SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, 2006

GOLDEN STAR RESOURCES LTD.

(Exact Name of Registrant as Specified in Its Charter)

Canada		98-0101955
(State or other Jurisdiction of Incorporation		(I.R.S. Employer Identification No.)
or Organization)
10901 West Toller Drive, Suite 300
Littleton, Colorado		80127-6312
(Address of Principal Executive Office)		(Zip Code)

Registrant’s telephone number, including area code (303) 830-9000
Securities registered or to be registered pursuant to Section 12 (b) of the Act:

Title of Each Class		Name of each exchange on which registered
Common Shares		American Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Act”) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer: o     Accelerated filer: þ     Non-accelerated filer: o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was approximately $605 million as of June 30, 2006, based on the closing price of the shares on the American Stock Exchange as of that date of $2.96 per share.

Number of Common Shares outstanding as at March 12, 2007: 232,104,141

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the 2007 Annual Meeting of Shareholders are incorporated by reference to Part III of this Report on Form 10-K.

 

 

REPORTING CURRENCY, FINANCIAL AND OTHER INFORMATION

All amounts in this Report are expressed in United States (“US”) dollars, unless otherwise indicated. Canadian currency is denoted as “Cdn$.” Euros are denoted as “€”.

Financial information is presented in accordance with accounting principles generally accepted in Canada (“Cdn GAAP” or “Canadian GAAP”). Differences between accounting principles generally accepted in the US (“US GAAP”) and those applied in Canada, as applicable to Golden Star Resources Ltd., are explained in Note 24 to the Consolidated Financial Statements.

Information in Parts I and II of this report includes data expressed in various measurement units and contains numerous technical terms commonly used in the gold mining industry. To assist readers in understanding this information, a conversion table and glossary are provided below.

References to “Golden Star,” the “Company,” “we,” “our,” and “us” mean Golden Star Resources Ltd., its predecessors and consolidated subsidiaries, or any one or more of them, as the context requires.

NON-GAAP FINANCIAL MEASURES

In this Form 10-K, we use the terms “total cash cost per ounce” and “cash operating cost per ounce” which are considered Non-GAAP financial measures as defined in SEC Regulation S-K Item 10 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. There are material limitations associated with the use of such non-GAAP measures. Since these measures do not incorporate revenues, changes in working capital and non-operating cash costs, they are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Changes in numerous factors, including, but not limited to, mining rates, milling rates, gold grade, gold recovery, and the costs of labor, consumables and mine site general and administrative activities can cause these measures to increase or decrease. We believe that these measures are the same or similar to the measures of other gold mining companies, but may not be comparable to similarly titled measures in every instance. See Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations for a definition of these measures as used in this Form 10-K.

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Form 10-K and the documents incorporated by reference in this Form 10-K contain forward-looking statements, within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, with respect to our financial condition, results of operations, business, prospects, plans, objectives, goals, strategies, future events, capital expenditures, and exploration and development efforts. Words such as “anticipates,” “expects,” “intends,” “forecasts,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” and similar expressions identify forward-looking statements.

Although we believe that our plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot be certain that these plans, intentions or expectations will be achieved. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained or incorporated by reference in this Form 10-K.

These statements include comments regarding: the completion, commissioning and commencement of production of the Bogoso Sulfide Expansion Project and its anticipated throughput and metallurgical recoveries, anticipated commencement dates of production, development costs, production capacity, production rates, and production costs; cash operating costs; gold sales; mining operations and recovery rates; ore delivery; ore processing; potential mine life; permitting; establishment and estimates of mineral reserves and resources; geological, environmental, and engineering studies; timing and results of feasibility studies; exploration efforts and activities; availability, cost and efficiency of mining equipment; ore grades; reclamation work; identification of acquisition and growth opportunities; power costs, the ability to meet total power requirements and the acquisition and operation of the power station; retention of earnings from our operations; sale of our remaining EURO Ressources S.A. common shares; sources of and adequacy of liquidity to meet capital and other needs in 2007.

The following, in addition to the factors described under “Risk Factors” in Item 1 below, are among the factors that could cause actual results to differ materially from the forward-looking statements:

	•		significant increases or decreases in gold prices;
	•		failure to develop Mineral Reserves on the HBB Properties or failure to expand Mineral Reserves around our existing mines;
	•		unexpected events during the construction and start-up of the Bogoso sulfide expansion project;
	•		unexpected changes in business and economic conditions;

	•		inaccuracies in Mineral reserves ad non-reserves estimates;
	•		changes in interest and currency exchange rates;
	•		timing and amount of gold production;
	•		unanticipated variations in ore grade, tonnes mined and crushed or milled;
	•		unanticipated recovery or production problems;
	•		effects of illegal mining on our properties;
	•		changes in mining and processing costs, including changes to costs of raw materials, supplies, services and personnel;
	•		changes in metallurgy and processing;
	•		availability of skilled personnel, contractors, materials, equipment, supplies, power and water;
	•		changes in project parameters or mine plans;
	•		costs and timing of development of new reserves;
	•		weather, including continuing drought in West Africa;
	•		global warming and its impacts on climate and regulatory frameworks that may impact our activities directly or indirectly;
	•		results of current and future exploration activities;
	•		results of pending and future feasibility studies;
	•		acquisitions and joint venture relationships;
	•		political or economic instability, either globally or in the countries in which we operate;
	•		changes in regulations affecting our operations, particularly in Ghana, where our principal producing properties are located;
	•		local and community impacts and issues;
	•		availability and cost of replacing reserves;
	•		timing of receipt and maintenance of government approvals and permits;
	•		unanticipated transportation costs and shipping incidents and losses;
	•		accidents, labor disputes and other operational hazards;
	•		environmental costs and risks;
	•		unanticipated title issues;
	•		competitive factors, including competition for property acquisitions;
	•		possible litigation; and
	•		availability of capital at reasonable rates or at all.

These factors are not intended to represent a complete list of the general or specific factors that could affect us. Your attention is drawn to other risk factors disclosed and discussed in Item 1 below. We undertake no obligation to update forward-looking statements.

CONVERSION FACTORS AND ABBREVIATIONS

For ease of reference, the following conversion factors are provided:

1 acre		= 0.4047 hectare		1 mile		= 1.6093 kilometers
1 foot		= 0.3048 meter		1 troy ounce		= 31.1035 grams
1 gram per metric tonne		= 0.0292 troy ounce/short ton		1 square mile		= 2.59 square kilometers
1 short ton (2000 pounds)		= 0.9072 tonne		1 square kilometer		= 100 hectares
1 tonne		= 1,000 kg or 2,204.6 lbs		1 kilogram		= 2.204 pounds or 32.151 troy oz
1 hectare		= 10,000 square meters		1 hectare		= 2.471 acres

The following abbreviations may be used herein:

Au		= gold		m2		= square meter
g		= gram		m3		= cubic meter
Au g/t		= grams of gold per tonne		Mg or mg		= milligram
ha		= hectare		mg/m3		= milligrams per cubic meter
km		= kilometer		T or t		= tonne
km2		= square kilometers		oz		= troy ounce
kg		= kilogram		ppb		= parts per billion
m		= meter		Ma		= million years

Note: All units in this report are stated in metric measurements unless otherwise noted.

GLOSSARY OF TERMS

We report our Mineral Reserves to two separate standards to meet the requirements for reporting in both Canada and the United States (“US”). Canadian reporting requirements for disclosure of mineral properties are governed by National Instrument 43-101 (“NI 43-101”). The definitions in NI 43-101 are adopted from those given by the Canadian Institute of Mining, Metallurgy and Petroleum. US reporting requirements for disclosure of mineral properties are governed by SEC Industry Guide 7. These reporting standards have similar goals in terms of conveying an appropriate level of confidence in the disclosures being reported, but embody differing approaches and definitions.

We estimate and report our Mineral Resources and Mineral Reserves according to the definitions set forth in NI 43-101 and modify and reconcile them as appropriate to conform to Industry Guide 7 for reporting in the U.S. The definitions for each reporting standard are presented below with supplementary explanation and descriptions of the parallels and differences.

NI 43-101 DEFINITIONS

Mineral Reserve		The term “Mineral Reserve” refers to the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a preliminary feasibility study. The study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that might occur when the material is mined.
Proven Mineral Reserve		The term “Proven Mineral Reserve” refers to the economically mineable part of a Measured Mineral Resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.(1)
Probable Mineral Reserve		The term “Probable Mineral Reserve” refers to the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
Mineral Resource		The term “Mineral Resource” refers to a concentration or occurrence of diamonds, natural, solid, inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.

Measured Mineral Resource		The term “Measured Mineral Resource” refers to that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Indicated Mineral Resource		The term “Indicated Mineral Resource” refers to that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
Inferred Mineral Resource		The term “Inferred Mineral Resource” refers to that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
qualified person(1)		The term “qualified person” refers to an individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination thereof, has experience relevant to the subject matter of the project and the technical report and is a member in good standing of a professional association.

SEC INDUSTRY GUIDE 7 DEFINITIONS

Reserve		The term “reserve” refers to that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves must be supported by a feasibility(2) study done to bankable standards that demonstrates the economic extraction. (“bankable standards” implies that the confidence attached to the costs and achievements developed in the study is sufficient for the project to be eligible for external debt financing.) A reserve includes adjustments to the in-situ tonnes and grade to include diluting materials and allowances for losses that might occur when the material is mined.
proven reserve		The term “proven reserve” refers to reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape depth and mineral content of reserves are well-established.
probable reserve		The term “probable reserve” refers to reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
mineralized material(3)		The term “mineralized material” refers to material that is not included in the reserve as it does not meet all of the criteria for adequate demonstration for economic or legal extraction.
non-reserves		The term “non-reserves” refers to mineralized material that is not included in the reserve as it does not meet all of the criteria for adequate demonstration for economic or legal extraction.

exploration stage		An “exploration stage” prospect is one which is not in either the development or production stage.
development stage		A “development stage” project is one which is undergoing preparation of an established commercially mineable deposit for its extraction but which is not yet in production. This stage occurs after completion of a feasibility study.
production stage		A “production stage” project is actively engaged in the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product.

ADDITIONAL DEFINITIONS

alteration — any change in the mineral composition of a rock brought about by physical or chemical means

ancillary equipment - service equipment not directly associated with primary process

artisanal - current or historic informal mining typically of a low tech, manually intensive nature

assay - a measure of the valuable mineral content

Au - gold

bio-oxidation or BIOX^® - a processing method that uses bacteria to oxidize refractory sulfide ore to make it amenable to normal oxide ore processing techniques such as carbon-in-leach

Birimian — a thick and extensive sequence of Proterozoic age metamorphosed sediments and volcanics first identified in the Birim region of southern Ghana

cash operating cost per ounce - is equal to total cash cost for the period less production royalties and production taxes, divided by the number of ounces of gold sold during the period. (This definition is consistent with the Gold Institute’s definition)

CIL or carbon-in-leach - an ore processing method involving the use of cyanide where activated carbon which has been added to the leach tanks is used to absorb gold as it is leached by cyanide

craton — a stable relatively immobile area of the earth’s crust

cut-off grade - when determining economically viable mineral reserves, the lowest grade of mineralized material that qualifies as ore, i.e. that can be mined and processed at a profit

cyanidation — the process of introducing cyanide to ore to recover gold

diamond drilling - rotary drilling using diamond-set or diamond-impregnated bits, to produce a solid continuous core of rock sample

dip - the angle that a structural surface, a bedding or fault plane, makes with the horizontal, measured perpendicular to the strike of the structure

diorite – a group of intrusive rocks intermediate in composition between acidic and basic, characteristically composed of dark-colored amphibole, acid plagioclase, pyroxene and sometimes a small amount of quartz.

disseminated - where minerals occur as scattered particles in the rock

doré — unrefined gold bullion bars containing various impurities such as silver, copper and mercury, which will be further refined to near pure gold

fault - a surface or zone of rock fracture along which there has been displacement

feasibility study - a definitive engineering and economic study addressing the viability of a mineral deposit taking into consideration all associated technical factors, costs, revenues and risks. We recognize three levels of feasibility studies: (i) Level 1 — a directional feasibility study or scoping study; (ii) Level 2 — a pre-feasibility study; and (iii) Level 3 — a detailed feasibility study. A feasibility study that satisfies the requirements for external financing is known as a bankable feasibility study.

fold - a curve or bend of a planar structure such as rock strata, bedding planes, foliation, or cleavage

formation - a distinct layer of sedimentary rock of similar composition

gabbro – a group of dark-colored basic intrusive igneous rocks (the intrusive equivalent to basalt)

gabbroic – rock masses made up of gabbro and other similar dark-colored basic igneous rock

geochemistry - the study of the distribution and amounts of the chemical elements in minerals, ores, rocks, solids, water, and the atmosphere

geochemical prospecting - a prospecting technique which measures the content of certain metals in soils and rocks used to define anomalies for further testing

geophysics - the study of the mechanical, electrical and magnetic properties of the earth’s crust

geophysical surveys — a survey method used primarily in the mining industry as an exploration tool, applying the methods of physics and engineering to the earth’s surface

geotechnical — the study of ground stability

grade — quantity of metal per unit weight of host rock

greenstone - a sequence of usually metamorphosed volcanic-sedimentary rock assemblages

granodiorite – a group of coarse-grained plutonic rocks intermediate in composition between quartz diorite and quartz monzonite containing quartz, plagioclase, potassium feldspar with biotite and hornblende

heap leach - a mineral processing method involving the crushing and stacking of an ore on an impermeable liner upon which solutions are sprayed to dissolve metals i.e. gold/copper etc.; the solutions containing the metals are then collected and treated to recover the metals

host rock - the rock in which a mineral or an ore body may be contained

hydrothermal - the products of the actions of heated water, such as a mineral deposit precipitated from a hot solution

in-situ - in its natural position

life-of-mine - a term commonly used to refer to the likely term of a mining operation and normally determined by dividing the tonnes of mineral reserve by the annual rate of mining and processing

mapped or geological mapping - the recording of geologic information including rock units and the occurrence of structural features, and mineral deposits on maps

metasediment - a sedimentary rock which shows evidence of having been subjected to metamorphism

metavolcanic — a volcanic rock which shows evidence of having been subjected to metamorphism

mineral - a naturally occurring inorganic crystalline material having a definite chemical composition

mineralization - a natural accumulation or concentration in rocks or soil of one or more potentially economic minerals, also the process by which minerals are introduced or concentrated in a rock

National Instrument 43-101 or NI 43-101 - Canadian standards of disclosure for mineral projects

non-refractory — ore containing gold that can be satisfactorily recovered by basic gravity concentration or simple cyanidation

outcrop - that part of a geologic formation or structure that appears at the surface of the earth

open pit or open cut - surface mining in which the ore is extracted from a pit or quarry, the geometry of the pit may vary with the characteristics of the ore body

ore - mineral bearing rock that can be mined and treated profitably under current or immediately foreseeable economic conditions

ore body - a mostly solid and fairly continuous mass of mineralization estimated to be economically mineable

ore grade - the average weight of the valuable metal or mineral contained in a specific weight of ore i.e. grams per tonne of ore

oxide - gold bearing ore which results from the oxidation of near surface sulfide ore

pH – a measure on a scale of 1 to 14 of the acidity or alkalinity of a solution where 7 is neutral, greater than 7 is basic and less than 7 is acidic

plunge - the angle from the horizontal of a linear geological feature on a plane

pre-strip – to remove overburden in order to expose ore during the mine’s pre-production phase

Proterozoic - the more recent time division of the Precambrian; rocks aged between 2,500 million and 550 million years old

put - a financial instrument that provides the right, but not the obligation, to sell a specified number of ounces of gold at a specified price

pyrite - common sulfide of iron

QA/QC – Quality Assurance/Quality Control is the process of controlling and assuring data quality for assays and other exploration and mining data

quartz - a mineral composed of silicon dioxide, SiO₂ (silica)

RAB (rotary air blast) drilling — relatively inexpensive and quick exploration drilling method returning rock chips from the drill hole using high pressure air

