GOLDEN STAR RESOURCES LTD., 10-Q filed on 11/8/2012
Quarterly Report
Document And Entity Information
9 Months Ended
Sep. 30, 2012
Nov. 6, 2012
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-Q 
 
Document Period End Date
Sep. 30, 2012 
 
Document Fiscal Year Focus
2012 
 
Document Fiscal Period Focus
Q3 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
259,015,970 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Share data in Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
REVENUE
 
 
 
 
Gold revenues
$ 133,497 
$ 125,880 
$ 400,830 
$ 352,193 
Cost of sales
120,899 
106,385 
354,914 
316,661 
Mine operating margin
12,598 
19,495 
45,916 
35,532 
Exploration expense
583 
1,824 
2,674 
3,972 
General and administrative expense
4,606 
5,996 
16,091 
20,350 
Derivative mark-to-market loss
11,161 
162 
17,840 
Loss/(gain) on fair value of convertible debentures
30,055 
2,084 
32,092 
(22,208)
Property holding costs
1,617 
1,778 
5,027 
6,141 
Foreign exchange loss
282 
666 
2,162 
1,385 
Interest expense
2,067 
2,193 
8,563 
6,663 
Interest and other income
(89)
(61)
(357)
(163)
Loss on sale of assets
(52)
(338)
(113)
(336)
Loss/(gain) on sale of investments
70 
(22,290)
(Gain)/loss on extinguishment of debt
(14)
568 
(Loss)/income before income tax
(26,527)
(5,808)
1,337 
1,888 
Income tax expense
(4,002)
(3,621)
(19,464)
(11,727)
Net loss
(30,529)
(9,429)
(18,127)
(9,839)
Net income/(loss) attributable to noncontrolling interest
322 
(767)
(483)
523 
Net loss attributable to Golden Star shareholders
$ (30,207)
$ (10,196)
$ (18,610)
$ (9,316)
Net loss per share attributable to Golden Star shareholders
 
 
 
 
Basic (dollars per share)
$ (0.12)
$ (0.04)
$ (0.07)
$ (0.04)
Diluted (dollars per share)
$ (0.12)
$ (0.04)
$ (0.07)
$ (0.04)
Weighted average shares outstanding (millions) (shares)
258.9 
258.6 
258.8 
258.6 
Weighted average shares outstanding-diluted (shares)
258.9 
258.6 
258.8 
258.6 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/LOSS (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
OTHER COMPREHENSIVE LOSS [Abstract]
 
 
 
 
Net loss
$ (30,529)
$ (9,429)
$ (18,127)
$ (9,839)
Unrealized gain/(loss) on investment net of deferred taxes
8,679 
(59)
(271)
280 
Comprehensive loss
(21,850)
(9,488)
(18,398)
(9,559)
Comprehensive income/(loss) attributable to noncontrolling interest
322 
767 
(483)
(523)
Comprehensive loss attributable to Golden Star shareholders
$ (22,172)
$ (10,255)
$ (17,915)
$ (9,036)
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
CURRENT ASSETS [Abstract]
 
 
Cash and cash equivalents
$ 106,322 
$ 103,644 
Accounts receivable
8,113 
10,077 
Inventories
91,876 
74,297 
Deposits
8,505 
6,474 
Available for sale investments
17,817 
1,416 
Prepaids and other
2,173 
2,048 
Total Current Assets
234,806 
197,956 
RESTRICTED CASH
2,028 
1,273 
PROPERTY, PLANT AND EQUIPMENT
256,338 
252,131 
INTANGIBLE ASSETS
3,685 
5,266 
MINING PROPERTIES
252,496 
270,157 
OTHER ASSETS
895 
Total Assets
749,353 
727,678 
CURRENT LIABILITIES [Abstract]
 
