EX-99.1 2 exhibit99-1.htm CONSOLIDATED FINANCIAL STATEMENTS Great Basin Gold Ltd.: Exhibit 99.1 - Filed by newsfilecorp.com


CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED
JUNE 30, 2012

 

(Unaudited)

(Expressed in thousands of Canadian Dollars, unless otherwise stated)


GREAT BASIN GOLD LTD.  
Consolidated Statements of Loss  
Expressed in thousands of Canadian dollars, except per share data  
        Three months ended     Six months ended  
              June 30           June 30  
    Note   2012     2011     2012     2011  
      $ '000   $ '000   $ '000   $ '000  
                             
Revenue       32,371     56,738     65,744     83,081  
                             
Cost of operations                            
Production cost       (30,165 )   (29,272 )   (57,236 )   (42,968 )
Depletion charge       (1,137 )   (1,856 )   (2,197 )   (2,990 )
Depreciation charge       (4,043 )   (5,984 )   (7,430 )   (7,198 )
                             
Expenses                            
Exploration expenses       (2,605 )   (3,443 )   (4,719 )   (6,344 )
Pre-development expenses       (5,009 )   (3,686 )   (9,751 )   (7,425 )
Corporate and administrative cost       (1,466 )   (2,170 )   (3,046 )   (4,452 )
Environmental impact study       (362 )   (488 )   (882 )   (925 )
Foreign exchange (loss) gain - net       (3,332 )   714     (423 )   3,177  
Salaries and compensation                            
 Salaries and wages       (2,136 )   (2,171 )   (4,575 )   (4,510 )
 Share based payments expense   10 (c)   (1,757 )   (1,574 )   (2,776 )   (3,015 )
(Loss) profit from operating activities       (19,641 )   6,808     (27,291 )   6,431  
Interest expense       (7,272 )   (6,126 )   (14,363 )   (11,197 )
Interest income       426     404     848     793  
Net interest expense       (6,846 )   (5,722 )   (13,515 )   (10,404 )
(Loss) profit from operating activities after net interest       (26,487 )   1,086     (40,806 )   (3,973 )
Impairment of loan due from related party   6   (1,377 )   –     (4,000 )   –  
Profit (loss) on derivative instruments - net       8,108     (1,373 )   7,610     (16,205 )
Loss before income taxes       (19,756 )   (287 )   (37,196 )   (20,178 )
Income tax expense       (2,234 )   (764 )   (2,564 )   (1,214 )
Net loss for the period       (21,990 )   (1,051 )   (39,760 )   (21,392 )
                             
                             
Basic and diluted loss per share       (0.04 )   (0.00 )   (0.08 )   (0.05 )
                             
Weighted average number of common shares outstanding (thousands)       551,997     454,559     514,231     443,155  

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

2


GREAT BASIN GOLD LTD.  
Consolidated Statements of Comprehensive Loss  
Expressed in thousands of Canadian dollars  
    Three months ended     Six months ended  
          June 30           June 30  
    2012     2011     2012     2011  
  $ '000   $ '000   $ '000   $ '000  
                         
                         
Net loss for the period   (21,990 )   (1,051 )   (39,760 )   (21,392 )
                         
Other comprehensive loss                        
Cumulative translation adjustment   (25,300 )   (3,307 )   (6,346 )   (29,956 )
Other comprehensive loss for the period   (25,300 )   (3,307 )   (6,346 )   (29,956 )
                         
Comprehensive loss for the period   (47,290 )   (4,358 )   (46,106 )   (51,348 )

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

3


GREAT BASIN GOLD LTD.  
Consolidated Statements of Financial Position  
Expressed in thousands of Canadian dollars  
        June 30     December 31  
    Note   2012     2011  
      $ '000   $ '000  
Assets                
Current assets                
Cash and cash equivalents       16,655     25,749  
Trade and other receivables       7,075     14,060  
Inventories   5   31,032     19,694  
Other current assets       981     2,404  
        55,743     61,907  
Non-current assets                
Inventories   5   7,603     7,998  
Loan due from related party   6   2,143     3,784  
Property, plant and equipment   7   765,276     720,213  
Other assets       6,135     5,327  
Deferred income tax assets       51,136     51,081  
Total assets       888,036     850,310  
                 
Liabilities                
Current liabilities                
Trade and other payables       77,548     56,038  
Current portion of long term debt   8   24,221     20,371  
Current portion of other liabilities   9   3,240     3,050  
        105,009     79,459  
Non-current liabilities                
Long term debt   8   268,929     262,075  
Other liabilities   9   23,451     31,197  
Site reclamation obligations       6,023     6,011  
Total liabilities       403,412     378,742  
                 
Equity                
Share capital   10 (b)   883,165     833,643  
Warrants   10 (b)   4,324     -  
Contributed surplus       88,653     83,337  
Accumulated other comprehensive loss       (80,110 )   (73,764 )
Deficit       (411,408 )   (371,648 )
Total equity       484,624     471,568  
                 
Total liabilities and equity       888,036     850,310  

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

Approved by the Board of Directors

/s/ Lou van Vuuren /s/ Ronald W. Thiessen
Lou van Vuuren Ronald W. Thiessen
Interim Chief Executive Officer Director

4

GREAT BASIN GOLD LTD.  
Consolidated Statements of Changes in Equity  
For the six months ended June 30, 2012 and 2011  
Expressed in thousands of Canadian dollars  

                      Accumulated              
                      other              
                Contributed      comprehensive               
    Share capital     Warrants     surplus     loss     Deficit     Total  
  $'000   $'000   $'000   $'000   $'000   $'000  
                                     
