the maturity of the debts
        under the continuing agreement:
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Year ending December 31, |            | Amount |        
|------------------------ | ---------- | ------ | -------
|                         |            |        |        
|                         | 2005       | $      | 30,222 
|                         | 2006       |        | 33,886 
|                         | 2007       |        | 37,995 
|                         | 2008       |        | 42,603 
|                         | 2009       |        | 47,769 
|                         | Thereafter |        | 526,119
|                         |            | $      | 718,594

7. Convertible Notes.

In July 2003, the Company issued convertible promissory notes
  for aggregate proceeds of $375,000 to three independent parties. The notes
  are due on demand, bearing interest at the rate of 6.5% per annum and convertible
  into 1,630,435 units at a rate of $0.23. Each unit consists of one common
  share and one non-transferable detachable share purchase warrant entitling the
  holder to purchase one additional common share of the Company at an exercise
  price of $0.32, exercisable for two years. Interest has been and will be
  waived on conversion. In June 2004, 978,260 units with a $225,000 face value
  were converted into common shares, leaving 652,175 units outstanding at December
  31, 2004.

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

|Expected dividend yield         | 0.00%  
|------------------------------- | -------
|Expected stock price volatility | 181%   
|Risk-free interest rate         | 1.37%  
|Expected life of warrants       | 2 years

The equity component was amortized to interest expense on
  a straight-line basis over the original term of the convertible promissory notes.
  Included in operations for the year ended December 31, 2004 was $196,000
  (2003 - $179,000) in interest expense related to the amortization of the
  equity component on the convertible promissory notes.

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars) )

7. Convertible Notes. - Continued

The convertible promissory notes are summarized as follows:

|                                 |   | Face     |   |   |          |   |   | Carrying |  
|-------------------------------- | - | -------- | - | - | -------- | - | - | -------- | -
|                                 |   | Amount   |   |   | Discount |   |   | Value    |  
|Issuance in 2003                 | $ | 375,000  |   | $ | (375,000 | ) | $ | -        |  
|Amortization of equity component |   | -        |   |   | 179,000  |   |   | 179,000  |  
|Balance, December 31, 2003       | $ | 375,000  |   | $ | (196,000 | ) |   | 179,000  |  
|Amortization of equity component |   | -        |   |   | 196,000  |   |   | 196,000  |  
|Conversion of notes              |   | (225,000 | ) |   | -        |   |   | (225,000 | )
|Balance, December 31, 2004       | $ | 150,000  |   | $ | -        |   | $ | 150,000  |  

8. Common Shares.

In January 2004, the Company entered into private placement
  agreements with 10 independent investors to issue an aggregate of 8,000,000
  units at C$0.50 per unit for gross proceeds of US$3,036,282 (C$4,000,000).
  Each unit was comprised of one share and one share purchase warrant. Each warrant
  entitles the holder to purchase during a two year period one common share at
  a price of C$0.62 in the first year and C$0.75 in the second year.

In 2004, three shareholders exercised an aggregate of 200,000
  options for common shares ranging from C$0.20 to C$0.50 per share for
  net proceeds of US$55,861 (C$68,750).

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

The following is a summary of warrant activity during the
  years ended December 31, 2004 and 2003:

|                                        | Year Ended        | Year Ended       
|--------------------------------------- | ----------------- | -----------------
|                                        | December 31, 2004 | December 31, 2003
|                                        | Shares            | Price Range      
|Warrants outstanding, beginning of year | -                 | -                
|Warrants granted                        | 8,978,260         | C$0.38-0.75      
|Warrants outstanding, end of year       | 8,978,260         | C$0.38-0.75      
|Warrants exercisable                    | 8,978,260         | C$0.38-0.75      

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

8. Common Shares. - Continued

The following table summarizes information about warrants
  outstanding at December 31, 2004:

|                |             | Warrants Outstanding | Warrants Exercisable
|--------------- | ----------- | -------------------- | --------------------
|                |             | Average              |                     
|                | Number      | Contractual Life     | Average             
|Range of Prices | Outstanding | (Years)              | Exercise
      Price
|C$0.62-$0.75    | 8,000,000   | 1.07                 | C$0.69              
|U$0.32          | 978,260     | 0.52                 | U$0.32              
|C$0.38 - $0.75  | 8,978,260   | 0.77                 | C$0.52              

*These warrants have an exercise price of C$0.62 if exercised
  in the first year and C$0.75 if exercised in the second year. These warrants
  have a two year life and expire on January 27, 2006.

