SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10–Q/A

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

For the quarterly period ended September 30, 2006

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

GOLDEN STAR RESOURCES LTD.

(Exact Name of Registrant as Specified in Its Charter)

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

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

Securities registered or to be registered pursuant to Section 12 (b) of the Act:

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

Securities registered or to be registered pursuant to Section 12(g) of the Act:

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

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

(Check one): Large accelerated filer: o   Accelerated filer: þ   Non–accelerated filer: o

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

Number of Common Shares outstanding as at November 6, 2006: 207,845,758

 

 

Explanatory Note

     This Form 10-Q/A is being filed to amend Golden Star Resources Ltd.’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2006 in order to reflect the restatement of our financial statements for the quarter ended September 30, 2006 to change, in the US GAAP Reconciliation note, the way in which we have accounted for our warrants to purchase common shares which have an exercise price denominated in Canadian dollars. The restatement arose from management’s determination on February 22, 2007 that such warrants denominated in Canadian dollars, which had been treated as equity instruments, should have been treated as derivative instruments under US GAAP. As such the fair value of such warrants is required to be treated as a liability, and we are required to mark to market those warrants on a current basis, with the resulting gains or losses being included in the statement of operations under US GAAP.

     Generally, no attempt has been made in this Form 10-Q/A to modify or update other disclosures presented in the original report on Form 10-Q except as otherwise required to reflect the effects of the restatement, including in footnote 24 and Item 4. This Form 10-Q/A does not reflect events occurring after the filing of the original Form 10-Q or modify or update those disclosures. Information not affected by the restatement is unchanged and reflects the disclosure made at the time of the original filing of the Form 10-Q with the Securities and Exchange Commission on November 6, 2006.

PART I

ITEM 1. FINANCIAL STATEMENTS

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

		As of				As of
		September 30,				December 31,
		2006				2005
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	10,043			$	89,709
Accounts receivable			6,094				6,560
Inventories (Note 2)			43,776				23,181
Future tax assets			23				6,248
Fair value of derivatives (Note 12)			—				1,220
Deposits (Note 3)			10,096				5,185
Prepaids and other			1,089				686
Total Current Assets			71,121				132,789
RESTRICTED CASH			1,572				5,442
LONG TERM INVESTMENTS (Note 4)			1,456				8,160
DEFERRED EXPLORATION AND DEVELOPMENT COSTS (Note 6)			165,715				167,532
PROPERTY, PLANT AND EQUIPMENT (Note 7)			87,400				84,527
MINING PROPERTIES (Note 8)			134,170				118,088
CONSTRUCTION IN PROGRESS (Note 9)			139,774				36,707
DEFERRED STRIPPING (Note 10)			—				1,548
FUTURE TAX ASSETS			3,695				8,223
OTHER ASSETS			1,351				1,587
Total Assets		$	606,254			$	564,603
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$	31,918			$	26,144
Fair value of derivatives (Note 12)			1,016				4,709
Asset retirement obligations (Note 13)			3,661				3,107
Current debt (Note 11)			5,812				6,855
Total Current Liabilities			42,407				40,815
LONG TERM DEBT (Note 11)			66,917				64,298
ASSET RETIREMENT OBLIGATIONS (Note 13)			13,916				8,286
FAIR VALUE OF DERIVATIVES (Note 12)			—				7,263
FUTURE TAX LIABILITY			42,202				45,072
Total liabilities			165,442				165,734
MINORITY INTERESTS			7,345				6,629
COMMITMENTS AND CONTINGENCIES (Note 14)			—				—
SHAREHOLDERS’ EQUITY
SHARE CAPITAL (Note 15)
First preferred shares, without par value, unlimited shares authorized. No shares issued			—				—
Common shares, without par value, unlimited shares authorized. Shares issued and outstanding: 207,845,758 at September 30, 2006; 205,954,582 at December 31, 2005			524,481				522,510
CONTRIBUTED SURPLUS			9,832				6,978
EQUITY COMPONENT OF CONVERTIBLE NOTES			2,857				2,857
DEFICIT			(103,703	)			(140,105	)
Total Shareholders’ Equity			433,467				392,240
Total Liabilities and Shareholders’ Equity		$	606,254			$	564,603

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

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

		Three months ended								Nine months ended
		September 30,				September 30,				September 30,				September 30,
		2006				2005				2006				2005
REVENUE
Gold sales		$	35,996			$	23,235			$	89,607			$	63,329
Royalty income			186				952				4,026				3,071
Interest and other			372				561				1,833				1,322
Total revenues			36,554				24,748				95,466				67,722
PRODUCTION EXPENSES
Mining operations			22,618				20,060				67,169				52,026
Depreciation, depletion and amortization			5,142				4,639				15,946				10,552
Accretion of asset retirement obligation (Note 13)			190				172				544				540
Total mine operating costs			27,950				24,871				83,659				63,118
OPERATING EXPENSES Exploration expense			414				191				1,004				605
General and administrative expense			1,887				1,556				7,040				6,504
Corporate development expense			—				37				—				147
Total production and operating expenses			30,251				26,655				91,703				70,374
Operating income/(loss)			6,303				(1,907	)			3,763				(2,652	)
OTHER EXPENSES, (GAINS) AND LOSSES
Derivative mark-to-market (gain)/loss (Note 12)			(1,382	)			5,486				9,346				7,412
Abandonment and impairment of mineral properties			1,849				—				1,849				1,083
Gain on sale of partial investment in EURO (Note 5)			—				—				(20,940	)			—
Gain on sale of investment in Moto (Note 4)			—				—				(30,294	)			—
Loss on equity investments			—				75				—				185
Interest expense			487				853				1,448				1,705
Foreign exchange (gain)/loss			1,118				(111	)			(2,339	)			732
Income/(loss) before minority interest			4,231				(8,210	)			44,693				(13,769	)
Minority interest			(672	)			(136	)			(716	)			(516	)
Net income/(loss) before income tax			3,559				(8,346	)			43,977				(14,285	)
Provision for future income taxes (Note 18)			(604	)			1,689				(7,575	)			1,710
Net income/(loss)		$	2,955			$	(6,657	)		$	36,402			$	(12,575	)
Deficit, beginning of period			(106,658	)			(132,492	)			(140,105	)			(126,574	)
Deficit, end of period		$	(103,703	)		$	(139,149	)		$	(103,703	)		$	(139,149	)
Net income/(loss) per common share — basic (Note 19)		$	0.014			$	(0.047	)		$	0.176			$	(0.088	)
Net income/(loss) per common share — diluted (Note 19)		$	0.014			$	(0.047	)		$	0.174			$	(0.088	)
Weighted average shares outstanding (millions of shares)			207.3				142.8				207.4				142.5

