UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2019
Commission File Number 001-12284
GOLDEN STAR RESOURCES LTD.
(Translation of registrant's name into English)

150 King Street West
Suite 1200
Toronto, Ontario
M5H 1J9, Canada
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ¨     Form 40-F þ
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____


INCORPORATION BY REFERENCE

Exhibits 99.1 and 99.2 included in this report on Form 6-K are each hereby incorporated by reference in the Registration Statements on Form S-8 of the Registrant, as each may be amended from time to time (File Nos. 333-105820, 333-105821, 333-118958, 333-169047, 333-175542, 333-211926 and 333-218064), and Form F-10 of the Registrant, as may be amended from time to time (File No. 333-220478), to the extent not superseded by documents or reports subsequently filed by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, in each case as amended.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GOLDEN STAR RESOURCES LTD.



Date: July 31, 2019
(signed) André van Niekerk
_______________________
André van Niekerk
Executive Vice President and Chief Financial Officer








EXHIBIT INDEX
Exhibit
Description of Furnished Exhibit
99.1
Management's Discussion and Analysis for the three and six months ended June 30, 2019
99.2
Condensed Interim Consolidated Financial Statements for the three and six months ended June 30, 2019 and June 30, 2018
99.3
Form 52-109F2 - Certification of Interim Filing - CEO
99.4
Form 52-109F2 - Certification of Interim Filing - CFO

















GOLDENSTARLARGEA02A01A01A25.JPG
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 2019




TABLE OF CONTENTS

 
 
 
OVERVIEW OF GOLDEN STAR
 
SUMMARY OF OPERATING AND FINANCIAL RESULTS
 
OUTLOOK FOR 2019
 
CORPORATE DEVELOPMENTS
 
WASSA OPERATIONS
 
PRESTEA OPERATIONS
 
SUMMARIZED QUARTERLY FINANCIAL RESULTS
 
LIQUIDITY AND FINANCIAL CONDITION
 
LIQUIDITY OUTLOOK
 
TABLE OF CONTRACTUAL OBLIGATIONS
 
RELATED PARTY TRANSACTIONS
 
OFF-BALANCE SHEET ARRANGEMENTS
 
NON-GAAP FINANCIAL MEASURES
 
OUTSTANDING SHARE DATA
 
CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
 
CHANGES IN ACCOUNTING POLICIES
 
FINANCIAL INSTRUMENTS
 
DISCLOSURES ABOUT RISKS
 
CONTROLS AND PROCEDURES
 
RISK FACTORS AND ADDITIONAL INFORMATION
 
 
 
 





MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Golden Star Resources Ltd. and its subsidiaries ( Golden Star or the Company or we or our ). This Management’s Discussion and Analysis of Financial Condition and Results of Operations ( MD&A ) should be read in conjunction with the Company's condensed interim consolidated financial statements and related notes for the three and six months ended June 30, 2019 , which are prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board. This MD&A includes information available to, and is dated, July 30, 2019 . Unless noted otherwise, all currency amounts are stated in U.S. dollars and all financial information presented in this MD&A is prepared in accordance with IFRS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 concerning the business, operations and financial performance and condition of Golden Star. Generally, forward-looking information and statements can be identified by the use of forward-looking terminology such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, “believes” or variations of such words and phrases (including negative or grammatical variations) or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative connotation or grammatical variation thereof. Forward-looking information and statements in this MD&A include, but are not limited to, information or statements with respect to: production, cash operating costs, and all-in sustaining costs estimates and guidance for 2019 on a consolidated basis; sustaining and development capital expenditure estimates and guidance for 2019 on a consolidated basis; the Company's achievement of 2019 consolidated guidance; the range of consolidated gold production for 2019; planned exploration and drilling at Wassa and Prestea in the third quarter of 2019; expected management and Board-level changes at the Company and its subsidiaries in the second half of 2019; the updating of mineral resource models at Father Brown and disclosure of the results thereof in the third quarter of 2019; the implementation of recommendations based on the operational review of Prestea Underground by CSA Global, including low-cost quick win initiatives beginning in August 2019, and execution of the long-term plan at some point in the future; the Company’s debt servicing obligations for the remainder of 2019; and the sufficiency of cash available to support the Company’s operations and mandatory expenditures for the next twelve months.
Forward-looking information and statements are made based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performance or achievements of Golden Star to be materially different from future results, performance or achievements expressed or implied by such statements. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which Golden Star will operate in the future, including the price of gold, anticipated costs and ability to achieve goals. Certain important factors that could cause actual results, performances or achievements to differ materially from those set forth in the forward-looking information and statements include, among others, gold price volatility, discrepancies between actual and estimated production, mineral reserves and resources and metallurgical recoveries, mining operational and development risks, litigation risks, liquidity risks, suppliers suspending or denying delivery of products or services, regulatory restrictions (including environmental regulatory restrictions and liability), actions by governmental authorities (including changes in taxation), currency fluctuations, the speculative nature of gold exploration, the global economic climate, dilution, share price volatility, the availability of capital on reasonable terms or at all, local and community impacts and issues, results of pending or future feasibility studies, competition, loss of key employees, additional funding requirements and defective title to mineral claims or property. Although Golden Star has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those described in forward-looking information and statements, there may be other factors that cause actual results, performance or achievements not to be as anticipated, estimated or intended.
Forward-looking information and statements are subject to known and unknown risks, uncertainties and other important factors that may cause the actual results, performance or achievements of Golden Star to be materially different from those expressed or implied by such forward-looking information and statements, including but not limited to: risks related to international operations, including economic and political instability in foreign jurisdictions in which Golden Star operates; risks related to current global financial conditions; actual results of current exploration activities; environmental risks; future prices of gold; possible variations in mineral reserves and mineral resources, grade or recovery rates; mine development and operating risks; an inability to obtain power for operations on favourable terms or at all; mining plant or equipment breakdowns or failures; an inability to obtain products or services for operations or mine development from vendors and suppliers on reasonable terms, including pricing, or at all; accidents, labor disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; risks related to indebtedness and the service of such indebtedness, as well as those factors discussed in the section entitled “Risk Factors” in Golden Star's Annual Information Form for the year ended December 31, 2018 (filed March 29, 2019). Although Golden Star has attempted to identify important factors that could cause

3



actual results, performances and achievements to differ materially from those contained in forward-looking information and statements, there may be other factors that cause results, performance and achievements not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results, performance, and achievements and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information and statements. Forward-looking information and statements are made as of the date hereof and accordingly are subject to change after such date. Except as otherwise indicated by Golden Star, these statements do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof. Forward-looking information and statements are provided for the purpose of providing information about management's current expectations and plans and allowing investors and others to get a better understanding of the Company's operating environment. Golden Star does not undertake to update any forward-looking information and statements that are included in this MD&A, except as required by applicable securities laws.
CAUTIONARY NOTE REGARDING RESERVES AND RESOURCES
Scientific and technical information contained in this MD&A was reviewed and approved by Dr. Martin Raffield, Senior Vice- President, Technical Services for Golden Star, who is a “qualified person” as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”), and by S. Mitchel Wasel, BSc Geology, who is a Qualified Person pursuant to NI 43-101.  Mr. Wasel is Vice President Exploration for Golden Star and an active member of the Australasian Institute of Mining and Metallurgy. All mineral reserves and mineral resources have been calculated in accordance with the standards of the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) and in compliance with the requirements of NI 43-101. All mineral resources are reported inclusive of mineral reserves. Mineral resources which are not mineral reserves do not have demonstrated economic viability. Information on data verification performed on, and other scientific and technical information relating to, the mineral properties mentioned in this MD&A that are considered to be material mineral properties of the Company are contained in Golden Star's Annual Information Form for the year ended December 31, 2018 and the following current technical reports for those properties available at www.sedar.com: (i) Wassa - “NI 43-101 Technical Report on Resources and Reserves, Golden Star Resources, Wassa Gold Mine, Ghana” effective date December 31, 2018; and (ii) Prestea Underground - “NI 43-101 Technical Report on Resources and Reserves, Golden Star Resources, Bogoso/Prestea Gold Mine, Ghana” effective date December 31, 2017.
Cautionary Note to U.S. Investors
This MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ materially from the requirements of United States securities laws applicable to U.S. companies. Information concerning our mineral properties has been prepared in accordance with the requirements of Canadian securities laws, which differ in material respects from the requirements of the United States Securities and Exchange Commission (the “SEC”) set forth in Industry Guide 7. Under the SEC's Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time of the reserve determination, and the SEC does not recognize the reporting of mineral deposits which do not meet the SEC Industry Guide 7 definition of “Reserve”. In accordance with NI 43-101, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in accordance with CIM standards. While the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are recognized and required by NI 43-101, the SEC does not recognize them. You are cautioned that, except for that portion of mineral resources classified as mineral reserves, mineral resources do not have demonstrated economic viability. Inferred mineral resources have a high degree of uncertainty as to their existence and as to whether they can be economically or legally mined. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Therefore, you are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally mined, or that it will ever be upgraded to a higher category. Likewise, you are cautioned not to assume that all or any part of measured mineral resources or indicated mineral resources will ever be upgraded into mineral reserves.