RC (reverse circulation) drilling — a drilling method using a tri-cone bit, during which rock cuttings are pushed from the bottom of the drill hole to the surface through an outer tube, by liquid and/or air pressure moving through an inner tube

run-of-mine or ROM - usually refers to the average ore material being mined and processed, i.e. run-of-mine grade of ore delivered to the processing plant

reef - general term that typically refers to a tabular ore body

refractory — ore containing gold that cannot be satisfactorily recovered by basic gravity concentration or simple cyanidation

rock - indurated naturally occurring mineral matter of various compositions

SAG - semi-autogeneous grinding

sampling and analytical variance/precision — an estimate of the total error induced by sampling, sample preparation and analysis

sediment - particles transported by water, wind or ice

sedimentary rock - rock formed at the earth’s surface from solid particles, whether mineral or organic, which have been moved from their position of origin and re-deposited

sericitic – a rock with abundant amounts of sericite, a white fine grained potassium mica occurring as an alteration product of various aluminosilicate minerals

shear - a form of strain resulting from stresses that cause or tend to cause contiguous parts of a body of rock to slide relatively to each other in a direction parallel to their plane of contact

shield - a large area of exposed basement rocks often surrounded by younger rocks, e.g. Guiana Shield

stratigraphic or stratigraphically — geology that deals with the origin and succession of strata

strike - the direction or trend that a structural surface, e.g. a bedding or fault plane, takes as it intersects the horizontal

strip - to remove overburden in order to expose ore

sulfide - a mineral including sulfur (S) and iron (Fe) as well as other elements; metallic sulfur-bearing mineral often associated with gold mineralization

syncline - a concave downward fold, the core of which contains the stratigraphically younger rocks

tailings - fine ground wet waste material produced from ore after economically recoverable metals or minerals have been extracted

Tarkwaian - a group of sedimentary rocks of Proterozoic age named after the town of Tarkwa in southern Ghana where they were found to be gold bearing

tonne - metric tonne, equal to 1,000 kilograms or 2,204.6 pounds

total cash cost per ounce - is equal to total production costs as found on our consolidated statement of operations less depreciation, depletion, amortization and asset retirement obligation accretion divided by the number of ounces of gold sold during the applicable period. (This definition is consistent with the Gold Institute’s definition)

total production cost per ounce - is equal to total production costs as found on our consolidated statement of operations divided by the ounces of gold sold in the period; total production costs include all mine-site operating costs, including the costs of mining, processing, maintenance, work in process inventory changes, mine-site overhead, production taxes and royalties, depreciation, depletion, amortization, asset retirement obligations and by-product credits, but does not include exploration costs, corporate, general and administrative expense, impairment charges, corporate business development costs, gains and losses on asset sales, interest expense, foreign currency gains and losses, gains and losses on investments and income tax

transition ore - is an ore zone lying between the oxide ore and the sulfide ore; ore material that is partially weathered and oxidized

vein - a thin, sheet-like crosscutting body of hydrothermal mineralization, principally quartz

volcanics - those originally molten rocks, generally fine grained, that have reached or nearly reached the earth’s surface before solidifying

volcano-sedimentary - rocks composed of materials of both volcanic and sedimentary origin

wall rock - the rock adjacent to a vein

weathering - near surface alteration and oxidation of minerals and rocks by exposure to the atmosphere or ground water

wire frame - a mesh of triangles used to define a volume in generating computerized geological models

Item 1. BUSINESS

OVERVIEW OF GOLDEN STAR

We are a Canadian incorporated international gold mining and exploration company producing gold in Ghana, West Africa. We also conduct gold exploration in West Africa and in South America. Golden Star Resources Ltd. was established under the Canada Business Corporations Act on May 15, 1992 as a result of the amalgamation of South American Goldfields Inc., a corporation incorporated under the federal laws of Canada, and Golden Star Resources Ltd., a corporation originally incorporated under the provisions of the Alberta Business Corporations Act on March 7, 1984 as Southern Star Resources Ltd. Our principal office is located at 10901 West Toller Drive, Suite 300, Littleton, Colorado 80127, and our registered and records offices are located at 66 Wellington St. W, 42^nd floor, Box 20, Toronto Dominion Bank Tower, Toronto Dominion Centre, Toronto, ON M5K 1N6. Our fiscal year ends on December 31.

Through our subsidiaries we own a controlling interest in four significant gold properties in southern Ghana in West Africa: the Bogoso/Prestea property (“Bogoso/Prestea”); the Wassa property (“Wassa”); the Hwini/Butre-Benso properties (“HBB Properties”, formerly referred to as the “St. Jude Properties”); and the Prestea Underground property (“Prestea Underground”).

The Bogoso/Prestea property encompasses the adjoining Bogoso and Prestea mining properties, which are operated as a single operation and referred to as “Bogoso/Prestea.” Bogoso/Prestea is owned by our 90% owned subsidiary Golden Star (Bogoso/Prestea) Limited (“GSBPL”, formerly known as Bogoso Gold Limited or BGL). In 2006, we produced and sold 103,793 ounces of gold from Bogoso/Prestea.

Wassa, which is located 35 kilometers east of Bogoso/Prestea, is owned by our 90% owned subsidiary Golden Star (Wassa) Limited (“GSWL”, formerly known as Wexford Goldfields Limited or WGL). Wassa produced and sold 97,614 ounces of gold during 2006.

The HBB Properties in Ghana were acquired in December 2005 as a result of our acquisition of St. Jude Resources Ltd. (“St. Jude”). The HBB Properties consist of the Hwini-Butre and Benso concessions covering an area of 201 square kilometers and located between 45 and 75 kilometers south of Wassa. We currently hold a 100% interest in these properties but the Government of Ghana is entitled to a 10% carried interest when mining permits are issued.

GSBPL owns a 90% operating interest in the Prestea Underground, an inactive underground mine. We continue to conduct exploration and engineering studies to determine if the Prestea Underground mine can be reactivated on a profitable basis.

We hold gold exploration properties in Sierra Leone, Ghana, Côte d’Ivoire, Niger, Burkina Faso, Suriname and French Guiana. We hold indirect interests in gold exploration properties in Peru and Chile through a 14% interest in the common shares of Minera IRL Limited, a privately held gold exploration company formerly known as “Goldmin Consolidated Holdings”. We have entered into a joint venture with a subsidiary of Newmont Mining Corporation pursuant to which Newmont may earn up to a 51% interest in the Saramacca property in Suriname.

All of our operations, with the exception of certain exploration projects, transact business in US dollars and keep financial records in US dollars. Our accounting records are kept in accordance with Canadian GAAP.

We are a reporting issuer or the equivalent in all provinces of Canada and in the United States and file disclosure documents with the Canadian securities regulatory authorities and the United States Securities and Exchange Commission.

GOLD SALES AND PRODUCTION

Ghana has been a significant gold producing country for over 100 years with AngloGold Ashanti’s Obuasi mine and our inactive underground mine at Prestea historically being the two major producers. Several other areas in Ghana have also produced significant amounts of gold. The gold industry in Ghana is currently experiencing growth in exploration and development and gold production. Annual gold production in Ghana has exceeded two million ounces in recent years and is expected to increase as planned developments and expansions now underway reach the production stage.

All of our gold production is sold to a South African gold refinery. Our gold is sold in the form of doré bars which average approximately 91% gold by weight with the remaining portion being primarily silver. Revenue is recognized when title is transferred at the refinery. The sales price is based on the London P.M. fix on the day of delivery to the refinery.

GOLD PRICE HISTORY

The price of gold is volatile and is affected by numerous factors beyond our control such as the sale or purchase of gold by various central banks and financial institutions, inflation or deflation, fluctuation in the relative values of the US dollar and foreign currencies, changes in global and regional gold demand, and the political and economic conditions of major gold-producing countries throughout the world.

The following table presents the high, low and average afternoon fixed prices for gold per ounce on the London Bullion Market over the past ten years:

														Average Price Received
Year		High				Low				Average				by Golden Star
1996			415				367				388				N/A
1997			362				283				331				N/A
1998			313				273				294				N/A
1999			326				253				279				293
2000			313				264				279				280
2001			293				256				271				271
2002			349				278				310				311
2003			416				320				363				364
2004			454				375				410				410
2005			537				411				445				446
2006			725				525				603				607
To March 12, 2007			686				608				647				650

Data Source: www.kitco.com

The following diagram depicts the organizational structure of Golden Star and its significant subsidiaries:

BUSINESS STRATEGY AND DEVELOPMENT

Since 1999, our business and development strategy has been focused primarily on the acquisition of producing and development-stage gold properties in Ghana and on the exploration, development and operation of these properties. Since 1999, our exploration efforts have been focused on Ghana, other West African countries and South America.

In line with our business strategy, we acquired Bogoso in 1999 and have operated a CIL processing plant at Bogoso since that time (the “Bogoso CIL processing plant”). In 2001, we acquired Prestea and have been mining surface deposits at Prestea since late 2001. In late 2002, we acquired Wassa, and following completion of a feasibility study, constructed a new CIL processing plant at Wassa which began commercial operation in April 2005 (the “Wassa CIL processing plant”).

We are in the process of completing and commissioning a nominal 3.5 million tonnes per year processing facility that uses a proprietary BIOX^® bio-oxidation technology to treat refractory sulfide ore (the “Bogoso BIOX^® processing plant”). We have stockpiled about one million tonnes of refractory ore, and the new processing facility is currently processing ore. We expect to complete commissioning of the Bogoso BIOX® processing plant in March 2007, with operations expected to commence in April 2007 and throughput and metallurgical recoveries increasing over the remainder of 2007. Based on currently known Proven and Probable Mineral Reserves and after the Bogoso BIOX^® processing plant comes on line, we expect a mine life of approximately 10 years at Bogoso/Prestea. Achievement of this target is subject to numerous risks. See the discussion of Risk Factors in Item 1A of this Form 10–K.

In late 2005, we acquired the HBB Properties. During 2006 we carried out geological, environmental and engineering studies to determine the economic feasibility of these undeveloped gold properties. These studies will continue into 2007.

Our overall objective since 1999 has been to grow our business to become a mid–tier gold producer with an annualized production rate of approximately 500,000 ounces. We anticipate reaching this production rate in the fourth quarter of 2007 once the Bogoso sulfide expansion project has achieved full production. We continue to evaluate potential acquisition and merger opportunities that could further increase our annual gold production. However we presently have no agreement or understanding with respect to any specific potential transaction.

We also conduct gold exploration in West Africa and South America, investing approximately $15.3 million on such activities during 2006. The majority of our 2006 exploration spending was focused on our new HBB Properties south of Wassa, on the Prestea Underground and on expanding Mineral Reserves around our existing mines. We actively conducted

regional reconnaissance projects in south Ghana, Cote d’Ivoire and Sierra Leone and have drilled more advanced targets in Ghana, Niger and Burkina Faso.

We employ a number of different strategies to achieve our exploration goals including the following:

•

we maintain a staff of geologists in Ghana responsible for exploring for new Mineral Resources in Ghana and for developing new Mineral Reserves in areas around the existing operations;

•

we contract with geologic consultants who advise us on existing holdings and who seek to identify new exploration opportunities;

•

we have purchased equity ownership in gold exploration companies that use the equity funds provided by us to explore in their areas of expertise;

•

we provide funding to joint venture partners that use our funding to conduct active exploration efforts; and

•

we maintain an international exploration group that carries out work on various properties in the Guiana Shield area of South America and in other areas of Africa outside of Ghana.

OUR ASSETS

Bogoso/Prestea Property- Our Bogoso/Prestea gold mine consists of two ore processing facilities and several open pit mines. Ore is hauled by truck from the pits to the processing plants. The nominal combined capacity of the Bogoso CIL processing plant and the Bogoso BIOX® processing plant is expected to be approximately 5.0 million tonnes of ore per year. In addition to the mine and processing plant facilities, Bogoso/Prestea’s assets include a fleet of mining equipment, numerous ancillary facilities including warehouses, maintenance shops, roadways, administrative offices and a residential complex. Historical gold output at the Bogoso processing plant has typically ranged between 100,000 and 175,000 ounces per year. See the “Gold Production and Unit Costs” table below for additional details on historical production and operating costs. The Bogoso/Prestea property also incorporates the following:

			Prestea Underground – The Prestea Underground is located directly beneath the Prestea property. It consists of a large underground gold mine that operated for over 100 years under a number of former owners. We are continuing to conduct exploration and development drilling and carry out engineering, geological and economic analysis of the mine to determine if it can be reopened on a profitable basis. The mine includes three useable shafts which allow access to all levels and several kilometers of underground workings on numerous levels extending as deep as 1,400 meters below the surface.
			Pampe – The Pampe deposit is located approximately 19 kilometers west of the Bogoso processing plants. We have identified an Probable Mineral Reserve of 2.1 million tonnes at an average gold grade of 3.31 g/t, which we believe is recoverable by open pit mining methods. Development of this deposit as a satellite to our Bogoso/Prestea property is substantially complete and ore production commenced in March 2007.
			Mampon – The Mampon deposit is located approximately 35 kilometers north of the Bogoso processing plant. It was acquired in 2003 as part of the Dunkwa property acquisition. Mampon is an undeveloped gold deposit with 1.3 million tonnes of Probable Mineral Reserves at an average gold grade of 5.14 g/t which we believe is recoverable by open pit mining methods. Production from this deposit, as a satellite pit to our Bogoso/Prestea property, is scheduled to begin in late 2008.

Wassa Property – We own and operate the Wassa gold mine in southwest Ghana. The property includes four open-pits, a nominal 4.0 million tonne per annum CIL processing plant with its crushing and grinding circuits, a fleet of mining equipment, ancillary facilities including an administration building, a warehouse, a maintenance shop, a stand-by power generating facility and a residential complex. The new Wassa CIL processing plant was completed in early 2005 and placed in service on April 1, 2005. The plant’s nominal design processing capacity ranges from 3.5 to 4.0 million tonnes per year depending on hardness of the ore. Wassa’s 2006 gold production and operating costs are shown on the “Gold Production and Unit Costs” table below.

HBB Properties – The HBB Properties consist primarily of the Hwini-Butre and Benso concessions containing undeveloped zones of gold mineralization and which together cover an area of 201 square kilometers. These two properties are located between 45 and 75 kilometers south of our Wassa mine. Prior to our acquisition, the previous owner conducted extensive exploration work at Hwini-Butre and Benso and based on our review of this past work as well as our own exploration efforts, we estimated an Indicated Mineral Resource at December 31, 2006 of approximately 5.2 million tonnes at an average gold grade of 4.30 g/t.

Exploration Assets – We have interests in numerous gold exploration properties in Ghana, Cote d’Ivoire, Sierra Leone, Burkina Faso, Niger, French Guiana, Suriname and in other areas of South America.

GOLD PRODUCTION AND UNIT COSTS

The following table shows historical and projected gold production and cash operating costs.

														2007
Production and Cost Per Ounce(1)		2004				2005				2006				Projected
BOGOSO/PRESTEA
Production(2) (thousands of ounces)			147.9				131.9				103.8	(3)			280.0
Cash Operating Cost ($/oz)			250				338				412				380
Total Cash Cost ($/oz)			264				351				430				—
Total Operating Cost ($/oz)			350				423				530				—
WASSA(3)
Production(2) (thousands of ounces)			—				69.1	(4)			97.6				110.0
Cash Operating Cost ($/oz)			—				468	(4)			475				410
Total Cash Cost ($/oz)			—				482	(4)			493				—
Total Operating Cost ($/oz)			—				587	(4)			615				—
CONSOLIDATED
Consolidated Total Production(2) (thousands of ounces)			147.9				201.0				201.4				390.0
Consolidated Cash Operating Cost ($/oz)			250				383				442				389
Consolidated Total Cash Cost ($/oz)			264				396				460				—
Consolidated Total Operating Cost ($/oz)			350				479				560				—

MINERAL RESERVES

Our Proven and Probable Mineral Reserves are estimated in conformance with definitions set out in NI 43-101. Technical Reports on our Mineral Reserves for Bogoso/Prestea and Wassa have been filed as required by NI 43-101. The Proven and Probable Mineral Reserves are those ore tonnages contained within economically optimized pits, configured using current and predicted mining and processing methods and related operating costs and performance parameters. We believe that our Mineral Reserves are estimated on a basis consistent with the definition of proven and probable reserves prescribed for use in the US by the US Securities and Exchange Commission and set forth in SEC Industry Guide 7. See our “Glossary of Terms.”

In estimating Mineral Reserves, we first design an economically optimized pit based on all operating costs, including the costs to mine. Since all material lying within the optimized pit will be mined, the cut-off grade used in determining our Mineral Reserves is estimated on the basis of material that, having been mined, is economic to transport and process without regard to primary mining costs (i.e. mining costs that were appropriately applied at the economic optimization stage).

The QA/QC controls program used in connection with the estimation of our Mineral Reserves consists of regular insertion and analysis of blanks and standards to monitor laboratory performance. Blanks are used to check for contamination. Standards are used to check for grade-dependence biases. A total of eleven standards are used, five generated by Golden Star ranging from 0.24 to 4.55 g/t and six commercially available standards ranging from 0.22 to 3.42 g/t.