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

GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of US dollars)
(Unaudited)

		Three months ended								Nine months ended
		September 30,				September 30,				September 30,				September 30,
		2006				2005				2006				2005
OPERATING ACTIVITIES:
Net income/(loss)		$	2,955			$	(6,657	)		$	36,402			$	(12,575	)
Reconciliation of net income to net cash provided by/(used in) operating activities:
Depreciation, depletion and amortization			5,163				4,709				15,998				10,623
Amortization of loan acquisition cost			27				30				171				105
Deferred stripping			516				(1,920	)			1,548				(1,803	)
Loss on equity investment			—				75				—				185
Gain on sale of investment in Moto and EURO			—				—				(51,234	)			—
Non-cash employee compensation			522				98				1,583				900
Impairment of deferred exploration projects			1,849				—				1,849				1,083
Income tax expense/(benefit)			604				(1,689	)			7,883				(1,710	)
Reclamation expenditures			(434	)			(176	)			(957	)			(468	)
Fair value of derivatives			(1,900	)			5,485				3,971				7,412
Accretion of convertible debt			177				174				529				348
Accretion of asset retirement obligations			190				172				544				540
Minority interests			672				136				716				516
			10,341				437				19,003				5,156
Changes in assets and liabilities:
Accounts receivable			1,169				1,769				(1,441	)			(1,119	)
Inventories			(7,976	)			(4,694	)			(20,596	)			(10,353	)
Deposits			1,832				830				(838	)			(127	)
Accounts payable and accrued liabilities			2,485				3,839				4,286				5,607
Other			(528	)			(410	)			(334	)			(317	)
Net cash provided by/(used in) operating activities			7,323				1,771				80				(1,153	)
INVESTING ACTIVITIES:
Expenditures on deferred exploration and development			(1,543	)			(1,719	)			(6,340	)			(3,782	)
Expenditures on mining properties			(4,164	)			(10,455	)			(11,926	)			(23,918	)
Expenditures on property, plant and equipment			(4,587	)			(6,279	)			(10,837	)			(25,372	)
Expenditures on mine construction in progress			(32,172	)			(13,084	)			(101,574	)			(19,123	)
Cash invested in short term investments			—				—				(21,080	)			—
Cash provided by short term investments			21,080				22,750				21,080				19,100
Cash provided by restricted cash			3,521				—				3,870				—
Expenditure on purchase of Moto shares			—				—				(1,656	)			—
Proceeds from sale of investment in Moto			—				—				38,952				—
Proceeds from sale of investment in EURO			—				—				3,239				—
Change in payable on capital expenditures			(3,342	)			9,071				733				9,071
Sale of property			—				—				—				1,000
Deposits			(2,291	)			(161	)			(4,073	)			(2,415	)
Other			(396	)			879				(760	)			(1,627	)
Net cash provided by/(used in) investing activities			(23,894	)			1,002				(90,372	)			(47,066	)
FINANCING ACTIVITIES:
Issuance of share capital, net of issue costs			115				877				3,392				1,177
Debt repayments (Note 11)			(1,361	)			(1,087	)			(5,050	)			(1,972	)
Issuance of debt (Note 11)			6,978				3,000				12,431				58,330
Equity portion of convertible notes			—				—				—				2,857
Other			—				(52	)			(149	)			(1,153	)
Net cash provided by financing activities			5,732				2,738				10,624				59,239
Increase/(decrease) in cash and cash equivalents			(10,839	)			5,511				(79,666	)			11,020
Cash and cash equivalents, beginning of period			20,882				18,386				89,709				12,877
Cash and cash equivalents end of period		$	10,043			$	23,897			$	10,043			$	23,897

(See Note 20 for supplemental cash flow information)

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

GOLDEN STAR RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in tables are 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, 2005, on file with Securities and Exchange Commission and with the Canadian securities commissions. Financial information is presented in accordance with accounting principles generally accepted in Canada.

In early 2006, it was determined that hedge accounting had been improperly applied by our subsidiary, EURO Resources S.A. (“EURO”) for their cash–settled forward gold price agreements during the first three quarters of 2005. As a result, our Form 10–Qs for the first three quarters of 2005 were amended to apply derivative accounting rather than hedge accounting to EURO’s derivatives. In this Form 10–Q, comparative amounts for the third quarter and for the first nine months of 2005 reflect the restatement.

In management’s opinion, the unaudited consolidated financial statements for the three and nine months ended September 30, 2006 and September 30, 2005 contained herein reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of financial position, results of operations and cash flows on a basis consistent with that of our prior audited consolidated financial statements.

In certain cases prior period amounts have been revised to reflect current period presentation.

1. Description of Business

Through our subsidiaries we own a controlling interest in four significant gold properties in southern Ghana in West Africa:

	•		Bogoso/Prestea property, which is comprised of the adjoining Bogoso and Prestea surface mining leases (“Bogoso/Prestea”),
	•		Prestea Underground property (“Prestea Underground”),
	•		Wassa property (“Wassa”), and
	•		Hwini–Butre and Benso concessions (“St. Jude Properties”).