4



OVERVIEW OF GOLDEN STAR
Golden Star is an established, African-focused gold producer that holds a 90% interest in two producing gold mines in Ghana.
The Wassa Complex (“Wassa”) became an underground-only operation in January 2017. The Prestea Complex (“Prestea”) comprises the Prestea Open Pits and the Prestea Underground Mine (“Prestea Underground”) and is planned to become an underground-only operation. The Wassa Underground Mine (“Wassa Underground”) achieved commercial production on January 1, 2017, and Prestea Underground achieved commercial production on February 1, 2018.
Golden Star’s objective is to grow into a best-in-class, mid-tier gold producer. We aim to expand the Company and its production profile through the exploration and development of our existing mines, particularly Wassa, and through strategic value accretive acquisitions.
As the winner of the Prospectors & Developers Association of Canada 2018 Environmental and Social Responsibility Award, we are committed to leaving a positive and sustainable legacy in the locations where we operate.
The Company is a reporting issuer or the equivalent in all provinces of Canada, in Ghana and in the United States, and files disclosure documents with securities regulatory authorities in Canada and Ghana, and with the SEC in the United States.
SUMMARY OF OPERATING AND FINANCIAL RESULTS
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
OPERATING SUMMARY
 
2019
 
2018
 
2019
 
2018
Wassa gold sold
oz
37,725

 
38,249

 
80,724

 
74,102

Prestea gold sold
oz
11,017

 
22,310

 
21,514

 
44,817

Total gold sold
oz
48,742

 
60,559

 
102,238

 
118,919

Wassa gold produced
oz
37,356

 
38,532

 
80,266

 
74,038

Prestea gold produced
oz
11,066

 
22,677

 
21,440

 
44,787

Total gold produced
oz
48,422

 
61,209

 
101,706

 
118,825

Average realized gold price 1
$/oz
1,270

 
1,273

 
1,263

 
1,266

 
 
 
 
 
 
 
 
 
Cost of sales per ounce - Consolidated 2
$/oz
1,093

 
1,106

 
1,016

 
1,153

Cost of sales per ounce - Wassa 2
$/oz
831

 
944

 
774

 
971

Cost of sales per ounce - Prestea 2
$/oz
1,987

 
1,383

 
1,924

 
1,468

Cash operating cost per ounce - Consolidated 2
$/oz
886

 
809

 
805

 
857

Cash operating cost per ounce - Wassa 2
$/oz
655

 
610

 
600

 
645

Cash operating cost per ounce - Prestea 2
$/oz
1,677

 
1,149

 
1,573

 
1,224

All-in sustaining cost per ounce - Consolidated 2
$/oz
1,212

 
1,104

 
1,089

 
1,117

All-in sustaining cost per ounce - Wassa 2
$/oz
941

 
994

 
844

 
954

All-in sustaining cost per ounce - Prestea 2
$/oz
2,143

 
1,293

 
2,006

 
1,401

1 Average realized gold price per ounce in the six months ended June 30, 2018 excludes 2,049 pre-commercial production ounces sold at Prestea Underground in January 2018.
2 See “Non-GAAP Financial Measures” section for a reconciliation of cost of sales per ounce, cash operating cost per ounce and all-in sustaining cost per ounce to cost of sales excluding depreciation and amortization.

5



 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
FINANCIAL SUMMARY
 
2019
 
2018   3
 
2019
 
2018   3
Gold revenues
$'000
61,915

 
77,121

 
129,172

 
147,940

Cost of sales excluding depreciation and amortization
$'000
46,506

 
57,717

 
90,310

 
117,291

Depreciation and amortization
$'000
6,749

 
9,235

 
13,611

 
17,456

Mine operating margin
$'000
8,660

 
10,169

 
25,251

 
13,193

General and administrative expense
$'000
9,505

 
6,909

 
13,610

 
8,018

(Gain)/loss on fair value of financial instruments, net
$'000
(424
)
 
1,301

 
3,449

 
(4,141
)
Income tax expense
$'000
5,278

 
3,783

 
12,480

 
6,674

Net loss attributable to Golden Star shareholders
$'000
(9,036
)
 
(6,642
)
 
(10,960
)
 
(5,627
)
Adjusted net income attributable to Golden Star shareholders 1
$'000
872

 
2,408

 
10,266

 
285

Loss per share attributable to Golden Star shareholders - basic
$/share
(0.08
)
 
(0.09
)
 
(0.10
)
 
(0.07
)
Loss per share attributable to Golden Star shareholders - diluted
$/share
(0.08
)
 
(0.09
)
 
(0.10
)
 
(0.07
)
Adjusted income per share attributable to Golden Star shareholders - basic 1
$/share
0.01

 
0.03

 
0.09

 
0.00

Cash provided by operations
$'000
2,183

 
10,321

 
1,593

 
6,350

Cash provided by operations before working capital changes 2
$'000
591

 
10,276

 
15,499

 
11,086

Cash provided by operations per share - basic
$/share
0.02

 
0.14

 
0.01

 
0.08

Cash provided by operations before working capital changes per share - basic 2
$/share
0.01

 
0.13

 
0.14

 
0.15

Capital expenditures
$'000
16,993

 
10,186

 
30,135

 
21,768

1 See “Non-GAAP Financial Measures” section for a reconciliation of adjusted net income attributable to Golden Star shareholders and adjusted income per share attributable to Golden Star shareholders-basic to net loss attributable to Golden Star shareholders.
2 See “Non-GAAP Financial Measures” section for an explanation of the calculation of cash provided by operations before working capital changes and cash provided by operations before working capital changes per share - basic.
³ Per share data has been re-stated to reflect the share consolidation that was implemented on October 30, 2018.
Gold revenue totaled $61.9 million in the second quarter of 2019 , compared to $77.1 million in the same period in 2018 . Gold revenue for the second quarter of 2019 was $15.2 million or 20% lower than the same period in 2018 , primarily as a result of a decrease in gold revenue generated from Prestea. Compared with the same period in 2018 , gold revenue generated from Prestea decrease d by 51% , resulting from the planned decrease in production from the Prestea Open Pits and lower than planned head grade at Prestea Underground due to a combination of excessive dilution and ore loss. Gold revenue generated from Wassa decrease d by 1% as a result of processing fewer tonnes from the stockpile in 2019 as compared to prior year. The consolidated average realized gold price remained consistent at $1,270 per ounce in the second quarter of 2019 , compared to $1,273 per ounce for the same period in 2018 . For the six months ended June 30, 2019 , gold revenue was $129.2 million , a 13% decrease compared to $147.9 million in the same period in 2018 due to a decrease in gold revenue at Prestea, offset by an increase at Wassa primarily a result of increased gold production from Wassa Underground.
Gold sales totaled 48,742 ounces in the second quarter of 2019 , compared to 60,559 ounces sold in the same period in 2018 . Gold sales in the second quarter of 2019 decrease d 20% from the same period in 2018 primarily as a result of a decrease in gold sales from Prestea. Prestea gold sales of 11,017 ounces in the second quarter of 2019 were 51% lower than the same period in 2018 due primarily to the planned decrease in production from the Prestea Open Pits and the lower than planned head grade at Prestea Underground due to a combination of excessive dilution and ore loss. Production rates at Prestea Underground continue to be lower than expected and have not been able to offset the lower production at the Prestea Open Pits as planned. Wassa gold sales of 37,725 ounces in the second quarter of 2019 were 1% lower than the same period in 2018 as a result of a decrease in stockpile ore processed. For the six months ended June 30, 2019 , gold sales of 102,238 ounces were 14% lower than the 118,919 ounces sold in the same period in 2018 due to a decrease in production at Prestea as a result of the planned reduction from the Prestea Open Pits and lower than planned head grade at Prestea Underground due to a combination of excessive dilution and ore loss. This was offset by an increase in production at Wassa which was primarily due to an increase in Wassa Underground tonnes mined and processed.
Cost of sales excluding depreciation and amortization in the second quarter of 2019 totaled $46.5 million compared to $57.7 million in the same period in 2018 . Cost of sales excluding depreciation and amortization in the second quarter of 2019 decrease d 19% compared to the same period in 2018 due mainly to a $3.1 million decrease in operating costs to metals

6



inventory expense, as both Prestea and Wassa drew down less on ore stockpiles during the period. Mine operating expenses decrease d $2.7 million mainly due to reduced production from the Prestea Open Pits, offset partially by higher costs associated with increase d mining rates at Wassa Underground. In addition, severance decrease d $1.5 million as suspension of the Wassa surface mining operation was completed in early 2018. Royalty expense decrease d $0.8 million due to lower gold sales in the period, and inventory net realizable value adjustments and write-offs decrease d $3.0 million primarily as a result of the materials and supplies inventories written off at Wassa in the prior period related to open pit mining. For the six months ended June 30, 2019 , cost of sales excluding depreciation and amortization was $90.3 million , a 23% decrease compared to $117.3 million in the same period in 2018 . The decrease is mainly due to a decrease at Wassa due to the suspension of the Wassa surface mining operation in the prior year and a decrease at Prestea as production decrease d compared to the same period in 2018 .
Consolidated cost of sales per ounce was $1,093 in the second quarter of 2019 , 1% lower than $1,106 in the same period in 2018 . Consolidated cash operating cost per ounce was $886 in the second quarter of 2019 , 10% higher than $809 in the same period in 2018 . Cash operating cost at Wassa increase d 7% in the second quarter of 2019 as gold sold was slightly lower compared to the same period in 2018 and mine operating expense increase d due to an increase in total tonnes mined, as Wassa Underground has steadily increased its mining rates. Cash operating cost per ounce at Prestea increase d 46% due mainly to a decrease in gold sold during the period, offset partially by a decrease in mine operating expenses and operating costs from metals inventory, resulting from reduced production from the Prestea Open Pits and a lower draw down of ore stockpiles in the period, respectively. Production rates at Prestea Underground continue to be lower than expected and have not been able to offset the lower production at the Prestea Open Pits as planned. For the six months ended June 30, 2019 , consolidated cash operating cost per ounce decrease d 6% to $805 from $857 in the same period in 2018 due mainly to a decrease in operating costs from metal inventory, offset partially by a decrease in gold sold at Prestea.
Depreciation and amortization expense totaled $6.7 million in the second quarter of 2019 compared to $9.2 million in the same period in 2018 . For the six months ended June 30, 2019 , depreciation and amortization expense was $13.6 million , a 22% decrease compared to $17.5 million in the same period in 2018 . The decrease in depreciation and amortization expense for the three and six months ended June 30, 2019 was due to decrease s at both Wassa and Prestea. Wassa depreciation decrease d mainly due to an increase in the total recoverable gold ounces over the life of mine of Wassa Underground, while Prestea depreciation decrease d due to a decrease in gold production.
General and administrative expense totaled $9.5 million in the second quarter of 2019 , compared to $6.9 million in the same period in 2018 . The increase in general and administrative expense for the second quarter of 2019 was due primarily to a $3.7 million increase in termination costs related to the change in senior management in 2019, offset by a decrease in share-based compensation expense compared to the same period in 2018 . Share-based compensation expense decrease d in the period as the final Performance Share Units ("PSU") vested in December 2018, therefore the Company did not recognize a PSU expense in the period. General and administrative expense, excluding share-based compensation and termination costs related to the change in senior management in 2019, totaled $4.7 million compared to $3.7 million in the same period in 2018 . For the six months ended June 30, 2019 , general and administrative expense totaled $13.6 million compared to $8.0 million in the same period in 2018 . The increase relates primarily to the $3.7 million termination costs related to the change in senior management in 2019, an increase in professional and consulting fees, and an increase in share-based compensation as the Company's share price increased compared to the same period in 2018 .
Finance expense totaled $3.6 million in the second quarter of 2019 , compared to $5.4 million in the same period in 2018 . The decrease in finance expense for the second quarter of 2019 was due primarily to a $1.5 million decrease in Royal Gold loan interest and amortization of Royal Gold loan financing fee as the loan was fully paid in the prior year. For the three months ended June 30, 2019 a total of $1.0 million in interest payments were made, compared to $1.1 million in the same period in 2018 . For the six months ended June 30, 2019 , finance expense totaled $7.1 million compared to $10.2 million in the same period in 2018 . The decrease was mainly due to a $2.0 million decrease in Royal Gold loan interest and amortization of Royal Gold loan financing fee as the loan was fully paid in the prior year, and a $0.9 million increase in foreign exchange gain. For the six months ended June 30, 2019 , a total of $3.8 million in interest payments were made, compared to $3.9 million in the same period in 2018 .
The Company recorded a gain of $0.4 million on fair value of financial instruments in the second quarter of 2019 compared to a $1.3 million loss in the same period in 2018 . The $0.4 million fair value gain in the second quarter of 2019 relates to a non-cash revaluation gain on the embedded derivative liability of the 7% Convertible Debentures. The $1.3 million fair value loss recognized in the second quarter of 2018 was related to a non-cash revaluation loss on the embedded derivative liability of the 7% Convertible Debentures. For the six months ended June 30, 2019 , the Company recorded a $3.4 million loss on fair value of financial instruments, compared to a $4.1 million gain in the same period in 2018 . The valuation techniques used for these financial instruments are disclosed in the “Financial Instruments” section of this MD&A.
Income tax expense was $5.3 million in the second quarter of 2019 compared to $3.8 million for the same period in 2018 . For the six months ended June 30, 2019 , income tax expense was $12.5 million , compared to $6.7 million in the same