The following table summarizes our estimated Proven and Probable Mineral Reserves as of December 31, 2006 and December 31, 2005:

PROVEN AND PROBABLE MINERAL RESERVES

		As at December 31, 2006												As at December 31, 2005
Property		Tonnes				Gold Grade				Ounces				Tonnes				Gold Grade				Ounces
Mineral Reserve Category		(millions)				(g/t)				(millions)				(millions)				(g/t)				(millions)
Bogoso/Prestea(1)
Proven Mineral Reserves
Non-refractory			0.9				2.30				0.07				1.9				3.82				0.23
Refractory			14.5				2.95				1.38				13.0				3.00				1.25
Total Proven			15.5				2.91				1.45				14.9				3.11				1.48
Probable Mineral Reserves
Non-refractory			6.9				2.59				0.57				8.0				2.42				0.62
Refractory			19.3				2.65				1.64				11.9				2.60				1.00
Total Probable			26.2				2.64				2.22				20.0				2.53				1.62
Total Proven and Probable
Non-refractory			7.8				2.56				0.64				9.9				2.68				0.86
Refractory			33.8				2.78				3.02				24.9				2.81				2.25
Total Bogoso/Prestea Proven and Probable			41.6				2.74				3.67				34.8				2.78				3.11
Wassa
Proven Mineral Reserves Non-refractory			0.5				1.08				0.02				—				—				—
Probable Mineral Reserves Non-refractory			13.0				1.11				0.46				21.9				1.34				0.94
Total Wassa Proven & Probable			13.6				1.11				0.48				21.9				1.34				0.94
Totals
Proven Mineral Reserves
Non-refractory			1.5				1.85				0.09				1.9				3.82				0.23
Refractory			14.5				2.95				1.38				13.0				3.00				1.25
Total Proven			16.0				2.85				1.47				14.9				3.11				1.48
Probable Mineral Reserves
Non-refractory			19.9				1.62				1.04				30.0				1.63				1.57
Refractory			19.3				2.65				1.64				11.9				2.60				1.00
Total Probable			39.2				2.13				2.68				41.9				1.90				2.57
Total Proven and Probable
Non-refractory			21.4				1.64				1.13				31.9				1.76				1.80
Refractory			33.8				2.78				3.02				24.9				2.81				2.25
Total Proven and Probable			55.2				2.34				4.15				56.8				2.22				4.05

Stockpiled Ores

Stockpiled ores are included in the Mineral Reserves for both Bogoso/Prestea and Wassa. Details of the stockpiles included in the Mineral Reserves at year-end 2006 and 2005 are summarized in the table below.

STOCKPILES INCLUDED IN MINERAL RESERVES

		As at December 31, 2006												As at December 31, 2005
Property		Tonnes				Gold Grade				Ounces				Tonnes				Gold Grade				Ounces
Mineral Reserve Category		(millions)				(g/t)				(millions)				(millions)				(g/t)				(millions)
Bogoso/Prestea
Proven Stockpiles
Non-refractory			0.5				2.70				0.04				0.2				2.39				0.02
Refractory			1.1				3.09				0.10				0.2				2.44				0.01
Total Proven Stockpiles			1.6				2.96				0.15				0.4				2.42				0.03
Wassa
Proven Stockpiles
Non-refractory			0.3				0.79				0.01				—				—				—
Totals
Proven Stockpiles
Non-refractory			0.8				2.01				0.05				0.2				2.39				0.02
Refractory			1.1				3.09				0.10				0.2				2.44				0.01
Total Proven			1.9				2.62				0.16				0.4				2.42				0.03

Reconciliation of Mineral Reserves as shown under NI 43-101 and under SEC Industry Guide 7

Since we report our Mineral Reserves to both NI 43-101 and SEC Industry Guide 7 standards, it is possible for our reserve figures to vary between the two. Where such a variance occurs it will arise from the differing requirements for reporting Mineral Reserves. For example, NI 43-101 has a minimum requirement that Mineral Reserves be supported by a pre-feasibility study, whereas Industry Guide 7 requires support from a detailed feasibility study that demonstrates that economic extraction is justified.

For the Mineral Reserves at December 31, 2006 and 2005, there is no difference between the Mineral Reserves as disclosed under NI 43-101 and those disclosed under Industry Guide 7, and therefore we do not provide reconciliation.

Reconciliation of Proven and Probable Mineral Reserves — December 31, 2005 to December 31, 2006

		Tonnes				Contained Ounces				Tonnes				Ounces
Reconciliation		(millions)				(millions)				(% of Opening)				(% of Opening)
Opening Mineral Reserves at December 31, 2005			56.8				4.05				100				100
Gold Price Increase(1)			28.6				1.37				50				34
Exploration Changes(2)			(2.1	)			(0.04	)			(4	)			(1	)
Mining Depletion(3)			(4.9	)			(0.28	)			(9	)			(7	)
Engineering (4)			(23.2	)			(0.95	)			(41	)			(23	)
Closing Mineral Reserves at December 31, 2006			55.2				4.15				97				102

NON-RESERVES — MEASURED AND INDICATED MINERAL RESOURCES

Measured and Indicated Mineral Resources

Cautionary Note to US Investors concerning estimates of Measured and Indicated Mineral Resources

This section uses the terms “Measured Mineral Resources” and “Indicated Mineral Resources.” We advise US investors that while those terms are recognized and required by Canadian regulations, the US Securities and Exchange Commission does not recognize them. US investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into Mineral Reserves.

Our Measured and Indicated Mineral Resources which are reported in this Form 10-K do not include that part of our Mineral Resources that have been converted to Proven and Probable Mineral Reserves as shown above, and have been estimated in conformance with definitions set out in NI 43-101. We have filed Technical Reports on our Mineral Reserves and Mineral Resources (Mineral Resources stated in the Technical Reports include Mineral Reserves) for Bogoso/Prestea and Wassa as required by NI 43-101. See our “Glossary of Terms.”

The total Measured and Indicated Mineral Resources for our properties have been estimated at an economic cut-off grade based on a gold price of $560 per ounce for December 31, 2006 and $480 per ounce for December 31, 2005 and on economic constraints that we consider are realistic. The economic cut-off grades for Mineral Resources are higher than those for Mineral Reserves and are indicative of the fact that the Mineral Resource estimates include material that may become economic under more favorable conditions including increases in gold price.

The following table summarizes our estimated non-reserves (Measured and Indicated Mineral Resources) as of December 31, 2006 as compared to the totals for December 31, 2005:

																		Measured &
		Measured								Indicated								Indicated
						Gold								Gold								Gold
		Tonnes				Grade				Tonnes				Grade				Tonnes				Grade
Property		(millions)				(g/t)				(millions)				(g/t)				(millions)				(g/t)
Bogoso/Prestea(1)			6.1				2.05				14.0				2.32				20.2				2.23
Prestea Underground			—				—				1.1				16.30				1.1				16.30
Wassa			0.2				1.05				11.7				0.75				11.9				0.76
Hwini-Butre & Benso			—				—				5.2				4.30				5.2				4.30
Goulagou(8)			—				—				2.7				1.75				2.7				1.75
Total 2006			6.4				2.02				34.7				2.48				41.0				2.40
Total 2005			3.5				2.20				33.9				2.09				37.4				2.10

NON-RESERVES — INFERRED MINERAL RESOURCES

Inferred Mineral Resources

Cautionary Note to US Investors concerning estimates of Inferred Mineral Resources

This section uses the term “Inferred Mineral Resources.” We advise US investors that while this term is recognized and required by Canadian regulations, the US Securities and Exchange Commission does not recognize it. “Inferred Mineral Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of Inferred Mineral Resources will ever be upgraded to a higher category. In accordance with Canadian rules, estimates of Inferred Mineral Resources cannot form the basis of feasibility or other economic studies. US investors are cautioned not to assume that part or all of the Inferred Mineral Resource exists, or is economically or legally mineable.

Our Inferred Mineral Resources have been estimated in conformance with definitions set out in NI 43-101. We have filed Technical Reports on our Mineral Reserves and Mineral Resources (Mineral Resources stated in the Technical Reports include Mineral Reserves) for Bogoso/Prestea and Wassa as required by NI 43-101. See our “Glossary of Terms.”

The Inferred Mineral Resources for our properties have been estimated at economic cut-off grades based on gold prices of $560 per ounce and $480 per ounce as of December 31, 2006 and December 31, 2005, respectively, and economic constraints that we consider are realistic.

The following table summarizes our estimated non-reserves – Inferred Mineral Resources as of December 31, 2006 as compared to the total for December 31, 2005:

		Inferred
						Gold
		Tonnes				Grade
Property		(millions)				(g/t)
Bogoso/Prestea(1)			4.2				2.70
Prestea Underground			5.0				8.68
Wassa			7.2				1.18
Hwini-Butre & Benso			1.6				4.02
Goulagou			0.5				1.02
Paul Isnard(9)			10.2				1.70
Total 2006			28.7				3.05
Total 2005			34.0				2.86

Notes to Non-Reserves – Inferred Mineral Resources Table

EMPLOYEES

As of December 31, 2006, Golden Star, including our majority-owned subsidiaries, had approximately 1,600 permanent employees and approximately 200 full time contract employees, a 20% increase from the approximately 1,500 people employed at the end of 2005. The 2006 total includes 14 employees at our principal office in Littleton, Colorado.

CUSTOMERS

Currently all our gold production is sold to a South African gold refinery in accordance with a long-term contract. We receive payment for gold sold approximately five working days after the gold leaves the mine site. We recognize revenue

when title passes to the buyer which occurs upon delivery to the refinery, unless we decide to retain title and hold the gold as inventory. During 2006 we sold all of the gold shipped, retaining no inventory of saleable doré bars. The global gold market is competitive with numerous banks and refineries willing to buy gold on short notice. Therefore we believe that the loss of our current customer would not materially delay or disrupt revenues.

COMPETITION

Our competitive position depends upon our ability to successfully and economically explore, acquire and develop new and existing mineral properties. Factors that allow producers to remain competitive in the market over the long term include the quality and size of ore bodies, costs of operation, and the acquisition and retention of qualified employees. We compete with other mining companies and other natural mineral resource companies in the acquisition, exploration, financing and development of new mineral properties. Many of these companies are larger and better capitalized than we are. There is significant competition for the limited number of gold acquisition and exploration opportunities.

We also compete with other mining companies for skilled mining engineers, mine and processing plant operators and mechanics, geologists, geophysicists and other technical personnel. This could result in higher turnover and greater labor costs.

SEASONALITY

Most of our operations are in tropical climates which experience annual rainy seasons. Typically mining operations are not materially affected by the rainy seasons in Ghana but unusually high rainfall in some years have impeded mine production at Bogoso/Prestea and heavy rains have in the past on occasion interrupted underground drilling in the Prestea Underground. Exploration efforts in Ghana and in the Guiana Shield in South America are generally timed to avoid the rainy periods to ease transportation logistics associated with wet roads and swollen rivers. Recent decreases in rainfall in the Volta river catchment basin has resulted in reduced electric power availability from a hydroelectric power plant that produces a major portion of Ghana’s electric power.

AVAILABLE INFORMATION

We make available, free of charge, on or through our Internet website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Internet address is www.gsr.com. Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS

RISK FACTORS

You should consider the following discussion of risks in addition to the other information contained in or included by reference in this Form 10-K. In addition to historical information, the information in this form 10-K contains “forward-looking” statements about our future business and performance. Our actual operating results and financial performance may be very different from what we expect as of the date of this Form 10-K. The risks below address material factors that may affect our future operating results and financial performance.

Financial Risks

A substantial or prolonged decline in gold prices would have a material adverse effect on us.

The price of our common shares, our financial results and our exploration, development and mining activities have previously been, and would in the future be, significantly adversely affected by a substantial or prolonged decline in the price of gold. The price of gold is volatile and is affected by numerous factors beyond our control such as the sale or purchase of gold by various central banks and financial institutions, inflation or deflation, fluctuation in the value of the United States

dollar and foreign currencies, global and regional demand, and the political and economic conditions of major gold-producing countries throughout the world. Any drop in the price of gold adversely impacts our revenues, profits and cash flows. In particular, a sustained low gold price could:

	•		cause suspension of our mining operations at Bogoso/Prestea and Wassa if the operations become uneconomic at the then-prevailing gold price, thus further reducing revenues;
	•		cause us to be unable to fulfill our obligations under agreements with our partners or under our permits and licenses which could cause us to lose our interests in, or be forced to sell, some of our properties;
	•		cause us to be unable to fulfill our debt payment obligations;
	•		halt or delay the development of new projects; and
	•		reduce funds available for exploration, with the result that depleted reserves are not replaced.

Furthermore, the need to reassess the feasibility of any of our projects because of declining gold prices could cause substantial delays or could interrupt operations until a reassessment could be completed. Mineral Reserve estimations and life-of-mine plans using significantly lower gold prices could result in reduced estimates of mineral reserves and non-reserve mineral resources and in material write-downs of our investment in mining properties and increased amortization, reclamation and closure charges.

We may incur substantial losses in the future that could make financing our operations and business strategy more difficult.

We experienced a net loss of $13.5 million in 2005 and have experienced net losses in other prior fiscal years. Numerous factors, including declining gold prices, lower than expected ore grades or higher than expected operating costs (including increased commodity prices), and impairment write-offs of mine property and/or exploration property costs, could cause us to be unprofitable in the future. Future operating losses could make financing our operations and our business strategy, including pursuit of the growth opportunities anticipated at the HBB Properties, or raising additional capital, difficult or impossible and could materially and adversely affect our operating results and financial condition.

Our obligations could strain our financial position and impede our business strategy.

We had total consolidated debt and liabilities as of December 31, 2006 of $194.3 million, including $15.0 million payable to banks, $22.9 million in equipment financing loans, $48.4 million in senior convertible notes maturing on April 15, 2009, $44.5 million of current trade payables, accrued current and other liabilities, $42.2 million of future taxes, a $19.1 million accrual for environmental rehabilitation liabilities and $2.2 million of derivative and other liabilities. We expect that our indebtedness and other liabilities will increase as a result of our corporate development activities. These liabilities could have important consequences, including the following:

	•		increasing our vulnerability to general adverse economic and industry conditions;
	•		limiting our ability to obtain additional financing to fund future working capital, capital expenditures, exploration costs and other general corporate requirements;
	•		requiring us to dedicate a significant portion of our cash flow from operations to make debt service payments, which would reduce our ability to fund working capital, capital expenditures, exploration costs and other general corporate requirements;
	•		limiting our flexibility in planning for, or reacting to, changes in our business and the industry; and
	•		placing us at a disadvantage when compared to our competitors that have less debt relative to their market capitalization.

Our estimates of Mineral Reserves and non-reserves could be inaccurate, which could cause production and costs to differ from estimates.

There are numerous uncertainties inherent in estimating Proven and Probable Mineral Reserves and non-reserves, Measured, Indicated and Inferred mineral resources, including many factors beyond our control. The accuracy of estimates of Mineral Reserves and non-reserves is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological interpretation, which could prove to be unreliable. These estimates of Mineral Reserves and non-reserves may not be accurate, and Mineral Reserves and non-reserves may not be able to be mined or processed profitably.

Fluctuation in gold prices, results of drilling, metallurgical testing, production, and the evaluation of mine plans subsequent to the date of any estimate could require revision of the estimates. The volume and grade of Mineral Reserves mined and processed and recovery rates might not be the same as currently anticipated. For example, approximately 34% of the reduction in Wassa’s Mineral Reserves at year-end 2006 resulted from changes in the resource model at Wassa based on our mining experience. Any material reductions in estimates of our Mineral Reserves and non-reserves, or of our ability to extract these Mineral Reserves and non-reserves, could have a material adverse effect on our results of operations and financial condition.

We currently have only two sources of operational cash flows, which will likely be insufficient by themselves to fund our continuing exploration and development activities.

While we have received significant infusions of cash from sales of our equity and debt, and in 2006 from the sale of shares of EURO Ressources S.A. and Moto Goldmines Limited, our only current significant internal sources of funds are operational cash flows from Bogoso/Prestea and Wassa. The anticipated continuing exploration and development of our properties are expected to require significant expenditures over the next several years, which should increase as we focus on development of the HBB Properties. We expect that these expenditures will exceed free cash flows generated by Bogoso/Prestea and Wassa during 2007 and possibly in later years and therefore we expect to require additional external debt or equity financing in the future. In the future, we may not be able to obtain adequate financing on acceptable terms, which could cause us to delay or indefinitely postpone further exploration and development of our properties. As a result, we could lose our interest in, or could be forced to sell, some of our properties.

