EX-99.2 3 financialsandfootnotesq3se.htm EXHIBIT 99.2 Exhibit
















goldenstarlargea02a01a01a12.jpg
Condensed Interim Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2017 and September 30, 2016





TABLE OF CONTENTS

FINANCIAL STATEMENTS
 
 
 
 
 
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)
 
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
 
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
 
 
 
 
 
1. NATURE OF OPERATIONS
 
2. BASIS OF PRESENTATION
 
3. CHANGES IN ACCOUNTING POLICIES
 
4. FINANCIAL INSTRUMENTS
 
5. INVENTORIES
 
6. MINING INTERESTS
 
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 
8. REHABILITATION PROVISIONS
 
9. DEFERRED REVENUE
 
10. DEBT
 
11. SHARE CAPITAL
 
12. COMMITMENTS AND CONTINGENCIES
 
13. SHARE-BASED COMPENSATION
 
14. INCOME/(LOSS) PER COMMON SHARE
 
15. REVENUE
 
16. COST OF SALES EXCLUDING DEPRECIATION AND AMORTIZATION
 
17. FINANCE EXPENSE, NET
 
18. RELATED PARTY TRANSACTIONS
 
19. OPERATIONS BY SEGMENT AND GEOGRAPHIC AREA
 
20. SUPPLEMENTAL CASH FLOW INFORMATION
 
 
 
 





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


Notes
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
15
 
$
87,772

 
$
55,511

 
$
233,652

 
$
168,035

Cost of sales excluding depreciation and amortization
16
 
53,502

 
44,608

 
160,081

 
128,622

Depreciation and amortization
 
 
7,365

 
5,111

 
24,697

 
15,043

Mine operating margin
 
 
26,905

 
5,792


48,874


24,370

 
 
 
 
 
 
 
 
 
 
Other expenses/(income)
 
 
 
 
 
 
 
 
 
Exploration expense
 
 
400

 
408

 
1,380

 
1,389

General and administrative
 
 
7,264

 
9,370

 
17,209

 
25,237

Finance expense, net
17
 
2,264

 
2,001

 
7,411

 
6,837

Other income
 
 
(172
)
 
(27
)
 
(466
)
 
(2,889
)
Loss/(gain) on fair value of financial instruments, net
4
 
3,446

 
5,784

 
(3,959
)
 
26,516

Loss on repurchase of 5% Convertible Debentures, net
4
 
—

 
12,048

 
—

 
11,594

Loss on conversion of 7% Convertible Debentures, net
10
 
—

 
—

 
165

 
—

Net income/(loss) and comprehensive income/(loss)
 
 
$
13,703

 
$
(23,792
)
 
$
27,134

 
$
(44,314
)
Net income/(loss) attributable to non-controlling interest
 
 
1,586

 
(682
)
 
964

 
(1,221
)
Net income/(loss) attributable to Golden Star shareholders
 
 
$
12,117

 
$
(23,110
)
 
$
26,170

 
$
(43,093
)
 
 
 
 
 
 
 
 
 
 
Net income/(loss) per share attributable to Golden Star shareholders
 
 
 
 
 
 
 
 
 
Basic
14
 
$
0.03

 
$
(0.07
)
 
$
0.07

 
$
(0.16
)
Diluted
14
 
$
0.03

 
$
(0.07
)
 
$
0.06

 
$
(0.16
)
Weighted average shares outstanding-basic (millions)
 
 
378.0

 
325.3

 
371.2

 
269.7

Weighted average shares outstanding-diluted (millions)
 
 
385.3

 
325.3

 
438.1

 
269.7

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

3


GOLDEN STAR RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(Stated in thousands of U.S. dollars)
(unaudited)

 
 
 
As of
 
As of
 
Notes
 
September 30,
2017
 
December 31,
2016
 
 
 
 
 
 
ASSETS
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and cash equivalents
 
 
$
29,954

 
$
21,764

Accounts receivable
 
 
4,207

 
7,299

Inventories
5
 
48,896

 
44,381

Prepaids and other
 
 
6,843

 
3,926

Total Current Assets
 
 
89,900

 
77,370

RESTRICTED CASH
 
 
6,493

 
6,463

MINING INTERESTS
6
 
243,076

 
215,017

Total Assets
 
 
$
339,469

 
$
298,850

 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
Accounts payable and accrued liabilities
7
 
$
87,169

 
$
92,900

Derivative liabilities
4
 
—

 
2,729

Current portion of rehabilitation provisions
8
 
3,254

 
5,515

Current portion of deferred revenue
9
 
17,827

 
19,234

Current portion of long term debt
10
 
12,533

 
15,378

Current portion of other liability
13
 
10,801

 
2,073

Total Current Liabilities
 
 
131,584

 
137,829

REHABILITATION PROVISIONS
8
 
71,273

 
71,867

DEFERRED REVENUE
9
 
95,634

 
94,878

LONG TERM DEBT
10
 
82,779

 
89,445

LONG TERM DERIVATIVE LIABILITY
4
 
9,061

 
15,127

LONG TERM OTHER LIABILITY
13
 
5,178

 
10,465

Total Liabilities
 
 
395,509

 
419,611

 
 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
 
 
SHARE CAPITAL
 
 
 
 
 
First preferred shares, without par value, unlimited shares authorized. No shares issued and outstanding
 
 
—

 
—

Common shares, without par value, unlimited shares authorized
11
 
783,232

 
746,542

CONTRIBUTED SURPLUS
 
 
34,758

 
33,861

DEFICIT
 
 
(806,781
)
 
(832,951
)
Equity/(deficit) attributable to Golden Star shareholders
 
 
11,209

 
(52,548
)
NON-CONTROLLING INTEREST
 
 
(67,249
)
 
(68,213
)
Total Deficit
 
 
(56,040
)
 
(120,761
)
Total Liabilities and Shareholders' Equity
 
 
$
339,469


$
298,850

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


Signed on behalf of the Board,

"Timothy C. Baker"                            "Robert E. Doyle"
Timothy C. Baker, Director                        Robert E. Doyle, Director


4


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


 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
Notes
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Net income/(loss)
 
 
$
13,703

 
$
(23,792
)
 
$
27,134

 
$
(44,314
)
Reconciliation of net income/(loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
7,373

 
5,114

 
24,719

 
15,056

Share-based compensation
13
 
4,059

 
6,426

 
7,501

 
16,166

Loss/(gain) on fair value of 7% Convertible Debentures embedded derivative
4
 
3,170

 
3,341

 
(3,997
)
 
