SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-12284
GOLDEN STAR RESOURCES LTD.
(Exact Name of Registrant as Specified in Its Charter)
Canada 98-0101955
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
10901 West Toller Drive, Suite 300
Littleton, Colorado 80127-6312
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (303) 830-9000
Securities registered or to be registered pursuant to Section 12 (b) of the Act:
Title of Each Class Name of each exchange on which registered
Common Shares American Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Warrants Issued February 2003
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Act") during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- ----
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. (See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act).
(Check one): Large accelerated filer:
----
Accelerated filer: X
----
Non-accelerated filer:
----
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes No X
---- ----
Number of Common Shares outstanding as at May 9, 2006: 207,513,758
REPORTING CURRENCY, FINANCIAL AND OTHER INFORMATION
All amounts in this report are expressed in United States ("US") dollars,
unless otherwise indicated. Canadian currency is denoted as "Cdn$." Euros
are denoted as "(euro)".
Financial information is presented in accordance with accounting principles
generally accepted in Canada ("Cdn GAAP" or "Canadian GAAP"). Differences
between accounting principles generally accepted in the US ("US GAAP") and those
applied in Canada, as applicable to Golden Star Resources Ltd., are explained in
Note 24 to the Consolidated Financial Statements.
References to "Golden Star," the "Company," "we," "our," and "us" mean Golden
Star Resources Ltd., its predecessors and consolidated subsidiaries, or any one
or more of them, as the context requires.
NON-GAAP FINANCIAL MEASURES
In this Form 10-Q, we use the terms "total cash cost per ounce" and "cash
operating cost per ounce" which are considered Non-GAAP financial measures as
defined in SEC Regulation S-K Item 10 and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with GAAP.
See Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations for a definition of these measures as used in this Form
10-Q.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This Form 10-Q contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended, with respect to our financial
condition, results of operations, business prospects, plans, objectives, goals,
strategies, future events, capital expenditures, and exploration and development
efforts. Words such as "anticipates," "expects," "intends," "forecasts,"
"plans," "believes," "seeks," "estimates," "may," "will," and similar
expressions identify forward-looking statements.
Although we believe that our plans, intentions and expectations reflected in
these forward-looking statements are reasonable, we cannot be certain that these
plans, intentions or expectations will be achieved. Actual results, performance
or achievements could differ materially from those contemplated, expressed or
implied by the forward-looking statements contained in this Form 10-Q.
These statements include comments regarding: the establishment and estimates of
mineral reserves and resources, recovery rates, production, production
commencement dates, production costs, cash operating costs, total cash costs,
grade, processing capacity, potential mine life, feasibility studies, permitting
and licensing, development costs, expenditures, exploration activities and
expenditures, recovery of deferred stripping charges at the Bogoso and Prestea
mining leases ("Bogoso/Prestea"), equipment replacement, anticipated benefits of
the acquisition of St. Jude Resources Ltd. ("St. Jude"), our plan to carry out
feasibility studies on the Hwini-Butre and Benso concessions ("St. Jude
Properties") in 2006, our expansion plans for Bogoso/Prestea, related permitting
and capital costs and anticipated production and other estimates at
Bogoso/Prestea in 2006 and 2007, cash requirements and sources, production
capacity, operating costs and gold recoveries and estimated capital spending in
2006.
The following, are among the factors that could cause actual results to differ
materially from the forward-looking statements:
o unexpected changes in business and economic conditions;
o significant increases or decreases in gold prices;
o changes in interest and currency exchange rates;
o timing and amount of gold production;
o failure to realize the anticipated benefits of the acquisition of the
St. Jude Properties;
o failure to develop reserves on the St. Jude Properties;
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o unanticipated grade changes;
o unanticipated recovery or production problems;
o effects of illegal miners on our properties;
o changes in mining and processing costs including changes to costs of raw
materials, supplies, services and personnel;
o changes in material type that impacts mining and processing;
o availability of skilled personnel, materials, equipment, supplies and
water;
o changes in project parameters;
o costs and timing of development of new reserves;
o results of current and future exploration activities;
o results of pending and future feasibility studies;
o joint venture relationships;
o political or economic instability, either globally or in the countries in
which we operate;
o local and community impacts and issues;
o timing of receipt of, and maintenance of, government approvals and permits;
o accidents and labor disputes;
o environmental costs and risks;
o marine transit and other shipping risks, including delays and losses;
o competitive factors, including competition for property acquisitions; and
o availability of capital at reasonable rates or at all.
These factors are not intended to represent a complete list of the general or
specific factors that could affect us. Your attention is drawn to other risk
factors disclosed and discussed in Item 1A of our 2005 Form 10-K. We undertake
no obligation to update forward-looking statements.
3
ITEM 1 FINANCIAL STATEMENTS
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of US dollars except shares issued and outstanding)
(Unaudited)
-------------------------------------------------------------------------------
As of As of
March 31, December
2006 31, 2005
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 86,873 $ 89,709
Accounts receivable 7,891 6,560
Inventories (Note 2) 26,338 23,181
Future tax assets (Note 18) 2,343 6,248
Fair value of derivatives (Note 12) 884 1,220
Deposits (Note 3) 15,490 5,185
Deferred Stripping (Note 9) 1,032 1,548
Prepaids and other 809 686
--------------------------------------------------------------------------------
Total Current Assets 141,660 134,337
RESTRICTED CASH 5,258 5,442
LONG TERM INVESTMENTS (Note 4) 1,162 8,160
DEFERRED EXPLORATION AND DEVELOPMENT COSTS (Note 5) 166,231 167,532
PROPERTY, PLANT AND EQUIPMENT (Note 6) 88,795 84,527
MINING PROPERTIES (Note 7) 121,864 118,088
CONSTRUCTION IN PROGRESS (Note 8) 61,770 36,707
LOAN ACQUISITION COSTS (Note 11) 955 1,020
FUTURE TAX ASSETS (Note 18) 13,451 8,223
OTHER ASSETS 504 567
--------------------------------------------------------------------------------
Total Assets $ 601,650 $ 564,603
================================================================================
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 9,209 $ 9,093
Other accrued liabilities 19,952 17,051
Fair value of derivatives (Note 12) 7,559 4,709
Asset retirement obligations (Note 13) 2,855 3,107
Current debt (Note 10) 7,585 6,855
--------------------------------------------------------------------------------
Total Current Liabilities 47,160 40,815
LONG TERM DEBT (Note 10) 67,475 64,298
ASSET RETIREMENT OBLIGATIONS (Note 13) 9,271 8,286
FAIR VALUE OF DERIVATIVES (Note 12) 11,780 7,263
FUTURE TAX LIABILITY (Note 18) 45,379 45,072
--------------------------------------------------------------------------------
Total liabilities 181,065 165,734
MINORITY INTERESTS 6,420 6,629
COMMITMENTS AND CONTINGENCIES (Note 14) - -
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 15)
First preferred shares, without par value,
unlimited shares authorized. No shares issued. - -
Common shares, without par value, unlimited
shares authorized. Shares issued and
outstanding: 207,265,758 at March 31, 2006;
205,954,582 at December 31, 2005 523,060 522,510
CONTRIBUTED SURPLUS 9,330 6,978
EQUITY COMPONENT OF CONVERTIBLE NOTES 2,857 2,857
DEFICIT (121,082) (140,105)
--------------------------------------------------------------------------------
Total Shareholders' Equity 414,165 392,240
--------------------------------------------------------------------------------
Total Liabilities and Shareholders'
Equity $ 601,650 $ 564,603
================================================================================
The accompanying notes are an integral part
of the consolidated financial statements
4
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of US dollars except per share amounts)
(Unaudited)
--------------------------------------------------------------------------------
Three months ended
----------------------------
March 31, March 31,
2006 2005
--------------------------------------------------------------------------------
REVENUE
Gold sales $ 24,936 $ 16,691
Royalty income 1,837 1,050
Interest and other 619 310
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Total revenues 27,392 18,051
--------------------------------------------------------------------------------
PRODUCTION EXPENSES
Mining operations 23,463 12,076
Depreciation, depletion and amortization 5,577 2,172
Accretion of asset retirement obligation (Note 13) 168 187
--------------------------------------------------------------------------------
Total mine operating costs 29,208 14,435
OTHER OPERATING EXPENSES
Exploration expense 212 167
General and administrative expense 2,755 2,861
Corporate development expense - 96
Loss on equity investments - 40
--------------------------------------------------------------------------------
Total production and operating expenses 32,175 17,599
Operating income/(loss) (4,783) 452
OTHER EXPENSES, GAINS AND (LOSSES)
Abandonment and impairment of mineral properties - (1,083)
Gain on sale of investment (Note 4) 30,294 -
Derivative mark-to-market loss (Note 12) (8,670) (1,280)
Foreign exchange gain/(loss) 1,121 (107)
Interest expense (471) (79)
--------------------------------------------------------------------------------
Income/(loss) before minority interest 17,491 (2,097)
Minority interest 209 (180)
--------------------------------------------------------------------------------
Net income/(loss) before income tax 17,700 (2,277)
Income tax benefit (Note 18) 1,323 54
--------------------------------------------------------------------------------
Net income/(loss) $ 19,023 $ (2,223)
================================================================================
Deficit, beginning of period (140,105) (126,574)
--------------------------------------------------------------------------------
Deficit, end of period $ (121,082) $ (128,797)
--------------------------------------------------------------------------------
Net income/(loss) per common share - basic (Note 19) $ 0.092 $ (0.016)
Net income/(loss) per common share - diluted (Note
19) $ 0.091 $ (0.016)
--------------------------------------------------------------------------------
Weighted average shares outstanding (millions of
shares) 206.8 142.3
--------------------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements
5
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of US dollars)
(Unaudited)
--------------------------------------------------------------------------------
Three months ended
----------------------------
March 31, March 31,
2006 2005
--------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income/(loss) $ 19,023 $ (2,223)
--------------------------------------------------------------------------------
Reconciliation of net income/(loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 5,593 2,172
Amortization of loan acquition costs 65 -
Deferred stripping 516 84
Loss on equity investment - 40
Gain on sale of investment (30,294) -
Non-cash employee compensation 897 568
Abandonment and impairment of mineral properties - 1,083
Provision for future income taxes (1,014) (54)
Reclamation expenditures (185) (229)
Fair value of derivatives 7,703 1,280
Accretion of asset retirement obligations 168 187
Accretion of convertible debt 177 -
Minority interests (209) 180
--------------------------------------------------------------------------------
2,440 3,088
Changes in assets and liabilities:
Accounts receivable (1,331) (757)
Inventories (3,157) 1,751
Deposits (1,099) (532)
Accounts payable and accrued liabilities (2,420) (1)
Other (125) 85
--------------------------------------------------------------------------------
Net cash provided by/(used in) operating activities (5,692) 3,634
--------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Expenditures on deferred exploration and
development (2,137) (688)
Expenditures on mining properties (3,004) (6,362)
Expenditures on property, plant and equipment (6,884) (4,032)
Expenditures on mine construction in progress (24,619) (10,607)
Asset retirement obligation assets - 300
Redemption of short term investments - 16,400
Restricted cash 184 -
Expenditure on purchase of investment (1,656) -
Proceeds from sale of investment 38,952 -
Change in payable on capital expenditures 5,437 -
Sale of property - 1,000
Deposits (9,206) (2,329)
Other 52 77
--------------------------------------------------------------------------------
Net cash used in investing activities (2,881) (6,241)
--------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Issuance of share capital, net of issue costs (Note
15) 2,154 175
Debt repayments (Note 10) (1,721) (477)
Issuance of debt (Note 10) 5,453 7,159
Other (149) (108)
--------------------------------------------------------------------------------
Net cash provided by financing activities 5,737 6,749
--------------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents (2,836) 4,142
Cash and cash equivalents, beginning of period 89,709 12,877
--------------------------------------------------------------------------------
Cash and cash equivalents end of period $ 86,873 $ 17,019
--------------------------------------------------------------------------------
The accompanying notes are an integral part
of the consolidated financial statements
(See Note 20 for supplemental cash flow information)
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GOLDEN STAR RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in tables are in thousands of US dollars unless noted otherwise)
(Unaudited)
--------------------------------------------------------------------------------
These consolidated financial statements and the accompanying notes are unaudited
and should be read in conjunction with the audited consolidated financial
statements and related notes thereto included in our annual report on Form 10-K
as amended for the year ended December 31, 2005, on file with Securities and
Exchange Commission and with the Canadian securities commissions. Financial
information is presented in accordance with accounting principles generally
accepted in Canada.