We are subject to fluctuations in currency exchange rates, which could materially adversely affect our financial position.

Our revenues are in United States dollars, and we maintain most of our working capital in United States dollars or United States dollar-denominated securities. We convert our United States funds to foreign currencies as certain payment obligations become due. Accordingly, we are subject to fluctuations in the rates of currency exchange between the United States dollar and these foreign currencies, and these fluctuations could materially affect our financial position and results of operations. A significant portion of the operating costs at Bogoso/Prestea and Wassa is based on the Ghanaian currency, the Cedi. We are required to convert into Cedis only 20% of the foreign exchange proceeds that we receive from selling gold, but the Government of Ghana could require us to convert a higher percentage of gold sales proceeds into Cedis in the future. In addition, we currently have future obligations that are payable in South African Rand and Euros, and receivables collectible in Euros. We obtain construction and other services and materials and supplies from providers in South Africa and other countries. The costs of goods and services could increase due to changes in the value of the United States dollar or the Cedi, Euros, the South African Rand or other currencies, such as the recent cost increase due to the decrease in the value of the United States dollar relative to other currencies. Consequently, operation and development of our properties might be more costly than we anticipate.

In the past, we have purchased South African Rand and Euro forward contracts to hedge the expected purchase of capital assets in South Africa and Europe in connection with the Bogoso sulfide expansion project. We may engage in additional currency hedges in the future in connection with other projects. Implementation of a currency hedging program may not adequately protect us from the effects of fluctuation in currency exchange rates.

Gold hedging could be unsuccessful and result in losses.

We purchased put options (“puts”) and sold call options (“calls”) from time to time during the construction phase of the new processing plant at Bogoso in Ghana. Puts give us the right but not the obligation to sell gold in the future at a fixed price. Calls are contractual commitments which require us to sell gold at a fixed price on specified future dates. If the spot market gold price exceeds the call option price on the specified sale date, we would receive the call price rather than the higher spot market price for the gold ounces covered by the call option. Of our expected 2007 production, approximately 1.5% is subject to calls at $525 per ounce, and approximately 10% is protected by puts at a floor price of $404 per ounce.

All of our hedges were closed or expired by March 31, 2007, and we have decided not to implement a more general hedging program on gold production from our own properties at this time. We continue to review whether or not, in light of the potential for gold prices to fall, it would be appropriate to establish a more general hedging program.

Risks inherent in acquisitions that we might undertake could adversely affect our current business and financial condition and our growth.

We plan to continue to pursue the acquisition of producing, development and advanced stage exploration properties and companies. The search for attractive acquisition opportunities and the completion of suitable transactions are time consuming and expensive, divert management attention from our existing business and may be unsuccessful. Success in our acquisition activities depends on our ability to complete acquisitions on acceptable terms and integrate the acquired operations successfully with our operations. Any acquisition would be accompanied by risks. For example, there may be a significant change in commodity prices after we have committed to complete a transaction and established the purchase price or exchange ratio, a material ore body may prove to be below expectations or the acquired business or assets may have unknown liabilities which may be significant. We may lose the services of our key employees or the key employees of any business we acquire or have difficulty integrating operations and personnel. The integration of an acquired business or assets may disrupt our ongoing business and our relationships with employees, suppliers and contractors. Any one or more of these factors or other risks could cause us not to realize the anticipated benefits of an acquisition of properties or companies, and could have a material adverse effect on our current business and financial condition and on our ability to grow.

We are subject to litigation risks.

All industries, including the mining industry, are subject to legal claims, with and without merit. We are involved in various routine legal proceedings, which include labor matters such as unfair termination claims, supplier matters and property issues incidental to our business. Defense and settlement costs can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, the resolution of any particular legal proceeding could have a material effect on our financial position and results of operations.

Operational Risks

The technology and cost of production with respect to refractory materials at Bogoso/Prestea remain subject to a number of uncertainties.

We began processing refractory ore from Bogoso/Prestea at the Bogoso BIOX^® processing plant in early 2007. Our projections for 2007 include assumptions that (i) the Bogoso BIOX^® processing plant will be operational on April 1, 2007, (ii) the processing technology will achieve certain anticipated efficiencies and (iii) production will increase and cash operating costs will decrease at certain rates throughout 2007. We have experienced delays in the past in building and commissioning this plant for operations, and the plant utilizes a technology that has not been commercially utilized under our circumstances, including on the Bogoso/Prestea refractory sulfide ore. There can be no assurance that our assumptions regarding anticipated efficiencies and timing will be realized. If we experience delays in start-up or other problems with the technology, our production and cost estimates for 2007 and thereafter may not be achieved.

We are subject to a number of operational hazards that can delay production or result in liability to us.

Our activities are subject to a number of risks and hazards including:

	•		difficulty in applying technology such as bio-oxidation processing;
	•		power shortages;
	•		environmental hazards;
	•		discharge of pollutants or hazardous chemicals;
	•		industrial accidents;
	•		labor disputes and shortages;
	•		supply and shipping problems and delays;
	•		shortage of equipment and contractor availability;
	•		unusual or unexpected geological or operating conditions;

	•		cave-ins of underground workings;
	•		slope failures and failure of pit walls or dams;
	•		fire;
	•		marine and transit damage and/or loss;
	•		changes in the regulatory environment; and
	•		natural phenomena such as inclement weather conditions, floods, droughts and earthquakes.

These or other occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, delayed production, monetary losses and possible legal liability. We could incur liabilities as a result of pollution and other casualties. Satisfying such liabilities could be very costly and could have a material adverse effect on our financial position and results of operations.

Our mining operations are subject to numerous environmental laws, regulations and permitting requirements that can delay production and adversely affect operating and development costs.

Compliance with existing regulations governing the discharge of materials into the environment, or otherwise relating to environmental protection, in the jurisdictions where we have projects may have a material adverse effect on our exploration activities, results of operations and competitive position. New or expanded regulations, if adopted, could affect the exploration or development of our projects or otherwise have a material adverse effect on our operations.

A significant portion of our Dunkwa property and portions of our Wassa property, as well as some of our exploration properties in Ghana, are located within forest reserve areas. Although Dunkwa and Wassa have been identified by the Government of Ghana as eligible for mining permits, subject to normal procedures and a site inspection, permits for projects in forest reserve areas may not be issued in a timely fashion, or at all, and such permits may contain special requirements with which it is burdensome or uneconomic to comply.

Mining and processing gold from the south end of the Prestea property and from the Pampe and Mampon properties and other activities will require mining and other permits from the Government of Ghana. These permits may not be issued on a timely basis or at all, and such permits, when issued, may be subject to requirements or conditions with which it is burdensome or uneconomic to comply. Such permitting issues could adversely affect our projected production commencement dates, production amounts and costs.

Due to an increased level of non-governmental organization activity targeting the mining industry in Ghana, the potential for the Government of Ghana to delay the issuance of permits or impose new requirements or conditions upon mining operations in Ghana may be increased. Any changes in the Government of Ghana’s policies may be costly to comply with and may delay mining operations. The exact nature of other environmental control problems, if any, which we may encounter in the future cannot be predicted, primarily because of the changing character of environmental requirements that may be enacted within various jurisdictions. To the extent that we are subject to any such changes, they may have a material adverse effect on our operations.

As a result of the foregoing risks, project expenditures, production quantities and rates and cash operating costs, among other things, could be materially and adversely affected and could differ materially from anticipated expenditures, production quantities and rates, and costs. In addition, estimated production dates could be delayed materially. Any such events could materially and adversely affect our business, financial condition, results of operations and cash flows.

The development and operation of our mining projects involve numerous uncertainties that could affect the feasibility or profitability of such projects.

Mine development projects, including our recent development at Wassa and expansion at Bogoso/Prestea, and the potential development of the HBB Properties, if Mineral Reserves are established, typically require a number of years and significant expenditures during the development phase before production is possible.

Development projects are subject to the completion of successful feasibility studies and environmental assessments, issuance of necessary governmental permits and receipt of adequate financing. The economic feasibility of development projects is based on many factors such as:

	•		estimation of Mineral Reserves and Mineral Resources;
	•		mining rate, dilution and recovery
	•		anticipated metallurgical and throughput recovery rates;
	•		environmental considerations and permitting;
	•		future gold prices; and
	•		anticipated capital and operating costs.

Our mine development projects could have limited relevant operating history upon which to base estimates of future operating costs and capital requirements. Estimates of Proven and Probable Mineral Reserves and operating costs determined in feasibility studies are based on geologic and engineering analyses and might not prove to be accurate.

The management of mine development projects and start up of new operations are complex, and we do not have a history of simultaneously managing ongoing operations, the start-up of a new operation and a significant development project. Completion of development and the commencement of production may be subject to delays, as occurred at Wassa and in connection with the Bogoso sulfide expansion project. Any of the following events, among others, could affect the profitability or economic feasibility of a project:

	•		unanticipated changes in grade and tonnage of ore to be mined and processed;
	•		unanticipated adverse geotechnical conditions;
	•		incorrect data on which engineering assumptions are made;
	•		costs of constructing and operating a mine in a specific environment;
	•		availability and cost of processing and refining facilities;
	•		availability of economic sources of power;
	•		adequacy of water supply;
	•		adequate access to the site including competing land uses (such as agriculture and illegal mining);
	•		unanticipated transportation costs and shipping incidents and losses;
	•		significant increases in the cost of diesel fuel, cyanide or other major components of operating costs;
	•		government regulations (including regulations relating to prices, royalties, duties, taxes, permitting, restrictions on production, quotas on exportation of minerals, as well as the costs of protection of the environment and agricultural lands);
	•		fluctuations in gold prices; and
	•		accidents, labor actions and force majeure events.

Adverse effects on the operations or further development of a project could also adversely affect our business, financial condition, results of operations and cash flow. Because of these uncertainties, and others identified in these “Risk Factors,” our production estimates at Bogoso/Prestea and Wassa may not be achieved.

We need to continually discover, develop or acquire additional Mineral Reserves for gold production and a failure to do so would adversely affect our business and financial position in the future.

Because mines have limited lives based on Proven and Probable Mineral Reserves, we must continually replace and expand our Mineral Reserves as our mines produce gold. We estimate that once the Bogoso BIOX^® processing plant comes on line, Bogoso/Prestea has about ten years of remaining mine life and Wassa has about three and one-half years of remaining mine life based on current Mineral Reserves, but our estimates may not be correct. In addition, mine life would be shortened if we expand production. Our ability to maintain or increase our annual production of gold will be dependent in significant part on our ability to bring new mines into production and to expand or extend the life of existing mines.

Gold exploration is highly speculative, involves substantial expenditures, and is frequently non-productive.

Gold exploration, including the exploration of the Prestea Underground, the HBB Properties and other projects, involves a high degree of risk. Exploration projects are frequently unsuccessful. Few prospects that are explored are ultimately developed into producing mines. We cannot assure you that our gold exploration efforts will be successful. The success of gold exploration is dependent in part on the following factors:

	•		the identification of potential gold mineralization based on superficial analysis;
	•		availability of prospective land;
	•		availability of government-granted exploration and exploitation permits;
	•		the quality of our management and our geological and technical expertise; and
	•		the funding available for exploration and development.

Substantial expenditures are required to determine if a project has economically mineable mineralization. It could take several years to establish Proven and Probable Mineral Reserves and to develop and construct mining and processing facilities. As a result of these uncertainties, we cannot assure you that current and future exploration programs will result in the discovery of Mineral Reserves, the expansion of our existing Mineral Reserves and the development of mines.

We face competition from other mining companies in connection with the acquisition of properties.

We face strong competition from other mining companies in connection with the acquisition of properties producing, or capable of producing, precious metals. Many of these companies have greater financial resources, operational experience and technical capabilities. As a result of this competition, we might be unable to maintain or acquire attractive mining properties on terms we consider acceptable or at all. Consequently, our future revenues, operations and financial condition could be materially adversely affected.

Title to our mineral properties could be challenged.

We seek to confirm the validity of our rights to title to, or contract rights with respect to, each mineral property in which we have a material interest. We have mining leases with respect to our Bogoso/Prestea, Wassa, and Prestea Underground properties and own the exploration concessions that comprise the HBB Properties. However, we cannot guarantee that title to our properties will not be challenged. Title insurance generally is not available, and our ability to ensure that we have obtained a secure claim to individual mineral properties or mining concessions could be severely constrained. We generally do not conduct surveys of our properties until they have reached the development stage, and therefore, the precise area and location of such properties could be in doubt. Accordingly, our mineral properties could be subject to prior unregistered agreements, transfers or claims, and title could be affected by, among other things, undetected defects. In addition, we might be unable to operate our properties as permitted or to enforce our rights with respect to our properties.

We depend on the services of key executives.

We are dependent on the services of key executives including our President and Chief Executive Officer and a small number of highly skilled and experienced executives and personnel. Due to the relatively small size of our management team, the loss of these persons or our inability to attract and retain additional highly skilled employees could adversely affect the exploration and development of our properties, which could have a material adverse effect on our business and future operations.

The period of weak gold prices prior to 2002 resulted in depletion of the number of trained and experienced professionals and managers in our industry. Higher gold prices have resulted in an increased demand for these people, and it could therefore be more difficult to attract or retain such experienced professionals and managers without significantly increasing the cost to us.

Our insurance coverage could be insufficient.

Our business is subject to a number of risks and hazards generally, including:

	•		adverse environmental conditions;
	•		industrial accidents;
	•		labor disputes;
	•		unusual or unexpected geological conditions;
	•		ground or slope failures;
	•		cave-ins;
	•		changes in the regulatory environment;
	•		marine transit and shipping damage and/or losses;
	•		natural phenomena such as inclement weather conditions, floods and earthquakes; and
	•		political risks including expropriation and civil war.

Such occurrences could result in:

	•		damage to mineral properties or production facilities;
	•		personal injury or death;
	•		loss of legitimate title to properties;
	•		environmental damage to our properties or the properties of others;
	•		delays in mining, processing and development;
	•		monetary losses; and
	•		possible legal liability.

Although we maintain insurance in amounts that we believe to be reasonable, our insurance might not cover all the potential risks associated with our business. We might also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage might not continue to be available or might not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to us or to other companies in the mining industry on acceptable terms. We might also become subject to liability for pollution or other hazards which we cannot insure against or which we might elect not to insure against because of premium costs or other reasons. Losses from these events might cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations.

Governmental and Regulatory Risks

As a holding company, limitations on the ability of our operating subsidiaries to make distributions to us could adversely affect the funding of our operations.

We are a holding company that conducts operations through foreign (principally Ghanaian) subsidiaries and joint ventures, and substantially all of our assets consist of equity in these entities. Accordingly, any limitation on the transfer of cash or other assets between the parent corporation and these entities, or among these entities, could restrict our ability to fund our operations efficiently, or to repay our convertible notes or other debt. Any such limitations, or the perception that such limitations might exist now or in the future, could have an adverse impact on available credit and our valuation and stock price.

We are subject to changes in the regulatory environment where we operate which may increase our costs of compliance.

Our mining operations and exploration activities are subject to extensive regulation governing various matters, including:

	•		licensing;
	•		production;
	•		taxes;
	•		disposal of process water or waste rock;
	•		toxic substances;
	•		development and permitting;
	•		exports and imports;
	•		labor standards;
	•		mine and occupational health and safety;
	•		environmental protections; and
	•		mine closure plans.

Compliance with these regulations increases the costs of the following:

	•		planning;
	•		designing;
	•		drilling;
	•		operating;
	•		developing;
	•		constructing; and
	•		closure and reclamation.

We believe that we are in substantial compliance with current laws and regulations in Ghana and elsewhere. However, these laws and regulations are subject to frequent change and reinterpretation. Due to the substantial increase in mining development in Ghana in recent years, the Government of Ghana has been reviewing the adequacy of reclamation bonds and guarantees throughout the country and in some cases has requested higher levels of bonding than previously had been required. Our bonds may be increased. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation or interpretation of these laws and regulations could have a material adverse impact on us, cause a reduction in levels of production and delay or prevent the development or expansion of our properties in Ghana.

Government regulations limit the proceeds from gold sales that could be withdrawn from Ghana. Changes in regulations that increase these restrictions could have a material adverse impact on us, as Bogoso/Prestea and Wassa are currently our only sources of internally generated operating cash flows.

The Government of Ghana has the right to increase its control of certain subsidiaries.

In accordance with the Minerals and Mining Act, 2006 (Act 703), the Government of Ghana has a 10% free carried interest in the mineral operations of mining companies. The carried interest comes into existence at the time the government issues a mining license. As such, the Government of Ghana currently has a 10% carried interest in our subsidiaries that own the Bogoso Prestea mine, the Wassa mine and a 19% carried interest in the Prestea Underground property in Ghana, and would have a 10% carried interest in the HBB Properties if mining permits were issued.

Under the new mining law, the Government has the right to acquire a special share or “golden share” in such 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.

The Government of Ghana may seek to exercise this right and adversely affect our ability to take certain actions.

We are subject to risks relating to exploration, development and operations in foreign countries.

Certain laws, regulations and statutory provisions in certain countries in which we have mineral rights could, as they are currently written, have a material negative impact on our ability to develop or operate a commercial mine. For countries where we have exploration or development stage projects, we intend to negotiate mineral agreements with the governments of these countries and seek variances or otherwise be exempted from the provisions of these laws, regulations and/or statutory provisions. We cannot assure you, however, that we will be successful in obtaining mineral agreements or variances or exemptions on commercially acceptable terms.

In addition, our assets and operations are affected by various political and economic uncertainties, including:

	•		the risks of war, civil unrest, terrorism, coups or other violent or unexpected changes in government;
	•		political instability and violence;
	•		expropriation and nationalization;
	•		renegotiation or nullification of existing concessions, licenses, permits, and contracts;
	•		illegal mining;
	•		changes in taxation policies;
	•		restrictions on foreign exchange and repatriation; and
	•		changing political conditions, currency controls, and governmental regulations that favor or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.

Illegal mining has occurred on our properties, is difficult to control, can disrupt our business and can expose us to liability.

From time to time we have experienced significant illegal mining activity on our mining and exploration properties. The Ghana Ministry of National Security initiated a country-wide operation in late 2006 to remove illegal miners from legal mineral concessions in Ghana, including those at our properties. While this action was successful in removing the illegal miners from our leases, there can be no assurance that illegal mining will not resume.

In addition to the impact on our Mineral Reserve and non-reserves, the presence of illegal miners can lead to project delays and disputes and delays regarding the development or operation of commercial gold deposits. The work performed by the illegal miners could cause environmental damage or other damage to our properties, or personal injury or death, for which we could potentially be held responsible. Illegal miners may work on other of our properties from time to time, and they may in the future increase their presence and have increased negative impacts such as those described above on such other properties.

Our activities are subject to complex laws, regulations and accounting standards that can adversely affect operating and development costs, the timing of operations, the ability to operate and financial results.

Our business, mining operations and exploration and development activities are subject to extensive Canadian, United States, Ghanaian and other foreign, federal, state, provincial, territorial and local laws and regulations governing exploration, development, production, exports, taxes, labor standards, waste disposal, protection of the environment, reclamation, historic and cultural resource preservation, mine safety and occupational health, toxic substances, reporting and other matters, as well as accounting standards. Compliance with these laws, regulations and standards or the imposition of new such requirements could adversely affect operating and development costs, the timing of operations, the ability to operate and financial results.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and share price.

We are required to annually test our internal control over financial reporting to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal control over financial reporting. Failure to maintain effective internal controls could have a material adverse effect on our business and share price.

Market Risks

The market price of our common shares could experience volatility and could decline significantly.

Our common shares are listed on the American Stock Exchange and the Toronto Stock Exchange. Securities of small-capitalization companies have experienced substantial volatility in the past, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include macroeconomic developments in North America and globally and market perceptions of the attractiveness of particular industries. Our share price is also likely to be significantly affected by short-term changes in gold prices or in our financial condition or results of operations as reflected in our quarterly earnings reports. Other factors unrelated to our performance that could have an effect on the price of our common shares include the following:

	•		the extent of analytical coverage available to investors concerning our business could be limited if investment banks with research capabilities do not continue to follow our securities;
	•		the trading volume and general market interest in our securities could affect an investor’s ability to trade significant numbers of common shares;
	•		the size of the public float in our common shares may limit the ability of some institutions to invest in our securities; and
	•		a substantial decline in our stock price that persists for a significant period of time could cause our securities to be delisted from the American Stock Exchange and the Toronto Stock Exchange, further reducing market liquidity.

As a result of any of these factors, the market price of our common shares at any given point in time might not accurately reflect our long-term value. The market has recently suffered major declines, occurring around the time of our public offering of common shares. Securities class action litigation often has been brought against companies following periods of market price volatility which affects the market price of particular securities without regard to the performance of the company whose stock price is affected. We could in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management’s attention and resources.

Investors could have difficulty or be unable to enforce certain civil liabilities on us, certain of our directors and our experts.

Golden Star is a Canadian corporation. Substantially all of our assets are located outside of Canada and the United States, and our head office is located in the United States. It might not be possible for investors to collect judgments obtained in Canadian courts predicated on the civil liability provisions of Canadian or U.S. securities legislation. It could also be difficult for you to effect service of process in connection with any action brought in the United States upon our directors and officers. Execution by United States courts of any judgment obtained against us, or any of the directors or executive officers, in the United States courts would be limited to our assets or the assets of such persons in the United States. The enforceability in Canada of United States judgments or liabilities in original actions in Canadian courts predicated solely upon the civil liability provisions of the federal securities laws of the United States is doubtful.

There are certain U.S. federal income tax risks associated with ownership of Golden Star common shares.

Holders of our common shares or warrants or options to purchase our common shares who are United States taxpayers should consider that we could be considered to be a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes. Although we believe that we were not a PFIC for 2006 and that we will not be a PFIC for 2007, and do not expect to become a PFIC in the foreseeable future, the tests for determining PFIC status depend upon a number of factors, some of which are beyond our control, and we cannot assure you that we will not be a PFIC.

If we are a PFIC for any year, any holder of our common shares or warrants or options to purchase our common shares who is a U.S. person for U.S. income tax purposes (a “U.S. Holder”) and whose holding period for those shares, warrants or options includes any portion of a year in which we are a PFIC generally would be subject to a special adverse tax regime in respect of “excess distributions.” Excess distributions include certain distributions received on shares in a PFIC in a taxable year. Gain recognized by a U.S. Holder on a sale or other transfer of warrant or options to purchase our shares (including certain transfers that would otherwise be tax free) would also generally be taxed as an excess distribution. Excess distributions are generally taxed at ordinary income rates and are subject to a nondeductible interest charge and to other adverse rules. Certain elections may sometimes be used to mitigate the adverse tax rules that apply to PFICs (the so-called “QEF” and “mark to market”), but these elections may accelerate the recognition of taxable income and may result in the recognition of ordinary income. The QEF and mark to market elections are not be available for U.S. Holders with respect to warrants or options to acquire our common shares. Additional adverse rules would apply to U.S. Holders of our common shares for any year in which we are a PFIC and own or dispose of shares in another corporation that is also a PFIC.

The existence of outstanding rights to purchase or acquire common shares could impair our ability to raise capital.

As of March 12, 2007, approximately 10.7 million common shares are issuable on exercise of warrants and options to purchase common shares at prices ranging from Cdn$1.02 to Cdn$9.07. In addition, 11.1 million common shares are currently issuable upon conversion of our senior convertible notes issued in April 2005. During the life of the warrants, options, notes and other rights, the holders are given an opportunity to profit from a rise in the market price of common shares, with a resulting dilution in the interest of the other shareholders. Our ability to obtain additional financing during the period such rights are outstanding could be adversely affected, and the existence of the rights could have an adverse effect on the price of our common shares. The holders of the warrants, options, notes and other rights can be expected to exercise or convert them at a time when we would, in all likelihood, be able to obtain any needed capital by a new offering of securities on terms more favorable than those provided by the outstanding rights.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. DESCRIPTION OF PROPERTIES

MAPS OF OPERATIONS AND PROPERTIES

The maps below show the locations of Bogoso, Prestea, Wassa, Pampe, the HBB Properties and Mampon in Ghana, and various exploration properties in other areas of West Africa. These properties are described in further detail below.

PROPERTY STATUS TABLE

The chart below summarizes information regarding our more significant properties, which are described in further detail below:

								2006
Property		Type of Interest		Expiry Date		Property size		Status		Comments
Bogoso (Ghana)		Government granted mining leases held by a 90% owned subsidiary		8/21/2017 8/16/2018		95 km2		Active		Mining stage
Prestea (Ghana)		Government granted mining lease held by a 90% owned subsidiary		7/6/2031		129 km2		Active		Mining stage
Wassa (Ghana)		Government granted mining lease held by a 90% owned subsidiary		9/16/2022		102 km2, another 15 km2 applied for		Active		Mining stage
Prestea Underground (Ghana)		Government granted mining lease, 81% beneficial interest		7/6/2031		129 km2 lies directly below Prestea surface lease		Active		Exploration stage
Dunkwa-Mampon (Ghana)		Prospecting License		1/26/07, extension applied for		66 km2		Active		Development stage
Dunkwa-Mansiso (Ghana)		Prospecting License		1/9/08		56 km2		Active		Exploration stage
Pampe		Prospecting License		Conversion to mining lease underway		5.8 km2		Active		Development stage
Hwini-Butre (Ghana)		2 Prospecting Licenses		3/10/08; Conversion to mining lease underway		180 km2		Active		Advanced exploration stage
Benso (Ghana)		3 Prospecting Licenses		05/16/06; Conversion to mining lease underway		21 km2		Active		Advanced exploration stage
Côte d’Ivoire Regional		2 Permis de Recherche		Various		~2,000 km2		Active		Exploration stage
Mano JV (Sierra Leone)		5 Prospecting Permits		Various		550 km2		Active		Exploration stage
Goulagou, Rounga, Titao (Burkina Faso)		2 Permis de Recherche Agreements allow earning up to 90%.		6/1/09		487 km2		Active		Advanced exploration stage
Deba & Tialkam (Niger)		2 Permis de Recherche		11/24/07		1,842 km2		Active		Exploration stage
Saramacca (Suriname)		Various Government granted rights of exploration and option agreements		Renewals Pending		660 km2		Active		Exploration stage

MINING IN GHANA

Ghanaian Ownership and Special Rights

Ghana is situated on the West Coast of Africa, approximately 600 kilometers north of the equator on the Gulf of Guinea. Accra, the capital city of Ghana, is located on the Prime Meridian. Following a period as a British colony, Ghana achieved independence in 1957 and it is now a republic with a democratically elected government. Ghana has a population of approximately 21 million people. English is the official and commercial language. The total land area of the country is

approximately 238,000 square kilometers and the topography is relatively flat. Ghana has a tropical climate with two rainy seasons and two dry seasons each year.

Rights to explore and develop a mine are administered by the Minister of Lands, Forests and Mines through the Minerals Commission, a governmental organization designed to promote and control the development of Ghana’s mineral wealth in accordance with the current mining law. A company or individual can apply to the Minerals Commission for a renewable exploration license granting exclusive rights to explore for a particular mineral in a selected area for an initial period not exceeding three years. When exploration has successfully delineated a mineable Mineral Reserve, an application may be made to the Minerals Commission for conversion to a mining lease, granting a company the right to produce a specific product from the concession area, normally for a period of 20 to 30 years. Production must typically begin within two years of the date of grant of a mining lease.

The new Minerals and Mining Act, 2006 (Act 703), which came into effect in March 2006 requires that any person who intends to acquire a controlling share of the equity of any mining company that has been granted a mining lease by the Government of Ghana must first give notice of its intent to the Government and obtain its consent prior to acquiring a controlling share.

In accordance with the current mining law, the Government of Ghana is granted a 10% carried interest in all companies such as Golden Star (Bogoso/Prestea) Limited (“GSBPL”) and Golden Star (Wassa) Limited (“GSWL”) that hold mining leases. The 10% carried interest entitles the Government of Ghana to a pro-rata share of future dividends (none have been declared to date), if any, from GSBPL and GSWL once all capital is repaid. The Government of Ghana has no obligation to contribute development or operating expenses. GSBPL and GSWL owe $277.7 million and $135.2 million, respectively, to Golden Star or its subsidiaries as of December 31, 2006 for past advances, and these amounts would be repaid to us before payment of any dividends. Under the old mining law the Government of Ghana was entitled to acquire up to an additional 20% interest in our operating companies at a mutually agreed price. Under the current mining law the Government of Ghana no longer has the right to acquire this additional 20% interest.

The Government of Ghana is also entitled to acquire a special or golden share in GSBPL or GSWL or any mining company at any time for no consideration or such consideration as the Government of Ghana and GSBPL or GSWL might agree. The special share would constitute a separate class of shares with such rights as the Government of Ghana and GSBPL or GSWL might agree. In the absence of such agreement, the special share would have the following rights:

•

the special share would carry no voting rights, but the holder would be entitled to receive notice of and attend and speak at any general meeting of the members or any separate meeting of the holders of any class of shares;

•

the special share could only be issued to, held by, or transferred to the Government or a person acting on behalf of the Government;

•

the written consent of the holder of the special share would be required for all amendments to the organizational documents of the company, the voluntary winding-up or liquidation of the company or the disposal of any mining lease or the whole or any material part of the assets of the company;

•

the special share does not confer a right to participate in the dividends, profits or assets of the company or a return of assets in a winding up or liquidation of the company;

•

the holder of a special share may require the company to redeem the special share at any time for no consideration or for a consideration determined by the company.

GSBPL and GSWL have not issued nor to date been requested to issue a special share to the Government of Ghana.

The Government of Ghana has a pre-emptive right to purchase all gold and other minerals produced by GSBPL and GSWL. The purchase price would be agreed by the Government of Ghana and GSBPL and GSWL, or the price established by any gold hedging arrangement between GSBPL or GSWL and any third party approved by the Government, or the publicly quoted market price prevailing for the minerals or products as delivered at the mine or plant where the right of preemption was exercised. The Government of Ghana has agreed to take no preemptive action pursuant to its right to purchase gold or other minerals so long as GSWBL and GSWL sell gold in accordance with certain procedures approved by the Bank of Ghana.

Ghanaian Royalty Requirements

Under the mining law a holder of a mining lease is required to pay quarterly a royalty of not less than 3% and not more than 6% of gold revenues. The Government of Ghana determines the royalty percentage each year based on the ratio that the operating margin bears to the value of gold produced from a mining lease in that year. Based on the Mineral Royalty Regulation of 1987, the royalty is 3% when the operating ratio is 30% or less, the royalty increases 0.225% for each 1% increase in operating ratio until the royalty reaches a maximum of 6% at an operating ratio of 70%. In 2006, 2005 and 2004

the royalty rate for GSBPL was 3% of revenues and GSBPL paid $1.9 million, $1.8 million and $1.9 million, respectively. The royalty payments from GSBPL have not exceeded 3% per annum in any year. GSWL paid a 3% royalty of $1.5 million and $0.9 million in 2006 and 2005, respectively.

Ghanaian Environmental Regulations

All environmental matters in Ghana, including those related to mining, fall under the oversight of the Ghana Environmental Protection Agency (“EPA”). The EPA has formulated rules and guidelines which govern environmental impact statements, mine operations, and mine closure and reclamation, to which our operations are subject. Additional provisions governing surface uses by our stakeholders are provided in the Minerals and Mining Act (Act 703, 2006).

In 2005, pursuant to a reclamation bonding agreement between the EPA and GSWL, we bonded $3.0 million to cover future reclamation obligations at Wassa. To meet the bonding requirements we established a $2.85 million letter of credit and deposited $0.15 million of cash with the EPA. In addition, pursuant to a bonding agreement between the EPA and GSBPL, we bonded $9.5 million in early 2006 to cover our future obligations at Bogoso/Prestea. To meet these requirements, we deposited $0.9 million of cash with the EPA with the balance covered by a letter of credit.

We completed a review of the asset retirement obligations for Bogoso/Prestea and Wassa in 2006. Additional work has been completed at Bogoso/Prestea to rehabilitate disturbed lands and reduce long-term corporate liabilities including re-profiling waste dumps, capping hard rock with oxide materials, topsoil spreading and planting for both slope stabilization and long-term rehabilitation. Rehabilitation expenditures totaled $1.1 million, $0.8 million and $0.7 million in 2006, 2005, and 2004, respectively

To our knowledge, all our operations in Ghana are currently in substantial compliance with all environmental requirements.

COMMUNITY DEVELOPMENT PROGRAMS AND SUSTAINABILITY

We conduct our business as a responsible corporate citizen in keeping with our environmental, social and health and safety policies. We believe our ongoing success in Ghana can only be achieved by continuing to build good relations with our local stakeholder communities and by incorporating stakeholder comments and addressing their concerns in our developing projects. We believe our success as an employer, as a neighbor and as an important part of the local economy is dependent on achieving and maintaining good community relationships while helping to develop a more sustainable economy that is not solely dependent on our activities. As such, we are committed to sharing our success with our neighbors through our development foundation and our oil palm project.

Our work in 2006 focused on furthering the alternative livelihood projects that were providing the most benefit to the communities, and developing and implementing a strategy to provide our neighbors with more control over the infrastructure and development projects that we fund. On reviewing the alternative livelihood program, we found that poultry farming and small business development were successfully providing sustainable livelihoods to a large number of stakeholders. Of the 47 people that were trained to develop their own small businesses, 37 are still deriving their income from these businesses. This is a success rate of almost 80%. Key among the successes are a number of single mothers who are now able to support their families as a result of their commitment and our trainings and investment in their future. The aim of the economic development activities in 2007 will be to make the various participants independent and self-supporting. A measure of success in the poultry project was achieved when the cooperative was able to assist with program funding for new members from funds repaid to the cooperative by its members.

Although we invested in local infrastructure during the past several years, our efforts were driven by our own people with some input from the local communities. This resulted in projects that, although worthwhile, were not focused on key community needs. To address this, during 2006 we established the Golden Star Development Foundation to fund all future community projects. The Foundation is funded by us by contributions equal to $1 per ounce of gold produced plus 0.5% of pretax profit. Projects are selected by a community consultation committee. The first project approved for funding was the electrification of a village.

Community support of another kind came from the Golden Star head office in the form of a book drive. Initiated in 2005, our staff in Denver have worked with local high school student volunteers to collect, sort and pack books with the first shipment arriving in Ghana in 2006. By year end, our project had collected over 170,000 books that will be placed in libraries in our stakeholder communities. Librarians have been selected for some of these libraries and the process of getting the books onto the shelves has begun.

Another of our major economic diversity efforts is our Golden Star Oil Palm Project. This project builds on the existing abilities within the local community to diversify economic opportunities for individuals who would be unable to establish a palm oil plantation due to either limitations on land or funding. We established links with the local traditional authorities who then provided us with access to land. Using local labor, the land was prepared for planting and then oil palms planted. For the first three to four years, we will fund the development of the Project and pay the people preparing the land and caring for the seedlings. After this, the more mature palms begin to produce fruit and hence income. At this point, blocks of about four

hectares will be assigned to individuals or family groups who then care for the trees while receiving technical assistance and inputs from the project. When the fruit is harvested, the individual growers sell the fruit to the project and receive their money minus the input costs.

We first promoted the use of oil palms as a way to diversify the local economy as part of our alternative livelihood program. Funding was subsequently channeled into the Golden Star Oil Palm Project with the specific goal of managing the oil palm plantations as a sustainable business. To date, the areas planted with oil palms total 605 hectares and 275 hectares for the alternative livelihood program and Golden Star Oil Palm Project, respectively.

OPERATING PROPERTIES

The Bogoso/Prestea Gold Mine

Overview of the Bogoso/Prestea Operation

Bogoso/Prestea consists of a gold mining and processing operation located along the Ashanti Trend in western Ghana, approximately 35 kilometers northwest of the town of Tarkwa. It can be reached by paved roads from Tarkwa, a local commercial center, and from Accra, the capital of Ghana. Bogoso and Prestea are adjoining mining concessions that together cover approximately 40 kilometers of strike of the southwest trending Ashanti gold district. Our mining areas at Bogoso and Prestea are linked to the Bogoso processing plants by paved and gravel haul-roads located on our properties. Equipment and facilities at Bogoso/Prestea include open pit mines, a nominal 1.5 million tonne per annum Bogoso CIL processing plant, a nominal 3.5 million tonne per annum Bogoso BIOX^® processing plant, and a fleet of haul trucks, loaders and mining support equipment. In addition, there are numerous ancillary support facilities including power and water supply equipment, haul roads, housing for management and technical staff, a medical clinic, a tailings storage facility, waste dumps, a warehouse, maintenance shops, offices and administrative facilities. There is also a large inactive underground mine at Prestea. The Bogoso/Prestea properties and mining rights are granted under four mining leases, which expire on or after August 2017.

We acquired Bogoso in late 1999 and all of our production came from reserves located on the Bogoso property until October 2001 when we commenced surface mining on the adjoining Prestea property. The Prestea property was acquired in mid-2001.

Operating Results for Bogoso/Prestea

The following table displays historical operating results at Bogoso/Prestea.

Bogoso/Prestea Operating Results		2006				2005				2004
Ore milled (t)			1,493,948				1,557,881				1,650,412
Rate (t/day)			4,093				4,268				4,526
Grade milled (g/t)			3.56				4.14				4.09
Recovery %			60.4				60.7				67.3
Total gold sales (oz) (1)			103,792				131,898				147,875
Cash operating cost ($/oz)			412				338				250
Total cash cost ($/oz)			430				351				264

In addition to the 2006 gold production shown above, 2,169 ounces of gold were recovered during testing and commissioning of the new Bogoso BIOX^® plant crushing, grinding and CIL circuits.

Bogoso/Prestea Expansion Project

Gold ore reserves in general and specifically at Bogoso/Prestea can be segregated into two general ore types referred to as “refractory” and “non-refractory.” Refractory ores typically contain un-oxidized sulfide minerals with the gold trapped within the sulfide minerals. Such ores are also commonly referred to as “sulfide” ores and they cannot be economically processed in conventional CIL circuits such as our existing Bogoso CIL processing plant which we have operated since 1999.

Non-refractory ores typically do not contain sulfide minerals, or the sulfide minerals have been oxidized in situ by natural geologic processes. There are also certain sulfide ores that are considered non-refractory if the gold exists on the surface of the sulfide minerals rather than being embedded within the sulfide minerals. Ores that have been naturally oxidized are referred to as “oxide” ores. Non-refractory ores, including oxide ores, can be efficiently processed through the existing Bogoso CIL processing plant.

About 80% of the remaining ore reserves at Bogoso/Prestea are refractory and cannot be processed by the Bogoso CIL processing plant. Therefore in June 2005, a decision was made to construct the 3.5 million tonne per annum Bogoso BIOX^® processing plant adjacent to the existing CIL processing plant. The new plant uses a proprietary BIOX^® bio-oxidation technology to

treat the refractory sulfide ore. We expect to complete construction and commissioning of the Bogoso BIOX^® processing plant in March 2007 with operations expected to commence in April 2007 and throughput and metallurgical recoveries increasing over the remainder of 2007. The new Bogoso BIOX^® processing plant, together with the existing Bogoso CIL processing plant, are expected to be capable of processing a combined 5.0 million tonnes of gold ore per year.

The existing Bogoso CIL processing plant will retain its current configuration and will continue to process non-refractory ores while the new Bogoso BIOX^® processing plant will process mostly refractory sulfide ores and mixed oxide-refractory ores. The two plants sitting side-by-side are expected to provide operational efficiencies since they will share management, labor, reagents, a warehouse and maintenance efforts. With the two plants and their differing technologies, we should be able to effectively process all of the ore types known to exist in the Bogoso/Prestea area.

Pre-stripping of two sulfide pits in readiness for the commissioning of the Bogoso BIOX^® processing plant has stockpiled or exposed in the pits approximately 1.6 million tonnes of refractory ore as of December 31, 2006.

The Bogoso CIL processing plant has processed oxide and non-refractory ores from the Plant-North pit at Prestea since 2002, but mining of this deposit was completed in December 2006. The Bogoso CIL processing plant is now temporarily processing stockpiled ores and limited amounts of non-refractory ores encountered in the new sulfide pits until March 2007 when we plan to begin feeding the Bogoso CIL processing plant with oxide ores from the Pampe deposit. Later in 2007, we expect to initiate non-refractory ore mining on the south end of the Prestea property and this ore will be trucked to the Bogoso CIL processing plant. There are additional non-refractory deposits at various locations in the Bogoso area, including at the south end of the Prestea property and at Mampon. The known non-refractory ore deposits should be adequate to provide ore feed to the Bogoso CIL processing plant for the next 4 years.

Project costs to December 31, 2006 are as follows:

		As of December 31,
		2006
Plant construction cost		$	118,826
Mining equipment cost			10,505
Pre-production stripping cost			22,397
Sub-total			151,728
Costs prior to project commencement			7,216
Capitalized interest			6,211
Total		$	165,155

In 2007, we expect combined gold production from the two Bogoso plants to total approximately 280,000 ounces at an average cash operating cost of $380 per ounce. Based on test work, we expect gold recoveries from the Bogoso BIOX^® processing plant to average 86% and vary between 78% and 88%. In the early stage of the project, when processing ore mined from close to the surface, recoveries will be at the lower end of the expected range.

Since August 2006, the Government of Ghana has rationed power to large industrial users, including Bogoso/Prestea and Wassa, due in part to the effects of low rainfall on hydroelectric power generation. Under the current rationing program, we expect to receive 90% of our power requirements, including requirements for the full operation of the Bogoso BIOX^® processing plant. As a result of the power rationing, we together with three other mining companies, have agreed to acquire a nominal 100 megawatt power station, which is expected to be operational by mid 2007. Our 25% share of the power station, at an estimated cost to us of $10 million, should be sufficient to provide up to 50% of our total power requirements and, combined with our diesel generators and power available from the national grid, should provide power in excess of our requirements. If there is inadequate rainfall in 2007, we may be adversely affected by further rationing, which could increase our anticipated cash operating costs.

Geology at Bogoso/Prestea

The Bogoso/Prestea property lies within the Eburnean Tectonic Province in the West African Precambrian Shield along a 40 kilometer stretch of the Ashanti Trend located immediately south of the town of Bogoso. The area is dominated by a major northeast-southwest trending structural fault zone referred to as the Ashanti Trend, which hosts the Prestea, Bogoso, Obuasi and Konongo gold deposits, among others. Parallel to the Ashanti Trend is the Akropong Trend, which hosts the Ayanfuri deposit. The Akropong Trend is about 15 kilometers west of the Ashanti Trend in the Bogoso region, and gradually converges with it at Obuasi forming the basis for the Obuasi mine, which is owned and operated by AngloGold Ashanti Limited.

Mineral Reserves and Non-Reserve Mineral Resources at Bogoso/Prestea

At December 31, 2006, Bogoso/Prestea had Proven and Probable Mineral Reserves, including the Probable Mineral Reserves at Mampon and at Pampe discussed below, of 41.6 million tonnes at a grade of 2.74 g/t containing approximately 3.67 million ounces of gold (before any reduction for the Government of Ghana’s 10% minority interest). Total Measured and Indicated Mineral Resources, including Measured and Indicated Mineral Resources at Mampon and Pampe discussed below, total 20.2 million tonnes with a grade of 2.23 g/t before a reduction for the 10% minority interest. Assuming no new reserves are discovered, the current Proven and Probable Mineral Reserves should support mining operations for approximately ten years, although we expect the mine life to be extended as we continue to evaluate mineral resources through ongoing

exploration efforts. See the Proven and Probable Mineral Reserves table and the Non-Reserves – Measured and Indicated Mineral Resource table in Item 1 of this Form 10-K.

Exploration at Bogoso/Prestea

Surface exploration was limited at Bogoso during 2006, following a major drilling program in 2005 undertaken to facilitate efficient mine planning for the sulfide deposits which will feed the Bogoso BIOX^® processing plant for the next several years. We plan additional drilling in 2007 for design of final pit models for the Chujah-Dumasi and Buesichem deposits near Bogoso and to commence evaluation of possible longer term underground mining potential.

Surface exploration drilling on the Prestea property during 2006 was focused on expanding known near-surface potential on the south end of the Prestea property. We also evaluated shallow underground targets in the Plant-North pit vicinity where encouraging results were obtained from the Main Reef Footwall structure, a laminated quartz reef which lies 10 to 15 meters into the footwall of the Prestea Main Reef. Historical exploration of the Footwall Reef was limited and we believe this constitutes an opportunity for shallow, decline accessible underground mining. We plan further drilling of this target in 2007 to help determine if the deposit can be accessed from a decline driven from the bottom of the Plant-North pit.

To better define the geometry of deeper parts of the Ashanti Trend on our Bogoso/Prestea properties we plan to complete a deep penetration VTEM airborne geophysical survey during 2007. This survey is expected to help map flexures and dislocations in the Ashanti Trend structure that could provide a host for deeper, non-outcropping gold deposits similar to those exposed at the surface.

The Pampe Project

The Pampe deposit is located approximately 19 kilometers west of the Bogoso processing plant on the Akropong trend. Drilling during 2006 identified a Probable Mineral Reserve at December 31, 2006 of 2.1 million tonnes at an average gold grade of 3.31 g/t which is either oxide ore or non-refractory sulfide ore and which we believe is recoverable by open pit mining methods. Environmental permits were finalized in November 2006 and haul road construction is substantially complete. Ore mining and delivery of ore to the Bogoso CIL processing plant commenced in March 2007.

The Mampon Project

The Mampon deposit lies along the Ashanti Trend approximately 35 kilometers north of the Bogoso processing plants. It was acquired in 2003, as part of the Dunkwa property acquisition. An analysis of the drilling and other geologic data provided by the former owner as well as our own drilling since the acquisition date has established a Probable Mineral Reserve at December 31, 2006 of approximately 1.3 million tonnes grading 5.14 grams per tonne or approximately 215,000 ounces of gold which is accessible by open pit mining methods. The geology of the Mampon deposit is similar to the geology at Bogoso/Prestea. Our current plan is to haul the Mampon ore by truck to the Bogoso processing plant to supplement ores from the Bogoso/Prestea deposits. Based on our current long-term mining plan we expect to initiate mining at Mampon in 2008. Mampon ore is approximately 75% refractory and 25% non-refractory. Exploration during 2007 will target the deeper, potentially underground exploitable extensions of the Mampon deposit and drilling to convert resources at the nearby Aboronye deposit to indicated status.

Prestea South (formerly referred to as Bondaye/Tuapim Area)

Due to the presence of illegal miners during much of 2006 only limited drilling was carried out on the south end of the Prestea property. However, in November 2006, the Ghanaian authorities were able to halt illegal mining on our properties and we have since completed a drilling campaign in these areas. This work confirmed the previously defined inferred resources. This oxide material, if proven economic, would be trucked to the Bogoso CIL plant beginning in late 2007. We also expect to commence initial investigation of the shallow and ultimately the deeper underground potential of this area which is outside of the immediate Tuampim and Bondaye shaft areas.

The Wassa Gold Mine

Overview of the Wassa Gold Mine

The Wassa gold mine, located approximately 35 kilometers east of Bogoso/Prestea, was initially developed in the late 1990s by a consortium of European mining companies and consisted of an open pit mine, a crusher and a conventional heap leach operation. While operating as a heap leach property, Wassa produced approximately 90,000 ounces of gold per year from 1999 until mid-2001 when mining operations were suspended.

In September 2002, GSWL, our 90% owned subsidiary, acquired the inactive Wassa gold property. As with GSBPL, the Government of Ghana holds a 10% carried interest which entitles it to 10% of any future dividends (none have been declared

to date). Dividend payments will not be made until GSWL has repaid all contributed capital and shareholder advances to Golden Star.

In late 2003, following completion of a feasibility study, we initiated construction of a nominal 4.0 million tonnes per year Wassa CIL processing plant. The construction phase ended in early 2005, and the Wassa open-pit mine and plant was placed in service on April 1, 2005. In the nine months ended December 31, 2005, Wassa processed 2.7 million tonnes of ore at an average grade of 0.91 grams per tonne and sold 69,070 ounces of gold at an average total cash cost per ounce of $482. Plant feed was a mixture of newly mined ore from the Wassa pit blended with material from the heap leach pads left by the prior owners.

During 2006, a total of 97,614 ounces of gold was sold at Wassa at an average cash operating cost of approximately $474 per ounce. In 2007, we expect gold sales of approximately 110,000 ounces at an average cash operating cost of approximately $410 per ounce. The Proven and Probable Mineral Reserves at Wassa at the end of 2006 should be sufficient to support operations to mid-2010. If the feasibility study for the HBB Properties indicates it is economical to haul ore from these properties to the Wassa CIL processing plant, the project life of the combined operation could be extended.

Geology at Wassa

Wassa lies within the Eburnean Tectonic Province in the West African Precambrian Shield. The Proterozoic rocks that comprise most of the West African craton and host the major gold mineralization in Ghana are subdivided into metasedimentary and volcanic rocks of the Birimian and Tarkwaian sequences.

Wassa is hosted within the same Birimian volcano-sedimentary greenstone package as Bogoso/Prestea. However, Wassa is situated on the southeastern flank of the Ashanti Belt while Bogoso and Prestea occur along the northwestern flank. The northwestern flank of the belt hosts the Obuasi, Prestea, and Bogoso gold mines, but the southeastern flank also is characterized by gold mines and mineral occurrences. Tarkwaian-hosted deposits along the southeastern limb include Goldfield’s Tarkwa and Abosso mines, while Birimian-hosted gold occurrences include the 7.6 million ounce Akyem deposit owned by Newmont Mining, the deposits on our HBB Properties and Wassa.

Operating Results for Wassa

The following table displays historical operating results at Wassa.

Wassa Operating Results		2006				2005				2004
Ore milled (t)			3,690,672				2,691,923				—
Rate (t/day)			10,111				9,789				—
Grade milled (g/t)			0.90				0.91				—
Recovery %			88.80				88.7				—
Total gold production (oz)(1)			97,614				69,070				—
Cash operating cost ($/oz)			474				468				—
Total cash cost ($/oz)			493				482				—

Mineral Reserves and Mineral Resources at Wassa

As at December 31, 2006, Wassa has Proven and Probable Mineral Reserve of 13.6 million tonnes with an average grade of 1.11 g/t containing approximately 0.48 million ounces of gold before any reduction for the Government of Ghana’s 10% minority interest. The total Measured and Indicated Mineral Resources consist of 11.9 million tonnes with a grade of approximately 0.76 g/t before any reduction for the 10% minority interest. See the Proven and Probable Mineral Reserves table and the Non-Reserves – Measured and Indicated Mineral Resource table in Item 1 of this 10-K.

Exploration at Wassa

Exploration activities at Wassa during 2006 focused on target generation activities, particularly at the Bawdia Boso, Area Two and along the Tarkwaian – Birimian contact on our Accra Newtown concession. Soil and auger sampling at these locations has generated numerous high quality targets that we plan to drill test during 2007, with the ultimate aim of providing additional mill feed for Wassa and thereby extending the mine life. Wassa-based exploration also covers the Chichiwelli property acquired as part of the Benso property package where work during 2006 has generated extensive soil gold anomalies associated with old galamsey (artisanal) workings. We expect that this area will also be drilled in 2007.

EXPLORATION STAGE PROPERTIES IN GHANA

Prestea Underground

Overview

The Prestea Underground is an inactive underground gold mine located to the south of Bogoso/Prestea and adjacent to the town of Prestea. The property consists of two access shafts and extensive underground workings and support facilities. Support facilities include an administrative office, maintenance shops, a warehouse and electrical substations. Access to the mine site is via a paved road from Tarkwa and Accra maintained by the Government of Ghana. Any potential future production from the Prestea Underground would be trucked to the Bogoso plants for processing.

From the 1870s to 2002 when mining ceased following an extended period of low gold prices, the Prestea Underground operations produced approximately nine million ounces of gold, the second highest production of any mine in Ghana. The underground workings are extensive, reaching depths of approximately 1,400 meters and extending along a strike length of approximately nine kilometers. Underground workings can currently be accessed via two surface shafts, one near the town of Prestea and a second approximately four kilometers to the southwest at Bondaye.

GSBPL now holds a 90% ownership in the Prestea Underground with the Government of Ghana holding a 10% ownership in Prestea Underground as well as its 10% holding in GSBPL, resulting in an 81% beneficial ownership by Golden Star. Underground drilling continued until late in 2006 when illegal mining in the vicinity of the Bondaye shaft caused damage to the shaft resulting in its closure. This in turn resulted in the suspension of all underground activities at Prestea as Bondaye was the alternate egress for all of the underground workings. We expect that the suspension will remain in place until major refurbishment work is completed on both Bondaye and Central Shafts.

Geology of Prestea Underground

The Prestea deposits are found along the Ashanti Trend which extends over 220 kilometers and which accounts for 80% to 90% of the total quartz lode-hosted gold extracted in Ghana. Other mines located along the same shear are our Bogoso pits and the Obuasi and Konongo mines owned by others.

Two types of gold hosts have historically been recognized at Prestea: fault-related hydrothermal quartz veins; and disseminated sulfide-hosted gold mineralization associated with metavolcanic pods. The first type of ore was the focus of intense mining during Prestea’s past production. We intend to evaluate both types of mineralization.

Mineral Resources at Prestea Underground

As of December 31, 2006 we have identified total Indicated Mineral Resources at the Prestea Underground of 1.1 million tonnes at an average grade of 16.3 g/t before any reduction for the 19% minority interest.

Exploration Activities at Prestea Underground

A total of 18,483 meters of underground exploration drilling was completed at the Prestea Underground during 2006. The drilling focused on testing extensions of the high grade West Reef shoot between levels 17 and 24 (a depth of between 700 and 900 meters) and the commencement of drilling of unmined down-plunge extensions of the Main Reef below 30 Level.

Drilling on the West Reef between 17 and 24 Levels resulted in an Indicated Resource of 0.86 million tonnes at an average grade of 18.3 grams per tonne in a roughly 300 by 300 meter block. Although this deposit appears to be narrowing at depth, further drilling is required to test down-plunge repetitions within the West Reef structure.

Initial drilling below 30 Level returned encouraging results from the Main Reef structure, confirming its down-plunge continuity. Once shaft repairs allow renewed access to the underground workings, this area will constitute one of our major exploration targets. Total exploration costs at the Prestea Underground were $2.3 million during 2006. We expect to complete a feasibility study for the development and mining of the Prestea Underground in late 2007.

We continue to believe these deeper levels provide the best opportunities for significant new discoveries at Prestea Underground. However, the major refurbishment work required for both the Bondaye and Central Shafts is unlikely to be completed before the end of 2007 and consequently we expect exploration during 2007 to focus on shallower sections of the reefs that can be drilled from the surface.

HBB Properties

The Hwini-Butre and Benso prospecting licenses were acquired in late December 2005. These lie at the southeastern end of the Ashanti trend in Ghana. While we currently hold a 100% interest in these properties (through our subsidiaries), the Government of Ghana would become entitled to a 10% carried interest at the time mining permits are granted.

The Hwini-Butre property is located approximately 75 kilometers south of Wassa and occupies an area of approximately 180 square kilometers. The prior owner and its predecessors previously carried out numerous exploration programs on the property and identified two significant zones of gold mineralization.

The Benso property is located directly north of the Hwini-Butre property and about 45 kilometers south of Wassa. The property covers an area of approximately 21 square kilometers, and consists of three properties: the Amantin, Subriso, and Chichiwelli. The prior owner and its predecessors previously conducted a geochemical soil sampling survey over the entire Benso property and drill programs on the three blocks.

We commenced our own exploration activities on the HBB Properties in early 2006, and have spent approximately $4.5 million for the program to year end.

The HBB Properties lie along the southeastern flank of the Birimian-aged (lower Proterozoic) Ashanti Belt, along the same structural trend as Wassa. The southwestern part of the Hwini-Butre property covers the Mpohor Complex, a syn-volcanic mafic intrusive that is bound to the east and north by the Butre volcanic sequence. The Mpohor Complex is a polyphase intrusion with compositions ranging from gabbroic to granophyric, with intermediate phases such as diorite and granodiorite. The Butre volcanic sequence, which also underlies the Benso property further north, mostly comprises volcanic flows with minor metasediment horizons. The main regional structural orientation trends northeasterly but extensive north to northwest trending cross-cutting fracture systems are also well developed. The latter host much of the mineralization in the district, with vein systems at Dabokrom, Father Brown, Adoikrom, the Subriso zones and Amantin located within or marginal to the Mpohor Complex. Mineralization on the Hwini-Butre property is typically associated with shallowly east-dipping narrow quartz veins and their associated sericitic alteration halos, with coarse free gold associated with sulfides and as specks within the quartz veins and altered host rocks. In contrast, mineralization at Subriso West and Central Subriso forms a series of relatively steep dipping, north-trending zones characterized by strong shearing and pervasive silica replacement with local silica flooding and only minor thin quartz veining.

Exploration activities on the Hwini-Butre property during 2006 concentrated on the Father Brown, Adoikrom and Dabokrom prospects in the southern portion of the property. The objectives of these programs were to test the strike extensions of the known zones of mineralization and to test the higher grade Father Brown zone down-dip to determine whether it has potential for underground exploitation. The programs were successful in delineating an extension of the Adiokrom zone to the south and the down-dip extension of the Father Brown zone.

In 2007, we plan to continue drilling to investigate additional targets at Father Brown, Adiokrom and Dabokrom. However, the main focus of future programs will be to test the northern portion of the concession where several colonial gold occurrences (Breminsu, Apotunso, Abada, Whinnie and Guadium) are located. Previous soil sampling in these areas has identified several anomalies which require deep auger followed by RAB drilling if justified.

Exploration on the Benso property during 2006 focused on testing the full potential of the property with extensive soil and deep auger surveys covering the entire property on a 200 by 50 meter spacing. Anomalies generated by the soil sampling campaigns were tested with RAB drilling which identified several new zones of mineralization which we plan to follow up with RC and diamond core drilling in 2007.

At Amantin soil augering late in 2006 delineated several anomalies which we plan to follow-up in 2007 including deep auger sampling on a 200 by 50 meter grid followed by RAB, RC and diamond drilling if warranted.

We expect to spend about $1.5 million on exploration activities as the Benso property in 2007, with a further $2.4 million at the Hwini-Butre property. We expect to complete and publish a feasibility study in the second quarter of 2007 for the development and mining of the HBB Properties. As of December 31, 2006 we have identified Indicated Mineral Resources of 5.2 million tonnes at an average gold grade of 4.30 g/t at the HBB Properties.

Akropong Trend Properties

Work continued on a reduced scale during 2006 on the Akropong Trend properties located approximately 10 to 20 kilometers to the west of Bogoso/Prestea. The objective of our efforts in this area is to identify additional Mineral Reserve opportunities in the immediate vicinity of Bogoso/Prestea that could, in the future, provide additional sources of ore for the Bogoso processing plants. Apart from the Pampe deposit, where ore mining commenced in March 2007, the other Akropong Trend projects are at an early stage of exploration. To date they do not have, and ultimately might not have, Proven and Probable Mineral Reserves.

Dunkwa Properties

In 2003, we purchased two prospecting licenses, Asikuma and Mansiso, along the Ashanti Trend which we refer to as the Dunkwa properties. These properties cover 45 kilometers of strike along the Ashanti Trend directly north of and contiguous with the current Bogoso property. They are accessible by Ghanaian public roads. The addition of the Asikuma and Mansiso

prospecting licenses, which cover 56 and 69 square kilometers, respectively, increases our property holdings along the trend to over 100 kilometers in length.

There are five known gold prospects on the Dunkwa concession including Mampon. All of these occur in the same approximate stratigraphic position within lower Birimian sediments from 1 to 1.5 kilometers west of the contact with the Birimian metavolcanics. These prospects are also associated with shearing and/or graphitic faults, similar to those seen at Bogoso and consist of narrow quartz veins with strong pyrite and arsenopyrite mineralization in the wall rocks ranging up to 15% total sulfides.

One of the main targets along this trend is an unexplored nine kilometer section of the Ashanti trend covered by Opon river valley sediments which coincides with a conductivity anomaly. Attempts to drill this target commencing in early 2006 met with unexpected delays due to farmer’s objections; however these problems now appear to have been resolved and drilling is expected to continue in 2007. Spending in the Dunkwa area totaled $0.2 million in 2006.

Regional Activities in Ghana

In 2005, we commenced exploration on several early stage regional projects in southern Ghana covering extensive areas to the east and south of the Bogoso/Prestea and Wassa areas (see map at the beginning of Item 2 Description of Properties.) The initial wide-spaced geochemical surveys identified promising gold and multi-element anomalies which were followed up and further refined by additional sampling in 2006. Work in 2007 is expected to involve initial auger and shallow drilling of the better anomalies leading to deeper drilling if warranted.

We are exploring several other early stage properties in Ghana with 2007 programs planned to involve broad-spaced reconnaissance sampling.

OTHER EXPLORATION STAGE PROPERTIES IN AFRICA

Mano River Joint Venture, Sierra Leone

In late 2003 we entered into a joint venture agreement with Mano River Resources Inc., which holds seven gold properties in Sierra Leone totaling approximately 550 square kilometers. A diamond core drilling program commenced in mid-March 2004 at the Yirisen prospect on the North Pampana license, and 26 holes were completed. Grades and gold mineralization proved to be variable and discontinuous. However, due to the prospective nature of the local area, as evidenced by numerous artisanal workings and favorable geology, a reconnaissance soil sampling program was initiated over all the joint venture properties in late 2004 which continued into 2005.

Exploration during 2006 involved extensive programs of prospecting and in-fill soil sampling to confirm and refine the initial anomalies. This work has both confirmed the original anomalies and identified several new areas of anomalism associated with artisanal workings. In late 2006 diamond drilling had recommenced on the Yirisen trend at Pampana and a RAB drill has been mobilized from Ghana to commence exploration beneath the thick laterite cover on the Sonfon trend.

Expenditures on the Mano River joint venture in 2006 totaled $0.9 with expenditures of $1.6 million planned for 2007.

Afema, Cote d’Ivoire

In March 2005, we entered into an option to purchase the Afema project in Côte d’Ivoire from the Ivorian parastatal company Société d’Etat pour le Développement Minier de la Côte d’Ivoire (‘SO.DE.MI.”). The Afema property covers an area of 2,012 square kilometers of prospective Birimian rocks in south east Côte d’Ivoire which represent the southeastern extension of the Sefwi Belt meta-volcanics and the Kumasi Basin meta-sedimentary rocks. Under the terms of the acquisition agreement, we were entitled to carry out a six month detailed technical due diligence, after which we had the right to acquire 100% of the property.

We undertook an intensive exploration program at Afema during the six months following signing of the option, including the collection and analysis of over 12,000 soil samples and compilation and assessment of previous exploration data. Despite this work, we were unable to come to a definitive decision on the merits of the project and hence a six month extension to the option period was requested, which SO.DE.MI. granted. The extension was used to continue the assessment of previous data and to complete infill sampling and trenching of some of the better anomalies defined by the initial program, as well as a base-line environmental study.

Goulagou, Burkina Faso

We hold an 80% beneficial interest in the Goulagou and adjoining Rounga gold properties, which were acquired along with the HBB Properties in late 2005. Together the two contiguous properties cover approximately 487 square kilometers and are located approximately 100 kilometers west of Ouagadougou, the capital city of Burkina Faso, and 20 kilometers north of the

city of Ouahigouya. Drilling programs carried out by the prior owner and their predecessors identified several areas of gold enrichment including two parallel gold mineralized zones on the Goulagou property – the Goulagou I and II deposits.

Work during 2006 has involved the collation and auditing of exploration data from all previous operators and its compilation into a coherent digital data base which is being used to review the effectiveness of past exploration and identify targets for ongoing work in 2007.

Deba and Tialkam Projects, Niger

The Deba and Tialkam properties are gold exploration properties in Niger which were acquired along with the HBB Properties in late 2005. We hold a 100% interest in the two exploration permits, subject to the 10% interest of the Government of Niger. Based on data obtained from exploration carried out by previous owners and the presence of artisanal workings, the prior owner initiated an RC drilling program in late 2005, which we continued in early 2006. The results of this drilling were largely inconclusive.

Our work during 2006 has involved the collation and auditing of exploration data from all previous operators and its compilation into a coherent digital database. This is being used to review the effectiveness of past exploration and identify targets for ongoing work in 2007.

EXPLORATION STAGE PROPERTIES IN SOUTH AMERICA

Saramacca Property

The Saramacca project is located in Suriname and is owned 100% by Golden Star. Two successive soil auger sampling programs completed in 2003 and 2004 evaluated a series of stream sediment gold anomalies and defined a five kilometer long soil anomaly forming a series of en-echelon zones. Deep augering in 2004 further confirmed the anomaly now termed ‘Anomaly M’.

Shallow diamond core drilling comprising 24 holes for a total of 1,315 meters commenced at Anomaly M in March 2005. This work was undertaken with a lightweight man-portable drill rig due to the rugged terrain, limiting hole depths to less than 100 meters. Mineralization intersected within drill cores consisted of variably sheared silicified pyritic metasediments of tuffaceous origin and volcanic conglomerates, often with little or no quartz veining. Significant gold assays were also intersected within the upper five to ten meters of enriched lateritic duricrust and mottled saprolite.

Based on the encouraging results from the 2005 work, we planned to follow up with a second phase of deeper core drilling and a program of mechanized trenching in an attempt to elucidate the structure of the host rocks beneath the duricrust capping. Since exploration in this logistically difficult and high-cost environment is likely to require a major commitment of funds, in August 2006 we entered into a joint venture agreement with a subsidiary of Newmont Mining Corporation (“Newmont”) to jointly explore this 1,546 square kilometer property.

Under the terms of the agreement, Newmont can earn a 51% participating interest in the Saramacca project by spending $6 million over the first five years of the joint venture. Thereafter, Newmont may elect to earn a further 19% interest by completing a feasibility study, provided that:

	i)		It does so within two years of earning 51%, and
	ii)		Golden Star does not exercise its one-time option to elect to contribute to maintain its 49% equity interest.

Standard dilution clauses apply if one or the other party does not contribute subsequent to Newmont acquiring a 51% interest. Further, if either party’s interest is reduced to below 20% by dilution, that party will be automatically assigned a 1.25% Net Smelter Royalty interest in the venture.

Upon Newmont completing a feasibility study, Golden Star may i.) elect to participate relative to its joint venture interest at that time; ii.) dilute its interest; or iii.) be assigned an automatic 1.25% Net Smelter Royalty interest in the venture. Additionally, if Golden Star elects to maintain its interest, it may elect to have Newmont carry all Golden Star’s share of mine development costs. If this option is selected, Golden Star would repay Newmont from 80% of its share of eventual mine earnings plus interest at LIBOR plus 2.75%. In addition, Golden Star will receive an advance royalty of $5.00 per ounce of gold reported on the date that Newmont approves development of a mine.

We retain management of the project for the initial two years or expenditure of $2 million funded by Newmont, whichever comes first. Joint operation began in late 2006 with an initial budget of $1.1 million for the first twelve month period through to August 2007. The primary goal is to extend and infill Anomaly M along strike to the southwest where it remains open-ended and approximately 2,000 meters of diamond core drilling is planned for this. The secondary goal of the program is to do regional reconnaissance to identify and sample artisanal mining sites in the area and to compile and reprocess existing data from previously flown regional aeromagnetics to provide a more refined picture of the geology and structure of the Saramacca district.

Bon Espoir Property

The Bon Espoir property is located in French Guiana and is owned 100% by Golden Star. It covers a sheared “belt-basin” volcanic-sediment contact zone analogous to those we are exploring in similar aged (lower Proterozoic) terrains in Ghana. During 2005, we conducted a regional soil sampling along much of the 40 kilometer long sediment-volcanic contact shear zone that hosts the Wayamaga prospect drilled by previous owners of the Bon Espoir permit. Assay results identified coherent zones of anomalous low grade zones of gold and arsenic along the main Wayamaga structural break; however the tenor of the anomalism was not strong enough to warrant immediate follow-up. We have filed an application to renew the permit with a reduced area covering the best of these anomalies.

Paul Isnard

The Paul Isnard project is located in the western part of French Guiana, some 200 km west of Cayenne. The project covers rocks of the Lower Proterozoic Paramacca Formation which contain gold mineralization in the form of pyritic disseminated zones or stringer zones and sulfide-rich shear zones, which can be reasonably correlated between the current widely spaced (200 meter) drill sections.

In early 2004, we retained independent consultants RSG Global to provide a NI43-101 compliant resource estimate for the Montagne d’Or deposit on the southern boundary of the Paul Isnard concession, and to run pit optimization studies using a range of gold prices and mining costs prevailing at that time.

In late 2006 RSG Global (now Coffey International) re-ran the pit optimizations using revised 2006 mining costs and gold prices. Using a gold price of $560 per ounce, the Montagne d’Or deposit was estimated to contain a NI43-101 compliant Inferred in-pit mineral resource of 10.2 million tonnes grading 1.7 g/t. Further work may be warranted to identify additional sources of hard rock mineralization, which together with the mineral resource at Montagne d’Or, could support a future mining operation.

Exploration rights to Guyanor’s Paul Isnard property are optioned to Golden Star in an earn-in agreement that provides Golden Star the right to acquire up to 100% of the 433 square kilometer property via a series of option payments and exploration spending.

Benzdorp

The four properties comprising the 72 km ² Benzdorp South gold project are located along the eastern border of Suriname, approximately 220 km southeast of Paramaribo. The Benzdorp mining district is underlain by greenstones of the Lower Proterozoic Paramacca Formation and a felsic intrusive assemblage. Recorded and estimated alluvial gold production from historical dredging and present-day small-scale alluvial mining is in excess of 600,000 ounces. Our work during the mid 1990’s failed to identify economically viable mineralization. Consequently, in early 2006 our underlying option rights over the Antino 1 property were farmed out to Reunion Gold Corporation in return for a minimum $5 million expenditure plus periodic property payments over five years and a 0.75% net smelter return to Golden Star.

Minera IRL

Minera IRL is a private, junior exploration company active in Peru, Argentina and Chile. We currently hold approximately 14% of their common shares. Minera IRL has informed us that it intends to developed a portfolio of exploration projects, the most advanced of which, Corihuarmi, located approximately 160km south east of Lima near Huancayo, is the most advanced. Corihuarmi, a high sulfidation vuggy-silica style epithermal deposit, was drilled over the period 2003 to 2005 with encouraging results leading to completion of a feasibility study in 2006

Development of the Corihuarmi Gold Mine as a low cost open-pit, heap leach operation based on NI43-101 compliant reserves at 3.4 million tonnes grading 1.1 grams of gold per tonne is expected to commence in 2007.

Other projects controlled by Minera IRL include the Jagüelito silver-gold project in Argentina which is in its pre-feasibility study stage and the Ollachea gold project in Peru. Jagüelito has over 100 holes (23,954m) of drilling already completed by previous owners and offers the potential for fast-tracking to production. Ollachea, which is being acquired from Rio Tinto represents an advanced gold project in what appears to be an emerging slate belt district.

Other earlier-stage projects being investigated by Minera IRL include Frontera (in joint venture with Teck Cominco), located in northern Chile, 90 km northeast from the seaport of Arica, and just across the Peruvian border from Minsur’s Checocollo project; Cushuro in the La Libertad district of northern Peru; and the Chama prospect near Abancay in central Peru.

Minera IRL intends to list on the London AIM exchange in 2007.

Other Areas

In addition to the project work discussed above we have undertaken several regional reconnaissance initiatives using both our own staff and contract geologists in various West African and South American countries, spending approximately $0.9 million in 2006 for such activities.

ITEM 3. LEGAL PROCEEDINGS

We are engaged in routine litigation incidental to our business none of which is deemed to be material. No material legal proceedings, involving us or our business are pending, or, to our knowledge, contemplated, by any governmental authority. We are not aware of any material events of noncompliance with environmental laws and regulations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2006.

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common shares trade on the Toronto Stock Exchange (“TSX”) under the trading symbol “GSC” and on the American Stock Exchange under the symbol “GSS.” As of March 12, 2007, 232,104,141 common shares were outstanding and we had 918 shareholders of record. On March 12, 2007, the closing price per share for our common shares as reported by the TSX was Cdn$4.95 and as reported by the American Stock Exchange was $4.23.

The following table sets forth, for the periods indicated, the high and low market closing prices per share of our common shares as reported by the TSX and the American Stock Exchange:

		Toronto Stock Exchange								American Stock Exchange
		Cdn$				Cdn$				$				$
2006		High				Low				High				Low
First Quarter			4.39				3.09				3.84				2.64
Second Quarter			4.05				2.78				3.75				2.53
Third Quarter			3.84				2.84				3.52				2.54
Fourth Quarter			3.76				2.77				3.30				2.48

		Toronto Stock Exchange								American Stock Exchange
		Cdn$				Cdn$				$				$
2005		High				Low				High				Low
First Quarter			4.94				3.15				4.04				2.58
Second Quarter			4.02				3.01				3.23				2.35
Third Quarter			4.33				3.40				3.73				2.84
Fourth Quarter			3.78				2.54				3.32				2.12

We have not declared or paid cash dividends on our common shares since our inception and we expect for the foreseeable future to retain all of our earnings from operations for use in expanding and developing our business. Future dividend decisions will consider then current business results, cash requirements and our financial condition.

Performance Graph and Table

The following graph and table illustrates the cumulative total shareholder return on the common shares for the fiscal years ended December 31, 2001 through 2006, together with the total shareholder return of the S&P/TSX Composite Index and the Canadian Gold Index for the same period. The graph and table assumes an initial investment of Cdn$100 at December 31,

2001 and is based on the trading prices of the common shares on the TSX during the periods indicated. Because we did not pay dividends on our common shares during the measurement period, the calculation of the cumulative total shareholder return on the common shares does not include dividends.

				2001					2002					2003					2004					2005					2006
	Golden Star Resources Ltd.
	Dollar Value				100.00					322.22					1,006.67					535.56					343.33					378.89
	Annualized Return since base Year									222.2	%				17.3	%				75.0	%				36.1	%				30.5	%
	Return over previous year									222.2	%				212.4	%				(46.8	)%				(35.9	)%				10.4	%
	S&P/TSX Composite Index
	Dollar Value				100.00					86.03					106.93					120.27					146.61					167.89
	Annualized Return since base Year									(14.0	)%				3.4	%				6.3	%				10.0	%				10.9	%
	Return over previous year									(14.0	)%				24.3	%				12.5	%				21.9	%				14.5	%
	Canadian Gold Index
	Dollar Value				100.00					145.87					166.06					150.67					182.84					235.98
	Annualized Return since base Year									45.9	%				28.9	%				14.6	%				16.3	%				18.7	%
	Return over previous year									45.9	%				13.8	%				(9.3	)%				21.4	%				29.1	%

RECENT SALE OF UNREGISTERED SECURITIES

There were no sales of unregistered securities during 2006.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following summarizes the principal Canadian federal income tax considerations applicable to the holding and disposition of our common shares by a holder of one or more common shares, who for Canadian income tax purposes is resident in the United States of America and holds the common shares as capital property. This summary is based on the current provisions of the Canada-United States Income Tax Convention (1980) (the “Treaty”), Income Tax Act (Canada) (the “Tax Act”), the regulations there under and all amendments to the Tax Act publicly proposed by the Government of Canada to the date hereof. It is assumed that each such amendment will be enacted as proposed and there is no other relevant change in any governing law, although no assurance can be given in these respects. Limited liability corporations created under the limited liability company legislation of certain U.S. states and treated as a partnership or disregarded entity under US tax law cannot access any of the benefits of the Treaty as described in the paragraphs below.

Dividends paid or credited by us to a holder of one or more common shares will be subject to Canadian non-resident withholding tax at the rate of 25%. Under the Treaty, the rate of withholding tax is reduced to 5% of the gross amount of the dividend where the holder is a company that owns at least 10% of the company’s voting stock and beneficially owns the dividend, and 15% in any other case.

Under the Tax Act, a holder will not be subject to Canadian tax on any capital gain realized on an actual or deemed disposition of a common share, including a deemed disposition at death, provided that he did not hold the common share as capital property used in carrying on a business in Canada, and that neither he nor persons with whom he did not deal at arm’s length, alone or together, owned (or have an option or interest in) 25% or more of the issued shares of any class of stock at any time in the 60 month period immediately preceding the disposition.

A holder who is liable under the Tax Act for Canadian tax in respect of a capital gain realized on an actual or deemed disposition of a common share could be relieved under the Treaty from such liability unless:

	(a)		the common share formed part of the business property of a permanent establishment or fixed base in Canada that the holder has or had within the twelve-month period preceding the disposition; or
	(b)		the holder was an individual and

	(i)		was resident in Canada for 120 months during any period of 20 consecutive years preceding the disposition; and
	(ii)		was resident in Canada at any time during the ten years immediately preceding the disposition; and
	(iii)		owned the common share when he ceased to be a resident of Canada.

To the extent that no Treaty relief is available, generally, one-half of any capital gain realized by a holder in a taxation year must be included in the income of the holder for the year, and one-half of any capital loss realized by a holder in a taxation year must be deducted from taxable capital gains realized by the holder in that year. Capital losses for a taxation year in excess of taxable capital gains for that year generally may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against net taxable capital gains realized in such years. A holder is required to file a Canadian income tax return if such holder disposes of a common share and the gain or loss is subject to tax in Canada, based on the application of the rules outlined in the above paragraphs, even where the Treaty applies to relieve the Canadian tax liability.

This summary is of a general nature and is not intended, nor should it be construed, to be legal or tax advice to any particular shareholder. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE INCOME AND OTHER TAX CONSEQUENCES ARISING IN THEIR PARTICULAR CIRCUMSTANCES.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

There are certain U.S. federal income tax risks associated with investments in Golden Star.

Holders of our common shares or warrants or options to purchase our common shares who are United States taxpayers should consider that we could be considered to be a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes. Although we believe that we were not a PFIC for 2006 and that we will not be a PFIC for 2007, and do not expect to become a PFIC in the foreseeable future, the tests for determining PFIC status depend upon a number of factors, some of which are beyond our control, and we cannot assure you that we will not be a PFIC.

If we are a PFIC for any year, any holder of our common shares or warrants or options to purchase our common shares who is a U.S. person for U.S. income tax purposes (a “U.S. Holder”) and whose holding period for those shares, warrants or options includes any portion of a year in which we are a PFIC generally would be subject to a special adverse tax regime in respect of “excess distributions.” Excess distributions include certain distributions received on shares in a PFIC in a taxable year. Gain recognized by a U.S. Holder on a sale or other transfer of warrant or options to purchase our shares (including certain transfers that would otherwise be tax free) would also generally be taxed as an excess distribution. Excess distributions are generally taxed at ordinary income rates and are subject to a nondeductible interest charge and to other adverse rules. Certain elections may sometimes be used to mitigate the adverse tax rules that apply to PFICs (the so-called “QEF” and “mark to market”), but these elections may accelerate the recognition of taxable income and may result in the recognition of ordinary income.

The QEF and mark to market elections are not be available for U.S. Holders with respect to warrants or options to acquire our common shares. Additional adverse rules would apply to U.S. Holders of our common shares for any year in which we are a PFIC and own or dispose of shares in another corporation that is also a PFIC.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data set forth below are derived from our audited consolidated financial statements for the years ended December 31, 2006, 2005, 2004, 2003 and 2002, and should be read in conjunction with those financial statements and the notes thereto. The consolidated financial statements have been prepared in accordance with Canadian GAAP. Selected financial data derived in accordance with US GAAP has also been provided and should be read in conjunction with Note 24 to the financial statements. Reference should also be made to “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Summary of Financial Condition

(Amounts in thousands except per share data)

		As of Dec.				As of Dec.				As of Dec.				As of Dec.				As of Dec.
Canadian GAAP		31, 2006				31, 2005				31, 2004				31, 2003				31, 2002
Working capital		$	21,383			$	91,974			$	61,366			$	96,784			$	21,963
Current assets			90,534				132,789				78,846				104,935				32,843
Total assets			663,774				564,603				252,160				222,391				74,135
Current liabilities			69,151				40,815				17,480				8,151				10,880
Long-term liabilities			125,099				124,919				10,367				8,402				8,973
Shareholder’s equity			462,100				392,240				217,960				198,362				49,384

		For the				For the				For the				For the				For the
		Year				Year				Year				Year				Year
		Ended Dec.				Ended Dec.				Ended Dec.				Ended Dec.				Ended Dec.
Canadian GAAP		31, 2006				31, 2005				31, 2004				31, 2003				31, 2002
Revenues		$	128,690			$	95,465			$	65,029			$	64,370			$	38,802
Net income/(loss)			64,689				(13,351	)			2,642				21,956				4,856
Net income/(loss) per share – basic			0.312				(0.094	)			0.019				0.198				0.067

		As of Dec.				As of Dec.				As of Dec.				As of Dec.				As of Dec.
US GAAP1		31, 2006				31, 2005				31, 2004				31, 2003				31, 2002
Working capital		$	21,383			$	91,794			$	61,366			$	96,784			$	22,262
Current assets			90,534				132,789				78,846				104,935				33,391
Total assets			606,095				522,443				219,972				200,337				62,644
Current liabilities			69,151				40,815				17,480				8,151				10,880
Long-term liabilities			129,624				135,832				22,432				87,126				14,445
Shareholder’s equity			404,418				343,832				176,161				98,698				35,597