Balance - January 1, 2012   833,643     -     83,337     (73,764 )   (371,648 )   471,568  
Comprehensive loss for the period   -     -     -     (6,346 )   (39,760 )   (46,106 )
Net loss for the period   -     -     -     -     (39,760 )   (39,760 )
Other comprehensive loss   -     -     -     (6,346 )   -     (6,346 )
Employee share options                                    
 Value of services recognized (note 10(c))   -     -     5,316     -     -     5,316  
Proceeds on issuance of units in public offering (net of transaction costs) (note 10(b))   49,522     4,324     -     -     -     53,846  
Balance - June 30, 2012   883,165     4,324     88,653     (80,110 )   (411,408 )   484,624  
                                     
Balance - January 1, 2011   709,449     6,108     77,676     26,395     (353,911 )   465,717  
Comprehensive loss for the period   -     -     -     (29,956 )   (21,392 )   (51,348 )
Net loss for the period   -     -     -     -     (21,392 )   (21,392 )
Other comprehensive loss   -     -     -     (29,956 )   -     (29,956 )
Employee share options                                    
 Value of services recognized (note 10(c))   -     -     4,965     -     -     4,965  
 Proceeds on issuing shares   4,206     -     (1,574 )   -     -     2,632  
Warrants                                    
   Proceeds on issuing shares   22,426     (3,793 )   -     -     -     18,633  
Proceeds on issuance of shares in public offering (net of transaction costs)   81,190     -     -     -     -     81,190  
Other   163     -     -     -     -     163  
Balance - June 30, 2011   817,434     2,315     81,067     (3,561 )   (375,303 )   521,952  

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

5


GREAT BASIN GOLD LTD.  
Consolidated Statements of Cash Flows  
Expressed in thousands of Canadian dollars  
    Three months ended     Six months ended  
          June 30           June 30  
    2012     2011     2012     2011  
  $ '000   $ '000   $ '000   $ '000  
Operating activities                        
Loss for the period   (21,990 )   (1,051 )   (39,760 )   (21,392 )
Items not involving cash                        
   Production non-cash charges   1,022     797     1,848     967  
   Depletion   1,137     1,856     2,197     2,990  
   Depreciation   4,190     6,160     7,730     7,554  
   Exploration non-cash charges   10     32     30     91  
   Pre-development non-cash charges   250     (13 )   519     375  
   Unrealized foreign exchange loss (gain)   3,296     (446 )   193     (3,258 )
   Share based payments expense   1,757     1,574     2,776     3,015  
   Impairment of loan due from related party   1,377     –     4,000     –  
   (Profit) loss on derivative instruments - net   (8,108 )   1,419     (7,610 )   16,221  
   Share donation   –     163     –     163  
Adjusted for                        
   Interest expense   7,272     6,126     14,363     11,197  
   Interest income   (426 )   (404 )   (848 )   (793 )
Changes in non-cash operating working capital                        
   Trade and other receivables   (2,674 )   (2,362 )   6,837     (578 )
   Other current assets   1,238     398     1,409     581  
   Inventories   (4,620 )   830     (11,122 )   (7,710 )
   Trade and other payables   19,836     8,676     21,570     4,850  
Net cash generated from operating activities   3,567     23,755     4,132     14,273  
                         
Investing activities                        
Advance to related party   (1,096 )   (1,468 )   (1,727 )   (1,468 )
Purchase of property, plant and equipment   (32,635 )   (56,657 )   (61,452 )   (93,191 )
Interest income   103     152     210     322  
Reclamation deposits   (628 )   (99 )   (770 )   (460 )
Net cash utilized by investing activities   (34,256 )   (58,072 )   (63,739 )   (94,797 )
                         
Financing activities                        
Common shares and warrants issued for cash, net of issue costs   6,888     14,338     53,845     102,455  
Proceeds on issuance of debt   10,029     –     19,986     68,810  
Repayment of debt   (6,010 )   (2,069 )   (14,746 )   (55,755 )
Interest expense   (7,363 )   (7,912 )   (9,347 )   (9,040 )
Net cash generated from financing activities   3,544     4,357     49,738     106,470  
                         
(Decrease) increase in cash and cash equivalents   (27,145 )   (29,960 )   (9,869 )   25,946  
Cash and cash equivalents, beginning of period   43,548     68,018     25,749     12,855  
Foreign exchange movement on cash and cash equivalents   252     713     775     (30 )
                         
Cash and cash equivalents, end of period   16,655     38,771     16,655     38,771  

Refer note 11 of the notes to the consolidated financial statements for supplementary information to the cash flow statement.
The accompanying notes are an integral part of these consolidated financial statements

6


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

1.

General information

   

Great Basin Gold Ltd. is incorporated under the laws of the Province of British Columbia and its registered address is 1108-1030 West Georgia Street, Vancouver BC, Canada. Great Basin Gold Ltd., including its subsidiaries (“Great Basin” or “the Company”), is a mineral exploration and development company with two operating assets, both in the production build-up phase, the Hollister Project on the Carlin Trend in Nevada, USA and the Burnstone Project in the Witwatersrand Goldfields in South Africa. Over and above the exploration being conducted at the above mentioned properties, greenfields exploration is being undertaken in Tanzania and Mozambique.

   

Operating results for the three and six month periods ended June 30, 2012 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2012. In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods presented.

   
2.

