SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________________________
FORM 10-Q
__________________________________________

		
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended June 30, 2012
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 of
Incorporation or Organization)	 	(I.R.S. Employer
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
__________________________________________
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 report) and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	
					
Large accelerated filer:	o	 	Accelerated filer:	x	
 	 	 	 	 	
Non-accelerated filer:	o	 	Smaller reporting company:	o	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   o     No   x
Number of Common Shares outstanding as at August 7, 2012: 258,861,960

REPORTING CURRENCY, FINANCIAL AND OTHER INFORMATION
All amounts in this report are expressed in United States (“U.S.”) dollars, unless otherwise indicated. Canadian currency is denoted as “Cdn$.” Financial information is presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
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 applicable Canadian securities law and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. 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, and within the meaning of applicable Canadian securities law, 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 (including negative and grammatical variations) tend to 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 Quarterly Report on Form 10-Q.
These statements include comments regarding: anticipated attainment of gold production rates; cash operating costs generally; gold sales; gold recovery rates; ore processing; permitting; geological, environmental, community and engineering studies; the timing for the completion of the final West Reef feasibility study; receipt of environmental management plan approvals by the Ghana Environmental Protection Agency (“EPA”); changes in the tax regime in Ghana; exploration efforts, activities and costs; ore grades; our anticipated investing and exploration spending during 2012; identification of acquisition and growth opportunities; our expectations regarding Pampe non-refractory ore, the Bogoso tailings and the Bogoso non-refractory plant; retention of earnings from our operations; gold production and cash operating cost estimates for 2012; expected operational cash flow during 2012; our objectives for 2012; expected debt payments during 2012; our plans for repayment of the 4% debentures; and sources of and adequacy of liquidity to meet capital and other needs in 2012 and beyond.
The following, in addition to the factors described under “Risk Factors” in Item 1A of our Form 10-K for the year ended December 31, 2011, are among the factors that could cause actual results to differ materially from the forward-looking statements:
• significant increases or decreases in gold prices;
• losses or gains in Mineral Reserves from changes in operating costs and/or gold prices;
• failure of exploration efforts to expand Mineral Reserves around our existing mines;
• unexpected changes in business and economic conditions;
• inaccuracies in Mineral Reserves and non-reserve estimates;
• changes in interest and currency exchange rates;
• timing and amount of gold production;
• unanticipated variations in ore grade, tonnes mined and crushed ore processed;
• unanticipated gold recovery or production problems;
• effects of illegal mining on our properties;
		
•	changes in mining and processing costs, including changes to costs of raw materials, power, supplies, services and personnel;	
• changes in metallurgy and processing;

2

• availability of skilled personnel, contractors, materials, equipment, supplies, power and water;
• changes in project parameters or mine plans;
• costs and timing of development of new Mineral Reserves;
• weather, including drought or excessive rainfall in West Africa;
• changes in regulatory frameworks based upon perceived climate trends;
• results of current and future exploration activities;
• results of pending and future feasibility studies;
• acquisitions and joint venture relationships;
• political or economic instability, either globally or in the countries in which we operate;
		
•	changes in regulations or in the interpretation of regulations by the regulatory authorities affecting our operations, particularly in Ghana, where our principal producing properties are located;	
• local and community impacts and issues;
• timing of receipt and maintenance of government approvals and permits;
• unanticipated transportation costs and shipping incidents and losses;
• accidents, labor disputes and other operational hazards;
• environmental costs and risks;
• changes in tax laws, such as those proposed in Ghana;
• unanticipated title issues;
• competitive factors, including competition for property acquisitions;
• possible litigation;
• availability of capital on reasonable terms or at all;
• potential losses from future hedging activities; and
• additional risk due to increased use of mining contractors.
These factors are not intended to represent a complete list of the general or specific factors that could affect us. Many of these factors are beyond our ability to control or predict. Although we believe the expectations reflected in our forward-looking statements are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risks and uncertainties. You should not unduly rely on any of our forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update any of these forward-looking statements to reflect future events or developments.

ITEM  1.	FINANCIAL STATEMENTS	
The following financial statements and footnotes presented immediately below, are prepared in conformity with U.S. GAAP.

3

GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of U.S. dollars except shares and per share data)
(unaudited)

	
																
	For the three months ended June 30,	 	For the six months ended June 30,	
 	2012	 	2011	 	2012	 	2011	
REVENUE				 	 	 	 	
Gold revenues	$	136,313		 	$	109,807		 	$	267,333		 	$	226,313		
Cost of sales (Note 15)	116,870		 	102,525		 	234,015		 	210,276		
Mine operating margin	19,443			7,282		 	33,318		 	16,037		
Exploration expense	827			1,569		 	2,091		 	2,148		
General and administrative expense	4,718			7,252		 	11,485		 	14,354		
Derivative mark-to-market loss (Note 5)	—			2,430		 	162		 	6,679		
(Gain)/loss on fair value of convertible debentures (Note 4)	1,145			(6,107	)	 	2,037		 	(24,292	)	
Property holding costs	1,336			1,689		 	3,410		 	4,363		
Foreign exchange loss	1,019			462		 	1,880		 	719		
Interest expense	3,723			2,112		 	6,496		 	4,470		
Interest and other income	(129	)		(63	)	 	(268	)	 	(102	)	
Loss on sale of assets	(76	)	 	—		 	(61	)	 	—		
(Gain)/loss on sale of investments (Note 13)	25			2		 	(22,360	)	 	2		
Loss on extinguishment of debt (Note 11)	582		 	—		 	582		 	—		
Income/(loss) before income tax	6,273			(2,064	)	 	27,864		 	7,696		
Income tax expense (Note 12)	(2,931	)		(3,801	)	 	(15,462	)	 	(8,106	)	
Net income/(loss)	$	3,342			$	(5,865	)	 	$	12,402		 	$	(410	)	
Net income/(loss) attributable to noncontrolling interest	859			(817	)	 	805		 	(1,290	)	
Net income/(loss) attributable to Golden Star shareholders	$	2,483			$	(5,048	)	 	$	11,597		 	$	880		
				 	 	 	 	
Net income/(loss) per share attributable to Golden Star shareholders				 	 	 	 	
Basic (Note 17)	$	0.010			$	(0.020	)	 	$	0.045		 	$	0.003		
Diluted (Note 17)	$	0.010			$	(0.020	)	 	$	0.045		 	$	0.003		
Weighted average shares outstanding (millions)	258.8			258.6		 	258.8		 	258.6		
Weighted average shares outstanding-diluted (millions)	258.9			258.6		 	258.8		 	259.2		

The accompanying notes are an integral part of the consolidated financial statements

4

GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/LOSS
(Stated in thousands of U.S. dollars except shares and per share data)
(unaudited)

	
																
 	For the three months ended June 30,	 	For the six months ended June 30,	
 	2012	 	2011	 	2012	 	2011	
OTHER COMPREHENSIVE INCOME/(LOSS)	 	 	 	 	 	 	 	
Net income/(loss)	$	3,342		 	$	(5,865	)	 	$	12,402		 	$	(410	)	
Unrealized (loss)/gain on investments net of deferred taxes (Note 7)	(4,785	)	 	(424	)	 	(8,950	)	 	(339	)	
Comprehensive income/(loss)	$	(1,443	)	 	$	(6,289	)	 	$	3,452		 	$	(749	)	
Comprehensive income/(loss) attributable to noncontrolling interest	$	859		 	$	(817	)	 	$	805		 	$	(1,290	)	
Comprehensive income/(loss) attributable to Golden Star shareholders	(2,302	)	 	(5,472	)	 	2,647		 	541		

The accompanying notes are an integral part of the consolidated financial statements

5

GOLDEN STAR RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of U.S. dollars except shares issued and outstanding)
(unaudited)

	
								
 	As of	 	As of	
 	June 30,	 	December 31,	
 	2012	 	2011	
ASSETS	 	 	 	
CURRENT ASSETS	 	 	 	
Cash and cash equivalents	$	105,729		 	$	103,644		
Accounts receivable	11,041		 	10,077		
Inventories (Note 6)	88,109		 	74,297		
Deposits	7,517		 	6,474		
Prepaids and other	2,167		 	2,048		
Total Current Assets	214,563		 	196,540		
RESTRICTED CASH	1,273		 	1,273		
PROPERTY, PLANT AND EQUIPMENT (Note 8)	255,910		 	252,131		
INTANGIBLE ASSETS	4,212		 	5,266		
MINING PROPERTIES (Note 9)	259,350		 	270,157		
AVAILABLE FOR SALE INVESTMENTS (Note 4 and 7)	9,565		 	1,416		
OTHER ASSETS	—		 	895		
Total Assets	$	744,873		 	$	727,678		
LIABILITIES	 	 	 	
CURRENT LIABILITIES	 	 	 	
Accounts payable	$	31,485		 	$	40,708		
Accrued liabilities	52,791		 	51,380		
Asset retirement obligations (Note 10)	8,256		 	8,996		
Current tax liability (Note 12)	—		 	197		
Current debt (Note 11)	57,476		 	128,459		
Total Current Liabilities	150,008		 	229,740		
LONG TERM DEBT (Note 11)	87,326		 	10,759		
ASSET RETIREMENT OBLIGATIONS (Note 10)	22,610		 	24,884		
DEFERRED TAX LIABILITY (Note 12)	39,455		 	23,993		
Total Liabilities	$	299,399		 	$	289,376		
COMMITMENTS AND CONTINGENCIES (Note 13)	—		 	—		
SHAREHOLDERS’ EQUITY	 	 	 	
SHARE CAPITAL	 	 	 	
First preferred shares, without par value, unlimited shares authorized. No shares issued and outstanding	—		 	—		
Common shares, without par value, unlimited shares authorized. Shares issued and outstanding: 258,861,960 at June 30, 2012; 258,669,487 at December 31, 2011 (Note 14)	$	694,341		 	$	693,899		
CONTRIBUTED SURPLUS	23,093		 	19,815		
ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)	(6,972	)	 	1,978		
DEFICIT	(264,515	)	 	(276,112	)	
Total Golden Star Equity	445,947		 	439,580		
NONCONTROLLING INTEREST	(473	)	 	(1,278	)	
Total Equity	445,474		 	438,302		
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	744,873		 	$	727,678		

The accompanying notes are an integral part of the consolidated financial statements

6

GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of U.S. dollars)
(unaudited)

																
 	For the three months ended	 	For the six months ended	
	June 30,	 	June 30,	
 	2012		2011	 	2012	 	2011	
OPERATING ACTIVITIES:				 	 	 	 	
Net income	$	3,342			$	(5,865	)	 	$	12,402		 	$	(410	)	
Reconciliation of net income/(loss) to net cash provided by operating activities:	 	 	 	 	 	 	 	
Depreciation, depletion and amortization	25,175			15,274		 	44,224		 	36,492		
Amortization of loan acquisition costs	—			318		 	895		 	672		
Loss/(gain) on sale of investments	25		 	—		 	(22,360	)	 	—		
Loss on extinguishment of debt	582		 	—		 	582		 	—		
Gain/(loss) on sale of assets	(76	)		2		 	(61	)	 	2		
Non-cash employee compensation	1,125			879		 	3,704		 	2,220		
Deferred income tax expense	2,931			3,040		 	15,462		 	6,347		
Fair value of derivatives loss	—			930		 	162		 	5,179		
Fair value loss/(gain) on convertible debt	1,145			(6,107	)	 	2,037		 	(24,292	)	
Accretion of asset retirement obligations	705			2,183		 	1,408		 	3,116		
Reclamation expenditures	(1,847	)		(7,945	)	 	(4,422	)	 	(11,828	)	
	33,107			2,709		 	54,033		 	17,498		
Changes in non-cash working capital:				 	 	 	 	
Accounts receivable	1,005			(1,779	)	 	(964	)	 	(2,804	)	
Inventories	(8,492	)		(15	)	 	(10,504	)	 	(421	)	
Deposits	591			245		 	(714	)	 	(700	)	
Accounts payable and accrued liabilities	(8,546	)		(2,185	)	 	(5,528	)	 	(18,799	)	
Other	(95	)		(425	)	 	(869	)	 	(2,089	)	
Net cash provided by/(used in) operating activities	17,570			(1,450	)	 	35,454		 	(7,315	)	
INVESTING ACTIVITIES:				 	 	 	 	
Expenditures on mining properties	(7,326	)		(9,191	)	 	(19,863	)	 	(18,031	)	
Expenditures on property, plant and equipment	(7,492	)		(9,951	)	 	(19,620	)	 	(19,863	)	
Change in accounts payable and deposits on mine equipment and material	1,007			(4,077	)	 	(2,689	)	 	(3,184	)	
Cash used for equity investments	—		 	—		 	(938	)	 	—		
Proceeds from sale of assets (Note 7)	80			—		 	6,685		 	—		
Net cash used in investing activities	(13,731	)		(23,219	)	 	(36,425	)	 	(41,078	)	
FINANCING ACTIVITIES:				 	 	 	 	
Principal payments on debt	(2,271	)		(2,573	)	 	(4,421	)	 	(5,338	)	
Proceeds from debt agreements and equipment financing	350			3,470		 	7,386		 	3,470		
Exercise of options	—		 	—		 	91		 	—		
Other	—			26		 	—		 	158		
Net cash provided by/(used in) financing activities	(1,921	)		923		 	3,056		 	(1,710	)	
Increase/(decrease) in cash and cash equivalents	1,918			(23,746	)	 	2,085		 	(50,103	)	
Cash and cash equivalents, beginning of period	103,811			151,661		 	103,644		 	178,018		
Cash and cash equivalents, end of period	$	105,729			$	127,915		 	$	105,729		 	$	127,915		

(See Note 20 for supplemental cash flow information)
The accompanying notes are an integral part of the consolidated financial statements

7

GOLDEN STAR RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All currency amounts in tables and text are in thousands of U.S. Dollars unless noted otherwise)

1. NATURE OF OPERATIONS
Through our 90% owned subsidiary Golden Star (Bogoso/Prestea) Ltd (“GSBPL”) we own and operate the Bogoso/Prestea gold mining and processing operation (“Bogoso/Prestea”) located near the town of Bogoso, Ghana. Through our 90% owned subsidiary Golden Star (Wassa) Ltd (“GSWL”) we also own and operate the Wassa gold mine (“Wassa”), located approximately 35 kilometers east of Bogoso/Prestea. Wassa mines ore from pits near the Wassa plant and also processes ore mined at our Hwini-Butre (“HBB”) property located south of Wassa. We hold interests in several gold exploration projects in Ghana and elsewhere in West Africa including Sierra Lone, Niger and Côte d'Ivoire, and in South America we hold and manage exploration properties in Brazil.
2. BASIS OF PRESENTATION
Golden Star Resources Ltd (“Golden Star” or “Company”) is a Canadian federally-incorporated, international gold mining and exploration company headquartered in the United States (“U.S.”).
These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the interim periods presented.
These consolidated financial statements include the accounts of the Company and its subsidiaries, whether owned directly or indirectly. All inter-company balances and transactions have been eliminated. Subsidiaries are defined as entities in which the company holds a controlling interest, is the general partner or where it is subject to the majority of expected losses or gains.
The results reported in these interim financial statements are not necessarily indicative of the results that may be reported for the entire year. Accordingly, these interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2011 , as filed on Form 10-K with the United States Securities and Exchange Commission (the "SEC").
3. RECENT ACCOUNTING PRONOUNCEMENTS
RECENTLY ADOPTED STANDARDS
Presentation of Comprehensive Income: In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220)-Presentation of Comprehensive Income (ASU 2011-05), to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective for us in the first quarter of fiscal 2012 and should be applied retrospectively. Our presentation of comprehensive income complies with this new guidance.
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements: In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) -Fair Value Measurement (ASU 2011-04), to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 is effective for us in 2012 and should be applied prospectively.
4. FINANCIAL INSTRUMENTS
The following tables illustrate the classification of the Company's financial instruments within the fair value hierarchy as of June 30, 2012 . The three levels of the fair value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
Level 3 - Inputs that are not based on observable market data.