 
Accounts payable
28,829 
40,708 
Accrued liabilities
53,981 
51,380 
Asset retirement obligations
7,886 
8,996 
Current tax liability
197 
Current debt
51,270 
128,459 
Total Current Liabilities
141,966 
229,740 
LONG TERM DEBT
116,642 
10,759 
ASSET RETIREMENT OBLIGATIONS
22,716 
24,884 
DEFERRED TAX LIABILITY
43,457 
23,993 
Total Liabilities
324,781 
289,376 
COMMITMENTS AND CONTINGENCIES
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: 258,950,971 at September 30, 2012; 258,669,487 at December 31, 2011
694,480 
693,899 
CONTRIBUTED SURPLUS
23,903 
19,815 
ACCUMULATED OTHER COMPREHENSIVE INCOME
1,707 
1,978 
DEFICIT
(294,722)
(276,112)
Total Golden Star Equity
425,368 
439,580 
NONCONTROLLING INTEREST
(796)
(1,278)
Total Equity
424,572 
438,302 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 749,353 
$ 727,678 
Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2012
Dec. 31, 2011
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
258,950,971 
258,669,487 
Common shares, shares outstanding
258,950,971 
258,669,487 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
OPERATING ACTIVITIES:
 
 
 
 
Net loss
$ (30,529)
$ (9,429)
$ (18,127)
$ (9,839)
Reconciliation of net loss to net cash provided by operating activities:
 
 
 
 
Depreciation, depletion and amortization
25,541 
15,621 
69,765 
52,113 
Amortization of loan acquisition cost
321 
895 
993 
Loss/(gain) on sale of investments
70 
(22,290)
(Gain)/loss on extinguishment of debt
(14)
568 
Gain on sale of assets
(52)
(338)
(113)
(336)
Non-cash employee compensation
1,033 
564 
4,737 
2,784 
Deferred income tax expense
4,002 
2,908 
19,464 
9,255 
Fair value of derivatives loss
1,700 
162 
6,879 
Fair value loss/(gain) on convertible debt
30,055 
2,084 
32,092 
(22,208)
Accretion of asset retirement obligations
703 
2,184 
2,111 
5,300 
Reclamation expenditures
(967)
(8,416)
(5,389)
(20,244)
Changes in working capital
(5,530)
4,268 
(24,109)
(20,545)
Net cash provided by operating activities
24,312 
11,467 
59,766 
4,152 
INVESTING ACTIVITIES:
 
 
 
 
Expenditures on mining properties
(11,079)
(12,211)
(30,942)
(30,242)
Expenditures on property, plant and equipment
(7,996)
(13,678)
(27,616)
(33,541)
Change in accounts payable and deposits on mine equipment and material
2,544 
2,499 
(145)
(685)
Increase in restricted cash
(755)
(755)
Cash used for equity investments
(1,200)
(938)
(1,200)
Proceeds from sale of assets
399 
681 
7,084 
681 
Net cash used in investing activities
(16,887)
(23,909)
(53,312)
(64,987)
FINANCING ACTIVITIES:
 
 
 
 
Principal payments on debt
(8,055)
(2,622)
(12,476)
(7,960)
Proceeds from debt agreements and equipment financing
1,124 
1,391 
8,510 
4,861 
Exercise of options
99 
52 
190 
210 
Net cash used in financing activities
(6,832)
(1,179)
(3,776)
(2,889)
Increase/(decrease) in cash and cash equivalents
593 
(13,621)
2,678 
(63,724)
Cash and cash equivalents, beginning of period
105,729 
127,915 
103,644 
178,018 
Cash and cash equivalents, end of period
$ 106,322 
$ 114,294 
$ 106,322 
$ 114,294 
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 (“HBB”) property located south of Wassa. We hold interests in several gold exploration projects in Ghana and other parts of West Africa, and in South America we hold and manage exploration properties in Brazil.
Basis Of Presentation
Basis of Presentation
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").
Recent Accounting Pronouncements
Recent Accounting Pronouncements
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 was 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 was applied prospectively. The fair value measurement principles used before the adoption of this standard is consistent with the standard and the disclosures made in the financial statements complies with this new guidance.
Financial Instruments
Financial Instruments
FINANCIAL INSTRUMENTS
The following tables illustrate the classification of the Company's financial instruments within the fair value hierarchy as of September 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.