Basis of preparation

   

The interim consolidated financial statements for the three and six months ended June 30, 2012 have been prepared in accordance with IAS34, Interim financial reporting. The condensed interim financial information should be read in conjunction with the annual financial statements for the year ended December 31, 2011, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The working capital deficit at June 30, 2012, indicates an uncertainty which may cast substantial doubt about the company's ability to continue as a going concern. See note 13 which details the strategic alternatives being considered by management together with managements’ basis for continuing to adopt the going concern assumption as a basis for preparing the interim consolidated financial statements.

   
3.

Accounting policies

   

These unaudited interim consolidated financial statements follow the same accounting policies and methods of application as the Company’s most recent annual financial statements. Accordingly, they should be read in conjunction with the Company’s most recent annual financial statements. The policies applied in these condensed consolidated financial statements are based on IFRS issued and outstanding as of August 13, 2012, the date the Board of Directors approved the financial statements.

   

Accounting standards and amendments issued but not yet adopted

   

Refer to note 2 of the Company’s most recent annual financial statements for a comprehensive listing of revised standards and amendments which are effective for annual periods beginning on or after January 1, 2013 with earlier application permitted. The Company has not yet assessed the impact of these standards and amendments or determined whether it will early adopt them.

7


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

4.

Estimates

   

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

   

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2011. In addition, see note 13 which details the strategic alternatives being considered by management together with managements' basis for continuing to adopt the going concern assumption as a basis for preparing the interim consolidated financial statements.

   
5.

Inventories


      June 30     December 31  
      2012     2011  
      $ ‘000     $ ‘000  
  Stores and materials   4,255     4,699  
  Unprocessed ore   2,688     2,437  
  Precious metals in process   31,692     20,556  
      38,635     27,692  
  Non-current   7,603     7,998  
  Current   31,032     19,694  
      38,635     27,692  

Cost of operations recognized in the statement of income consists of direct and indirect mining costs, overhead costs, royalties, depreciation of mining equipment and depletion of mineral properties. The Company recognized cost of inventories of $35 million (2011: $38 million) and $67 million (2011: $54 million) as cost of operations expenses during the three and six months ended June 30, 2012 respectively.

   

Inventories including unprocessed ore and precious metals in process of $4.5 million are carried at net realizable value (2011: $nil).

   

Non-current inventories comprise of gold in lock-up in metallurgical plants which are expected to be realized upon plant clean-up or dismantling.

   
6.

Related party balances and transactions

   

Related party transactions are recorded at the exchange amount which is the amount of consideration paid or received.

   

Loan due from related party


      June 30     December 31  
      2012     2011  
      $’000     $’000  
  Balance, beginning of the period   3,784     13,372  
   Cash advances   1,727     4,506  
   Interest earned   638     1,000  
   Impairment provision   (4,000 )   (13,680 )
   Foreign exchange   (6 )   (1,414 )
  Balance, end of the period   2,143     3,784  

8


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

6.

Related party balances and transactions (continued)

   

In 2007 the Company completed a series of transactions in order to achieve compliance with South Africa’s post-apartheid legislation designed to facilitate participation by historical disadvantages South Africans (“HDSAs”) in the mining industry. This legislation is reflected in the South African Mining Charter and required the Company to achieve a target of 26% ownership by HDSA in the Company’s South African projects by 2014. In order to comply with these requirements, Tranter Burnstone (Pty) Ltd (“Tranter”), an HDSA company, acquired 19,938,650 Great Basin treasury common shares for $38 million (ZAR260 million) which, because it involved indirect economic participation in both the Hollister and Burnstone projects, was deemed equivalent to a 26% interest in Burnstone. Tranter borrowed ZAR200 million ($27 million) from Investec Bank Ltd (“Investec”), a South African bank, to partly fund the purchase of the shares and the Company gave a loan guarantee in favour of Tranter limited of ZAR140 ($19 million) million. A loan of $16.9 million (ZAR 136 million) was advanced to Tranter under the guarantee agreement to enable Tranter to meet its payment obligation to Investec.

   

As a result of this loan the remaining guarantee available, as at June 30, 2012, is $0.5 million (ZAR4 million) (2011: $2.2 million (ZAR17 million)) (refer note 9).

   

Any advances to Tranter are due to be repaid in installments from 2014 to 2017, with interest accruing at the South African prime interest rate plus 2%. Security for any advances made includes a second charge against any shares of the Company held by Tranter (second to Investec).

The fair value of the security, based on the prolonged decline in the Company’s share price, was deemed inadequate and the Company raised a fair value impairment provision of $1.4 million (ZAR11.2 million) and $4 million (ZAR31.5 million) during the three and six months ended June 30, 2012 respectively. These are in addition to the $13.7 million (ZAR100 million) impairment provision raised against the loan to provide for its exposure to potential future repayment losses in quarter 4 of 2011.

   
7.

Property, plant and equipment


                      Assets              
    Mineral     Mine     Mine     under     Other        
    properties     infrastructure     equipment     construction     assets     Total  
    $’000     $’000     $’000     $’000     $’000     $’000  
                                     
Period ended June 30, 2012                                
At January 1, 2012   164,854     460,320     40,131     47,141     7,767     720,213  
Additions   -     30,131     299     34,298     195     64,923  
Transfers   -     3,190     2,204     (5,496 )   102     -  
Depletion and depreciation   (2,601 )   (3,529 )   (6,091 )   -     (777 )   (12,998 )
Foreign exchange differences   (696 )   (5,014 )   (294 )   (798 )   (60 )   (6,862 )
At June 30, 2012   161,557     485,098     36,249     75,145     7,227     765,276  
At June 30, 2012                                    
Cost   184,757     499,142     66,435     75,145     12,174     837,653  
Accumulated depreciation   (23,200 )   (14,044 )   (30,186 )   -     (4,947 )   (72,377 )
Net book value   161,557     485,098     36,249     75,145     7,227     765,276  

9


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

7.