8

	
																
 	Financial assets measured at fair value as at	
 	June 30, 2012	
 	Level 1    	 	Level 2    	 	Level 3    	 	Total    	
Available for sale investments	$	9,565		 	$	—		 	$	—		 	$	9,565		
 	$	9,565		 	$	—		 	$	—		 	$	9,565		

Available for sale investments in Level 1 are based on the quoted market price for the equity investment. It is possible that some of these investments could be sold in large blocks at a future date via a negotiated agreement and such agreements may include a discount from the quoted price.

																
 	Financial liabilities measured at fair value as at	
 	June 30, 2012	
 	Level 1	 	Level 2	 	Level 3	 	Total	
4% Convertible debentures	$	50,301		 	$	—		 	$	—		 	$	50,301		
5% Convertible debentures	74,003		 	—		 	—		 	74,003		
 	$	124,304		 	$	—		 	$	—		 	$	124,304		

Both the 4% and 5% Convertible Senior Unsecured Debentures are recorded at fair value. The Debentures are valued based on recent observable trading of the Debentures. The 4% Debenture's $50.3 million fair value includes $0.2 million of accrued interest as of June 30, 2012 , and the 5% Debenture's $74.0 million fair value includes $0.3 million of accrued interest as of June 30, 2012 .

																
 	Financial assets measured at fair value as at	
 	December 31, 2011	
 	Level 1    	 	Level 2    	 	Level 3    	 	Total    	
Available for sale investments	$	1,416		 	$	—		 	$	—		 	$	1,416		
Warrants	—		 	555		 	—		 	555		
 	$	1,416		 	$	555		 	$	—		 	$	1,971		

	
																
 	Financial liabilities measured at fair value as at	
 	December 31, 2011	
 	Level 1	 	Level 2	 	Level 3	 	Total	
4% Convertible debentures	$	121,625		 	$	—		 	$	—		 	$	121,625		
 	$	121,625		 	$	—		 	$	—		 	$	121,625		

During the six months ended June 30, 2012 , an unrealized loss of $2.0 million (2011: gain of $24.3 million ) was recorded in the Statement of Operations relating to the change in fair value of the Convertible Debentures.
5. DERIVATIVE GAINS AND LOSSES
The derivative mark-to-market (gains)/losses recorded in the Statement of Operations are comprised of the following amounts:

	
																
 	For the three months ended	 	For the six months ended	
 	June 30,	 	June 30,	
 	2012		2011	 	2012	 	2011	
Riverstone Resources, Inc. - warrants	$	—		 	$	315		 	$	162		 	$	41		
Gold price derivatives	—		 	2,115		 	—		 	6,638		
Derivative (gain)/loss	$	—		 	$	2,430		 	$	162		 	$	6,679		

	
																
 	For the three months ended	 	For the six months ended	
 	June 30,	 	June 30,	
 	2012		2011	 	2012	 	2011	
Realized (gain)/loss	$	—			$	1,499		 	$	(393	)	 	$	1,499		
Unrealized (gain)/loss	—			931		 	555		 	5,180		
Derivative (gain)/loss	$	—			$	2,430		 	$	162		 	$	6,679		

9

RIVERSTONE RESOURCES INC. - WARRANTS
In the first quarter of 2008, we received two million warrants from Riverstone Resources Inc. (“Riverstone”) as partial payment for the right to earn an ownership interest in our exploration projects in Burkina Faso. These warrants were exercisable through January 2012 at Cdn $0.45 . In January 2012, the Riverstone warrants were exercised.
GOLD PRICE DERIVATIVES
In January 2011, we entered into a series of put and call contracts covering 76,800 ounces of future gold production between February and December 2011. The contracts were spread evenly in each week over this period and structured as cashless collars with a floor of $1,200 per ounce and a cap of $1,457 per ounce. In early February 2011, we entered into a second set of put and call contracts covering 75,200 ounces of future gold production between February and December 2011. The contracts were spread evenly in each week during this period and structured as cashless collars with a floor of $1,200 per ounce and a cap of $1,503 per ounce. As of June 30, 2012 , there were no outstanding gold price contracts.
6. INVENTORIES

								
 	As of	 	As of	
 	June 30,	 	December 31,	
 	2012	 	2011	
Stockpiled ore	$	29,557		 	$	16,773		
In-process	10,716		 	8,912		
Materials and supplies	47,836		 	48,612		
Finished goods	—		 	—		
       Total	$	88,109		 	$	74,297		
There were approximately 59,000 and 48,000 recoverable ounces of gold in the ore stockpile inventories shown above at June 30, 2012 , and December 31, 2011 , respectively. Stockpile inventories are short-term surge piles expected to be processed within the next 12 months. A total of $0.2 million and $1.4 million of material and supply inventories were written off in 2012 and 2011 respectively, due to obsolescence and counts. $0.1 million and $1.7 million of net realizable value adjustments were recorded at Bogoso in 2012 and 2011 respectively. The net realizable value adjustments in 2012 are related to the non-refractory plant in process inventory.
7. AVAILABLE FOR SALE INVESTMENTS
The following table presents changes in available for sale investments in the first six months of 2012 and the full year 2011 :

														
 	As of June 30, 2012	 	As of December 31, 2011	
 	Riverstone	 	Riverstone	
 	Fair Value	 	Shares	 	Fair Value	 	Shares	
Balance at beginning of period	$	1,416		 	2,000,000		 	$	928		 	1,300,000		
Acquisitions	17,117		 	23,676,301		 	469		 	700,000		
Dispositions	(18	)	 	(25,000	)	 	—		 	—		
OCI - unrealized gain/(loss)	(8,950	)	 	—		 	19		 	—		
Balance at end of period	$	9,565		 	25,651,301		 	$	1,416		 	2,000,000		

During the first quarter of 2012, we acquired Riverstone shares. The acquisition was accomplished through two transactions. The first was an exercise of the two million warrants at an exercise price Cdn $0.45 for cash consideration of Cdn $0.9 million . The fair value of the shares acquired was $1.3 million . The second transaction was the sale of the Company's Burkina Faso subsidiary to Riverstone. The sale generated $6.6 million of cash plus 21.7 million Riverstone shares. We recognized the shares at their fair value of $15.8 million on February 2, 2012, when the sale was finalized. It is possible that some of these investments could be sold in large blocks at a future date via a negotiated agreement and such agreements may include a discount from the quoted price. The Company currently does not intend to actively trade in its holdings and it is classified as long term.  Subsequent to February 2, 2012, the quoted market price of Riverstone's common stock has decreased, such that for the period ended June 30, 2012 , we have recognized through Comprehensive Income a loss of $ 8.95 million related to our holdings.

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8. PROPERTY, PLANT AND EQUIPMENT

																								
 	As of June 30, 2012	 	As of December 31, 2011	
 	Property,
Plant and
Equipment
at Cost	 	Accumulated
Depreciation	 	Property,
Plant and
Equipment
Net Book
Value	 	Property,
Plant and
Equipment
at Cost	 	Accumulated
Depreciation	 	Property,
Plant and
Equipment
Net Book
Value	
Bogoso/Prestea	$	182,294		 	$	(109,972	)	 	$	72,322		 	$	179,216		 	$	(109,519	)	 	$	69,697		
Bogoso refractory plant	193,217		 	(63,110	)	 	130,107		 	186,607		 	(58,873	)	 	127,734		
Wassa/HBB	111,635		 	(58,611	)	 	53,024		 	106,631		 	(52,430	)	 	54,201		
Corporate & other	1,348		 	(891	)	 	457		 	1,378		 	(879	)	 	499		
Total	$	488,494		 	$	(232,584	)	 	$	255,910		 	$	473,832		 	$	(221,701	)	 	$	252,131		

There was no interest capitalized in new additions to property, plant and equipment in the periods shown above.
9. MINING PROPERTIES

																								
 	As of June 30, 2012	 	As of December 31, 2011	
 	Mining
Properties	 	Accumulated
Amortization	 	Mining
Properties,
Net Book	 	Mining
Properties	 	Accumulated
Amortization	 	Mining
Properties,
Net Book	
Bogoso/Prestea	$	123,290		 	$	(63,049	)	 	$	60,241		 	$	119,700		 	$	(60,186	)	 	$	59,514		
Bogoso refractory	70,309		 	(37,812	)	 	32,497		 	70,090		 	(34,839	)	 	35,251		
Mampon	16,095		 	—		 	16,095		 	16,095		 	—		 	16,095		
Wassa/HBB	328,914		 	(203,571	)	 	125,343		 	314,801		 	(180,486	)	 	134,315		
Other	29,595		 	(4,421	)	 	25,174		 	27,312		 	(2,330	)	 	24,982		
Total	$	568,203		 	$	(308,853	)	 	$	259,350		 	$	547,998		 	$	(277,841	)	 	$	270,157		

There was no interest capitalized in new additions to mining properties in the periods shown above.
10. ASSET RETIREMENT OBLIGATIONS
At the end of each period, Asset Retirement Obligations (“ARO”) are equal to the present value of all estimated future costs required to remediate any environmental disturbances that exist as of the end of the period, using discount rates applicable at the time of initial recognition of each component of the liability. Included in this liability are the costs of closure, reclamation, demolition and stabilization of the mines, processing plants, infrastructure, tailings storage facilities, waste dumps and ongoing post-closure environmental monitoring and maintenance costs. While the majority of these costs will be incurred near the end of the mines' lives, it is expected that certain on-going reclamation costs will be incurred prior to mine closure. These costs are recorded against the asset retirement obligation liability as incurred. At June 30, 2012 , and June 30, 2011 , the total undiscounted amount of the estimated future cash needs was estimated to be $71.9 million and $76.2 million , respectively. Discount rates used to value the ARO range between 8% and 10% . The schedule of payments required to settle the December 31, 2011, ARO liability extends through 2029.
The changes in the carrying amount of the ARO during the six months ended June 30, 2012 , and June 30, 2011 , are as follows:

								
 	For the six months ended	
 	June 30,	
 	2012	 	2011	
Beginning balance	$	33,880		 	$	44,952		
Accretion expense	1,408		 	3,116		
Additions and changes in estimates	—		 	3,748		
Cost of reclamation work performed	(4,422	)	 	(11,828	)	
Balance at June 30	$	30,866		 	$	39,988		
 	 	 	 	
Current portion	$	8,256		 	$	15,459		
Long term portion	$	22,610		 	$	24,529		

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11. DEBT

								
 	As of	 	As of	
 	June 30,	 	December 31,	
 	2012	 	2011	
Current debt:	 	 	 	
Equipment financing credit facility	$	7,341		 	$	7,036		
Capital lease	—		 	224		
4% Convertible debentures	50,135		 	121,199		
Total current debt	$	57,476		 	$	128,459		
Long term debt:	 	 	 	
Equipment financing credit facility	$	13,641		 	$	10,759		
5% Convertible debentures	73,685		 	—		
Total long term debt	$	87,326		 	$	10,759		
Schedule of payments on outstanding debt as of June 30, 2012 :

																										
	Six Months	 	 	 	 	 	 	 	 	 	 	 	 	
Debt	2012	 	2013	 	2014	 	2015	 	2016	 	2017	 	Maturity	
Equipment financing loans	 	 	 	 	 	 	 	 	 	 	 	 	 	
     principal	$	3,999		 	$	6,571		 	$	4,515		 	$	3,567		 	$	1,961		 	$	370		 	 2012 to 2017	
     interest	658		 	941		 	556		 	288		 	101		 	6		 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
4% Convertible debentures	 	 	 	 	 	 	 	 	 	 	 	 	 	
     principal	50,490		 	—		 	—		 	—		 	—		 	—		 	November 30, 2012	
     interest	1,010		 	—		 	—		 	—		 	—		 	—		 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
5% Convertible debentures	 	 	 	 	 	 	 	 	 	 	 	 	 	
     principal	—		 	—		 	—		 	—		 	—		 	77,490		 	June 1, 2017	
     interest	1,937		 	3,875		 	3,875		 	3,875		 	3,875		 	1,937		 	 	
Total	$	58,094		 	$	11,387		 	$	8,946		 	$	7,730		 	$	5,937		 	$	79,427		 	 	
EQUIPMENT FINANCING CREDIT FACILITY
GSBPL and GSWL maintain a $40.0 million equipment financing facility with Caterpillar Financial Services Corporation, with Golden Star as the guarantor of all amounts borrowed. The facility provides credit for new and used mining equipment. 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 or London Interbank Offered Rate (“LIBOR”) plus 2.38% . At June 30, 2012 , approximately $19.0 million was available to draw down, compared to $22.2 million at December 31, 2011 . The average interest rate on the outstanding loans was approximately 6.7% at June 30, 2012 , down marginally from 6.8% at December 31, 2011 . Each outstanding equipment loan is secured by the title of the specific equipment purchased with the loan until the loan has been repaid in full.
CAPITAL LEASE
In February 2010, GSBPL accepted delivery of a nominal 20 megawatt power plant. Upon acceptance, a $4.9 million liability was recognized which, at the time, was equal to the present value of future lease payments. The life of the lease was two years from the plant's February 2010 in-service date. We were required to pay the owner/operator a minimum of $0.3 million per month on the lease, of which $0.23 million was allocated to principal and interest on the recognized liability and the remainder of the monthly payments were charged as operating costs. In February 2012, we made the final lease payment and assumed ownership of the power plant.
CONVERTIBLE DEBENTURES
As of June 30, 2012 , we have two series of convertible debentures outstanding. The first series are 4% Convertible Senior Unsecured Debentures due November 30, 2012 (the " 4% Debentures") in the amount of $50.5 million and the second series are