 
Financial assets measured at fair value as at
 
September 30, 2012
 
Level 1    
 
Level 2    
 
Level 3    
 
Total    
Available for sale investments
$
17,817

 
$

 
$

 
$
17,817

 
$
17,817

 
$

 
$

 
$
17,817


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
 
September 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
4% Convertible debentures
$
44,415

 
$

 
$

 
$
44,415

5% Convertible debentures

 

 
105,214

 
105,214

 
$
44,415

 
$

 
$
105,214

 
$
149,629



Both the 4% and 5% Convertible Senior Unsecured Debentures are recorded at fair value. The 4% Debentures are valued based on recent observable trading of the Debentures. The 4% Debentures $44.4 million fair value includes $0.6 million of accrued interest as of September 30, 2012. The 5% Debentures are valued based on discounted cash flows for the debt component and a Black-Scholes model for the equity component. Inputs used to determine these values were: discount rate of 8.5%, risk free interest rate of 0.63%, volatility of 40% and a remaining life of 4.67 years. The 5% Debentures $105.2 million fair value includes $1.3 million of accrued interest as of September 30, 2012.
Fair value measurements using significant unobservable inputs
 
Level 3
Balance at December 31, 2011
 
$

5% Debentures transferred into Level 3
 
74,003

Unrealized loss included in loss on fair value of Convertible Debentures in Statement of Operations
 
31,211

Balance at September 30, 2012
 
$
105,214


It is our policy to transfer fair value measurements if there is an indication that quoted market prices will not be available to value the Debentures. As a result the 5% Debentures was transferred from Level 1 to Level 3 because of a lack of observable market data, resulting from a decrease in market activity of these 5% Debentures.
During the nine months ended September 30, 2012, an unrealized loss of $32.1 million (2011: gain of $22.2 million) was recorded in the Statement of Operations relating to the change in fair value of the Convertible Debentures.
 
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

DERIVATIVE LOSSES
Derivative Gains And Losses
DERIVATIVE LOSSES
The derivative mark-to-market losses recorded in the Statement of Operations are comprised of the following amounts:
 
 
For the three months ended
 
For the nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Riverstone Resources, Inc. - warrants
$

 
$
25

 
$
162

 
$
67

Gold price derivatives

 
11,136

 

 
17,773

Derivative loss
$

 
$
11,161

 
$
162

 
$
17,840


 
For the three months ended
 
For the nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Realized (gain)/loss
$


$
9,461

 
$
162

 
$
10,960

Unrealized loss


1,700

 

 
6,880

Derivative loss
$


$
11,161

 
$
162

 
$
17,840


RIVERSTONE RESOURCES INC. - WARRANTS
In the first quarter of 2008, we received 2.0 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, and 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 September 30, 2012, there were no outstanding gold price contracts.
INVENTORIES
Inventories
INVENTORIES
 
As of
 
As of
 
September 30,
 
December 31,
 
2012
 
2011
Stockpiled ore
$
28,993

 
$
16,773

In-process
13,122

 
8,912

Materials and supplies
46,782

 
48,612

Finished goods
2,979

 

       Total
$
91,876

 
$
74,297


There were approximately 54,000 and 48,000 recoverable ounces of gold in the ore stockpile inventories and in-process inventories at September 30, 2012, and December 31, 2011, respectively. Finished goods at September 30, 2012, consisted of 2,461 ounces of unsold gold. Stockpile inventories are short-term surge piles expected to be processed within the next 12 months. A total of $0.6 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 and 2011 are related to in-process inventory in the non-refractory plant during the first quarter 2012.
Available For Sale Investments
Available for Sale Investments
AVAILABLE FOR SALE INVESTMENTS
The following table presents changes in available for sale investments in the first nine months of 2012 and the full year 2011:
 
As of September 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
(445
)
 
(638,700
)
 

 

OCI - unrealized (loss)/gain
(271
)
 

 
19

 

