GOLDEN STAR RESOURCES LTD., 10-K filed on 2/23/2012
Annual Report
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Feb. 22, 2012
Jun. 30, 2011
Entity Information [Line Items]
 
 
 
Entity Registrant Name
GOLDEN STAR RESOURCES LTD 
 
 
Entity Central Index Key
0000903571 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
258,674,486 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 486,755,511 
Consolidated Statements Of Operations And Comprehensive Income/(Loss) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
REVENUE
 
 
 
Gold revenues
$ 471,007 
$ 432,693 
$ 400,739 
Cost of sales (Note 17)
420,153 
401,455 
362,788 
Mine operating margin
50,854 
31,238 
37,951 
Exploration expense
5,137 
5,398 
4,291 
General and administrative expense
25,378 
17,065 
14,156 
Derivative mark-to-market (gain)/loss (Note 4)
19,276 
850 
3,538 
Gain/Loss Fair Value Debentures
(26,154)
3,208 
31,181 
Property holding costs
8,674 
5,299 
4,196 
Foreign exchange loss
2,749 
872 
(2,995)
Interest expense
8,891 
9,207 
12,037 
Interest and other income
(229)
(362)
(197)
(Gain)/loss on sale of assets
(1,350)
(1,171)
304 
Other (income)/expense
(1,142)
Income/(loss) before income tax
8,482 
(9,128)
(27,418)
Income tax (expense)/benefit
(10,984)
(5,477)
18,515 
Net income/(loss)
(2,502)
(14,605)
(8,903)
Net income/(loss) Attributable to Noncontrolling Interest
(427)
(3,376)
2,524 
Net income/(loss) attributable to Golden Star shareholders
(2,075)
(11,229)
(11,427)
Net income/(loss) per share attributable to Golden Star shareholders
 
 
 
Basic (Note 15)
$ (0.008)
$ (0.044)
$ (0.048)
Diluted (Note 15)
$ (0.008)
$ (0.044)
$ (0.048)
Weighted average shares outstanding (millions)
258.6 
258.0 
237.2 
Weighted average shares outstanding-diluted (millions)
258.6 
258.0 
237.2 
OTHER COMPREHENSIVE INCOME/(LOSS)
 
 
 
Net income/(loss)
(2,502)
(14,605)
(8,903)
Unrealized (gain)/loss on investments (Note 7)
19 
619 
113 
Comprehensive income/(loss)
(2,483)
(13,986)
(8,790)
Comprehensive income/(loss) attributable to Golden Star shareholders
(2,056)
(10,610)
(11,314)
Comprehensive (income)/loss attributable to noncontrolling interest
(427)
(3,376)
2,524 
Comprehensive income/(loss)
$ (2,483)
$ (13,986)
$ (8,790)
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
ASSETS
 
 
Cash and cash equivalents (Note 4)
$ 103,644 
$ 178,018 
Accounts receivable (Note 4)
10,077 
11,885 
Inventories (Note 7)
74,297 
65,204 
Deposits
6,474 
5,865 
Prepaids and other
2,048 
1,522 
Total Current Assets
196,540 
262,494 
RESTRICTED CASH
1,273 
1,205 
PROPERTY, PLANT AND EQUIPMENT (Note 10)
252,131 
228,367 
INTANGIBLE ASSETS
5,266 
7,373 
MINING PROPERTIES (Note 11)
270,157 
250,620 
OTHER ASSETS (Note 7)
2,311 
3,167 
Total Assets
727,678 
753,226 
LIABILITIES
 
 
Accounts payable (Note 4)
40,708 
34,522 
Accrued liabilities (Note 4)
51,380 
53,935 
Asset retirement obligations (Note 13)
8,996 
23,485 
Current tax liability (Note 15)
197 
1,128 
Current debt (Notes 14)
128,459 
10,014 
Total Current Liabilities
229,740 
123,084 
LONG TERM DEBT (Notes 4 and 11)
10,759 
155,879 
ASSET RETIREMENT OBLIGATIONS (Note 13)
24,884 
21,467 
DEFERRED TAX LIABILITY (Note 15)
23,993 
15,678 
Total Liabilities
289,376 
316,108 
COMMITMENTS AND CONTINGENCIES (Note 16)
SHAREHOLDERS' EQUITY
 
 
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: 258,624,486 at December 31, 2011; 258,511,236 at December 31, 2010 (Note 14)
693,899 
693,487 
CONTRIBUTED SURPLUS
19,815 
16,560 
ACCUMULATED OTHER COMPREHENSIVE INCOME
1,978 
1,959 
DEFICIT
(276,112)
(274,037)
Total Golden Star Equity
439,580 
437,969 
NONCONTROLLING INTEREST
(1,278)
(851)
Total Equity
438,302 
437,118 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 727,678 
$ 753,226 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2011
Dec. 31, 2010
Consolidated Balance Sheets
 
 
First preferred shares, no par value
   
   
First preferred shares, shares issued
First preferred shares, shares outstanding
Common shares, no par value
   
   
Common shares, shares issued
258,624,486 
258,511,236 
Common shares, shares outstanding
258,624,486 
258,511,236 
Consolidated Statements of Changes in Shareholders' Equity (USD $)
In Thousands, unless otherwise specified
Total
Common Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained Earnings [Member]
Noncontrolling Interest [Member]
Warrants [Member]
Additional Paid-in Capital [Member]
Employee Stock Option [Member]
Additional Paid-in Capital [Member]
Balance at Dec. 31, 2008
$ 379,150 
$ 615,097 
$ 1,228 
$ (251,381)
$ 1 
$ 5,138 
$ 9,067 
Shares, Balance at Dec. 31, 2008
 
235,945,311 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Shares issued under options
 
1,417,250 
 
 
 
 
 
Shares issued under options, value
2,538 
4,008 
 
 
 
 
(1,470)
Options granted net of forfeitures
 
 
 
 
 
 
2,032 
Stock Granted During Period, Value, Share-based Compensation, Net of Forfeitures
2,032 
 
 
 
 
 
 
Unrealized gain on available for sale securities
112 
 
112 
 
 
 
 
Common shares issued
 
20,000,000 
 
 
 
 
 
Common shares issued, value
75,000 
75,000 
 
 
 
 
 
Noncontrolling interest
2,524 
 
 
 
2,524 
 
 
Issue costs
(4,049)
(4,049)
 
 
 
 
 
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest
(8,903)
 
 
 
 
 
 
Net Income
(11,427)
 
 
(11,427)
 
 
 
Shares, Balance at Dec. 31, 2009
 
257,362,561 
 
 
 
 
 
Balance at Dec. 31, 2009
445,880 
690,056 
1,340 
(262,808)
2,525 
5,138 
9,629 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Shares issued under options
 
1,148,675 
 
 
 
 
 
Shares issued under options, value
2,355 
3,537 
 
 
 
 
(1,182)
Options granted net of forfeitures
 
 
 
 
 
 
2,975 
Stock Granted During Period, Value, Share-based Compensation, Net of Forfeitures
2,975 
 
 
 
 
 
 
Unrealized gain on available for sale securities
619 
 
619 
 
 
 
 
Noncontrolling interest
(3,376)
 
 
 
(3,376)
 
 
Issue costs
(106)
(106)
 
 
 
 
 
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest
(14,605)
 
 
 
 
 
 
Net Income
(11,229)
 
 
(11,229)
 
 
 
Balance at Dec. 31, 2010
437,969 
 
 
 
 
 
 
Shares, Balance at Dec. 31, 2010
 
258,511,236 
 
 
 
 
 
Balance at Dec. 31, 2010
437,118 
693,487 
1,959 
(274,037)
(851)
5,138 
11,422 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Shares issued under options
 
158,251 
 
 
 
 
 
Shares issued under options, value
282 
412 
 
 
 
 
(130)
Options granted net of forfeitures
 
 
 
 
 
 
3,336 
Stock Granted During Period, Value, Share-based Compensation, Net of Forfeitures
3,336 
 
 
 
 
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Restricted Stock Units, Requisite Service Period Recognition
49 
 
 
 
 
 
49 
Unrealized gain on available for sale securities
19 
 
19 
 
 
 
 
Noncontrolling interest
(427)
 
 
 
(427)
 
 
Issue costs
 
 
 
 
 
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest
(2,502)
 
 
(2,075)
 
 
 
Net Income
(2,075)
 
 
 
 
 
 
Balance at Dec. 31, 2011
$ 439,580 
 
 
 
 
 
 
Shares, Balance at Dec. 31, 2011
 
258,669,487 
 
 
 
 
 
Consolidated Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Net Income/(loss)
$ (2,502)
$ (14,605)
$ (8,903)
Reconciliation of net loss to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
71,466 
98,775 
109,666 
Amortization of loan acquisition cost
1,563 
1,228 
1,201 
(Gain)/Loss on sale of assets
(1,350)
(1,172)
304 
Non-cash employee compensation
3,385 
2,975 
2,033 
Future income tax expense/(benefit)
8,315 
3,374 
(20,886)
Fair value of derivatives (gain)/loss
(177)
(217)
(1,838)
Fair value (gains)/losses on convertible debt
(26,154)
3,210 
34,195 
Accretion of asset retirement obligations
3,845 
2,802 
2,165 
Reclamation expenditures
(26,895)
(9,704)
(1,985)
Reconciliation, Total
31,496 
86,666 
115,952 
Changes in non-cash working capital:
 
 
 
Accounts receivable
1,839 
(4,022)
(2,702)
Inventories
(9,030)
(14,351)
(5,619)
Deposits
(1,250)
235 
(193)
Accounts payable and accrued liabilities
2,335 
27,607 
(10,232)
Other
(1,747)
481 
(267)
Net cash provided by operating activities
23,643 
96,616 
96,939 
INVESTING ACTIVITIES:
 
 
 
Expenditures on mining properties
(50,027)
(34,342)
(28,624)
Expenditures on property, plant and equipment
(51,353)
(30,849)
(12,468)
Cash securing letters of credit (used)/refunded
(68)
2,599 
445 
Change in accounts payable and deposits on mine equipment and material
1,907 
901 
(1,016)
Other
1,984 
141 
Net cash used in investing activities
(97,557)
(61,550)
(41,661)
FINANCING ACTIVITIES:
 
 
 
Issuance of share capital, net of issuance costs
282 
2,248 
73,489 
Principal payments on debt
(10,397)
(38,049)
(28,856)
Proceeds from debt agreements and equipment financing
9,875 
25,674 
22,837 
Other
(220)
(1,010)
(2,219)
Net cash provided by/(used in) financing activities
(460)
(11,137)
65,251 
Increase/(decrease) in cash and cash equivalents
(74,374)
23,929 
120,529 
Cash and cash equivalents, beginning of period
178,018 
154,089 
33,560 
Cash and cash equivalents end of period
$ 103,644 
$ 178,018 
$ 154,089 
Nature Of Operations
Nature Of Operations
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 and Benso (“HBB”) mines located south of Wassa. We hold interests in several gold exploration projects in Ghana and elsewhere in West Africa including Niger and Côte d'Ivoire, and in South America we hold and manage exploration properties in Brazil and Suriname.
Basis Of Presentation
Nature of Operations [Text Block]
BASIS OF PRESENTATION AND LIQUIDITY RISK
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.”). Prior to 2011, Golden Star reported to security regulators in Canada, Ghana and the U.S. using financial statements prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") with a footnote reconciliation showing financial results prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). However, a change in SEC position in late 2009 required Canadian companies such as Golden Star, which do not qualify as foreign private issuers, to file their financial statements in the U.S. using U.S. GAAP after December 31, 2010. We therefore adopted U.S. GAAP as of January 1, 2011 for all of our subsequent U.S., Ghanaian and Canadian filings. All comparative financial information presented in these consolidated financial statements is reported in accordance with U.S. GAAP.
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.
Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and discharge of all liabilities in the normal course of business. With the exception of a few exploration offices, the functional currency, including the Ghanaian operations, is the U.S. dollar.
As of December 31, 2011, the company had a negative working capital position of $33.2 million, which includes cash of $103.6 million and a current liability for our convertible debenture of $125.0 million (measured at fair value of $121.2 million at December 31, 2011). Our convertible debentures, due on November 30, 2012, became a current liability in the fourth quarter of 2011, which caused our current liabilities to exceed current assets. The options available to settle this liability include: 1.) cash; 2.) re-financing of the debt; 3.) payment in common shares; or 4.) a combination of shares and cash.
While it is our current intent to redeem the debentures with cash in November 2012, or depending upon market conditions, refinance the debentures using long term debt, the debentures contain a provision for settlement in common shares. On maturity, we may, at our option, satisfy the repayment obligation by paying the full $125.0 million principal amount of the Debentures in cash or, alternatively by issuing up to 46.7 million common shares to the debenture holders. If we opt to settle in shares, we must redeem all, and not less than all, of the debentures by issuing up to 46.7 million shares. The value assigned to the shares issued will be determined as 95% of the weighted average trading price of our common shares on the NYSE Amex stock exchange for the 20 consecutive trading days ending five trading days preceding the maturity date. If the value assigned to the shares multiplied by 46.7 million shares is insufficient to cover the entire $125.0 million liability, we would be required to pay cash, in addition to the shares issued, in an amount that when added to the value of the shares will equal $125.0 million. If required, the share issuance option would not impact our cash position to the extent shares are used to retire the debt.
Summary of Significant Accounting Policies
Significant Accounting Policies [Text Block]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that can affect reported amounts of assets, liabilities, deferred tax liabilities, and expenses. The more significant areas requiring the use of estimates include asset impairments, valuation of convertible debentures, stock based compensation, depreciation and amortization of assets, and site reclamation and closure accruals. Accounting for these areas is subject to estimates and assumptions regarding, among other things, ore reserves, gold recoveries, future gold prices, future operating costs, asset usage rates, and future mining activities. Management bases its estimates on historical experience and on other assumptions we believe to be reasonable under the circumstances. However, actual results may differ from our estimates.
 CASH AND CASH EQUIVALENTS
Cash includes cash deposits in any currency residing in checking accounts, money market funds and sweep accounts. Cash equivalents consist of highly liquid investments purchased with maturities of three months or less. Investments with maturities greater than three months and up to one year are classified as short-term investments, while those with maturities in excess of one year are classified as long-term investments. Cash equivalents and short-term investments are stated at cost, which typically approximates market value.
INVENTORIES
Inventory classifications include “stockpiled ore,” “in-process inventory,” “finished goods inventory” and “materials and supplies.” All of our inventories, except materials and supplies, are recorded at the lower of weighted average cost or market. The stated value of all production inventories include direct production costs and attributable overhead and depreciation incurred to bring the materials to their current point in the processing cycle. General and administrative costs for corporate offices are not included in any inventories.
Stockpiled ore represents coarse ore that has been extracted from the mine and is waiting processing. Stockpiled ore is measured by estimating the number of tonnes (via truck counts or by physical surveys) added to, or removed from the stockpile, the number of contained ounces (based on assay data) and estimated gold recovery percentage. Stockpiled ore value is based on the costs incurred (including depreciation and amortization) in bringing the ore to the stockpile. Costs are added to the stockpiled ore based on current mining costs per tonne and are removed at the average cost per tonne of ore in the stockpile.
In-process inventory represents material that is currently being treated in the processing plants to extract the contained gold and to transform it into a saleable product. The amount of gold in the in-process inventory is determined by assay and by measure of the quantities of the various gold-bearing materials in the recovery process. The in-process gold is valued at the average of the beginning inventory and the cost of material fed into the processing stream plus in-process conversion costs including applicable mine-site overhead, depreciation and amortization related to the processing facilities.
Finished goods inventory is composed of saleable gold in the form of doré bars that have been poured but not yet shipped from the mine site. The bars are valued at the lower of total cost or net realizable value. Included in the total costs are the direct costs of the mining and processing operations as well as direct mine-site overhead, amortization and depreciation.
Material and supply inventories consist mostly of equipment parts, fuel, lubricants and reagents consumed in the mining and ore processing activities. Materials and supplies are valued at the lower of average cost or net realizable value.
ORE RESERVE QUANTITIES USED IN UNITS-OF-PRODUCTION AMORTIZATION
Gold ounces contained in stockpiled ore are excluded from total reserves when determining units-of-production amortization of mining property, asset retirement assets and other assets.
PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT COSTS
The initial acquisition costs of exploration and mining properties are capitalized. Subsequent exploration and development costs are expensed as incurred until such time as a feasibility study has been completed which establishes, in compliance with SEC Industry Standard Guide 7, that proven and probable reserves exist on the property. After proven and probable reserves have been established, subsequent exploration and development costs are capitalized until such time as a property is placed in-service. Following a property's in-service date, accumulated capitalized acquisition, exploration and development costs are reclassified as Mining Property assets and are subject to amortization on a units-of-production basis when metal production begins.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment assets, including machinery, processing equipment, mining equipment, mine site facilities, buildings, vehicles and expenditures that extend the life of such assets, are recorded at cost including acquisition and installation costs. The costs of self-constructed assets include direct construction costs, direct overhead and allocated interest during the construction phase. Indirect overhead costs are not included in the cost of self-constructed assets. Depreciation for mobile equipment and other assets having estimated lives shorter than the estimated life of the ore reserves is calculated using the straight-line method at rates which depreciate the cost of the assets, less their anticipated residual values, if any, over their estimated useful lives. Mobile mining equipment is amortized over a five year life. Assets, such as processing plants, power generators and buildings, which have an estimated life equal to or greater than the estimated life of the ore reserves, are amortized over the life of the proven and probable reserves of the associated mining property using a units-of-production amortization method. The net book value of property, plant and equipment assets is charged against income if the mine site is abandoned and it is determined that the assets cannot be economically transferred to another project or sold.
MINING PROPERTIES
Mining property assets, including property acquisition costs, tailings dams, mine-site drilling costs where proven and probable reserves have been established, pre-production waste stripping, condemnation drilling, roads, feasibility studies and wells are recorded at cost. The costs of self-constructed assets include direct construction costs, direct overhead and allocated interest during the construction phase. Indirect overhead costs are not included in the cost of self-constructed assets. Ore control drilling costs incurred during the production phase are allocated to inventory costs and then included in cost of sales.
Mining property assets typically have an estimated life equal to or greater than the estimated life of an ore reserves and are amortized over the life of the proven and probable reserves to which they relate, using a units-of-production amortization method. At open pit mines the costs of removing overburden from an ore body in order to expose ore during its initial development period are capitalized.
IMPAIRMENT OF LONG-LIVED ASSETS
We review and evaluate our long-lived assets for impairment at least annually and also when events or changes in circumstances indicate the related carrying amounts may not be recoverable. An asset impairment is considered to exist if an asset's recoverable value is less than its carrying value as recorded on our Consolidated Balance Sheet. In most cases, an asset's recoverable value is assumed to be equal to the sum of the asset's expected future cash flows on an undiscounted basis. If the sum of the undiscounted future cash flows does not exceed the asset's carrying value, an impairment loss is measured and recorded based on discounted estimated future cash flows from the asset. Future cash flows are based on estimated quantities of gold and other recoverable metals, expected price of gold (considering current and historical prices, price trends and related factors), production levels and cash costs of production, capital and reclamation costs, all based on detailed engineering life-of-mine plans.
In estimating future cash flows, assets are grouped at the lowest levels for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. All assets at a particular operation are considered together for purposes of estimating future cash flows. The carrying amounts of purchase costs of exploration and development projects not yet in service are also evaluated periodically for impairment.
Numerous factors including, but not limited to, unexpected grade changes, gold recovery problems, shortages of equipment and consumables, equipment failures, and collapse of pit walls could impact our ability to achieve forecasted production schedules from proven and probable reserves. Additionally, commodity prices, capital expenditure requirements and reclamation costs could differ from the assumptions used in the cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically.
Material changes to any of these factors or assumptions discussed above could result in future impairment charges to operations.
ASSET RETIREMENT OBLIGATIONS
Environmental reclamation and closure liabilities are recognized at the time of environmental disturbance, in amounts equal to the discounted value of expected future reclamation and closure costs. The discounted cost of future reclamation and closure activities is capitalized and amortized over the life of the property. The estimated future cash costs of such liabilities are based primarily upon environmental and regulatory requirements of the various jurisdictions in which we operate. Cash expenditures for environmental remediation and closure are charged as incurred against the accrual.
PROPERTY HOLDING COST
Property holding costs are costs incurred to retain and maintain properties which have been written off but ownership is retained. Such cost are expensed in the period incurred.
FOREIGN CURRENCIES AND FOREIGN CURRENCY TRANSLATION
Our functional currency is the U.S. dollar.
The carrying value of monetary assets and liabilities are translated at the rate of exchange prevailing at the balance sheet date. Non-monetary assets and liabilities are translated at the rates of exchange prevailing when the assets were acquired or the liabilities assumed. Revenue and expense items are translated at the average rate of exchange during the period. Translation gains or losses are included in net earnings for the period.
Canadian currency in these financial statements is denoted as “Cdn$,” European Common Market currency is denoted as “Euro” or “€,” and Ghanaian currency is denoted as “Ghana Cedi” or “Ghana Cedis.”
INCOME TAXES
Income taxes comprise the provision for (or recovery of) taxes actually paid or payable and for deferred taxes. Deferred income taxes are computed using the asset and liability method whereby deferred income tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred income tax assets and liabilities are computed using enacted income tax rates in effect when the temporary differences are expected to reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in the period of enactment. The provision for or the recovery of deferred taxes is based on the changes in deferred tax assets and liabilities during the period. In estimating deferred tax assets, a valuation allowance is provided to reduce the deferred tax assets to amounts that are more likely than not to be realized.
We deal with uncertainties and judgments in the application of complex tax regulations in the multiple jurisdictions where our properties are located. The amount of taxes paid are dependent upon many factors, including negotiations with taxing authorities in the various jurisdictions and resolution of disputes arising from our international tax audits. We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in our various tax jurisdictions based on our assessment of additional taxes due. We adjust these reserves in light of changing facts and circumstances, however, due to the complexity of some of these uncertainties, the ultimate resolution may result in payment that is materially different from our estimates of our tax liabilities. If our estimate of tax liability proves to be less than the ultimate assessment, an additional charge to expense would result. If the estimate of tax liabilities proves to be greater that the ultimate assessment, a tax benefit is recognized.
A tax benefit from an uncertain tax position may only be recognized if it is more-likely-than-not that the position will be sustained upon examination by the tax authority based on the technical merits of the position. The tax benefit of an uncertain tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount that is greater than 50% likely to be realized upon settlement with the tax authority. To the extent a full benefit is not expected to be realized, an income tax liability is established. Any change in judgment related to the expected resolution of uncertain tax positions are recognized in the year of such a change. Accrued interest and penalties related to unrecognized tax benefits are recorded in income tax expense in the current year.
MINING TAX
Ghana imposed a levy on mining companies during 2009, 2010 and 2011, equal to 5% of pre-tax book income as reported in our financial accounting records. This tax was considered a current mine operating tax and was expensed as incurred.
NET INCOME/(LOSS) PER SHARE
Basic income/(loss) per share of common stock is calculated by dividing income available to Golden Star's common shareholders by the weighted average number of common shares outstanding during the period. In periods with earnings, the calculation of diluted net income per common share uses the treasury stock method to compute the dilutive effects of stock options, and other dilutive instruments. In periods of loss, diluted net income per share is equal to basic income per share.
REVENUE RECOGNITION
Revenue from the sale of metal is recognized when there is persuasive evidence that an arrangement exists, the price is determinable, the metal has been delivered, title and risk of ownership has passed to the buyer and collection is reasonably assured. All of our gold is transported to a South African gold refiner who locates a buyer and arranges for sale of our gold on the same day that the gold is shipped from the mine site. The sales price is based on the London P.M. fix on the day of shipment. Title and risk of ownership pass to the buyer on the day doré is shipped from the mine sites.
STOCK BASED COMPENSATION
Under the Company's stock option plan, common share options may be granted to executives, employees, consultants and non-employee directors. Compensation expense for such grants is recorded in the Consolidated Statements of Operations as a component of general and administrative expense, with a corresponding increase recorded in the Contributed Surplus account in the Consolidated Balance Sheets. The expense is based on the fair values of the option at the time of grant and is recognized over the vesting periods of the respective options. Consideration paid to the company on exercise of options is credited to share capital.
Under the Company's Deferred Share Unit ("DSU") plan, DSUs may be granted to executive officers and/or directors. Compensation expense for such grants is recorded in the Consolidated Statements of Operations as a component of general and administrative expense, with a corresponding increase recorded in the Contributed Surplus account in the Consolidated Balance Sheets. The expense is based on the fair values at the time of grant and is recognized over the vesting periods of the respective DSU. Upon exercise the Company's compensation committee may, at its discretion, issue cash, shares of a combination thereof.
LEASES
Leases that transfer substantially all of the benefits and risks of ownership to the Company are recorded as capital leases and classified as property, plant and equipment with a corresponding amount recorded with current and long-term debt. All other leases are classified as operating leases under which leasing costs are expensed in the period incurred.
FINANCIAL INSTRUMENTS
Investments
Equity security investments are accounted for as available for sale securities in accordance with ASC guidance on accounting for certain investments in debt and equity securities. Changes in the fair value of available for sale investments are charged or credited to other comprehensive income until the instrument is realized.

The Company periodically evaluates whether declines in fair values of its investments below the Company's carrying value are other-than-temporary in accordance with guidance for the meaning of other-than-temporary impairment and its application to certain investments. The Company also monitors its investments for events or changes in circumstances that have occurred that may have a significant adverse effect on the fair value of the investment and evaluates qualitative and quantitative factors regarding the severity and duration of the unrealized loss and the Company's ability to hold the investment until a forecasted recovery occurs to determine if the decline in value of an investment is other-than-temporary. Declines in fair value below the Company's carrying value deemed to be other-than-temporary are charged to the statement of operations.

Convertible debt

The convertible senior unsecured debentures are recorded at fair value in accordance with ASC 825. Changes in fair value are recorded in the statement of operations. Upfront costs and fees related to the convertible debt were recognized in the statement of operations as incurred and not deferred.

Derivatives
At various times we utilize foreign exchange and commodity price derivatives to manage exposure to fluctuations in foreign currency exchange rates and gold prices, respectively. We do not employ derivative financial instruments for trading purposes or for speculative purposes. Our derivative instruments are recorded on the balance sheet at fair value with changes in fair value recognized in the statement of operations at the end of each period in an account titled “Derivative mark-to-market gain/(loss)”.

OTHER COMPREHENSIVE INCOME (“OCI”)
Components of comprehensive income/loss consist of unrealized gains/(losses) on available-for-sale securities and net income. Unrealized gains or losses on securities are net of any reclassification adjustments for realized gains or losses included in net income.
RECENTLY ADOPTED STANDARDS
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-06, “Improving Disclosures about Fair Value Measurements,” which amends Subtopic 820-10 of the FASB Accounting Standards Codification to require new disclosures for fair value measurements and provides clarification for existing disclosure requirements. More specifically, this update required (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This update clarified existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. We adopted this new guidance in the first quarter of 2010 and it did not materially expand our consolidated financial statement footnote disclosures.
In April 2010, the FASB issued Accounting Standards Update No. 2101-12 which amends topic 718 “Compensation-Stock Compensation”. The amendment addresses the classification of an employee share-based payment awards with an exercise price denominated in the currency of a market in which the underlying equity security trades, stating that a share-based award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity. This new provision is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2010. While our stock option plan denominates option strike prices in Canadian dollars, a substantial portion of our common shares trade in Canada and thus this new guidance did not affect our consolidated financial position, cash flows, nor results of operations in 2011.
RECENTLY ISSUED 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 already 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. We do not believe adoption of the new standard will have a material impact on our consolidated financial statements.
Financial Instruments
Financial Instruments
FAIR VALUE ACCOUNTING
The following tables illustrate the classification of the Company's assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy as of December 31, 2011. 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.
 
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
Convertible debentures
$
121,625

 
$

 
$

 
$
121,625

 
$
121,625

 
$

 
$

 
$
121,625


 

 
Financial assets measured at fair value as at December 31, 2010
 
Level 1
 
Level 2
 
Level 3
 
Total
Available for sale investments
$
928

 
$

 
$

 
$
928

Warrants

 
375

 

 
375

 
$
928

 
$
375

 
$

 
$
1,303


 
Financial liabilities measured at fair value as at December 31, 2010
 
Level 1
 
Level 2
 
Level 3
 
Total
Convertible debentures
$

 
$

 
$
147,779

 
$
147,779

 
$

 
$

 
$
147,779

 
$
147,779


The convertible senior unsecured debentures are recorded at fair value. In prior years these debentures were valued based on discounted cash flows for the debt portion and based on a Black-Scholes model for the equity portion. As of December 31, 2011, a quoted market price for the convertible senior unsecured debentures was available. These debentures are listed as a Level 1 liability as of December 31, 2011.
Fair value measurements using Level 3 inputs:
 
 
Convertible debentures
Balance at December 31, 2010
 
$
147,779

Gain included in net income
 
(26,154
)
Transfer to level 1
 
$
(121,625
)
Balance at December 31, 2011
 
$

Derivative Gains And Losses
Derivative Gains And Losses
DERIVATIVE GAINS AND LOSSES
The derivative mark-to-market (gains)/losses recorded in the Consolidated Statements of Operations are comprised of the following amounts:  
 
 
For the years ended December 31, 
 
 
2011
 
2010
 
2009
Riverstone Resources, Inc. - warrants
 
$
(177
)
 
$
(216
)
 
$
(139
)
Gold forward price contracts
 
19,453

 
1,066

 
3,677

Derivative (gain)/loss
 
$
19,276

 
$
850

 
$
3,538

 
 
 
 
 
 
 
Realized (gain)/loss
 
19,453

 
1,066

 
3,677

Unrealized (gain)/loss
 
(177
)
 
(216
)
 
(139
)
Derivative loss (gain)/loss
 
$
19,276

 
$
850

 
$
3,538

RIVERSTONE RESOURCES INC. - WARRANTS
In the first quarter of 2008, we received 2 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 December 31, 2011, there were no outstanding contracts.
Inventories
Inventories
INVENTORIES
 
As at
 
As at
 
December 31
 
December 31
 
2011
 
2010
Stockpiled ore
$
16,773

 
$
2,551

In-process
8,912

 
13,839

Materials and supplies
48,612

 
48,814

Finished goods

 

Total
$
74,297

 
$
65,204

There were approximately 48,000 and 20,000 recoverable ounces of gold in the ore stockpile inventories shown above at December 31, 2011, and December 31, 2010, respectively. Stockpile inventories are short-term surge piles expected to be processed within the next 12 months. A total of $1.4 million of materials and supplies inventories were written off in 2011 due to obsolescence and counts and an additional $1.7 million of net realizable value adjustments was recorded at Bogoso.
Accounts Receivable
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
ACCOUNTS RECEIVABLE  
 
 
As at
December 31,
 
 
2011
 
2010
Value added tax refunds
 
$
8,051

 
$
9,518

Other
 
2,026

 
2,367

Total
 
$
10,077

 
$
11,885

Available For Sale Investments
Available For Sale Investments
AVAILABLE FOR SALE INVESTMENTS
The following table presents changes in available for sale investments for the years ended:
 
As at December 31, 2011
 
As at December 31, 2010
 
Riverstone
 
Riverstone
 
Fair Value
 
Shares
 
Fair Value
 
Shares
Balance at beginning of year
$
928

 
1,300,000

 
$
181

 
700,000

Acquisitions
469

 
700,000

 
128

 
600,000

OCI - unrealized gain/(loss)
19

 

 
619

 

Balance at end of year
$
1,416

 
2,000,000

 
$
928

 
1,300,000


Available for sale assets are included in the Prepaids and Other account in the balance sheet.
Property, Plant And Equipment
Property, Plant And Equipment
PROPERTY, PLANT AND EQUIPMENT
 
As at December 31, 2011
 
As at December 31, 2010
 
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
$
179,216

 
$
(109,519
)
 
$
69,697

 
$
157,010

 
$
(107,132
)
 
$
49,878

Bogoso sulfide plant
186,607

 
(58,873
)
 
127,734

 
184,641

 
(50,988
)
 
133,653

Wassa/HBB
106,631

 
(52,430
)
 
54,201

 
89,875

 
(45,607
)
 
44,268

Corporate & other
1,378

 
(879
)
 
499

 
1,343

 
(775
)
 
568

Total
$
473,832

 
$
(221,701
)
 
$
252,131

 
$
432,869

 
$
(204,502
)
 
$
228,367


There was no interest capitalized in new additions to property, plant and equipment in the periods shown above.
Mining Properties
Mining Properties
MINING PROPERTIES 
 
As at December 31, 2011
 
As at December 31, 2010
 
Mining
Properties
 
Accumulated
Amortization
 
Mining
Properties,
Net Book
 
Mining
Properties
 
Accumulated Amortization
 
Mining
Properties,
Net Book
Bogoso/Prestea
$
119,700

 
$
(60,186
)
 
$
59,514

 
$
99,435

 
$
(56,488
)
 
$
42,947

Bogoso sulfide
70,090

 
(34,839
)
 
35,251

 
58,591

 
(27,688
)
 
30,903

Mampon
16,095

 

 
16,095

 
15,995

 

 
15,995

Wassa/HBB
314,801

 
(180,486
)
 
134,315

 
287,619

 
(147,400
)
 
140,219

Other
27,312

 
(2,330
)
 
24,982

 
22,886

 
(2,330
)
 
20,556

Total
$
547,998

 
$
(277,841
)
 
$
270,157

 
$
484,526

 
$
(233,906
)
 
$
250,620


There was no interest capitalized in new additions to mining properties in the periods shown above.
Intangible Assets
Intangible Assets Disclosure [Text Block]
INTANGIBLE ASSET
Our intangible asset represents a right to receive, from the Ghana national grid, an amount of electric power equal to one fourth of this plant's power output over and above any rationing limit that might be imposed in the future by the Ghana national power authority. The intangible asset is being amortized over five years ending in 2014. As of December 31, 2011, the carrying value of the intangible asset was $5.3 million, with a gross asset value of $12.4 million and accumulated amortization of $7.1 million. We amortized $2.4 million in 2011 and expect the same for 2012 and 2013 with the remaining amount amortized in 2014.
Asset Retirement Obligations
Asset Retirement Obligations
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 December 31, 2011, and December 31, 2010, the total undiscounted amount of the estimated future cash needs was estimated to be $72.8 million and $84.3 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 years ended December 31, 2011 and 2010 are as follows:

 
For the years ended
December 31
 
2011
 
2010
Beginning balance
$
44,952

 
$
31,969

Accretion expense
3,845

 
2,802

Additions and change in estimates
11,977

 
19,885

Cost of reclamation work performed
(26,894
)
 
(9,704
)
Balance at December 31
$
33,880

 
$
44,952

 


 


Current portion
$
8,996

 
$
23,485

Long term portion
$
24,884

 
$
21,467


Our current reclamation plans estimate spending of approximately $9 million in 2012, $17 million per year in 2013 and 2014, $5 million per year in 2015 and 2016 and $38 million after 2016.
Debt
Debt
DEBT
 
For the years ended December 31
 
2011
 
2010
Current debt:
 
 
 
Equipment financing credit facility
$
7,036

 
$
7,189

Capital lease
224

 
2,825

Convertible debentures
121,199

 

Revolving credit facility

 

Total current debt
$
128,459

 
$
10,014

Long term debt:
 
 
 
Equipment financing credit facility
$
10,759

 
$
8,525

Convertible debentures

 
147,354

Total long term debt
$
10,759

 
$
155,879

EQUIPMENT FINANCING CREDIT FACILITY
GSBPL and GSWL maintain a $40 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 December 31, 2011, approximately $22.2 million was available to draw down compared to $19.3 million at the end of 2010. The average interest rate on the outstanding loans was approximately 6.8% at December 31, 2011, down from 7.4% a year earlier. 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 is two years from the plant's February 2010 in-service date. We are required to pay the owner/operator a minimum of $0.3 million per month on the lease, of which $0.23 million will be allocated to principal and interest on the recognized liability and the remainder of the monthly payments will be charged as operating costs.
CONVERTIBLE DEBENTURES
Interest on the $125 million aggregate principal amount of 4.0% convertible senior unsecured debentures due November 30, 2012, (the “Debentures”) is payable semi-annually in arrears on May 31 and November 30 of each year. The Debentures are, subject to certain limitations, convertible into common shares at a conversion rate of 200 shares per $1,000 principal amount of the Debentures (equal to a conversion price of $5.00 per share) subject to adjustment under certain circumstances. The Debentures are not redeemable at our option.
On maturity, we may, at our option, satisfy our repayment obligation by paying the $125.0 million principal amount of the Debentures in cash or, alternatively by issuing up to approximately 46.7 million common shares to the debenture holders. If we settle in shares, we must redeem all, and not less than all of the debentures by issuing shares. The value assigned to the shares issued will be determined as 95% of the weighted average trading price of our common shares on the NYSE Amex stock exchange for the 20 consecutive trading days ending five trading days preceding the maturity date. If the value assigned to the shares multiplied by the 46.7 million shares is insufficient to cover the entire $125.0 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 $125.0 million.
Upon the occurrence of certain change in control transactions, the holders of the Debentures may require us to purchase the 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 Debentures and receive a number of additional common shares, determined as set forth in the indenture.
The 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 Debentures, and the Debentures do not limit the amount of debt that we or our subsidiaries may incur.
REVOLVING CREDIT FACILITY
We have a revolving credit facility agreement (the “Facility Agreement”) with Standard Chartered Bank which extends through September 30, 2012. The Facility currently provides us with $31.5 million of borrowing capacity and bears interest at the higher of LIBOR or the applicable lenders' cost of funds rate (which is capped at 1.25% per annum above LIBOR), plus a margin of 5% per annum. As of December 31, 2011 and 2010, the outstanding balance was nil. Covenants require that we meet certain financial ratios at the end of each quarter, including that in excess of 90% of our assets are retained within a group of subsidiaries whose common shares are pledged as collateral for amounts drawn under the revolving credit facility. We were in compliance with all covenants at December 31, 2011 and December 31, 2010.
CONTRACTUAL MATURITIES OF DEBT
Liabilities 
 
2012 
 
2013 
 
2014 
 
2015 
 
2016
 
Maturity 
Equipment financing loans
 
 
 
 
 
 
 
 
 
 
 
 
principal
 
7,030

 
5,242

 
3,097

 
2,055

 
493

 
2010 to 2014
interest
 
$
1,022

 
$
577

 
$
280

 
$
107

 
$
18

 
 
Capital leases
 
 
 
 
 
 
 
 
 
 
 
 
principal
 
224

 

 

 

 

 
February 28, 2012
interest
 
2

 

 

 

 

 
 
Revolving credit facility
 
 
 
 
 
 
 
 
 
 
 
 
principal
 

 

 

 

 

 
September 30, 2012
interest
 

 

 

 

 

 
 
Convertible debentures
 
 
 
 
 
 
 
 
 
 
 
 
principal
 
125,000

 

 

 

 

 
November 30, 2012
interest
 
5,000

 

 

 

 

 
 
Total
 
138,278

 
5,819

 
3,377

 
2,162

 
511

 
 
Income Taxes
Income Taxes
INCOME TAXES
We recognize deferred tax assets and liabilities based on the difference between the financial reporting and tax basis of assets and liabilities using the enacted tax rates expected to be in effect when the taxes are paid or recovered. We provide a valuation allowance against deferred tax assets for which we do not consider realization of such assets to meet the required “more likely than not” standard.  
Our deferred tax assets and liabilities at December 31, 2011, and 2010 include the following components:
 
 
As of December 31, 
 
 
2011
 
2010
Deferred tax assets:
 
 
 
 
Offering costs
 
$
595

 
$
1,338

Non-capital loss carryovers
 
191,182

 
171,007

Capital loss carryovers
 
907

 
513

Mine property costs
 
7,154

 
9,700

Reclamation costs
 
6,638

 
9,406

Derivatives
 
(1,094
)
 
6,326

Unrealized loss
 
(173
)
 
(7
)
Other
 
5,061

 
4,064

Valuation allowance
 
(131,208
)
 
(120,387
)
Future tax assets
 
79,062

 
81,960

Deferred tax liabilities:
 
 
 
 

Mine property costs
 
102,948

 
97,281

Other
 
107

 
357

Deferred tax liabilities
 
103,055

 
97,638

Net deferred tax assets/(liabilities)
 
$
(23,993
)
 
$
(15,678
)
 
The composition of our valuation allowance by tax jurisdiction is summarized as follows:
 
 
As at December 31, 
 
 
2011
 
2010
Canada
 
$
46,254

 
$
48,385

U.S.
 
228

 
399

Ghana
 
84,067

 
71,006

Burkina Faso
 
659

 
597

Total valuation allowance
 
$
131,208

 
$
120,387

The income taxes (recovery)/expense includes the following components:
 
 
For the years ended December 31,
 
 
2011
 
2010
 
2009
Current
 
 
 
 
 
 
Canada
 
$

 
$

 
$

Foreign
 
2,669

 
1,487

 
1,756

Future
 
 

 
 

 
 
Canada
 

 

 

Foreign
 
8,315

 
3,990

 
(20,271
)
Total
 
$
10,984

 
$
5,477

 
$
(18,515
)
A reconciliation of expected income tax on net income before minority interest at statutory rates with the actual expenses (recovery) for income taxes is as follows:  
 
 
For the years ended December 31, 
 
 
2011
 
2010
 
2009
Net income /(loss) before minority interest
 
$
8,482

 
$
(9,128
)
 
$
(27,418
)
Statutory tax rate
 
26.5
%
 
28.5
%
 
29.0
%
Tax expense/(benefit) at statutory rate
 
$
2,248

 
$
(2,601
)
 
$
(7,951
)
Foreign tax rates
 
(7,340
)
 
(7,548
)
 
(7,923
)
Change in tax rates
 
3,395

 
659

 
476

Ghana investment allowance
 
(513
)
 
(761
)
 
(63
)
Non-deductible stock option compensation
 
884

 
848

 
560

Non-deductible expenses
 
376

 
543

 
3

Loss carryover not previously recognized
 
(1,189
)
 
2,321

 
(2,849
)
Ghana property basis not previously recognized
 
(1,385
)
 
912

 
(7,601
)
Change in future tax assets due to exchange rates
 
738

 
(1,864
)
 
(4,018
)
Change in valuation allowance
 
10,881

 
10,907

 
9,095

National Tax Levy
 
2,669

 
1,488

 
1,756

Other
 
220

 
573

 

Income tax expense /(recovery)
 
$
10,984

 
$
5,477

 
$
(18,515
)
During 2009, we recognized $4 million of share offering costs. Shareholders' equity has been credited in the amounts of $1.2 million for the tax benefits of these deductions. A $1.2 million valuation allowance has been provided in shareholders' equity for the net tax impact of the share offering costs. In addition, a $1 million valuation allowance has been provided in other comprehensive income for the net tax impact of the unrealized loss.
 

At December 31, 2011, we had tax pool and loss carryovers expiring as follows:
 
 
Canada
 
Ghana
2012
 
$

 
$
28,769

2013
 

 
46,294

2014
 
4,123

 

2015
 
8,090

 
41,401

2026
 
15,615

 

2027
 
15,908

 

2028
 
14,299

 

2029
 
21,988

 

2030
 
20,182

 

2031
 
40,313

 

Indefinite
 
6,842

 
498,742

Total
 
$
147,360

 
$
615,206

Commitments And Contingencies
Commitments And Contingencies
COMMITMENTS AND CONTINGENCIES
Our commitments and contingencies include the following items:
ENVIRONMENTAL BONDING IN GHANA
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, Ghana Environmental Protection Agency ("EPA) raised Wassa/HBB's reclamation bonding requirement to approximately $10.6 million, reflecting increases in on-going mining disturbances. We expect that this $2.6 million increase in bonding will be met with a combination of letters of credit and cash.
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 the EPA. The cash deposits are recorded as Restricted Cash on our Consolidated Balance Sheets.
In 2008, Bogoso/Prestea resubmitted an updated draft of the 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 March 2011, we provided $12 million of reclamation bonding to the EPA to cover backfilling of the Plant North pit at Prestea, which we mined from 2003 to 2006. The bonding requirements were met by a $1.2 million cash deposit and a $10.8 million letter of credit from a commercial bank. Provisions of the bond allow the bonded amount to be reduced as cash is spent on the progress of the backfill project. The bonded amount was reduced by $2.7 million in June and then a further $4.7 million in August, reflecting the effort and success achieved in backfilling the Plant North Pit. In November 2011, the $1.2 million cash deposit was refunded to us upon completion of the backfilling project and the bonding requirements expired at that time.
GOVERNMENT OF GHANA'S RIGHTS TO INCREASE ITS PARTICIPATION
Under Act 703, the Government of Ghana has the right to acquire a special share or “golden 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 “golden share” carries no voting rights and does not participate in dividends, profits or assets. 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, effective as of March 31, 2011. Prior to March 31, 2011, the royalty rate was 3% of mineral revenues.
Benso
Benso has paid a $1.00 per ounce gold production royalty to former owners, but with mining ending at Benso in February 2012, there will be no further royalty payments after this time.
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.
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 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 and 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.
LEGAL PROCEEDINGS
On July 19, 2011, B.D. Goldfields, Ltd. (“plaintiff”), a Ghanaian registered company, filed suit in the Superior Court of Judicature, the High Court of Justice, Commercial Division, in Accra, Ghana, against Golden Star Resources Ltd. and our subsidiary St. Jude Resources (Ghana) Ltd. The plaintiff is challenging the validity of the concession contracts and settlements related to our acquisition of the Hwini-Butre gold property in Ghana in 2006. More specifically the plaintiff is taking the position that the original sales agreement covered only a small section of the Hwini-Butre concession and is now seeking $24 million plus a royalty for the remaining portion of the concession. The plaintiff is also seeking an interim court injunction which would halt mining on the concession until all legal issues are resolved.
In 2008, the plaintiff filed two similar suits in the United States, challenging our ownership of the Hwini-Butre concession and these claims were dismissed by the courts. Based on the earlier dismissed claims brought by the same plaintiff, and on comprehensive court-approved settlements that were reached among the plaintiff and our wholly-owned subsidiary St Jude Resources Ltd. and other related parties before the Ghanaian Court of Appeal in February 2006 with respect to title to the Hwini-Butre gold property, we believe this present action, as commenced before a lower court in the Ghana court hierarchy, and within the same Ghanaian jurisdiction is without merit and will not be successful. During the third quarter of 2011, we prepared a defense to this claim and filed it with the Ghana court on October 5, 2011, and we continue to wait for the court's initial consideration of this case. We have not accrued a provision for this action.
Cost Of Sales
Cost Of Sales
COST OF SALES
 
For the years ended December 31
 
2011
 
2010
 
2009
Mining operations costs
$
354,074

 
$
302,902

 
$
247,786

Operations costs from/(to) metal inventory
(9,232
)
 
(4,900
)
 
2,377

Mining related depreciation and amortization
71,466

 
100,649

 
110,460

Accretion of asset retirement obligations
3,845

 
2,803

 
2,165

Total cost of sales
$
420,153

 
$
401,454

 
$
362,788

Stock Based Compensation
Stock Based Compensation
STOCK BASED COMPENSATION
Non-cash employee compensation expense recognized in general and administrative expense in the statements of operations with respect to the Plan are as follows:
 
For the years ended December 31
 
2011
 
2010
 
2009
Total stock compensation expense
$
3,385

 
$
2,975

 
$
2,032


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 9,030,346 are available for grant as of December 31, 2011, 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 three years from the date of grant. Vesting periods are determined at the discretion of the Board of Directors.
We granted 2,288,000 and 1,598,500 options during 2011 and 2010, 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 2011, 2010 and 2009 were based on the assumptions noted in the following table:
 
For the years ended December 31
 
2011
 
2010
 
2009
Expected volatility
66.06% to 70.29%
 
68.67% to 77.37%
 
68.39 to 74.25%
Risk-free interest rate
0.90% to 2.26%
 
1.18% to 2.58%
 
1.88% to 2.94%
Expected lives
6 to 9 years
 
6 to 9 years
 
4 to 7 years
Dividend yield
0%
 
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 is used in 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 year ended December 31, 2011:
 
 
Options
(000) 
 
Weighted-
Average
Exercise
price
(Cdn$) 
 
Weighted-
Average
Remaining
Contractual
Term (Years) 
 
Aggregate
intrinsic value
Cdn($000) 
Outstanding as of December 31, 2010
 
6,724

 
3.35

 
7.0

 
9,001

Granted
 
2,288

 
2.67

 
9.3

 

Exercised
 
(159
)
 
1.78

 
4.6

 

Forfeited, canceled and expired
 
(314
)
 
3.67

 
6.8

 

Outstanding as of December 31, 2011
 
8,539

 
3.18

 
7.0

 
95

Exercisable at December 31, 2011
 
6,233

 
3.3

 
6.2

 
95

A summary of option activity under the Plan as of December 31, 2010, and changes during the year then ended is presented below:
 
 
Options
(000) 
 
Weighted-
Average
Exercise
price
(Cdn$) 
 
Weighted-
Average
Remaining
Contractual
Term (Years) 
 
Aggregate
intrinsic value
Cdn($000) 
Outstanding as of December 31, 2009
 
7,283

 
3.19

 
7.0

 
4,221

Granted
 
1,599

 
3.77

 
9.3

 

Exercised
 
(1,149
)
 
2.11

 
5.4

 
2,423

Forfeited, canceled and expired
 
(1,009
)
 
4.27

 

 

Outstanding as of December 31, 2010
 
6,724

 
3.35

 
7.0

 
9,001

Exercisable at December 31, 2010
 
4,622

 
3.48

 
6.3

 
5,770

The number of options outstanding by strike price as of December 31, 2011, and 2010 is shown in the following tables:
 
 
Options outstanding 
 
Options exercisable 
Range of exercise prices (Cdn$) 
 
Number
outstanding at
December 31,
2011
(000) 
 
Weighted-
average
remaining
contractual life
(years) 
 
Weighted-
average
exercise price
(Cdn$) 
 
Number
exercisable at
December 31,
2011
(000) 
 
Weighted-
average
exercise price
(Cdn$) 
0 to 2.50
 
1,619

 
7.2

 
1.66

 
1,215

 
1.64

2.51 to 4.00
 
5,688

 
7.3

 
3.22

 
3,901

 
3.32

4.01 to 7.00
 
1,232

 
4.8

 
5

 
1,117

 
5.02

 
 
8,539

 
6.9

 
3.18

 
6,233

 
3.29


 
 
Options outstanding 
 
Options exercisable 
Range of exercise prices (Cdn$) 
 
Number
outstanding at
December 31,
2010
(000) 
 
Weighted-
average
remaining
contractual life
(years) 
 
Weighted-
average
exercise price
(Cdn$) 
 
Number
exercisable at
December 31,
2010
(000) 
 
Weighted-
average
exercise price
(Cdn$) 
0 to 2.50
 
1,472

 
7.5

 
1.61

 
804

 
1.53

2.51 to 4.00
 
3,965

 
7.2

 
3.43

 
2,845

 
3.44

4.01 to 7.00
 
1,287

 
6.0

 
4.98

 
973

 
5.10

 
 
6,724

 
7.0

 
3.35

 
4,622

 
3.48

 
 The weighted-average grant date fair value of share options granted during the years ended December 31, 2011, 2010 and 2009 was Cdn$1.78, Cdn$2.54 and Cdn$1.21, respectively. The intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009 was Cdn$0.3 million, Cdn$2.4 million and Cdn$1.7 million, respectively.
A summary of the status of non-vested options at December 31, 2011, and 2010 and changes during the years ended December 31, 2011 and 2010, is presented below:  
 
 
Number of
options
(000) 
 
Weighted
average
grant date
fair value
(Cdn$) 
Non-vested at January 1, 2011
 
2,102

 
1.9

Granted
 
2,288

 
1.78

Vested
 
(1,988
)
 
1.81

Forfeited, canceled and expired
 
(95
)
 
2.14

Non-vested at December 31, 2011
 
2,307

 
1.91

 
 
 
 
 
 
 
Number of
options
(000) 
 
Weighted
average
grant date
fair value
(Cdn$) 
Non-vested at January 1, 2010
 
2,125

 
1.49

Granted
 
1,599

 
2.54

Vested
 
(1,491
)
 
1.94

Forfeited, canceled and expired
 
(131
)
 
1.73

Non-vested at December 31, 2010
 
2,102

 
1.9

As of December 31, 2011, there was a total unrecognized compensation cost of Cdn$2.7 million related to share-based compensation granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.8 years. The total fair values of shares vested during the years ended December 31, 2011, 2010 and 2009 were Cdn$3.6 million, Cdn$2.9 million and Cdn$2.4 million, respectively.
Stock Bonus Plan
In December 1992, we established an Employees' Stock Bonus Plan (the “Bonus Plan”) for any full-time or part-time employee (whether or not a director) of the Company or any of our subsidiaries who has rendered meritorious services which contributed to the success of the Company or any of its subsidiaries. The Bonus Plan provides that a specifically designated committee of the Board of Directors may grant bonus common shares on terms that it might determine, within the limitations of the Bonus Plan and subject to the rules of applicable regulatory authorities. The Bonus Plan, as amended, provides for the issuance of 900,000 common shares of bonus stock, of which 545,845 common shares had been issued as of December 31, 2011. No shares were issued to employees under the Bonus Plan during 2011, 2010 and 2009.
Deferred Share Units
On March 9, 2011, the Board adopted a Deferred Share Unit Plan (“DSU plan”) which was subsequently approved by shareholders at the May 2011 annual meeting. The DSU Plan creates 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.
In 2011, the Company granted 22,147 units to directors of the Company in payment of fees earned in 2011. These units were immediately vested. The Company recognized compensation expense related to DSUs of $49,473. As of December 31, 2011, there was nil unrecognized compensation expense related to DSUs granted under the Company's DSU plan. There were 22,147 DSUs outstanding at December 31, 2011.
Earnings Per Common Share
Earnings Per Common Share
EARNINGS PER COMMON SHARE
The following table provides reconciliation between basic and diluted earnings per common share:
 
For the years ended December 31
 
2011
 
2010
 
2009
Net income/(loss) attributable to Golden Star shareholders
$
(2,075
)
 
$
(11,229
)
 
$
(11,427
)
 
 
 
 
 
 
Weighted average number of shares (millions)
258.6

 
258.0

 
237.5

Dilutive securities:
 
 
 
 
 
Options

 

 

Convertible debentures

 

 

Weighted average number of diluted shares (millions)
258.6

 
258.0

 
237.5

 
 
 
 
 
 
Net income/(loss) per share attributable to Golden Star shareholders:
 
 
 
 
 
Basic
(0.008
)

(0.044
)

(0.048
)
Diluted
(0.008
)

(0.044
)

(0.048
)

As of December 31, 2011, 2010 and 2009, 0.6 million, 1.8 million and 1.2 million options were in the money, respectively, as compared to the weighted average stock price for the year. As of December 31, 2011 we also had 0.05 million deferred share units outstanding.
Operations By Segment And Geographic Area
Operations By Segment And Geographic Area
OPERATIONS BY SEGMENT AND GEOGRAPHIC AREA
 
 
Africa
 
Other
 
 
Ghana
 
Ghana
 
Other
 
Brazil
 
USA
 
Total
As at and for years ended December 31
 
Bogoso/
Prestea
 
Wassa/
HBB
 
Exploration
 
Exploration
 
Corporate
 
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
222,542

 
$
248,465

 
$

 
$

 
$

 
$
471,007

Net income/(loss) attributable to Golden Star
 
(10,340
)
 
34,581

 
(2,885
)
 
(478
)
 
(22,953
)
 
(2,075
)
Depreciation
 
29,353

 
42,240

 

 
2

 
103

 
71,698

Income tax expense
 

 
(10,984
)
 

 

 

 
(10,984
)
Capital expenditure
 
59,410

 
41,898

 
1

 

 
71

 
101,380

Long-lived Assets
 
339,671

 
187,015

 
736

 
1

 
131

 
527,554

Total assets
 
415,168

 
256,113

 
1,616

 
855

 
53,926

 
727,678

2010
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
206,448

 
$
226,245

 
$

 
$

 
$

 
$
432,693

Net income/(loss) attributable to Golden Star
 
694

 
16,880

 
(3,001
)
 
6,463

 
(32,265
)