7



period in 2018 . The increase in income tax expense for the three and six months ended June 30, 2019 compared to the same periods in 2018 relates to the increase in mine operating margin at Wassa.
Net loss attributable to Golden Star shareholders for the second quarter of 2019 totaled $9.0 million or $0.08 loss per share (basic), compared to a net loss of $6.6 million or $0.09 loss per share (basic) in the same period in 2018 . The increase in net loss and loss per share attributable to Golden Star shareholders in the second quarter of 2019 was mainly due to a $1.5 million decrease in mine operating margin and a $2.6 million increase in general and administrative expenses, offset by a $1.7 million increase in fair value gain on financial instruments. For the six months ended June 30, 2019 , net loss attributable to Golden Star shareholders totaled $11.0 million or $0.10 loss per share (basic), compared to a net loss of $5.6 million or $0.07 loss per share (basic) in the same period in 2018 . This increase is mainly due to a $5.6 million increase in general and administration expenses, $5.8 million increase in income tax expense, $7.6 million increase in fair value loss on financial instruments, offset by a $12.1 million increase in mine operating margin.
Adjusted net income attributable to Golden Star shareholders (see Non-GAAP Financial Measures section) was $0.9 million in the second quarter of 2019 , compared to adjusted net income attributable to Golden Star shareholders of $2.4 million for the same period in 2018 . The decrease in adjusted net income attributable to Golden Star shareholders for the second quarter of 2019 compared to the same period in 2018 was primarily due to an increase in general and administrative expenses (excluding share-based compensation) and a decrease in mine operating margin, offset by a decrease in finance expense compared to the same period in 2018 . For the six months ended June 30, 2019 , the adjusted net income attributable to Golden Star shareholders was $10.3 million compared to $0.3 million for the same period in 2018 . The increase in adjusted net income attributable to Golden Star shareholders was mainly due to an increase in mine operating margin and decrease in finance expense, offset by an increase in general and administrative expenses (excluding share-based compensation).
Cash provided by operations before working capital changes (see Non-GAAP Financial Measures section) was $0.6 million for the second quarter of 2019 , compared to $10.3 million in the same period in 2018 . The decrease in cash provided by operations before working capital changes was due primarily to a decrease in mine operating margin at Prestea and an increase in consolidated general and administrative expense (excluding share based compensation). For the six months ended June 30, 2019 , cash provided by operations before working capital changes was $15.5 million compared to $11.1 million in the same period in 2018 . The increase was primarily due to an increase in mine operating margin at Wassa, partially offset by an increase in c onsolidated general and administrative expense (excluding share based compensation).
Capital expenditures for the second quarter of 2019 totaled $17.0 million compared to $10.2 million in the same period in 2018 . Capital expenditures at Wassa during the second quarter of 2019 comprised 80% of total capital expenditures and totaled $13.6 million , which included $6.6 million on exploration drilling, $2.5 million on Wassa Underground capitalized development, $1.1 million on mobile equipment, $0.4 million on the construction of a ventilation raise, $1.2 million related to the tailings storage facility and the remainder on other equipment and capital expenditures. Capital expenditures at Prestea during the second quarter of 2019 comprised 20% of total capital expenditures and totaled $3.4 million , which included $2.7 million on sustaining capital related to Prestea Underground, $0.3 million on exploration drilling and $0.4 million on other equipment and capital expenditures.
OUTLOOK FOR 2019
Production and cost guidance
The Company's consolidated production and cost guidance has been revised. Consolidated gold production for 2019 is expected to be in the range of 190,000 to 205,000 ounces, representing a 14% decrease from the midpoint of the previous guidance range. At Prestea Underground, grade is expected to be lower due to barren zones not identified beforehand as a result of the large drill spacing, and mining rate for the remainder of 2019 is expected to be lower. This is partially offset by the extension of surface mining to the third quarter of 2019. At Wassa, grade for the full year is expected to be lower due to limited stope grade definition drilling and low mine plan flexibility, offset by an increase in ore tonnes mined.
Consolidated cash operating cost per ounce is expected to be in the range of $800 to $850 for 2019, representing 27% increase from the midpoint of the previous guidance range as a result of the revised gold production. Consolidated all-in sustaining cost per ounce is expected to be in the range of $1,100 to $1,200 for 2019, representing a 26% increase from the midpoint of the previous guidance range.

8



Revised production and cost guidance for 2019 :
 
Gold production
Cash operating costs
All-in sustaining costs
 
thousands of ounces
$ per ounce
$ per ounce
Wassa
150 - 160
600 - 650
880 - 940
Prestea
40 - 45
1,450 - 1,650
1,900 - 2,150
Consolidated
190 - 205
800 - 850
1,100 - 1,200
Capital expenditure guidance
Capital expenditure guidance for 2019 remains unchanged.
 
Sustaining
Development
Total
 
$ millions
$ millions
$ millions
Wassa
20.7
18.1
38.8
Prestea
9.5
9.5
Exploration
13.4
13.4
Consolidated
30.2
31.5
61.7
CORPORATE DEVELOPMENTS
Gold prices
Spot gold prices were $1,409 per ounce at June 30, 2019 , up from $1,282 per ounce at December 31, 2018 . The Company realized an average gold price of $1,270 per ounce for gold sales during the second quarter of 2019 , compared to an average realized gold price of $1,273 per ounce for the same period in 2018. The spot gold price on July 30, 2019 was $1,419 per ounce.
Revenue from spot sales during the second quarter of 2019 resulted in an average realized gold price of $1,319 per ounce whereas revenue recognized from the gold purchase and sale agreement (the “Streaming Agreement”) with RGLD Gold AG, a wholly-owned subsidiary of Royal Gold Inc., resulted in an average realized gold price of $875 per ounce.
 
Three Months Ended
June 30, 2019
 
$'000
 
Ounces
 
Realized price per ounce
Revenue - Stream arrangement
 
 
 
 
 
     Cash proceeds
$
1,407

 
 
 
 
     Deferred revenue recognized
3,306

 
 
 
 
 
$
4,713

 
5,384

 
$
875

Revenue - Spot sales
57,202

 
43,358

 
1,319

Total
61,915

 
48,742

 
$
1,270

$60 Million Credit Facility
Subsequent to the quarter, on July 18, 2019, the Company signed a commitment letter for a senior secured credit facility in the principal amount of $60 million (the "Credit Facility") with Macquarie Bank. The Credit Facility is expected to close during the third quarter of 2019 subject to normal course conditions precedent, including finalization of an intercreditor agreement with RGLD Gold AG. The Credit Facility will be used to refinance Ecobank Loan III, Ecobank Loan IV, and the Vendor Agreement, with any remaining balance to be available for general corporate purposes. The Credit Facility is available by way of a single drawdown with repayments of $5 million quarterly, commencing on June 30, 2020. The final maturity date is March 31, 2023. The interest rate is 4.5% plus the applicable USD LIBOR rate. The Credit Facility is subject to normal course financial covenants.
Management Changes
On April 17, 2019, the Company announced that Sam Coetzer would be leaving the Company as of April 30, 2019, and that the Board of Directors had appointed Andrew Wray as President and Chief Executive Officer, effective May 1, 2019 and will be based in London.