3,341

Loss on fair value of 5% Convertible Debentures
4
 
—

 
1,920

 
317

 
17,086

Loss on repurchase of 5% Convertible Debentures, net
4
 
—

 
12,048

 
—

 
11,594

Recognition of deferred revenue
9
 
(4,266
)
 
(2,889
)
 
(10,651
)
 
(8,495
)
Proceeds from Royal Gold stream
9
 
—

 
20,000

 
10,000

 
40,000

Reclamation expenditures
8
 
(2,157
)
 
(1,325
)
 
(5,151
)
 
(4,026
)
Other
20
 
2,059

 
657

 
5,992

 
5,153

Changes in working capital
20
 
(224
)
 
(536
)
 
(11,627
)
 
(23,546
)
Net cash provided by operating activities
 
 
23,717

 
20,964

 
44,237

 
28,015

INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Additions to mining properties
 
 
(82
)
 
(261
)
 
(474
)
 
(873
)
Additions to plant and equipment
 
 
(374
)
 
—

 
(519
)
 
—

Additions to construction in progress
 
 
(16,655
)
 
(21,395
)
 
(51,128
)
 
(59,704
)
Change in accounts payable and deposits on mine equipment and material
 
 
(2,194
)
 
146

 
(3,100
)
 
(5,910
)
Increase in restricted cash
 
 
—

 
—

 
(29
)
 
—

Net cash used in investing activities
 
 
(19,305
)
 
(21,510
)
 
(55,250
)
 
(66,487
)
FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Principal payments on debt
10
 
(357
)
 
(23,803
)
 
(1,717
)
 
(28,429
)
Proceeds from debt agreements
10
 
—

 
—

 
10,000

 
3,000

Proceeds from 7% Convertible Debentures, net
10
 
—

 
20,729

 
—

 
20,729

5% Convertible Debentures repayment
10
 
—

 
(18,240
)
 
(13,611
)
 
(19,941
)
Shares issued, net
11
 
—

 
31,771

 
24,521

 
45,477

Exercise of options
 
 
—

 
6

 
10

 
22

Net cash (used in)/provided by financing activities
 
 
(357
)
 
10,463

 
19,203

 
20,858

Increase/(decrease) in cash and cash equivalents
 
 
4,055

 
9,917

 
8,190

 
(17,614
)
Cash and cash equivalents, beginning of period
 
 
25,899

 
7,577

 
21,764

 
35,108

Cash and cash equivalents, end of period
 
 
$
29,954

 
$
17,494

 
$
29,954

 
$
17,494

See Note 20 for supplemental cash flow information.

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

5


GOLDEN STAR RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Stated in thousands of U.S. dollars except share data)
(unaudited)
 
 
Number of
Common
Shares  
 
Share
Capital  
 
Contributed
Surplus
 
Deficit
 
Non-Controlling Interest
 
Total
Shareholders'
Equity 
 
 
 
Balance at December 31, 2015
 
259,897,095

 
$
695,555

 
$
32,612

 
$
(793,304
)
 
$
(66,097
)
 
$
(131,234
)
Shares issued
 
68,750,000

 
49,515

 
—

 
—

 
—

 
49,515

Shares issued under DSUs
 
39,744

 
9

 
(9
)
 
—

 
—

 
—

Shares issued under options
 
58,919

 
39

 
(17
)
 
—

 
—

 
22

Options granted net of forfeitures
 
—

 
—

 
618

 
—

 
—

 
618

Deferred share units granted
 
—

 
—

 
446

 
—

 
—

 
446

Share issue costs
 
—

 
(4,039
)
 
—

 
—

 
—

 
(4,039
)
Net loss
 
—

 
—

 
—

 
(43,093
)
 
(1,221
)
 
(44,314
)
Balance at September 30, 2016
 
328,745,758

 
$
741,079

 
$
33,650

 
$
(836,397
)
 
$
(67,318
)
 
$
(128,986
)
Balance at December 31, 2016
 
335,356,450

 
$
746,542

 
$
33,861

 
$
(832,951
)
 
$
(68,213
)
 
$
(120,761
)
Shares issued (see Note 11)
 
40,809,502

 
35,682

 
—

 
—

 
—

 
35,682

Shares issued under DSUs
 
1,167,689

 
521

 
(521
)
 
—

 
—

 
—

Shares issued under options
 
23,750

 
16

 
(6
)
 
—

 
—

 
10

Shares issued under warrants (see Note 11)
 
3,223,684

 
2,450

 
—

 
—

 
—

 
2,450

Options granted net of forfeitures
 
—

 
—

 
1,027

 
—

 
—

 
1,027

Deferred share units granted
 
—

 
—

 
247

 
—

 
—

 
247

Performance and restricted share units granted
 
—

 
—

 
150

 
—

 
—

 
150

Share issue costs
 
—

 
(1,979
)
 
—

 
—

 
—

 
(1,979
)
Net income
 
—

 
—

 
—

 
26,170

 
964

 
27,134

Balance at September 30, 2017
 
380,581,075

 
$
783,232

 
$
34,758

 
$
(806,781
)
 
$
(67,249
)
 
$
(56,040
)

