SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.

Commission file number 1-12284

GOLDEN STAR RESOURCES LTD.

(303) 830-9000
(Registrant’s telephone number, including area code)

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 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 [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [  ]

Number of Common Shares outstanding as of October 29, 2004: 142,004,112

INDEX

REPORTING CURRENCY, FINANCIAL AND OTHER INFORMATION

All amounts in this report are expressed in US dollars, unless otherwise indicated. Canadian currency is denoted as “Cdn$”, Australian currency is denoted by “A$” and the Euro is denoted as “€”. Financial information is presented in accordance with accounting principles generally accepted in Canada (“Cdn 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 18 to the Consolidated Financial Statements. References to “Golden Star”, “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 MEASURES

In this Form 10-Q, the terms “total cash cost” and “cash operating cost” are used on a per ounce of gold basis. Total cash cost per ounce is equivalent to mining operations expense for the period as found on the Consolidated Statements of Operations, divided by the number of ounces of gold sold during the period. Cash operating cost per ounce is equivalent to mining operations expense for the period less production royalties and production taxes, divided by the number of ounces of gold sold during the period. We have included total cash cost and cash operating cost information to provide investors with information about the cost structure of our mining operations. We use this information for the same purpose and for monitoring the performance of our operations. This information differs from measures of performance determined in accordance with GAAP in Canada and the US and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. These measures might not be comparable to similarly titled measures of other companies. See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of these non-GAAP measures to our Statements of Operations.

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, with respect to our financial condition, results of operations, business prospects, plans, objectives, goals, strategies, future events, capital expenditure, and exploration and development efforts. Words such as “anticipates”, “expects”, “intends”, “plans”, “forecasts”, “projects”, “budgets”, “believes”, “seeks”, “estimates”, “could”, “might”, “should”, “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-

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looking statements contained or incorporated by reference in this Form 10-Q. These statements include comments regarding: the establishment and estimates of mineral reserves and mineral resources, production, production commencement dates, production costs, cash operating costs per ounce, total cash costs per ounce, grade, processing capacity, potential mine life, feasibility studies, development costs, capital and operating expenditures, exploration, the closing of certain transactions including acquisitions and offerings, our expansion plans for Bogoso/Prestea and the start-up of Wassa.

The following, in addition to the factors described in “Risk Factors” discussed in our Form 10-K for the fiscal year ended December 31, 2003, are among the factors that could cause actual results to differ materially from the forward-looking statements:

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ITEM 1 FINANCIAL STATEMENTS

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

     The accompanying notes are an integral part of these consolidated financial statements.

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GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of US dollars except per share amounts)
(Unaudited)

     The accompanying notes are an integral part of these consolidated financial statements.

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GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS

See Note 17 for supplemental cash flow information

The accompanying notes are an integral part of these consolidated financial statements.

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GOLDEN STAR RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All tabular amounts in thousands of US dollars unless noted otherwise)
(Unaudited)

These consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the audited consolidated financial statements and related notes thereto included in our annual report on Form 10-K for the year ended December 31, 2003, on file with the Securities and Exchange Commission and with the Canadian securities commissions (referred to as the “2003 Form 10-K”). Financial information is presented in accordance with accounting principles generally accepted in Canada.

The unaudited consolidated financial statements for the three and nine months ended September 30, 2004 and September 30, 2003 contained herein reflect all adjustments, consisting solely of normal recurring items, which are necessary for a fair presentation of financial position, results of operations and cash flows on a basis consistent with that of our prior audited consolidated financial statements, except for the adoption of a deferred waste stripping policy. See Note 6 below.

Prior period amounts have been restated to reflect the impact of the adoption in December 2003 of the Canadian Institute of Chartered Accountant’s amended Handbook Section 3870, “Stock-based Compensation and other Stock-based Payments”. Information presented for prior periods in 2003 have been restated to reflect the adoption of Section 3870 amendments as of January 1, 2003.