Balance at end of period
$
17,817

 
25,037,601

 
$
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. Subsequent to February 2, 2012, the quoted market price of Riverstone's common stock has decreased, such that for the period ended September 30, 2012, we recognized through Comprehensive Income a loss of $0.3 million related to our holdings.
Property, Plant And Equipment
Property, Plant And Equipment
PROPERTY, PLANT AND EQUIPMENT
 
As of September 30, 2012
 
As of December 31, 2011
 
Cost
 
Accumulated
Depreciation
 
Net Book Value
 
Cost
 
Accumulated
Depreciation
 
Net Book Value
Bogoso/Prestea
$
182,842

 
$
(112,135
)
 
$
70,707

 
$
179,216

 
$
(109,519
)
 
$
69,697

Bogoso refractory plant
195,152

 
(64,998
)
 
130,154

 
186,607

 
(58,873
)
 
127,734

Wassa/HBB
117,090

 
(62,051
)
 
55,039

 
106,631

 
(52,430
)
 
54,201

Corporate & other
1,346

 
(908
)
 
438

 
1,378

 
(879
)
 
499

Total
$
496,430

 
$
(240,092
)
 
$
256,338

 
$
473,832

 
$
(221,701
)
 
$
252,131



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 of September 30, 2012
 
As of December 31, 2011
 
Cost
 
Accumulated
Amortization
 
Net Book Value
 
Cost
 
Accumulated
Amortization
 
Net Book Value
Bogoso/Prestea
$
126,469

 
$
(63,836
)
 
$
62,633

 
$
119,700

 
$
(60,186
)
 
$
59,514

Bogoso refractory plant
70,318

 
(39,121
)
 
31,197

 
70,090

 
(34,839
)
 
35,251

Mampon
16,095

 

 
16,095

 
16,095

 

 
16,095

Wassa/HBB
336,804

 
(218,103
)
 
118,701

 
314,801

 
(180,486
)
 
134,315

Other
29,657

 
(5,787
)
 
23,870

 
27,312

 
(2,330
)
 
24,982

Total
$
579,343

 
$
(326,847
)
 
$
252,496

 
$
547,998

 
$
(277,841
)
 
$
270,157



There was no interest capitalized in new additions to mining properties in the periods shown above.
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 September 30, 2012, and December 31, 2011, the total undiscounted amount of the estimated future cash needs was estimated to be $70.9 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 nine months ended September 30, 2012, and September 30, 2011, are as follows:
 
For the nine months ended
 
September 30,
 
2012
 
2011
Beginning balance
$
33,880

 
$
44,952

Accretion expense
2,111

 
5,300

Additions and changes in estimates

 
3,748

Cost of reclamation work performed
(5,389
)
 
(20,244
)
Balance at September 30
$
30,602

 
$
33,756

 
 
 
 
Current portion
$
7,886

 
$
11,445

Long term portion
$
22,716

 
$
22,311

Debt
Debt
DEBT
 
As of
 
As of
 
September 30,
 
December 31,
 
2012
 
2011
Current debt:
 
 
 
Equipment financing credit facility
$
7,448

 
$
7,036

Capital lease

 
224

4% Convertible debentures
43,822

 
121,199

Total current debt
$
51,270

 
$
128,459

Long term debt:
 
 
 
Equipment financing credit facility
$
12,723

 
$
10,759

5% Convertible debentures
103,919

 

Total long term debt
$
116,642

 
$
10,759


Schedule of payments on outstanding debt as of September 30, 2012:

Three Months
 
 
 
 
 
 
 
 
 
 
 
 
Debt
2012
 
2013
 
2014
 
2015
 
2016
 
2017
 
Maturity
Equipment financing loans
 
 
 
 
 
 
 
 
 
 
 
 
 
     principal
$
2,160

 
$
6,774

 
$
4,732

 
$
3,798

 
$
2,208

 
$
499

 
 2012 to 2017
     interest
330

 
1,003

 
604

 
322

 
120

 
9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4% Convertible debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
     principal
44,360

 

 

 

 

 

 
November 30, 2012
     interest
890

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5% Convertible debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
     principal