In early 2006, it was determined that hedge accounting had been improperly
applied by our subsidiary, EURO Ressources S.A. ("EURO") for their cash-settled
forward gold price agreements during the first three quarters of 2005. As a
result, our Forms 10-Q for the first three quarters of 2005 have been amended to
apply derivative accounting rather than hedge accounting to EURO's derivatives.
In this Form 10-Q, comparative amounts from the first quarter of 2005 reflect
this restatement.
In management's opinion, the unaudited consolidated financial statements for the
three months ended March 31, 2006 and March 31, 2005 contained herein reflect
all adjustments, consisting solely of normal recurring items, which are
necessary for the fair presentation of financial position, results of operations
and cash flows on a basis consistent with that of our prior audited consolidated
financial statements.
In certain cases prior period amounts have been revised to reflect current
period presentation.
1. Description of Business
Through our subsidiaries we own a controlling interest in four significant gold
properties in southern Ghana in West Africa: the Bogoso/Prestea property, which
is comprised of the adjoining Bogoso and Prestea surface mining leases
("Bogoso/Prestea"), the Prestea Underground property ("Prestea Underground"),
the Wassa property ("Wassa"), and the Hwini-Butre and Benso concessions ("St.
Jude Properties"). In addition to these gold properties we hold various other
exploration rights and interests and are actively exploring in a variety of
locations in West Africa and South America.
Bogoso/Prestea is owned by our 90% owned subsidiary Bogoso Gold Limited ("BGL").
BGL was acquired in 1999. Bogoso/Prestea produced and sold 131,898 ounces of
gold during 2005.
Through another 90% owned subsidiary, Wexford Goldfields Limited ("WGL"), we own
the Wassa gold mine located some 35 kilometers east of Bogoso/Prestea.
Construction and commissioning of Wassa's new processing plant and open pit mine
was completed at the end of March 2005 and the project was placed in service on
April 1, 2005. Wassa produced and sold 24,205 ounces of gold in the quarter
ending March 31, 2006 and 93,275 ounces since its April 2005 in-service date.
The Prestea Underground is located on the Prestea property and consists of a
currently inactive underground gold mine and associated support facilities. BGL
owns a 90% operating interest in the Prestea Underground. We are currently
conducting exploration and engineering studies to determine if the underground
mine can be reactivated on a profitable basis.
Through our 100% owned subsidiary, St. Jude Resources Ltd. ("St. Jude"), we own
the St. Jude Properties in southwest Ghana. The St. Jude Properties cover an
area of 201 square kilometers. Both concessions contain undeveloped zones of
gold mineralization. These two concessions are located between 40 and 80
kilometers south of Wassa. The mineralized zones have been delineated through
the efforts of the prior owner who conducted extensive exploration work from the
mid-1990s to 2005.
We hold interests in several gold exploration projects in Ghana and elsewhere in
West Africa including Sierra Leone, Ghana, Burkina Faso, Niger and Cote
d'Ivoire. We also hold and manage exploration properties in Suriname and French
Guiana in South America. We hold indirect interests in gold exploration
properties in Peru and Chile through a 17% shareholding investment in Goldmin
Consolidated Holdings. We also own a 53% interest in EURO a French registered,
publicly-traded royalty holding company (formerly known as Guyanor Ressources
S.A.) which owns a royalty interest based on gold production at Cambior Inc.'s
Rosebel gold mine in Suriname.
7
Our corporate headquarters is located in Littleton, Colorado. Our accounting
records are kept in compliance with Canadian GAAP and all of our operations,
except for certain exploration projects, transact business and keep financial
records in US dollars.
2. Inventories
As of As of
March 31, December 31,
2006 2005
--------------------------------------------------------------------------------
Stockpiled ore $ 6,992 $ 5,753
In-process 3,285 3,106
Materials and supplies 16,061 14,322
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Total inventories $ 26,338 $ 23,181
--------------------------------------------------------------------------------
3. Deposits
Represents cash advances for equipment and materials purchases at WGL and BGL.
4. Long Term Investments
We hold a 17% interest in Goldmin Consolidated Holdings, a privately held gold
exploration company which operates in South America. In the year ended December
31, 2005 we accounted for our investment as an equity investment but during the
quarter ended March 31, 2006 our investment was diluted to less than 20% and we
now account for the investment on the cost basis at $1.2 million.
As of December 31, 2005 we held approximately 11% of the outstanding common
shares of Moto Goldmines Limited ("Moto"), a gold exploration and development
company publicly traded in Canada, with a focus on gold exploration and
development in the Democratic Republic of Congo. In March 2006 we exercised our
remaining one million warrants increasing our total ownership to six million
common shares, and immediately afterward sold all six million common shares in
a bought-deal transaction in Canada for Cdn$7.50 per share. The sale of the six
million shares resulted in net proceeds to Golden Star of $39.0 million
(Cdn$45.0 million) yielding a pre-tax capital gain of $30.3 million. A $4.9
million non-cash tax expense was recognized on the gain.
5. Deferred Exploration and Development Costs
Consolidated property expenditures on our exploration projects for the three
months ended March 31, 2006 were as follows:
Deferred
Exploration & Deferred
Development Transfer Exploration &
Costs Capitalized to Development
as of Exploration Acquistion mining Costs
12/31/05 Expenditures Costs properties as of 3/31/06
---------------------------------------------------------------------------------------------------------
AFRICAN PROJECTS
Akropong trend and other Ghana $ 5,237 $ 178 $ - $ (3,438) $ 1,977
Prestea property - Ghana 2,074 25 - - 2,099
Hwini-Butre and Benso - Ghana 135,832 604 952 - 137,388
Mano River - Sierra Leone 1,285 - - - 1,285
Afema - Ivory Coast 1,028 93 - - 1,121
Goulagou - Burkina Faso 18,247 - 124 - 18,371
Other Africa 1,460 - 10 - 1,470
SOUTH AMERICAN PROJECTS
Saramacca - Suriname 731 26 - - 757
Bon Espoir - French Guiana 1,382 125 - - 1,507
Paul Isnard - French Guiana 256 - - - 256
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TOTAL $ 167,532 $ 1,051 $ 1,086 $ (3,438) $ 166,231
---------------------------------------------------------------------------------------------------------
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6. Property, Plant and Equipment
As of March 31, 2006 As of December 31, 2005
-------------------------------------- ---------------------------------------
Property, Property,
Property, Plant and Property, Plant and
Plant and Equipment, Plant and Equipment,
Equipment Accumulated Net Book Equipment Accumulated Net Book
at Cost Depreciation Value at Cost Depreciation Value
---------------------------------------------------------- ---------------------------------------
Bogoso/Prestea $ 44,911 $ 9,359 $ 35,552 $ 40,802 $ 8,240 $ 32,562
Prestea Underground 2,847 - 2,847 2,748 - 2,748
Wassa 53,498 3,593 49,905 50,701 1,985 48,716
EURO Ressources 10 - 10 1,456 1,449 7
Corporate & Other 613 132 481 611 117 494
---------------------------------------------------------- ---------------------------------------
TOTAL $ 101,879 $ 13,084 $ 88,795 $ 96,318 $ 11,791 $ 84,527
---------------------------------------------------------- ---------------------------------------
7. Mining Properties
As of March 31, 2006 As of December 31, 2005
--------------------------------------- -------------------------------------
Mining Mining
Mining Properties, Mining Properties,
Properties Accumulated Net Book Properties Accumulated Net Book
at Cost Amortization Value at Cost Amortization Value
----------------------------------------------------------- -------------------------------------
Bogoso/Prestea $ 47,951 $ 30,126 $ 17,825 $ 46,970 $ 28,792 $ 18,178
Prestea Underground 23,348 - 23,348 21,612 - 21,612
Bogoso Sulfide 13,065 - 13,065 13,065 - 13,065
Mampon 15,467 - 15,467 15,062 - 15,062
Wassa 51,188 6,621 44,567 50,810 5,104 45,706
Other 7,592 - 7,592 4,465 - 4,465
-------------------------------------------------------------------------------------------------
TOTAL $ 158,611 $ 36,747 $ 121,864 $ 151,984 $ 33,896 $ 118,088
-------------------------------------------------------------------------------------------------
8. Mine Construction-in-Progress
At March 31, 2006 and at December 31, 2005, mine construction-in-progress
represents costs incurred for the Bogoso sulfide expansion project since the
beginning of 2005. Included in the total are costs of development drilling,
plant equipment purchases, materials and construction costs, including payments
to the construction contractors.
9. Deferred Stripping
In recent years, mining at the Plant-North pit at Prestea has trended toward a
deeper pit with longer life and higher and more variable stripping ratios than
in the past. Stripping ratios at the Plant-North pit increased from 2.3 to 1 in
2002, to 3.4 to 1 in 2003 and to 5.1 to 1 in 2004. In response to the changing
stripping rate we initiated a deferred waste stripping policy at the Plant-North
pit during 2004.
The amount of stripping costs to be capitalized in each period is calculated by
determining the tonnes of waste moved in excess of the life-of-pit average strip
ratio and valuing the excess tonnage of removed waste at the average mining cost
per tonne during the period. Costs are recovered in periods when the actual
tonnes of waste moved are less than what would have been moved at the average
life-of-pit rate, such tonnes being valued at the rolling average cost of the
waste tonnage amounts capitalized.
The capitalized component of waste rock removal costs is shown on our
consolidated balance sheets in the line item titled "Deferred Stripping." The
cost impact is included in the Statements of Operations in the line item titled
"Mining operations." In periods when the strip ratio exceeds the pit average,
the costs of the excess stripping are excluded from our cost per ounce
calculations. In periods when the strip ratio is less than the pit average,
capitalized waste costs are added back to operating costs and included in cost
per ounce calculations.
9
Based on actual results from 2004 and our January 1, 2005 mine plan, we expected
to move 3.7 million tonnes of ore and 18.0 million tonnes of waste during the
overall life of the Plant-North pit and thus the expected strip ratio was 4.8 to
1.
In January 2006, we completed a new mine plan which extended the life of
Plant-North Pit to late in 2006. The new plan also added significant amounts of
unanticipated waste tonnage, and projections of the life-of-mine strip ratio
indicated that $3.4 million of deferred stripping costs accrued as of December
31, 2005 would not be recovered and was consequently written off in December
2005. During the quarter ended March 31, 2006, $0.5 million of deferred
stripping costs were recovered and we expect the remaining deferred stripping
cost will be recovered by the third quarter of 2006.
10. Debt
As of As of
March 31, December 31,
2006 2005
Current debt:
Bank loan - at EURO Ressources (Note a) $ 2,667 $ 2,667
CAT equipment financing loans (Note b) 4,918 4,188
--------------------------------------------------------------------------------
Total current debt $ 7,585 $ 6,855
--------------------------------------------------------------------------------
Long term debt:
Bank loan - at EURO Ressources (Note a) $ 4,333 $ 5,000
CAT equipment financing loans (Note b) 15,300 11,632
Convertible notes (Note c) 47,842 47,666
--------------------------------------------------------------------------------
Total long term debt $ 67,475 $ 64,298
--------------------------------------------------------------------------------
(a) Bank debt - In January 2005, EURO Ressources S.A. ("EURO") drew down $6.0
million under a credit facility from a bank and paid the funds to Golden
Star as the first installment on its purchase of the Rosebel royalty. The
loan is repayable in nine equal payments of $666,667 beginning July 29,
2005. Accrued interest is added to each quarterly payment. The interest
rate for each period is set at LIBOR plus 2.5% and EURO may choose a 1, 2
or 3 month interest period. The loan is collateralized by the assets of
EURO, including the Rosebel royalty. The lender has no recourse to Golden
Star. The fair value of the outstanding balance of this debt at March 31,
2006 is essentially equal to its carrying value.
In September 2005 EURO borrowed an additional $3.0 million from the same
commercial bank and forwarded the proceeds to Golden Star. The interest
rate on this debt is set at LIBOR plus 2.5% and EURO may choose a 1, 2 or 3
month interest period. The $3.0 million is to be repaid by five quarterly
payments of $0.6 million each, commencing October 31, 2007. The fair value
of the outstanding balance of this debt at March 31, 2006 is essentially
equal to its carrying value.
(b) Equipment financing credit facility - We have established a $25 million
equipment financing facility between Caterpillar Financial Services
Corporation, BGL and WGL, with Golden Star as the guarantor of all amounts
borrowed. The facility provides credit for a mixture of new and used mining
equipment. This facility is reviewed annually. Amounts drawn under this
facility are repayable over five years for new equipment and over two years
for used equipment. The interest rate for each draw-down is fixed at the
date of the draw-down using the Federal Reserve Bank 2-year or 5-year swap
rate plus 2.38% or a floating interest rate of LIBOR plus 2.38%. As of
March 31, 2006, $20.2 million was outstanding under this facility. The
average interest rate on the outstanding loans is approximately 6.2%. We
estimate the fair value of the Caterpillar debt to be approximately $18.5
million at March 31, 2006.
(c) Convertible notes - We sold $50 million of senior unsecured convertible
notes to a private investment fund on April 15, 2005. These notes, maturing
on April 15, 2009, were issued at par and bear interest at 6.85% with a
conversion price of $4.50 per common share. At the maturity date, we have
the option, at our discretion and assuming the market price of our common
shares exceeds $4.50 per share, to pay the outstanding notes with cash or
by issuing common shares to the note holders. If the notes are paid in
common shares the number of shares will be determined by dividing the loan
balance by an amount equal to 95% of the average price of the 20 trading
day period ended five days before the notes are due. Due to the beneficial
conversion feature, approximately $47.1 million of the note balance was
initially classified as a liability and $2.9 million was classified as
equity. Periodic accretion will increase the liability to the full $50
million amount due (after adjustments for converted notes) by the end of
the note term. The periodic accretion is classified as interest expense. A
total of $2.9 million of interest on the convertible notes was capitalized
as Bogoso sulfide expansion project costs. We estimate the fair value of
the convertible debentures to be essentially equal to its carrying value at
March 31, 2006.
10
11. Loan Acquisition Costs
In the second quarter of 2005 approximately $0.9 million of loan acquisition
fees were incurred in obtaining the $50 million convertible notes. This amount
was capitalized and is being amortized to interest expense over the term of the
notes based on the effective interest rate method. In addition, we recorded loan
acquisition costs at EURO related to its January 2005 and September 2005
borrowings. As with the convertible notes, the balance is being amortized to
interest expense over the term of the loan. We did not incur any additional loan
acquisition costs during the quarter ending March 31, 2006.
12. Derivatives
EURO - In January 2005, EURO, a majority owned subsidiary, entered into a series
of contracts that qualify as derivatives as part of a $6.0 million loan
agreement (see note 10a). EURO's derivatives are tied to a future stream of gold
royalty payments EURO expects to receive from a Canadian mining company that
purchased a mining property interest from Golden Star in 2002. Golden Star
originally owned the royalty but sold the royalty to EURO in 2004. The
derivative provides that (a) when the average gold price for a quarter exceeds
$421 per ounce, EURO will pay to the counter party cash equal to the difference
between the quarter's average gold price per ounce and $421 per ounce, times
5,700 ounces, and (b) when the average quarterly gold price is below $421 per
ounce, EURO will receive a cash payment from the counterparty equal to the
difference between $421 per ounce and the average gold price per ounce times
5,700 ounces. The $421 per ounce figure was the spot gold price on the date EURO
entered into the derivative. The derivative agreement established 10 tranches of
5,700 ounces each which settle quarterly over ten quarters beginning in the
first quarter of 2005.
In September 2005, EURO entered into a second set of derivative contracts
related to a $3.0 million debt facility. These contracts are spread over ten
quarters beginning in the last quarter of 2007 and have a fixed price of $458.50
per ounce which was approximately $18 per ounce over the spot price on the date
of the agreement. The quarterly cash payments are determined exactly as with the
first derivative describe above except $458.50 per ounce is the reference price
for calculating the quarterly payments.
During 2005, we recorded a realized derivative loss of $0.5 million for the cash
settlement of the first four quarterly tranches and we recorded $9.6 million of
unrealized, non-cash mark-to-market losses as of December 31, 2005. At March 31,
2006 we recorded an additional $5.3 million mark-to-market loss for the first
quarter of 2006.
Gold Derivatives - To provide gold price protection during the 2005/2006
construction phase of the Bogoso sulfide expansion project, we purchased a
series of gold puts. The first purchase occurred in the second quarter of 2005
when we purchased put options on 140,000 ounces of gold at an average floor
price of $409.75, paying approximately $1.0 million in cash for the options.
We purchased an additional 90,000 put options in the third quarter of 2005
locking in a $400 per ounce floor for each of the 90,000 ounces. Continuing
increases in the gold prices during the first quarter of 2006 resulted in a nil
value for the puts at March 31, 2006. This was $0.1 million less than the value
at December 31, 2005 and approximately $1.0 million less than the initial
purchase cost. We have 150,000 ounces of put options with an average strike
price of $406 per ounce remaining at March 31, 2006.
To acquire the put options in the third quarter of 2005, we sold 90,000 ounces
of call options with a strike price of $525 per ounce. The revenues from the
sale of the call options exactly offset the cost of the put options bought in
the same quarter. Increasing gold prices in the first quarter of 2006 added $2.2
million to the settlement costs of the calls and accordingly we recorded a $2.2
million mark-to-market loss on the calls. In addition a 5,000 ounce tranche was
exercised in March 2006 requiring a $0.2 million payment to the counterparty.
The payment is included in derivative loss in the Statement of Operations. We
have 60,000 ounces of call options with an average strike price of $525 per
ounce remaining at March 31, 2006.
Foreign Currency Forward Positions - To help control the potential adverse
impact of fluctuations in foreign currency exchange rates on the cost of
equipment and materials we expect to purchase during the 2006 construction phase
of the Bogoso sulfide expansion project, we entered into Rand and Euro forward
contracts. These contracts, established without cost, had a positive fair value
of $1.0 million at December 31, 2005 and $0.9 million at March 31, 2006. The
$0.1 million loss was recognized in our statement of operations at March 31,
2006.
11
The following table summarizes our derivative contracts at March 31, 2006:
Amount Outstanding/ Total /
Average Price Average
------------------------------------------------
At March 31, 2006 2006 2007 Thereafter
--------------------------------------------------------------------------------
Cash-settled Forward Price Contracts (EURO Ressources)
--------------------------------------------------------------------------------
Ounces (thousands) 22.8 17.1 51.3 91.2
Average price per ounce ($) 421 430 459 443
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Gold Put Options (Golden Star)
--------------------------------------------------------------------------------
Ounces (thousands) 112.5 37.5 - 150
Average price per ounce ($) 407 405 - 406
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Gold Call Options (Golden Star)
--------------------------------------------------------------------------------
Ounces (thousands) 45 15 - 60
Average price per ounce ($) 525 525 - 525
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Foreign Exchange Forward Contracts (Golden Star)
--------------------------------------------------------------------------------
South African Rand (millions) 67.3 - - 67.3
Average Rate (ZAR/$) 6.8 - - 6.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Euros ( EUR millions) 1.0 - - 1.0
Average Rate (EUR /$) 0.80 - - 0.80
--------------------------------------------------------------------------------
The puts, calls and foreign exchange forward contracts are comprised of numerous
individual contracts each with a different settlement date.
Fair Value of Derivatives March 31, December 31, (Expense)/
2006 2005 Gain
--------------------------------------------------------------------------------
Cash-settled forward gold price agreements $ (14,859) $ (9,560) $ (5,299)
Puts 6 74 (69)
Calls (4,441) (2,250) (2,190)
Rand forward purchases 878 1,146 (268)
Euros forward purchases (39) (162) 123
--------------------------------------------------------------------------------
Unrealized loss $ (18,455) $ (10,752) $ (7,703)
--------------------------------------------------------------------------------
Realized losses:
--------------------------------------------------------------------------------
Cash-settled forward gold price
agreements (757)
Calls (210)
--------------------------------------------------------------------------------
Total gains/(losses) $ (8,670)
--------------------------------------------------------------------------------
13. Asset Retirement Obligations
Our Asset Retirement Obligations ("ARO") are equal to the present value of all
estimated future closure costs associated with reclamation, demolition and
stabilization of our Bogoso/Prestea and Wassa mining and ore processing
properties. Included in this liability are the costs of mine closure and
reclamation, processing plant and infrastructure demolition, tailings pond
stabilization and reclamation and environmental monitoring costs. While the
majority of these costs will be incurred near the end of the mines' lives, it is
expected on-going reclamation costs will be incurred prior to mine closure.
These costs are recorded against the current ARO provision.
The changes in the carrying amount of the ARO during the first quarter of 2006
were as follows:
Balance at December 31, 2005 $ 11,393
Accretion expense 168
Cost of reclamation work performed (185)
New AROs incurred during the period 750
--------------------------------------------------------------------------------
Balance at March 31, 2006 $ 12,126
--------------------------------------------------------------------------------
Current portion $ 2,855
Long term portion $ 9,271
--------------------------------------------------------------------------------
12
14. Commitments and Contingencies
Our commitments and contingencies include the following items:
(a) Environmental Regulations - The Company's mining and exploration activities
are subject to various laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and are
generally becoming more restrictive as such we cannot predict the full
amount of our future expenditure to comply with these laws and regulations.
We conduct our operations so as to protect the environment and believe our
operations are in compliance with applicable laws and regulations in all
material respects.
(b) Environmental Bonding in Ghana - In 2005, pursuant to a reclamation bonding
agreement between the Ghana Environmental Protection Agency ("EPA") and
WGL, we bonded $3.0 million to cover future reclamation obligations at
Wassa. To meet the bonding requirements we established a $2.85 million
letter of credit and deposited $0.15 million of cash with the EPA. In
addition, pursuant to a bonding agreement between the EPA and BGL we bonded
$9.5 million in early 2006 to cover our future obligations at
Bogoso/Prestea. To meet these requirements we deposited $0.9 million of
cash with the EPA with the balance covered by a letter of credit.
(c) Cash Restricted for Environmental Rehabilitation Liabilities - In 1999, we
were required, according to the acquisition agreement with the sellers of
BGL, to restrict $6.0 million of cash to be used for the ongoing and final
reclamation and closure costs at Bogoso. Between 1999 and 2001 we withdrew
$2.6 million of the restricted cash to cover our out-of-pocket cash
reclamation costs. There have been no disbursements of the restricted cash
since 2001. Now that BGL has met the EPA's environmental bonding
requirements, we will seek to amend the agreement with the original sellers
of BGL and obtain their consent to allow us to withdraw the remaining $3.4
million of restricted cash.
(d) Royalties -
(i) Dunkwa Properties: As part of the acquisition of the Dunkwa properties
in August 2003, we agreed to pay the seller a net smelter return
royalty on future gold production from the Mansiso and Asikuma
properties. Per the acquisition agreement, there will be no royalty
due on the first 200,000 ounces produced from Mampon which is located
on the Asikuma property. The amount of the royalty is based on a
sliding scale which ranges from 2% of net smelter return at gold
prices at or below $300 per ounce up to 3.5% for gold prices in excess
of $400 per ounce.
(ii) Government of Ghana: Under the laws of Ghana, a holder of a mining
lease is required to pay an annual royalty of not less than 3% and not
more than 6% of the total revenues earned from the lease area. The
royalty is payable on a quarterly basis. We currently pay a 3% annual
royalty on gold production from Bogoso/Prestea and Wassa production.
(iii) Benso: Benso is subject a 1.5% smelter return royalty and a $1.00 per
ounce gold production royalty. The smelter return royalty may be
purchased for $4.0 million (or $6.0 million if a feasibility study
indicates more than 3.5 million ounces of recoverable gold) and the
gold production royalty may be purchased for $0.5 million.
(iv) Prestea Underground - The Prestea Underground is subject to a 2.5% net
profits interest on future income. Ownership of the 2.5% net profit
interest is currently held by the bankruptcy trustee overseeing
liquidation of Prestea Gold Resources, our former joint venture
partner in the Prestea Underground.
(e) Afema Project - On March 29, 2005 we entered into an agreement with Societe
d'Etat pour le Developpement Minier de la Cote d'Ivoire ("SO.DE.MI."), the
Cote d'Ivoire state mining and exploration company, to acquire their 90%
interest in the Afema gold property in south-east Cote d'Ivoire. A $0.1
million initial payment to SO.DE.MI. provided us the right to carry out a
six month detailed technical due diligence program which was essentially
completed by September of 2005. We now have the right to acquire 100% of
SO.DE.MI.'s rights in the Afema property for an additional $1.5 million. A
six month extension to March 2006 was subsequently granted by SO.DE.MI. to
allow Golden Star to carry out further due diligence work and to analyze
the large quantity of data collected during 2005 before exercising our
13
right to acquire. Prior to the expiry of the option, we contacted SO.DE.MI.
indicating our desire to exercise the option subject to SO.DE.MI.
clarifying that (i) Golden Star will be indemnified in respect of the past
environmental degradation at Afema, and (ii) that no other claims against
the property exist. In addition to the acquisition payments, we agreed to
pay SO.DE.MI. a royalty on any future gold production from the Afema
property. The royalty is indexed to the gold price and ranges from 2% of
net smelter returns at gold prices below $300 per ounce to 3.5% of net
smelter returns for gold prices exceeding $525 per ounce. If we proceed
with the $1.5 million payment to acquire full rights to the property, the
purchase agreement requires us to spend an additional $3.5 million on
exploration work at Afema, subject to exploration success, over the
following three and a half years.
(f) We are engaged in routine litigation incidental to our business. No
material legal proceedings, involving us or our business are pending, or,
to our knowledge, contemplated, by any governmental authority. We are not
aware of any material events of non-compliance with environmental laws and
regulations.
15. Share Capital
Changes in share capital during the three months ended March 31, 2006 were:
Shares Amount
--------------------------------------------------------------------------------
Balance as of December 31,2 005 205,954,582 $ 522,510
Common shares issued:
Option exercises 1,307,176 3,259
Reclassification of warrants to capital
surplus - (2,575)
Bonus shares and other 4,000 (134)
--------------------------------------------------------------------------------
Balance as of March 31, 2006 207,265,758 $ 523,060
--------------------------------------------------------------------------------
16. Warrants
The following warrants were outstanding as of March 31, 2006:
Warrants Exercise Expiration
Issued with: Date issued outstanding price date
--------------------------------------------------------------------------------
Equity Offering February 14, 2003 8,448,334 Cdn$4.60 February 14, 2007
--------------------------------------------------------------------------------
St. Jude
Acquisition December 21, 2005 3,240,000 Cdn$4.17 November 20, 2008
--------------------------------------------------------------------------------
Total 11,688,334
--------------------------------------------------------------------------------
The 8.4 million warrants expiring February 14, 2007 are traded on the Toronto
Stock Exchange under the symbol GSC.WT.A. No warrants were exercised during the
quarters ended March 31, 2005 and 2006.
17. Stock Based Compensation
Stock Options - We have one stock option plan, the 1997 Stock Option Plan, as
amended (the "GSR Plan") and options are granted under this plan from time to
time at the discretion of the Compensation Committee. Options granted are
non-assignable and are exercisable for a period of ten years or such other
period as stipulated in a stock option agreement between Golden Star and the
optionee. Under the GSR Plan, we may grant options to employees, consultants and
directors of the Company or its subsidiaries for up to 15,000,000 shares of
common stock. Options take the form of non-qualified stock options, and the
exercise price of each option is not less than the market price of our stock on
the date of grant. Options typically vest over periods ranging from immediately
to four years from the date of grant. Vesting periods are determined at the
discretion of the Compensation Committee.
In addition to options issued under the GSR Plan, there were 2,533,176 options
issued to various employees of St. Jude of which 1,332,000 remain unexercised as
of March 31, 2006. All of the remaining unexercised shares issued to St. Jude
employees are rested. All figures shown below include the options issued to St.
Jude employees.
14
Amounts recognized in the statements of operations with respect to our stock
option plan are as follows:
Three Months ended March 31,
----------------------------
2006 2005
--------------------------------------------------------------------------------
Total cost of share-based payment plan during the
quarter $882 $558
Amount of related income tax benefit recognized to
income - -
--------------------------------------------------------------------------------
We granted 746,000 and 514,000 options during the quarters ended March 31, 2006
and March 31, 2005, respectively. The Company recognized $0.9 million and $0.6
million of non-cash compensation expense in the quarters ended March 31, 2006
and 2005, respectively.
The fair value of options granted during the first quarters of 2006 and 2005
were estimated at the grant dates using the Black-Scholes option-pricing model
based on the assumptions noted in the following table:
Three months ended March 31,
-------------------------------------
2006 2005
--------------------------------------------------------------------------------
Expected volatility 62.5% to 96.1% 34.9%
Risk-free interest rate 2.44% to 2.78% 3.15% to 3.52%
Expected lives 3.5 to 5 years 3.5 to 5 years
Dividend yield 0% 0%
--------------------------------------------------------------------------------
Expected volatilities are based on the historical volatility of Golden Star's
shares. Golden Star uses historical data to estimate share option exercise and
employee departure behavior used in the Black-Scholes model; groups of employees
that have similar historical behavior are considered separately for valuation
purposes. The expected term of the options granted is derived from the output of
the option pricing model and represents the period of time that the option
granted are expected to be outstanding; the range given below results from
certain groups of employees exhibiting different post-vesting behaviors. The
risk-free rate for periods within the contractual term of the option is based on
the Chartered Bank Administered Interest rates in effect at the time of the
grant.
A summary of option activity under the Plan as of March 31, 2006 and changes
during the quarter the ended is presented below:
Weighted- Weighted-
Average Average Aggregate
Excerise Remaining intrinsic
Options price Contractual value
(000') (Cdn$) Term (Years) ($000)
Outstanding as of Decmber 31, 2005 7,390 2.75 - -
Granted 746 3.94 - -
Exercised (1,307) 1.90 - -
Forfeited (120) 7.08 - -
--------------------------------------------------------------------------------
Outstanding as of March 31, 2006 6,709 2.97 5.8 4,534
================================================================================
Excerisable at March 31, 2006 5,598 2.51 4.3 4,534
--------------------------------------------------------------------------------
The weighted-average grant date fair value of share options granted during the
quarters ended March 31, 2006 and March 31, 2005 was Cdn$2.50 and Cdn$1.58,
respectively. The intrinsic value of options exercised during the quarters ended
March 31, 2006 and 2005 was $1.7 million and $0.1 million, respectively.
15
A summary of the status of Golden Star's non-vested options as March 31, 2006
and changes during the quarter ended March 31, 2006, is presented below:
Number of options Weighted-Average grant
('000) date fair value (Cdn$)
Nonvested at January 1, 2006 1,062 1.64
Granted 746 1.84
Vested (629) 1.49
Forfeited (68) 2.12
--------------------------------------------------------------------------------
Nonvested at March 31, 2006 1,111 1.89
As of March 31, 2006 there was a total unrecognized compensation cost of $2.4
million related to non-vested share-based compensation arrangement granted under
the GSR Plan. That cost is expected to be recognized over a weighted-average
period of 2.8 years. The total fair value of shares vested during the quarters
ended March 31, 2006 and March 2005 was Cdn$1.0 million and Cdn$0.4 million,
respectively.
Stock Bonus Plan - In December 1992, we established an Employees' Stock Bonus
Plan (the "Bonus Plan") for any full-time or part-time employee (whether or not
a director) of the Company or any of our subsidiaries who has rendered
meritorious services which contributed to the success of the Company or any of
its subsidiaries. The Bonus Plan provides that a specifically designated
committee of the Board of Directors may grant bonus common shares on terms that
it might determine, within the limitations of the Bonus Plan and subject to the
rules of applicable regulatory authorities. The Bonus Plan, as amended, provided
for the issuance of 900,000 common shares of bonus stock of which 499,162 common
shares have been issued as of March 31, 2006.
During the quarters ended March 31, 2006 and 2005 we issued 4,000 and 45,342
common shares, respectively, to employees under the Bonus Plan.
18. Income Taxes
Income tax expense/(benefit) attributable to net income before income taxes
consists of:
Three months ended March 31,
-------------------------------
2006 2005
--------------------------------------------------------------------------------
Current
Canada $ 4,926 $ -
Foreign - -
Future
Canada - -
Foreign (6,249) (54)
--------------------------------------------------------------------------------
Total $ (1,323) $ (54)
--------------------------------------------------------------------------------
The current tax expense recorded for the quarter ended March 31, 2006 is for the
gain on sale of the Moto shares. The future tax benefit recorded in the quarter
ended March 31, 2006 relates primarily to the EURO derivative loss and the
decrease in the Ghanaian tax rate. Golden Star records a valuation allowance
against any portion of its remaining future income tax assets that it believes
will, more likely than not, fail to be realized.
16
19. Earnings per Common Share
The following table provides a reconciliation between basic and diluted earnings
per common share:
Three months ended March 31,
-------------------------------
2006 2005
--------------------------------------------------------------------------------
Net income/(loss) $ 19,023 $ (2,223)
--------------------------------------------------------------------------------
Shares (in millions)
-------------------------------------------------
Weighted average number of common shares 206.8 142.3
Impact of Dilutive Securities:
Options 2.3 1.9
Warrants - 0.2
--------------------------------------------------------------------------------
Weighted average number of dilutive common shares 209.1 144.4
--------------------------------------------------------------------------------
Basic Income/(Loss) per Common Share $ 0.092 $ (0.016)
Diluted Income/(Loss) per Common Share $ 0.091 $ (0.016)
--------------------------------------------------------------------------------
20. Supplemental Cash Flow Information
There was no cash paid for income taxes during the quarters ended March 31, 2006
and 2005. Cash paid for interest was $0.5 million and $0.1 million for March 31,
2006 and 2005, respectively. A total of $12,000 and nil of depreciation
was included in general and administrative costs or was capitalized into
projects for the quarters ended March 31, 2006 and 2005 respectively.
21. Operations by Segment and Geographic Area
The following segment and geographic data includes revenues based on product
shipment origin and long-lived assets based on physical location. The corporate
entity is incorporated in Canada and domiciled in the United States.
Africa - Ghana
-----------------------------
As of and for the three Bogoso/ Wassa Other South Corporate Total
months ended March 31 Prestea America
--------------------------------------------------------------------------------------
2006
Revenues $ 11,554 $ 13,428 $ 15 $ 1,865 $ 530 $ 27,392
Net Income/(Loss) (1,182) (2,137) 3,623 (3,072) 21,791 19,023
Total Assets 174,045 105,130 207,263 12,464 102,748 601,650
--------------------------------------------------------------------------------------
2005
Revenues $ 16,717 $ - $ - $ 1,072 $ 262 $ 18,051
Net Income/(Loss) 1,826 (49) - (62) (3,938) (2,223)
Total Assets 94,974 78,845 32,040 2,560 50,735 259,154
--------------------------------------------------------------------------------------
22. Related Parties
During the first quarter of 2006 we obtained legal services from a legal firm to
which our Chairman is counsel. Total value of all services purchased from this
law firm during the first quarter was $0.4 million. Our Chairman did not
personally perform any legal services for us during the first quarter nor did he
benefit directly or indirectly from payments for the services performed by the
firm.
During the first quarter of 2006, a corporation controlled by Michael A.
Terrell, a director of Golden Star, provided management services to St. Jude for
which it was paid Cdn$0.13 million. Mr. Terrell became a director of Golden Star
following our acquisition of St. Jude in December 2005. Mr. Terrell's company
ceased doing business with St. Jude at the end of March 2006.
17
23. Financial Instruments
Fair Value - Our financial instruments are comprised of cash, short-term
investments, accounts receivable, restricted cash, accounts payable, accrued
liabilities, accrued wages, payroll taxes, derivatives and debt. The fair value
of cash and short-term investments, derivatives, accounts receivable, accounts
payable, accrued liabilities and accrued wages, payroll taxes and current debt
equals their carrying value due to the short-term nature of these items. The
fair value of restricted cash is equal to the carrying value as the cash is
invested in short-term, high-quality instruments. The fair value of the debt is
essentially equal to its carrying value.
24. Generally Accepted Accounting Principles in the United States
Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada, which differ from US GAAP.
The effect of applying US GAAP to our financial statements is shown below.
(a) Consolidated Balance Sheets Under US GAAP March 31, December 31,
2006 2005
--------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 86,873 $ 89,709
Accounts receivable 7,891 6,560
Inventories 26,338 23,181
Future tax assets 2,343 6,248
Fair value of derivatives 884 1,220
Deposits 15,490 5,185
Other current assets 809 686
--------------------------------------------------------------------------------
Total current assets 140,628 132,789
Restricted cash 5,258 3,865
Long term investments (Notes d1 and d2) - 15,182
Deferred exploration and development costs (Notes
d3 and d4) - -
Property, plant and equipment (Note d5) 88,081 83,813
Mine construction in progress 61,770 36,707
Mining properties (Notes d3, d4 and d5) 238,038 237,153
Deferred stripping (Note d6) - 1,548
Loan acquisition costs 955 1,020
Future tax asset 13,451 8,223
Other assets 509 2,144
--------------------------------------------------------------------------------
Total assets $ 548,690 $ 522,443
================================================================================
LIABILITIES
Current
liabilities $ 47,159 $ 40,815
Long term debt (Note
d7) 69,635 66,632
Asset retirement obligations 9,271 8,286
Future tax liability 45,380 45,072
Fair value of long term derivatives 11,780 7,263
--------------------------------------------------------------------------------
Total liabilities 183,225 168,068
--------------------------------------------------------------------------------
Minority
interest 1,596 1,964
Commitments and contingencies - -
SHAREHOLDERS' EQUITY
Share capital (Note d8) 520,090 519,540
Contributed surplus 9,330 8,294
Accumulated comprehensive income and other (Note
d2) 1,316 8,179
Deficit (166,867) (183,602)
--------------------------------------------------------------------------------
Total shareholders' equity 363,869 352,411
--------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 548,690 $ 522,443
--------------------------------------------------------------------------------
18
(b) Consolidated Statements of Operations under
US GAAP Three months ended March 31,
------------------------------
2006 2005
--------------------------------------------------------------------------------
Net income under Cdn GAAP $ 19,023 $ (2,223)
Deferred exploration expenditures expensed per US
GAAP (Note d3) (2,886) (4,574)
Depreciation and amortization differences - Wassa
(Note d5) 1,475 (4,654)
Write-off of deferred exploration properties (Note
d3) - 1,083
Other (Notes d3 and d7) (4) 40
--------------------------------------------------------------------------------
Net income/(loss) under US GAAP before minority
interest 17,608 (10,328)
Minority interest, as adjusted 158 2
--------------------------------------------------------------------------------
Net Income/(loss) under US GAAP 17,766 (10,326)
Other comprehensive income - gain on marketable
securities (Note d2) - 1,049
--------------------------------------------------------------------------------
Comprehensive income/(loss) $ 17,766 $ (9,277)
--------------------------------------------------------------------------------
Basic net income/(loss) per share under US GAAP
before cumulative effect of change in accounting
method $ 0.086 $ (0.073)
Diluted net income/(loss) per share under US GAAP
before cumulative effect of change in accounting
method $ 0.085 $ (0.073)
--------------------------------------------------------------------------------
(c) Consolidated Statements of Cash Flows under
US GAAP Three months ended March 31,
--------------------------------------------------------------------------------
2006 2005
--------------------------------------------------------------------------------
Cash provided by (used in):
Operating Activities $ (8,423) $ (7,041)
Investing activities (240) 4,434
Financing activities 5,737 6,749
--------------------------------------------------------------------------------
Increase/(Decrease) in cash and cash equivalents (2,926) 4,142
Cash and cash equivalent beginning of period 89,709 12,877
--------------------------------------------------------------------------------
Cash and cash equivalents end of period $ 86,873 $ 17,019
--------------------------------------------------------------------------------
(d) Notes:
(1) Minority investments in entities whose major business is mineral
exploration are deemed for US GAAP to be equivalent to exploration
spending and are expensed as incurred.
(2) Under US GAAP, investments in marketable equity securities are marked
to fair value at the end of each period with gains and losses
recognized in the statement of operations. Under Cdn GAAP gains and
losses on marketable equity securities are noted in the foot notes and
recognized in the statement of operations only when the investment is
sold.
(3) Under US GAAP, exploration, acquisition and general and administrative
costs related to exploration projects are charged to expense as
incurred. Under Cdn GAAP, exploration, acquisition and direct general
and administrative costs related to exploration projects are
capitalized. In each subsequent period, the exploration, engineering,
financial and market information for each exploration project is
reviewed by management to determine if any of the capitalized costs
are impaired. If found impaired, the asset's cost basis is reduced in
accordance with Cdn GAAP provisions.
(4) Under US GAAP, the initial purchase cost of mining properties is
capitalized. Pre-acquisition costs and subsequent development costs
incurred, until such time as a final feasibility study is completed,
are expensed in the period incurred. Under Cdn GAAP, the purchase
costs of new mining properties as well as all development costs
incurred after acquisition are capitalized and subsequently reviewed
each period for impairment. If found impaired, the asset's cost basis
is reduced in accordance with Cdn GAAP provisions.
(5) Under US GAAP new production facilities are placed in service once the
facility has been constructed and fully tested to the point where it
can be shown that it is capable of producing its intended product.
Under Cdn GAAP new production facilities are placed in service when
output reaches a significant portion of the facility's design
capacity. As such, the new Wassa mine and processing operation was
placed in service on January 1, 2005 for US GAAP purposes and was
19
placed in service on April 1, 2005 for Cdn GAAP purposes. All
operating expenses, including ARO accretion, depreciation, depletion
and amortization and work in process inventory adjustments were
recognized in the statement of operations for US GAAP during the first
quarter of 2005 while such costs were capitalized net of revenues
generated for Cdn GAAP.
(6) In March 2005, the Emerging Issues Task Force of the Financial
Accounting Standards Board issued statement 04-6 "Accounting for
Stripping Costs Incurred During Production in the Mining Industry"
("EITF 04-6") which precludes deferral of stripping costs during a
mine's production phase. EITF 04-6 requires that deferred stripping
costs be considered a variable production cost. The new pronouncement
is effective January 1, 2006 and transition provisions allow any
remaining balances in deferred stripping asset accounts to be closed
directly to retained earnings on January 1, 2006. In Canada the
Emerging Issues Committee ("EIC") has issued EIC 160 "Stripping Costs
Incurred in the Production Phase of the Mining Operation" which
concludes that deferred stripping costs during the production phase of
a mine's life should generally be considered a variable production
cost and included in the cost of inventory unless it can be shown the
stripping costs represent a betterment to the mineral property.
(7) For US GAAP purposes, 100% of the $50.0 million of convertible notes
issued in the second quarter of 2005 was classified as a liability.
Under Cdn GAAP, the fair value of the conversion feature is classified
as equity and the balance is classified as a liability. Under Cdn
GAAP, the liability portion is accreted each period in amounts which
will increase the liability to its full amount as of the maturity date
and the accretion is recorded as interest expense.
(8) Numerous transactions since the Company's organization in 1992 have
contributed to the difference in share capital versus the Cdn GAAP
balance, including: (i) under US GAAP, compensation expense was
recorded for the difference between quoted market prices and the
strike price of options granted to employees and directors under stock
option plans while under Cdn GAAP, recognition of compensation expense
was not required; (ii) in May 1992 our accumulated deficit was
eliminated through an amalgamation (defined as a quasi-reorganization
under US GAAP); - under US GAAP the cumulative deficit was greater
than the deficit under Cdn GAAP due to the past write-offs of certain
deferred exploration costs; and (iii) gains recognized in Cdn GAAP
upon issuances of subsidiaries' shares are not allowed under US GAAP.
(9) In December 2004, the FASB finalized SFAS No. 123R Share-Based
Payment, amending SFAS No. 123, effective beginning our first quarter
of fiscal 2006. SFAS 123R requires the Company to expense stock
options based on grant date fair value in its financial statements.
Further, the SFAS 123R requires additional accounting related to the
income tax effects and additional disclosure regarding the cash flow
effects resulting from share-based payment arrangements. In March
2005, the U.S. Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") No. 107, which expresses views of
the SEC staff regarding the interaction between SFAS 123R and certain
SEC rules and regulations, and provides the staff's views regarding
the valuation of share-based payment arrangements for public
companies. We adopted the optional provisions of FAS 123 in 2003 and
have expensed share based payments since that time. We have expanded
share-based payment disclosures as required by of SFAS No. 123R at
March 31, 2006.
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
accompanying unaudited consolidated financial statements and related notes. The
financial statements have been prepared in accordance with accounting principles
generally accepted in Canada ("Cdn GAAP"). For a reconciliation to accounting
principles generally accepted in the United States ("US GAAP"), see Note 24 to
the consolidated financial statements. This Management's Discussion and Analysis
of Financial Condition and Results of Operations includes information available
to May 9, 2006.
OUR BUSINESS
Through our subsidiaries we own a controlling interest in four significant gold
properties in southern Ghana in West Africa: the Bogoso/Prestea property, which
is comprised of the adjoining Bogoso and Prestea surface mining leases
("Bogoso/Prestea"), the Prestea Underground property ("Prestea Underground"),
the Wassa property ("Wassa"), and the Hwini-Butre and Benso concessions ("St.
Jude Properties"). In addition to these gold properties we hold various other
exploration rights and interests and are actively exploring in a variety of
locations in West Africa and South America.
Bogoso/Prestea is owned by our 90% owned subsidiary Bogoso Gold Limited ("BGL").
BGL was acquired in 1999. Bogoso/Prestea produced and sold 131,898 ounces of
gold during 2005.
Through another 90% owned subsidiary, Wexford Goldfields Limited ("WGL"), we own
the Wassa gold mine located some 35 kilometers east of Bogoso/Prestea.
Construction and commissioning of Wassa's new processing plant and open pit mine
was completed at the end of March 2005 and the project was placed in service on
April 1, 2005. Wassa produced and sold 24,205 ounces of gold in the quarter
ending March 31, 2006 and 93,275 ounces since its April 2005 in-service date.
The Prestea Underground is located on the Prestea property and consists of a
currently inactive underground gold mine and associated support facilities. BGL
owns a 90% operating interest in the Prestea Underground. We are currently
conducting exploration and engineering studies to determine if the underground
mine can be reactivated on a profitable basis.
Through our 100% owned subsidiary, St. Jude Resources Ltd. ("St. Jude"), we own
the St. Jude Properties in southwest Ghana. The St. Jude Properties consist of
the Hwini-Butre and Benso concessions which together cover an area of 201 square
kilometers. Both concessions contain undeveloped zones of gold mineralization.
These two concessions are located between 40 and 80 kilometers south of Wassa.
The mineralized zones have been delineated through the efforts of the prior
owner who conducted extensive exploration work from the mid-1990s to 2005.
We hold interests in several gold exploration projects in Ghana and elsewhere in
West Africa including Sierra Leone, Ghana, Burkina Faso, Niger and Cote
d'Ivoire. We also hold and manage exploration properties in Suriname and French
Guiana in South America. We hold indirect interests in gold exploration
properties in Peru and Chile through a 17% shareholding investment in Goldmin
Consolidated Holdings. We also own a 53% interest in EURO a French registered,
publicly-traded royalty holding company (formerly known as Guyanor Ressources
S.A.) which owns a royalty interest based on gold production at Cambior Inc.'s
Rosebel gold mine in Suriname.
Our corporate headquarters is located in Littleton, Colorado. Our accounting
records are kept in compliance with Canadian GAAP and all of our operations,
except for certain exploration projects, transact business and keep financial
records in US dollars.
NON-GAAP FINANCIAL MEASURES
In this Form 10-Q, we use the terms "total operating cost per ounce," "total
cash cost per ounce" and "cash operating cost per ounce."
Total operating cost per ounce for a period is equal to "Total mine operating
costs" for the period, as found on our consolidated statements of operations
divided by the ounces of gold sold in the period. Total mine operating costs
include all mine-site operating costs, including the costs of mining,
processing, maintenance, work in process inventory changes, mine-site overhead,
production taxes and royalties, mine site depreciation, depletion, amortization,
21
asset retirement obligations and by-product credits, but do not include
exploration costs, corporate general and administrative expenses, impairment
charges, corporate business development costs, gains and losses on asset sales,
interest expense, mark-to-market gains and losses on derivatives, foreign
currency gains and losses, gains and losses on investments and income tax.
Total cash cost per ounce for a period is equal to "Mining operations" costs for
the period, as found on our consolidated statements of operations divided by the
number of ounces of gold sold during the period.
Cash operating cost per ounce for a period is equal to "total cash costs" for
the period less production royalties and production taxes, divided by the number
of ounces of gold sold during the period.
The calculations of total cash cost per ounce and cash operating cost per ounce
are in compliance with an industry standard for such measures established in
1996 by the Gold Institute, a non-profit industry group.
The following table shows the derivation of these measures and a reconciliation
of "total cash cost per ounce" and "cash operating cost per ounce."
Derivation of Total Mine Operating Cost For the three months ended March 31, 2006
--------------------------------------------
Wassa (1) Bogoso/Prestea Total
-------------------------------------------------------------------------------------------------
Mining operations $12,199 $11,264 $23,463
-------------------------------------------------------------------------------------------------
Mining related depreciation, depletion & amortization 3,125 2,452 5,577
-------------------------------------------------------------------------------------------------
Accretion of asset retirement obligations 48 120 168
-------------------------------------------------------------------------------------------------
Total mine operating costs $15,372 $13,836 $29,208
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Ounces sold 24,205 20,735 44,940
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Derivation of Costs per Ounce:
-------------------------------------------------------------------------------------------------
Total mine operating cost per ounce - GAAP ($/oz) 635 667 650
-------------------------------------------------------------------------------------------------
Less mine depreciation, depletion & amortization
($/oz) 129 118 124
-------------------------------------------------------------------------------------------------
Less accretion of asset retirement obligation ($/oz) 2 6 4
-------------------------------------------------------------------------------------------------
Total cash cost per ounce ($) 504 543 522
-------------------------------------------------------------------------------------------------
Less royalties and production taxes ($/oz) 17 16 17
-------------------------------------------------------------------------------------------------
Cash operating cost per ounce ($) 487 527 505
-------------------------------------------------------------------------------------------------
22
Derivation of Total Mine Operating Cost For the three months ended March 31, 2005
-------------------------------------------
Wassa (1) Bogoso/Prestea Total
-------------------------------------------------------------------------------------------
Mining operations $ - $ 12,076 $ 12,076
-------------------------------------------------------------------------------------------
Mining related depreciation, depletion &
amortization - 2,172 2,172
-------------------------------------------------------------------------------------------
Accretion of asset retirement obligations - 187 187
-------------------------------------------------------------------------------------------
Total mine operating costs $ - $ 14,435 $ 14,435
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Ounces sold - 39,164 39,164
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Derivation of Costs per Ounce:
-------------------------------------------------------------------------------------------
Total mine operating cost per ounce - GAAP ($/oz) - 369 369
-------------------------------------------------------------------------------------------
Less mine depreciation, depletion & amortization
($/oz) - 55 55
-------------------------------------------------------------------------------------------
Less accretion of asset retirement obligation
($/oz) - 4 4
-------------------------------------------------------------------------------------------
Total cash cost per ounce ($) - 309 309
-------------------------------------------------------------------------------------------
Less royalties and production taxes ($/oz) - 12 12
-------------------------------------------------------------------------------------------
Cash operating cost per ounce ($) - 297 297
-------------------------------------------------------------------------------------------
(1) The Wassa mine did not commence commercial production until April 2005.
We use total cash cost per ounce and cash operating cost per ounce as key
operating indicators. We monitor these measures monthly, comparing each
periods's values to prior period's values to detect trends that may indicate
increases or decreases in operating efficiencies. These measures are also
compared against budget to alert management to trends that may cause actual
results to deviate from planned operational results. We provide these measures
to our investors to allow them to also monitor operational efficiencies of our
mines. We calculate these measures for both individual operating units and on a
consolidated basis.
Total cash cost per ounce and cash operating cost per ounce should be considered
as non-GAAP financial measures as defined in SEC Regulation S-K Item 10 and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. There are material limitations
associated with the use of such non-GAAP measures. Since these measures do not
incorporate revenues, changes in working capital and non-operating cash costs,
they are not necessarily indicative of operating profit or cash flow from
operations as determined under GAAP. Changes in numerous factors including, but
not limited to, mining rates, milling rates, gold grade, gold recovery, and the
costs of labor, consumables and mine site general and administrative activities
can cause these measures to increase or decrease. We believe that these measures
are the same as, or similar to the measures of other gold mining companies, but
may not be comparable to similarly titled measures in every instance.
Ownership - All figures and amounts in this Item 2 are shown on a 100% basis,
which represents our current beneficial interest in gold production and
revenues. Once all capital has been repaid, the Government of Ghana would
receive 10% of the dividends distributed from the subsidiaries owning the
Bogoso/Prestea and Wassa mines.
Restatement of Prior Periods - In early 2006, it was determined that hedge
accounting had been improperly applied by our subsidiary, EURO Ressources S.A.
("EURO") for its cash-settled forward gold price agreements during the first
three quarters of 2005. As a result, our Form 10-Qs for the first three
quarters of 2005 have been amended to apply derivative accounting rather than
hedge accounting to EURO's derivatives. In this Form 10-Q, comparative amounts
from the first quarter of 2005 reflect this restatement. The initial loss of
$(1.4) million was restated to a loss of $(2.2) million.
BUSINESS STRATEGY AND DEVELOPMENT
Since 1999, our business and development strategy has been focused primarily on
the acquisition of producing and development stage gold properties in Ghana and
on the exploration, development and operation of these properties. Since 1999,
our exploration efforts have been focused on Ghana, other West African countries
and South America.
23
In line with our business strategy, we acquired Bogoso in 1999 and have operated
the Bogoso processing plant since that time. In 2001, we acquired Prestea and
have been mining at Prestea since late 2001. In late 2002, we acquired Wassa and
following completion of a feasibility study, constructed a new CIL processing
plant at Wassa which began commercial operation in April 2005. We are currently
constructing a new BIOX(R) processing plant at Bogoso designed to expand annual
production at Bogoso/Prestea from approximately 130,000 ounces in 2005 to
approximately 370,000 ounces in 2007. Based on currently known reserves we
expect a mine life of approximately seven years at Bogoso/Prestea. Achievement
of this target is subject to numerous risks. See the discussion of Risk Factors
in Item 1A of our 2005 Form 10-K.
In late 2005, we acquired the St. Jude Properties where we plan to carry out
geological and engineering studies during 2006 to determine the economic
feasibility of these undeveloped gold properties.
Our overall objective since 1999 has been to grow our business to become a
mid-tier gold producer (which we understand to be a producer with annual
production of approximately 500,000 ounces). Assuming the benefit of a full
year's production from the Bogoso expansion project in 2007, we anticipate
reaching this goal in 2007. We continue to actively investigate potential
acquisition and merger candidates which could further increase our annual gold
production, however we presently have no agreement or understanding with respect
to any specific potential transaction.
SIGNIFICANT TRENDS AND EVENTS DURING THE FIRST QUARTER OF 2006
Sale of Shares of Moto Goldmines Limited
In March 2006, we exercised our remaining one million Moto Goldmines Limited
("Moto") warrants bringing our total ownership in Moto to six million common
shares and immediately afterward sold all six million common shares in a
bought-deal transaction in Canada for Cdn$7.50 per share. The sale of the six
million shares resulted in net proceeds to Golden Star of $38.9 million
(Cdn$45.0 million). The sale realized approximately $30.3 million of pre-tax
capital gain for Golden Star, which was recognized in income in the first
quarter. A $4.9 million non-cash tax expense was recognized on the gain.
Gold Prices
Gold prices have generally trended upward during the last five years, from a low
of just under $260 per ounce in early 2001 to a high of $700 per ounce in May
2006. Much of the price increase during this period appears to be related to the
fall in the value of the US dollar versus other major foreign currencies, but in
recent quarters prices appear to be responding to additional influences
including an increased demand for gold as an investment with a resulting
increase in the rate of increase. Our realized gold price for shipments during
the first quarter of 2006 averaged $554 per ounce compared to $426 per ounce
average price received in the first quarter of 2005.
Ore processing at Bogoso/Prestea
As has been the case since mid-2004, Bogoso/Prestea continues to deal with ores
that are not well suited for processing in the existing Bogoso processing plant.
The Bogoso plant was originally configured to process oxide and other
non-refractory ores. Since mid-2004, when oxide ores were depleted on the north
end of the Prestea property, the Bogoso plant has sought to process ore from the
Plant-North pit at Prestea which were thought to be relatively non-refractory.
The Plant-North ores have proven more difficult to treat than anticipated, and
recovery and plant through-put has been lower than expected as a result. We are
now stockpiling certain of the more refractory Plant-North ores as feed for the
new BIOX(R) plant scheduled for start-up in the fourth quarter of 2006.
Additional oxide and non-refractory ore from the sulfide pit pre-stripping will
supplement feed to the existing Bogoso plant in the second and third quarters
and in the second half of 2006 we expect to start mining oxide ores from the new
Pampe project located 18 kilometers west of Bogoso.
RESULTS OF OPERATIONS
First quarter 2006 Compared to First quarter 2005
Summary - Net income totaled $19.0 million or $0.092 per share during the first
quarter of 2006, versus a net loss of $(2.2) million or $(0.016) per share
during the first quarter of 2005. The major factor contributing to the earnings
in the first quarter of 2006 was a $30.3 million gain on the sale of shares of
Moto (see Trends and Events section above). Off-setting the gain on the sale of
the Moto shares is an $8.7 million loss on derivatives and a $4.8 million
operating loss. The derivative loss consists of an unrealized non-cash loss of
$7.7 million and a realized loss of $1.0 million. The unrealized loss on the
derivatives included a $5.3 million loss on the cash-settled forward gold price
agreements at EURO. As gold prices continued to increase during the first
24
quarter of 2006, the amount EURO now expects to pay to the counter-party on the
cash-settled forward gold price agreements increased, resulting in current
period recognition of the potential future payments. We also recorded an
additional $2.2 million unrealized expected future loss on call options. This
loss is an opportunity costs based on current gold prices and assume that gold
prices will remain at current levels during the remaining 12 month life of the
call option lives. Derivative mark-to-market losses totaled $1.3 million in the
first quarter of 2005 when our only derivatives were EURO's cash-settled forward
gold price agreements.
All of our puts, calls and forward currency agreements expire over the next 12
months. We do not plan to enter into any additional gold puts or calls nor to
sell our gold forward in a rising gold market. The derivative agreements were
scheduled to provide downside gold price and currency protection for an 18 month
period coinciding with Bogoso sulfide plant construction and start-up period. In
March 2007, all existing derivatives, except for EURO's cash-settled forward
gold price agreements, will have expired.
First quarter consolidated gold revenues were up $8.2 million from a year ago
but the operating profit was lower. Increases in gold revenues and in mine
operating costs are mostly related to the inclusion of Wassa's revenues and
costs in the first quarter of 2006. Wassa was not in-service in the first
quarter of 2005. Higher gold prices ($554 per ounce in the first quarter of 2006
versus $426 per ounce in the same quarter of 2005) also contributed to the
increased revenues.
Bogoso's and Wassa's combined operations yielded a $4.3 million mine
pre-tax operating loss (gold revenues less mine operating costs) in the first
quarter of 2006 compared to a pre-tax operating income of $2.3 million on Bogoso
operations in the first quarter of 2005. The major factors responsible for the
consolidated mine operating loss were lower gold output at Bogoso versus a year
ago and an operating loss at Wassa in the first quarter of 2006.
Increases in interest expense from higher debt balances were partially offset by
a $1.1 million foreign exchange gain on foreign currency accounts in the US and
Canada.
SUMMARY OF FINANCIAL RESULTS For the three months ended
March 31,
-------------------------------
2006 2005
-----------------------------------------------------------------------------------------
Gold sold (oz) 44,940 39,164
-----------------------------------------------------------------------------------------
Average realized price ($/oz) 554 426
-----------------------------------------------------------------------------------------
Total revenues (in $ thousands) 27,392 18,051
-----------------------------------------------------------------------------------------
Cash flow provided by/(used in) operations (in $ thousands) (5,696) 3,634
-----------------------------------------------------------------------------------------
Net income/(loss) (in $ thousands) 19,023 (2,223)
-----------------------------------------------------------------------------------------
Net income/(loss) per share - basic ($) 0.092 (0.016)
-----------------------------------------------------------------------------------------
Bogoso/Prestea Operations - Bogoso/Prestea generated a $(2.4) million pre-tax
operating loss during the first quarter of 2006 on sales of 20,735 ounces of
gold, down from $2.3 million of after-tax operating income on sales of 39,164
ounces in the first quarter of 2005. The major factors contributing to the loss
were lower gold production and sales. First quarter gold sales were down 18,429
ounces versus the first quarter of 2005 due to a combination of lower plant
throughput, lower ore grades and lower gold recovery. The lower plant
throughput and recovery were caused by the metallurgical characteristics of the
deeper, harder non-refractory sulfide Plant-North ores processed in the first
quarter of 2006 versus the ores processed in the first quarter of 2005. The
Bogoso processing plant processed an average of 3,729 tonnes per day in the
first quarter of 2006 at an average grade of 3.45 grams per tonne, as compared
to 4,348 tonnes per day at 4.56 grams per tonne in the same period in 2005. Gold
recovery dropped to 57.3% from 61.5% in the first quarter of 2005. The drop in
recovery was related to increasing metallurgical complexity of the deeper ores
in the Plant-North pit at Prestea. We expect gold production to increase
marginally in each of the next two quarters and to increase significantly in the
fourth quarter as a result of the start up of the new sulfide processing plant
at Bogoso and higher recoveries from the new Pampe oxide ore body.
25
BOGOSO/PRESTEA For the three months ended
March 31,
--------------------------------------------------------------------------------
OPERATING RESULTS 2006 2005
--------------------------------------------------------------------------------
Ore mined (t) 397,416 400,144
--------------------------------------------------------------------------------
Waste mined (t) 3,481,508 2,019,253
--------------------------------------------------------------------------------
Ore processed (t) 335,581 391,294
--------------------------------------------------------------------------------
Grade processed (g/t) 3.45 4.56
--------------------------------------------------------------------------------
Recovery (%) 57.3 61.5
--------------------------------------------------------------------------------
Gold sold (oz) 20,735 39,164
--------------------------------------------------------------------------------
Cash operating cost ($/oz) 527 297
--------------------------------------------------------------------------------
Royalties ($/oz) 16 12
--------------------------------------------------------------------------------
Total cash cost ($/oz) 543 309
--------------------------------------------------------------------------------
While Bogoso's first quarter mine operating costs were unchanged from the same
quarter of 2005, a decrease in gold output resulted in significantly higher
costs per ounce. Cash operating costs came in at $527 per ounce versus $297 per
ounce in the first quarter of 2005.
Wassa Operations - Wassa generated a $1.9 million after-tax operating loss in
the three months ended March 31, 2006 on sales of 24,205 ounces of gold. The
Wassa processing plant processed an average of 10,859 tonnes per day at an
average grade of 0.86 grams per tonne with a gold recovery of 86.7%. Cash
operating costs averaged $487 per ounce and total cash costs averaged $504 per
ounce.
WASSA For the three months ended
March 31,
--------------------------------------------------------------------------------
OPERATING RESULTS 2006 2005(1)
--------------------------------------------------------------------------------
Ore mined (t) 668,741 -
--------------------------------------------------------------------------------
Waste mined (t) 3,449,355 -
--------------------------------------------------------------------------------
Ore processed (t) 977,330 -
--------------------------------------------------------------------------------
Grade processed (g/t) 0.86 -
--------------------------------------------------------------------------------
Recovery (%) 86.7 -
--------------------------------------------------------------------------------
Gold sold (oz) 24,205 -
--------------------------------------------------------------------------------
Cash operating cost ($/oz) 487 -
--------------------------------------------------------------------------------
Royalties ($/oz) 17 -
--------------------------------------------------------------------------------
Total cash cost ($/oz) 504 -
--------------------------------------------------------------------------------
1) The Wassa mine did not commence commercial production until April 2005.
While Wassa's first quarter 2006 operating results were again short of
expectations, plant throughput was higher than in any quarter of 2005 and we
continue to anticipate higher ore grades in the pit as mining reaches deeper
levels. On a monthly basis the operation at Wassa continues to improve as shown
in the following table:
Units January February March
--------------------------------------------------------------------------------
Throughput rate tonnes/day 10,398 11,088 11,114
--------------------------------------------------------------------------------
Total milled tonnes 322,338 310,472 344,520
--------------------------------------------------------------------------------
Average grade g/t 0.75 0.88 0.94
--------------------------------------------------------------------------------
Recovery % 88.7 87.3 89.6
--------------------------------------------------------------------------------
Gold sold Ounces 6,841 7,609 9,755
--------------------------------------------------------------------------------
Cash operating
cost $/oz $608 $459 $425
--------------------------------------------------------------------------------
The first quarter direct mine operating costs at Wassa are consistent with
budget expectations. As mining reaches deeper levels in the pit we expect waste
to ore strip ratios to decrease and an increase in ore grade which will result
in higher gold output and lower cash operating cost per ounce.
DEVELOPMENT PROJECTS
Bogoso Sulfide Expansion Project
Nearly 75% of the remaining ore reserves at Bogoso/Prestea are refractory and
cannot be efficiently processed at our existing processing plant. In 2005 a
decision was made to construct a new 3.5 million tonne per annum processing
facility at Bogoso alongside the existing non-refractory processing plant. The
new plant, which is currently under construction, will utilize the proprietary
BIOX(R) bio-oxidation technology to treat the refractory sulfide ore. When
completed in late 2006, the new sulfide processing plant and the existing CIL
plant are together expected to process a combined 5.0 million tonnes per year.
The existing CIL mill will retain its current configuration and will continue to
process non-refractory ores during the construction phase of the new BIOX(R)
plant. After the new BIOX(R) plant comes on line, it is anticipated that the
existing Bogoso CIL plant will process mostly oxide ores
26
and the new BIOX(R) plant will process mostly refractory sulfide ores and mixed
oxide-refractory ores. The two plants sitting side-by-side are expected to
provide operational efficiencies since they will share common management, labor,
reagent inventories, warehouse parts and maintenance efforts. And with the two
plants and their differing technologies, we should be able to effectively
process all of the ore types known to exist in the Bogoso/Prestea area.
Construction work is proceeding within schedule and budget. Design and
engineering is essentially complete and most equipment items have been delivered
to site or are in the final stages of supply and shipment. Concrete work and
tankage is well progressed and the installation of structural steel and
electrical equipment and wiring has commenced.
The design and construction of the expansion project is being managed by GRD
Minproc in accordance with an engineering, procurement and construction
management contract that was finalized and signed in April 2006.
Pre-stripping of the first two sulfide pits has commenced using mining equipment
acquired in 2005 and 2006. The non-refractory plant will continue to process
non-refractory ores from the Plant-North pit at Prestea until completion of
mining in the fourth quarter of 2006. Thereafter we plan to feed the
non-refractory plant with oxide ores from Pampe, Mampon and various areas on the
south end of the Prestea property.
We estimate that the total capital cost of the new sulfide plant project,
including the expansion of the mining fleet, to be approximately $125 million,
and expect construction to be completed by late 2006. At the end of March 31,
2006 approximately $61.8 million of the total project costs had been spent. An
additional $25 million will be spent on pre-stripping and inventory build up.
In 2007, following completion of the BIOX(R) plant, we expect combined gold
production from the two Bogoso plants to be approximately 370,000 ounces at an
average cash operating cost of $330 per ounce. Based on our metallurgical test
work, gold recoveries from the BIOX(R) process are expected to average 86% and
vary between 78% for near surface material and 88% for deeper, more refractory
sulfides.
EXPLORATION PROJECTS
We have budgeted $16.5 million for exploration in 2006, and intend to focus our
efforts on core assets in Ghana, including the Prestea Underground and the newly
acquired St Jude Properties at Hwini-Butre and Benso. Key areas where we plan to
be active include:
o Mineralized areas around the operating mines;
o Prestea Underground, where we have intensified exploration to allow
feasibility (upper levels) and scoping studies (deep levels) to be
completed this year;
o Prestea South - Bondaye area, where we plan to resume drilling of the known
oxide targets to allow feasibility and permitting to be progressed in 2006;
and
o Hwini-Butre and Benso, where intensive drilling programs are planned to be
undertaken to allow feasibility and permitting to be progressed in 2006.
By the end of 2005, dewatering efforts at the Prestea Underground had cleared
the lowest sections of the old underground workings and an extensive underground
drilling program has been initiated which will continue during most of 2006. We
currently have three drills working between the 17 and 24 levels which
accomplished 6,524 meters of drilling during the first quarter. Later in the
year we plan to test extensions to mineralized zones in the deepest section of
the mine between 30 and 35 level. We believe these deeper levels provide the
best opportunities for significant new discoveries in the Prestea Underground.
We intend to complete an initial feasibility study by the end of 2006,
evaluating the economic potential of restarting production from the upper levels
of the Prestea Underground mine.
Other opportunities include:
o Saramacca Anomaly M in Suriname, where we plan to follow up the encouraging
2005 drilling results;
o Cote d'Ivoire and Sierra Leone, where we plan to advance our interests to
key decision points.
27
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2006 our cash, cash equivalents and short term investments totaled
$86.9 million, down marginally from $89.7 million at December 31, 2005. While
operating activities consumed $5.7 million and capital spending used $45.9
million during the first quarter, sale of the Moto shares contributed $39.0
million of cash. Lower gold output and use of cash to reduce operating payables
and to increase inventories were the major factors contributing to the
operational consumption of cash during the first quarter.
Option exercises provided $2.2 million of cash and $5.5 million of new equipment
loans contributed a total of $7.6 million of cash, and $1.7 million was used to
repay various loans.
Of the $45.9 million spent on new capital projects during the first quarter,
approximately $24.6 million of the total was spent on the Bogoso sulfide project
and $9.9 million was spent on other plant and equipment needs mostly at
Bogoso/Prestea and at Wassa. A total of $2.1 million was spent on capital
exploration projects.
Liquidity Outlook
Capital expenditures plans for 2006 include the following projects:
Capital Spending Amount (millions)
-----------------
Development
Bogoso Expansion Project $89.0
Bogoso/Prestea pre-stripping and inventory build up 25.0
Pampe 4.0
Mampon 1.2
St. Jude properties 1.0
Sustaining Capital
Bogoso/Prestea 7.0
Prestea Underground care and maintenance 4.8
Wassa 6.2
Exploration
Bogoso/Prestea 1.7
Prestea Underground 3.3
Wassa 0.9
St. Jude properties 4.6
Other 6.3
-------
Total $155.0
Approximately 80% of the expected Bogoso sulfide expansion project spending is
scheduled in the first half of 2006, while 90% of all capital spending is
scheduled in the first three quarters of 2006.
At current gold prices (approximately $700 per ounce) we expect both
Bogoso/Prestea and Wassa to generate positive operating cash flows in 2006, but
this source of funding along with the $86.9 million of cash on hand at March 31,
2006 will not meet all of our growth needs during 2006.
In March 2006, we liquidated our share holdings in Moto yielding $39.0 million
of cash and we are currently negotiating with banks to set up a $30 million
revolving line of credit that could be drawn on if we find that cash from
operations and cash on hand are not sufficient to meet our projected needs. We
may also consider selling other non-key assets if necessary to complete our
capital plans during 2006.
LOOKING AHEAD
Our main objectives for the remainder of 2006 include:
o completion of mining and commencement of reclamation at the Prestea
Plant-North pit in late 2006;
o permitting and commencement of oxide mining from Pampe on the Akropong
trend west of Bogoso, to provide oxide ore to the Bogoso plant following
exhaustion of the Prestea Plant-North ores;
28
o commencement of sulfide mining at Bogoso;
o completion of construction and commissioning of the Bogoso sulfide
expansion project by the end of 2006;
o achievement of improved production rates and costs at Wassa;
o commencement of mining of the higher grade deposit at Wassa in the second
half of 2006
o commencement of mining of the higher grade South Akyempim deposit at Wassa
in the second half of 2006;
o a continued high level of exploration effort;
o continued evaluation of the Prestea Underground potential and progress of
feasibility studies;
o assimilation and further exploration of the St. Jude Properties and
progress of feasibility studies; and
o continuation of efforts to identify and pursue acquisition and growth
opportunities in Ghana and elsewhere.
We expect gold production at Bogoso/Prestea during 2006 to total approximately
180,000 ounces at an average cash operating cost for the year of $330 per ounce.
Production is expected to increase gradually through the second and third
quarter, and significantly in the fourth quarter when production from the new
BIOX(R) facility is expected to commence and mining begins at the Pampe oxide
deposit.
We expect 2006 gold production at Wassa to total approximately 120,000 ounces at
an average cash operating cost of approximately $340 per ounce. Cash operating
costs should decrease significantly over the next three quarters due to a lower
stripping ratio and expected higher grades resulting in increased gold
production.
As more fully disclosed in the Risk Factors Item 1A in our 2005 Form 10-K,
numerous factors could cause our estimates and expectations to be wrong or could
lead to changes in our plans. Under any of these circumstances, the estimates
described above could change materially.
RELATED PARTY TRANSACTIONS
During the first quarter of 2006 we obtained legal services from a legal firm to
which our Chairman is counsel. Total value of all services purchased from the
this law firm during the first quarter were $0.4 million. Our Chairman did not
personally perform any legal services for us during the first quarter nor did he
benefit directly or indirectly from payments for the services performed by the
firm.
During the first quarter of 2006 a corporation controlled by Michael A. Terrell,
a director of Golden Star, provided management services to St. Jude for which it
was paid Cdn$0.13 million. Mr. Terrell became a director of Golden Star
following our acquisition of St. Jude in December 2005. Mr. Terrell's company
ceased doing business with St. Jude at the end of March 2006.
OFF BALANCE SHEET ARRANGEMENTS
We have no off balance sheet arrangements.
OUTSTANDING SHARE DATA
This MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION includes information available to May 9, 2006. As of May 9, 2006 we
had outstanding 207,513,758 common shares, options to acquire 6,600,451 common
shares, warrant to acquire 11,724,334 common shares and convertible notes which
are convertible into 11,111,111 common shares.
TABLE OF CONTRACTUAL OBLIGATIONS
CONTRACTUAL OBLIGATIONS Payments due by period
--------------------------------------------------------------------------------------
As of March 31, 2006 Less than 1 1 to 3 3 to five More than 5
Total year years years years
--------------------------------------------------------------------------------------
Debt (1) $77,218 $7,585 $14,594 $55,039 $-
--------------------------------------------------------------------------------------
Interest on long term debt 14,267 5,101 8,614 552 -
--------------------------------------------------------------------------------------
Operating lease obligations 405 143 262 - -
--------------------------------------------------------------------------------------
Asset retirement obligations(2) 21,339 3,197 7,297 3,804 7,041
--------------------------------------------------------------------------------------
Total $113,229 $16,026 $30,767 $59,395 $7,041
--------------------------------------------------------------------------------------
29
(1) Includes $50.0 million of convertible notes maturing in 2009. Golden
Star has the right to repay the $50.0 million in cash or in common
shares at the due date under certain circumstances. The presentation
shown above assumes payment is made in cash and also assumes no
conversions of the debt to common shares by the note holders prior to
the maturity date.
(2) Asset retirement obligations include several estimates about future
reclamation costs, mining schedules, timing of the performance of
reclamation work and the quantity of ore reserves which in turn
determine the ultimate closure date, which in turn impacts the
discounted amounts of future asset retirement liabilities. The
discounted value of these projected cash flows is recorded as "Asset
retirement obligations" on the balance sheet of $12.1 million as of
March 31, 2006. The amounts shown above are undiscounted to show full
expected cash requirements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk includes, but is not limited to, the following
risks: changes in interest rates on our investment portfolio and debt, changes
in foreign currency exchange rates, commodity price fluctuations and equity
price risk.
Interest Rate Risk
From time to time we invest excess cash in high quality short-term debt
instruments. The rates received on such investments may fluctuate with changes
in economic conditions. As a result, our investment income may fall short of
expectations during periods of lower interest rates. We estimate that, given the
cash balances expected during 2006, a 1% change in interest rates would result
in a $0.1 to $0.3 million change in annual interest income.
We have both fixed rate and variable rate debt. At March 31, 2006 we had $7.0
million of variable rate debt which carries an interest rate of LIBOR plus 2.5%.
We estimate that a 1% increase in the interest rate on the variable rate debt
would result in a $0.1 million change in annual interest expense. We have not
entered into any agreements to hedge against unfavorable changes in interest
rates, but may in the future actively manage our exposure to interest rate risk.
Foreign Currency Exchange Rate Risk
While our major operating units transact most of their business in US dollars,
many purchases of labor, operating supplies and capital assets are denominated
in Euros, British pounds, Australian dollars, South African Rand and Ghanaian
Cedis. As a result, currency exchange fluctuations may impact the costs incurred
at our operations. Gold is sold throughout the world based principally on the US
dollar price, but portions of our operating expenses and some of our capital
purchases are incurred in currencies other than the US dollar. The appreciation
of non-US dollar currencies against the US dollar increases production costs and
the cost of capital assets in US dollar terms at mines located outside the US,
which can adversely impact our net income and cash flows. Conversely, a
depreciation of non-US dollar currencies usually decreases production costs and
capital asset purchases in US dollar terms.
The value of cash and cash equivalent investments denominated in foreign
currencies also fluctuates with changes in currency exchange rates. Appreciation
of non-US dollar currencies results in a foreign currency gain on such
investments and a decrease in non-US dollar currencies results in a loss.
While in the past we have not utilized market risk sensitive instruments to
manage our exposure to foreign currency exchange rates, during 2005 we entered
into forward purchase contracts for the South African Rand and the Euro to hedge
expected future purchases of capital assets in South Africa and Europe
associated mostly with the Bogoso sulfide expansion project. We also hold
portions of our cash reserves in non-US dollar currencies.
Commodity Price Risk
Gold is our primary product and, as a result, changes in the price of gold could
significantly affect our results of operations and cash flows. According to
current estimates, a $10 per ounce change in our average realized price of gold
for 2006 would result in a $2.5 to $3 million change in 2006's expected pre-tax
earnings and cash flows.
During 2005, to reduce the risk of unfavorable gold price fluctuations on our
operating cash flows during the construction period of the Bogoso sulfide
expansion project, we purchased puts to lock in minimum gold prices for portions
of our expected gold sales in 2006 and early 2007. As of March 31, 2006 we have
150,000 put options remaining which establish an average minimum price of $405
per ounce on 150,000 ounces of expected gold production spread monthly through
2006 and early 2007.
30
We also sold calls during 2005 to offset a portion of the costs of purchasing
the puts. At March 31, we had 60,000 call options remaining which expire in 2006
and early 2007, each carrying a strike price of $525 per ounce.
Since the Rosebel Royalty revenues received by EURO fluctuate with gold prices,
EURO's loan agreements required that EURO enter into a series of cash-settled
forward gold price agreements with the lender designed to eliminate a portion of
the potential impact of gold price fluctuations on expected future Rosebel
royalty revenues. These cash-settled forward gold price agreements meet the
definition of a derivative. See Note 12 above for additional details of these
derivatives and their impact on gold price risk.
Equity Price Risk
We have in the past and may in the future seek to acquire additional funding by
sale of common shares. Movements in the price of our common shares have been
volatile in the past and may also be volatile in the future. As a result, there
is a risk that we may not be able to sell new common shares at an acceptable
price should the need for new equity funding arise.
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
The principal executive officer and principal financial officer have evaluated
the effectiveness of the Corporation's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended) as of March 31, 2006. Based on the evaluation, the principal
executive officer and the principal financial officer concluded that the
disclosure controls and procedures in place are effective to ensure that
information required to be disclosed by the Corporation, including consolidated
subsidiaries, in reports that the Corporation files or submits under the
Exchange Act, is recorded, processed, summarized and reported on a timely basis
in accordance with applicable time periods specified by the Securities and
Exchange Commission rules and forms. There has been no change in the
Corporation's internal control over financial reporting during the quarter ended
March 31, 2006, that has materially affected, or is reasonably likely to
materially affect, the Corporation's internal control over financial reporting
other than disclosed in item (b) below.
(b) Change in Internal Control Over Financial Reporting
As discussed in the notes to the consolidated financial statements, it was
determined that as of December 31, 2005 management did not maintain effective
controls over the presentation and documentation of certain derivatives.
Specifically, Golden Star did not prepare and maintain sufficient documentation
to support the designation and effectiveness of hedges of certain gold future
contracts entered into by its subsidiary, EURO Ressources S.A., during 2005.
Because of the existence of the deficiency in question at year-end, management
concluded that our internal control over financial reporting was ineffective as
of December 31, 2005.
During the quarter ended March 31, 2006, management has undertaken remedial
action to address the above described material weakness by revising its
accounting procedures to record the derivative transaction in accordance with
Canadian and United States Generally Accepted Accounting Principles (GAAP). The
Company no longer applies hedge accounting to its derivatives.
Management believes it has completed these remediation efforts; however,
management has not engaged its audit firm to perform a stand alone engagement to
determine if the material weakness continues to exist.
31
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding legal proceedings is contained in Note 14 to the
Consolidated Financial Statements contained in the Report .
ITEM 1A. RISK FACTORS
The risk factors for the quarter ended March 31, 2006 are substantially the same
as those disclosed and discussed in Item 1A of our 2005 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS,
31.1 Certification of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certificate of Principal Executive Officer pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
32.2 Certificate of Principal Financial Officer pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report on Form 10-Q to be
signed on its behalf by the undersigned, thereunto duly authorized.
GOLDEN STAR RESOURCES LTD.
Registrant
By: /s/ Peter J. Bradford
--------------------------------------------------
Peter J. Bradford
President and Chief Executive Officer
Date: May 10, 2006
33
EXHIBITS
31.1 Certification of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certificate of Principal Executive Officer pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
32.2 Certificate of Principal Financial Officer pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
34