12

5% Convertible Debentures due June 1, 2017 (the " 5% Debentures") in the amount of $77.5 million .
4% Debentures - The 4% Debentures were originally issued in November 2007 in the amount of $125.0 million . On May 31, 2012, we exchanged $74.5 million of these debentures with private holders for $77.5 million leaving $50.5 million of the 4% Debentures outstanding as of June 30, 2012 . See details of this transaction below. The remaining outstanding 4% Debentures plus the final payment of accumulated interest are due on November 30, 2012.
The 4% Debentures are, subject to certain limitations, convertible into common shares at a conversion rate of 200 shares per $1,000 principal amount (equal to a conversion price of $5.00 per share) subject to adjustment under certain circumstances. The 4% Debentures are not redeemable at our option.
On maturity, we may, at our option, satisfy our repayment obligation by paying the remaining $50.5 million of outstanding principal amount in cash or, by issuing up to approximately 46.7 million common shares to the 4% Debenture holders. If we settle in shares, we must redeem all, but not less than all of the Debentures, by issuing shares. The value assigned to the shares issued will be based on 95% of the weighted average trading price of our common shares on the NYSE MKT stock exchange for the twenty consecutive trading days ending five trading days preceding the maturity date. If the value assigned to 46.7 million shares is insufficient to cover the entire $50.5 million liability, we would be required to pay cash, in addition to the shares, in an amount that when added to the value of the shares will equal $50.5 million .
Upon the occurrence of certain change in control transactions, the holders of the 4% Debentures may require us to purchase these Debentures for cash at a price equal to 101% of the principal amount plus accrued and unpaid interest. If 10% or more of the fair market value of any such change in control consideration consists of cash, the holders may convert their 4% Debentures and receive a number of additional common shares, determined as set forth in the indenture.
The 4% Debentures are direct senior unsecured indebtedness of Golden Star Resources Ltd., ranking equally and ratably with all our other senior unsecured indebtedness, and senior to all our subordinated indebtedness. None of our subsidiaries has guaranteed the 4% Debentures, and they do not limit the amount of debt that we or our subsidiaries may incur.
5% Debentures - On May 31, 2012, we issued $77.5 million of 5% Convertible Senior Unsecured Debentures due June 1, 2017 (the " 5% Debentures") in exchange for $74.5 million of the principal outstanding under our 4% Debentures in privately negotiated transactions with certain holders of the 4% Debentures exempt from the registration requirements of the U.S. Securities Act of 1933, as amended.
The 5% Debentures are governed by the terms of an indenture dated May 31, 2012, by and between the Company and The Bank of New York Mellon, as Indenture Trustee.
Interest on the 5% Debentures is payable semi-annually in arrears on May 31 and November 30 of each year, beginning November 30, 2012, and continuing until maturity. The 5% Debentures are subject to certain limitations, convertible into common shares at a conversion rate of 606.0606 common shares per $1,000 principal amount of the 5% Debentures (equal to an initial conversion price of $1.65 per share), or approximately 25% above the closing price of the Company's common shares on the NYSE MKT on May 17, 2012, the last full trading day prior to entry into the purchase agreement. The 5% Debentures are not be redeemable at our option, except in the event of certain change in control transactions where 90% or more of the outstanding 5% Debentures have accepted a mandatory offer to purchase by us.
On maturity, we may, at our option, satisfy our repayment obligation by paying the principal amount of the 5% Debentures in cash or, subject to certain limitations, by issuing that number of our common shares obtained by dividing the principal amount of the 5% Debentures outstanding by 95% of the weighted average trading price of our common shares on the NYSE MKT for the 20 consecutive trading days ending five trading days preceding the maturity date (the "Current Market Price"). If we elect to repay the principal amount of the 5% Debentures at maturity by issuing common shares, and we are limited under the terms of the indenture from issuing a number of common shares sufficient to fully repay the 5% Debentures outstanding at maturity, we will pay the balance owing in cash, based on the difference between the principal amount of the 5% Debentures outstanding and the value of the common shares (based on the Current Market Price) delivered in repayment of the 5%  Debentures.
The 5% Debentures are direct senior unsecured indebtedness of the Company, ranking equally and ratably with all other senior unsecured indebtedness, and senior to all subordinated indebtedness, of the Company. None of our subsidiaries has guaranteed the 5% Debentures, and the 5% Debentures do not limit the amount of debt that the Company or our subsidiaries may incur.
Similar to the 4% Debentures, the 5% Debentures are accounted for at fair value and marked to market each reporting period and the gain/loss on fair value is recorded in the Statement of Operations. The 5% Debentures were initially recorded at the fair value of $74.2 million on their May 31, 2012 issue date, and a loss of $0.6 million on the extinguishment of the 4% Debentures was incurred. The fair value of the 4% Debentures was $73.6 million at the time of the extinguishment.
Financing charges of $2.1 million related to the 5% Debentures are included in interest expense in the Statement of Operations for the quarter ended June 30, 2012 .

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REVOLVING CREDIT FACILITY
The loan agreement for our $31.5 million revolving credit facility provided that the facility would end on September 30, 2012 . The loan agreement further specified that our ability to draw on the facility would expire on April 1, 2012, if there was no outstanding balance as of that date. Since there was no outstanding balance at April 1, 2012 the facility expired on that date.
12. INCOME TAXES
The provision for income taxes includes the following components:  

																
 	For the three months ended June 30,	 	For the six months ended June 30,	
 	2012	 	2011	 	2012	 	2011	
Current expense:	 	 	 	 	 	 	 	
Canada	$	—		 	$	—		 	$	—		 	$	—		
Foreign	—		 	(686	)	 	—		 	(1,684	)	
Deferred tax expense:	 	 	 	 	 	 	 	
Canada	—		 	—		 	—		 	—		
Foreign	(2,931	)	 	(3,115	)	 	(15,462	)	 	(6,422	)	
Total expense	$	(2,931	)	 	$	(3,801	)	 	$	(15,462	)	 	$	(8,106	)	
The deferred tax expense is related to the change in the temporary difference between book and tax basis at GSWL. In the first quarter of 2012, Ghana implemented a new tax law that raised the statutory rate from 25% to 35% . This increase had a $9.6 million impact on the first quarter 2012 deferred tax expense relating to the temporary difference at GSWL arising from prior periods. The tax expense related to the activity of the first six months of 2012 is $5.9 million . The historical tax losses in Canada are sufficient to offset the taxable gain on the sale of our Burkina Faso subsidiary to Riverstone. No tax expense has been recorded related to this transaction.
The current tax expense in 2011 related to a temporary tax levy on certain Ghanaian industries, including; mining, brewing, banking, communications and insurance. The levy was set at 5% of “profits before tax” as disclosed on the statements of operations. The levy expired at the end of 2011.
13. COMMITMENTS AND CONTINGENCIES
Our commitments and contingencies include the following items:
ENVIRONMENTAL BONDING IN GHANA
The Ghana Environmental Protection Agency ("EPA") requires environmental compliance bonds that provide assurance for environmental remediation at our Bogoso/Prestea and Wassa mining operations. In July 2011, we increased a letter of credit for Wassa/HBB's environmental bonding from $2.85 million to $7.8 million . This brought the total bonded amount, including $0.15 million of cash, from $3.0 million to $7.95 million . In early 2012, the Ghana Environmental Protection Agency raised Wassa/HBB's reclamation bonding requirement to approximately $10.6 million , reflecting increases in on-going mining disturbances. In July 2012, we increased our cash deposit by $0.9 million and our existing letter of credit by $1.7 million to meet the $2.65 million bonding increase.
We have also bonded $9.0 million to cover rehabilitation and closure obligations at Bogoso/Prestea. These bonding requirements have been met by an $8.1 million letter of credit from a commercial bank and a $0.9 million cash deposit held by a Ghanaian bank on behalf of the EPA. The cash deposits are recorded as Restricted Cash on our Consolidated Balance Sheets.
In 2008, Bogoso/Prestea resubmitted an updated draft of an Environmental Management Plan (“EMP”) to the EPA that included an updated estimate of the reclamation and closure costs prepared by a third party consultant. A consultant was commissioned to prepare the reclamation and closure cost estimate and the final EMP was submitted to the EPA in February 2009. Bogoso/Prestea has completed all the legal requirements and is waiting for the environmental certificate. In the mean time, and in compliance with the legal time line for the previous EMP, Bogoso/Prestea prepared a new EMP and submitted it to the EPA in the fourth quarter of 2011. This EMP included a more current estimate of the reclamation and closure costs for Bogoso/Prestea and could result in a need for additional bonding later in 2012.
In recent years, the bonds were provided by the same bank that provided our revolving credit facility. The credit facility expired

14

on April 1, 2012 and the bonds expired on April 30, 2012. The environmental bonds were replaced with new bonds provided by a Ghanaian bank on May 1, 2012 on terms similar to the prior bonds. The Ghanaian bank provided an $8.1 million bond to GSBPL and a $9.6 million bond to GSWL. The new bonds are guaranteed by Golden Star Resources Ltd.
GOVERNMENT OF GHANA'S RIGHTS TO INCREASE ITS PARTICIPATION
Under Act 703, the Government of Ghana has the right to acquire a special share in our Ghanaian subsidiaries at any time for no consideration or such consideration as the Government of Ghana and such subsidiaries might agree, and a pre-emptive right to purchase all gold and other minerals produced by such subsidiaries. A special share carries no voting rights and does not participate in dividends, profits or assets. If the Government of Ghana acquires a special share it may require us to redeem the special share at any time for no consideration or for consideration determined by us. To date, the Government of Ghana has not sought to exercise any of these rights at our properties.

ROYALTIES
Dunkwa Properties
As part of the acquisition of the Dunkwa properties in 2003, we agreed to pay the seller a net smelter return royalty on future gold production from the Mansiso and Asikuma properties. As 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 and progressively increases to 3.5% for gold prices in excess of $400 per ounce.
Government of Ghana
The Ghana Government receives a royalty equal to 5% of mineral revenues.
Hwini-Butre
As part of the agreement for the purchase of the Hwini-Butre properties, Golden Star agreed to pay B.D. Goldfields Ltd, Hwini-Butre’s former owner, an additional $1.0 million in cash if at least one million ounces of gold are produced and recovered in the first five years of production from the area covered by the Hwini-Butre prospecting license. Gold production was initiated at Hwini-Butre in May 2009. It is not possible at this time to know if future exploration work will increase Hwini-Butre’s reserves sufficiently to yield production of one million ounces prior to May 2014, and as such, no amounts have been accrued in the financial statements.
EXPLORATION AGREEMENTS
Obuom
In October 2007, we entered into an agreement with AMI Resources Inc. (“AMI”), which gives AMI the right to earn our 54% ownership position in the Obuom property in Ghana. Should AMI eventually obtain full rights to our position on the property and develop a gold mining operation at Obuom, we would receive from AMI a 2% net smelter return royalty on 54% of the property’s gold production.
Goulagou and Rounga
In October 2007, we entered into an option agreement with Riverstone Resources Inc. (“Riverstone”) whereby Riverstone had the right to acquire our 90% interest in the Goulagou and Rounga properties in Burkina Faso. To exercise the option, Riverstone was required to spend Cdn $4.0 million on exploration programs on the Goulagou and Rounga properties over a four-year period ended in February 2012, and could then purchase our interest for $18.6 million in cash or Riverstone common shares. We were also entitled to receive up to two million shares of Riverstone over the term of the option, all of which were received as of March 31, 2011. In addition, we received a one-time distribution of two million Riverstone common share purchase warrants during 2008. The Riverstone purchase warrants had an exercise price of Cdn $0.45 and were exercised in January 2012. In December 2011, Riverstone notified us of their intent to exercise their option to acquire Goulagou and Rounga in February 2012. The sale of exploration projects was completed in February 2012 upon receipt of $6.6 million of cash and 21.7 million Riverstone common shares valued at $15.8 million on the day of the sale. A gain of $22.4 million was recognized on the completion of this disposition in the Statement of Operations as the underlying properties were written down to a zero carrying value in prior periods. There was no tax expense recorded in connection with this transaction since there are sufficient carried forward tax losses in Canada to offset the gain. Subsequent to the conclusion of this transaction, there was a drop in the Riverstone stock price, and as a result, we recorded an unrealized loss of $7.6 million in the Statement of Comprehensive

15

Income/Loss. The value of these Riverstone shares is $8.2 million at June 30, 2012.
LEGAL PROCEEDINGS
B.D. Goldfields Action - On July 19, 2011 B.D. Goldfields, Ltd. (“plaintiff”), a Ghanaian registered company, filed suit in the Commercial Division of the High Court of Justice (the "Court") in Accra, Ghana, against Golden Star Resources Ltd. and our subsidiary St. Jude Resources (Ghana) Ltd. The plaintiff challenged the validity of the concession contracts and settlements related to our acquisition in 2006 of the Hwini-Butre gold property in Ghana. In May 2012, the Court ruled in our favor on the basis that in an earlier action, which also challenged our ownership of the Hwini-Butre property, a Court of Appeals in Ghana had ruled that we were the legal owners of the Hwini-Butre mineral rights. Based on the Court of Appeal's ruling, the Court refused further consideration of the B.D. Goldfields action.
Genser Legal Action - In March 2012, Genser Power Ghana Limited ("plaintiff"), a Ghanaian registered company, filed a suit in the High Court of Justice (the "Court"), in Sekondi, Ghana against our subsidiary Golden Star (Bogoso/Prestea) Limited ("GSBPL"). The plaintiff challenged our ownership of an electric power generating plant that the plaintiff had constructed and subsequently operated on our behalf at GSBPL's Bogoso mine site from February 2010 to February 2012.
Per terms of the plant's construction/operations contract, upon completion of construction, GSBPL was to make a series of payments to the plaintiff during the first two years of the plant's operational life and upon completion of such payments, the construction/operations contract required the plaintiff to transfer ownership of the plant to GSBPL for no additional consideration. At the end of the two year operational period, the plaintiff refused to transfer ownership to GSBPL stating that GSBPL's notice of intent to assume ownership was defective.
GSBPL challenged the plaintiff's right to bring legal action in Ghana in this matter because the construction and operations contract provides that any disputes between GSBPL and the plaintiff would be resolved by international arbitration at the ICC in Paris, France. On May 4, 2012 the Court ruled that it would not hear the plaintiff's action since the construction/operations contract provides for international arbitration for all dispute resolutions. To date, we have received no notice of Genser's intent to pursue arbitration.
14. SHARE CAPITAL
Changes in share capital during the six months ended June 30, 2012 , are as follows:  

							
 	Shares	 	Amount	
Balance at December 31, 2011	258,669,487		 	$	693,899		
Common shares issued:	 	 	 	
Option exercises	78,333		 	134		
     Unclaimed shares forfeited	(50,869	)	 	—		
     Bonus shares and other	165,009		 	308		
Balance at June 30, 2012	258,861,960		 	$	694,341		

We held no treasury shares as of December 31, 2011 , and June 30, 2012 .
15. COST OF SALES

																
 	For the three months ended June 30,	 	For the six months ended June 30,	
 	2012		2011	 	2012	 	2011	
Mining operations costs	$	98,885			$	82,621		 	$	199,734		 	$	171,100		
Operations costs to metal inventory	(7,830	)		2,231		 	(11,280	)	 	(459	)	
Mining related depreciation and amortization	25,110			15,490		 	44,153		 	36,519		
Accretion of asset retirement obligations	705			2,183		 	1,408		 	3,116		
Total cost of sales	$	116,870		 	$	102,525		 	$	234,015		 	$	210,276		
16. STOCK BASED COMPENSATION
Non-cash employee compensation expense recognized in general and administrative expense in the statements of operations, with respect to our non-cash employee compensation plans are as follows:

16

	
																
 	For the three months ended June 30,	 	For the six months ended June 30,	
 	2012	 	2011	 	2012	 	2011	
Total stock compensation expense	$	1,125		 	$	879		 	$	3,704		 	$	2,220		
STOCK OPTIONS
We have one stock option plan, the Third Amended and Restated 1997 Stock Option Plan (the “Plan”) approved by shareholders in May 2010, under which options are granted at the discretion of the Board of Directors. 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 Plan, we may grant options to employees, consultants and directors of the Company or its subsidiaries for up to 25,000,000 shares, of which 5,116,646 are available for grant as of June 30, 2012 , and the exercise price of each option is not less than the closing price of our shares on the Toronto Stock Exchange on the day prior to 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 Board of Directors.
We granted 4,862,000 and 1,918,000 options during the first six months of 2012 and 2011, respectively. We do not receive a tax deduction for the issuance of options. As a result, we do not recognize any income tax benefit related to the stock compensation expense.
The fair value of our option grants are estimated at the grant dates using the Black-Scholes option-pricing model. Fair values of options granted in the first six months of 2012 and 2011 were based on the assumptions noted in the following table:

				
 	For the six months ended June 30,	
 	2012	 	2011	
Expected volatility	57.11 to 87.50%	 	66.33 to 69.79%	
Risk-free interest rate	0.18 to 0.89%	 	2.17 to 2.26%	
Expected lives	4.1 to 9.5 years	 	5.6 to 8.5 years	
Dividend yield	0%	 	0%	
Expected volatilities are based on the mean reversion tendency of the volatility of Golden Star's shares. Golden Star uses historical data to estimate share option exercise and employee departure behavior and this data is used in determining input data for the Black-Scholes model. Groups of employees that have dissimilar historical behavior are considered separately for valuation purposes. The expected term of the options granted represents the period of time that the options granted are expected to be outstanding; the range given above 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 Canadian Chartered Bank administered interest rates in effect at the time of the grant.
A summary of option activity under the Plan during the six months ended June 30, 2012 :

												
 	Options
(‘000)	 	Weighted–
Average
Exercise
price
(Cdn$)	 	Weighted–
Average
Remaining
Contractual
Term (Years)	 	Aggregate
intrinsic  value
Cdn($000)	
Outstanding as of December 31, 2011	8,539		 	3.18		 	7.0		 	95		
Granted	4,862		 	1.97		 	6.9		 	—		
Exercised	(78	)	 	1.16		 	—		 	81		
Forfeited, canceled and expired	(948	)	 	2.90		 	6.9		 	—		
Outstanding as of June 30, 2012	12,375		 	2.75		 	6.6		 	8		
 	 	 	 	 	 	 	 	
Exercisable as of June 30, 2012	8,046		 	3.01		 	6.1		 	8		
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, provides for the issuance of 900,000 common shares of bonus stock, of which 710,854 common shares have been issued as of June 30, 2012 . In the first

17

quarter of 2012 165,009 shares were issued in 2012 under the Stock Bonus Plan at a value of $0.3 million . No shares were issued in 2011.
Deferred Share Units
Our DSU Plan provides for Deferred Share Units (“DSUs”), each representing the right to receive one share of Golden Star common stock upon redemption. DSUs may be redeemed only upon termination of the holder's services to the Company, and may be subject to vesting provisions. DSU awards are granted at the sole discretion of the Company's compensation committee. The DSU Plan allows directors, at their option, to receive all or any portion of their retainer by accepting DSUs in lieu of cash.
The compensation committee may also award DSUs to executive officers and/or directors in lieu of cash as a component of their long term performance compensation, the amount of such awards being in proportion to the officer's or director's achievement of pre-determined performance goals. As with DSU awards for directors' retainers, DSUs received as performance compensation are redeemable only upon termination of the holder's services to the Company. The Company may, at its option, provide cash in lieu of common shares upon a holder's redemption, the cash value being established by the share price on the DSU original award date, less all applicable tax withholding.
During the first six months of 2012, we granted 133,558 DSUs to directors of the Company in payment of fees earned in 2012. These units were immediately vested and a compensation expense of $ 0.3 million was recognized for these grants. As of June 30, 2012 , there was nil unrecognized compensation expense related to DSUs granted under the Company's DSU plan. There were 155,705 DSUs outstanding at June 30, 2012 .
Stock Appreciation Rights
During the six months ended June 30, 2012 , the Company granted 1,452,526 stock appreciation rights (SARs) that vest after a period of three years. These awards will be settled in cash equal to the Company’s stock price less the strike price on the vesting date. Since these awards are settled in cash, the Company marks-to-market the associated expense for each award at the end of each reporting period. The Company accounts for these as liability awards and marks-to-market the fair value of the award until final settlement. 
As of June 30, 2012 , there was approximately $1.5 million of total unrecognized compensation cost related to unvested SARs. The Company recognized approximately $0.1 million of compensation expense related to these cash based awards for the six months ended June 30, 2012 .
17. EARNINGS PER COMMON SHARE
The following table provides reconciliation between basic and diluted earnings per common share:

																
 	For the three months ended June 30,	 	For the six months ended June 30,	
 	2012	 	2011	 	2012	 	2011	
Net income/(loss) attributable to Golden Star shareholders	$	2,483		 	$	(5,048	)	 	$	11,597			$	880		
 	 	 	 	 	 				
Weighted average number of shares (millions)	258.8		 	258.6		 	258.8			258.6		
Dilutive securities:	 	 	 	 	 			
Options (millions)	0.1		 	—		 	—			0.6		
Convertible debentures	—		 	—		 	—			—		
Weighted average number of diluted shares (millions)	258.9		 	258.6		 	258.8		 	259.2		
 	 	 	 	 	 	 	 	
Net income/(loss) per share attributable to Golden Star shareholders:	 	 	 	 	 	 	 	
Basic	$	0.010		 	$	(0.020	)	 	$	0.045		 	$	0.003		
Diluted	$	0.010		 	$	(0.020	)	 	$	0.045		 	$	0.003		
Options to purchase 12.4 million and 7.8 million shares of common stock were outstanding at June 30, 2012 , and 2011, respectively, but were not included in the computation of diluted weighted average common shares because their effect would not be dilutive. In addition, we had 57.0 million shares related to the Debentures that were not dilutive for either period.

18

18. OPERATIONS BY SEGMENT AND GEOGRAPHIC AREA

																									
 	 	Africa	 	 	 	 	 	 	
As of and for the three months ended June 30	 	Bogoso/
Prestea	 	Wassa/
HBB	 	Other	 	South
America	 	Corporate	 	Total	
2012	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	70,563		 	$	65,750		 	$	—		 	$	—		 	$	—		 	$	136,313		
Net income/(loss) attributable to Golden Star	 	6,690		 	5,653		 	(604	)	 	(159	)	 	(9,097	)	 	2,483		
Income tax expense	 	—		 	(2,931	)	 	—		 	—		 	—		 	(2,931	)	
Capital expenditure	 	5,748		 	9,067		 	—		 	—		 	3		 	14,818		
Total assets	 	429,103		 	231,102		 	1,870		 	187		 	82,611		 	744,873		
2011	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	51,609		 	$	58,198		 	$	—		 	$	—		 	$	—		 	$	109,807		
Net income/(loss) attributable to Golden Star	 	(8,166	)	 	8,374		 	(675	)	 	(167	)	 	(4,414	)	 	(5,048	)	
Income tax expense	 	—		 	(3,801	)	 	—		 	—		 	—		 	(3,801	)	
Capital expenditure	 	12,508		 	6,456		 	178		 	—		 	—		 	19,142		
Total assets	 	359,857		 	247,332		 	4,255		 	(253	)	 	105,930		 	717,121		

	
																									
 	 	Africa	 	 	 	 	 	 	
As of and for the six months ended June 30	 	Bogoso/
Prestea	 	Wassa/
HBB	 	Other	 	South
America	 	Corporate	 	Total	
2012	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	140,158		 	$	127,175		 	$	—		 	$	—		 	$	—		 	$	267,333		
Net income/(loss) attributable to Golden Star	 	12,162		 	6,505		 	(1,715	)	 	(281	)	 	(5,074	)	 	11,597		
Income tax expense	 	—		 	(15,462	)	 	—		 	—		 	—		 	(15,462	)	
Capital expenditure	 	20,705		 	18,775		 	—		 	—		 	3		 	39,483		
Total assets	 	429,103		 	231,102		 	1,870		 	187		 	82,611		 	744,873		
2011	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	94,097		 	$	132,216		 	$	—		 	$	—		 	$	—		 	$	226,313		
Net income/(loss) attributable to Golden Star	 	(15,770	)	 	19,015		 	(1,380	)	 	(264	)	 	(721	)	 	880		
Income tax expense	 	—		 	(8,106	)	 	—		 	—		 	—		 	(8,106	)	
Capital expenditure	 	20,850		 	16,769		 	275		 	—		 	—		 	37,894		
Total assets	 	359,857		 	247,332		 	4,255		 	(253	)	 	105,930		 	717,121		
19. RELATED PARTIES
During the first six months of 2012, we obtained legal services from a firm to which one of our board members is of counsel. The cost of services from this firm during the first six months of 2012 and 2011 was $0.5 million and $0.2 million , respectively. Our board member did not personally provide any legal services to the Company during these periods nor did he benefit directly or indirectly from payments for the services performed by the firm.
20. SUPPLEMENTAL CASH FLOW INFORMATION
In the first six months of 2012, $0.2 million was paid for taxes. Cash paid for taxes during the first six months of 2011 was  $1.8 million . Cash paid for interest was $5.0 million in the first six months of 2012 and $3.1 million in the first six months of 2011.

19

		
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 our Form 10-K for the period ended December 31, 2011 , and with the accompanying unaudited consolidated financial statements and related notes for the period ended June 30, 2012 . This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information available to August 7, 2012. All amounts shown are in thousands of dollars unless noted otherwise. All currency amounts are stated in U.S. dollars unless noted otherwise.
OVERVIEW OF GOLDEN STAR
We are a Canadian federally-incorporated, international gold mining and exploration company producing gold in Ghana, West Africa. We also conduct gold exploration in other countries in West Africa and in South America. Golden Star Resources Ltd. was established under the Canada Business Corporations Act on May 15, 1992. Our principal office is located at 10901 West Toller Drive, Suite 300, Littleton, Colorado 80127, and our registered and records offices are located at 333 Bay Street, Bay Adelaide Centre, Box 20, Toronto, Ontario M5H2T6.
We own controlling interests in several gold properties in southwest Ghana:
		
•	Through a 90% owned subsidiary, Golden Star (Bogoso/Prestea) Limited (“GSBPL”), we own and operate the Bogoso/Prestea gold mining and processing operations (“Bogoso/Prestea”) located near the town of Bogoso, Ghana. GSBPL operates a gold ore processing facility at Bogoso/Prestea with a capacity of up to 3.5 million tonnes of ore per annum, which uses bio-oxidation technology to treat refractory ore (“Bogoso refractory plant”). In addition, GSBPL has a carbon-in-leach (“CIL”) processing facility located adjacent to the refractory plant, which is suitable for treating non-refractory gold ores (“Bogoso non-refractory plant”) at a rate up to 1.5 million tonnes per annum. Bogoso/Prestea produced and sold 140,504 ounces of gold in 2011 and 170,973 ounces of gold in 2010.	

•	Through another 90% owned subsidiary, Golden Star (Wassa) Limited (“GSWL”), we own and operate the Wassa open-pit gold mine and CIL processing plant (“Wassa”), located approximately 35 kilometers east of Bogoso/Prestea. The design capacity of the CIL processing plant at Wassa (“Wassa processing plant”) is nominally 3.0 million tonnes per annum but varies depending on the ratio of hard to soft ore. GSWL also owns the Hwini-Butre and Benso concessions (“HBB”) in southwest Ghana. Ore from the HBB mines is sent to Wassa for processing. The Hwini-Butre and Benso concessions are located approximately 80 kilometers and 50 kilometers, respectively, south of Wassa along the Company's dedicated haul road. Wassa/HBB produced and sold 160,616 ounces of gold in 2011 and 183,931 ounces of gold in 2010.	
We also hold interests in several gold exploration projects in Ghana and elsewhere in West Africa including Sierra Leone, Niger and Côte d'Ivoire, and in South America we hold and manage exploration properties in Brazil.
All our operations, with the exception of certain exploration projects, transact business in U.S. dollars and keep financial records in U.S. dollars. Our accounting records are kept in accordance with U.S. GAAP. Our fiscal year ends December 31. We are a reporting issuer or the equivalent in all provinces of Canada, in Ghana and in the United States and file disclosure documents with securities regulatory authorities in Canada and Ghana and with the United States Securities and Exchange Commission.
NON-GAAP FINANCIAL MEASURES
In this Form 10-Q, we use the terms “total cash cost per ounce” and “cash operating cost per ounce.”
“Cost of sales” as found in our statements of operations, includes all mine-site operating costs, including the costs of mining, ore processing, maintenance, work-in-process inventory changes, mine-site overhead as well as production taxes, royalties, mine site depreciation, depletion, amortization, asset retirement obligation accretion and by-product credits, but excludes exploration costs, property holding costs, corporate office general and administrative expenses, impairment charges, corporate business development costs, gains and losses on asset sales, foreign exchange gains and losses, interest expense, gains and losses on derivatives, gains and losses on investments and income tax expense/benefit.
“Cash operating cost per ounce” for a period is equal to “Cost of sales” for the period less mining related depreciation, depletion and amortization costs, royalties, production taxes, accretion of asset retirement obligation costs, costs that meet the definition of Betterment Stripping and operations-related foreign currency gains and losses for the period, divided by the number of ounces of gold sold during the period. “Total cash cost per ounce” for a period is equal to “Cash operating costs” for the period plus royalties and production taxes, divided by the number of ounces of gold sold during the period.

20

	
												
	For the three months ended	
	June 30, 2012	
	Wassa	 	Bogoso/Prestea	 	Combined	
Mining operations costs	$	36,066		 	$	55,954		 	$	92,020		
Royalties	3,292		 	3,529		 	6,821		
Costs to metals inventory	(1,933	)	 	(5,856	)	 	(7,789	)	
Mining related depreciation and amortization	17,025		 	8,090		 	25,115		
Accretion of asset retirement obligations	323		 	380		 	703		
Cost of sales – GAAP	54,773		 	62,097		 	116,870		
Less royalties	(3,292	)	 	(3,529	)	 	(6,821	)	
Less betterment waste stripping costs	—		 	(6,256	)	 	(6,256	)	
Less operations-related foreign exchange losses	282		 	228		 	510		
Less mining related depreciation and amortization	(17,025	)	 	(8,090	)	 	(25,115	)	
Less accretion of asset retirement obligations	(323	)	 	(380	)	 	(703	)	
Cash operating cost	$	34,415		 	$	44,070		 	$	78,485		
 		 		 		
Plus royalties	3,292		 	3,529		 	6,821		
Total cash costs	$	37,707		 	$	47,599		 	$	85,306		
 		 		 		
Ounces sold	41,068		 	44,115		 	85,183		
Cost per ounce measures ($/oz):		 		 		
Cash operating cost per ounce	$	838		 	$	999		 	$	921		
Total cash cost per ounce	$	918		 	$	1,079		 	$	1,001		

	
												
 	For the three months ended	
 	June 30, 2011	
 	Wassa	 	Bogoso/Prestea	 	Combined	
Mining operations costs	$	32,434		 	$	44,626		 	$	77,060		
Royalties	2,929		 	2,352		 	5,281		
Costs from/(to) metals inventory	(1,381	)	 	3,753		 	2,372		
Mining related depreciation and amortization	8,484		 	7,007		 	15,491		
Accretion of asset retirement obligations	289		 	2,033		 	2,322		
Cost of sales – GAAP	42,754		 	59,771		 	102,525		
Less royalties	(2,929	)	 	(2,352	)	 	(5,281	)	
Less betterment waste stripping costs	—		 	(1,456	)	 	(1,456	)	
Less operations-related foreign exchange losses	137		 	191		 	328		
Less mining related depreciation and amortization	(8,484	)	 	(7,007	)	 	(15,491	)	
Less accretion of asset retirement obligations	(288	)	 	(2,033	)	 	(2,321	)	
Cash operating cost	$	31,190		 	$	47,114		 	$	78,304		
 	 	 	 	 	 	
Plus royalties	2,929		 	2,352		 	5,281		
Total cash costs	$	34,119		 	$	49,466		 	$	83,585		
 	 	 	 	 	 	