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


6


GOLDEN STAR RESOURCES LTD.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 and 2016
(All currency amounts in tables are in thousands of U.S. dollars unless noted otherwise)
(unaudited)
1. NATURE OF OPERATIONS
Golden Star Resources Ltd. ("Golden Star" or "the Company" or "we" or "our") is a Canadian federally-incorporated, international gold mining and exploration company headquartered in Toronto, Canada. The Company's shares are listed on the Toronto Stock Exchange (the "TSX") under the symbol GSC, the NYSE American (formerly NYSE MKT) under the symbol GSS and the Ghana Stock Exchange under the symbol GSR. The Company's registered office is located at 150 King Street West, Sun Life Financial Tower, Suite 1200, Toronto, Ontario, M5H 1J9, Canada.
Through a 90% owned subsidiary, Golden Star (Wassa) Limited, we own and operate the Wassa open-pit gold mine, the Wassa underground mine and a carbon-in-leach ("CIL") processing plant (collectively, “Wassa”), located northeast of the town of Tarkwa, Ghana. Through our 90% owned subsidiary Golden Star (Bogoso/Prestea) Limited, the Company owns and operates the Bogoso gold mining and processing operations (“Bogoso”), the Prestea open-pit mining operations and the Prestea underground development project located near the town of Prestea, Ghana. We hold interests in several gold exploration projects in Ghana and in South America we hold and manage exploration properties in Brazil.
2. BASIS OF PRESENTATION
Statement of compliance
These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) including International Accounting Standards ("IAS") 34 Interim financial reporting. These condensed interim consolidated financial statements should be read in conjunction with the Company's annual consolidated financial statements for the year ended December 31, 2016, which have been prepared in accordance with IFRS as issued by the IASB. The accounting policies and methods of application adopted are consistent with those disclosed in Note 3 of the Company’s consolidated financial statements for the year ended December 31, 2016, except for the changes in accounting policies as described below.
These condensed interim consolidated financial statements were approved by the Audit Committee of the Company on October 31, 2017.
Basis of presentation
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries, whether owned directly or indirectly. The financial statements of the subsidiaries are prepared for the same period as the Company using consistent accounting policies for all periods presented. All inter-company balances and transactions have been eliminated. Subsidiaries are entities controlled by the Company. Non-controlling interests in the net assets of consolidated subsidiaries are a separate component of the Company's equity.
These condensed interim consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and discharge of all liabilities in the normal course of business.
The condensed interim consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments which are measured at fair value through profit or loss.
3. CHANGES IN ACCOUNTING POLICIES
The Company has adopted the following new and revised standards, effective January 1, 2017. These changes were made in accordance with the applicable transitional provisions.
IAS 7 Statement of cash flows - Disclosures related to financing activities was amended to require disclosures about changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. As a result of the adoption of IAS 7, the Company has included additional disclosure on non-cash changes of debt amounts in Note 20.
IAS 12 Income taxes - Deferred tax was amended to clarify (i) the requirements for recognizing deferred tax assets on unrealized losses; (ii) deferred tax where an asset is measured at a fair value below the asset's tax base, and (iii) certain other aspects of

7


accounting for deferred tax assets. The adoption of this amendment did not result in any impact to the Company's financial statements.
Standards, interpretations and amendments not yet effective
IFRS 9 Financial Instruments was issued in July 2014 and includes (i) a third measurement category for financial assets - fair value through other comprehensive income; (ii) a single, forward-looking "expected loss" impairment model; and (iii) a mandatory effective date of annual periods beginning on or after January 1, 2018. The Company does not expect material impact to the financial statements on adoption of this standard.
IFRS 15 Revenue from Contracts with Customers was amended to clarify how to (i) identify a performance obligation in a contract; (ii) determine whether a company is a principal or an agent; and (iii) determine whether the revenue from granting a license should be recognized at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new standard. The amendments have the same effective date as the standard, which is January 1, 2018. The Company has reviewed its contracts with customers with respect to the applications to IFRS 15. The Company does not expect that the timing or amounts of revenue currently recognized on our bullion spot sales will be affected by IFRS 15. It is anticipated that the Company’s streaming arrangement with RGLD Gold AG (“RGLD”), will be impacted by the adoption of IFRS 15 as a result of a significant financing component in the contract as defined by IFRS 15. It is expected that the finance costs and revenue will increase on adoption of this standard. The Company is currently in the process of quantifying these impacts to the financial statements.
IFRS 2 Share-based payments was amended to address (i) certain issues related to the accounting for cash settled awards, and (ii) the accounting for equity settled awards that include a "net settlement" feature in respect of employee withholding taxes effective for years beginning on or after January 1, 2018. The Company does not expect material impact to the financial statements on adoption of this standard.
IFRS 16 Leases specifies how an IFRS reporter will recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17. IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after January 1, 2019. The Company is still assessing the impact of this standard.
IFRIC 23 Uncertainty over income tax treatments clarifies how the recognition and measurement requirements of IAS 12, Income Taxes, are applied where there is uncertainty over income tax treatments effective for years beginning on or after January 1, 2019. The Company is still assessing the impact of this standard.
4. FINANCIAL INSTRUMENTS
The following tables illustrate the classification of the Company's recurring fair value measurements for financial instruments within the fair value hierarchy and their carrying values and fair values as at September 30, 2017 and December 31, 2016:
 
 
 
September 30, 2017
 
December 31, 2016
 
Level
 
Carrying value
 
Fair value
 
Carrying value
 
Fair value
Financial Liabilities
 
 
 
 
 
 
 
 
 
Fair value through profit or loss
 
 
 
 
 
 
 
 
 
5% Convertible Debentures
3
 
$
—

 
$
—

 
$
13,294

 
$
13,294

Warrants
2
 
—

 
—

 
2,729

 
2,729

7% Convertible Debentures embedded derivative
3
 
9,061

 
9,061

 
15,127

 
15,127

There were no non-recurring fair value measurements of financial instruments as at September 30, 2017.
The three levels of the fair value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
Level 3 - Inputs that are not based on observable market data.
The Company's policy is to recognize transfers into and transfers out of the fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. During the nine months ended September 30, 2017, there were no transfers between the levels of the fair value hierarchy.

8


Loss/(gain) on fair value of financial instruments in the Statement of Operations includes the following components:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Loss on fair value of 5% Convertible Debentures
$
—

 
$
1,920

 
$
317

 
$
17,086

Loss/(gain) on fair value of warrants
469

 
820

 
(86
)
 
2,804

Gain on warrant exercise
(193
)
 
—

 
(193
)
 
—

Loss/(gain) on fair value of 7% Convertible Debentures embedded derivative
3,170

 
3,341

 
(3,997
)
 
3,341

Unrealized (gain)/loss on non-hedge derivative contracts
—

 
(297
)
 
—

 
3,285

 
$
3,446

 
$
5,784

 
$
(3,959
)
 
$
26,516

The valuation techniques that are used to measure fair value are as follows:
5% Convertible Debentures
On May 26, 2017, $13.6 million principal and $0.3 million interest was paid in full settlement of the 5% Convertible Debentures.
The debt component of the 5% Convertible Debentures was valued based on discounted cash flows and the conversion feature was valued based on a Black-Scholes model. The risk free interest rate used in the fair value computation was the interest rate on US treasury bills with maturity similar to the remaining life of the 5% Convertible Debentures. The discount rate used was determined by adding our risk premium to the risk free interest rate. A market-based volatility rate was applied to the fair value computation.
The following table presents the changes in the 5% Convertible Debentures for the nine months ended September 30, 2017:
 