In addition to these gold properties we hold various other exploration rights and interests and are actively exploring in a variety of locations in West Africa and South America.

Bogoso/Prestea is owned by our 90% owned subsidiary Golden Star (Bogoso/Prestea) Limited (“GSBPL”) (formerly Bogoso Gold Limited) which was acquired in 1999. Bogoso/Prestea produced and sold approximately 132,000 ounces of gold during 2005.

Through another 90% owned subsidiary, Golden Star (Wassa) Limited (“GSWL”) (formerly Wexford Goldfields Limited), we own the Wassa gold mine located some 35 kilometers east of Bogoso/Prestea. Construction and commissioning of Wassa’s new processing plant and open pit mine was completed at the end of March 2005 and the project was placed in service on April 1, 2005. Wassa produced and sold approximately 69,000 ounces of gold in 2005 following its April 2005 in–service date.

The Prestea Underground is located on the Prestea property and consists of a currently inactive underground gold mine and associated support facilities. GSBPL owns a 90% operating interest in the

Prestea Underground. We are currently conducting exploration and engineering studies to determine if the underground mine can be reactivated on a profitable basis.

Through our 100% owned subsidiary, St. Jude Resources Ltd. (“St. Jude”), we own the St. Jude Properties in southwest Ghana. The St. Jude Properties consist of the Hwini–Butre and Benso concessions which together cover an area of 201 square kilometers. Both concessions contain undeveloped zones of gold mineralization. The Hwini-Butre and Benso concessions are located approximately 75 and 45 kilometers south of Wassa, respectively based on the proposed haulage route. The mineralized zones have been delineated through the efforts of the prior owner who conducted extensive exploration work from the mid–1990s to 2005.

We hold interests in several gold exploration projects in Ghana and elsewhere in West Africa including Sierra Leone, Burkina Faso, Niger and Cote d’Ivoire. We also hold and manage exploration properties in Suriname and French Guiana in South America. We hold indirect interests in gold exploration properties in Peru and Chile through a 16.5% shareholding investment in Goldmin Consolidated Holdings. Golden Star also own a 43% interest in EURO Resources S.A. (“EURO”), a French publicly–traded royalty holding company which owns a royalty interest based on gold production at Cambior Inc.’s Rosebel gold mine in Suriname.

Our corporate headquarters are located in Littleton, Colorado, USA and we also maintain a regional corporate office in Accra, Ghana. Our accounting records are kept in compliance with Canadian GAAP. All of our operations, except for certain exploration projects keep financial records in US dollars.

2. Inventories

		As of September 30,				As of December 31,
		2006				2005
Stockpiled ore		$	17,855			$	5,753
In–process			3,231				3,106
Materials and supplies			22,690				14,322
Total		$	43,776			$	23,181

3. Deposits

Represents cash advances and payments for equipment and materials purchases by GSWL and GSBPL which are not yet delivered on-site.

4. Long Term Investments

We hold a 16.5% interest in Goldmin Consolidated Holdings, a privately held gold exploration company which operates in South America. In the year ended December 31, 2005 we accounted for our investment as an equity investment, but by March 31, 2006 our investment was diluted to less than 20%, and we now account for the investment on the cost basis at $1.5 million.

At December 31, 2005 we held approximately 11% of the outstanding common shares of Moto Goldmines Limited (“Moto”), a gold exploration and development company publicly traded in Canada, with a focus on gold exploration and development in the Democratic Republic of Congo. In March 2006 we exercised our remaining one million warrants increasing our total ownership to six million common shares, and immediately afterward sold all six million common shares in a “bought–deal” transaction in Canada for Cdn$7.50 per share. The sale of the six million shares resulted in net proceeds to Golden Star of $39.0 million (Cdn$45.0 million) yielding a pre–tax capital gain of $30.3 million.

5. Investment in EURO

EURO’s most significant asset is its royalty from the Rosebel mine in Suriname, owned and operated by Cambior Inc. Additionally, EURO holds certain gold exploration and development mineral rights in French Guiana, which are the subject of joint venture arrangements. At March 31, 2006 we owned 53% of EURO’s outstanding common shares and as such consolidated EURO’s financial results with our own.

During the second quarter of 2006 we sold 362,029 of our EURO shares in open market transactions realizing approximately $0.7 million of cash. On June 19, 2006 we sold an additional four million EURO shares in a private transaction receiving $2.5 million of cash. The purchasers of the four million shares have agreed to pay additional consideration to Golden Star if they sell the shares at a gain.

The combined share sales during the second quarter diluted our holding in EURO‘s common shares to approximately 43%. In response to our reduced ownership position, the equity method of accounting was adopted on June 20, 2006 for our remaining interest in EURO. Under the equity accounting method, our consolidated financial statements no longer include EURO’s assets and liabilities which at March 31, 2006 included $3.2 million of net current assets, $5.6 million of tax assets, $7.0 million of bank loans and $14.9 million of derivative liabilities. The net effect of the change in accounting method resulted in recognition of $17.7 million of non-cash gains in the second quarter of 2006. The total gain from the change in our EURO ownership position, consisting of $3.2 million in cash received from sale of shares and $17.7 million from the change in accounting method, is $20.9 million.

Under the equity method accounting rules, Golden Star will recognize a share of EURO’s future earnings/losses in proportion to Golden Star’s ownership position at the end of each period (currently 43%). Golden Star has a zero carrying value for its investment in EURO, and future gains and losses will not be recognized until such time as EURO’s future income offsets accumulated deficits. The value of our remaining 21.4 million EURO common shares was $33.9 million based on EURO’s closing share price on September 30, 2006.