Property, plant and equipment (continued)


                      Assets              
    Mineral     Mine     Mine     under     Other        
    properties     infrastructure      equipment      construction     assets     Total  
    $’000     $’000     $’000     $’000     $’000     $’000  
Year ended December 31, 2011                                
At January 1, 2011   182,992     23,064     44,399     435,255     9,664     695,374  
Additions   85     389     11,443     138,151     898     150,966  
Transfers   -     482,985     -     (482,985 )   -     -  
Depletion and depreciation   (5,354 )   (9,103 )   (9,634 )   -     (1,508 )   (25,599 )
Foreign exchange differences   (12,869 )   (37,015 )   (6,077 )   (43,280 )   (1,287 )   (100,528 )
At December 31, 2011   164,854     460,320     40,131     47,141     7,767     720,213  
                                     
At December 31, 2011                                    
Cost   185,404     470,913     64,460     47,141     11,959     779,877  
Accumulated depreciation   (20,550 )   (10,593 )   (24,329 )   -     (4,192 )   (59,664 )
Net book value   164,854     460,320     40,131     47,141     7,767     720,213  

Depletion of $2.3 million relating to stockpiled tons and ounces in process was capitalized to the value of the unprocessed ore and precious metals in process at June 30, 2012 (2011: $2.4 million) (refer note 5).

Mineral properties of $116.2 million consisting of the Hollister, Esmeralda and Burnstone properties and fixed assets of $603 million have been pledged as security for the term loans (refer note 8(a) and 8(b)).

Mining equipment includes leased assets with net book values as set out below. These assets are pledged as security for the related finance leases (refer note 8).

      June 30     December 31  
      2012     2011  
      $’000     $’000  
  Cost   1,121     5,451  
  Accumulated depreciation   (224 )   (981 )
  Net book value   897     4,470  

8.

Long term debt

   

Non-current portion of long term debt


      June 30     December 31  
      2012     2011  
      $ ‘000     $ ‘000  
  Convertible debentures   101,563     97,669  
  Finance lease liabilities   46     71  
  Term loan I (note 8(a))   135,901     125,879  
  Term loan II (note 8(b))   31,419     38,456  
      268,929     262,075  

10


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

8.

Long term debt (continued)

   

Current portion of long term debt


      June 30     December 31  
      2012     2011  
      $ ‘000     $ ‘000  
  Convertible debentures   843     843  
  Finance lease liabilities   519     2,902  
  Term loan I (note 8(a))   10,872     280  
  Term loan II (note 8(b))   11,987     16,346  
      24,221     20,371  

The continuity of long term debt is as follows:

      June 30     December 31  
      2012     2011  
      $ ‘000     $ ‘000  
  Balance, beginning of the period   282,446     209,578  
   New debt   19,986     135,321  
   New leases   -     1,989  
   Transaction cost   (260 )   (6,525 )
   Repayment of debt and interest   (23,570 )   (94,010 )
   Settlement loss on senior secured notes   -     8,817  
   Amortized transaction cost   881     1,231  
   Interest expense   13,220     25,476  
   Foreign exchange   447     569  
  Balance, end of the period   293,150     282,446  

(a) Term loan I

In December 2011, the Company successfully negotiated the restructuring of Term loan I, thereby increasing the facility to $152.6 million (US$150 million) and extending repayment to 2016. $132 million (US$130 million) of the restructured facility was drawn down on December 15, 2011, with the remaining $20 million (US$20 million) drawn down during the six months ended June 30, 2012.

Term loan I has a maximum term of 5 years from the December 15, 2011 draw down and capital will be repaid in 16 quarterly consecutive installments, commencing on March 15, 2013. The interest rate for Term loan I is linked to the US$ London interbank offered rate (“US$ LIBOR”) at a premium of 4% above US$ LIBOR and is fixed on a quarterly basis. The floating rate on June 30, 2012 is 4.46785% (USD LIBOR of 0.46785% plus 4% premium).

The Burnstone Property, its assets and certain subsidiary guarantees serve as security for the facility (refer note 7).

Term loan I contains certain financial covenants, customary to facilities of this nature, and includes borrower tangible net worth, debt to equity ratio, debt service cover ratio, a loan life cover ratio and available liquidity. As at June 30, 2012, the Company assessed and complied with all covenants.

Refer to note 9(a) for details of the hedge structure entered into under the Term loan I agreement.

11


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

8.

Long term debt (continued)

   

(b) Term loan II

   

Term loan II is being repaid in 14 remaining quarterly consecutive installments. The interest rate for Term loan II is linked to the US$ LIBOR at a premium of 3.75% above US$ LIBOR and is fixed on a quarterly basis. The floating rate on June 30, 2012 is 4.21785% (USD LIBOR of 0.46785% plus 3.75% premium).

   

The Hollister project and a surety signed by the Company serve as security for the loan (refer note 7).

   

Term loan II contains certain financial covenants customary to facilities of this nature and includes borrower tangible net worth, debt to equity ratio, debt service cover ratio and a loan life cover ratio. As at June 30, 2012, the Company assessed and complied with all covenants.

   

Refer to note 9(b) for details of the hedge structure entered into under the Term loan II agreement.

   
9.