9



On June 26, 2019, the Company announced that Daniel Owiredu would be stepping out of the role of Executive Vice President and Chief Operating Officer of Golden Star with effect from July 8, 2019, and would be replaced in that role by Graham Crew. During the transition period until December 31, 2019, Mr. Owiredu will take on the role of President of the Company.
As of January 1, 2020, Mr. Owiredu will step down as President and be appointed as Chairman of the Boards of Directors of the Company's subsidiaries, Golden Star (Wassa) Limited and Golden Star (Bogoso/Prestea) Limited.
Mr. Crew will relinquish his position on the Board of Directors of Golden Star once he takes over as Executive Vice President and Chief Operating Officer and will be based in London.
In addition to this change, Martin Raffield will be leaving his position as Executive Vice President, Chief Technical Officer of the Company with effect from September 30, 2019. Dr. Raffield's successor will be appointed in due course.
Exploration Update
Updated Technical Report for Wassa
On June 24, 2019, the Company filed an updated technical report pursuant to National Instrument 43-101 for its Wassa Gold Mine in Ghana entitled "NI 43-101 Technical Report on Resources and Reserves, Golden Star Resources, Wassa Gold Mine, Ghana" effective date December 31, 2018. See press release entitled "Golden Star Files Updated Technical Report for Wassa Gold Mine".
Wassa
On July 15, 2019, the Company reported significant gold mineralization 200 metres ("m") down plunge to the south of the Inferred Mineral Resource at the Wassa Underground demonstrating the extension of the deposit. The Company will continue with the inferred delineation and conversion drilling at Wassa into the third quarter of the year, then will be incorporating all of the results, including underground drilling, to the update of mineral resource and reserves for 2020 budgeting and year-end mineral resource and reserve estimation.
Father Brown
On July 15, 2019, the Company reported significant gold mineralization showing that the Adoikrom gold bearing structure extends over 200 m down plunge of the last drill hole. The drilling has been paused with the next step being to update the mineral resource models during the third quarter of 2019 which in turn will enable the Company’s planning engineers to determine whether there is a viable underground mining project at Father Brown. The results of this study will also determine whether further drilling is warranted.
Prestea Underground
On June 3, 2019, the Company reported initial high grade extension drilling results from Prestea Underground which include 124.4 grams per tonne of gold over one metre. Assay results for eight diamond drill holes along the northern extension of the West Reef were received confirming ore body extensions to the north of the current reserves, approximately 150 m along strike between 21 and 24 levels. The exploration program for the third quarter of 2019 will continue to focus on further delineation of the mineralization in this area in order to potentially bring this material into mineral reserves. Also, definition drilling between 17 level and 21 level is expected to occur during the third quarter of 2019, after which exploration drilling will then be paused in the second half of 2019 to focus on operational improvements.
Independent Review Recommendations at Prestea Underground
As a result of the operational challenges at Prestea Underground, CSA Global was contracted to review the mine's operations with the mandate to take a holistic approach to understanding the challenges facing the operation. All aspects of technical, operational and management areas were examined in order for recommendations to be set forth to the Company for improvements at Prestea.
CSA Global has identified a range of issues affecting performance at the operation driving both lower volumes as well as excessive dilution. These include insufficient geological and geotechnical data, poor definition of the reef position, inadequate alignment of Alimak raises, inaccurate long hole drilling and blasting, low equipment mechanical availability and lack of access to the top level.
In order to address these issues, two main initiatives are being undertaken. Firstly, the prioritization and implementation of a number of low-cost, quick win initiatives are being undertaken with immediate effect, including increased definition drilling, development of a geotechnical block model, improved supervision, additional critical small equipment, capacity building and better defined key performance indicators. Secondly, the long-term mine plan will be redesigned and will assess whether the current mining method or a revised Alimak design with shorter raises is appropriate and whether a complementary mining method to bring additional flexibility is appropriate.

10



WASSA OPERATIONS
Through a 90% owned subsidiary, Golden Star (Wassa) Limited, the Company owns and operates the Wassa Complex. Wassa is located in the southwestern region of Ghana, approximately 35 kilometers northeast of the town of Tarkwa. In 2018, Golden Star operated the Wassa Main Pit (an open pit operation) and Wassa Underground (an underground operation). As of February 1, 2018, Wassa became an underground-only operation. Wassa has a non-refractory processing plant (the “Wassa processing plant”) consisting of a carbon-in-leach (“CIL”) system with a capacity of 2.7 million tonnes per annum. In the first half of 2018, ore from both the Wassa Main Pit and Wassa Underground was processed at the Wassa processing plant, while in the first half of 2019 ore from Wassa Underground and stockpiles was processed at the Wassa processing plant.
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
WASSA FINANCIAL RESULTS
 
 
 
 
 
 
 
 
Revenue
$'000
47,893

 
48,588

 
101,885

 
93,940

 
 
 
 
 
 
 
 
 
Mine operating expenses
$'000
24,067

 
21,952

 
47,500

 
43,178

Severance charges
$'000

 
1,576

 
225

 
4,970

Royalties
$'000
2,439

 
2,517

 
5,238

 
4,883

Operating costs from metals inventory
$'000
636

 
1,374

 
959

 
4,625

Inventory net realizable value adjustment and write-off
$'000

 
3,103

 

 
3,103

Cost of sales excluding depreciation and amortization
$'000
27,142

 
30,522

 
53,922

 
60,759

Depreciation and amortization
$'000
4,226

 
5,581

 
8,598

 
11,189

Mine operating margin
$'000
16,525

 
12,485

 
39,365

 
21,992

 
 
 
 
 
 
 
 
 
Capital expenditures
$'000
13,622

 
7,881

 
24,688

 
14,487

 
 
 
 
 
 
 
 
 
WASSA OPERATING RESULTS
 
 
 
 
 
 
 
 
Ore mined - Main Pit
t

 

 

 
54,281

Ore mined - Underground
t
312,115

 
238,953

 
638,862

 
452,345

Ore mined - Total
t
312,115

 
238,953

 
638,862

 
506,626

Waste mined - Main Pit
t

 

 

 
72,538

Waste mined - Underground
t
78,214

 
73,122

 
134,443

 
146,650

Waste mined - Total
t
78,214

 
73,122

 
134,443

 
219,188

Ore processed - Main Pit/Stockpiles
t
52,786

 
140,517

 
92,829

 
356,069

Ore processed - Underground
t
312,115

 
235,415

 
638,862

 
448,807

Ore processed - Total
t
364,901

 
375,932

 
731,691

 
804,876

Grade processed - Main Pit/Stockpiles
g/t
0.64

 
0.72

 
0.64

 
0.83

Grade processed - Underground
g/t
3.51

 
4.99

 
3.92

 
4.78

Recovery
%
95.9

 
96.1

 
95.8

 
95.7

Gold produced - Main Pit/Stockpiles
oz
1,192

 
3,013

 
1,998

 
9,005

Gold produced - Underground
oz
36,164

 
35,519

 
78,268

 
65,033

Gold produced - Total
oz
37,356

 
38,532

 
80,266

 
74,038

Gold sold - Main Pit/Stockpiles
oz
1,561

 
2,730

 
2,456

 
9,070

Gold sold - Underground
oz
36,164

 
35,519

 
78,268

 
65,033

Gold sold - Total
oz
37,725

 
38,249

 
80,724

 
74,102

 
 
 
 
 
 
 
 
 
Cost of sales per ounce 1
$/oz
831

 
944

 
774

 
971

Cash operating cost per ounce 1
$/oz
655

 
610

 
600

 
645

All-in sustaining cost per ounce 1
$/oz
941

 
994

 
844

 
954

1 See “Non-GAAP Financial Measures” section for a reconciliation of cost of sales per ounce, cash operating cost per ounce and all-in sustaining cost per ounce to cost of sales excluding depreciation and amortization.

11



For the three months ended June 30, 2019 compared to the three months ended June 30, 2018
Production
Gold production from Wassa was 37,356 ounces for the second quarter of 2019 , a 3% decrease from the 38,532 ounces produced during the same period in 2018 . This decrease in production was primarily due to a decrease in stockpile production as there was a 62% decrease in stockpile ore tonnes processed compared to the same period in 2018 .
Wassa Underground
Wassa Underground produced 36,164 ounces of gold (or approximately 97% of Wassa's total production) in the second quarter of 2019 , compared to 35,519 ounces in the same period in 2018 (or approximately 92% of Wassa's total production). This 2% increase in production was related to the 31% increase in ore tonnes mined and 33% increase in ore tonnes processed, resulting from productivity improvements, offset by a 30% decrease in grade due to limited flexibility with the mine plan. Mining rates at Wassa Underground increase d to approximately 3,470 tpd on average in the second quarter of 2019 compared to approximately 2,620 tpd in the same period in 2018 . Underground ore processed increase d 33% to 312,115 tonnes in the second quarter of 2019 compared to 235,415 tonnes in the same period in 2018 .
Wassa Main Pit/Stockpiles
Wassa Main Pit produced 1,192 ounces in the second quarter of 2019 , compared to 3,013 ounces in the same period in 2018 . This decrease in production is a result of a 62% decrease in stockpile ore tonnes processed and an 11% decrease in stockpile ore grade processed compared to the same period in 2018 .
Gold revenue
Gold revenue for the second quarter of 2019 was $47.9 million , a decrease of 1% from $48.6 million in the same period in 2018 due mainly to a decrease in gold sold. Gold sold decrease d 1% to 37,725 ounces for the second quarter of 2019 , compared to 38,249 ounces in the same period in 2018 . The decrease was primarily due to a decrease in stockpile ore processed and grade compared to the same period in 2018 . The average realized gold price remained consistent at $1,270 per ounce for the second quarter of 2019 compared to $1,270 per ounce in the same period in 2018 .
Cost of sales excluding depreciation and amortization
Cost of sales excluding depreciation and amortization was $27.1 million for the second quarter of 2019 , compared to $30.5 million for the same period in 2018 . The decrease was due primarily to a $1.6 million decrease in severance charges, as suspension of the Wassa surface mining operation was completed in early 2018, a $0.7 million decrease in operating costs from metals inventory related to a reduction in drawdown of ore stockpiles compared to the same period in 2018 , a $3.1 million decrease in inventory net realizable value adjustment and write-off as materials and supplies inventories related to open pit mining were written off in the same period in 2018 , and a $0.1 million decrease in royalty expense due to lower gold sales. Partially offsetting these decreases was a $2.1 million increase in mine operating expenses, resulting from an increase in total tonnes mined, as Wassa Underground has steadily increased its mining rates.
Depreciation and amortization
Depreciation and amortization expense decrease d to $4.2 million for the second quarter of 2019 , compared to $5.6 million for the same period in 2018 due mainly to an increase in the total recoverable gold ounces over the life of mine of Wassa Underground.
Costs per ounce
Cost of sales per ounce decrease d 12% to $831 for the second quarter of 2019 from $944 in the same period in 2018 . Cash operating cost per ounce increase d 7% to $655 from $610 for the same period in 2018 . The higher cash operating costs per ounce in the second quarter of 2019 compared to the same period in 2018 were primarily a result of a decrease in gold sold and an increase in mine operating expenses. All-in sustaining cost per ounce decrease d 5% to $941 from $994 for the same period in 2018 mainly due to a decrease in sustaining capital expenditures.
Capital expenditures
Capital expenditures for the second quarter of 2019 totaled $13.6 million compared with $7.9 million incurred during the same period in 2018 . The increase in capital expenditures was due primarily to an increase of $5.3 million in exploration drilling, a $0.4 million increase related to the construction of a ventilation raise and a $1.2 million increase related to the tailings storage facility. Offsetting these increases was a $0.7 million decrease in capitalized development related to a decrease in development meters compared to the same period in 2018 .