6. Deferred Exploration and Development Costs

Consolidated property expenditures on our exploration projects for the nine months ended September 30, 2006 were as follows:

		Deferred																				Deferred
		Exploration &																				Exploration &
		Development				Capitalized												Transfer to				Development
		Costs as of				Exploration				Acquisition								mining				Costs as of
		12/31/05				Expenditures				Costs				Impairments				properties				9/30/06
AFRICAN PROJECTS
Akropong trend and other Ghana		$	4,947			$	80			$	—			$	—			$	(4,209	)		$	818
Prestea property – Ghana			2,074				25				—				—				(2,099	)			—
Hwini–Butre and Benso – Ghana			135,832				3,194				1,897				—				—				140,923
Mano River – Sierra Leone			1,285				555				—				(197	)			—				1,643
Afema – Ivory Coast			1,028				494				—				—				—				1,522
Goulagou – Burkina Faso			18,247				173				254				—				—				18,674
Other Africa			1,750				357				(1,090	)			—				—				1,017
SOUTH AMERICAN PROJECTS
Saramacca – Suriname			731				131				—				—				—				862
Bon Espoir – French Guiana			1,382				268				—				(1,650	)			—				—
Other South America			256				—				—				—				—				256
Total		$	167,532			$	5,277			$	1,061			$	(1,847	)		$	(6,308	)		$	165,715

7. Property, Plant and Equipment

		As of September 30, 2006												As of December 31, 2005
										Property,
		Property,								Plant and				Property,								Property,
		Plant and								Equipment				Plant and								Plant and Equipment,
		Equipment				Accumulated				Net Book				Equipment				Accumulated				Net Book
		at Cost				Depreciation				Value				at Cost				Depreciation				Value
Bogoso/Prestea		$	46,578			$	11,821			$	34,757			$	40,802			$	8,240			$	32,562
Prestea Underground			3,287				—				3,287				2,748				—				2,748
Wassa			55,073				6,204				48,869				50,701				1,985				48,716
EURO Resources			—				—				—				1,456				1,449				7
Corporate & Other			656				169				487				611				117				494
Total		$	105,594			$	18,194			$	87,400			$	96,318			$	11,791			$	84,527

8. Mining Properties

		As of September 30, 2006												As of December 31, 2005
										Mining												Mining
		Mining								Properties,				Mining								Properties,
		Properties at				Accumulated				Net Book				Properties at				Accumulated				Net Book
		Cost				Amortization				Value				Cost				Amortization				Value
Bogoso/Prestea		$	53,249			$	32,393			$	20,856			$	46,970			$	28,792			$	18,178
Prestea Underground			27,543				—				27,543				21,612				—				21,612
Bogoso Sulfide			13,065				—				13,065				13,065				—				13,065
Mampon			15,631				—				15,631				15,062				—				15,062
Wassa			54,760				9,425				45,335				50,810				5,104				45,706
Other			11,740				—				11,740				4,465				—				4,465
Total		$	175,988			$	41,818			$	134,170			$	151,984			$	33,896			$	118,088

9. Mine Construction–in–Progress

At September 30, 2006 and at December 31, 2005, mine construction–in–progress represents costs incurred for the Bogoso Sulfide Expansion Project since the beginning of 2005. Included in the total are costs of development drilling, plant equipment purchases, materials and construction costs, payments to the construction contractors, mining equipment costs, capitalized interest and pre-production stripping costs.

		As of				As of
		September 30, 2006				December 31, 2005
Plant construction cost		$	107,983			$	34,871
Mining equipment cost			13,667				—
Pre-production stripping cost			13,019				—
Capitalized Interest			5,105				1,836
Total		$	139,774			$	36,707

10. Deferred Stripping

The amount of stripping costs to be capitalized in each period is calculated by determining the tonnes of waste moved in excess of the life–of–pit average strip ratio and valuing the excess tonnage of removed waste 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 the average life–of–pit rate, such tonnes being valued at the rolling average cost of the waste tonnage amounts capitalized.

The capitalized component of waste rock removal costs is shown on our consolidated balance sheets in the line item titled “Deferred Stripping.” The cost impact is included in the Statements of Operations in the line item titled “Mining operations.”

During the quarter ended September 30, 2006 all the remaining deferred stripping cost of $0.5 million was recovered.

11. Debt

		As of				As of
		September 30, 2006				December 31, 2005
Current debt:
Bank loan – EURO Resources (Note a)		$	–			$	2,667
Equipment financing loans (Note b)			5,812				4,188
Total current debt		$	5,812			$	6,855
Long term debt:
Bank loan – EURO Ressources (Note a)		$	–			$	5,000
Equipment financing loans (Note b)			18,722				11,632
Convertible notes (Note c)			48,195				47,666
Total long term debt		$	66,917			$	64,298

12. Derivatives

EURO – In January 2005, EURO, then a majority owned subsidiary, entered into a series of derivative contracts in conjunction with a $6.0 million loan agreement. EURO’s derivatives are tied to a future stream of gold royalty payments EURO expects to receive from Cambior Inc., which purchased a mining property interest from Golden Star in 2002. Golden Star originally owned the royalty but sold the royalty to EURO in 2004. In September 2005, EURO entered into a second set of derivative contracts related to a further $3.0 million debt facility.

During 2005, we recorded a realized derivative loss of $0.5 million for cash settlement of the first four quarterly tranches and we recorded $9.6 million of unrealized, non–cash, mark–to–market losses as of December 31, 2005. At June 30, 2006 we recorded $0.8 million payments to EURO’s counterparties for expiring positions and an additional $4.1 million mark–to–market loss for the period ended June 19, 2006.

As a result of the sale of the EURO shares in June 2006 (see Note 5), Golden Star no longer consolidates the financial statements of EURO. Therefore the EURO derivative contract liability is not included in our consolidated balance sheet as of September 30, 2006.

Gold Derivatives – To provide gold price protection during the 2005/2006 construction phase of the Bogoso Sulfide Expansion Project, we purchased a series of gold puts. The first purchase occurred in the second quarter of 2005 when we purchased put options on 140,000 ounces of gold at an average floor price of $409.75, paying approximately $1.0 million in cash for the options.