Ounces sold	38,463		 	34,077		 	72,540		
Cost per ounce measures ($/oz):	 	 	 	 	 	
Cash operating cost per ounce	$	811		 	$	1,383		 	$	1,079		
Total cash cost per ounce	$	887		 	$	1,452		 	$	1,152		

21

	
												
 	For the six months ended	
 	June 30, 2012	
 	Wassa	 	Bogoso/Prestea	 	Combined	
Mining operations costs	$	75,264		 	$	111,083		 	$	186,347		
Royalties	6,374		 	7,012		 	13,386		
Costs to metals inventory	(4,873	)	 	(6,407	)	 	(11,280	)	
Mining related depreciation and amortization	27,917		 	16,239		 	44,156		
Accretion of asset retirement obligations	645		 	761		 	1,406		
Cost of sales – GAAP	105,327		 	128,688		 	234,015		
Less royalties	(6,374	)	 	(7,012	)	 	(13,386	)	
Less betterment waste stripping costs	—		 	(10,364	)	 	(10,364	)	
Less operations-related foreign exchange losses	480		 	163		 	643		
Less mining related depreciation and amortization	(27,917	)	 	(16,239	)	 	(44,156	)	
Less accretion of asset retirement obligations	(645	)	 	(761	)	 	(1,406	)	
Cash operating cost	$	70,871		 	$	94,475		 	$	165,346		
 	 	 	 	 	 	
Plus royalties	6,374		 	7,012		 	13,386		
Total cash costs	$	77,245		 	$	101,487		 	$	178,732		
 	 	 	 	 	 	
Ounces sold	77,551		 	85,357		 	162,908		
Cost per ounce measures ($/oz):	 	 	 	 	 	
Cash operating cost per ounce	$	914		 	$	1,107		 	$	1,015		
Total cash cost per ounce	$	996		 	$	1,189		 	$	1,097		

	
												
 	For the six months ended	
 	June 30, 2011	
 	Wassa	 	Bogoso/Prestea	 	Combined	
Mining operations costs	$	72,896		 	$	89,143		 	$	162,039		
Royalties	5,165		 	3,626		 	8,791		
Costs from/(to) metals inventory	(1,520	)	 	1,202		 	(318	)	
Mining related depreciation and amortization	23,480		 	13,030		 	36,510		
Accretion of asset retirement obligations	577		 	2,678		 	3,255		
Cost of sales – GAAP	100,597		 	109,679		 	210,276		
Less royalties	(5,165	)	 	(3,626	)	 	(8,791	)	
Less waste betterment stripping costs	—		 	(1,456	)	 	(1,456	)	
Less operations-related foreign exchange losses	172		 	127		 	299		
Less mining related depreciation and amortization	(23,480	)	 	(13,030	)	 	(36,510	)	
Less accretion of asset retirement obligations	(577	)	 	(2,678	)	 	(3,255	)	
Cash operating cost	$	71,548		 	$	89,016		 	$	160,564		
 	 	 	 	 	 	
Plus royalties	5,165		 	3,626		 	8,791		
Total cash costs	$	76,713		 	$	92,642		 	$	169,355		
 	 	 	 	 	 	
Ounces sold	91,795		 	64,653		 	156,448		
Cost per ounce measures ($/oz):	 	 	 	 	 	
Cash operating cost per ounce	$	779		 	$	1,377		 	$	1,026		
Total cash cost per ounce	$	836		 	$	1,433		 	$	1,082		

We use total cash cost per ounce and cash operating cost per ounce as key operating indicators. We monitor these measures monthly, comparing each month's values to prior periods' values to detect trends that may indicate increases or decreases in operating efficiencies. These measures are also compared against budget to alert management of 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

22

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 in applicable Canadian securities laws 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, ore grade, gold recovery, 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 similar to the measures of other gold mining companies, but may not be comparable to similarly titled measures in every instance.
BUSINESS STRATEGY AND DEVELOPMENT
Our business and development strategy is focused primarily on the acquisition of producing and development-stage gold properties in Ghana and on the exploration, development and operation of these properties. We also pursue gold exploration activities in South America and other countries in West Africa.
We acquired the Bogoso property and began operating its mines and non-refractory processing facility in 1999. In 2001, we acquired the Prestea property located adjacent to the Bogoso property. In late 2002, we acquired Wassa and constructed the Wassa processing plant, which began commercial operation in April 2005. In July 2007, we completed construction and development of the Bogoso refractory plant. In late 2005, we acquired the HBB properties consisting of the Benso and Hwini-Butre properties. Benso began sending ore to the Wassa processing plant in 2008, and in 2009, following its development phase, Hwini-Butre began sending ore to the Wassa processing plant.
Our current focus is to improve operating efficiencies at both operations; to evaluate in detail the opening of Prestea Underground and, to continue broader and deeper drilling at Wassa Main to evaluate the expansion potential for the Wassa operation.
Our longer term objective is to continue the growth of our mining business to become a mid-tier gold producer. We continue to evaluate potential acquisition and merger opportunities that could further increase our annual gold production. However, we presently have no agreement or understanding with respect to any specific potential transaction.
In addition to our gold mining and development activities, we actively explore for gold in West Africa and South America, investing approximately $24.4 million in 2011 and we plan to spend approximately $14.0 million in 2012. We are conducting regional reconnaissance projects in Ghana, Cote d'Ivoire and Brazil, and have drilled more advanced targets in Ghana, Niger and Sierra Leone. See Item 2 - “Description of Properties” in our Annual Report on Form 10-K for the year ended December 31, 2011, for additional details on these properties.
TRENDS AND EVENTS IN THE THREE MONTHS ENDED JUNE 30, 2012
RESTART OF THE BOGOSO NON-REFRACTORY PLANT
Ore processing was restarted at our Bogoso non-refractory plant in the first quarter of 2012 following completion of the plant renovation project in late 2011. Feed for the restarted plant came initially from non-refractory stockpiles at Bogoso but, by March 2012 the plant began receiving non-refractory ore from our Pampe mine, where mining was restarted in the third quarter of 2011. Going forward, we expect most of the feed for the Bogoso non-refractory plant to come from Pampe, with minor amounts of supplemental non-refractory ores from the Bogoso pits, and once construction is completed, tailings materials from a decommissioned Bogoso tailings storage facility (see below). It is expected that Pampe non-refractory ores will be less expensive to process than the Bogoso refractory ores. The Bogoso non-refractory plant produced and sold 10,064 ounces of gold in the second quarter of 2012 and 17,003 ounces in the first six months of 2012. See Bogoso's Results of Operations section below for additional detail.
GOLD PRICES
While gold prices have generally trended upward during the last eleven years from a low of $260 per ounce in 2001 to a high of $1,895 per ounce in September 2011, prices have tracked between $1,550 per ounce and $1,750 per ounce for most of the past nine months. Gold prices can fluctuate widely due to several factors such as changes in demand for physical gold, forward selling by gold mining companies, government actions, changes in the value of the U.S. dollar and global mine production rates. We realized an average of $1,600 per ounce for our gold shipments during the second quarter of 2012 and $1,513 per ounce for our gold shipments during the second quarter of 2011.

23

INCREASES IN MINING COSTS
While gold prices have trended sharply upward in recent years, the mining industry has also experienced steady increases in mine operating costs including the costs of fuel, electric power, labor, explosives, mining equipment, equipment maintenance parts and chemicals consumed in the processing plants. In addition, many governments around the world have increased mineral royalties, fees and income tax rates in recent years.
Mining is an energy intensive industry using large quantities of electricity and fuel in the mining, transport, crushing, grinding and processing of ores and as a result, a mine's cost structure is sensitive to changes in fuel and electric power costs. Increases in crude oil prices from $45 per barrel in early 2009, to in excess of $100 per barrel in early 2012 have thus contributed to higher mining costs worldwide. Increasing fuel costs have also resulted in higher electric power costs in many areas including Ghana. The resource boom of recent years has constrained the availability of skilled mining personnel, which in turn has put upward pressure on labor costs. It has also contributed to increases in mining equipment costs and longer lead times for new orders for large equipment.
INCREASES IN TAXATION
In the first quarter of 2012, the Government of Ghana enacted three changes to tax rules which apply to mining companies operating in Ghana and further announced its intent to implement two additional changes.
Changes enacted and implemented in the first quarter of 2012 are as follows:
1. Rate Increase: A 10% increase in income tax rates from 25% in 2011 to 35% in the first quarter of 2012 resulted in a one-time increase in our deferred tax liability of approximately $9.6 million as our deferred future income tax liabilities as of December 31, 2011, were increased to reflect the new higher rate.
2. Tax Depreciation Limits: Prior to 2012, a mining company could add 80% of the cost of its annual qualified capital spending to a tax asset pool known as "Capital Allowances", which was immediately available, on an unlimited basis, to reduce taxable income. Once taxable income was reduced to zero in a given year, the remaining balance of the Capital Allowance pool was available for use in subsequent years. Under the new rule, only 20% of a year's capital spending can be added to the Capital Allowance pool, and one fourth of the remaining 80% is added to the pool in each of the subsequent four years. This new rule delays the availability of Capital Allowances and could result in a smaller amount of available Capital Allowance in a given year which could result in a higher taxable income and accelerated cash paid for taxes.
3. Ring Fencing: The Government's new rules disallow the use of expenditures in one mining area as a deduction from revenues in a separate mining area leased by the same company in determining the company's taxable income. While no details have been released for the application of this new rule, the Company expects this to have an immaterial impact on the calculation of tax expense in the current year.
Additional changes announced but not yet enacted:
4. Windfall Profit Tax: The Government of Ghana has stated its intention to implement a 10% windfall profit tax on mining companies. The Government held hearings on this new development during the second quarter of 2012, but has not yet finalized the details of the new tax.
5. Stability Agreement Renegotiations: The Government has established a tax stability renegotiation team that is reviewing the existing tax stability agreements of mining companies operating in Ghana. While our subsidiaries do not have tax stability agreements, it is not clear if the tax stability renegotiation team will also review the Deeds of Warranty which specify certain tax agreements for our properties.
EXPIRY OF REVOLVING CREDIT FACILITY
The loan agreement for our $31.5 million revolving credit facility provided that the facility would end on September 30, 2012. The loan agreement further specified that our ability to draw on the facility would expire on April 1, 2012, if there was no outstanding balance as of this date. Since there was no outstanding balance at April 1, 2012, the facility expired on that date.
SALE OF BURKINA FASO EXPLORATION PROPERTIES
In December 2011, Riverstone Resources notified us, per terms of a 2007 exploration earn-in agreement, of their intent to exercise their purchase option for our Goulagou and Rounga exploration properties in Burkina Faso. The sale of these exploration projects was completed in February 2012 upon receipt of $6.6 million of cash and 21.7 million Riverstone common shares valued at $15.8 million on the day of the sale. A gain of $22.4 million was recognized on the completion of this disposition in the Statement of Operations. The underlying properties' carrying value were written down to zero in prior periods. Since the sale of this property in February 2012, the price of Riverstone's shares has fallen from $0.73 per share to

24

$0.38 per share as at June 30, 2012. As a result we recorded an unrealized loss of $7.6 million in the Statement of Comprehensive Income/Loss, the value of these Riverstone shares is $8.2 million at June 30, 2012.

CONVERTIBLE DEBENTURES
On May 31, 2012, we issued $77.5 million of 5% Convertible Senior Unsecured Debentures due June 1, 2017 (the "5% Debentures") in exchange for an aggregate of $74.5 million of the principal amount outstanding of our 4% Convertible Senior Unsecured Debentures due November 30, 2012, (the "4% Debentures"), by way of privately negotiated transactions with certain holders of the 4% Debentures. We incurred a $0.6 million loss on the extinguishment of the 4% Debentures. As a result an aggregate of approximately $50.5 million principal amount of 4% Debentures remained outstanding as of May 31, 2012. We currently expect to repay the $50.5 million of outstanding 4% Debentures in cash at their maturity. See Note 11 to the accompanying financial statements and also the Liquidity Outlook section below for additional details of this transaction.
PRESTEA UNDERGROUND - WEST REEF
In early May 2012, we completed a preliminary economic assessment ("PEA") of the West Reef area of the Prestea Underground located near our Bogoso mining operation in Ghana. Based on the results of this study, the Company's Board of Directors has asked for a full feasibility study to be prepared to better define the economic potential of this underground property. See "Prestea Underground" in the Development Projects section of this Form 10-Q for additional details of the study.
CONSOLIDATED RESULTS OF OPERATIONS

												
 	For the three months ended	 	For the six months ended	
 	June 30,	 	June 30,	
 	2012	 	2011	 	2012	 	2011	
SUMMARY OF CONSOLIDATED FINANCIAL RESULTS	 	 	 	 	 	 	 	
Bogoso/Prestea gold sold (oz)	44,115		 	34,077		 	85,357		 	64,653		
Wassa/HBB gold sold (oz)	41,068		 	38,463		 	77,551		 	91,795		
Total gold sold (oz)	85,183		 	72,540		 	162,908		 	156,448		
 	 	 	 	 	 	 	 	
Average realized price ($/oz)	1,600		 	1,513		 	1,641		 	1,447		
Cash Operating cost - combined ($/oz)	921		 	1,079		 	1,015		 	1,026		
Gold revenues ($ in thousands)	136,313		 	109,807		 	267,333		 	226,313		
Cash flow provided by/(used in) operations ($ in thousands)	17,570		 	(1,450	)	 	35,454		 	(7,315	)	
Cash flow provided by/(used in) operations per share ($)	0.072		 	(0.006	)	 	0.137		 	(0.028	)	
Net income/(loss) attributable to Golden Star ($ in thousands)	2,483		 	(5,048	)	 	11,597		 	880		
Net income/(loss) per share – basic ($)	0.010		 	(0.020	)	 	0.045		 	0.003		
THREE MONTHS ENDED JUNE 30, 2012 COMPARED TO THREE MONTHS ENDED JUNE 30, 2011
Results for the three months ended June 30, 2012 , include net income attributable to Golden Star shareholders of $2.5 million or $0.010 per share, compared with a net loss of $5.0 million or $ (0.020) per share in the same period of 2011. A $12.2 million increase in mine operating margin as compared to the second quarter of 2011 was the major factor responsible for the earnings improvement. Higher gold sales and higher gold prices as compared to a year earlier were the major factors contributing to the improvement in mine operating margin. Mining operations costs were higher than in the same period of 2011, but the increase in revenues more than offset the cost increases.
Our mines sold 85,183 ounces in the second quarter of 2012, up from 72,540 ounces sold in the same quarter of 2011, and our average realized gold price increased to $1,600 per ounce, up 6% from $ 1,513 per ounce in the second quarter of 2011. The combination of higher gold sales and higher gold prices yielded revenues of $136.3 million in the second quarter of 2012, up from $109.8 million in the same period in 2011.
Second quarter 2012 cost of sales was $116.9 million, up from $102.5 million in the same period of 2011. The major factors contributing to the increased cost of sales were the operating costs of the Bogoso non-refractory mining and processing operations which came on line in the first quarter of 2012 and higher depreciation and amortization resulting from the increase in ounces sold. See operational discussions below for more details on operational results.
There were no derivative losses in the second quarter of 2012. The Riverstone warrants held earlier in 2012 were exercised for Riverstone common shares in the first quarter of 2012. Most of the $2.4 million derivative loss in the second quarter of 2011