12



For the six months ended June 30, 2019 compared to the six months ended June 30, 2018
Production
Gold production from Wassa was 80,266 ounces for the six months ended June 30, 2019 , an 8% increase from the 74,038 ounces produced in 2018 . This increase in production was due to the Wassa Underground mine as tonnes mined and processed increase d compared to the same period in 2018 . As of February 1, 2018, Wassa became an underground-only mining operation, however, open pit stock piled ore continued to be processed throughout the year.
Wassa Underground
Wassa Underground produced 78,268 ounces of gold (or approximately 98% of Wassa's total production) for the six months ended June 30, 2019 , compared to 65,033 ounces in 2018 (or approximately 88% of Wassa's total production). This 20% increase in production was related to increase d tonnes mined, processed and recovery, resulting from productivity improvements. This was partially offset by an 18% decrease in grade due to limited flexibility with the mine plan. Mining rates at Wassa Underground increased to approximately 3,550 tpd on average for the six months ended June 30, 2019 , compared to approximately 2,490 tpd in the same period in 2018 . Ore processed increased 42% for the six months ended June 30, 2019 to 638,862 tonnes compared to 448,807 tonnes in the same period in 2018 .
Wassa Main Pit/Stockpiles
Wassa Main Pit produced 1,998 ounces for the six months ended June 30, 2019 , compared to 9,005 in the same period in 2018 . This decrease in production is a result of a 74% decrease in stockpile ore tonnes processed and a 23% decrease in stockpile ore grade processed compared to the same period in 2018 .
Gold revenue
Gold revenue for the six months ended June 30, 2019 was $101.9 million , an increase of 8% from $93.9 million in 2018 due mainly to an increase in gold sold. Gold sold increase d 9% to 80,724 ounces for the six months ended June 30, 2019 compared to 74,102 ounces in 2018 . The increase was primarily a result of increased gold production from Wassa Underground. The average realized gold price remained consistent at $1,262 per ounce for the six months ended June 30, 2019 compared to $1,268 per ounce in 2018 .
Cost of sales excluding depreciation and amortization
Cost of sales excluding depreciation and amortization was $53.9 million for the six months ended June 30, 2019 compared to $60.8 million in 2018 . The decrease was due primarily to a $4.7 million decrease in severance charges as suspension of the Wassa surface mining operation was completed in early 2018, a $3.1 million decrease in inventory net realizable value adjustment and write-off as materials and supplies inventories related to open pit mining were written off in the same period in 2018 , and a $3.7 million decrease in operating costs from metals inventory due to a reduction in drawdown of ore stockpiles compared to the same period in 2018 . Partially offsetting these decreases were a $4.3 million increase in mine operating expenses, resulting from an increase in total tonnes mined, as Wassa Underground has steadily increased its mining rates and a $0.4 million increase in royalty expense due to higher gold sales.
Depreciation and amortization
Depreciation and amortization expense decrease d to $8.6 million for the six months ended June 30, 2019 compared to $11.2 million in 2018 due mainly to an increase in the total recoverable gold ounces over the life of mine of Wassa Underground.
Costs per ounce
Cost of sales per ounce decrease d 20% to $774 for the six months ended June 30, 2019 compared to $971 in 2018 . Cash operating cost per ounce decrease d 7% to $600 for the six months ended June 30, 2019 from $645 in 2018 . All-in sustaining cost per ounce decrease d 11% to $844 for the six months ended June 30, 2019 from $954 in 2018 . The lower costs per ounce for the six months ended June 30, 2019 as compared to 2018 was primarily a result of an increase in gold sold related to increased production from Wassa Underground.
Capital expenditures
Capital expenditures for the six months ended June 30, 2019 totaled $24.7 million compared to $14.5 million during the same period in 2018 . The increase in capital expenditures is due primarily to an increase of $9.4 million in exploration drilling, a $1.6 million increase related to the construction of a ventilation raise and a $1.6 million increase related to the tailings storage facility. Offsetting these increases was a $1.7 million decrease in capitalized development related to a decrease in development meters compared to the same period in 2018 .

13



PRESTEA OPERATIONS
Through a 90% owned subsidiary, Golden Star (Bogoso/Prestea) Limited, the Company owns and operates the Prestea Complex located near the town of Prestea, Ghana. The Prestea complex consists of Prestea Underground (an underground operation), the Prestea Open Pits (neighboring open pits formed from oxide deposits) and associated support facilities. Prestea has a CIL processing facility with capacity of up to 1.5 million tonnes per annum, located 14 km away at Bogoso, which is suitable for treating non-refractory gold ore (the “non-refractory plant”). Ore from both Prestea Underground and the Prestea Open Pits is processed in the non-refractory plant. Prestea Underground achieved commercial production on February 1, 2018.
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
PRESTEA FINANCIAL RESULTS
 
 
 
 
 
 
 
 
Revenue
$'000
14,022

 
28,533

 
27,287

 
54,000

 
 
 
 
 
 
 
 
 
Mine operating expenses
$'000
18,706

 
23,504

 
35,169

 
46,424

Severance charges
$'000
30

 

 
99

 

Royalties
$'000
726

 
1,483

 
1,401

 
2,947

Operating costs (to)/from metals inventory
$'000
(229
)
 
2,134

 
(1,332
)
 
5,924

Inventory net realizable value adjustment and write-off
$'000
131

 
74

 
1,051

 
1,237

Cost of sales excluding depreciation and amortization
$'000
19,364

 
27,195

 
36,388

 
56,532

Depreciation and amortization
$'000
2,523

 
3,654

 
5,013

 
6,267

Mine operating loss
$'000
(7,865
)
 
(2,316
)
 
(14,114
)
 
(8,799
)
 
 
 
 
 
 
 
 
 
       Capital expenditures
$'000
3,371

 
2,305

 
5,447

 
7,281

 
 
 
 
 
 
 
 
 
PRESTEA OPERATING RESULTS
 
 
 
 
 
 
 
 
Ore mined - Open pits
t
158,300

 
45,547

 
203,007

 
274,255

Ore mined - Underground
t
37,155

 
31,373

 
75,833

 
63,819

Ore mined - Total
t
195,455

 
76,920

 
278,840

 
338,074

Waste mined - Open pits
t
219,400

 
146,316

 
253,637

 
652,313

Waste mined - Underground
t
2,014

 

 
3,222

 
2,211

Waste mined - Total
t
221,414

 
146,316

 
256,859

 
654,524

Ore processed - Open pits
t
174,718

 
342,226

 
270,372

 
686,918

Ore processed - Underground
t
37,155

 
31,373

 
75,833

 
63,819

Ore processed - Total
t
211,873

 
373,599

 
346,205

 
750,737

Grade processed - Open pits
g/t
1.55

 
2.33

 
1.46

 
1.84

Grade processed - Underground
g/t
4.09

 
13.56

 
5.19

 
10.58

Recovery
%
83.2

 
88.0

 
84.8

 
88.0

Gold produced - Open pits
oz
7,196

 
10,214

 
10,226

 
24,843

Gold produced - Underground
oz
3,870

 
12,463

 
11,214

 
19,944

Gold produced - Total
oz
11,066

 
22,677

 
21,440

 
44,787

Gold sold - Open pits
oz
7,147

 
9,847

 
10,300

 
24,873

Gold sold - Underground
oz
3,870

 
12,463

 
11,214

 
19,944

Gold sold - Total
oz
11,017

 
22,310

 
21,514

 
44,817

 
 
 
 
 
 


 


Cost of sales per ounce 1
$/oz
1,987

 
1,383

 
1,924

 
1,468

Cash operating cost per ounce 1
$/oz
1,677

 
1,149

 
1,573

 
1,224

All-in sustaining cost per ounce 1
$/oz
2,143

 
1,293

 
2,006

 
1,401

1 See “Non-GAAP Financial Measures” section for a reconciliation of cost of sales per ounce, cash operating cost per ounce and all-in sustaining cost per ounce to cost of sales excluding depreciation and amortization.


14



For the three months ended June 30, 2019 compared to the three months ended June 30, 2018
Production
Gold production from Prestea was 11,066 ounces in the second quarter of 2019 , a 51% decrease from the 22,677 ounces produced during the same period in 2018 . This decrease in production was due primarily to the planned reduction from the Prestea Open Pits and lower than planned head grade at Prestea Underground due to a combination of excessive dilution and ore loss.
Prestea Open Pits
The Prestea Open Pits produced 7,196 ounces in the second quarter of 2019 , compared to 10,214 ounces in the same period in 2018 . This decrease in production was planned, as the Prestea Open Pits were expected to complete gold production in 2018. Mining has continued into the second quarter of 2019 with additional ore being sourced from the pits close to Bogoso.
Prestea Underground
Prestea Underground produced 3,870 ounces in the second quarter of 2019 compared to 12,463 ounces in the same period in 2018 . Production decrease d 69% in the second quarter of 2019 compared to the same period in 2018 , as a result of a 70% decrease in ore grade processed, offset partially by a 18% increase in ore tonnes processed. Production during the quarter was impacted by stopes performing poorly due to waste zones within the current stoping area not previously identified in the resource block model. These waste zones necessitated redesign and re-slotting of some stopes and resulted in production delays and excessive internal dilution. Further unplanned dilution was encountered due to poor ground conditions resulting in hanging wall failures as well as inaccurate production drilling in some instances. A number of initiatives have been implemented including closer spaced definition (grade control) drilling to address these issues and will form part of the broader review of the operation.
Gold revenue
Gold revenue for the second quarter of 2019 was $14.0 million , a decrease of 51% from $28.5 million in the same period of 2018 due mainly to a decrease in gold sales. Gold sold decrease d 51% to 11,017 ounces for the second quarter of 2019 , compared to 22,310 ounces in the same period of 2018 . The decrease was primarily a result of a decrease in gold production from the Prestea Open Pits and Prestea Underground. The average realized gold price remained consistent at $1,273 per ounce for the second quarter of 2019 compared to $1,279 per ounce for the same period in 2018 .
Cost of sales excluding depreciation and amortization
Cost of sales excluding depreciation and amortization was $19.4 million for the second quarter of 2019 , compared to $27.2 million for the same period in 2018 . The decrease was due primarily to a $4.8 million decrease in mine operating expenses related to less production from the Prestea Open Pits, a $2.4 million decrease in operating costs from metals inventory, and a $0.8 million decrease in royalty expense resulting from lower gold sales, offset by a $0.1 million increase inventory net realizable value adjustment and write-off.
Depreciation and amortization
Depreciation and amortization expense decrease d to $2.5 million for the second quarter of 2019 , compared to $3.7 million for the same period in 2018 due mainly to a decrease in gold production, offset partially by the commencement of depreciation of Prestea Underground assets as commercial production was achieved on February 1, 2018.
Costs per ounce
Cost of sales per ounce increase d 44% to $1,987 for the second quarter of 2019 from $1,383 in the same period in 2018 . Cash operating cost per ounce of $1,677 increase d 46% to $1,149 for the same period in 2018 . All-in sustaining cost per ounce increase d 66% to $2,143 from $1,293 for the same period in 2018 . The increase in costs per ounce were primarily due to lower gold sales in the period, offset partially by lower mine operating expenses and operating costs from metals inventory.
Capital expenditures
Capital expenditures for the second quarter of 2019 totaled $3.4 million compared to $2.3 million incurred during the same period in 2018 . The increase relates primarily to a $0.6 million increase in capitalized development of Prestea Underground.
For the six months ended June 30, 2019 compared to the six months ended June 30, 2018
Production
Gold production from Prestea was 21,440 ounces for the six months ended June 30, 2019 , a 52% decrease from the 44,787 ounces produced in 2018 . This decrease in production was due primarily to the planned reduction from the Prestea Open Pits and the slower than expected ramp up at Prestea Underground.