We purchased an additional 90,000 put options in the third quarter of 2005 locking in a $400 per ounce floor for each of the 90,000 ounces. Increases in gold price during the first nine months of 2006 resulted in a nil value for our remaining puts at September 30, 2006. This was $0.1 million less than the value at December 31, 2005 and approximately $1.0 million less than the initial purchase cost. We have 75,000 ounces of put options with an average strike price of $404 per ounce remaining at September 30, 2006.

To acquire the put options in the third quarter of 2005, we sold 90,000 ounces of call options with a strike price of $525 per ounce. The revenue from the sale of the call options exactly offset the cost of the put options bought in the same quarter. At the beginning of 2006 there were 65,000 call options outstanding. During the second quarter of 2006 we bought back 30,000 ounces of call options for $2.6 million. The lower number of call options held by the Company at September 30, 2006 resulted in a $1.2 million decrease in settlement costs of the calls and accordingly we recorded a $1.2 million mark–to–market gain on the calls. In addition, call options for 23,000 ounces were exercised during the first nine months of 2006 requiring a $2.0 million payment to the counterparty. The payment is included in derivative loss in the Statement of Operations. At September 30, 2006 our gold call obligation consists of 12,000 ounces at $525 per ounce.

Foreign Currency Forward Positions – To help control the potential adverse impact of fluctuations in foreign currency exchange rates on the cost of equipment and materials we expect to purchase during the 2006 construction phase of the Bogoso Sulfide Expansion Project, we entered into Rand forward contracts. These contracts, established without cost, had a fair value of nil and $1.0 million at September 30, 2006 and December 31, 2005, respectively.

The following table summarizes our derivative contracts at September 30, 2006:

										Total/
At September 30, 2006		2006				2007				Average
Gold put options
Ounces (thousands)			37.5				37.5				75
Average price per ounce ($)			404				404				404
Gold call options
Ounces (thousands)			6				6				12
Average price per ounce ($)			525				525				525

The puts, calls and foreign exchange forward contracts are comprised of numerous individual contracts each with a different settlement date.

						Fair value of
						EURO								Nine months
		September 30,				derivative on				December 31,				(Expense)/
Fair Value of Derivatives		2006				June 19, 2006				2005				Gain
Cash–settled forward gold price agreements		$	—			$	(13,707	)		$	(9,560	)		$	(4,147	)
Puts			—				—				74				(74	)
Calls			(1,016	)			—				(2,250	)			1,234
Rand forward purchases			—				—				1,146				(1,146	)
Euro forward purchases			—				—				(162	)			162
Unrealized loss		$	(1,016	)		$	(13,707	)		$	(10,752	)		$	(3,971	)
Realized losses:
Cash–settled forward gold price agreements															(757	)
Calls															(4,618	)
Total gains/(losses)														$	(9,346	)

13. Asset Retirement Obligations

Our Asset Retirement Obligations (“ARO”) are equal to the present value of all estimated future closure costs associated with reclamation, demolition and stabilization of our Bogoso/Prestea and Wassa mining and ore processing 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. While the majority of these costs will be incurred near the end of the mines’ lives, it is expected that certain on–going reclamation costs will be incurred prior to mine closure. These costs are recorded against the current ARO provision as incurred.

The changes in the carrying amount of the ARO were as follows:

Balance at December 31, 2005		$	11,393
Accretion expense			544
Cost of reclamation work performed			(957	)
New AROs incurred during the period			6,597
Balance at September 30, 2006		$	17,577
Current portion		$	3,661
Long term portion		$	13,916

During the quarter we increased our estimate of the asset retirement obligation at Bogoso/Prestea and Wassa as a result of the greater reclamation liability associated with the Bogoso Sulfide Expansion Project and the mining of the SAK pits at Wassa. The increased liability relates to the reclamation associated with the removal of the plant, the expanded tailings facility and the increased size of the pits and dumps. We also completed a reclamation study for bonding purposes with the Ghana Environmental Protection Agency (“EPA”) and updated our cost estimates based on the results of the study.

14. Commitments and Contingencies

Our commitments and contingencies include the following items:

	(e)		Environmental Regulations – The Company’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. As such we cannot predict the full amount of our future expenditure to comply with these laws and regulations. We conduct our operations so as to protect the environment and believe our operations are in compliance with applicable laws and regulations in all material respects.
	(f)		Environmental Bonding in Ghana – In 2005, pursuant to a reclamation bonding agreement between the EPA and GSWL, we bonded $3.0 million to cover future reclamation obligations at Wassa. To meet the bonding requirements we established a $2.85 million letter of credit and deposited $0.15 million of cash with the EPA. In addition, pursuant to a bonding agreement between the EPA and GSBPL we bonded $9.5 million in early 2006 to cover our future obligations at Bogoso/Prestea. To meet these requirements we deposited $0.9 million of cash with the EPA with the balance covered by a letter of credit.
	(g)		Cash Restricted for Environmental Rehabilitation Liabilities – In 1999, we were required, according to the acquisition agreement with the sellers of GSBPL, to restrict $6.0 million of cash to be used for the ongoing and final reclamation and closure costs at Bogoso. Between 1999 and 2001 we withdrew $2.6 million of the restricted cash to cover our out–of–pocket cash reclamation costs. In early 2006 GSBPL met the EPA’s bonding requirements and as a result the sellers of GSBPL released the remaining $3.5 million during September 2006.
	(h)		Royalties –

	(i)		Dunkwa Properties: As part of the acquisition of the Dunkwa properties in August 2003, we agreed to pay the seller a net smelter return royalty on future gold production from the Mansiso and Asikuma properties. Per the acquisition agreement, there will be no royalty due on the first 200,000 ounces produced from Mampon which is located on the Asikuma property. The amount of the royalty is based on a sliding scale which ranges from 2% of net smelter return at gold prices at or below $300 per ounce up to 3.5% for gold prices in excess of $400 per ounce.
	(ii)		Government of Ghana: Under the laws of Ghana, a holder of a mining lease is required to pay an annual royalty of not less than 3% and not more than 6% of

			the total revenues earned from the lease area. The royalty is payable on a quarterly basis. We currently pay a 3% annual royalty on gold production from Bogoso/Prestea and Wassa.
	(iii)		Benso: Benso is subject to a 1.5% net smelter return royalty and a $1.00 per ounce gold production royalty. The smelter return royalty may be purchased for $4.0 million (or $6.0 million if a feasibility study indicates more than 3.5 million ounces of recoverable gold) and the gold production royalty may be purchased for $0.5 million.
	(iv)		Prestea Underground – The Prestea Underground is subject to a 2.5% net profits interest on future income. Ownership of the 2.5% net profit interest is currently held by the bankruptcy trustee overseeing liquidation of Prestea Gold Resources Limited, our former joint venture partner in the Prestea Underground.

	(i)		Afema Project – On March 29, 2005 we entered into an agreement with Societe d’Etat pour le Development Minier de la Cote d’Ivoire (“SO.DE.MI.”), the Cote d’Ivoire state mining and exploration company, to acquire their 90% interest in the Afema gold property in south–east Cote d’Ivoire. A $0.1 million initial payment to SO.DE.MI. provided us the right to carry out a six month detailed technical due diligence program. On September 30, 2005 a six month extension to March 29, 2006 was granted by SO.DE.MI. to allow Golden Star to carry out further due diligence work and to analyze the large quantity of data collected during 2005, after which Golden Star has the right to complete the transaction to acquire 100% of SO.DE.MI.’s rights in the Afema property for $1.5 million. On March 14, 2006, we contacted SO.DE.MI. to clarify that (i) Golden Star will be indemnified in respect of the past environmental degradation at Afema, and (ii) that no other claims against the property exist. SO.DE.MI. is still considering its response to the latter question and hence the option remains unexercised pending their decision. In addition to the acquisition payments, we agreed to pay SO.DE.MI. a royalty on any future gold production from the Afema property. The royalty is indexed to the gold price and ranges from 2% of net smelter returns at gold prices below $300 per ounce to 3.5% of net smelter returns for gold prices exceeding $525 per ounce. If we proceed with the $1.5 million payment to acquire full rights to the property, the purchase agreement requires us to spend an additional $3.5 million on exploration work at Afema, subject to exploration success, over the following three and a half years.
	(j)		Stock based compensation – On September 9, 2006 GSBPL and GSWL entered into an agreement with the Ghana Mine Workers Union whereby GSBPL and GSWL agreed to grant each union employee in employment on August 31, 2006 Golden Star options or at our election, Share Appreciation Rights (“SAR’s”). The union employees will receive 100 options (or SAR’s) for each year of service up to a maximum of 500 options (or SAR’s). While the grant of these options (or SAR’s) have been approved they still have not been granted to the union employees as of September 30, 2006.
	(k)		We are engaged in routine litigation incidental to our business. No material legal proceedings, involving us or our business are pending, or, to our knowledge, contemplated, by any governmental authority. We are not aware of any material events of non–compliance with environmental laws and regulations.

15. Share Capital

Changes in share capital during the nine months ended September 30, 2006 were:

		Shares				Amount
Balance as of December 31, 2005			205,954,582			$	522,510
Common shares issued:
Option exercises			1,887,176				4,680
Reclassification of warrants to capital surplus			—				(2,575	)
Bonus shares and other			4,000				(134	)
Balance as of September 30, 2006			207,845,758			$	524,481

16. Warrants

The following warrants were outstanding as of September 30, 2006:

				Warrants
Issued with:		Date issued		outstanding				Exercise price		Expiration date
Equity offering		February 14, 2003			8,448,334			Cdn$4.60		February 14, 2007
St. Jude acquisition		December 21, 2005			3,240,000			Cdn$4.17		November 20, 2008
Total					11,688,334

The 8.4 million warrants expiring February 14, 2007 are traded on the Toronto Stock Exchange under the symbol GSC.WT.A. No warrants were exercised during the nine months ended September 30, 2005 and 2006.

17. Stock Based Compensation

Stock Options – We have one stock option plan, the Second Amended and Restated 1997 Stock Option Plan (the “Plan”) and options are granted under this plan from time to time at the discretion of the Compensation Committee. Options granted are non–assignable and are exercisable for a period of ten years or such other period as stipulated in a stock option agreement between Golden Star and the optionee. Under the 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. Under the plan we reserved an aggregate of 15,000,000 shares of common stock for issuance pursuant to the exercise of options of which 11,456,351 is available at September 30, 2006. 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 Compensation Committee.

In addition to options issued under the Plan, 2,533,176 options were issued to various employees of St. Jude in exchange for St. Jude options of which 864,000 remain unexercised as of September 30, 2006. All of the remaining unexercised options held by St. Jude employees are vested. All figures shown below include the options issued to St. Jude employees.

Amounts recognized in the statements of operations with respect to the Plan are as follows:

		Nine months ended September 30,
		2006				2005
Total cost during the period		$	1,568			$	900

We granted 850,650 and 514,000 options during the nine months ended September 30, 2006 and September 30, 2005, respectively. The Company recognized $1.6 million and $0.9 million of non–cash compensation expense in the nine months ended September 30, 2006 and 2005, respectively. Golden Star does not receive a tax deduction for the issuance of options. As a result we did not recognize any income tax benefit related to the stock compensation expense during the nine months ended September 30, 2006 and 2005.

The fair value of options granted during the first nine months of 2006 and 2005 were estimated at the grant dates using the Black–Scholes option–pricing model based on the assumptions noted in the following table:

		Nine months ended September 30,
		2006		2005
Expected volatility		63.7% to 103.4%		34.9%
Risk–free interest rate		4.00% to 4.09%		3.15% to 3.52%
Expected lives		4 to 7 years		3.5 to 5 years
Dividend yield		0%		0%

In 2006 expected volatilities are based on the historical volatility of Golden Star’s shares. Golden Star uses historical data to estimate share option exercise and employee departure behavior used in the Black–Scholes model; groups of employees that have dissimilar historical behavior are considered separately for valuation purposes. The expected term of the options granted represents the period of time that the option granted are expected to be outstanding; the range given above results from certain groups of employees exhibiting different post–vesting behaviors. The risk–free rate for periods within the contractual term of the option is based on the Canadian Chartered Bank Administered Interest rates in effect at the time of the grant.

A summary of option activity under the Plan as of September 30, 2006 and changes during the nine months then ended is presented below:

										Weighted–
						Weighted–				Average
						Average				Remaining				Aggregate
		Options				Exercise price				Contractual				intrinsic value
		(000’)				(Cdn$)				Term (Years)				($000)
Outstanding as of December 31, 2005			7,390				2.75				5.2			$	9,554
Granted			851				3.88				9.4				—
Exercised			(1,887	)			1.97				—				2,209
Forfeited			(136	)			7.07
Outstanding as of September 30, 2006			6,218				3.02				5.6				7,073
Exercisable at September 30, 2006			3,954				1.78				4.0			$	7,073

The weighted–average grant date fair value of share options granted during the nine months ended September 30, 2006 and September 30, 2005 was Cdn$2.70 and Cdn$1.67, respectively. The intrinsic value of options exercised during the nine months ended September 30, 2006 and 2005 was $2.2 million and $0.2 million, respectively.

A summary of the status of non–vested options at September 30, 2006 and changes during the nine months ended September 30, 2006, is presented below:

						Weighted
						average grant
		Number of				date fair value
		options (‘000)				(Cdn$)
Nonvested at January 1, 2006			155				2.03
Granted			851				2.74
Vested			(466	)			2.61
Forfeited			(71	)			2.09
Nonvested at September 30, 2006			469				2.74

As of September 30, 2006 there was a total unrecognized compensation cost of Cdn$1.2 million related to non–vested share–based compensation granted under the Plan. That cost is expected to be recognized over a weighted–average period of 2.3 years. The total fair values of shares vested during the nine months ended September 30, 2006 and 2005 were Cdn$1.2 million and Cdn$0.4 million, respectively.

Stock Bonus Plan – In December 1992, we established an Employees’ Stock Bonus Plan (the “Bonus Plan”) for any full–time or part–time employee (whether or not a director) of the Company or any of our subsidiaries who has rendered meritorious services which contributed to the success of the Company or any of its subsidiaries. The Bonus Plan provides that a specifically designated committee of the Board of Directors may grant bonus common shares on terms that it might determine, within the limitations of the Bonus Plan and subject to the rules of applicable regulatory authorities. The Bonus Plan, as amended, provides for the issuance of 900,000 common shares of bonus stock of which 495,162 common shares had been issued as of September 30, 2006.

During the nine months ended September 30, 2006 and 2005 we issued 4,000 and 45,342 common shares, respectively, to employees under the Bonus Plan.

18. Income Taxes

Income tax (expense)/benefit attributable to net income before income taxes consists of:

		Three months ended September 30,								Nine months ended September 30,
		2006				2005				2006				2005
Current
Canada		$	—			$	—			$	(4,926	)		$	—
Foreign			—				—				—				—
Future
Canada			61				—				3,179				—
Foreign			(665	)			1,689				(5,828	)			1,710
Total		$	(604	)		$	1,689			$	(7,575	)		$	1,710

The current tax expense recorded for the nine months ended September 30, 2006 relates to the gain on sale of the Moto shares. The Canadian future tax benefit recorded relates primarily to exploration expenditures incurred by St. Jude. The foreign future tax expense recorded for the nine months ended September 30, 2006 relates primarily to the sale of EURO (see Note 5) and the decrease in the Ghanaian tax rate, which is offset by derivative losses incurred. Golden Star records a valuation allowance against any portion of its remaining future income tax assets that it believes will, more likely than not, fail to be realized.

19. Earnings per Common Share

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

		Three months ended								Nine months ended
		September 30,								September 30,
		2006				2005				2006				2005
Net income/(loss)		$	2,955			$	(6,657	)		$	36,402			$	(12,575	)
Weighted average number of common shares (millions)			207.3				142.8				207.4				142.5
Dilutive securities:
Options			1.9				1.8				2.0				1.9
Warrants			—				—				—				—
Weighted average number of diluted shares			209.2				144.6				209.4				144.4
Basic earnings/(loss) per share		$	0.014			$	(0.047	)		$	0.176			$	(0.088	)
Diluted earnings/(loss) per share		$	0.014			$	(0.047	)		$	0.174			$	(0.088	)

20. Supplemental Cash Flow Information

No cash income taxes were paid during the nine months ended September 30, 2006 and 2005. Cash paid for interest was $2.9 million and $1.1 million for September 30, 2006 and 2005, respectively. A total of $53,000 and nil of depreciation was included in general and administrative costs, or was capitalized into projects, for the quarters ended September 30, 2006 and 2005, respectively.

		Nine months ended September 30,
		2006				2005
Supplemental disclosure of non-cash transactions
De-consolidation of EURO (see Note 5):
- Accounts receivable		$	2,341				—
- Capitalized loan fees			91				—
- Accounts Payable			754				—
- Derivative liability			6,333				—

21. Operations by Segment and Geographic Area

The following segment and geographic data includes revenues based on product shipment origin and long–lived assets based on physical location. The corporate entity is incorporated in Canada.