Other liabilities


  Non-current portion of other liabilities            
               
      June 30     December 31  
      2012     2011  
      $ ‘000     $ ‘000  
   Zero cost collar program I (note 9(a))   13,793     17,834  
   Zero cost collar program II (note 9(b))   9,658     13,363  
      23,451     31,197  

  Current portion of other liabilities            
               
      June 30     December 31  
      2012     2011  
      $ ‘000     $ ‘000  
   Financial guarantee   2,143     2,165  
   Zero cost collar program I (note 9(a))   512     666  
   Zero cost collar program II (note 9(b))   585     219  
      3,240     3,050  

  The continuity of other liabilities is as follows:            
               
      June 30     December 31  
      2012     2011  
      $ ‘000     $ ‘000  
   Balance, beginning of the period   34,247     12,697  
   ZCC fair value upon inception   -     43,212  
   ZCC fair value upon novation   -     (18,295 )
   ZCC marked-to-market adjustments   (7,556 )   (3,814 )
   Foreign exchange   -     447  
   Balance, end of the period   26,691     34,247  

12


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

9.

Other liabilities (continued)

   

(a) Zero cost collar program I

   

In connection with Term loan I (refer note 8(a)), the Company executed a zero cost collar hedge program for a total 165,474 gold ounces over a period of five years that commenced in January 2012.

   

The pricing and delivery dates of the put and call options are presented in note 9(d) below.

   

The marked-to-market movements until June 30, 2012 were calculated using an option pricing model with inputs based on the following assumptions:


      June 30     December 31  
      2012     2011  
  Gold price (per ounce)   US$1,599     US$1,564  
  Risk free interest rate   0.31% - 0.96%     0.33% - 1.285%  
  Expected life   1 - 54 months     1 – 60 months  
  Gold price volatility   18.08% - 27.50%     20.35% - 32%  

  Gold delivery positions as at June 30, 2012:            
               
      June 30     December 31  
      2012     2011  
   Expired unexercised at no cost   7,776 ounces     Nil ounces  
   Delivered   Nil ounces     Nil ounces  
   Remaining positions   157,698 ounces     165,474 ounces  

(b) Zero cost collar program II

In connection with Term loan II (refer note 8(b)), the Company executed a zero cost collar hedge program for a total 117,500 gold ounces over a period of four years that commenced in January 2012.

The marked-to-market movements until June 30, 2012 were calculated using an option pricing model with inputs based on the following assumptions:

      June 30     December 31  
      2012     2011  
  Gold price (per ounce)   US$1,599     US$1,564  
  Risk free interest rate   0.31% - 0.79%     0.33% - 1.06%  
  Expected life   1 - 42 months     1 - 48 months  
  Gold price volatility   18.08% - 26.51%     20.35% - 30.76%  

  Gold delivery positions as at June 30, 2012:            
               
      June 30     December 31  
      2012     2011  
   Expired unexercised at no cost   5,250 ounces     Nil ounces  
   Delivered   Nil ounces     Nil ounces  
   Remaining positions   112,250 ounces     117,500 ounces  

13


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

9.

Other liabilities (continued)

(c) Classification

The fair values of the derivative instruments as of June 30, 2012 are as follows:

          Asset     Liability     Net  
          derivatives     derivatives     derivatives  
                         
          Estimated     Estimated     Estimated  
Derivatives not designated as hedging
instruments 		  Statement of financial
position classification 		    fair value
$’000 		    fair value
$’000 		    fair value
$’000 		 
Commodity contracts (gold) – ZCC 1   Other liabilities     10,446     (24,239 )   (13,793 )
Commodity contracts (gold) – ZCC 2   Other liabilities     2,707     (12,365 )   (9,658 )
          13,153     (36,604 )   (23,451 )
Commodity contracts (gold) – ZCC 1   Current other liabilities     5     (517 )   (512 )
Commodity contracts (gold) – ZCC 2   Current other liabilities     28     (613 )   (585 )
          33     (1,130 )   (1,097 )

(d) Gold delivery positions

The Company’s gold delivery positions as at June 30, 2012 are as follows:

Put options

            2012     2013     2014     2015     2016     Total  
      Strike price     AU oz     AU oz     AU oz     AU oz     AU oz     AU oz  
  ZCC – 1 $ 900     13,536     -     -     -     -     13,536  
  ZCC – 1 $ 950     -     28,506     -     -     -     28,506  
  ZCC – 1 $ 1,200     -     -     34,008     39,768     41,880     115,656  
  ZCC – 2 $ 1,050     5,250     36,000     36,000     35,000     -     112,250  
            18,786     64,506     70,008     74,768     41,880     269,948  

Call options

      Strike     2012     2013     2014     2015     2016     Total  
      price     AU oz     AU oz     AU oz     AU oz     AU oz     AU oz  
  ZCC – 1 $ 1,890     6,768     14,253     17,004     19,884     20,940     78,849  
  ZCC – 1 $ 1,930     6,768     14,253     17,004     19,884     20,940     78,849  
  ZCC – 2 $ 1,930     5,250     36,000     36,000     35,000     -     112,250  
            18,786     64,506     70,008     74,768     41,880     269,948  

10.

Share capital

(a) Authorized share capital

The Company’s authorized share capital consists of an unlimited number of common shares without par value.

14


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

10.

Share capital (continued)

(b) Public offering, March and April 2012

The Company completed a public offering on March 30, 2012 whereby it issued 66,700,000 units (the “Units”) at a price of $0.75 per Unit. On April 5, 2012, the Company issued a further 10 million Units for proceeds of $7.5 million upon closing the offering’s overallotment. Each Unit consisted of one common share (each, a “Common Share”) in the capital of the Company and one-half of one common share purchase warrant (each whole common share purchase warrant, a “Warrant”) of the Company.