Fair value
Balance, December 31, 2016
$
13,294

Repayment
(13,611
)
Loss in the period included in earnings
317

Balance, September 30, 2017
$
—

Warrants
As part of the term loan transaction with Royal Gold, Inc. ("RGI"), 5,000,000 warrants to purchase Golden Star shares were issued to RGI. The warrants had a $0.27 exercise price and expire on July 28, 2019, being the fourth year anniversary of the date of issuance. These instruments were fair valued based on a Black-Scholes model.
On August 30, 2017, the Company issued 3,223,684 common shares upon a cashless exercise of all 5,000,000 warrants held by RGI. The Company recorded a $2.5 million increase in equity, $2.7 million decrease in warrant liability and a $0.2 million gain on exercise.
The following table presents the changes in the warrants for the nine months ended September 30, 2017:
 
Fair value
Balance, December 31, 2016
$
2,729

Exercise
(2,643
)
Gain on fair value of warrants
(86
)
Balance, September 30, 2017
$
—


9


7% Convertible Debentures embedded derivative
The debt component of the 7% Convertible Debentures is recorded at amortized cost using the effective interest rate method, and the conversion feature is classified as an embedded derivative measured at fair value through profit or loss.
The embedded derivative was valued at September 30, 2017 and December 31, 2016 using a convertible note valuation model. The significant inputs used in the convertible note valuation are as follows:
 
September 30, 2017
 
December 31, 2016
Embedded derivative
 
 
 
Risk-free interest rate
1.7
%
 
1.7
%
Risk premium
9.3
%
 
12.9
%
Borrowing costs
15.0
%
 
10.0
%
Expected volatility
45.0
%
 
45.0
%
Remaining life (years)
3.9

 
4.6

The following table presents the changes in the 7% Convertible Debentures embedded derivative for the nine months ended September 30, 2017:
 
Fair value
Balance, December 31, 2016
$
15,127

Gain on conversions
(2,069
)
Gain on fair value of 7% Convertible Debentures embedded derivative
(3,997
)
Balance, September 30, 2017
$
9,061

If the risk premium increases by 5%, the fair value of the 7% Convertible Debentures embedded derivative would decrease and the related gain in the Statement of Operations would increase by $0.1 million at September 30, 2017.
5. INVENTORIES
Inventories include the following components:
 
As of
 
As of
 
September 30,
2017
 
December 31, 2016
Stockpiled ore
$
23,504

 
$
23,833

In-process ore
4,556

 
5,008

Materials and supplies
20,416

 
14,824

Finished goods
420

 
716

Total
$
48,896

 
$
44,381

The cost of inventories expensed for the nine months ended September 30, 2017 and 2016 was $147.4 million and $119.8 million, respectively.
During the three and nine months ended September 30, 2017, $0.6 million and $3.5 million of net realizable value adjustments were recorded for stockpiled ore, respectively (three and nine months ended September 30, 2016 - $nil).

10


6. MINING INTERESTS
The following table shows the breakdown of the cost, accumulated depreciation and net book value of plant and equipment, mining properties and construction in progress:
 
Plant and equipment
 
Mining properties
 
Construction in progress
 
Total
Cost
 
 
 
 
 
 
 
As of December 31, 2016
$
461,438

 
$
746,657

 
$
131,409

 
$
1,339,504

Additions
519

 
474

 
48,191

 
49,184

Transfers
17,614

 
35,795

 
(53,409
)
 
—

Capitalized interest
—

 
—

 
3,703

 
3,703

Change in rehabilitation provision estimate
—

 
1,363

 
—

 
1,363

Disposals and other
(7,142
)
 
—

 
(390
)
 
(7,532
)
As of September 30, 2017
$
472,429

 
$
784,289


$
129,504

 
$
1,386,222

 
 
 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
 
 
As of December 31, 2016
$
431,698

 
$
692,789

 
$
—

 
$
1,124,487

Depreciation and amortization
9,387

 
16,063

 
—

 
25,450

Disposals and other
(6,791
)
 
—

 
—

 
(6,791
)
As of September 30, 2017
$
434,294

 
$
708,852


$
—

 
$
1,143,146

 
 
 
 
 
 
 
 
Carrying amount
 
 
 
 
 
 
 
As of December 31, 2016
$
29,740

 
$
53,868


$
131,409

 
$
215,017

As of September 30, 2017
$
38,135

 
$
75,437


$
129,504

 
$
243,076

As at September 30, 2017, equipment under finance leases had net carrying amounts of $0.6 million. The total minimum lease payments are disclosed in Note 10 - Debt.
No depreciation is charged to construction in progress assets. For the nine months ended September 30, 2017, the general capitalization rate for borrowing costs was 7%.
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities include the following components:
 
As of
 
As of
 
September 30,
2017
 
December 31, 2016
Trade and other payables
$
42,872

 
$
48,591

Accrued liabilities
33,793

 
35,998

Payroll related liabilities
10,504

 
8,311

Total
$
87,169

 
$
92,900


11


8. REHABILITATION PROVISIONS
At September 30, 2017, the total undiscounted amount of future cash needs for rehabilitation was estimated to be $81.2 million. A discount rate assumption of 2% and an inflation rate assumption of 2% were used to value the rehabilitation provisions. The changes in the carrying amount of the rehabilitation provisions are as follows:
 
Nine Months Ended 
 September 30, 2017
 
Year Ended
December 31, 2016
Beginning balance
$
77,382

 
$
79,685

Accretion of rehabilitation provisions
933

 
1,368

Changes in estimates
1,363

 
1,856

Cost of reclamation work performed
(5,151
)
 
(5,527
)
Balance at the end of the period
$
74,527

 
$
77,382

 
 
 
 
Current portion
$
3,254

 
$
5,515

Long term portion
71,273

 
71,867

Total
$
74,527

 
$
77,382

9. DEFERRED REVENUE
During the nine months ended September 30, 2017, the Company sold 18,361 ounces of gold to RGLD Gold AG ("RGLD"). Revenue recognized on the ounces sold to RGLD during the nine months ended September 30, 2017 consisted of $4.6 million of cash payment proceeds and $10.7 million of deferred revenue recognized in the period (see Note 15). The Company has delivered a total of 48,726 ounces of gold to RGLD since the inception of the Streaming Agreement.
 
Nine Months Ended 
 September 30, 2017
 
Year Ended
December 31, 2016
Beginning balance
$
114,112

 
$
65,379

Deposits received
10,000

 
60,000

Deferred revenue recognized
(10,651
)
 
(11,267
)
Balance at the end of the period
$
113,461

 
$
114,112

 
 
 
 
Current portion
$
17,827

 
$
19,234

Long term portion
95,634

 
94,878

Total
$
113,461

 
$
114,112


12


10. DEBT
The following table displays the components of our current and long term debt instruments:
 
As of
 
As of
 
September 30, 2017
 
December 31, 2016
Current debt:
 
 
 
Equipment financing credit facility
$
218

 
$
931

Finance leases
1,448

 
1,153

Ecobank Loan III
1,667

 
—

5% Convertible Debentures at fair value (see Note 4)
—

 
13,294

Vendor agreement
9,200

 
—

Total current debt
$
12,533

 
$
15,378

Long term debt:
 
 
 
Equipment financing credit facility
$
—

 
$
188

Finance leases
461

 
806

Ecobank Loan III
7,867

 
—

7% Convertible Debentures
42,028

 
47,617

Royal Gold loan
18,736

 
18,496

Vendor agreement
13,687

 
22,338

Total long term debt
$
82,779

 
$
89,445

 
 
 
 
Current portion
$
12,533

 
$
15,378

Long term portion
82,779

 
89,445

Total
$
95,312


$
104,823

5% Convertible Debentures
On May 26, 2017, $13.6 million principal and $0.3 million interest was paid in full settlement of the 5% Convertible Debentures.
7% Convertible Debentures
A total of 9,445,552 shares were issued on conversion of $8.5 million principal amount of 7% Convertible Debentures during the first quarter of 2017. The Company recorded a net loss on conversions of $0.2 million. The Company also made make-whole interest payments of $1.4 million as a result of the conversions. There were no conversions during the second or third quarters of 2017. As at September 30, 2017, $51.5 million principal amount of 7% Convertible Debentures remains outstanding.
The changes in the carrying amount of the 7% Convertible Debentures are as follows:
 
Nine Months Ended 
 September 30, 2017
 
Year Ended
December 31, 2016
Beginning balance
$
47,617

 
$
—

Principal value of debt issued
—

 
65,000

Embedded derivative fair value at debt issuance
—

 
(12,259
)
Transaction costs
—

 
(2,271
)
Conversions
(6,947
)
 
(3,708
)
Accretion of debt
1,358

 
855

Balance at the end of the period
$
42,028

 
$
47,617

Ecobank Loan III
On February 22, 2017, the Company through its subsidiary Golden Star (Wassa) Limited closed a $25 million secured Medium Term Loan Facility ("Ecobank Loan III") with Ecobank Ghana Limited. Ecobank Loan III has a term of 60 months from the date of initial drawdown and is secured by, among other things, Wassa's existing plant, and certain machinery and equipment. The interest rate on the loan is three month LIBOR plus 8%, per annum, payable monthly in arrears beginning a month following the

13


initial drawdown. Repayment of principal commences six months following the initial drawdown and is thereafter payable quarterly in arrears. The Company has twelve months to drawdown the loan.
During the nine months ended September 30, 2017, the Company drew down $10.0 million on Ecobank Loan III.
Finance leases
During the three months ended September 30, 2017, the Company entered into a financing lease agreement for a period of 24 months.
Schedule of payments on outstanding debt as of September 30, 2017:
 
 
Three months ending December 31, 2017
 
Year ending December 31, 2018
 
Year ending December 31, 2019
 
Year ending December 31, 2020
 
Year ending December 31, 2021
 
Year ending December 31, 2022
 
Maturity
Equipment financing loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal
 
$
30

 
$
188

 
$
—

 
$
—

 
$
—

 
$
—

 
 2017 to 2018
Interest
 
7

 
4

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Finance leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal
 
416

 
1,224

 
269

 
—

 
—

 
—

 
2019
Interest
 
32

 
63

 
8

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ecobank Loan III
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal
 
—

 
2,222

 
2,222

 
2,222

 
2,500

 
834

 
2022
Interest
 
226

 
831

 
629

 
429

 
245

 
56

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7% Convertible Debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal
 
—

 
—

 
—

 
—

 
51,498

 
—

 
August 15, 2021
Interest
 
—

 
3,605

 
3,605

 
3,605

 
3,605

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royal Gold loan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal 1
 
—

 
—

 
20,000

 
—

 
—

 
—

 
2019
Interest 2
 
398

 
1,594

 
930

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vendor agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal
 
—

 
12,266

 
12,266

 
—

 
—

 
—

 
2019
Interest
 
460

 
1,418

 
498

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total principal
 
$
446

 
$
15,900

 
$
34,757

 
$
2,222

 
$
53,998

 
$
834

 
 
Total interest
 
1,123

 
7,515

 
5,670

 
4,034

 
3,850

 
56

 
 
 
 
$
1,569

 
$
23,415

 
$
40,427

 
$
6,256

 
$
57,848

 
$
890

 
 
1 Beginning with the three months ending June 30, 2017, the excess cash flow provision of the Royal Gold loan came into effect. The excess cash flow provision as defined in the Royal Gold loan agreement requires the Company to make mandatory repayments of 25% of excess cash flow for the remainder of 2017 and mandatory repayments of 50% excess cash flow beginning 2018 until maturity. The excess cash flow calculation is dependent upon factors beyond the Company's control such as gold price. No excess cash flow repayments have been required to date. The schedule of payments shows the total principal amount outstanding settled at maturity.
2 Interest payments on the Royal Gold loan are based on the average daily London Bullion Market Association ("LBMA") gold price multiplied by 62.5% divided by 10,000 to a maximum interest rate of 11.5% per annum. The estimated interest payments are calculated based on $1,275 per ounce LBMA gold price.

14


11. SHARE CAPITAL
 
 
 
Number of Common Shares
 
Share Capital
Balance at December 31, 2016
 
 
335,356,450

 
$
746,542

Bought deal
a
 
31,363,950

 
26,203

Conversion of 7% Convertible Debentures
b
 
9,445,552

 
9,479

Shares issued under DSUs
 
 
1,167,689

 
521

Shares issued under options
 
 
23,750

 
16

Shares issued under warrants
c
 
3,223,684

 
2,450

Share issue costs
 
 
—

 
(1,979
)
Balance at September 30, 2017
 
 
380,581,075

 
$
783,232

a.
On February 7, 2017, the Company closed a bought deal offering of 31,363,950 common shares, which includes shares issued upon full exercise of the over-allotment option, at a price of C$1.10 per share, for net proceeds to the Company of $24.5 million.
b.
During the nine months ended September 30, 2017, a total of 9,445,552 common shares were issued on conversion of $8.5 million principal amount of 7% Convertible Debentures. The Company recorded a $9.5 million increase in equity offset by capitalized share issue costs of $0.3 million, resulting in a net equity increase of $9.2 million. The Company recorded a net loss on conversions of $0.2 million.
c.
On August 30, 2017, the Company issued 3,223,684 common shares upon a cashless exercise of all 5,000,000 warrants held by RGI. The Company recorded a $2.5 million increase in equity, $2.7 million decrease in warrant liability and a $0.2 million gain on exercise.
12. COMMITMENTS AND CONTINGENCIES
The Company has capital commitments of $19.7 million, all of which are expected to be incurred within the next three months.
Due to the nature of the Company’s operations, various legal matters from time to time arise in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, these matters will not have a material effect on the Condensed Interim Consolidated Financial Statements of the Company.
13. SHARE-BASED COMPENSATION
Non-cash employee compensation expenses, recognized in general and administrative expense in the Statements of Operations and Comprehensive Income, are as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Share options
$
205

 
$
143

 
$
1,027

 
$
618

Deferred share units
69

 
229

 
247

 
446

Share appreciation rights
240

 
347

 
259

 
696

Performance share units
3,545

 
5,707

 
5,968

 
14,406

 
$
4,059

 
$
6,426

 
$
7,501

 
$
16,166

Share options
The fair value of option grants is estimated at the grant dates using the Black-Scholes option-pricing model. Fair values of options granted during the nine months ended September 30, 2017 and 2016 were based on the weighted average assumptions noted in the following table:

15


 
Nine Months Ended 
 September 30,
 
2017
 
2016
Expected volatility
73.70%
 
72.40%
Risk-free interest rate
1.86%
 
1.28%
Expected lives
5.99 years
 
4.86 years
The weighted average fair value per option granted during the nine months ended September 30, 2017 was $0.84 (nine months ended September 30, 2016 - $0.35). As at September 30, 2017, there was $0.7 million of share-based compensation expense (September 30, 2016 - $0.4 million) relating to the Company's share options to be recorded in future periods. For the nine months ended September 30, 2017, the Company recognized an expense of $1.0 million (nine months ended September 30, 2016 - $0.6 million). 
A summary of option activity under the Company's Fourth Amended and Restated 1997 Stock Option Plan during the nine months ended September 30, 2017 are as follows: 
 
Options
(‘000)
 
Weighted–
Average
Exercise
price ($CAD)
 
Weighted–
Average
Remaining
Contractual
Term (Years)
Outstanding as of December 31, 2016
16,119

 
1.29

 
5.7

Granted
2,352

 
1.28

 
9.4

Exercised
(24
)
 
0.55

 
7.6

Forfeited
(626
)
 
2.20

 
2.1

Expired
(1,164
)
 
2.19

 
—

Outstanding as of September 30, 2017
16,657

 
1.19

 
6.1

 
 
 
 
 
 
Exercisable as of December 31, 2016
11,738

 
1.55

 
4.8

Exercisable as of September 30, 2017
12,831

 
1.28

 
5.4

Deferred share units ("DSUs")
For the nine months ended September 30, 2017, the DSUs that were granted vested immediately and a compensation expense of $0.2 million was recognized for these grants (nine months ended September 30, 2016 - $0.4 million). As of September 30, 2017, there was no unrecognized compensation expense related to DSUs granted under the Company's DSU Plan.
A summary of DSU activity during the nine months ended September 30, 2017 and 2016:
 
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
Number of DSUs, beginning of period ('000)
 
5,734

 
4,496

Grants
 
313

 
1,178

Exercises
 
(1,168
)
 
(40
)
Number of DSUs, end of period ('000)
 
4,879

 
5,634

Share appreciation rights ("SARs")
As of September 30, 2017, there was approximately $0.6 million of total unrecognized compensation cost related to unvested SARs (September 30, 2016 - $0.4 million). For the nine months ended September 30, 2017, the Company recognized an expense of $0.3 million related to these cash settled awards (nine months ended September 30, 2016 - $0.7 million).

16


A summary of the SARs activity during the nine months ended September 30, 2017 and 2016:
 
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
Number of SARs, beginning of period ('000)
 
2,687

 
2,934

Grants
 
1,460

 
1,850

Exercises
 
(185
)
 
(10
)
Forfeited
 
(408
)
 
(480
)
Number of SARs, end of period ('000)
 
3,554

 
4,294

Performance share units ("PSUs")
For the nine months ended September 30, 2017, the Company recognized an expense of $5.8 million related to PSU's (nine months ended September 30, 2016 - $14.4 million). As at September 30, 2017, the long term PSU liability is $5.2 million, recognized on the Balance Sheet as Other Long Term Liability and the current portion of $10.8 million is recognized on the Balance Sheet as Other Liability.
A summary of the PSU activity during the nine months ended September 30, 2017 and 2016:
 
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
Number of PSUs, beginning of period ('000)
 
15,480

 
9,618

Grants
 
—

 
6,058

Redeemed
 
(1,876
)
 
—

Forfeited
 
—

 
(196
)
Number of PSUs, end of period ('000)
 
13,604

 
15,480

2017 Performance and restricted share units ("PRSUs")
On May 4, 2017, the Company adopted a 2017 performance and restricted share unit plan (the “2017 PRSU Plan”). Pursuant to the 2017 PRSU Plan, performance share units (“2017 PSUs”) and restricted share units (“2017 RSUs” and, together with the 2017 PSUs, the “Share Units”) may be issued to any employee or officer of the Company or its designated affiliates. Share Units may be redeemed for: (i) common shares issued from treasury; (ii) common shares purchased in the secondary market; (iii) a cash payment; or (iv) a combination of (i), (ii) and (iii). On March 21, 2017, the Company issued 1,694,491 Share Units.
Each PRSU represents one notional common share that is redeemed for common shares or common shares plus cash subject to the consent of the Company based on the value of a common share at the end of the three year performance period, to the extent performance and vesting criteria have been met. The PRSUs vest at the end of a three year performance period based on the Company’s total shareholder return relative to a performance peer group of gold companies as listed in the 2017 PRSU Plan. The award is determined by multiplying the number of Share Units by the performance adjustment factor, which ranges from 0% to 200%. The performance adjustment factor is determined by comparing the Company's share price performance to the share price performance of a peer group of companies. As the Company is required to settle these awards in common shares or common shares plus cash subject to the consent of the Company, they are accounted for as equity awards with corresponding compensation expense recognized. For the nine months ended September 30, 2017, the Company recognized an expense of $0.1 million.

17


14. INCOME/(LOSS) PER COMMON SHARE
The following table provides reconciliation between basic and diluted income/(loss) per common share:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Net income/(loss) attributable to Golden Star shareholders
$
12,117

 
$
(23,110
)
 
$
26,170

 
$
(43,093
)
Adjustments:
 
 
 
 
 
 
 
Interest expense on 7% Convertible Debentures
—

 
—

 
2,749

 
—

Amortization of 7% Convertible Debentures discount
—

 
—

 
1,358

 
—

Gain on fair value of 7% Convertible Debentures embedded derivative
—

 
—

 
(3,997
)
 
—

Diluted income/(loss)
$
12,117


$
(23,110
)
 
$
26,280

 
$
(43,093
)
 
 
 
 
 
 



Weighted average number of basic shares (millions)
378.0

 
325.3

 
371.2

 
269.7

Dilutive securities:
 
 
 
 
 


Options
2.0

 
—

 
2.6

 
—

Deferred stock units
5.3

 
—

 
5.7

 
—

Convertible Debentures
—

 
—

 
58.6

 
—

Weighted average number of diluted shares (millions)
385.3

 
325.3

 
438.1

 
269.7

 
 
 
 
 
 
 
 
Income/(loss) per share attributable to Golden Star shareholders:
 
 
 
 
 
 
 
Basic
$
0.03

 
$
(0.07
)
 
$
0.07

 
$
(0.16
)
Diluted
$
0.03

 
$
(0.07
)
 
$
0.06

 
$
(0.16
)
15. REVENUE
Revenue includes the following components:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Revenue - Streaming Agreement
 
 
 
 
 
 
 
Cash payment proceeds
$
1,881

 
$
1,212

 
$
4,596

 
$
3,333

Deferred revenue recognized
4,266

 
2,889

 
10,651

 
8,495

 
6,147

 
4,101

 
15,247

 
11,828

Revenue - Spot sales
81,625

 
51,410

 
218,405

 
156,207

Total revenue
$
87,772

 
$
55,511

 
$
233,652

 
$
168,035

16. COST OF SALES EXCLUDING DEPRECIATION AND AMORTIZATION
Cost of sales excluding depreciation and amortization include the following components:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Mine operating expenses
$
50,093

 
$
42,432

 
$
144,414

 
$
125,824

Severance charges
228

 
—

 
1,182

 
(71
)
Operating costs to metal inventory
(2,359
)
 
(827
)
 
(600
)
 
(5,975
)
Inventory net realizable value adjustment
606

 
—

 
2,410

 
—

Royalties
4,934

 
3,003

 
12,675

 
8,844

 
$
53,502

 
$
44,608

 
$
160,081

 
$
128,622


18


17. FINANCE EXPENSE, NET
Finance income and expense includes the following components:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Interest income
$
(2
)
 
$
(11
)
 
$
(59
)
 
$
(21
)
Interest expense, net of capitalized interest (see Note 6)
1,645

 
2,043

 
5,312

 
6,398

Net foreign exchange loss/(gain)
310

 
(373
)
 
(220
)
 
(566
)
Accretion of rehabilitation provision
311

 
342

 
933

 
1,026

Conversion make-whole payment
—

 
—

 
1,445

 
—

 
$
2,264

 
$
2,001

 
$
7,411

 
$
6,837

18. RELATED PARTY TRANSACTIONS
There were no material related party transactions for the nine months ended September 30, 2017 and 2016 other than the items disclosed below.
Key management personnel
Key management personnel is defined as members of the Board of Directors and certain senior officers. Compensation of key management personnel are as follows, with such compensation made on terms equivalent to those prevailing in an arm's length transaction:
 
Three Months Ended 
 September 30,

Nine Months Ended 
 September 30,
 
2017

2016

2017

2016
Salaries, wages, and other benefits
$
649


$
627


$
2,211


$
1,982

Bonuses
327


284


983


815

Share-based compensation
3,070


4,618


3,893


11,857

 
$
4,046


$
5,529


$
7,087


$
14,654


19


19. OPERATIONS BY SEGMENT AND GEOGRAPHIC AREA
The Company has reportable segments as identified by the individual mining operations. Segments are operations reviewed by the executive management. Each segment is identified based on quantitative and qualitative factors.
Three Months Ended September 30,
 
Wassa
 
Bogoso/Prestea
 
Other
 
Corporate
 
Total
2017
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
39,556

 
$
48,216

 
$
—

 
$
—

 
$
87,772

Mine operating expenses
 
27,980

 
22,113

 
—

 
—

 
50,093

Severance charges
 
145

 
83

 
—

 
—

 
228

Operating costs to metal inventory
 
(603
)
 
(1,756
)
 
—

 
—

 
(2,359
)
Inventory net realizable value adjustment
 
606

 
—

 
—

 
—

 
606

Royalties
 
2,033

 
2,901

 
—

 
—

 
4,934

Cost of sales excluding depreciation and amortization
 
30,161

 
23,341

 
—

 
—

 
53,502

Depreciation and amortization
 
4,481

 
2,884

 
—

 
—

 
7,365

Mine operating margin
 
4,914

 
21,991

 
—

 
—

 
26,905

Net income attributable to non-controlling interest
 
444

 
1,142

 
—

 
—

 
1,586

Net income/(loss) attributable to Golden Star
 
$
3,117

 
$
20,565

 
$
(1,373
)
 
$
(10,192
)
 
$
12,117

 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
6,469

 
$
11,408

 
$
—

 
$
—

 
$
17,877

 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
25,958

 
$
29,553

 
$
—

 
$
—

 
$
55,511

Mine operating expenses
 
22,473

 
19,959

 
—

 
—

 
42,432

Operating costs to metal inventory
 
(20
)
 
(807
)
 
—

 
—

 
(827
)
Royalties
 
1,488

 
1,515

 
—

 
—

 
3,003

Cost of sales excluding depreciation and amortization
 
23,941

 
20,667

 
—

 
—

 
44,608

Depreciation and amortization
 
3,464

 
1,647

 
—

 
—

 
5,111

Mine operating (loss)/margin
 
(1,447
)
 
7,239

 
—

 
—

 
5,792

Net loss attributable to non-controlling interest
 
(317
)
 
(365
)
 
—

 
—

 
(682
)
Net (loss)/income attributable to Golden Star
 
$
(1,411
)
 
$
7,300

 
$
(1,733
)
 
$
(27,266
)
 
$
(23,110
)
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
9,699

 
$
11,913

 
$
44

 
$
—

 
$
21,656


20


Nine Months Ended September 30,
 
Wassa
 
Prestea
 
Other
 
Corporate
 
Total
2017
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
115,748

 
$
117,904

 
$
—

 
$
—

 
$
233,652

Mine operating expenses
 
84,613

 
59,801

 
—

 
—

 
144,414

Severance charges
 
1,099

 
83

 
—

 
—

 
1,182

Operating costs from/(to) metal inventory
 
3,827

 
(4,427
)
 
—

 
—

 
(600
)
Inventory net realizable value adjustment
 
2,410

 
—

 
—

 
—

 
2,410

Royalties
 
5,970

 
6,705

 
—

 
—

 
12,675

Cost of sales excluding depreciation and amortization
 
97,919

 
62,162

 
—

 
—

 
160,081

Depreciation and amortization
 
14,612

 
10,085

 
—

 
—

 
24,697

Mine operating margin
 
3,217

 
45,657

 
—

 
—

 
48,874

Net (loss)/income attributable to non-controlling interest
 
(73
)
 
1,037

 
—

 
—

 
964

Net income/(loss) attributable to Golden Star
 
$
1,229

 
$
43,434

 
$
(2,743
)
 
$
(15,750
)
 
$
26,170

 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
13,113

 
$
39,774

 
$
—

 
$
—

 
$
52,887

 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
87,556

 
$
80,479

 
$
—

 
$
—

 
$
168,035

Mine operating expenses
 
69,799

 
56,025

 
—

 
—

 
125,824

Severance charges
 
113

 
(184
)
 
—

 
—

 
(71
)
Operating costs to metal inventory
 
(4,988
)
 
(987
)
 
—

 
—

 
(5,975
)
Royalties
 
4,713

 
4,131

 
—

 
—

 
8,844

Cost of sales excluding depreciation and amortization
 
69,637

 
58,985

 
—

 
—

 
128,622

Depreciation and amortization
 
10,892

 
4,151

 
—

 
—

 
15,043

Mine operating margin
 
7,027

 
17,343

 
—

 
—

 
24,370

Net income/(loss) attributable to non-controlling interest
 
137

 
(1,358
)
 
—

 
—

 
(1,221
)
Net income/(loss) attributable to Golden Star
 
$
5,467

 
$
18,983

 
$
(5,683
)
 
$
(61,860
)
 
$
(43,093
)
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
31,650

 
$
28,883

 
$
44

 
$
—

 
$
60,577


 
Wassa
 
Prestea
 
Other
 
Corporate
 
Total
September 30, 2017
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
179,876

 
$
154,231

 
$
3,143

 
$
2,219

 
$
339,469

 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
175,738

 
$
109,691

 
$
8,786

 
$
4,635

 
$
298,850

Currently, approximately 90% of our gold production is sold through a South African gold refinery. Except for the sales to RGLD as part of the Streaming Agreement, the refinery arranges for the sale of gold on the day it is shipped from the mine sites and we receive payment for gold sold two working days after the gold leaves the mine site. 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 revenue.

21


20. SUPPLEMENTAL CASH FLOW INFORMATION
During the nine months ended September 30, 2017 and 2016, there was no payment of income taxes. The Company paid $7.3 million of interest during the nine months ended September 30, 2017 (nine months ended September 30, 2016 - $5.9 million).
Changes in working capital for the nine months ended September 30, 2017 and 2016 are as follows:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Decrease/(increase) in accounts receivable
 
$
2,222

 
$
1,354

 
$
3,092

 
$
(349
)
Increase in inventories
 
(3,889
)
 
(906
)
 
(6,192
)
 
(7,110
)
(Increase)/decrease in prepaids and other
 
(478
)
 
(405
)
 
(1,661
)
 
471

Increase/(decrease) in accounts payable and accrued liabilities
 
1,921

 
(579
)
 
(6,866
)
 
(3,189
)
Decrease in current portion of vendor agreement
 
—

 
—

 
—

 
(13,369
)
Total changes in working capital
 
$
(224
)
 
$
(536
)
 
$
(11,627
)
 
$
(23,546
)
Other includes the following components:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Loss on disposal of assets
 
$
98

 
$
—

 
$
611

 
$
—

Net realizable value adjustment on inventory
 
606

 
—

 
2,410

 
—

Loss/(gain) on fair value of warrants (see Note 4)
 
469

 
820

 
(86
)
 
2,804

Loss/(gain) on fair value of marketable securities
 
10

 
—

 
(27
)
 
(84
)
Unrealized (gain)/loss on non-hedge derivative contracts
 
—

 
(297
)
 
—

 
3,285

Realized gain on non-hedge derivative contracts
 
—

 
(1,320
)
 
—

 
(2,172
)
Gain on deferral of payables
 
—

 
—

 
—

 
(2,682
)
Accretion of vendor agreement
 
183

 
183

 
549

 
1,825

Accretion of rehabilitation provisions (see Note 8)
 
311

 
342

 
933

 
1,026

Amortization of financing fees
 
105

 
582

 
272

 
804

Amortization of 7% Convertible Debentures discount
 
470

 
347

 
1,358

 
347

Loss on conversion of 7% Convertible Debentures, net
 
—

 
—

 
165

 
—

Gain on warrant exercise
 
(193
)
 
—

 
(193
)
 
—

 
 
$
2,059


$
657


$
5,992


$
5,153

Non-cash changes of liabilities arising from financing activities
During the nine months ended September 30, 2017, the non-cash changes relating to the changes in liabilities arising from financing activities were $6.9 million relating to the conversion of the 7% Convertible Debentures, $1.6 million accretion of debt and $0.3 million fair value loss on the 5% Convertible Debentures.

22