STOCK BASED COMPENSATION

Non-cash employee compensation expense recognized in general and administrative expense in the statements of operations, with respect to our non-cash employee compensation plans are as follows:



	For the three months ended March 31,
	2012		2011
Total stock compensation expense	$	2,579	$	1,342

STOCK OPTIONS

We have one stock option plan, the Third Amended and Restated 1997 Stock Option Plan (the “Plan”) approved by shareholders in May 2010, under which options are granted at the discretion of the Board of Directors. Options granted are non-assignable and are exercisable for a period of ten years or such other period as stipulated in a stock option agreement between Golden Star and the optionee. Under the Plan, we may grant options to employees, consultants and directors of the Company or its subsidiaries for up to 25,000,000 shares, of which 4,833,346 are available for grant as of March 31, 2012, and the exercise price of each option is not less than the closing price of our shares on the Toronto Stock Exchange on the day prior to the date of grant. Options typically vest over periods ranging from immediately to three years from the date of grant. Vesting periods are determined at the discretion of the Board of Directors.

We granted 4,537,000 and 1,718,000 options during the first three months of 2012 and 2011, respectively. We do not receive a tax deduction for the issuance of options. As a result, we do not recognize any income tax benefit related to the stock compensation expense.

The fair value of our option grants are estimated at the grant dates using the Black-Scholes option-pricing model. Fair values of options granted in the first three months of 2012 and 2011 were based on the assumptions noted in the following table:



	For the three months ended March 31,
	2012	2011
Expected volatility	67.07 to 87.50%	66.34 to 69.79%
Risk-free interest rate	0.36 to 0.84%	2.26 to 2.26%
Expected lives	4.3 to 7.4 years	5.6 to 8.5 years
Dividend yield	0%	0%

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

A summary of option activity under the Plan during the three months ended March 31, 2012:



	Options (‘000)		Weighted– Average Exercise price (Cdn$)	Weighted– Average Remaining Contractual Term (Years)	Aggregate intrinsic value Cdn($000)
Outstanding as of December 31, 2011	8,539		3.18	7.0	95
Granted	4,537		2.02	7.0	—
Exercised	(78	)	1.16	—	81
Forfeited, canceled and expired	(340	)	3.13	7.8	—
Outstanding as of March 31, 2012	12,658		2.79	6.8	358

Exercisable as of March 31, 2012	8,235		3.03	6.3	337



	Options (‘000)		Weighted– Average Exercise price (Cdn$)	Weighted– Average Remaining Contractual Term (Years)	Aggregate intrinsic value Cdn($000)
Outstanding as of December 31, 2010	6,724		3.35	7.0	9,001
Granted	1,718		2.83	10.0	—
Exercised	(48	)	2.73	7.0	132
Forfeited, canceled and expired	—		—	—	—
Outstanding as of March 31, 2011	8,393		3.25	7.4	1,896

Exercisable as of March 31, 2011	5,765		3.36	6.6	1,386

Stock Bonus Plan

In December 1992, we established an Employees' Stock Bonus Plan (the “Bonus Plan”) for any full-time or part-time employee (whether or not a director) of the Company or any of our subsidiaries who has rendered meritorious services which contributed to the success of the Company or any of its subsidiaries. The Bonus Plan provides that a specifically designated committee of the Board of Directors may grant bonus common shares on terms that it might determine, within the limitations of the Bonus Plan and subject to the rules of applicable regulatory authorities. The Bonus Plan, as amended, provides for the issuance of 900,000 common shares of bonus stock, of which 710,854 common shares have been issued as of March 31, 2012. 165,009 shares were issued in 2012 under the Stock Bonus Plan at a value of $0.3 million. No shares were issued in 2011.

Deferred Share Units

Our DSU Plan provides for Deferred Share Units (“DSUs”), each representing the right to receive one share of Golden Star common stock upon redemption. DSUs may be redeemed only upon termination of the holder's services to the Company, and may be subject to vesting provisions. DSU awards are granted at the sole discretion of the Company's compensation committee. The DSU Plan allows directors, at their option, to receive all or any portion of their retainer by accepting DSUs in lieu of cash.

The compensation committee may also award DSUs to executive officers and/or directors in lieu of cash as a component of their long term performance compensation, the amount of such awards being in proportion to the officer's or director's achievement of pre-determined performance goals. As with DSU awards for directors' retainers, DSUs received as performance compensation are redeemable only upon termination of the holder's services to the Company. The Company may, at its option, provide cash in lieu of common shares upon a holder's redemption, the cash value being established by the share price on the DSU original award date, less all applicable tax withholding.

During the first quarter of 2012, we granted 14,625 DSUs to directors of the Company in payment of fees earned in 2012. These units were immediately vested and a compensation expense of $31,882 was recognized for these grants. As of March 31, 2012, there was nil unrecognized compensation expense related to DSUs granted under the Company's DSU plan. There were 36,772 DSUs outstanding at March 31, 2012.

Stock Appreciation Rights

During the three months ended March 31, 2012, the Company granted 1,452,526 stock appreciation rights (SARs) that vest over a period of three years. These awards will be settled in cash equal to the Company’s stock price less the strike price on the vesting date. Since these awards are settled in cash, the Company marks-to-market the associated expense for each award at the end of each reporting period. The Company accounts for these as liability awards and marks-to-market the fair value of the award until final settlement.

As of the March 31, 2012, there was approximately $1.5 million of total unrecognized compensation cost related to unvested SARs. The Company recognized approximately $0.1 million of compensation expense related to these cash based awards for the three months ended March 31, 2012.