Each Warrant entitles the holder thereof to purchase one Common Share at a price of $0.90 until expiry on March 30, 2014.

On the date of issuance, the fair value of the 38,352,500 warrants was estimated at $0.12 per warrant. The valuation was performed by using an option pricing model.

The Company paid the underwriters a fee of $2.9 million and incurred other share issue costs of approximately $0.64 million. Net proceeds of $49.5 million and $4.3 million have been recorded as share capital and warrants respectively.

(c) Share option plan

The continuity of share purchase options is as follows:

                Contractual weighted  
    Weighted average     Number of options     average remaining life  
    exercise price     (thousands)     (years)  
  Opening total at January 1 $ 1.97     17,958     2.22  
  Granted to employees $ 0.95     12,490        
  Cancelled $ 1.71     (20,270 )      
  Replaced $ 0.75     10,135        
  Expired $ 1.82     (1,227 )      
  Forfeited $ 1.73     (2,309 )      
    $ 0.83     16,777     3.70  

Directors, employees and certain consultants were allowed to cancel unexercised employee and non-employee stock options and receive new options equal to 50% of the cancelled options at an exercise price of $0.75 and vesting period of 24 months. The cancellation of these options was concluded on June 7, 2012.

The cancelled options were accounted for as cancellations in accordance with IFRS 2 where any carry forward cost not yet recognized was recognized immediately in the statement of operations. The new options issued were accounted for as modifications in accordance with IFRS 2, where the incremental value was recorded as additional cost measured by the difference between the fair value of the cancelled options calculated on the modification date and the value of the replacement options at the modification date. The amount is recognized over the vesting period of the replacement option. Any remaining compensation cost for as yet unvested cancelled options is also recognized over the new vesting period.

As at June 30, 2012, 1.2 million of the outstanding options were exercisable at an average exercise price of $1.87 per option and expiry dates ranging between March 26, 2013 and March 26, 2015.

15


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

10.

Share capital (continued)

(c) Share option plan (continued)

On June 1, 2012, 677,766 out of plan options expired unexercised. These options were issued with the acquisition of mineral properties in 2008.

Costs previously recognized on options were, upon forfeiture, reversed through the current period’s consolidated statement of loss.

The exercise prices of all share purchase options granted during the three and six months ended June 30, 2012 and 2011 were at or above the market price at the grant date.

Using an option pricing model with the assumptions noted below, the estimated fair value of options granted to employees which have been included in the consolidated statement of loss for the three and six months ended June 30, 2012, is as follows:

      Three months ended June 30  
      2012     2011  
      $ ‘000     $ ‘000  
  Total compensation cost recognized, credited to contributed surplus   3,374     3,095  
  Compensation cost allocated to production cost   (1,617 )   (1,521 )
  Share based payments expense   1,757     1,574  

      Six months ended June 30  
      2012     2011  
      $ ‘000     $ ‘000  
  Total compensation cost recognized, credited to contributed surplus   5,316     4,965  
  Compensation cost allocated to production cost   (2,540 )   (1,854 )
  Compensation cost capitalized on Burnstone mine development   -     (96 )
  Share based payments expense   2,776     3,015  

The weighted-average assumptions used to estimate the fair value of options granted during the respective periods were as follows:

      Three months ended     Six months ended  
            June 30           June 30  
      2012     2011     2012     2011  
  Risk free interest rate   1.86%     3%     1.79%     2.68%  
  Expected life   3.9 years     5 years     3.6 years     3.6 years  
  Expected volatility   67%     74.2%     64.21%     81%  
  Expected dividends   Nil     Nil     Nil     Nil  

11.

Additional cash flow information


  Supplementary information            
      Three months ended June 30  
      2012     2011  
      $’000     $’000  
               
  Income taxes paid   -     2  
               
  Non-cash investing activities:            
  Depreciation capitalized to property, plant and machinery (note 7)   1,806     1,569  

16


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

11.

Additional cash flow information (continued)


  Supplementary information (continued)            
      Three months ended June 30  
      2012     2011  
      $’000     $’000  
  Non-cash financing activities:            
  Fair value of stock options transferred to share capital from contributed surplus on options exercised   -     762  
  Fair value of warrants transferred to share capital on warrants exercised   -     2,727  

      Six months ended June 30  
      2012     2011  
      $’000     $’000  
               
  Income taxes paid   -     2  
               
  Non-cash investing activities:            
  Depreciation capitalized to property, plant and machinery (note 7)   3,463     2,318  
  Accrued interest capitalized to property, plant and machinery (note 7)   -     2,515  
  Share based compensation capitalized (refer note 10(c))   -     96  
               
  Non-cash financing activities:            
  Fair value of stock options transferred to share capital from contributed surplus on options exercised   -     1,574  
  Fair value of warrants transferred to share capital on warrants exercised   -     3,793  

12.

Segment disclosure

   

The Company operates in reportable operating segments to deliver on its strategy to explore, develop and exploit mineral properties. Management has determined the operating segments based on the reports reviewed by the Company's Chief Operating Decision Maker ("CODM") that are used to make strategic decisions. The Company's CODM is its Chief Executive Officer.

17


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

12.