25

was related to losses on the fair value of outstanding gold price forward contracts, all of which expired by December 31, 2011.
The $1.1 million second quarter 2012 fair value loss adjustment for the 4% Debentures was based on recent observed market transaction pricing of the 4% Debentures. In comparison, the $6.1 million gain on the fair value of the conversion feature of the 4% Debentures in the second quarter of 2011 was in response to declining prices for our common shares during the period.
We recognized a $0.6 million loss on extinguishment of debt upon the refinancing of $74.5 million of our 4% Debentures on May 31, 2012. The loss represents the difference between the fair value of the new 5% Debentures issued in exchange for $74.5 million of the 4% Debentures and the fair value of the 4% Debentures retired. Financing charges of $2.1 million related to this transaction is included in interest expense for the quarter ended June 30, 2012
General and administrative costs were down $2.5 million from the second quarter of 2011. The majority of the decrease is related to a one time-corporate advisory consulting project during 2011. Transaction costs of refinancing the convertible debentures during the second quarter of 2012 added $2.1 million to interest expense. Depreciation charges for the second quarter of 2012 were up by $9.6 million from the same period in 2011 due to the impact of higher gold sales on units of production amortization costs.
SIX MONTHS ENDED JUNE 30, 2012 COMPARED TO SIX MONTHS ENDED JUNE 30, 2011
Results for the six months ended June 30, 2012 include net income attributable to Golden Star shareholders of $11.6 million  or $0.045 per share, compared with net income of $0.9 million or $0.003 per share in the same period of 2011. Gold sales totaled 162,908 ounces in the first six months of 2012, up from 156,448 ounces sold in the first six months of 2011 and our average realized gold price rose to $1,641 per ounce, up 13% from $1,447 per ounce in the first six months of 2011.
A $17.3 million increase in mine operating margins from higher gold sales and improved gold prices were the major factors contributing to the operating margin improvement. While revenues were higher than a year earlier, mining operations costs were higher than in the same period of 2011, but the increase in revenues more than offset the cost increases. Cost of sales was $234.0 million in the first half of 2012, up from $210.3 million in the same period of 2011. The major factors contributing to the increase, as compared to the first half of 2011, were the operating costs of the Bogoso non-refractory mining and processing operations which came online in the first quarter of 2012, and higher depreciation and amortization resulting from the increase in ounces sold.
Consolidated cash operating costs were $165.3 million in the first half of 2012, up from $160.5 million in the first half of 2011. Among the major factors causing the increase in cash operating costs versus the same period of 2011 was the start-up of the Bogoso non-refractory processing plant in the first quarter of 2012. A decrease in refractory waste tonnes mined at Bogoso partially offset the cost increase. Our cash operating costs, as calculated in the Non-GAAP Financial Measure section above, exclude $10.4 million of betterment waste stripping costs at the Chujah and Pampe pits at Bogoso during the first half of 2012. An additional $11.3 million of mining costs were added to in-process ore stockpile inventories during the first half of 2012.
Depreciation charges for the first half of 2012 were up by $7.6 million from the same period in 2011 due to the impact of Bogoso's higher gold sales on units of production amortization costs. General and administrative costs were down $2.9 million from the first half of 2011. The majority of the decrease is related to a one time-corporate advisory consulting project in early 2011. The decline in derivative losses is related to the expiry of all of our 2011 gold price forward contracts at December 31, 2011, and thus there were no gains or losses from this source in 2012.
The $24.3 million gain on change in fair value of our 4% Debentures in the first half of 2011 was caused by declining share prices for our common shares during the first half of 2011 which reduced the value of the option component of the 4% Debentures which in turn caused a decrease in the fair value of the Debenture liability. The $2.0 million loss recorded in the first half of 2012 reflects the value of recent market trades of the Debentures. Given the relatively short remaining life of the 4% Debentures and the recent trends in our common share price, the current fair value is now largely a reflection of the present value of the remaining interest and principal payments.
The $22.4 million gain on the sale of investments in the first half of 2012 came from the sale of our exploration properties in Burkina Faso in February 2012, when Riverstone Resources exercised its rights under a 2007 earn-in agreement to purchase all of our exploration properties in Burkina Faso. The sale of these exploration projects was completed in February 2012 upon the receipt of $6.6 million of cash and 21.7 million Riverstone common shares valued at $15.8 million. Subsequent to the conclusion of this transaction there was a drop in the Riverstone stock price and, as a result, we recorded an unrealized loss of $7.6 million in the Statement of Comprehensive Income/Loss. The value of these Riverstone shares was $8.2 million at June 30, 2012.
In the first quarter of 2012, Ghana passed new tax laws that raised the statutory income tax rate from 25% to 35%. This change had a one-time $9.6 million impact on the first quarter 2012 deferred tax expense relating to the temporary difference at GSWL arising from prior periods. The deferred tax expense related to current activity in the first half of 2012 was $5.9 million. Transaction costs of refinancing the convertible debentures added $2.1 million to interest expense.

26

BOGOSO/PRESTEA OPERATIONS

												
	For the three months ended	 	For the six months ended	
 	June 30,	 	June 30,	
 	2012	 	2011	 	2012	 	2011	
BOGOSO/PRESTEA OPERATING RESULTS		 		 	 	 	 	
Ore mined refractory (t)	604,596		 	607,814		 	1,374,268		 	1,302,571		
Ore mined non-refractory (t)	244,627		 	6,887		 	385,197		 	7,074		
Total ore mined (t)	849,223		 	614,701		 	1,759,465		 	1,309,645		
Waste mined (t)	5,013,827		 	5,392,767		 	12,255,752		 	9,481,987		
Refractory ore processed (t)	570,450		 	604,088		 	1,181,676		 	1,325,316		
Refractory ore grade (g/t)	2.60		 	2.31		 	2.57		 	2.40		
Gold recovery – refractory ore (%)	71.3		 	66.0		 	72.3		 	63.2		
Non-refractory ore processed (t)	201,912		 	—		 	374,927		 	—		
Non-refractory ore grade (g/t)	2.71		 	—		 	2.68		 	—		
Gold recovery - non-refractory ore (%)	62.2		 	—		 	55.3		 	—		
Gold sold refractory (oz)	34,051		 	34,077		 	68,354		 	64,653		
Gold sold non-refractory (oz)	10,064		 	—		 	17,003		 	—		
Gold sales (oz)	44,115		 	34,077		 	85,357		 	64,653		
 	 	 	 	 	 	 	 	
Total cash cost ($/oz)	1,079		 	1,452		 	1,189		 	1,433		
Royalties ($/oz)	80		 	69		 	82		 	56		
Cash operating cost ($/oz)	999		 	1,383		 	1,107		 	1,377		
THREE MONTHS ENDED JUNE 30, 2012 COMPARED TO THREE MONTHS ENDED JUNE 30, 2011
Bogoso/Prestea's second quarter 2012 revenues totaled $70.6 million , up $19.0 million from $51.6 million in the second quarter of 2011. The increase in revenues was the result of an increase in the number of ounces sold and higher gold prices as compared to the second quarter of 2011. Total gold sold increased to 44,115 ounces in the second quarter of 2012, up from 34,077 ounces in the same period of 2011, and the realized gold price averaged $1,600 per ounce in the second quarter of 2012, up from $1,514 per ounce a year earlier.
While the refractory plant at Bogoso sold essentially the same number of ounces in the second quarter 2012 as it did in the second quarter of 2011, start-up of the Bogoso non-refractory plant in the first quarter of 2012 accounted for the 10,038 ounce increase in Bogoso's gold output in the quarter. The non-refractory plant was not in service in the second quarter of 2011 and thus contributed no production in that period, however the non-refractory plant added 10,064 ounces to sales in the second quarter of 2012.
The refractory plant processed less tonnes of ore during the second quarter of 2012 than it did in the second quarter of 2011, but higher feed grade and improved recovery rates offset the lower tonnes to yield 34,051 ounces, approximately the same as a year earlier. Total tonnes of ore mined in the second quarter of 2012 were higher than in the same period of 2011, with all of the increase coming from the Pampe non-refractory pit where mining was initiated in the third quarter of 2011.
The refractory ore mining rates in excess of processing rates and recent processing plant disruptions caused by power outages and scheduled and unscheduled plant maintenance have resulted in a substantial increase in the refractory ore stockpile at the Bogoso refractory plant. While the ore stockpile should be large enough to provide a reliable source of plant feed during the rainy season, it is now sufficiently large enough to allow a temporary reduction in refractory ore mining rates at Bogoso over the next few months.
An effort is now underway to resolve the various refractory plant operational issues responsible for lower refractory plant throughput in recent periods. Good progress has been made on achieving a quicker start-up of the stand-by power generator at Bogoso in response to frequent electric power interruptions in the Ghana grid power supply. A faster start-up of the stand-by power plant allows for a quicker re-start of the refractory plant once grid power comes back and also reduces mechanical strain on the refractory plant equipment upon restart of the grid power, thereby helping to control maintenance costs. An accelerated refractory plant maintenance program is also underway to help achieve an increase in plant availability going forward.
The increase in refractory plant disruptions, as discussed above, has caused the drop in tonnes of refractory ore processed, as compared to the second quarter of 2011. The increase in refractory ore grade reflects natural variability in the ore deposits being mined. Higher amounts of fresh refractory ore, as mining progressed deeper into the Bogoso pits, was successful in bringing gold recovery rates up to 71.3% in the second quarter of 2012 from 66.0 % in the second quarter of 2011.

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Following a three year hiatus, non-refractory ore processing was re-started at the Bogoso non-refractory plant in the first quarter of 2012. One of the ore feeds to this facility is the recently reopened Pampe pit located 18 kilometers west of Bogoso. The Pampe pit was mined in 2007 and 2008, which exposed the upper benches of the pit to weathering. In the first quarter of 2012, there were two slippages along the previously mined upper benches totaling approximately 500,000 cubic meters of rock.
While the slip material is broken rock with relatively low mining costs per tonne, removal of the slip material temporarily increased Pampe's strip ratio and mining costs during the first and second quarter of 2012. We removed most of the slip material by the end of June 2012, with approximately 603,000 tonnes removed in the second quarter of 2012, and now anticipate completing removal of the slip material by mid-third quarter 2012. Afterward, we anticipate lower mining costs as mining rates of ore and waste return to design levels. Given the limited access to Pampe's fresh non-refractory ore during the slip clean up period, the Bogoso non-refractory plant processed mostly non-refractory stockpile and transition ores during the second quarter which typically have gold recovery rates lower than the fresh Pampe ore. With clean-up of the slip material mostly completed, we expect to see increasing amounts of fresh non-refractory ore from the Pampe pit going forward and improvements in gold recovery.
Bogoso's consolidated second quarter 2012 cash operating costs totaled $44.1 million, down from $47.1 million in the second quarter of 2011 (see Non-GAAP Financial Measures section above for details of cash operating costs).
The $7.7 million of mining costs added to stockpile inventory balances in the second quarter of 2012 reflect increases in the tonnages of stockpiled ores during the second quarter at both the refractory and at the non-refractory operations as ore mining rates exceeded processing rates at both operations. Portions of the costs of waste push back programs at the Chujah and Pampe pits which meet the definition of betterment stripping, were treated as capitalized costs in the calculation of Bogoso's cash operating costs per ounce. The inventory increases and betterment stripping deferral more than offset the increase in costs from start up of the non-refractory mining and processing, resulting in lower net cash operating costs than in the second quarter of 2011. Second quarter 2012 mining costs are lower than the first quarter of 2012 as a result of reduced mining activity due to large stockpiles and a lower strip ratio in Chujah Main and Bogoso North. It is expected that the stockpile will be drawn down in the third quarter 2012.
The increase in ounces sold, as compared to the second quarter of 2011, combined with lower cash operating costs, resulted in a drop in cash operating costs per ounce to $999 per ounce, down from $1,383 per ounce a year earlier. The increase in ounces sold also contributed to higher units-of-production amortization expense.
SIX MONTHS ENDED JUNE 30, 2012 COMPARED TO SIX MONTHS ENDED JUNE 30, 2011
Bogoso/Prestea's revenues totaled $140.2 million in the first six months of 2012, up $46.1 million from $94.1 million in the first six months of 2011. The increase in revenues was related to a 20,704 ounce increase in the number of ounces sold in the first half of 2012 and to higher gold prices as compared to the same period in 2011. The major factor contributing to the 20,704 increase in ounces sold, as compared to the first half of 2011, was the start-up of the Bogoso non-refractory plant in the first quarter of 2012 and its sales of 17,003 ounces in the first half of 2012. Bogoso's realized gold price averaged $1,642 per ounce in the first half of 2012, up from $1,455 per ounce a year earlier. Bogoso's refractory plant processed less tonnes of ore than in the first half of 2011, but higher feed grade and improved recovery rates more than offset the drop in tonnes processed yielding 68,354 ounces, up 5.7% from 64,653 ounces in the first half of 2011.
The increase in refractory ore tonnes mined, as compared to the first half of 2011 was related to a better ore to waste strip ratio experienced during the first half of 2012. The increase in non-refractory tonnes mined in the first half of 2012, reflects that Bogoso did not initiate non-refractory mining in 2011 until the fourth quarter.
The higher refractory ore mining rates, coupled with recent processing plant disruptions caused by power outages and scheduled and unscheduled plant maintenance, have resulted in an increase in the refractory ore stockpile at the Bogoso refractory plant. While the ore stockpile should be large enough to provide a reliable source of plant feed during the rainy season, it is now sufficiently large enough to allow a temporary reduction in refractory ore mining rates at Bogoso over the next few months.
An effort is now underway to resolve the various refractory plant operational issues responsible for lower refractory plant throughput in recent periods. Good progress has been made on achieving a quicker start-up of the stand-by power generator at Bogoso in response to frequent interruptions in the Ghana grid power in recent quarters. A faster start-up of the stand-by power plant allows for a quicker re-start of the refractory plant once grid power comes back and also reduces mechanical strain on the refractory plant equipment upon restart of the grid power, thereby helping to control maintenance costs. An accelerated refractory plant maintenance program is also underway to help achieve an increase in plant availability going forward.
The increase in refractory plant disruptions, as discussed above, caused the drop in tonnes of refractory ore processed, as compared to the first half of 2011. The increase in refractory ore grade reflects natural variability in the ore deposits being mined. Higher amounts of fresh refractory ore, as mining progressed deeper into the Bogoso pits, was successful in bringing gold recovery rates up to 72.3 % in the first half of 2012 up from 63.2 % in the first half of 2011.

28

Bogoso's consolidated cash operating costs totaled $94.5 million in the first half of 2012, up from $89.0 million in the first half of 2011. Most of the increase in costs was related to the restart of Bogoso's non-refractory operations in the first quarter of 2012. Increases in the price of fuel, cyanide and labor since the first half of 2011 also contributed to the increase in Bogoso's cash operating expense.
The increase in ounces sold, as compared to the first half of 2011, resulted in a drop in cash operating costs per ounce to $1,107  per ounce, down from $1,377 per ounce a year earlier. The increase in ounces sold also contributed to higher units-of-production amortization expense.
Based on our current 2013 mine planing, it is expected that refractory mining operations at Bogoso will encounter areas in the Chujah and Bogoso North pits that have higher strip ratios and lower grades than those of recent quarters resulting in higher waste mining costs and less ounces from Bogoso's refractory operations. Planned increases in the amount of non-refractory ore mined and processed in 2013 is expected to offset much of the drop in refractory ounces and to partially offset the impact of higher waste mining costs at Bogoso.