15



Prestea Open Pits
The Prestea Open Pits produced 10,226 ounces for the six months ended June 30, 2019 , compared to 24,843 ounces in 2018 . This decrease in production was planned, as the Prestea Open Pits were expected to complete gold production in 2018. Mining has continued into the first half of 2019 with additional ore being sourced from the pits close to Bogoso.
Prestea Underground
Prestea Underground produced 11,214 ounces for the six months ended June 30, 2019 , compared to 19,944 ounces in 2018 . Production decrease d 44% compared to the same period in 2018 , as a result of a 51% decrease in ore grade processed, offset partially by a 19% increase in ore tonnes processed. Production during the quarter was impacted by stopes performing poorly due to waste zones within the current stoping area not previously identified in the resource block model. These waste zones necessitated redesign and re-slotting of some stopes and resulted in production delays and excessive internal dilution. Further unplanned dilution was encountered due to poor ground conditions resulting in hanging wall failures as well as inaccurate production drilling in some instances. A number of initiatives have been implemented including closer spaced definition (grade control) drilling to address these issues and will form part of the broader review of the operation.
Gold revenue
Gold revenue for the six months ended June 30, 2019 was $27.3 million , a decrease of 49% from $54.0 million in 2018 due mainly to a decrease in gold sold. Gold sold decrease d 52% to 21,514 ounces for the six months ended June 30, 2019 compared to 44,817 ounces in 2018 . The decrease was primarily a result of a decrease in gold production from the Prestea Open Pits and Prestea Underground. The average realized gold price increase d 5% to $1,268 per ounce for the six months ended June 30, 2019 compared to $1,205 per ounce in 2018 .
Cost of sales excluding depreciation and amortization
Cost of sales excluding depreciation and amortization was $36.4 million for the six months ended June 30, 2019 , compared to $56.5 million in 2018 . The decrease was due primarily to a $11.3 million decrease in mine operating expenses related to less production, a $7.3 million decrease in operating costs to metals inventory, and a $1.5 million decrease in royalties resulting from lower gold sales
Depreciation and amortization
Depreciation and amortization expense decrease d to $5.0 million for the six months ended June 30, 2019 , compared to $6.3 million in 2018 due mainly to a decrease in gold production, offset partially by the commencement of depreciation of Prestea Underground assets as commercial production was achieved on February 1, 2018.
Costs per ounce
Cost of sales per ounce increase d 31% to $1,924 for the six months ended June 30, 2019 , compared to $1,468 in 2018 . Cash operating cost per ounce increase d 28% to $1,573 for the six months ended June 30, 2019 compared to $1,224 in 2018 . All-in sustaining cost per ounce increase d 43% to $2,006 for the six months ended June 30, 2019 compared to $1,401 in 2018 . The increase in cost per ounce was primarily due to the decrease in ounces sold for the six months ended June 30, 2019 compared to 2018 .
Capital expenditures
Capital expenditures for the six months ended June 30, 2019 totaled $5.4 million , compared to $7.3 million incurred in 2018 . The decrease relates primarily to a $0.6 million decrease in capitalized borrowing costs relating to Prestea Underground which achieved commercial production on February 1, 2018. In addition, there was a $0.5 million decrease in capital expenditures related to the Prestea Open Pits and Mampon, as some of these deposits ceased production during 2018, and a $0.8 million decrease in exploration drilling.

16



SUMMARIZED QUARTERLY FINANCIAL RESULTS
 
Three Months Ended,
(Stated in thousands of U.S dollars except per share data)
Q2 2019
Q1 2019
Q4 2018
Q3 2018 2
Q2 2018 2
Q1 2018 2
Q4 2017 2
Q3 2017 2
Revenues
$
61,915

$
67,257

$
57,339

$
67,738

$
77,121

$
70,819

$
81,845

$
87,772

Cost of sales excluding depreciation and amortization
46,506

43,804

57,565

48,873

57,717

59,574

66,401

53,502

Net (loss)/income
(10,882
)
(2,659
)
(11,894
)
(4,222
)
(7,560
)
(395
)
13,825

13,703

Net (loss)/income attributable to shareholders of Golden Star
(9,036
)
(1,924
)
(9,318
)
(3,178
)
(6,642
)
1,015

12,601

12,117

Adjusted net income/(loss) attributable to Golden Star shareholders 1
872

9,394

(5,211
)
3,011

2,408

(2,124
)
10,701

19,827

Net (loss)/income per share attributable to Golden Star shareholders - basic
(0.08
)
(0.02
)
(0.09
)
(0.04
)
(0.09
)
0.01

0.17

0.16

Net (loss)/income per share attributable to Golden Star shareholders - diluted
(0.08
)
(0.02
)
(0.09
)
(0.04
)
(0.09
)
(0.03
)
0.16

0.16

Adjusted income/(loss) per share attributable to Golden Star shareholders - basic 1
0.01

0.09

(0.05
)
0.04

0.03

(0.03
)
0.14

0.26

1 See “Non-GAAP Financial Measures” section for a reconciliation of adjusted net income attributable to Golden Star shareholders and adjusted income per share attributable to Golden Star shareholders (basic) to net loss attributable to Golden Star shareholders.
2 Per share quarterly financial information has been re-stated to reflect the share consolidation that was implemented on October 30, 2018.
LIQUIDITY AND FINANCIAL CONDITION
The Company held $66.2 million in cash and cash equivalents as at June 30, 2019 compared to $96.5 million in cash and cash equivalents at December 31, 2018 . During the six months ended June 30, 2019 , operations provided $1.6 million , investing activities used $26.9 million and financing activities used $5.0 million of cash.
Before working capital changes, operations provided $15.5 million of operating cash flow during the six months ended June 30, 2019 , compared to $11.1 million in the same period in 2018 . Cash provided by operations before working capital changes increase d primarily due to an increase in consolidated mine operating margin related to Wassa, as Wassa Underground gold sold increase d compared to the same period in 2018 .
Working capital used $13.9 million during the six months ended June 30, 2019 , compared to $4.7 million in the same period in 2018 . The working capital changes included a $2.7 million decrease in accounts payable and accrued liabilities, a $6.4 million decrease in other liability as the final amount owing on the PSU liability was paid in April 2019, a $2.8 million increase in inventory, and a $2.1 million increase in accounts receivable, offset by a $0.1 million decrease in prepaids and other. Accounts payable and accrued liabilities increase d slightly from $78.5 million at December 31, 2018 to $80.5 million at June 30, 2019 .
Investing activities used $26.9 million during the six months ended June 30, 2019 , which included $12.4 million on exploration drilling, $9.7 million on the development of Wassa Underground, $4.3 million on the development of Prestea Underground and $3.7 million on equipment purchases and other. Offsetting these capital expenditures was a $3.2 million increase in accounts payable and deposits on mine equipment and material.
Financing activities used $5.0 million during the six months ended June 30, 2019 , compared to $8.4 million in the same period in 2018 . Financing activities was comprised of $5.6 million in principal repayments of debt, offset by $0.6 million received on exercise of options.
LIQUIDITY OUTLOOK
As at June 30, 2019 , the Company had $66.2 million in cash and a working capital deficit of $19.0 million , compared to $96.5 million in cash and working capital of $5.9 million at December 31, 2018 . The Company expects Prestea to incur losses for the remainder of 2019, however this is expected to be offset by cash flow generated from the Wassa mine.
The Company expects to incur $34.5 million on capital expenditures during the remainder of 2019 of which $16.0 million is expected to be development capital and $18.6 million is expected to be sustaining capital. The Company's debt servicing obligations are expected to be $27.3 million for the remainder of 2019 .
Subsequent to the quarter, on July 18, 2019, the Company signed a commitment letter for a senior secured credit facility in the principal amount of $60 million (the "Credit Facility") with Macquarie Bank. The Credit Facility is expected to close during the third quarter of 2019 subject to normal course conditions precedent, including finalization of an intercreditor agreement with

17



RGLD Gold AG. The Credit Facility will be used to refinance Ecobank Loan III, Ecobank Loan IV, and the Vendor Agreement, with any remaining balance to be available for general corporate purposes. The Credit Facility is available by way of a single drawdown with repayments of $5 million quarterly, commencing on June 30, 2020. The final maturity date is March 31, 2023. The interest rate is 4.5% plus the applicable USD LIBOR rate. The Credit Facility is subject to normal course financial covenants.
Based on the Company's cash balance together with the operating cash flow that the Company anticipates generating and the Credit Facility, the Company expects to have sufficient cash available to support its operations and mandatory expenditures for the next twelve months.
TABLE OF CONTRACTUAL OBLIGATIONS
As at June 30, 2019 , the Company is committed to the following:
 