Segment disclosure (continued)

   

Segment statement of income – three months ended June 2012


      North     South                    
      American     African     Tanzanian              
      operations     operations     operations     Other1     Total  
      $’000     $’000     $’000     $’000     $’000  
  Revenue   23,111     9,260     -     -     32,371  
  Cost of operations                              
  Production cost   (16,542 )   (13,623 )   -     -     (30,165 )
  Depletion charge   (1,086 )   (51 )   -     -     (1,137 )
  Depreciation charge   (993 )   (3,050 )   -     -     (4,043 )
  Expenses                              
  Exploration expenses   (2,226 )   (71 )   (308 )   -     (2,605 )
  Pre-development expenses   (5,009 )   -     -     -     (5,009 )
  Corporate and administrative cost   -     (22 )   (34 )   (1,410 )   (1,466 )
  Environmental impact study   (362 )   -     -     -     (362 )
  Foreign exchange gain (loss)   -     47     (4 )   (3,375 )   (3,332 )
  Salaries and compensation                              
   Salaries and wages   -     -     -     (2,136 )   (2,136 )
   Share based compensation   -     -     -     (1,757 )   (1,757 )
  Loss from operating activities   (3,107 )   (7,510 )   (346 )   (8,678 )   (19,641 )
  Interest expense   (728 )   (2,004 )   -     (4,540 )   (7,272 )
  Interest income   -     394     -     32     426  
  Net interest expense   (728 )   (1,610 )   -     (4,508 )   (6,846 )
  Loss from operating activities after net interest   (3,835 )   (9,120 )   (346 )   (13,186 )   (26,487 )
  Impairment of loan due from related party   -     -     -     (1,377 )   (1,377 )
  Profit on derivative instruments – net   2,452     5,656     -     -     8,108  
  Loss before income taxes   (1,383 )   (3,464 )   (346 )   (14,563 )   (19,756 )
  Income tax expense   (2,234 )   -     -     -     (2,234 )
  Net loss for the period   (3,617 )   (3,464 )   (346 )   (14,563 )   (21,990 )

1 Corporate entities

18


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

12.

Segment disclosure (continued)

   

Segment statement of income – three months ended June 2011


      North     South                    
      American     African     Tanzanian              
      operations     operations     operations     Other1     Total  
    $’000   $’000   $’000   $’000   $’000  
  Revenue   48,686     8,052     -     -     56,738  
  Cost of operations                              
  Production cost   (20,839 )   (8,433 )   -     -     (29,272 )
  Depletion charge   (1,615 )   (241 )   -     -     (1,856 )
  Depreciation charge   (1,258 )   (4,726 )   -     -     (5,984 )
  Expenses                              
  Exploration expenses   (3,063 )   (83 )   (297 )   -     (3,443 )
  Pre-development expenses   (3,686 )   -     -     -     (3,686 )
  Corporate and administrative cost   -     -     (255 )   (1,915 )   (2,170 )
  Environmental impact study   (488 )   -     -     -     (488 )
  Foreign exchange (loss) gain   -     -     (6 )   720     714  
  Salaries and compensation                              
   Salaries and wages   -     -     -     (2,171 )   (2,171 )
   Share based compensation   -     -     -     (1,574 )   (1,574 )
  Profit (loss) from operating activities   17,737     (5,431 )   (558 )   (4,940 )   6,808  
  Interest expense   (656 )   (1,245 )   -     (4,225 )   (6,126 )
  Interest income   -     340     -     64     404  
  Net interest expense   (656 )   (905 )   -     (4,161 )   (5,722 )
  Profit (loss) from operating activities after net interest   17,081     (6,336 )   (558 )   (9,101 )   1,086  
  (Loss) profit on derivative instruments – net   (1,226 )   (147 )   -     -     (1,373 )
  Profit (loss) before income taxes   15,855     (6,483 )   (558 )   (9,101 )   (287 )
  Income tax expense   (764 )   -     -     -     (764 )
  Net profit (loss) for the period   15,091     (6,483 )   (558 )   (9,101 )   (1,051 )

1 Corporate entities

19


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

12.

Segment disclosure (continued)

   

Segment statement of income – six months ended June 2012


      North     South                    
      American     African     Tanzanian              
      operations     operations     operations     Other1     Total  
    $’000   $’000   $’000   $’000   $’000  
  Revenue   46,164     19,580     -     -     65,744  
  Cost of operations                              
  Production cost   (29,584 )   (27,652 )   -     -     (57,236 )
  Depletion charge   (2,090 )   (107 )   -     -     (2,197 )
  Depreciation charge   (1,963 )   (5,467 )   -     -     (7,430 )
  Expenses                              
  Exploration expenses   (3,891 )   (189 )   (639 )   -     (4,719 )
  Pre-development expenses   (9,751 )   -     -     -     (9,751 )
  Corporate and administrative cost   -     (46 )   (58 )   (2,942 )   (3,046 )
  Environmental impact study   (882 )   -     -     -     (882 )
  Foreign exchange gain (loss)   -     92     (5 )   (510 )   (423 )
  Salaries and compensation                              
   Salaries and wages   -     -     -     (4,575 )   (4,575 )
   Share based compensation   -     -     -     (2,776 )   (2,776 )
  Loss from operating activities   (1,997 )   (13,789 )   (702 )   (10,803 )   (27,291 )
  Interest expense   (1,766 )   (3,641 )   -     (8,956 )   (14,363 )
  Interest income   -     807     -     41     848  
  Net interest expense   (1,766 )   (2,834 )   -     (8,915 )   (13,515 )
  Loss from operating activities after net interest   (3,763 )   (16,623 )   (702 )   (19,718 )   (40,806 )
  Impairment of loan due from related party   -     -     -     (4,000 )   (4,000 )
  Profit on derivative instruments – net   3,313     4,297     -     -     7,610  
  Loss before income taxes   (450 )   (12,326 )   (702 )   (23,718 )   (37,196 )
  Income tax expense   (2,564 )   -     -     -     (2,564 )
  Net loss for the period   (3,014 )   (12,326 )   (702 )   (23,718 )   (39,760 )

1 Corporate entities

20


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

12.

