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,
	2013		2012
Total stock compensation expense	$	1,694	$	2,579

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 is 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 2,856,358 were available for grant as of March 31, 2013. The exercise price of each option is not less than the closing price of Golden Star shares on the Toronto Stock Exchange on the day prior to the date of grant. Options typically vest over periods ranging from immediately to four years from the date of grant. Vesting periods are determined at the discretion of the Board of Directors.

We granted 2,693,805 and 4,537,000 options during the first three months of 2013 and 2012, respectively. Golden Star does not receive a tax deduction for the issuance of options. As a result, the Company does 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 2013 and 2012 were based on the assumptions noted in the following table:



	For the three months ended March 31,
	2013	2012
Expected volatility	56.11 to 68.19%	67.07 to 87.50%
Risk-free interest rate	1.17 to 1.62%	0.36 to 0.84%
Expected lives	3 to 7 years	4 to 7 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, 2013:



	Options (‘000)		Weighted– Average Exercise price (Cdn$)	Weighted– Average Remaining Contractual Term (Years)	Aggregate intrinsic value Cdn($000)
Outstanding as of December 31, 2012	12,337		2.74	6.2	541
Granted	2,694		1.71	6.2	—
Exercised	(90	)	1.70	5.9	18
Forfeited, canceled and expired	(751	)	2.85	5.2	—
Outstanding as of March 31, 2013	14,190		2.55	6.0	223

Exercisable as of March 31, 2013	9,996		2.81	5.9	117

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 Company did not issue shares under the Stock Bonus Plan during first quarter of 2013. 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, 2013.

Deferred Share Units

Our Deferred Share Unit Plan (the "DSU Plan") provides for the issue of Deferred Share Units (“DSUs”), each representing the potential right to receive one Golden Star common share upon redemption. DSUs may be redeemed only upon termination of the holder's services to the Company, and may be subject to vesting provisions. 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 compensation (other than director's retainers) 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. 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.

DSUs issued during the quarter ended March 31, 2013 were immediately vested and a compensation expense of $0.2 million was recognized for these grants. As of March 31, 2013, there was nil unrecognized compensation expense related to DSUs granted under the Company's DSU plan.

A summary of the DSU activity during the three months ended March 31, 2013:



		Number of Deferred Share Units
As of December 31, 2012		388,059
Grants		112,654
Exercises		—
As of March 31, 2013		500,713

Share Appreciation Rights

In February 2012, the Company adopted a Share Appreciation Rights Plan (the "SARs Plan") to provide incentive compensation based on the appreciation in value of the common shares over a specified period of time. Under the SARs plan, the Company may from time to time grant awards of Share Appreciation Rights ("SARs") to current and future directors, executive officers, employees and consultants of the Company and/or its subsidiaries. The SARs Plan is administered by the Compensation Committee, which determines from time to time who will participate in the SARs Plan, as well the terms of the grants, including the vesting provisions applicable to specific SARs grants. The vesting schedule of the SARs is determined at the discretion of the Board, but generally the SARs vest one-third on each of the first three anniversaries of the grant date. Upon exercise of a SAR, the participant will be entitled to receive an amount in respect of each SAR equal to the amount by which the fair market value of one common share as of the date of such exercise exceeds the fair market value of one common share as of the grant date of such SAR. No SARs will be settled in shares; rather, all SAR exercises will be settled solely in cash.

Since these awards are settled in cash, the Company determines the fair value of 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. The Company uses a Black-Scholes valuation model to determine the fair value of the outstanding SARs.

As of March 31, 2013, there was approximately $2.6 million of total unrecognized compensation cost related to unvested SARs. The Company recognized approximately $0.3 million of compensation expense related to these cash based awards for the three months ended March 31, 2013.

A summary of the SARs activity during the three months ended March 31, 2013:



	Number of SARs ('000)
As of December 31, 2012	1,079
Grants	1,940
Exercises	—
Canceled	(87	)
As of March 31, 2013	2,932