9. Stock Option Plan.

Under its amended 1996 stock option plan, the Company may
  grant options to purchase up to 3,300,000 shares of common stock to officers,
  directors and employees. The exercise price for all stock options is the closing
  price of the Company’s common shares in Canadian dollars as traded on
  the Toronto Stock Exchange on the date of grant. Options issued to directors
  vest immediately. For all other options, the right to exercise vests over a
  two year period in equal increments on the date of grant and on each of the
  first two anniversaries of such date. All stock options granted and outstanding
  as at December 31, 2004 expire at a date determined by the Company’s Board
  of Directors, not exceeding five years from the date of grant, or after 39 months
  from the date of grant if not specified.

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

The following is a summary of stock option activity during
  the years ended December 31, 2004 and 2003:

|                                       | Year Ended        | Year Ended       
|-------------------------------------- | ----------------- | -----------------
|                                       | December 31, 2004 | December 31, 2003
|                                       | Shares            |                  
|Options outstanding, beginning of year | 1,540,000         |                  
|Options granted                        | -                 |                  
|Options exercised                      | (200,000          | )                
|Options expired / cancelled            | (300,000          | )                
|Options outstanding, end of year       | 1,040,000         |                  
|Options exercisable                    | 1,040,000         |                  

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

9. Stock Option Plan. - Continued

The following table summarizes information about stock options
  outstanding at December 31, 2004:

|                |             | Options Outstanding | Options Exercisable
|--------------- | ----------- | ------------------- | -------------------
|                |             | Weighted-           | Weighted-          
|                | Number      | Average             | Average            
|Range of Prices | Outstanding | Contractual Life    | Exercise Price     
|                |             | (Years)             |                    
|C$0.50          | 290,000     | 2.35                | C$0.50             
|C$0.23          | 110,000     | 0.10                | C$0.23             
|C$0.13          | 90,000      | 1.93                | C$0.13             
|C$0.55          | 550,000     | 1.10                | C$0.55             
|C$0.13 - $0.55  | 1,040,000   | 1.41                | C$0.47             

*Subsequent to the year ended December 31, 2004, two directors
  exercised 110,000 stock options at C$0.23 per share on February 4, 2005
  for net proceeds of US$21,048 (C$25,300).

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

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

Subsequent to the year ended December 31, 2004, the Company
  granted 1,200,000 stock options to four directors on February 1, 2005. The options
  are exercisable at C$0.35 per share and expire on February 1, 2010.

No additional compensation costs were recorded for the modification
  of the exercise price for the options granted in 2003 as the market value of
  the Company’s stock on the date of the modification and at year end was
  less than the amended exercise price of the options.

The Company estimates the fair value of each stock option
  at the grant date by using the Black-Scholes options-pricing model with the
  following weighted-average assumptions used for grants in 2003: no dividend
  yield and weighted average expected option life of 3 years; expected weighted
  average volatility of 227%; and weighted average risk-free interest rate of
  3.81% . No stock options were granted by the Company during 2004.

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

9. Stock Option Plan. - Continued

Based on the above assumptions, the fair value of options
  issued during 2004 and 2003 was $Nil ($Nil per share) and $280,117
  ($0.51 per share) respectively. During 2004, the Company, using the Black-Scholes
  option-pricing model with the above-noted assumptions estimated the fair value
  of stock options granted for non-director services as $Nil (2003 - $127,326)
  which was recognized as compensation expense in the Statement of Loss.

10. Asset Retirement Obligations

The Company adopted SFAS No. 143, “Accounting for Asset
  Retirement Obligations” as at January 1, 2003. At that time, the Company
  estimated that the costs of the reclamation of Soledad as nominal. As a result,
  no asset retirement liability was accrued as at January 1, 2003. During 2004,
  the Company received additional information regarding the required reclamation
  and clean-up activities and increased its estimated costs by approximately $399,000,
  which is expected to be incurred evenly over 3 years commencing when production
  is completed and Soledad is closed. This change in estimate resulted in the
  recognition of additional asset retirement obligations and a corresponding capitalization
  to the resource property as at December 31, 2004 of $345,766, being the
  discounted present value of the estimated reclamation costs. At the end of the
  year, the Company evaluated the future recoverability of its resource property
  and wrote down the carrying amount of the resource property by the full amount
  of the additional asset retirement obligations of $345,766. The asset retirement
  obligation accrual required management to make significant estimates and assumptions.
  Actual results could materially differ from these estimates

11. Commitments and Contingencies.

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

Agreements are typically subject to sliding scale royalties
  on net smelter returns and these range from 1 % to 7.5 %.

The Company has agreed to issue 100,000 common shares upon
  commencement of commercial production on Soledad in connection with certain
  property acquisitions.