		Africa – Ghana
As of and for the		Bogoso/												South
three months ended September 30,		Prestea				Wassa				Other				America				Corporate				Total
2006
Revenues		$	21,544			$	14,529			$	2			$	170			$	309			$	36,554
Net income/(loss)			6,932				321				(204	)			(164	)			(3,930	)			2,955
Total assets			291,381				107,028				196,184				7,849				3,812				606,254
2005
Revenues		$	12,856			$	10,500			$	—			$	1,058			$	334			$	24,748
Net income/(loss)			1,667				(3,660	)			(1,331	)			(2,654	)			(679	)			(6,657	)
Total assets			131,575				98,512				45,531				7,684				42,354				325,656

		Africa – Ghana
As of and for the		Bogoso/												South
nine months ended September 30,		Prestea				Wassa				Other				America				Corporate				Total
2006
Revenues		$	48,001			$	41,808			$	18			$	4,186			$	1,453			$	95,466
Net income/(loss)			7,789				(1,930	)			2,820				(3,936	)			31,659				36,402
Total assets			291,381				107,028				196,184				7,849				3,812				606,254

		Africa – Ghana
As of and for the		Bogoso/												South
nine months ended September 30,		Prestea				Wassa				Other				America				Corporate				Total
2005
Revenues		$	43,806			$	19,690			$	—			$	3,177			$	1,049			$	67,722
Net income/(loss)			5,278				(6,336	)			(1,331	)			(2,263	)			(7,923	)			(12,575	)
Total assets			131,575				98,512				45,531				7,684				42,354				325,656

22. Related Parties

We obtained legal services from a legal firm to which our Chairman is counsel. Total value of all services purchased from this law firm during the first nine months was $0.6 million. Our Chairman did not personally perform any legal services for us during the period nor did he benefit directly or indirectly from payments for the services performed by the firm.

During the first quarter of 2006, a corporation controlled by Michael A. Terrell, a director of Golden Star, provided management services to St. Jude for which it was paid Cdn$0.13 million. Mr. Terrell became a director of Golden Star following our acquisition of St. Jude in December 2005. Mr. Terrell’s company ceased providing services to St. Jude at March 31, 2006.

23. Financial Instruments

Fair Value – Our financial instruments are comprised of cash, short term investments, accounts receivable, restricted cash, accounts payable, accrued liabilities, accrued wages, payroll taxes, derivatives and debt. The fair value of cash and short term investments, derivatives, accounts receivable, accounts payable, accrued liabilities and accrued wages, payroll taxes and current debt equals their carrying value due to the short term nature of these items. The fair value of restricted cash is equal to the carrying value as the cash is invested in short term, high–quality instruments.

24. Generally Accepted Accounting Principles in the United States

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada, which differ from US GAAP. The effect of applying US GAAP to our financial statements is shown below.

(a) Consolidated Balance Sheets in US GAAP

		As of				As of
		September 30,				December 31,
		2006				2005
		(Restated-Note d13)				(Restated-Note d13)
ASSETS
Current assets:
Cash and cash equivalents		$	10,043			$	89,709
Accounts receivable			6,094				6,560
Inventories			43,776				23,181
Future tax assets			23				6,248
Fair value of derivatives			—				1,220
Deposits			10,096				5,185
Other current assets			1,089				686
Total current assets			71,121				132,789
Restricted cash			1,572				3,865
Long term investments (Notes d1 and d2)							15,182
Deferred exploration and development costs (Notes d3 and d4)			—				—
Property, plant and equipment (Note d5)			86,686				83,813
Mine construction in progress			139,774				36,706
Mining properties (Notes d3, d4 and d5)			244,285				237,153
Deferred stripping (Note d6)			—				1,548
Future tax asset (Note d10)			3,695				8,223
Other assets			1,351				3,164
Total assets		$	548,484			$	522,443
LIABILITIES
Current liabilities		$	42,407			$	40,815
Long term debt (Note d8)			68,721				66,632
Asset retirement obligations			13,916				8,286
Future tax liability			42,202				45,072
Fair value of long term derivatives (Note d7)			6,131				15,842
Total liabilities			173,377				176,647
Minority interest			2,824				1,964
Commitments and contingencies			—				—
SHAREHOLDERS’ EQUITY
Share capital (Note d9)			525,668				523,696
Contributed surplus (Note d10)			7,272				4,419
Accumulated comprehensive income and other (Note d2)			1,316				9,495
Deficit			(161,973	)			(193,778	)
Total shareholders’ equity			372,283				343,832
Total liabilities and shareholders’ equity		$	548,484			$	522,443

(b) Consolidated Statements of Operations under US GAAP

		Three months ended								Nine months ended
		September 30								September 30
		2006				2005				2006				2005
		(Restated-Note d13)				(Restated-Note d13)				(Restated-Note d13)				(Restated-Note d13)
Net income under Cdn GAAP		$	2,955			$	(6,657	)		$	36,402			$	(12,575	)
Deferred exploration expenditures expensed per US GAAP (Note d3)			(475	)			(5,920	)			(8,308	)			(9,495	)
Impact of start-up accounting (Note d5)			—				—				—				(4,718	)
Depreciation and amortization differences – Wassa (Note d5)			(314	)			182				1,423				(825	)
Write-off of deferred exploration properties (Note d3)			—				—				—				1,083
Derivative gain/(loss) on non-US$ warrants (Note d11)			2,572				(2,314	)			2,448				2,169
Other (Notes d3 and d7)			(524	)			150				(19	)			370
Net income/(loss) under US GAAP before minority interest			4,214				(14,559	)			31,946				(23,991	)
Minority interest, as adjusted			(82	)			71				(144	)			127
Net income/(loss) under US GAAP			4,132				(14,488	)			31,802				(23,864	)
Other comprehensive income – gain on marketable securities (Note d2)			—				3,938				—				4,831
Comprehensive income/(loss)		$	4,132			$	(10,550	)		$	31,802			$	(19,033	)
Basic net income/(loss) per share under US GAAP before cumulative effect of change in accounting method		$	0.020			$	(0.101	)		$	0.153			$	(0.167	)
Diluted net income/(loss) per share under US GAAP before cumulative effect of change in accounting method		$	0.020			$	(0.101	)		$	0.152			$	(0.167	)