1. Description of Business

We are a Canadian international gold mining and exploration company focused primarily on mining, mine development and exploration in Ghana, West Africa. Through our subsidiaries and joint ventures we own a controlling interest in four gold properties in Ghana; the Bogoso property (“Bogoso”), the Prestea property (“Prestea”), the Wassa property (“Wassa”) and the currently inactive Prestea underground property (“Prestea Underground”). Bogoso and Prestea are adjoining properties and both are owned by our 90% owned subsidiary Bogoso Gold Limited (“BGL”). These two properties now function as a single operation referred to as “Bogoso/Prestea”. BGL holds a 90% interest in the Prestea Underground. Wassa is owned by our 90% owned subsidiary, Wexford Goldfields Limited.

We operate the Bogoso/Prestea mine, with ore mined at the Prestea property being processed at the Bogoso processing plant. To date, Bogoso/Prestea has produced all of our gold since we became a gold producer upon our purchase of Bogoso in late 1999. We commenced development of the Wassa mine in mid-2003 and are currently in a commissioning and testing phase.

We hold interests in exploration joint ventures, managed by our joint venture partners, in Mali and Sierra Leone in West Africa. We also hold active exploration properties in Ghana, Suriname and French Guiana. And through our affiliate Goldmin Holdings, we hold interests in gold exploration properties in Peru and Chile.

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

2. Inventories

3. Guiana Shield Transaction

In late 2001 we sold our Gross Rosebel exploration property in South America to Cambior Inc. (“Cambior”). In addition to a $5.0 million payment received at closing in 2002, terms of the sale agreement provided that Cambior would make

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thought to be ore bearing are not and unexpected changes in the geologic environment at depth can all impact the estimates used in a deferred stripping program. At least once per year an engineering study will evaluate the remaining ore and waste tonnages in the pit using the most recent information available and adjustments to the capitalization and recovery rates will be made to insure that the capitalized costs and all future waste costs will be appropriately expensed over ore tonnes remaining in the pit.

Note that there are mixed accounting practices in this area and some mining companies expense waste removal costs as incurred, which policy if followed, may result in reporting greater volatility in period to period results of operations than would be expected from a company that employs a deferred stripping policy.

We include capitalized waste cost with mining properties on our balance sheet. The cost impact is included in the statement of operations in the line titled “Mining operations”.

7. Mine Construction-in-Progress

Mine construction in progress represents costs incurred at the Wassa project subsequent to acquisition. The balance includes exploration drilling, feasibility study costs, equipment purchases and construction costs, including progress payments to the construction contractor and development costs.

8. Other Assets

Represents deposits paid on purchases prior to shipment.

9. Debt

10. Asset Retirement Obligations

Our Asset Retirement Obligations (“ARO”) are estimated to be the present value of the ultimate closure cost associated with reclamation, demolition and stabilization of our Bogoso/Prestea and Wassa mining properties. Included in this liability are the costs of mine closure and reclamation, processing plant and infrastructure demolition, tailings pond stabilization and reclamation and environmental monitoring costs.

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The changes in the carrying amount of the ARO during the first nine months of 2004 are:

11. Commitments and Contingencies

(a) Environmental Regulations and Asset Retirement Obligations — We are not aware of any events of material non-compliance with environmental laws and regulations in our operations which could have a material adverse effect on our operations or financial condition. The exact nature of environmental control problems, if any, which we may encounter in the future cannot be predicted, primarily because of the changing character of environmental regulations that may be enacted. Asset retirement obligations, which include environmental rehabilitation liabilities for reclamation and for closure costs, were $5.6 million at Bogoso/Prestea at September 30, 2004, up from $5.2 million at December 31, 2003. Asset retirement obligations at Wassa totaled $2.7 million at September 30, 2004, up from $2.5 million at December 31, 2003.