Segment disclosure (continued)

   

Segment statement of income – six months ending June 2011


      North     South                    
      American     African     Tanzanian              
      operations     operations     operations     Other1     Total  
    $’000   $’000   $’000   $’000   $’000  
  Revenue   71,195     11,886     -     -     83,081  
  Cost of operations                              
  Production cost   (32,078 )   (10,890 )   -     -     (42,968 )
  Depletion charge   (2,720 )   (270 )   -     -     (2,990 )
  Depreciation charge   (1,986 )   (5,212 )   -     -     (7,198 )
  Expenses                              
  Exploration expenses   (5,498 )   (207 )   (639 )   -     (6,344 )
  Pre-development expenses   (7,425 )   -     -     -     (7,425 )
  Corporate and administrative cost   -     -     (306 )   (4,146 )   (4,452 )
  Environmental impact study   (925 )   -     -     -     (925 )
  Foreign exchange (loss) gain   -     -     (12 )   3,189     3,177  
  Salaries and compensation                              
   Salaries and wages   -     -     -     (4,510 )   (4,510 )
   Share based compensation   -     -     -     (3,015 )   (3,015 )
  Profit (loss) from operating activities   20,563     (4,693 )   (957 )   (8,482 )   6,431  
  Interest expense   (812 )   (2,515 )   -     (7,870 )   (11,197 )
  Interest income   -     708     -     85     793  
  Net interest expense   (812 )   (1,807 )   -     (7,785 )   (10,404 )
  Profit (loss) from operating activities after net interest   19,751     (6,500 )   (957 )   (16,267 )   (3,973 )
  (Loss) profit on derivative instruments – net   (9,677 )   2,289     -     (8,817 )   (16,205 )
  Profit (loss) before income taxes   10,074     (4,211 )   (957 )   (25,084 )   (20,178 )
  Income tax expense   (1,214 )   -     -     -     (1,214 )
  Net profit (loss) for the period   8,860     (4,211 )   (957 )   (25,084 )   (21,392 )

Refined precious metals were sold to RK Mine Finance Trust I (“RK Mine”) under the terms of an off-take agreement.

Statement of financial position

      North     South                    
      American     African     Tanzanian              
      operations     operations     operations     Other1     Total  
  June 30, 2012 $’000   $’000   $’000   $’000   $’000  
                                 
  Total assets   178,640     647,762     45,198     16,436     888,036  
                                 
  Total liabilities   104,933     193,215     114     105,150     403,412  

1 Corporate entities

21


GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

12.

Segment disclosure (continued)

   

Statement of financial position (continued)


      North     South                    
      American     African     Tanzanian              
      operations     operations     operations     Other1     Total  
  December 31, 2011 $’000   $’000   $’000   $’000   $’000  
                                 
  Total assets   180,682     613,772     45,392     10,464     850,310  
                                 
  Total liabilities   100,198     174,941     19     103,584     378,742  

1 Corporate entities

Additions to non-current assets2

      North     South                    
      American     African     Tanzanian              
      operations     operations     operations     Other1     Total  
    $’000   $’000   $’000   $’000   $’000  
                                 
  June 30, 2012   3,494     61,343     -     86     64,923  
                                 
  December 31, 2011   7,353     143,641     (117 )   89     150,966  

1 Corporate entities
2 Additions to non-current assets exclude financial instruments and deferred tax assets

13.

Liquidity

   

The operational performance from the Nevada and South African operations resulted in a working capital deficit of approximately $23 million on June 30, 2012. The Board of Directors has recently initiated a review process to consider a range of strategic alternatives with a view to preserving and enhancing shareholder value in light of the continuing financial challenges. Strategic alternatives are likely to include, but are not limited to, the sale of all or a portion of the Company's assets, a merger or other business combination transaction involving a third party acquiring all of the Company, a capital raising, recapitalization, reorganization, or restructuring of the Company, as well as continued execution of the Company's existing business plan, or some combination of these alternatives. The Company is also working with its lenders to potentially restructure the current term loan facilities to improve the Company’s cash flow in the short to medium term.

   

In assessing whether the Company was a going concern management was cognizant of the near term liquidity challenges. However after assessing the carrying value of the principal assets management concluded that the realizable value of the Company’s aggregate assets continues to exceed aggregate liabilities by a significant margin. Given the residual shareholders’ equity in the business, management believes that a solution to the liquidity issue is more likely than not and hence has concluded in favour of going concern treatment.

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GREAT BASIN GOLD LTD.
Notes to the Consolidated Financial Statements
For the three and six months ended June 30, 2012 and 2011

14.

Subsequent events

Subsequent to June 30, 2012

(a) Related party transaction

Following negotiations between the Company, Tranter and Investec, a Term sheet was agreed to during late April 2012 setting out the mutually beneficial proposal whereby the Company provides Tranter with further financial assistance over a period of 18 months to enable them to meet their proposed restructured loan repayment obligations to Investec and thereby remove their current breach on the loan agreement. In terms of the proposal Investec will remove all cash margin requirements and also restructure the repayment in such a manner that the required assistance from the Company does not impact on its short term cash requirements. The parties are currently working on finalizing the legal agreements and obtaining the required approvals to enter into the binding legal agreements. Finalization of this restructured financial support is being delayed as a result of the strategic review process the Company has initiated.

Refer to note 6 for information on the loan advanced to Tranter.

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