 

 

 

 

 
77,490

 
June 1, 2017
     interest
1,937

 
3,875

 
3,875

 
3,875

 
3,875

 
1,937

 
 
Total
$
49,677

 
$
11,652

 
$
9,211

 
$
7,995

 
$
6,203

 
$
79,935

 
 

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 September 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 September 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 September 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 $44.4 million and the second series are 5% Convertible Debentures due June 1, 2017, (the "5% Debentures") in the amount of $77.5 million.
Both the 4% and 5% Debentures are accounted for at fair value and marked to market each reporting period and the corresponding gain/loss on fair value is recorded in the Statement of Operations.
4% Debentures - The 4% Debentures were 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 of 5% Debentures. See details of this transaction in the "5% Debentures" section below. The remaining 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 September 14, 2012, we redeemed $6.1 million of the remaining 4% Debentures by way of a privately negotiated transaction. After purchasing and canceling the $6.1 million of the 4% Debentures, $44.4 million principal amount remains outstanding at September 30, 2012. The remaining outstanding 4% Debentures, plus the final payment of accumulated interest, are expected to be settled in cash on November 30, 2012.
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.
The fair value of the 4% Debentures are based on recent observable trading of the debentures. At September 30, 2012, the fair value of the 4% Debentures was $43.8 million and the face value of the debentures was $44.4 million.
5% Debentures - The 5% Debentures were issued on May 31, 2012, in the amount of $77.5 million, 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 on June 1, 2017. 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 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 from us to purchase them.
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 are required to 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.
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 exchanged for 5% 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 nine ended September 30, 2012.
The fair value of the 5% Debentures is based on discounted cash flows for the debt component and a Black-Scholes model for the equity component. Inputs used to determine these values were: discount rate 8.5%, risk free interest rate of 0.63%, volatility of 40% and a remaining life of 4.67 years. The fair value of the 5% Debentures is $103.9 million and the face value of the 5% Debentures is $77.5 million at September 30, 2012.

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 April 1, 2012.
Income Taxes
Income Taxes
INCOME TAXES
The provision for income taxes includes the following components: 
 
For the three months ended
September 30,
 
For the nine months ended
September 30,
 
2012
 
2011
 
2012
 
2011
Current expense:
 
 
 
 
 
 
 
Canada
$

 
$

 
$

 
$

Foreign

 
(788
)
 

 
(2,472
)
Deferred tax expense:
 
 
 
 
 
 
 
Canada

 

 

 

Foreign
(4,002
)
 
(2,833
)
 
(19,464
)
 
(9,255
)
Total expense
$
(4,002
)
 
$
(3,621
)
 
$
(19,464
)
 
$
(11,727
)

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 nine months of 2012 is $9.9 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 is 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.
Commitments And Contingencies
Commitments And Contingencies
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 the fourth quarter of 2011, Bogoso/Prestea submitted a draft Environmental Management Plan (“EMP”) to the EPA that included an updated estimate of the reclamation and closure costs. 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 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. Since this property is currently undeveloped, we are not required to pay a royalty on this property.
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.
LEGAL PROCEEDINGS
None.
Share Capital
Share Capital
SHARE CAPITAL
Changes in share capital during the nine months ended September 30, 2012, are as follows: 
 
Shares
 
Amount
Balance at December 31, 2011
258,669,487

 
$
693,899

Common shares issued:
 
 
 
Option exercises
138,334

 
234

Deferred share units exercised
29,010

 
39

     Unclaimed shares forfeited
(50,869
)
 

     Bonus shares and other
165,009

 
308

Balance at September 30, 2012
258,950,971

 
$
694,480



We held no treasury shares as of December 31, 2011, or at September 30, 2012.
Cost Of Sales
COST OF SALES
COST OF SALES
 
For the three months ended
September 30,
 
For the nine months ended
September 30,
 
2012
 
2011
 
2012
 
2011
Mining operations costs
$
98,686


$
87,387

 
$
298,420

 
$
258,487

Operations costs to metal inventory
(4,322
)