(b) Cash Restricted for Environmental Rehabilitation Liabilities — In 1999, we were required, according to the acquisition agreement with the sellers of BGL, to restrict $6.0 million of cash to be used for the ongoing and final reclamation and closure costs at Bogoso. The withdrawal of these funds for our use must be agreed to by the sellers, who are ultimately responsible for the reclamation in the event of our non-performance. In the past the sellers have agreed to allow disbursement of portions of the restricted cash to us equal to the cash costs we have incurred for work performed, but there have been no agreements for disbursements since 2001. We are seeking to obtain an amendment to the agreement that would remove the restriction and in its place establish a reclamation bond to meet Ghana’s Environmental Protection Agency’s reclamation bonding requirements. At September 30, 2004, approximately $3.3 million of restricted cash was held as a cash provision against future reclamation commitments at Bogoso.

(c) Royalties

(d) Wassa Construction Contract — In July 2003 we entered into a contract with Metallurgical Design and Management (Pty) Ltd. (“MDM”), a South African company, for the construction of the CIL processing plant facility and other associated processing facilities at Wassa. The total contract amount, including provisional cost allowances and contract variances was set at $16.5 million. Total payments to MDM, and to its suppliers and subcontractors pursuant to the contract as at September 30, 2004, totaled $16.8 million. MDM’s obligations under the contract are not complete.

(e) Mano River Joint Venture — In late 2003 we entered into a joint venture to invest up to $6 million over the next four years in the Mano River project in Sierra Leone via an earn-in agreement with a junior exploration company which now holds a group of gold exploration properties in Sierra Leone. The initial $6 million, if fully funded (we can terminate the agreement after spending $1.0 million) would yield a 51% interest in the joint venture. Further provisions of the joint venture agreement permits us to acquire up to 85% of the joint venture by continued long term funding. Our spending during the first nine months of 2004 totaled $0.8 million.

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12. Share Capital

Changes in share capital during the nine months ended September 30, 2004 were:

13. Stock Based Compensation

(a) Stock Options — We have one stock option plan, the Second Amended and Restated 1997 Stock Option Plan (the “GSR Plan”). Options are granted under the GSR plan from time to time at the discretion of the Board of Directors. Options granted are non-assignable and are exercisable for a period of ten years or such other period as stipulated in a stock option agreement between Golden Star and an optionee. Under the GSR Plan we may grant options to employees, consultants and directors of the Company or its subsidiaries for up to 15,000,000 shares of common stock. Options take the form of non-qualified stock options, and the exercise price of each option is not less than the market price of our stock on the date of grant. Options typically vest over periods ranging from immediately to four years from the date of grant. Vesting periods are determined at the discretion of the Board of Directors.

In 2003 the Canadian Institute of Chartered Accountants amended CICA Handbook Section 3870, “Stock-based Compensation and other Stock-based Payments” to require expensing of all stock based compensation awards for fiscal years beginning on or after January 1, 2004. In light of this development we adopted the new provision of CICA 3870 at the end of 2003 as if it had been in effect for the entire year. Data presented in this Form 10-Q related to the quarter and the nine months ended September 30, 2003 has been revised to reflect compensation expense that would have been reported had the provisions of CICA 3870 been in place at the beginning of 2003.

No new options were granted during the third quarter of 2004. A total 855,000 options were granted in the second quarter of 2004. Certain of these options vested immediately and others vested 1/4th immediately, and 1/4th on each of the next three anniversary dates. In the three months ended September 30, 2004, we recognized approximately $0.2 million of option related expense of which $0.1 million allocated to BGL employees and was included in mining operations costs, approximately $0.1 million was related to employees in the corporate group and less than $0.1 million was related to employees working on construction of the Wassa project and these costs were capitalized as a construction costs. We recognized $1.2 million of option related expenses for the nine months ended September 30, 2004 of which $0.4 million was allocated to BGL employees and included in mining operation costs, $0.1 million was allocated to Wassa employees and included in capital costs of the Wassa project and $0.7 million was related to the corporate employees.