In October 2000, the Company ceased making property payments
  and advance, minimum royalty payments after successfully concluding moratorium
  agreements with a number of the landowners. The moratorium agreements typically
  had a term of three years and these have now expired. After the expiration of
  the moratorium agreements the Company reached an agreement with a landowner
  and is making lease payments of $10,000 per year to this landowner. The
  Company is also making advance minimum royalty payments of $100,000 per
  year to another landowner and these advance payments will be applied against
  any future production royalties. The Company is technically in default of certain
  non-material agreements but is not currently in litigation with any landowner.

The Company will continue to work with its landowners in 2005.
  While the Company has successfully reached agreement with its landowners in
  the past, there can be no assurance that such agreement will continue into the
  future.

In 2004, 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 Soledad into commercial production, a bonus of 150,000
  common shares is to be issued. Upon commencement of commercial production on
  Soledad, a bonus of 150,000 common shares is to be issued. As at December 31,
  2004, the milestones had not been reached and no accrual was made in connection
  with these arrangements.

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

12. Related Party Transactions.

For the year ended December 31, 2004, $82,600 (2003 -
  $49,009) was paid to Mr. H. L. Klingmann for services as President of the
  Company, and $5,800 (2003 - $5,400) was paid to Mr. Chester Shynkaryk
  for consulting services to the Company. No other compensation was paid or given
  during the year for services rendered by the directors in such capacity, and
  no additional amounts were payable at year-end under any standard arrangements
  for committee participation or special assignments.

For the year ended December 31, 2004, $6,600 (2003 - $Nil)
  was owed and included in accounts payable to Mr. H. L. Klingmann for services
  as President of the Company.

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.

13. Canadian GAAP Reconciliation

The Company prepares its consolidated financial statements
  in accordance with accounting principles generally accepted in the United States
  (“U.S. GAAP”), which differ in certain respects from the principles
  that the Company would have followed had its consolidated financial statements
  been prepared in accordance with accounting principles generally accepted in
  Canada (“Canadian GAAP”). The major measurement differences between
  the U.S. and Canadian GAAP and their effects on the consolidated financial statements
  are provided below.

The amounts in the consolidated statement of loss that differ
  significantly from those reported under U.S. GAAP are as follows:

|                                           |   | 2004       |   |   | 2003     |  
|------------------------------------------ | - | ---------- | - | - | -------- | -
|                                           |   |            |   |   |          |  
|Net loss per US GAAP                       | $ | (1,772,250 | ) | $ | (744,516 | )
|Adjustments related to:                    |   |            |   |   |          |  
|Asset retirement obligation (b)            |   | 345,766    |   |   | -        |  
|Accretion expense (b)                      |   | (16,073    | ) |   | (13,286  | )
|                                           |   |            |   |   |          |  
|Net loss per Canadian GAAP                 | $ | (1,442,557 | ) | $ | (757,802 | )
|                                           |   |            |   |   |          |  
|Loss per share per Canadian GAAP           |   |            |   |   |          |  
|Basic and diluted                          | $ | (0.02      | ) | $ | (0.01    | )
|                                           |   |            |   |   |          |  
|Shareholders’ equity (capital deficit) per | $ | 1,424,140  |   | $ | (81,778  | )
|US GAAP                                    |   |            |   |   |          |  
|Adjustment related to:                     |   |            |   |   |          |  
|Asset retirement obligation (b)            |   | -          |   |   | (329,693 | )
|                                           |   |            |   |   |          |  
|Shareholders’ equity (capital deficit) per | $ | 1,424,140  |   | $ | (411,471 | )
|Canadian GAAP                              |   |            |   |   |          |  

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

13. Canadian GAAP Reconciliation – Continued

(a) Stock option compensation

The Company has adopted the disclosure requirements of SFAS
  No. 123, Accounting for Stock-Based Compensation (“SFAS 123”) and
  as permitted under SFAS 123, applies Accounting Principles Board Opinion No.
  25, Accounting for Stock Issued to Employees (“APB 25”) and related
  interpretations in accounting for its stock option plans. SFAS No. 148, Accounting
  for Stock-Based Compensation – Transition and Disclosure – an amendment
  of FASB Statement No. 123, requires disclosure of pro forma amounts to reflect
  the impact if the Company had elected to adopt the optional recognition provisions
  of SFAS 123 for its stock option plans and employee stock purchase plans.

Under Canadian GAAP, the Canadian Institute of Chartered Accountants
  (“CICA”) Section 3870 (“CICA 3870”), issued in December
  2001, established standards for the recognition, measurement and disclosure
  of stock-based compensation, and other stock-based payments. Under the provisions
  of CICA 3870, prior to January 1, 2004, companies could either measure the compensation
  cost of equity instruments issued under employee compensation plans using a
  fair value-based method or could recognize compensation cost using another method,
  such as the intrinsic value-based method. However, if another method was applied,
  pro forma disclosure of net income or loss and earnings or loss per share was
  required in the financial statements as if the fair value-based method had been
  applied. Effective January 1, 2004, CICA 3870 requires that all stock-based
  compensation be measured and expensed using a fair value-based methodology.

Prior to the accounting change in 2004 the Company accounted
  for all stock-based compensation issued on or after July 1, 2002 to non-employees
  using the fair value based method and the intrinsic method for stock-based awards
  granted to employees. Under the intrinsic method, the Company did not recognize
  any compensation expense for stock-based awards to employees when the exercise
  price of the options was equal to or greater than the market value of the Company’s
  common stock on the date of grant. The effect of applying on a retroactive basis
  without restatement, the fair value based method of stock-based compensation
  to options granted to employees rather than the previously noted intrinsic method
  would be to increase the deficit on January 1, 2004 by $238,610 with a corresponding
  increase to reported contributed surplus. The Company’s net loss for the
  prior period and net loss per common share would have been increased to the
  pro forma amounts below had the fair value based method, been followed:

|                                                                       |   | December 31, 2003 |  
|---------------------------------------------------------------------- | - | ----------------- | -
|Loss applicable to common shareholders, Canadian GAAP:                 |   |                   |  
|As restated, per above                                                 | $ | (757,802          | )
|Stock-based non-employee compensation
      expense                    |   |                   |  
|included
      in reported loss                                        |   | 127,326           |  
|Stock-based compensation expense
      determined under                |   |                   |  
|fair
      value based method for all awards                           |   | (280,117          | )
|                                                                       |   |                   |  
|Pro forma                                                              | $ | (910,593          | )
|Loss applicable to common shareholders per share, Canadian
      GAAP: |   |                   |  
|As restated, per above                                                 | $ | (0.01             | )
|Pro forma net loss                                                     | $ | (0.02             | )

---

GOLDEN QUEEN MINING CO. LTD.(an exploration stage company) 
  Notes to Consolidated Financial Statements(U.S. dollars)

13. Canadian GAAP Reconciliation - Continued

For the year ended December 31, 2003, the fair value of each
  option grant was estimated on the date of grant using the Black-Scholes option-pricing
  model with the assumptions as outlined in Note 9. As there were no stock options
  granted during fiscal year 2004, no compensation expense was recorded in the
  year under both US and Canadian GAAP.

(b) Asset retirement obligation

The Company adopted SFAS No. 143, “Accounting for Asset
  Retirement Obligations” as at January 1, 2003. At that time, the Company
  estimated that the costs of the reclamation of Soledad as nominal As a result,
  no asset retirement liability was accrued as at December 31, 2003. During 2004,
  the Company received additional information regarding the required reclamation
  and clean-up activities and increased their estimated costs by approximately
  $399,000 and recorded additional asset retirement obligations in 2004 as
  a result of this change in estimate in accordance with SFAS No. 143. At the
  end of the year, the Company evaluated the future recoverability of its resource
  property and wrote down the carrying amount of the resource property by the
  full amount of the additional asset retirement obligations of $345,766.

Under Canadian GAAP, effective January 1, 2004, the Company
  retroactively adopted CICA 3110, “Asset Retirement Obligations”.
  The Company retroactively recorded the fair value of an asset retirement obligation
  as a liability in the period in which it incurred 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. In 2004, the Company
  estimated its asset retirement obligations based on its understanding of the
  requirement to reclaim and clean up Soledad. The Company estimated that annual
  payments of approximately $133,000 for a period of 3 years for a total of
  approximately $399,000 commencing in 2020 would be required to complete
  the retirement obligations.

The obligation was initially measured at fair value using
  present value methodology, and the resulting costs capitalized into the carrying
  amount of the related asset. In recording the estimated initial present value
  of the obligations, the Company used a discount factor of 4.875% (the credit-adjusted
  risk-free rate). The Company’s retirement obligations related to Soledad
  were incurred when the Company initially commenced exploration in 1998. Accordingly,
  the asset retirement obligations and the related asset would have been initially
  recorded at its fair value in 1998 and recorded an annual accretion of interest
  on the liability. In 2000, at the same time that the Company recorded an impairment
  reserve on the property, the asset portion of the retirement obligations was
  also written-off.

The effect of the retroactive restatement under Canadian GAAP
  was to increase the net loss for 2003 by $13,286, and to increase liabilities
  and accumulated deficit at December 31, 2003 by $329,693, shown for comparative
  purposes. The accretion expense recorded for 2004 was $16,073. As at December
  31, 2004, the asset retirement liabilities obligations were $345,766.

---