1,310

 
(15,602
)
 
851

Mining related depreciation and amortization
25,832


15,504

 
69,985

 
52,023

Accretion of asset retirement obligations
703


2,184

 
2,111

 
5,300

Total cost of sales
$
120,899

 
$
106,385

 
$
354,914

 
$
316,661

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 our non-cash employee compensation plans are as follows:
 
For the three months ended
September 30,
 
For the nine months ended
September 30,
 
2012
 
2011
 
2012
 
2011
Total stock compensation expense
$
1,033

 
$
564

 
$
4,737

 
$
2,784


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 is 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 4,939,646 are available for grant as of September 30, 2012. 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 5,054,000 and 1,988,000 options during the first nine 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 nine months of 2012 and 2011 were based on the assumptions noted in the following table:
 
For the nine months ended
September 30,
 
2012
 
2011
Expected volatility
57.11 to 87.50%
 
66.33 to 69.79%
Risk-free interest rate
0.36 to 1.91%
 
1.58 to 2.26%
Expected lives
2.77 to 8.06
 
5.63 to 8.47
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 nine months ended September 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
5,054

 
1.97

 
5.9

 

Exercised
(138
)
 
1.36

 
2.6

 
101

Forfeited, canceled and expired
(963
)
 
2.89

 
6.6

 

Outstanding as of September 30, 2012
12,492

 
2.73

 
6.4

 
767

 
 
 
 
 
 
 
 
Exercisable as of September 30, 2012
8,057

 
3.00

 
5.9

 
527

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 September 30, 2012. In the first 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 the issue of 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 nine months of 2012, we granted 296,381 DSUs to directors of the Company in payment of fees earned in 2012. These units were immediately vested and a compensation expense of $0.4 million was recognized for these grants. As of September 30, 2012, there was nil unrecognized compensation expense related to DSUs granted under the Company's DSU plan. There were 289,518 DSUs outstanding at September 30, 2012.
Stock Appreciation Rights
During the nine months ended September 30, 2012, the Company granted 1,543,043 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 September 30, 2012, there was approximately $1.5 million of total unrecognized compensation cost related to unvested SARs. The Company recognized approximately $0.3 million of compensation expense related to these cash based awards for the nine months ended September 30, 2012.
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 three months ended
September 30,
 
For the nine months ended
September 30,
 
2012
 
2011
 
2012
 
2011
Net loss attributable to Golden Star shareholders
$
(30,207
)
 
$
(10,196
)
 
$
(18,610
)

$
(9,316
)
 
 
 
 
 
 



Weighted average number of shares (millions)
258.9

 
258.6

 
258.8


258.6

Dilutive securities:
 
 
 
 
 


Options

 

 



Deferred stock units

 

 

 

Convertible debentures

 

 



Weighted average number of diluted shares (millions)
258.9

 
258.6

 
258.8

 
258.6

 
 
 
 
 
 
 
 
Net loss per share attributable to Golden Star shareholders:
 
 
 
 
 
 
 
Basic
$
(0.12
)
 
$
(0.04
)
 
$
(0.07
)
 
$
(0.04
)
Diluted
$
(0.12
)
 
$
(0.04
)
 
$
(0.07
)
 
$
(0.04
)

Options to purchase 12.5 million and 7.8 million shares of common stock were outstanding at September 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. Deferred Stock Units totaling 0.4 million and zero shares of common stock were outstanding at September 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 39.3 million and 25.0 million shares of common stock potentially outstanding at September 30, 2012 and 2011, respectively, related to the convertible debentures that were not dilutive.
Operations By Segment And Geographic Area
Operations by Segment and Geographic Area
OPERATIONS BY SEGMENT AND GEOGRAPHIC AREA
 
 
Africa
 
 
 
 
 
 
As of and for the three months ended September 30
 
Bogoso/
Prestea
 
Wassa/
HBB
 
Other
 
South
America
 
Corporate
 
Total
2012
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
65,775

 
$
67,722

 
$

 
$

 
$

 
$
133,497

Net income/(loss) attributable to Golden Star
 
(1,750
)
 