The fair value of options granted during the second quarter of 2004 was estimated at the grant dates using a Black-Scholes option-pricing model with the following assumptions:

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The expense of options issued prior to 2003 and vesting during 2004 is not recognized in reported net income. Had compensation costs been recognized for options granted prior to 2003 and vesting in 2004, our net income and earnings per share would have been reduced to the pro forma amounts shown below:

(b) Stock Bonus Plan — In December 1992, we established an Employees’ Stock Bonus Plan (the “Bonus Plan”) for any full-time or part-time employee (whether or not a director) of the Company or any of our subsidiaries who has rendered meritorious services which contributed to the success of the Company or any of its subsidiaries. The Compensation Committee grants bonus common shares under the Bonus Plan on terms that it determines, within the limitations of the Bonus Plan and subject to the rules of applicable regulatory authorities. The Bonus Plan, as amended, provides for the issuance of up to 900,000 common shares of which 445,820 common shares have been issued as of September 30, 2004.

During the three months ended September 30, 2004 and 2003, there were no common shares issued to employees pursuant to the Bonus Plan. During the nine months ended September 30, 2004 and 2003 a total of nil and 57,200 common shares, respectively, were issued to employees pursuant to the Bonus Plan. We recognized nil compensation expense related to bonuses under the Bonus Plan during each of the three months ended September 30, 2004 and 2003. We recognized compensation expense related to bonuses under the Bonus Plan during the nine months ended September 30, 2004 and 2003 of nil and $0.1 million, respectively.

14. Operations by Geographic Area

The following geographic data includes revenues based on product shipment origin and long-lived assets based on physical location:

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15. Income Tax

For the nine months ended September 30, 2004, BGL generated approximately $8.3 million of pre-tax net income. BGL has tax loss carry-forwards not previously recognized in amounts sufficient to fully offset income taxes on the pre-tax net income. Accordingly, no tax provision has been recorded in the period ended September 30, 2004.

16. Earnings per Common Share

The following table provides reconciliation between basic and diluted earnings per common share:

Earnings per share on a US GAAP basis are found in Note 18 below.

17. Supplemental Cash Flow Information

The following is a summary of non-cash transactions:

There were no cash income taxes paid in the quarter and six months of both 2004 and 2003.

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18. Generally Accepted Accounting Principles in Canada and the United States

The following Golden Star consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

(a) Balance Sheets under US GAAP

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(b) Statements of Operations under US GAAP

(c) Statements of Cash Flows under US GAAP

(d) Footnotes

(1) Under US GAAP, exploration, acquisition and general and administrative costs related to exploration projects are charged to expense as incurred. Under Cdn GAAP, exploration, acquisition and exploration group general and administrative costs are capitalized. In each subsequent period, the exploration, engineering, financial and market information for each exploration project is reviewed by management to determine if any of the capitalized costs are impaired.

(2) Under US GAAP, the initial purchase cost of mining properties is capitalized. Pre-acquisition costs and subsequent development costs incurred, until such time as a feasibility study had been completed, are expensed in the period incurred. Under Cdn GAAP, all costs of new mine properties as well as costs incurred after acquisition are capitalized, and subsequently reviewed each period for impairment.

(3) Asset retirement obligations: Under US GAAP, the cumulative effect of applying Statement of Financial Accounting Standard No. 143 “Accounting for Asset Retirement Obligations” was included in net income in 2003. In Cdn GAAP,

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under the Canadian Institute of Chartered Accountant’s Section 3110 “Asset Retirement Obligations”, the cumulative effect of the initial application of this new standard in 2003 was recorded as an adjustment to the beginning deficit account.

(4) Under US GAAP, marketable securities available for sale are marked to market and gains or losses are recognized in Other Comprehensive Income until the securities are sold. Under Cdn GAAP, marketable securities are accounted for at the lower of cost or market.

(5) Differences in share capital are the result of various historical transactions including conversions of convertible debentures, the impact of options granted below market and gains on sale of subsidiaries shares.

19. Subsequent Events

Bon Espoir Property Acquisition

In early October we acquired a 100% interest in the 466 square kilometer Bon Espoir exploration property in French Guiana from Gold Fields Exploration B.V. for a purchase price of $300,000 paid in common shares of Golden Star. The Bon Espoir property is located north of our Paul Isnard Property in a geological setting interpreted by us as having many similarities to the Ashanti Trend area of Ghana.

Moto Gold Mines Investment

In late October we entered into an agreement to subscribe for 15 million new shares of Moto Goldmines (“Moto”) at an issue price of $0.26 (A$0.35) per share, together with 15 million attaching options (or warrants), for an initial investment of $3.9 (A$5.25) million. The options will be exercisable in three tranches of 5 million options each, with the first tranche exercisable at $0.26 (A$0.35) and expiring six months after issue, the second tranche exercisable at $0.30 (A$0.40) and expiring 12 months after issue and the third tranche exercisable at $ 0.33 (A$0.45) and expiring 18 months after issue.

Upon completion of the purchase (and following other proposed issuances of securities previously announced by Moto), we expect to be Moto’s largest single shareholder with approximately 9.5% of its issued shares or approximately 13.3% if all options and warrants are exercised. The share subscription is subject to (i.) completion of our due diligence, (ii.) approval by Moto’s shareholders at this year’s annual general meeting scheduled to be held on 29 November 2004, and (iii.) approval of the Australian Foreign Investment Review Board, if required. At the annual general meeting, shareholders will also vote on the appointment of Dr. Doug Jones, Golden Star’s Vice President, Exploration, to join the board of directors of Moto Goldmines.

Moto controls the approximate 4,700 square kilometer Moto concessions located in the north east of the Democratic Republic of Congo. The Moto concessions form part of the Kilo-Moto gold belt which has historical production in excess of 11 million ounces with over 2 million ounces mined from ten small mines within the central 35 square kilometers on the Moto concessions. After securing control of the property in 2003, Moto Goldmines began a drilling program in February 2004 to confirm and expand the gold resource around the areas previously mined. The funds from our placement will be used by Moto for the exploration and development of the Moto concessions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes. The financial statements have been prepared in accordance with accounting principles generally accepted in Canada (“Cdn GAAP”). For a reconciliation to accounting principles generally accepted in the United States (“US GAAP”), see Note 18 to the accompanying consolidated financial statements.

In this Form 10-Q, the terms “total cash cost” and “cash operating cost” are used on a per ounce of gold basis. Total cash cost per ounce is equivalent to mining operations expense for the period as found on the Consolidated Statements of Operations, divided by the number of ounces of gold sold during the period. Cash operating cost per ounce is equivalent to mining operations expense for the period less production royalties and production taxes, divided by the number of ounces of gold sold during the period.

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We have included total cash cost and cash operating cost information to provide investors with information about the cost structure of our mining operations. We use this information for the same purpose and for monitoring the performance of our operations. This information differs from measures of performance determined in accordance with GAAP in Canada and the United States and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Cdn or US GAAP. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under Cdn or US GAAP and may not be comparable to similarly titled measures of other companies.

All amounts in this Item 2 are reported on a 100% basis, which represents our current beneficial interest in gold production and revenues. Once all capital invested in a Ghanaian subsidiary has been repaid, the Government of Ghana would receive 10% of any dividends declared by that Ghanaian subsidiary.

Additional documents which discuss our company and its management, history and operations are available at www.sec.gov and for Canadian investors also at www.SEDAR.com.

OVERVIEW OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004

Financial results

We recorded a net loss of $4.3 million during the three months ended September 30, 2004. This compares to net income of $6.1 million in the same period of 2003. The major factors contributing to the variance from the prior year were $6.2 million less gold revenues from lower gold production and a $3.9 million increase in corporate development expenses related mostly to our tender offer for IAMGold Corporation (“IAMGold”), a Canadian gold mining company, earlier in the year. Higher mining and processing costs, higher depreciation and amortization charges and higher general and administrative costs further contributed to the loss for the quarter. A discussion of the revenue and cost factors contributing to the loss are included in the Results of Operation section below.

Net income for the nine months ended September 30, 2004 totaled $2.1 million or $0.015 per share on revenues of $49.8 million, versus net income of $14.1 million or $0.132 per share on revenues of $46.6 million in the same period of 2003. Increases in operating costs and a $3.9 million increase in corporate development expenses related to the IAMGold tender offer were the major factors responsible for the lower earnings versus the first nine months of 2003. Higher depreciation and amortization, foreign exchange losses, and higher general and administrative costs also contributed to the lower earnings versus the same period of 2003. As with the quarter, a more detailed discussion of the nine month’s results is included in the Results of Operation section below.

IAMGold Tender Offer

In June of this year, we made a tender offer to the shareholders of IAMGold. On August 11, 2004, IAMGold announced that it and another international gold mining had agreed to join IAMGold’s mining assets together with certain of the other entity’s gold mining assets to form a new gold mining company. IAMGold’s management and board recommended acceptance of this plan to its shareholders. After analyzing this development we concluded that it was not in the best interests of our shareholders to continue our offer for IAMGold and our board of directors elected not to extend our tender offer which expired on August 16. No shares of IAMGold were acquired. We incurred approximately $3.9 million of direct, incremental acquisition costs resulting from our tender offer for IAMGold’s common shares. The majority of these costs were for financial advisory, legal, printing and accounting services.

Prestea Underground Restructuring

In late 2003, our partner in the Prestea Underground joint venture filed for bankruptcy in Ghana. This event resulted in our partner relinquishing its rights under the joint venture agreement and the transfer of the partner’s remaining ownership position

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to our subsidiary, Bogoso Gold Limited, (“BGL”), thereby giving BGL a 90% ownership in the Prestea Underground. The Government of Ghana continues to hold a 10% ownership in Prestea Underground as well as its 10% holding in BGL, resulting in an 81% beneficial ownership by Golden Star.

Guyanor and Guiana Shield Restructuring

Work continued during the third quarter on the previously announced plan for the restructuring of our investment in our subsidiary Guyanor Ressources S.A. (“Guyanor”) and the revitalization of our property interests in the Guiana Shield of South America. In August we entered into a Restructuring Agreement which provided for, amongst other things, the inter-company debt owed by Guyanor to Golden Star to be restructured and Golden Star to acquire a direct interest in certain French Guiana assets.

Pursuant to the Restructuring Agreement, Golden Star has acquired an option to earn an undivided interest in an exclusive exploration permit currently held by Guyanor and eight mineral concessions owned by SOTRAPMAG in French Guiana (together, referred to as the “Paul Isnard Property”). If the option is exercised, Golden Star would enter into a Joint Venture Agreement with respect to the Paul Isnard Property. If Golden Star makes a production decision in respect of the Paul Isnard Property within five years from the date of the Option Agreement, Golden Star may make further payments to Guyanor to acquire the Paul Isnard property. The total payments to exercise the option and acquire the Paul Isnard property are $10 million which will be offset against the debt that Guyanor owes to Golden Star. In addition Golden Star will pay Guyanor a floating rate production royalty over all gold production from the Paul Isnard Property to a maximum of two million ounces (the “Royalty”). The Royalty would vary in accordance with the price of gold.

Guyanor’s Yaou and Dorlin gold properties will be joint-ventured or sold to a new company organized by Guyanor’s former management.

The final step in the restructuring will require Guyanor’s new management to undertake a rights offering or other financing. In the interim, until December 31, 2004, when the restructuring and financing is completed, Golden Star has agreed to provide continued financial support to Guyanor. Golden Star has further agreed to indemnify Guyanor from liabilities relating to the operation of Guyanor’s business prior to the restructuring, including potential environmental and severance liabilities. Once the restructuring and recapitalization of Guyanor is completed, it is expected that Golden Star will (i) have no involvement in Guyanor’s day-to-day operation; and (ii) will no longer fund Guyanor’s operations.

In late September, we entered into an agreement to sell to Guyanor our rights to receive royalty payments from gold production from Cambior’s Rosebel gold mine in Suriname. Under the terms of the sale, Guyanor will make cash payments to us of $12 million in two installments, the first due upon closing and the second due within six months of closing. The agreement also provides for additional payments to Golden Star if Gross Rosebel were to produce gold in excess of its current reserves of 2 million ounces. The additional payments accrue on gold production between 2 million and 7 million ounces and, at current gold prices, would add approximately $8 million to the initial $12 million payment. The closing of this transaction is expected to be before December 31, 2004.