 
Payment due by period 
 (Stated in thousands of U.S dollars)
 
Less than 1
Year 
 
1 to 3 years 
 
4 to 5 years  
 
More than
5 Years 
 
Total 
Accounts payable and accrued liabilities
 
$
80,462

 
$

 
$

 
$

 
$
80,462

Debt 1
 
28,073

 
69,985

 
5,806

 

 
103,864

Interest on long-term debt
 
7,388

 
8,387

 
349

 

 
16,124

Purchase obligations
 
18,248

 

 

 

 
18,248

Rehabilitation provisions 2
 
10,416

 
18,546

 
24,778

 
17,919

 
71,659

Total
 
144,587
 
96,918
 
30,933
 
17,919
 
290,357
1  
Includes the outstanding repayment amounts from the 7% Convertible Debentures maturing on August 15, 2021, Ecobank Loan III, Ecobank Loan IV, finance leases and the Vendor Agreement.
2  
Rehabilitation provisions indicates the expected undiscounted cash flows for each period.
RELATED PARTY TRANSACTIONS
There were no material related party transactions for the three and six months ended June 30, 2019 and 2018 other than compensation of key management personnel which is presented in Note 18 of the condensed interim consolidated financial statements for the three and six months ended June 30, 2019 and June 30, 2018 . Key management personnel are defined as members of the Board of Directors and certain senior officers. Compensation of key management personnel are made on terms equivalent to those prevailing in an arm's length transaction.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no material off-balance sheet arrangements.
NON-GAAP FINANCIAL MEASURES
In this MD&A, we use the terms “cash operating cost”, “cash operating cost per ounce”, “all-in sustaining costs”, “all-in sustaining costs per ounce”, “ loss attributable to Golden Star shareholders”, “adjusted income per share attributable to Golden Star shareholders”, “cash provided by operations before working capital changes”, and “cash provided by operations before working capital changes per share - basic”.
“Cost of sales excluding depreciation and amortization” as found in the statements of operations includes all mine-site operating costs, including the costs of mining, ore processing, maintenance, work-in-process inventory changes, mine-site overhead as well as production taxes, royalties, severance charges and by-product credits, but excludes exploration costs, property holding costs, corporate office general and administrative expenses, foreign currency gains and losses, gains and losses on asset sales, interest expense, gains and losses on derivatives, gains and losses on investments and income tax expense/benefit.
“Cost of sales per ounce” is equal to cost of sales excluding depreciation and amortization for the period plus depreciation and amortization for the period divided by the number of ounces of gold sold (excluding pre-commercial production ounces sold) during the period.
“Cash operating cost” for a period is equal to “cost of sales excluding depreciation and amortization” for the period less royalties, the cash component of metals inventory net realizable value adjustments, materials and supplies write-off and severance charges,

18



and "cash operating cost per ounce" is that amount divided by the number of ounces of gold sold (excluding pre-commercial production ounces sold) during the period. We use cash operating cost per ounce as a key operating metric. We monitor this measure monthly, comparing each month's values to prior periods' values to detect trends that may indicate increases or decreases in operating efficiencies. We provide this measure to investors to allow them to also monitor operational efficiencies of the Company's mines. We calculate this measure for both individual operating units and on a consolidated basis. Since cash operating costs do not incorporate revenues, changes in working capital or non-operating cash costs, they are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Changes in numerous factors including, but not limited to, mining rates, milling rates, ore grade, gold recovery, costs of labor, consumables and mine site general and administrative activities can cause these measures to increase or decrease. We believe that these measures are similar to the measures of other gold mining companies, but may not be comparable to similarly titled measures in every instance.
“All-in sustaining costs” commences with cash operating costs and then adds the cash component of metals inventory net realizable value adjustments, royalties, sustaining capital expenditures, corporate general and administrative costs (excluding share-based compensation expenses and severance), and accretion of rehabilitation provision. For mine site all-in sustaining costs, corporate general and administrative costs (excluding share-based compensation expenses and severance) are allocated based on gold sold by each operation. "All-in sustaining costs per ounce" is that amount divided by the number of ounces of gold sold (excluding pre-commercial production ounces sold) during the period. This measure seeks to represent the total costs of producing gold from current operations, and therefore it does not include capital expenditures attributable to projects or mine expansions, exploration and evaluation costs attributable to growth projects, income tax payments, interest costs or dividend payments. Consequently, this measure is not representative of all of the Company's cash expenditures. In addition, the calculation of all-in sustaining costs does not include depreciation expense as it does not reflect the impact of expenditures incurred in prior periods. Therefore, it is not indicative of the Company's overall profitability. Share-based compensation expenses are also excluded from the calculation of all-in sustaining costs as the Company believes that such expenses may not be representative of the actual payout on equity and liability based awards.
The Company believes that “all-in sustaining costs” will better meet the needs of analysts, investors and other stakeholders of the Company in understanding the costs associated with producing gold, understanding the economics of gold mining, assessing the operating performance and the Company's ability to generate free cash flow from current operations and to generate free cash flow on an overall Company basis. Due to the capital intensive nature of the industry and the long useful lives over which these items are depreciated, there can be a disconnect between net earnings calculated in accordance with IFRS and the amount of free cash flow that is being generated by a mine. In the current market environment for gold mining equities, many investors and analysts are more focused on the ability of gold mining companies to generate free cash flow from current operations, and consequently the Company believes these measures are useful non-IFRS operating metrics ("non-GAAP measures") and supplement the IFRS disclosures made by the Company. These measures are not representative of all of Golden Star's cash expenditures as they do not include income tax payments or interest costs. Non-GAAP measures are intended to provide additional information only and do not have standardized definitions under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. The table below reconciles these non-GAAP measures to the most directly comparable IFRS measures and, where applicable, previous periods have been recalculated to conform to the current definition.

19



The table below reconciles consolidated cost of sales excluding depreciation and amortization to cost of sales per ounce, cash operating cost per ounce and all-in sustaining cost per ounce:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(Stated in thousands of U.S dollars except cost per ounce data)
2019
 
2018
 
2019
 
2018
Cost of sales excluding depreciation and amortization
46,506

 
57,717

 
90,310

 
117,291

Depreciation and amortization
6,749

 
9,235

 
13,611

 
17,456

Cost of sales
53,255

 
66,952

 
103,921

 
134,747

 
 
 
 
 
 
 
 
Cost of sales excluding depreciation and amortization
46,506

 
57,717

 
90,310

 
117,291

Severance charges
(30
)
 
(1,576
)
 
(324
)
 
(4,970
)
Royalties
(3,165
)
 
(4,000
)
 
(6,639
)
 
(7,830
)
Inventory net realizable value adjustment and write-off
(131
)
 
(3,177
)
 
(1,051
)
 
(4,340
)
Cash operating costs
43,180

 
48,964

 
82,296

 
100,151

Royalties
3,165

 
4,000

 
6,639

 
7,830

Inventory net realizable value adjustment and write-off
131

 
3,177

 
1,051

 
4,340

Accretion of rehabilitation provision
166

 
131

 
365

 
345

General and administrative costs, excluding share-based compensation and severance 1
4,726

 
3,689

 
7,885

 
7,436

Sustaining capital expenditures
7,725

 
6,913

 
13,093

 
10,491

All-in sustaining costs
59,093

 
66,874

 
111,329

 
130,593

 
 
 
 
 
 
 
 
Ounces sold 2
48,742

 
60,559

 
102,238

 
116,870

 
 
 
 
 
 
 
 
Cost of sales per ounce
$
1,093

 
$
1,106

 
$
1,016

 
$
1,153

Cash operating cost per ounce
$
886

 
$
809

 
$
805

 
$
857

All-in sustaining cost per ounce
$
1,212

 
$
1,104

 
$
1,089

 
$
1,117

1 Severance charges are termination costs related to the change in senior management in 2019.
2 Ounces sold used in the calculation of cost of sales per ounce, cash operating cost per ounce and all-in sustaining cost per ounce excludes 2,049 pre-commercial production ounces sold at Prestea Underground in January 2018.

20



The tables below reconcile cost of sales excluding depreciation and amortization to cash operating cost per ounce for each of the operating mines:
 
For the Three Months Ended
June 30, 2019
(Stated in thousands of U.S dollars except cost per ounce data)
Wassa
 
Prestea
 
Combined
Cost of sales excluding depreciation and amortization
27,142

 
19,364

 
46,506

Depreciation and amortization
4,226

 
2,523

 
6,749

Cost of sales
31,368

 
21,887

 
53,255

 
 
 
 
 
 
Cost of sales excluding depreciation and amortization
27,142

 
19,364

 
46,506

Severance charges

 
(30
)
 
(30
)
Royalties
(2,439
)
 
(726
)
 
(3,165
)
Inventory net realizable value adjustment and write-off

 
(131
)
 
(131
)
Cash operating costs
24,703

 
18,477

 
43,180

Royalties
2,439

 
726

 
3,165

Inventory net realizable value adjustment and write-off

 
131

 
131

Accretion of rehabilitation provision
32

 
134

 
166

General and administrative costs, excluding share-based compensation and severance 1
3,658

 
1,068

 
4,726

Sustaining capital expenditures
4,650

 
3,075

 
7,725

All-in sustaining costs
35,482

 
23,611

 
59,093

 
 
 
 
 
 
Ounces sold
37,725

 
11,017

 
48,742

 
 
 
 
 
 
Cost of sales per ounce
$
831

 
$
1,987

 
$
1,093

Cash operating cost per ounce
$
655

 
$
1,677

 
$
886

All-in sustaining cost per ounce
$
941

 
$
2,143

 
$
1,212

1 Severance charges are termination costs related to the change in senior management in 2019.

21



 
For the Six Months Ended
June 30, 2019
(Stated in thousands of U.S dollars except cost per ounce data)
Wassa
 
Prestea
 
Combined
Cost of sales excluding depreciation and amortization
53,922

 
36,388

 
90,310

Depreciation and amortization
8,598

 
5,013

 
13,611

Cost of sales
62,520

 
41,401

 
103,921

 
 
 
 
 
 