7,406

 
(481
)
 
(119
)
 
(35,263
)
 
(30,207
)
Income tax expense
 

 
(4,002
)
 

 

 

 
(4,002
)
Capital expenditures
 
5,790

 
13,285

 

 

 

 
19,075

Total assets
 
427,482

 
221,915

 
2,386

 
168

 
97,402

 
749,353

2011
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
68,693

 
$
57,187

 
$

 
$

 
$

 
$
125,880

Net income/(loss) attributable to Golden Star
 
2,881

 
8,174

 
(1,039
)
 
(92
)
 
(20,120
)
 
(10,196
)
Income tax expense
 

 
(3,621
)
 

 

 

 
(3,621
)
Capital expenditures
 
9,027

 
11,638

 
146

 

 

 
20,811

Total assets
 
371,787

 
253,685

 
2,532

 
228

 
83,560

 
711,792


 
 
Africa
 
 
 
 
 
 
As of and for the nine months ended September 30
 
Bogoso/
Prestea
 
Wassa/
HBB
 
Other
 
South
America
 
Corporate
 
Total
2012
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
205,933

 
$
194,897

 
$

 
$

 
$

 
$
400,830

Net income/(loss) attributable to Golden Star
 
10,412

 
13,911

 
(2,196
)
 
(400
)
 
(40,337
)
 
(18,610
)
Income tax expense
 

 
(19,464
)
 

 

 

 
(19,464
)
Capital expenditures
 
26,495

 
32,060

 

 

 
3

 
58,558

Total assets
 
427,482

 
221,915

 
2,386

 
168

 
97,402

 
749,353

2011
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
162,790

 
$
189,403

 
$

 
$

 
$

 
$
352,193

Net income/(loss) attributable to Golden Star
 
(12,889
)
 
27,189

 
(2,419
)
 
(356
)
 
(20,841
)
 
(9,316
)
Income tax expense
 

 
(11,727
)
 

 

 

 
(11,727
)
Capital expenditures
 
29,877

 
28,407

 
421

 

 

 
58,705

Total assets
 
371,787

 
253,685

 
2,532

 
228

 
83,560

 
711,792

Related Parties
Related Parties
RELATED PARTIES
During the first nine 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 nine months of 2012 and 2011 was $0.6 million and $0.3 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.
Supplemental Cash Flow Information
Supplemental Cash Flow Information
SUPPLEMENTAL CASH FLOW INFORMATION
In the first nine months of 2012, $0.2 million was paid for taxes. Cash paid for taxes during the first nine months of 2011 was $2.5 million. Cash paid for interest was $5.7 million in the first nine months of 2012 and $3.4 million in the first nine months of 2011.
Recent Accounting Pronouncements (Policies)
Recent Accounting Pronouncements
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 was 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 was applied prospectively. The fair value measurement principles used before the adoption of this standard is consistent with the standard and the disclosures made in the financial statements complies with this new guidance.
Financial Instruments (Tables)
The 5% Debentures $105.2 million fair value includes $1.3 million of accrued interest as of September 30, 2012.
Fair value measurements using significant unobservable inputs
 
Level 3
Balance at December 31, 2011
 
$

5% Debentures transferred into Level 3
 
74,003

Unrealized loss included in loss on fair value of Convertible Debentures in Statement of Operations
 
31,211

Balance at September 30, 2012
 
$
105,214

During the nine months ended September 30, 2012, an unrealized loss of $32.1 million (2011: gain of $22.2 million) was recorded in the Statement of Operations relating to the change in fair value of the Convertible Debentures.
 
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

The following tables illustrate the classification of the Company's financial instruments within the fair value hierarchy as of September 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.