In early October, we announced the closing of a transaction to acquire a 100% interest in the 466 square kilometer Bon Espoir exploration property in French Guiana from Gold Fields Exploration B.V. for a purchase price of $300,000 payable in common shares of Golden Star. The Bon Espoir property is located north of the Paul Isnard Property in a geological setting interpreted by Golden Star as having close similarities to the Ashanti Trend in Ghana.

TRENDS AFFECTING OUR OPERATIONS DURING THE FIRST NINE MONTHS OF 2004

Gold Prices

Gold prices have generally trended upward during most of the last three and a half years, from a low of just under $260 per ounce in early 2001 to approximately $420 per ounce in recent weeks. Much of the price increase has been attributed to a decrease in the value of the US dollar versus other major foreign currencies. Our realized gold price averaged $403 per ounce for shipments during the first nine months of 2004, which is well above the $356 per ounce average price received in the first nine months of 2003.

Mining Costs

As anticipated, we experienced higher operating costs per ounce of gold produced at Bogoso/Prestea for both the quarter and the nine months versus the same periods last year. The operating costs were higher than targeted. Several factors, including a change in ore types and unusually high rainfall in recent months have contributed to the higher cost which are discussed here and below in Results of Operations.

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Change in Ore Type

The Bogoso plant completed processing Plant-North oxide ore during the second quarter and is now processing exclusively transition ores from the Plant-North pit and from stockpiles. The Bogoso plant is scheduled to continue processing transition ores until late 2005 when construction of a BIOX^® circuit is scheduled for completion, after which the Bogoso plant is expected to begin processing sulfide ore.

In anticipation of the Plant-North transition ore, the Bogoso plant flotation circuit was redesigned, re-built and commissioned in the second quarter and is now being used to assist in obtaining higher recoveries from the more complex transition ores. The total capital cost for the upgraded flotation circuit, which was managed in-house and which will be a component of the future BIOX^® project, was approximately $4 million. Based on metallurgical test work completed in 2003 the combination of gravity, flotation and intensive cyanide leaching of transition material would increase gold recoveries from Plant-North transition ores to a range of 60% to 70% compared to recoveries in the range of 42% to 50% for carbon-in-leach alone.

In the third quarter of 2004 we achieved an average recovery of 59% from a ratio of 2 tonnes of Plant-North for each tonne stockpiled transition ore. The stockpiled transition ore was originally mined from the Bogoso concession and is more refractory yielding lower recoveries than the transition ore from the Plant-North pit at Prestea. The Bogoso stockpiled transition ore was processed in the third quarter to supplement ore produced from the Plant-North pit as high strip ratios exacerbated by high rainfall caused a short fall in ore production from the Plan-North pit. The opportunity to process the Bogoso stockpiled transition ore eliminated a potential acid rock drainage problem. While third quarter recovery was below our targeted 60% to 70% range, we expect recoveries in the 60% to 70% range once the mill returns to processing strictly Prestea transition ore.

Deferred Stripping Policy

We initiated a deferred waste stripping policy at the Plant-North pit on the Prestea property in the third quarter of 2004. In the past, most of our pits have been relatively shallow and short-lived because the Bogoso plant could effectively process only near surface ores that had been naturally oxidized by relatively shallow ground water. With recent mill modifications we are now able to process certain deeper ores found at Prestea. As a result we anticipate deeper pits with longer lives than in the past. A continuation of our current policy of expensing waste costs as incurred would result in a material mis-match of stripping costs and associated revenues on the future.

A total of $0.6 million of Plant-North deferred waste stripping cost was capitalized in the third quarter, which would have been included in operating costs under our previous policy. Engineering forecasts indicate that the Plant-North pit should continue to strip waste in excess of the Plant-North average strip rate for most of the next five quarters followed by approximately three quarters of stripping below the average rate. At July 1, 2003 we estimated there were 17.9 million tonnes of waste remaining in the Plant-North pit and 3.9 million tonnes of ore.