WASSA OPERATIONS

												
	For the three months ended	 	For the six months ended	
 	June 30,	 	June 30,	
 	2012	 	2011	 	2012	 	2011	
WASSA/HBB OPERATING RESULTS		 		 	 	 	 	
Ore mined (t)	715,021		 	576,246		 	1,379,751		 	1,279,302		
Waste mined (t)	3,818,386		 	3,491,281		 	8,263,598		 	7,606,272		
Ore and heap leach materials processed (t)	641,359		 	665,466		 	1,322,879		 	1,389,236		
Grade processed (g/t)	2.06		 	1.93		 	1.90		 	2.14		
Recovery (%)	94.8		 	94.1		 	94.3		 	94.7		
Gold sales (oz)	41,068		 	38,463		 	77,551		 	91,795		
 	 	 	 	 	 	 	 	
Total cash cost ($/oz)	918		 	887		 	996		 	836		
Royalties ($/oz)	80		 	76		 	82		 	57		
Cash operating cost ($/oz)	838		 	811		 	914		 	779		
THREE MONTHS ENDED JUNE 30, 2012 COMPARED TO THREE MONTHS ENDED JUNE 30, 2011
Wassa sold 41,068 ounces in the second quarter of 2012, up from 38,463 ounces in the second quarter of 2011, and second quarter 2012 realized gold prices averaged $1,601 per ounce, up from $1,513 per ounce in the second quarter of 2011. The combination of higher unit sales and improved gold prices combined to yield second quarter revenues of $65.7 million , up $7.5 million from $58.2 million in the second quarter of 2011.
While second quarter plant throughput was down slightly from the same period of 2011, higher plant feed grade and improved gold recovery more than compensated resulting in an increase in ounces sold. Second quarter 2012 ore grades were higher than a year earlier mostly due to start-up of mining at the higher grade Father Brown pit at Hwini-Butre in the fourth quarter of 2011. Plant throughput in the second quarter was down 3.6% from a year earlier, reflecting a change in ore blends that included higher amounts of harder rock.
Wassa's cash operating costs totaled $34.4 million in the second quarter of 2012, up from $31.2 million in the second quarter of 2011 Wassa mined 466,000 more tonnes in the second quarter of 2012 than it did in the second quarter of 2011. Capitalization of $3.7 million of pre-strip mining costs at the Father Brown pit in the second quarter of 2011 resulted in a lower cash operating cost in the second quarter of 2011 than in the second quarter of 2012. The benefit of an increase in ounces sold in the second quarter of 2012, as compared to the same period of 2011, was offset by the higher cash operating costs, resulting in higher cash operating costs per ounce.
Various projects are underway to avoid Wassa plant ore feed disruptions similar to the ones experienced during recent rainy seasons when processing wet sticky ore has caused processing plant slow-downs. These projects include installation of improved drainage systems around the Wassa plant's ore pads, relocation of the heap leach feed system, profiling of non-refractory ore stockpiles and installation of equipment that will allow fine wet ore to bypass the secondary crusher during rainy periods and go directly to the grinding circuit. It is expected that these projects will be completed by the third quarter of 2012.
SIX MONTHS ENDED JUNE 30, 2012 COMPARED TO SIX MONTHS ENDED JUNE 30, 2011
During the six months ended June 30, 2012, Wassa's mining activities were focused on the Father Brown pit at Hwini-Butre

29

and on the Wassa pits. Mining was completed at Wassa's SAK I and Benso pits in February 2012. The Benso mining operation is now on hold until completion of a review of exploration data to evaluate further potential of this mining area. Mining rates at both Wassa and at Father Brown have improved and the ore grade delivered to the Wassa plant is meeting expectations.
Wassa sold 77,551 ounces in the first half of 2012, down from 91,795 ounces in the first half of 2011. Gold revenues totaled $127.2 million in the first half of 2012, down from $132.2 million in the same period of 2011. While Wassa realized an average gold price of $1,640 per ounce in the first half of 2012, up from $1,440 per ounce a year earlier, the decrease in ounces sold more than offset the gold price improvement causing the decrease in revenues.
First half 2012 gold sales were lower than a year earlier mostly due to lower ore grades and a marginal drop on tonnes processed. The drop in tonnes processed, as compared to the first half of 2011, was due to a change in ore blends that included higher amounts of harder rock and a seven day power outage in the local Ghana power grid in the first quarter of 2012. The grade drop reflects closure of the Benso mine in the first quarter of 2012 and replacement of the Benso ore feed by lower grade Wassa pit ores. Cash operating costs came down to $70.9 million in the first half of 2012 from $71.5 million in the first half of 2011. While total mining operations spending in the first six months of 2012 was $2.4 million higher than in the same period of 2011, Wassa added $4.9 million of mining costs to ore stockpile inventories in the first half of 2012, resulting in a net decrease in first half cash operating costs. Even with the reduction in cash operating costs, the drop in ounces sold during the first half of 2012 resulted in an increase in first half 2012 cash operating costs per ounce to $914 as compared to $779 per ounce in the first half of 2011.
DEVELOPMENT PROJECTS
PRESTEA UNDERGOUND
During the first quarter of 2012, a preliminary economic assessment ("PEA") study was finalized for the West Reef section of the Prestea Underground property south of Bogoso. The PEA targets a mechanized mine development plan which would deliver approximately 1,200 tonnes per day at an average diluted mined grade of approximately 8 grams per tonne, producing approximately 90,000 ounces of gold per year at full production. Economic analysis from the PEA indicates a capital cost of approximately $115 million for completion of the refurbishment of the Central Shaft and existing haulage drives to the West Reef area, upgrading of pumps, compressors and ventilation, development of a decline and raise-bored shaft to 30 Level and initial stope development.
Test work indicates that the mineralization is non-refractory with a significant portion of the gold expected to be recovered from the gravity circuit at the Bogoso non-refractory processing plant for total gold production of approximately 437,000 ounces over the life of the project.
The PEA assumes access to the West Reef via a decline from surface, with simultaneous decline development from 24 Level (900 meters below surface). The decline would be used for passage of people, materials and equipment into the West Reef area. The PEA incorporates an ore hoisting shaft that would be raise-bored from West Reef to surface.
The final PEA was filed on SEDAR in Canada and was furnished to the US Securities and Exchange Commission in early May 2012. The Minerals Resources reported in the PEA are compliant with Canada's National Instrument 43-101. The Board of Directors has authorized management to proceed with a final West Reef feasibility study to be completed by the first quarter of 2013. The environmental permitting will proceed in parallel with the feasibility study. This project has been registered with the Ghana Environmental Protection Agency and the consultant to complete the environmental impact assessment work has been selected.
In the second quarter of 2012, the Board of Directors approved $1.8 million for additional drilling on the West Reef and $4.0 million for mining equipment, permitting and shaft rehabilitation during the second half of 2012.
BOGOSO TAILINGS RECOVERY PROJECT
Construction continued at Bogoso on our hydraulic tailings recovery system which is designed to feed tailings from a decommissioned Bogoso tailings storage facility directly into the Bogoso non-refractory processing plant. The environmental permit needed for start-up was received in October 2011. While the grade of the tailings material is lower than that of the ores typically treated in the Bogoso non-refractory plant in the past, operating costs are expected to be low since reclaimed tailings can be fed directly into the existing CIL circuit after a minimal amount of processing through the ball mill. Thus, ore processing costs should be lower than for freshly mined ore, resulting in lower overall average costs per ounce at Bogoso. It is expected that this material will be a supplemental feed to the higher grade non-refractory ores mined from Pampe.
PRESTEA SOUTH PROPERTIES
We continue to seek the environmental permits required to develop the Prestea South deposits. In 2010, the Ghana EPA

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requested an update to the Prestea South Project Environmental Impact Statement (“EIS”) and a revised draft EIS was submitted to the EPA in April 2011. Recent design changes to the Prestea South project are being incorporated into a supplemental environmental statement that will be submitted to the EPA along with a resettlement action plan, which is currently being updated to incorporate the project changes.
When the environmental permits are obtained, we expect to initiate development at Prestea South deposits, including its 10 kilometer access road. We plan to transport Prestea South oxide ore to Bogoso and process it through the Bogoso non-refractory plant. Prestea South sulfide ore will be processed through the Bogoso refractory plant.
EXPLORATION PROJECTS
Our original 2012 budget included approximately $10 million for exploration activities, including development drilling around our operating mine sites and early-stage projects in Cote d'Ivoire, Sierra Leone and Brazil. The major focus of the 2012 work programs continues to be infill drilling in and around the Wassa and Hwini Butre pits and some limited non-refractory target testing at Bogoso/Prestea.
As previously reported, drilling at Wassa during the first half of 2012 has delineated new zones of gold mineralization below the current Wassa pits. These recent Wassa drill results have been incorporated into our resource and pit optimization models and based on the results of these models, the Board of Directors approved an additional $4.0 million to extend this drilling program through the end of 2012 to further delineate the deeper higher grade intersections found so far. Drilling at the Father Brown underground target south of Wassa continued during the second quarter of 2012, confirming the reef structure at depth and along strike.
Elsewhere in Africa, a deep auger drilling program was completed at our Amelekia concessions in Cote D'Ivoire during the second quarter which defined two geo-chem targets where deeper drilling is planned for the third quarter of 2012. The Sonfon project in Sierra Leone remains on care and maintenance as we continue discussions with the government trying to resolve the ownership issue through dialog rather than international arbitration.
In South America, second quarter exploration efforts continued to focus on the Iriri joint venture in Brazil. The regional stream sediment programs are 90% complete over the 3,400 square kilometer concession area, and we have delineated several targets which will be further tested with regional soil sampling programs. We have assessed the regional stream results received thus far and are currently reviewing the land package to determine which concessions have gold potential and which ones we will return to our joint venture partner Votorantim Metals. We continue to wait for the Suriname government to transfer the Saramacca exploration license to Newmont.
LIQUIDITY AND CAPITAL RESOURCES
Gold revenues less the mining operations cost components of cost of goods sold (non-GAAP measure) totaled $67.6 million during the first half of 2012, up from $55.2 million in the same period of 2011. Portions of the $67.6 million of cash generated in the first half of 2012 were used to cover various non-operating cash costs and changes in working capital, bringing cash from operations to $35.5 million for the six months, as compared to a use of $7.3 million of cash from operations in the first six months of 2011. The major non-operating uses of cash during the first half of 2012 included approximately $8.2 million of cash for corporate general and administrative items, $4.4 million for reclamation projects, $5.0 million for interest payments, $18.6 million for working capital needs and $6.3 million for non-mine-site exploration and property holding costs.
A total of $36.4 million was used in investing activities during the first half of 2012, including $19.9 million on mining property exploration and development projects and $19.6 million for the acquisition of new equipment and facilities at the mine sites. The sale of our Burkina Faso assets generated $6.6 million of cash in February 2012. Major capital spending items at Bogoso during the first half of 2012 included $6.6 million for new haul trucks, $2.0 million for development drilling, $1.8 million for pre-stripping at Pampe, $1.0 million for tailings facilities, $1.4 million for Dumasi development and $2.3 million for on-going construction of a water treatment plant. Wassa's major capital projects include $9.6 million for an upgrade to its current tailings disposal facility and development of a new tailings disposal facility now underway, $1.3 million for two new drill rigs and $4.0 million for development drilling at the Wassa pits and at the Father Brown pit at Hwini-Butre.
Scheduled debt payments on our equipment financing facility and capital leases used $4.4 million of cash in the first half of 2012, and new borrowings on our equipment financing facility provided $7.4 million of cash. The new borrowing covered the purchase of five new haul trucks, a loader and two new drills.
The mines provided sufficient cash to meet all of our operating and non-operating needs during the first half of 2012, as well as our investment and financing needs. During the first half of 2012, all of our cash was held as cash or was invested in funds that held only U.S. treasury notes and bonds.
LIQUIDITY OUTLOOK

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We expect to spend between $90 million and $100 million on capital projects at Bogoso/Prestea and Wassa/HBB during 2012, of which $39.5 million was spent in the first half of 2012. In addition, during 2012 we expect to spend approximately $10 million on rehabilitation projects at Bogoso/Prestea and Wassa/HBB, of which $4.4 million was spent in the first half. The major planned capital projects in 2012 for Wassa include development of a new tailings storage facility, new mining equipment, processing plant upgrades and additional exploration drilling at the Wassa and Father Brown pits. At Bogoso, 2012 spending includes completion of a water treatment plant, new mining facilities, equipment for the Prestea Underground, upgrades to the Bogoso refractory plant and development spending at the Dumasi deposit.
We plan to use approximately $8 million of cash for payments on equipment financing loans during 2012, and we expect to draw approximately $8 million on new equipment loans to replace mining equipment. We also expect to pay $1.2 million of interest on our equipment financing facility, and $7.4 million of interest payments on the 4% Debentures and 5% Debentures, and including $2.0 million of financing fees that was paid on the new 5% debentures.
On May 31, 2012, we issued $77.5 million of 5% Debentures due June 1, 2017 in exchange for an aggregate of $74.5 million principal amount of our 4% Debentures due November 30, 2012, by way of privately negotiated transactions with certain holders of our 4% Debentures. After purchasing and canceling $74.5 million of the 4% Debentures, an aggregate of approximately $50.5 million principal amount of 4% Debentures remained outstanding.
We currently expect to repay the $50.5 million of outstanding 4% Debentures in cash at their maturity on November 30, 2012. As an alternative, we have the option to repay the 4% Debentures at maturity in common shares or a combination of shares and cash, based on (a) a share issue value which is 95% of the weighted average trading price of our common shares on the NYSE MKT stock exchange for the 20 consecutive trading days ending five days preceding the maturity date and (b) a maximum share issuance of 46.7 million shares. If the value of 46.7 million shares is less than the $50.5 million principal outstanding, we would be required to pay cash, in addition to the shares issued, in an amount equal to the difference between the aggregate value of the shares issued and $50.5 million.
As of June 30, 2012 , we had $19.0 million of borrowing capacity under our $40.0 million equipment financing credit facility. Our revolving credit facility expired on April 1, 2012, per terms of the original loan agreement.
We expect that our 2012 operating cash flow, along with cash on hand at June 30, 2012 , and borrowings under the equipment financing facility, will be sufficient to cover capital, operating and debt needs for the next 12 months. However, since our operating cash flows are sensitive to fluctuations in gold price, a prolonged down turn in gold price could adversely affect our ability to generate sufficient cash flow from operations to meet all of our needs during next 12 months.
LOOKING AHEAD
Our main objectives for the remainder of 2012 include:
		
•	improve plant reliability and throughput at the Bogoso refractory processing plant;	
		
•	improve gold recovery rates at the Bogoso non-refractory processing plant;	
		
•	achieve reductions in operating costs throughout the organization;	
		
•	continue exploration drilling at the Wassa mining lease to follow up on the 2011 drilling results;	
		
•	complete Prestea Underground feasibility study; and	
		
•	re-evaluate all mining plans and equipment needs for longer term profitable operation.	
We are estimating Bogoso/Prestea gold production of approximately 188,000 ounces at an average cash operating cost of $1,100 to $1,180 per ounce for 2012. We expect Wassa to produce approximately 150,000 ounces during 2012 at an average cash operating cost of $950 to $985 per ounce, with combined total production of approximately 338,000 ounces at an average cash operating cost of $1,040 to $1,100 per ounce.
As more fully disclosed in the Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011, 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.
ENVIRONMENTAL LAWS AND REGULATIONS
In the various jurisdictions where we operate, all phases of our exploration, project development, and operations are subject to environmental laws and regulations. These laws and regulations may define, among other things, air and water quality standards, waste management requirements, and closure and rehabilitation obligations. In general, environmental legislation is evolving to require more strict operating standards, more detailed socioeconomic and environmental impact assessments of proposed projects, and a heightened degree of accountability for companies and their officers, directors, and employees for corporate social responsibility, and health and safety. Changes in environmental regulations, and the way they are interpreted by

32

the regulatory authorities, could affect the way we operate, resulting in higher environmental and social operating costs that may affect the viability of our operations.
We note a continuing trend toward increasing environmental requirements, and greater corporate social responsibility expectations in stakeholder communities and from the regulatory authorities in Ghana. This includes requirements for more permits, analysis, data gathering, and community hearings and negotiations than have been required typically in the past for both routine operational needs and for new development projects. The trend to longer lead times in obtaining environmental permits has reached a point where we are no longer able to estimate permitting times for our planning purposes. The increases in permitting requirements could affect our environmental management activities, including but not limited to, tailings storage facilities and water management projects at our mines.
Our mining, processing, development and mineral exploration activities are subject to various laws governing prospecting, development, production, taxes, labor standards, occupational health and safety, land claims of local people and other matters. New rules and regulations may be enacted or existing rules and regulations may be modified and applied in a manner that could have an adverse effect on our financial position and results of operations.
RELATED PARTY TRANSACTIONS
We obtained legal services from a legal firm to which one of our board members is of Counsel. The total value of all services purchased from this law firm during the first half of 2012 and 2011 was $0.5 million and $0.2 million , respectively. Our board member did not personally perform any legal services for us during the period nor did he benefit directly or indirectly from payments for the services performed by the firm.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Preparation of our consolidated financial statements requires the use of estimates and assumptions that can affect reported amounts of assets, liabilities, revenues and expenses. Accounting policies relating to asset impairments, depreciation and amortization of mining property, plant and equipment, stock based compensation, tax assets, determination of fair values of financial instruments and site reclamation/closure accruals are subject to estimates and assumptions regarding reserves, gold recoveries, future gold prices, future operating and reclamation costs and future mining activities.
Decisions to write off, or not to write off all or a portion of the purchase costs of exploration and development properties are based on our judgment as to the actual value of such properties and are therefore subjective in most cases. Certain exploration and development properties have been found to be impaired in the past and were written off in prior years. We continue to retain title to certain exploration properties after impairment write-offs as future events and discoveries may ultimately prove that they have value.
Listed below are the accounting policies and estimates that we believe are critical to our financial statements based on the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.
Ore stockpiles: Stockpiles represent coarse ore that has been extracted from the mine and is available for further processing. Stockpiles are measured by physical surveys or by estimating the number of tonnes of ore added and removed from the stockpile during a period. The number of recoverable ounces of gold in stockpiles is based on assay data and the gold recovery rate expected when the ore is processed. Stockpile values include mining and mine maintenance costs incurred in bringing the ore to the stockpile, and also a share of direct overhead and applicable depreciation, depletion and amortization relating to mining operations. Costs are added to a stockpile based on current mining costs and are removed at the average cost per tonne of the total stockpile. Stockpiles are reduced as material is removed and fed to the processing plant. A 10% adjustment to the volume of the stockpile, based on typical stockpile tonnage, would change the carrying value of the stockpile inventory by approximately $2.5 million to $3.0 million.
Impairment charges: We periodically review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable from continued operation of the asset. An asset impairment is considered to exist if the sum of all estimated future cash flows, on an undiscounted basis, are less than the carrying value of the long-lived asset. The determination of expected future cash flows requires numerous estimates about the future, including gold prices, operating costs, production levels, gold recovery rates, ore reserves, amounts of recoverable gold and capital expenditures. Based on our assessment, we don't believe that our long lived assets are impaired.
As at June 30, 2012, management determined that impairment indicators existed, and completed an impairment assessment for the Company's long lived assets. The primary impairment indicator was the decline in the Company's share price during the quarter ended June 30, 2012. The assessment of the recoverability of the Company's long lived assets used a forecast undiscounted cash flow model. Key assumptions incorporated in the model included forecast commodity prices, capital and sustaining capital expenditures, operating costs incurred and estimated forecasts, grades and recovery. Management's

33

impairment evaluation did not result in the identification of an impairment loss as of June 30, 2012. Although management believes the estimates applied in these impairment assessments are reasonable, such estimates are subject to significant uncertainties and judgments.
Amortization: Capital expenditures for mining properties, mine development and certain property plant and equipment items, are amortized using a units-of-production method over Proven and Probable Mineral Reserve ounces of gold. Capital expenditures that benefit an entire mining property, such as the cost of building an administrative facility, are amortized over all ounces contained on the property. Capital expenditures that benefit only a specific asset such as the pre-production stripping costs of a pit, are amortized over only the ounces located in the associated pit. Reserve estimates, which serve as the denominator in units of production amortization calculations, involve the exercise of subjective judgment and are based on numerous assumptions about future operating costs, future gold prices, continuity of mineralization, future gold recovery rates, spatial configuration of gold deposits, and other factors that may prove to be incorrect. A 10% change in estimated total reserves at Wassa and at Bogoso/Prestea could result in an approximately $7.0 million to $9.0 million change in annual amortization expense.
Tax assets: Recognition of future tax assets requires an analysis of future taxable income expectations to evaluate the probability of sufficient future taxable income to utilize the accrued tax benefits. Determination of expected future taxable income requires numerous estimates of future variables including but not limited to gold prices, operating costs, gold recovery, ore reserves, gold production, ore grades, administrative costs, tax rates, and potential changes in tax laws.
Asset retirement obligation and reclamation expenditures: Accounting for future reclamation obligations requires management to make estimates at each mine site of future reclamation and closure costs. In many cases, a majority of such costs are incurred at the end of a mine's life which can be several years in the future. Such estimates are subject to changes in mine plans, reclamation requirements, inflation rates and technology. As a result, future reclamation and closure costs are difficult to estimate. Our estimates of future reclamation and closing costs are reviewed frequently and are adjusted as needed to reflect new information about the timing and expected future costs of our environmental disturbances. Based upon our current situation, we estimate that a 10% increase in total future reclamation and closure cash costs would result in an approximately $2.0 million increase in our asset retirement obligations.
ACCOUNTING DEVELOPMENTS     
Presentation of Comprehensive Income: In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220)-Presentation of Comprehensive Income (ASU 2011-05), to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective for us in the first quarter of fiscal 2012 and should be applied retrospectively. Our presentation of comprehensive income complies with this new guidance.
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements: In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) -Fair Value Measurement (ASU 2011-04), to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 was effective for us in 2012 and was applied prospectively.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
OUTSTANDING SHARE DATA
This “Management's Discussion and Analysis of Financial Condition and Results of Operations” includes information available to August 7, 2012. As of August 7, 2012, we had outstanding 258,861,960 common shares, options to acquire 12,566,738 common shares, and convertible notes which are convertible into approximately 57 million common shares.

		
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	

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Our exposure to market risk includes, but is not limited to, the following risks: changes in interest rates on our debt, changes in foreign currency exchange rates and commodity price fluctuations.
Interest Rate Risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our 4% Debentures, 5% Debentures and the outstanding loans under our equipment financing facility bear interest at a fixed rate and are not subject to changes in interest payments. 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
Currency risk is risk that the fair value of future cash flows will fluctuate because of changes in foreign currency exchange rates. In addition, the value of cash and cash equivalents and other financial assets and liabilities denominated in foreign currencies can fluctuate with changes in currency exchange rates.
Since our revenues are denominated in U.S. dollars and our operating units transact much of their business in U.S. dollars, we are typically not subject to significant impacts from currency fluctuations. Even thus, certain purchases of labor, operating supplies and capital assets are denominated in Ghana cedis, euros, British pounds, Australian dollars and South African rand. To accommodate these purchases, we maintain operating cash accounts in non-US dollar currencies and appreciation of these non-US dollar currencies against the U.S. dollar results in a foreign currency gain and a decrease in non-U.S. dollar currencies results in a loss. In the past, we have entered into forward purchase contracts for South African rand, euros and other currencies to hedge expected purchase costs of capital assets. During 2012 and 2011 we had no currency related derivatives. At June 30, 2012, and December 31, 2011 we held $8.8 million and $16.3 million , respectively, of foreign currency.
Commodity Price Risk
Gold is our primary product and, as a result, changes in the price of gold can significantly affect our results of operations and cash flows. Based on our expected gold production in 2012, a $10 per ounce change in gold price would result in approximately a $3.5 million change in our sales revenues and operating cash flows. To reduce gold price volatility, we have at various times entered into gold price derivatives. During the first six months of 2012, we did not hold any gold price derivatives and thus, there were no financial instruments subject to gold price risk at those dates.
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. We manage the liquidity risk inherent in these financial obligations by preparing quarterly forecasts and annual long-term budgets which forecast cash needs and expected cash availability to meet future obligations. Typically these obligations are met by cash flows from operations and from cash on hand. Scheduling of capital spending and acquisitions of financial resources may also be employed, as needed and as available, to meet the cash demands of our obligations.
Our ability to repay or refinance our future obligations depends on a number of factors, some of which may be beyond our control. Factors that influence our ability to meet these obligations include general global economic conditions, credit and capital market conditions, results of operations and the price of gold.
Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Our credit risk is primarily associated with liquid financial assets and derivatives. We limit exposure to credit risk on liquid financial assets by holding our cash, cash equivalents, restricted cash and deposits at highly-rated financial institutions. All of our excess cash is invested in funds that hold only U.S. treasury bills. We mitigate the credit risks of our derivatives by entering into derivative contracts with only high quality counter parties. Risks associated with gold trade receivables is considered minimal as we sell gold to a credit-worthy buyer who settles promptly within two days of receipt of gold bullion.

		
ITEM 4.	CONTROLS AND PROCEDURES	
During the fiscal period covered by this report, the Company's management, with the participation of the Chief Executive

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Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods and are designed to ensure that information required to be disclosed in its reports is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There has been no change in the Company's internal control over financial reporting during the most recent fiscal quarter that has materially affected, or that is reasonably likely to materially affect, the Company's internal control over financial reporting.
This Form 10-Q was prepared with the assistance of, and approval by our Disclosure Committee prior to its filing with securities regulators in the U.S., Canada and Ghana. Our Disclosure Committee includes a broad cross-section of Company employees who are closely associated with and knowledgeable about the Company's operations and its engineering, exploration, legal, environmental, socio-economic and financial activities. Our Forms 10-Q and 10-K, are also reviewed by our Audit Committee which, prior to filing, meets with senior management to review the documents. Subsequent to its review, the Audit Committee forwards the documents to the Board of Directors with recommendation that the directors approve the document for filing with securities regulators and distribution to shareholders.

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	
B.D. Goldfields Action - On July 19, 2011 B.D. Goldfields, Ltd. (“plaintiff”), a Ghanaian registered company, filed suit in the Commercial Division of the High Court of Justice (the "Court") in Accra, Ghana, against Golden Star Resources Ltd. and our subsidiary St. Jude Resources (Ghana) Ltd. The plaintiff challenged the validity of the concession contracts and settlements related to our acquisition in 2006 of the Hwini-Butre gold property in Ghana. In May 2012, the Court ruled in our favor on the basis that in an earlier action, which also challenged our ownership of the Hwini-Butre property, a Court of Appeals in Ghana had ruled that we were the legal owners of the Hwini-Butre mineral rights. Based on the Court of Appeal's ruling, the Court refused further consideration of the B.D. Goldfields action.
Genser Legal Action - In March 2012, Genser Power Ghana Limited ("plaintiff"), a Ghanaian registered company, filed a suit in the High Court of Justice (the "Court"), in Sekondi, Ghana against our subsidiary Golden Star (Bogoso/Prestea) Limited ("GSBPL"). The plaintiff challenged our ownership of an electric power generating plant that the plaintiff had constructed and subsequently operated on our behalf at GSBPL's Bogoso mine site from February 2010 to February 2012.
Per terms of the plant's construction/operations contract, upon completion of construction, GSBPL was to make a series of payments to the plaintiff during the first two years of the plant's operational life and upon completion of such payments, the construction/operations contract required the plaintiff to transfer ownership of the plant to GSBPL for no additional consideration. At the end of the two year operational period, the plaintiff refused to transfer ownership to GSBPL stating that GSBPL's notice of intent to assume ownership was defective.
GSBPL challenged the plaintiff's right to bring legal action in Ghana in this matter because the construction and operations contract provides that any disputes between GSBPL and the plaintiff would be resolved by international arbitration at the ICC in Paris, France. On May 4, 2012 the Court ruled that it would not hear the plaintiff's action since the construction/operations contract provides for international arbitration for all dispute resolutions. To date, we have received no notice of Genser's intent to pursue arbitration.
		
ITEM 1A.	RISK FACTORS	
The risk factors for the quarter ended June 30, 2012, are substantially the same as those disclosed and discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011.
		
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	
None, other than as previously reported in a Current Report on Form 8-K filed with the United States SEC on May 18, 2012 and May 31, 2012.

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ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	
None
		
ITEM 4.	MINE SAFETY DISCLOSURE	
Not applicable
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)	
101		The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, (ii) Consolidated Statements of Operations for the three and six months ended June30, 2012 and 2011, (iii) Consolidated Statements of Cash Flows for the three and six months ended June 30, 2012 and 2011; and (iv) Notes to the Unaudited Consolidated Financial Statements, tagged as blocks of text. The information in Exhibit 101 is “furnished” and not “filed,” as provided in Rule 402 of Regulation S-T.	

37

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned

				
 	 	
GOLDEN STAR RESOURCES LTD.
Registrant	
 	 	
By:	/s/ Thomas G. Mair	
 	                Thomas G. Mair	 	
 	                President and Chief Executive Officer	 	
 	 	
 	            Date: August 8, 2012	 	
 	 	
By:	/s/ Roger Palmer	
 	                Roger Palmer	 	
 	                Vice President and Chief Financial Officer	 	
 	 	
 	            Date: August 8, 2012	 	

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Exhibit 31.1
CERTIFICATION
I, Thomas G. Mair, certify that:
1. I have reviewed this report on Form 10-Q of Golden Star Resources Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	
	
/s/ Thomas G. Mair	
Thomas G. Mair	
President and Chief Executive Officer	
August 8, 2012	

Exhibit 31.2
CERTIFICATION
I, Roger Palmer, certify that:
1. I have reviewed this report on Form 10-Q of Golden Star Resources Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	
	
/s/ Roger Palmer	
Roger Palmer	
Vice President and Chief Financial Officer	
August 8, 2012	

Exhibit 32.1
Certification of Principal Executive Officer
Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
I, Thomas G. Mair, President and Chief Executive Officer of Golden Star Resources Ltd., certify, to the best of my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended June 30, 2012 of Golden Star Resources Ltd. that:
(1) The Quarterly Report on Form 10-Q fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained and incorporated by reference in the Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Golden Star Resources Ltd.

	
	
/s/ Thomas G. Mair	
Thomas G. Mair	
President and Chief Executive Officer	
August 8, 2012	

Exhibit 32.2
Certification of Principal Executive Officer
Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
I, Roger Palmer, Vice President and Chief Financial Officer of Golden Star Resources Ltd., certify, to the best of my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended June 30, 2012 of Golden Star Resources Ltd. that:
(1) The Quarterly Report on Form 10-Q fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained and incorporated by reference in the Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Golden Star Resources Ltd.

	
	
/s/ Roger Palmer	
Roger Palmer	
Vice President and Chief Financial Officer	
August 8, 2012