 
Financial assets measured at fair value as at
 
September 30, 2012
 
Level 1    
 
Level 2    
 
Level 3    
 
Total    
Available for sale investments
$
17,817

 
$

 
$

 
$
17,817

 
$
17,817

 
$

 
$

 
$
17,817


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
 
September 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
4% Convertible debentures
$
44,415

 
$

 
$

 
$
44,415

5% Convertible debentures

 

 
105,214

 
105,214

 
$
44,415

 
$

 
$
105,214

 
$
149,629

DERIVATIVE LOSSES (Tables)
Derivative mark-to-market (gains)/losses recorded in the Statement of Operations
The derivative mark-to-market losses recorded in the Statement of Operations are comprised of the following amounts:
 
 
For the three months ended
 
For the nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Riverstone Resources, Inc. - warrants
$

 
$
25

 
$
162

 
$
67

Gold price derivatives

 
11,136

 

 
17,773

Derivative loss
$

 
$
11,161

 
$
162

 
$
17,840


 
For the three months ended
 
For the nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Realized (gain)/loss
$


$
9,461

 
$
162

 
$
10,960

Unrealized loss


1,700

 

 
6,880

Derivative loss
$


$
11,161

 
$
162

 
$
17,840

INVENTORIES (Tables)
Schedule of inventories
 
As of
 
As of
 
September 30,
 
December 31,
 
2012
 
2011
Stockpiled ore
$
28,993

 
$
16,773

In-process
13,122

 
8,912

Materials and supplies
46,782

 
48,612

Finished goods
2,979

 

       Total
$
91,876

 
$
74,297

Available For Sale Investments (Tables)
Available for Sale Investments
The following table presents changes in available for sale investments in the first nine months of 2012 and the full year 2011:
 
As of September 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
(445
)
 
(638,700
)
 

 

OCI - unrealized (loss)/gain
(271
)
 

 
19

 

Balance at end of period
$
17,817

 
25,037,601

 
$
1,416

 
2,000,000

Property, Plant And Equipment (Tables)
Schedule of Property, Plant and Equipment
 
As of September 30, 2012
 
As of December 31, 2011
 
Cost
 
Accumulated
Depreciation
 
Net Book Value
 
Cost
 
Accumulated
Depreciation
 
Net Book Value
Bogoso/Prestea
$
182,842

 
$
(112,135
)
 
$
70,707

 
$
179,216

 
$
(109,519
)
 
$
69,697

Bogoso refractory plant
195,152

 
(64,998
)
 
130,154

 
186,607

 
(58,873
)
 
127,734

Wassa/HBB
117,090

 
(62,051
)
 
55,039

 
106,631

 
(52,430
)
 
54,201

Corporate & other
1,346

 
(908
)
 
438

 
1,378

 
(879
)
 
499

Total
$
496,430

 
$
(240,092
)
 
$
256,338

 
$
473,832

 
$
(221,701
)
 
$
252,131

Mining Properties (Tables)
Schedule of Mining Properties
 
As of September 30, 2012
 
As of December 31, 2011
 
Cost
 
Accumulated
Amortization
 
Net Book Value
 
Cost
 
Accumulated
Amortization
 
Net Book Value
Bogoso/Prestea
$
126,469

 
$
(63,836
)
 
$
62,633

 
$
119,700

 
$
(60,186
)
 
$
59,514

Bogoso refractory plant
70,318

 
(39,121
)
 
31,197

 
70,090

 
(34,839
)
 
35,251

Mampon
16,095

 

 
16,095

 
16,095

 

 
16,095

Wassa/HBB
336,804

 
(218,103
)
 
118,701

 
314,801

 
(180,486
)
 
134,315

Other
29,657

 
(5,787
)
 
23,870

 
27,312

 
(2,330
)
 
24,982

Total
$
579,343

 
$
(326,847
)
 
$
252,496

 
$
547,998

 
$
(277,841
)
 
$
270,157

Asset Retirement Obligations (Tables)
Schedule of changes in the carrying amounts of the ARO
The changes in the carrying amount of the ARO during the nine months ended September 30, 2012, and September 30, 2011, are as follows:
 
For the nine months ended
 
September 30,
 
2012
 
2011
Beginning balance
$
33,880

 
$
44,952

Accretion expense
2,111

 
5,300

Additions and changes in estimates