Capitalized amounts are determined each quarter by determining the tonnes of waste moved in excess of the life-of-pit average and valuing them at the average mining cost per tonne during the period. Costs are recovered in periods when the actual tonnes of waste moved are less than what would have been moved at the average life-of-pit rate. We have included capitalized waste cost with “Mining properties” on our balance sheet. The cost impact is included in the statement of operations in the line item titled “Mining operations”. In periods when the strip ratio exceeds the pit average, the cost of the excess stripping are excluded from our cash operating costs per ounce calculation. In periods when the strip ratio is less than the pit average, capitalized waste costs are added back to operating costs and included in the cash operating cost per ounce calculation.

Illegal Mining

We have experienced a significant increase in illegal mining activity in recent months on the Prestea property involving an estimated 3,000 or more illegal miners. Most of this activity is in the Beta Boundary area south of Prestea and includes areas where we have established reserves. While it is difficult to quantify the exact impact of this activity on our reserves and non-reserve mineral resources, it now appears, based on a preliminary survey completed in September, that between 40,000 and 50,000 ounces have been removed by the illegal activity. The extent of the illegal mining and its impact on our currently reported non-reserve mineral resources will be further assessed in the fourth quarter. We are proactively working with local, regional and national governmental authorities requesting that they take a more active role in protecting our property rights and that they do so on a more timely basis. The preferred solution is to establish a separate area, away from our mining licenses, where the illegal miners can operate officially under the control of the relevant governmental agencies. Planning to set aside such an area and to provide independent funding to effect this relocation are well advanced. In addition to the ounces that have been and may be stolen from our properties, we are also concerned with the possibility of environmental degradation and safety issues.

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Royalty Income

We began receiving royalty payments from the Gross Rosebel mine in Suriname which we sold to Cambior Inc. in 2001. Royalty revenue of approximately $1.8 million was recorded in the first nine months of 2004. The Gross Rosebel mine did not begin operations until early 2004 and thus there were no comparable royalty revenues in the first nine months of 2003.

RESULTS OF OPERATIONS

Three months ended September 30, 2004 compared to the three months ended September 30, 2003

We recorded a net loss of $4.3 million during the three months ended September 30, 2004. This compares to net income of $6.1 million in the same period of 2003. The major factors contributing to the variance from the prior year were $5.4 million less revenues on lower production due to lower mill throughput rates and lower recoveries, and a $3.9 million increase in corporate development expenses related to the IAMGold tender offer earlier in the year. Higher mining and processing costs, higher depreciation and amortization charges and higher general and administrative costs further contributed to the loss for the quarter.

While gold prices were substantially higher in the three months ended September 30, 2004 than in the same period last year ($401 per ounce vs $363 per ounce), revenues were sharply lower due to lower gold production. Third quarter 2004 gold shipments totaled 30,755 ounces, down from 50,871 ounces sold in the same period of 2003. The drop in production was related to expected lower mill throughput and lower recoveries versus the same period in 2003.

Although ore production from the Plant-North pit was expected to be lower in the third quarter due to a scheduled period of waste stripping, this was exacerbated by high rainfall during the third quarter affecting mining operations at the Plant-North pit which in turn limited the availability of Prestea transition ore to the Bogoso plant. To compensate approximately 30% of the ore milled in the quarter was stockpiled Bogoso transition ore. The Bogoso transition ore is more refractory than the Plant-North transition ore resulting in lower overall recoveries being achieved. As a result the combined impact of harder transitional material, the higher then average rain fall and, at times lack of ore to fully feed the mill, Bogoso plant throughput fell to an average of 4,111 tonnes per day of transition ore compared to 5,941 tonnes per day of oxide ore in the third quarter of 2003. Rainfall has since returned to more normal levels for this time of year in Ghana, and we expect improved production from the Plant-North pit for the remainder of the year.