Cost of sales excluding depreciation and amortization
53,922

 
36,388

 
90,310

Severance charges
(225
)
 
(99
)
 
(324
)
Royalties
(5,238
)
 
(1,401
)
 
(6,639
)
Inventory net realizable value adjustment and write-off

 
(1,051
)
 
(1,051
)
Cash operating costs
48,459

 
33,837

 
82,296

Royalties
5,238

 
1,401

 
6,639

Inventory net realizable value adjustment and write-off

 
1,051

 
1,051

Accretion of rehabilitation provision
95

 
270

 
365

General and administrative costs, excluding share-based compensation and severance 1
6,226

 
1,659

 
7,885

Sustaining capital expenditures
8,153

 
4,940

 
13,093

All-in sustaining costs
68,171

 
43,158

 
111,329

 
 
 
 
 
 
Ounces sold
80,724

 
21,514

 
102,238

 
 
 
 
 
 
Cost of sales per ounce
$
774

 
$
1,924

 
$
1,016

Cash operating cost per ounce
$
600

 
$
1,573

 
$
805

All-in sustaining cost per ounce
$
844

 
$
2,006

 
$
1,089

1 Severance charges are termination costs related to the change in senior management in 2019.
 
For the Three Months Ended
June 30, 2018
(Stated in thousands of U.S dollars except cost per ounce data)
Wassa
 
Prestea
 
Combined
Cost of sales excluding depreciation and amortization
30,522

 
27,195

 
57,717

Depreciation and amortization
5,581

 
3,654

 
9,235

Cost of sales
36,103

 
30,849

 
66,952

 
 
 
 
 
 
Cost of sales excluding depreciation and amortization
30,522

 
27,195

 
57,717

Severance charges
(1,576
)
 

 
(1,576
)
Royalties
(2,517
)
 
(1,483
)
 
(4,000
)
Inventory net realizable value adjustment and write-off
(3,103
)
 
(74
)
 
(3,177
)
Cash operating costs
23,326

 
25,638

 
48,964

Royalties
2,517

 
1,483

 
4,000

Inventory net realizable value adjustment and write-off
3,103

 
74

 
3,177

Accretion of rehabilitation provision

 
131

 
131

General and administrative costs, excluding share-based compensation
2,330

 
1,359

 
3,689

Sustaining capital expenditures
6,759

 
154

 
6,913

All-in sustaining costs
38,035

 
28,839

 
66,874

 
 
 
 
 
 
Ounces sold
38,249

 
22,310

 
60,559

 
 
 
 
 
 
Cost of sales per ounce
$
944

 
$
1,383

 
$
1,106

Cash operating cost per ounce
$
610

 
$
1,149

 
$
809

All-in sustaining cost per ounce
$
994

 
$
1,293

 
$
1,104


22



 
For the Six Months Ended
June 30, 2018
(Stated in thousands of U.S dollars except cost per ounce data)
Wassa
 
Prestea
 
Combined
Cost of sales excluding depreciation and amortization
60,759

 
56,532

 
117,291

Depreciation and amortization
11,189

 
6,267

 
17,456

Cost of sales
71,948

 
62,799

 
134,747

 
 
 
 
 
 
Cost of sales excluding depreciation and amortization
60,759

 
56,532

 
117,291

Severance charges
(4,970
)
 

 
(4,970
)
Royalties
(4,883
)
 
(2,947
)
 
(7,830
)
Inventory net realizable value adjustment and write-off
(3,103
)
 
(1,237
)
 
(4,340
)
Cash operating costs
47,803

 
52,348

 
100,151

Royalties
4,883

 
2,947

 
7,830

Inventory net realizable value adjustment and write-off
3,103

 
1,237

 
4,340

Accretion of rehabilitation provision
81

 
264

 
345

General and administrative costs, excluding share-based compensation
4,634

 
2,802

 
7,436

Sustaining capital expenditures
10,180

 
311

 
10,491

All-in sustaining costs
70,684

 
59,909

 
130,593

 
 
 
 
 
 
Ounces sold 1
74,102

 
42,768

 
116,870

 
 
 
 
 
 
Cost of sales per ounce
$
971

 
$
1,468

 
$
1,153

Cash operating cost per ounce
$
645

 
$
1,224

 
$
857

All-in sustaining cost per ounce
$
954

 
$
1,401

 
$
1,117

1 Ounces sold used in the calculation of cost of sales per ounce and cash operating cost per ounce in the six months ended June 30, 2018 excludes 2,049 pre-commercial production ounces sold at Prestea Underground in January 2018.
“Cash provided by operations before working capital changes” is calculated by subtracting the “changes in working capital” from “net cash provided by operating activities” as found in the statements of cash flows. “Cash provided by operations before working capital changes per share - basic” is “Cash provided by operations before working capital changes” divided by the basic weighted average number of shares outstanding for the period.
We use cash operating cost per ounce and cash provided by operations before working capital changes as key operating metrics. We monitor these measures monthly, comparing each month's values to the values in prior periods to detect trends that may indicate increases or decreases in operating efficiencies. These measures are also compared against budget to alert management of trends that may cause actual results to deviate from planned operational results. We provide these measures to investors to allow them to also monitor operational efficiencies of the mines owned by the Company.
Cash operating cost per ounce and cash provided by operations before working capital changes should be considered non-GAAP financial measures as defined in Canadian securities laws and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. There are material limitations associated with the use of such non-GAAP measures. Since these measures do not incorporate revenues, changes in working capital or non-operating cash costs, they are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Changes in numerous factors including, but not limited to, mining rates, milling rates, ore grade, gold recovery, costs of labor, consumables and mine site general and administrative activities can cause these measures to increase or decrease. We believe that these measures are similar to the measures of other gold mining companies, but may not be comparable to similarly titled measures in every instance.

23



Adjusted net income attributable to Golden Star shareholders
The table below shows the reconciliation of net loss attributable to Golden Star shareholders to adjusted net income attributable to Golden Star shareholders and adjusted income per share attributable to Golden Star shareholders:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(Stated in thousands of U.S dollars except per share data)
2019
 
2018
 
2019
 
2018
Net loss attributable to Golden Star shareholders
(9,036
)
 
(6,642
)
 
(10,960
)
 
(5,627
)
Add back/(deduct):
 
 
 
 
 
 
 
Share-based compensation expense
1,058

 
3,220

 
2,004

 
582

(Gain)/loss on fair value of financial instruments
(424
)
 
1,301

 
3,449

 
(4,141
)
Severance charges 1
3,751

 
1,576

 
4,045

 
4,970

Loss/(gain) on change in asset retirement obligations
862

 
(327
)
 
587

 
(1,121
)
Income tax expense
5,278

 
3,783

 
12,480

 
6,674

 
1,489

 
2,911

 
11,605

 
1,337

Adjustments attributable to non-controlling interest
(617
)
 
(503
)
 
(1,339
)
 
(1,052
)
Adjusted net income attributable to Golden Star shareholders
872

 
2,408

 
10,266

 
285

 
 
 
 
 
 
 
 
Adjusted income per share attributable to Golden Star shareholders - basic
$
0.01

 
$
0.03

 
$
0.09

 
$
0.00

Weighted average shares outstanding - basic (millions) 2
108.9

 
76.2

 
108.8

 
76.2

1 Severance charges includes termination costs related to the change in senior management in 2019.
2 Weighted average shares outstanding - basic has been re-stated to reflect the share consolidation that was implemented on October 30, 2018.
The Company uses “Adjusted net income attributable to Golden Star shareholders” for its own internal purposes. Management’s internal budgets and forecasts and public guidance do not reflect the items which have been excluded from the determination of adjusted net income attributable to Golden Star shareholders. Consequently, the presentation of adjusted net income attributable to Golden Star shareholders enables shareholders to better understand the underlying operating performance of our core mining business through the eyes of management. Management periodically evaluates the components of adjusted net earnings based on an internal assessment of performance measures that are useful for evaluating the operating performance of our business and a review of non-GAAP measures used by mining industry analysts and other mining companies.
“Adjusted net income attributable to Golden Star shareholders” is calculated by adjusting net loss attributable to Golden Star shareholders for share-based compensation expenses, gain/loss on fair value of financial instruments, severance charges, loss/gain on change in asset retirement obligations and income tax expense. “Adjusted income per share attributable to Golden Star shareholders” for the period is “Adjusted net income attributable to Golden Star shareholders” divided by the weighted average number of shares outstanding using the basic method of earnings per share.
Adjusted net income attributable to Golden Star shareholders and adjusted income per share attributable to Golden Star shareholders should be considered non-GAAP financial measures as defined in the Canadian securities laws and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. There are material limitations associated with the use of such non-GAAP measures. Since these measures do not incorporate all non-cash expense and income items, changes in working capital and non-operating cash costs, they are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Changes in numerous factors including, but not limited to, our share price, risk-free interest rates, gold prices, mining rates, milling rates, ore grade, gold recovery, costs of labor, consumables and mine site general and administrative activities can cause these measures to increase or decrease. The Company believes that these measures are similar to the measures of other gold mining companies, but may not be comparable to similarly titled measures in every instance.
OUTSTANDING SHARE DATA
As of July 30, 2019 , there were 109,141,742 common shares of the Company issued and outstanding, 3,934,683 stock options outstanding, 1,230,358 deferred share units outstanding, 971,295 share units of 2017 PRSUs outstanding and 7% Convertible Debentures which are convertible into an aggregate of 11,444,000 common shares.

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CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
For a full list of judgments, estimates and assumptions, please refer to Note 4 of the 2018 Annual Financial Statements.
CHANGES IN ACCOUNTING POLICIES
The Company has adopted the following new and revised standards, effective January 1, 2019. These changes were made in accordance with the applicable transitional provisions.
IFRS 16 Leases specifies how an IFRS reporter will recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is twelve months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17. IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after January 1, 2019.
On January 1, 2019, the Company adopted the requirements of IFRS 16 Leases . As a result, the Company updated its accounting policy for leases to align with the requirements of IFRS 16. The Company elected to use the modified retrospective approach to initially adopt IFRS 16 which resulted in recognizing the cumulative effect of prior period amounts as an adjustment to the opening balance sheet through opening deficit on January 1, 2019.
Under IFRS 16, the Company recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 7.5%.
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. The change in accounting policy affected the following items in the balance sheet on January 1, 2019: