8-K/A 1 0001.txt AMENDMENT NO. 3 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A-3 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 30, 1999 GOLDEN STAR RESOURCES LTD. (Exact Name of Registrant as Specified in Its Charter) Canada 1-12284 98-0101955 (State or other Jurisdiction of Commission file number (I.R.S. Employer Incorporation or Organization) Identification No.)
1660 Lincoln Street, Suite 3000 Denver, Colorado 80264-3001 (Address of Principal Executive Office) (Zip Code) (303) 830-9000 (Registrant's telephone number, including area code) Not applicable ------------------------------------------------------------------------------- (Former name or former address, if changed since last report) =============================================================================== 1 Item 7. Financial Statements & Exhibits ------------------------------- Set forth below is the information required by Item 7(a), Financial Statements of Acquired Businesses, and by Item 7(b),Pro Forma Financial Information, of Form 8-K with respect to the Acquisition by Golden Star Resources Ltd. ("Golden Star" or the "Company") of Bogoso Gold Limited ("BGL") as disclosed on the Form 8-K filed with the Securities and Exchange Commission on October 14, 1999. (a) Financial Statements of Business Acquired Index to Historical BGL Financial Statements 1. Auditors' Opinion.......................................................3 2. Balance Sheet as of September 30, 1999 and June 30, 1998 and 1997..........................................4 3. Statements of Income and Expenditure for the three months ended September 30, 1999 and 1998 and for the years ended June 30, 1999, 1998 and 1997................5 4. Statements of Accumulated Deficit for the three months ended September 30, 1999 and for the years ended June 30, 1999, 1998 and 1997................6 5. Statements of Cash Flow for the three months ended September 30, 1999 and 1998 and for the years ended June 30, 1999, 1998 and 1997............................7 6. Notes to the Financial Statements....................................8-26 2 AUDITORS' REPORT TO THE MEMBERS OF BOGOSO GOLD LIMITED We have examined the financial statements of Bogoso Gold Limited for the years ended June 30, 1999, 1998 which have been prepared in accordance with the accounting policies set out in Note 2. Respective responsibilities of Directors and Auditors The company's Directors are responsible for the preparation of the financial statements. It is our responsibility to express an independent opinion, based on our audit, on those financial statements prepared by the Directors. Basis of opinion We conducted our audit in accordance with International Standards on Auditing and auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes an assessment of the accounting principles used and significant estimates and judgements made by the directors, and an evaluation of the overall adequacy of the presentation of the financial statements. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary for the purposes of our audit. We believe that our audit provides us with a reasonable basis for our opinion. Without qualifying our opinion, we draw attention to Note 18 of the financial statements which indicates that the company had accumulated losses as of June 30, 1999. This factor along with other matters set forth in Note 18 indicates that the company's ability to continue as a going concern requires continued support from the new shareholders. Opinion In our opinion, the company has kept proper books and the financial statements, which are in agreement with the books, give a true and fair view of the state of the company's affairs at June 30, 1999 and 1998 and of the loss and cash flow of the company for each of the three years then ended June 30, 1999 in conformity with International Accounting Standards and comply with the Ghana Companies Code 1963, (Act 179). /s/ PricewaterhouseCoopers Chartered Accountants Accra, Ghana DECEMBER 14, 1999 3 BALANCE SHEETS
(Unaudited) June 30, June 30, September 30, 1999 1999 1998 Note US$'000 US $'000 US $'000 ------- -------- -------- Fixed Assets 3 21,874 23,093 27,692 Development expenditure 4 12,942 13,806 18,648 Deferred assets 5 2,945 2,243 973 --------- --------- --------- 37,761 39,142 47,313 --------- --------- --------- Current assets Inventories 6 8,383 8,233 6,041 Accounts receivable 7 1,574 1,982 1,396 Cash and short cash equivalents 8 6,923 10,729 15,901 --------- --------- --------- 16,880 20,944 23,338 --------- --------- --------- Current liabilities 9 (14,041) (13,552) (11,882) --------- --------- --------- Net current assets 2,839 7,392 11,456 Total assets less current liabilities 40,600 46,534 58,769 --------- --------- --------- Less: Long term liabilities 10 (24,625) (24,564) (28,232) Environmental rehabilitation provision 11 (6,991) (10,209) (12,105) --------- --------- --------- (31,616) (34,773) (40,337) --------- --------- --------- 8,984 11,761 18,432 ========= ========= ========= Represented by: Stated capital 12 78,292 78,292 78,292 Accumulated deficit (69,308) (66,531) (59,860) Shareholders' advances 13 - - - --------- --------- --------- 8,984 11,761 18,432 ========= ========= =========
Director........................................ Approved by and signed on behalf of the Board of Directors on...........................1999 Director....................................... The notes on pages 8 to 26 form an integral part of these financial statements. 4 STATEMENTS OF INCOME AND EXPENDITURE
(Unaudited) (Unaudited) Three months Three months ended ended Year ended Year ended Year ended September 30, September 30, June 30, 1999 June 30, 1998 June 30, 1997 Note 1999 1998 US$'000 US$'000 US$'000 ------------- ------------ ------------- ------------- ------------- Sales proceeds 7,010 8,835 38,512 35,872 38,856 Less: Royalties on sales (210) (265) (1,155) (1,076) (1,166) --- --- ----- ----- ----- Net sale proceeds 6,800 8,570 37,357 34,796 37,690 Cost of sales Depreciation of fixed assets 2(b) (1,636) (2,595) (8,171) (5,990) (4,107) Amortization of development expenditure 2(c) (864) (4,133) (4,842) (5,856) (2,537) Other cost of sales (5,251) (6,242) (25,554) (19,286) (18,651) ------ ------ ------- ------- ------- (7,751) (13,168) (38,567) (31,132) (25,295) Gross operating profit (loss) (951) (4,598) (1,210) 3,664 12,395 General and administrative expenses (1,529) (2,218) (5,234) (12,332) (14,427) Loan and other interest waived 10(d) - - - 6,293 - Other income 275 82 2,203 778 2,533 ------- -------- -------- ------- ------- Net operating (loss)/ profit before interest expense (2,205) (6,734) (4,241) (1,597) 501 Interest expense (572) (648) (2,430) (7,113) (7,190) ------- ------ ------ ------ ------ Net loss before taxation 15 (2,777) (7,382) (6,671) (8,710) (6,689) Taxation 16 - - - - - ------- ------ ------ ------ ------ Net loss for the year (2,777) (7,382) (6,671) (8,710) (6,689) ======= ====== ======= ======= =======
The notes on pages 8 to 26 form an integral part of these financial statements. 5 STATEMENTS OF ACCUMULATED DEFICIT
(Unaudited) Three months ended Year ended Year ended Year ended September 30, 1999 June 30, 1999 June 30, 1998 June 30, US$`000 US$'000 US$'000 1997 US$'000 ------- ------- ------- ------------ Accumulated deficit brought forward (66,531) (59,860) (51,150) (44,461) Loss for the year transferred from statement of income and expenditure (2,777) (6,671) (8,710) (6,689) ------ ------- ------- ------- Accumulated deficit carried forward (69,308) (66,531) (59,860) (51,150) ======= ======= ======= =======
The notes on pages 8 to 26 form an integral part of these financial statements. 6 STATEMENTS OF CASH FLOW
(Unaudited) (Unaudited) Three months ended Three months ended September 30, September 30, Year ended Year ended Year ended 1999 1998 June 30, 1999 June 30, 1998 June 30, 1997 US$'000 US$'000 US$'000 US$'000 US$'000 Note ------- ------- ------- ------- ------- Net cash inflow from operating activities (a) 19 (2,407) 939 8,363 8,882 17,476 ------- ------- ------- ------- ------- Net cash outflow from investment and servicing of finance: Interest paid - (551) (2,203) (1,773) (1,327) Interest received 136 29 631 415 785 ------- ------- ------- ------- ------- Net cash outflow/(inflow) from investment and servicing of finance (b) 136 (522) (1,572) (1,358) (542) ------- ------- ------- ------- ------- Cash flow from investing activities: Purchase of tangible fixed assets and development expenditure (417) (2,282) (4,124) (3,187) (3,251) Sale of tangible fixed assets - - 27 5 116 Deferred mine and plant expenditure (1,118) (179) (5,156) (1,128) (2,199) ------- ------- ------- ------- ------- Net cash outflow from investing activities (c ) (1,535) (2,461) (9,253) (4,310) (5,334) ------- ------- ------- ------- ------- Net inflow before financing (a+b+c) (3,806) (2,044) (2,462) 3,214 11,600 ------- ------- ------- ------- ------- Cash flow from financing activities: Repayment of deferred liabilities - - - - - Repayment of loans - (1,578) (2,710) (3,933) (4,082) ------- ------- ------- ------- ------- Net cash outflow from financing (d) - (1,578) (2,710) 3,933) (4,082) ------- ------- ------- ------- ------- (Decrease)/ increase in cash and cash equivalents (a+b+c+d) (3,806) (3,622) (5,172) (719) 7,518 Cash and cash equivalents at beginning of period 10,729 15,901 15,901 16,620 9,102 ------- ------- ------- ------- ------- Cash and cash equivalents at end of period 6,923 12,279 10,729 15,901 16,620 ------- ------- ------- ------- -------
The notes on pages 8 to 26 form an integral part of these financial statements. 7 NOTES TO THE FINANCIAL STATEMENTS 1. The Company ----------- Bogoso Gold Limited (the "Company"), known as Billiton Bogosu Gold Limited until November 14, 1997, was granted a prospecting licence by the Government of Ghana on August 16, 1988 to work, develop and produce gold in a defined concession area at Bogoso, Western Region, Ghana, for a period of thirty years. Under an agreement signed on November 30, 1994, and effective July 1, 1994, the Shell Group transferred its assets of Billiton Group to Billiton Group (BVI) Limited, a company incorporated in the British Virgin Islands whose ultimate holding company was Gencor Limited, a company incorporated in South Africa. On July 1, 1997, the Company was owned 82% by Billiton Group (BVI) Limited, with 8% held by International Finance Corporation and the remaining 10% held by the Government of Ghana. On April 27, 1998, the 82% holding was transferred to Orogen Holdings (BVI) Limited due to a reorganisation within Gencor Limited. Subsequently, this shareholding was transferred to Gencor Bogoso Holdings (BVI) Limited on May 19, 1998. As part of a Shareholders Reorganisation Agreement effective June 30, 1998, the 82% shareholding of Gencor was transferred to a Consortium of nine banks, namely, International Finance Corporation, Credit Lyonnais, The Sumitomo Bank Limited, Ecobank Transnational Inc., Societe Generale, Bank Austria, Bank Internationale a Luxembourg, DB (Belgium) Finance N.V./S.A. and Deutsche Investitions und Entwicklungsgesellschaft GmbH. In addition, advances, loans and interest payable of US$60,070,000 effective June 30, 1998 were converted into 540,639 Class A Shares. See Note 12 to the financial statements for details of the shareholdings as at June 30, 1998. Effective September 30, 1999, the shares of the consortium of nine banks were sold to Golden Star Resources Ltd., a company incorporated in Canada and Anvil Mining NL, a company incorporated in Australia. Following these share transfers Golden Star Resources Ltd. owns 70% of the shares, Anvil Mining NL owns 20% and the Government of Ghana owns the remaining 10%. 2. Accounting policies ------------------- The following are the significant accounting policies adopted by the Company in the preparation of these financial statements: (a) Basis of accounting ------------------- The financial statements have been prepared under the historical cost convention. (b) Fixed assets ------------ These assets are valued at cost less accumulated depreciation. They are depreciated over their expected useful lives, with varying lives between different groups of assets ranging from five to ten years. 8 NOTES TO THE FINANCIAL STATEMENTS (Continued) 2. Accounting policies (Continued) ------------------------------ (b) Fixed assets (Continued) ------------------------ Change in method of depreciation: With effect from July 1, 1997, the Company changed its estimate in calculating the depreciation charge for the plant and machinery only. The new method assumes the estimated remaining economic life of the assets to be to June 30, 2003. Previously these assets were depreciated over lives of between five and ten years. (c) Development expenditure ----------------------- Development expenditure is valued at cost and is amortised on a straight line basis, taking into consideration the estimated economic life of the specific project, which is reviewed on a regular basis and to the extent to which this value exceeds its recoverable amount that excess is fully written off in the financial year in which this is determined. Change in method of amortisation: With effect from July 1, 1997, the Company changed its method of calculating the amortisation charge on its development expenditure from a unit of production basis to straight line. In addition, the new method assumes the estimated remaining economic life of the project to be to June 30, 2003. (d) Deferred assets --------------- Deferred assets mainly represent costs for major overhauls of equipment to improve the equipment or extend their useful lives. These costs are deferred and amortised over the remaining useful lives of the equipment. (e) Functional currency ------------------- The functional currency of the Company is the United States dollar since the capital invested, the financing of the Company and all sales proceeds are in United States dollars, and approximately 70% of expenditures are dollar related, with the remaining 30% being in Ghanaian currency. (f) Foreign currency translation ---------------------------- Current assets and liabilities denominated in foreign currencies are translated into the functional currency (United States dollars) at the rates of exchange ruling at the balance 9 NOTES TO THE FINANCIAL STATEMENTS (Continued) 2. Accounting policies (Continued) ------------------------------ (f) Foreign currency translation (Continued) --------------------------------------- sheet date. Items in the statement of income and expenditure are translated at the average rate for the period. Gains and losses arising from the translation of balances are dealt with through the income and expenditure statement. (g) Inventories ----------- Inventories have been valued at the lower of cost (weighted average cost basis), and net realisable value (being estimated sales proceeds less expenses incurred in making the sale). For ore and gold inventories, cost comprises all direct production costs and attributable operating expenses, including depreciation. For consumable and spare parts, cost comprises direct purchase costs. Where appropriate, provision for obsolescence has been included in the inventory valuation. (h) Accounts receivable ------------------- Accounts receivable are shown at nominal value less, where necessary, provision for bad and doubtful debts. (i) Cash equivalents ---------------- Cash at bank, in hand and in short term deposits is shown at nominal value. (j) Long-term and short-term liabilities ------------------------------------ These are shown at nominal value. (k) Net sales proceeds ------------------ These are the proceeds from the sale of gold bullion, after deduction of sales taxes, discounts, excise duties, and similar levies. The sale of gold bullion was to Billiton Marketing and Trading B.V. (BMT), under the terms of the Gold Refining and Marketing Agreement dated January 18, 1990. This agreement ended on June 30, 1998. An agreement for gold purchase and refining has been agreed with Societe Generale and is pending execution upon formal termination of the BMT agreement. (l) Cost of sales ------------- These are the historical costs of direct production and production support activities, including related depreciation, amortisation salaries and wages. 10 NOTES TO THE FINANCIAL STATEMENTS (Continued) 2. Accounting policies (Continued) ------------------------------ (m) General and administrative expenses ----------------------------------- The administrative expenses include related depreciation, salaries and wages. All amounts as of and for the three months ended September 30, 1999 and 1998 are unaudited. 11 NOTES TO THE FINANCIAL STATEMENTS (Continued) 3. Fixed Assets ------------
Land & Plant & Mobile Other Capital Buildings Machinery Equipment Equipment WIP Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 ------- ------- ------- ------- ------- ------- Cost At July 1, 1998 9,073 39,240 14,070 4,156 2,899 69,438 ----- ------ ------ ----- ------ ------ Additions - - - - 4,124 4,124 Transfers/ disposals/ reclassifications 129 1,306 2,283 451 (5,186) (1,017) ----- ------ ------ ----- ------ ------ At June 30, 1999 9,202 40,546 16,353 4,607 1,837 72,545 ----- ------ ------ ----- ------ ------ Additions - - - - 417 417 Transfers/ disposals/ reclassifications 41 199 143 34 (417) - ----- ------ ------ ----- ------ ------ At Sept. 30, 1999 9,243 40,745 16,496 4,641 1,837 72,962 Accumulated Depreciation At July 1, 1998 5,362 21,034 12,167 3,183 - 41,746 ----- ------ ------ ----- ------ ------ Charge for the year 1,665 5,016 1,050 440 - 8,171 Transfers/ disposals - - (465) - - (465) ----- ------ ------ ----- ------ ------ At June 30, 1999 7,027 26,050 12,752 3,623 - 49,452 ----- ------ ------ ----- ------ ------ Charge for the period 281 888 334 133 - 1,636 Transfers/ disposals - - - - - - ----- ------ ------ ----- ------ ------ At Sept. 30, 1999 7,308 26,938 13,086 3,756 - 51,088 Net book value At Sept. 30, 1999 1,935 13,807 3,410 885 1,837 21,874 ===== ====== ====== ===== ====== ====== At June 30, 1999 2,175 14,496 3,601 984 1,837 23,093 ===== ====== ====== ===== ====== ====== At June 30, 1998 3,711 18,206 1,903 973 2,899 27,692 ===== ====== ====== ===== ====== ======
4. Development expenditure -----------------------
(Unaudited) September 30, June 30, 1999 June 30, 1998 1999 US$'000 US$'000 ---------- ------- ------- Balance at beginning of period 13,806 18,648 24,430 Expenditure for the period - - 74 Less: Amortisation during the period (See Note 2(c)) (864) (4,842) (5,856) ----- ------ ------ Balance at end of period 12,942 13,806 18,648 ====== ====== ======
12 NOTES TO THE FINANCIAL STATEMENTS (Continued) 5. Deferred assets --------------- (Unaudited) September 30, June 30, June 30, 1999 1999 1998 US$'000 US$'000 US$'000 ------- ------- ------- Balance at beginning of period 2,243 973 3,709 Expenditure for the period 1,118 5,156 1,128 Less: Amortisation during the period (see Note 2(d)) (416) (3,886) (3,864) ------ ------ ------ Balance at end of period 2,945 2,243 973 ====== ====== ====== 6. Inventories ----------- Ore 2,205 2,465 784 In-process 949 677 563 Finished - - 398 ----- ----- ----- 3,154 3,142 1,745 Consumables and spare parts 5,229 5,091 4,296 ----- ----- ----- 8,383 8,233 6,041 ===== ===== ===== 7. Accounts receivable ------------------- (Unaudited) September 30, June 30, June 30, 1999 1999 1998 US$'000 US$'000 US$'000 ------- ------- ------- Sundry receivables 1,426 1,561 914 Employee advances 27 217 186 Prepaid expenses 121 204 296 ----- ----- ----- 1,574 1,982 1,396 ===== ===== ===== 8. Cash and short term deposits ---------------------------- Balance held within Ghana (40) (592) 320 Balances held externally 6,963 11,321 15,581 ----- ------ ------ 6,923 10,729 15,901 ===== ====== ====== 13 NOTES TO THE FINANCIAL STATEMENTS (Continued) 9. Current liabilities
(Unaudited) September 30, June 30, June 30, Note 1999 1999 1998 US$'000 US$'000 US$'000 ------- ------- ------- Long-term liabilities - current portion 9(a) 4,931 4,914 3,956 Loan interest payable 9(b),10 4,748 4,177 4,049 Amounts owed to suppliers 1,782 1,363 1,490 Amounts owed to group companies - - - Accruals and other payables 22 2,580 3,098 2,387 ------ ------ ------ 14,041 13,552 11,882 ====== ====== ====== (a) Long-term liabilities - current portion International Finance Corporation 10 3,725 3,725 2,937 Deutsche Investitions und Entwicklungsgesellschaft GmbH 10 1,206 1,189 1,019 Consortium of Banks (ex New Billiton loan) 10 - - - ------ ------ ------ (b) Loan interest payable 4,931 4,914 3,956 ====== ====== ====== International Finance Corporation 3,605 3,180 3,024 Deutsche Investitions und Entwicklungsgesellschaft GmbH 1,143 997 1,025 Consortium of Banks (ex New Billiton loan) - - - ------ ------ ------ 4,748 4,177 4,049 ====== ====== ======
14 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10. Long term liabilities
September 30, June 30, June 30, 1999 1999 1998 Note US$'000 US$'000 US$'000 ------- ------- ------- Formerly - International Finance Corporation 10(b) Tranche 1 4,827 4,827 6,608 Tranche 2 13,630 13,630 13,630 ------ ------ ------- 18,457 18,457 20,238 Less: Current portion Tranche 1 9(a) (3,725) ( 3,725) ( 2,937) ------ ------ ------- 14,732 14,732 17,301 ------ ------ ------- Formerly - Deutsche Investitions und 10(c) Entwicklungsgesellschaft GmbH Tranche 1 1,502 1,481 2,150 Tranche 2 4,268 4,211 4,471 ----- ------ ------- 5,770 5,692 6,621 Less : Current portion Tranche 1 9(a) (1,206) (1,189) (1,019) ------ ------ ------- 4,564 4,503 5,602 ----- ------ ------- International Finance Corporation - advance 5,329 5,329 Anvil International Finance Ltd. 1,066 - - Bogoso Holdings (Golden Star Resources Ltd.) 3,730 - - Government of Ghana 533 - - Interest Payable on shareholders 10(d) advances - - - ------ ------ ------- 24,625 24,564 22,903 ====== ====== =======
(a) The loans are secured by a first fixed and floating charge on fixed assets and the mining leases; the assignment of the rights of the Company under the Gold Refining and Marketing Agreement; a charge on the foreign exchange retention accounts of the Company under the Foreign Exchange Retention Account Agreement; and the assignment of insurances. (b) International Finance Corporation loans, which totaled US$43,000,000 are divided into six loans comprising an A1 loan of US$9,570,000, an A2 loan of US$4,430,000, a B1 loan of US$16,400,000, a B2 loan of 15 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10. Long term liabilities (Continued) -------------------------------- US$7,600,000, a C1 loan of US$3,400,000 and a C2 loan of US$1,600,000. The A1, B1 and C1 loans were repayable in 15 semi-annual installments which commenced on October 1, 1993 and thereafter each six months, with the final installment due on October 1, 2000, attracting interest at LIBOR plus 2.125% per annum on the principal outstanding. The A2, B2 and C2 loans are repayable in 20 semi-annual installments which were to commence on April 1, 1995 and thereafter each six months with the final installment due on October 1, 2004, attracting interest at LIBOR plus 2.5% per annum on the principal outstanding. BGL has notified IFC pursuant to Section 3.03 (h) of the IFC Rescheduling and Amendatory Agreement that there is insufficient cash available to be able to repay the respective principal installments of the A2, B2 and C2 loans which fell due commencing April 1, 1995. The Company did make payments of interest in respect of the A2, B2, and C2 loans in October 1997 but not in April 1998 for the year ended June 30, 1998 and such interest is due on the next interest payment date thereafter unless demanded or paid beforehand. In respect of the amount of such payment due and unpaid, interest at 1% above libor plus 2.125% per annum is in effect from the date any such amount became due until the date of actual payment. (c) Deutsche Investitions und Entwicklungsgesellschaft GmbH loans, which totaled DM25,000,000 (approximately US$13.1 million at June 30, 1998) are divided into two loans comprising an A1 loan of DM17,100,000 (approximately US$9.1 million) and an A2 loan of DM7,900,000 (approximately US$4.2 million). The A1 loan was repayable in 15 semi-annual installments which commenced on October 1, 1993 and thereafter each six months with the final installment due on October 1, 2000 attracting interest at the rate of 8.125% per annum on the principal outstanding. The A2 loan is repayable in 20 semi-annual installments which commenced on April 1, 1995 and thereafter each six months with the final installment due on October 1, 2004, attracting interest at the rate of 8.75% per annum on the principal balance outstanding. BGL has notified the DEG that the relevant Tranche 2 cash availability is insufficient for the Company to be able to repay the respective principal installments of the A2 loan which fell due commencing April 1, 1995. The Company did make a payment of interest in respect of the A2 loan in October 1997 but not in April 1998 for the year ended June 30, 1998 and such interest shall be payable on the next interest payment date thereafter, unless demanded or paid beforehand. Interest at 10.75% per annum on the balance outstanding is in effect from the date any such amount became due until the date of actual payment. 16 NOTES TO THE FINANCIAL STATEMENTS (Continued) 10. Long term liabilities (Continued) -------------------------------- (d) The Company obtained loans totaling US$13,800,000 divided into a Tranche A loan of US$8,800,000 and Tranche B loan of US$5,000,000, under the terms of the Billiton Loan Amending Agreement. The Tranche A loan is repayable in 20 semi-annual installments commencing on April 1, 1995 and thereafter each six months with the final installment due on October 1, 2004, attracting interest at the rate of LIBOR plus 2.5% per annum on the principal balance outstanding. Penalty interest is charged at 1% above the relevant interest rate if payment is not made. The Tranche A loan was transferred to the Consortium of nine the main shareholders of the Company effective June 30, 1998. At this date, the Consortium converted the Tranche A loan of US$8,800,000 and the cumulative interest of US$2,275,000 into Class A Shares (See Note 13). The Tranche B loan of US$5,000,000 and the cumulative interest of US$1,293,000 was waived on June 30, 1998. (e) Interest on shareholders' advances of US$24,324,000 was converted into Class A Shares effective June 30, 1998 (See Note 13). 11. Environmental rehabilitation provision -------------------------------------- Costs are estimated based primarily upon environmental and regulatory requirements and are accrued and charged to expense over the expected economic life of the operation. The environmental rehabilitation provision to meet closure costs is currently made at the rate of US$1 per milled ton of ore 12. Stated capital --------------
(Unaudited) September 30, June 30, June 30, 1999 1999 1998 No. of shares No. of shares No. of shares ------------- ------------- ------------- Authorised shares ----------------- Class A shares 18,000,000 18,000,000 18,000,000 Class B shares 2,000,000 2,000,000 2,000,000 ---------- ---------- ---------- 20,000,000 20,000,000 20,000,000 ========== ========== ==========
17 NOTES TO THE FINANCIAL STATEMENTS (Continued) 12. Stated capital (Continued) -------------------------
(Unaudited) September 30, June 30, June 30, 1999 1999 1998 ---- ---- ---- No. of Amount No. of Amount No. of Amount Issued: shares US$'000 shares US$'000 shares US$'000 ------- ------ ------- ------ ------- ------ ------- Class A shares 704,639 78,293 704,639 78,293 704,639 78,293 Class B shares 78,293 - 78,293 - 78,293 - ------- ------ ------- ------ ------- ------ 782,932 78,293 782,932 78,293 782,932 78,293 ======= ====== ======= ====== ======= ======
The Company issued 540,639 additional Class A Shares for the conversion of advances, loans and interest payable of US$60,070,000 as at June 30, 1998 (See Note 13). In addition, the Government of Ghana was issued 60,071 Class B Shares for no consideration, to maintain their proportionate 10% ownership of the Company. The shareholders of the Company as at September 30, 1999, June 30, 1999 and 1998 are as follows:
(Unaudited) September 30, 1999 June 30, 1999 June 30, 1998 Number Number Number ------ ------ ------ Class A shares International Finance Corporation - 216,270 216,270 DEG-Deutsche Investitions und Entwicklungsgesellschaft mbH - 158,004 158,004 Societe Generale - 91,140 91,140 Credit Lyonnais - 76,897 76,897 Bank Austria AG - 45,566 45,566 DB (Belgium) Finance N.V./S.A - 45,566 45,566 The Sumitomo Bank Limited - 31,331 31,331 Banque International a Luxembourg - 28,477 28,477 Transnational Incorporated - 11,388 11,388 Anvil International Finance Ltd. 156,586 - - Bogoso Holdings 704,639 - - ------- ------- ------- 704,639 704,639 704,639 Class B shares Government of Ghana 78,293 78,293 78,293 ------- ------- ------- Total Shares 782,932 782,932 782,932 ======= ======= =======
18 NOTES TO THE FINANCIAL STATEMENTS (Continued) 13. Shareholders' advances ---------------------- Shareholders' advances represented interest bearing foreign currency advances made under the terms of the Revised Shareholders Financing Agreement of March 22, 1994. These advances attracted interest at the rate of 10% per annum. In accordance with letters of consent from the shareholders, the advances, loans and interest payable to the consortium of banks were converted into Class A Shares effective June 30, 1998. The IFC advance of US$5,329,000 will not accrue any further interest on the remaining principal from June 30, 1999. 14. Net loss before taxation is stated after charging/(crediting) -------------------------------------------------------------
September 30, 1999 June 30, 1999 June 30,1998 US$'000 US$'000 US$'000 ------- ------- ------- Auditors' remuneration 6 25 22 Bad and doubtful debts - 2 350 Directors' fees 3 36 6 Director's emoluments 41 162 162 Director's compensation for loss of office - - 68 Exchange (gain)/loss (31) (426) (210) Interest received (137) (631) (415) Inventory write down 1 40 2,078 Loss/(profit) on disposal of assets - (14) 16 Roaster write-off - - - Rehabilitation expenditure 338 1,352 2,125 ==== ====== =====
15. Taxation -------- The Company has no taxation charge for the nine months ended September 30, 1999 or the years ended June 30, 1999 or 1998 or 1997 as there are significant tax losses to carry forward. However, the Company has a tax credit of U.S. $249,000 being Value Added Tax paid on inputs. 16. Capital commitments ------------------- Capital expenditure authorised but not yet expended as at September 30, 1999, June 30, 1999 and at June 30, 1998 were $125,000, nil and $6,483,000, respectively. 17. Contingent liabilities ---------------------- (a) Hedged gold The Company had no hedged gold contracts as at September 30, 1999, June 30, 1999 or June 30, 1998. 19 NOTES TO THE FINANCIAL STATEMENTS (Continued) 17. Contingent liabilities (Continued) ---------------------------------- (b) Staff car loans The Company had guaranteed car loans to senior staff provided through Barclays Bank of Ghana Limited until early 1999. The balance guaranteed as at June 30, 1998 amounted to $43,085. 18. Going concern and subsequent events ----------------------------------- The Company has accumulated losses of $66,531,000 as at June 30, 1999 due to trading losses over the past years as a result of the high cost of servicing a heavy debt portfolio and the declining gold price, as well as working capital problems with the non-payment of external debt and limited finance available for an on-going capital renewal program. The Company has been deferring payments due on long-term loans. A major exploration program has been undertaken to identify proven and probable oxide reserves to extend the life of the mine. In addition, the exploration work has identified highly prospective targets and investigations are underway into alternative sources of ore such as the treatment of tailings. As discussed in Note 1, effective September 30, 1999 the consortium of nine banks sold their shares and assigned their debts owed them by the Company to new shareholders, Golden Star Resources Ltd. and Anvil Mining NL. 19. Net cash inflow from operating activities -----------------------------------------
(Unaudited) Three months ended Year ended Year ended September 30, 1999 June 30, 1999 June 30, 1998 US$'000 US$'000 US$'000 ------- ------- ------- Net operating (loss)/profit before interest expense (2,205) (4,241) (1,597) Depreciation 1,636 8,171 5,990 Amortisation of development expenditure 864 4,842 5,856 Amortisation of deferred assets 416 3,886 3,864 (Increase)/decrease in inventories (150) (2,192) 3,291 (Increase)/decrease in accounts receivable 407 (586) (371) (Decrease)/increase in creditors (99) 584 (519) (Decrease)/increase in long term liabilities (3,140) (1,896) (735) Loan and interest waiver - - (6,293) Exchange (gain)/loss on loans - (99) (205) Loss/(profit) on disposal of assets - (14) 16 Interest income (136) (631) (415) Reclassification of fixed assets - 539 - ------ ----- ----- (2,407) 8,363 8,882 ====== ===== =====
20 NOTES TO THE FINANCIAL STATEMENTS (Continued) 20. Reclassification ---------------- The prior years comparative figures have been reclassified where applicable to be consistent with the current year's presentation. 21. Generally Accepted Accounting Principles in the United States and Canada ------------------------------------------------------------------------ The financial statements have been prepared in accordance with generally accepted accounting principles and in compliance with Ghana Companies Code 1963 (Act 179), in the United Kingdom which differ in certain respects from those principles that the Company would have followed had its financial statements been prepared in accordance with accounting principles generally accepted in the United States or Canada. Differences which materially affect these financial statements are: (a) Under U.S. GAAP, items such as foreign exchange gains and losses are required to be shown separately in the derivation of comprehensive income. Under Canadian GAAP, foreign exchange gains and losses related to the translation of foreign currency loans would be deferred and amortised over the remaining period of the loan. The Company has certain loans denominated in deutschmarks. (b) Under U.S. GAAP, changes in accounting policies are accounted for in the year of change and includes the cumulative effect of that accounting change. Under Canadian GAAP, changes are applied retroactively to prior period financial statements by restating the prior years' financial statements and the prior year opening retained earnings balance in the earliest year reported. In June 1998, the Company changed its method of amortization of development expenditure costs from units of production to straight line. (c) Under U.S. GAAP, extraordinary items are usually limited to unusual and infrequent events. Such items are reported separately in the statement of operations, net of taxes, and included in the determination of net income. Under Canadian GAAP, gains and losses from the extinguishment of debt generally do not meet the criteria for extraordinary items. During the year ended June 30, 1998, creditors forgave portions of certain loans as discussed Note 10. (d) Under U.S. and Canadian GAAP, basic earnings per share of common stock is calculated on the weighted average number of common shares outstanding during the period and is required for each period presented. Per share amounts are reflected for income before extraordinary items, the cumulative effect of a change in accounting principle and for net income. (e) Under U.S. and Canadian GAAP, the impact of a change in accounting estimate is recorded in the current reporting period, typically three- month quarters. As of June 30, 1998, the Company changed the estimated remaining useful lives of its plant and machinery and mine to five years, effective as of July 1, 1997. Under U.S. and Canadian 21 GAAP, the impact of the change in estimate would have been recorded as of April 1, 1998, resulting in a lower charge for depreciation and amortization for the year ended June 30, 1998. 22 NOTES TO THE FINANCIAL STATEMENTS (Continued) Had the Company followed GAAP in the United States and Canada, certain items on the statements of operations would have been reported as follows: Statement of operations (Stated in thousands of United States Dollars except per share amounts)
(Unaudited) (Unaudited) Three months Three months Year ended Year ended Year ended ended ended June 30, June 30, June 30, Sept. 30, 1999 Sept. 30, 1998 1999 1998 1997 US$'000 US$'000 US$'000 US$'000 US$'000 -------- -------- --------- -------- -------- Net loss as presented $ (2,777) $ (7,382) $ (6,671) $ (8,710) $ (6,689) Foreign exchange gain (a) (65) 19 (238) (6) (75) Change in accounting estimate (e) - - - 3,084 - Extraordinary gain on extinguishment of debt (c) - - - (6,293) - -------- -------- --------- -------- -------- Income before extraordinary item (2,842) (7,363) (6,909) (11,925) (6,764) Extraordinary gain on extinguishment of debt (c) - - - 6,293 - Cumulative effect of change in accounting principle (b) - - - 1,083 - -------- -------- --------- -------- -------- Net income (loss) under U.S. GAAP (2,842) (7,363) (6,909) (4,549) (6,764) Other comprehensive income - foreign exchange gain (a) (65) (19) 238 6 75 -------- -------- --------- -------- -------- Comprehensive income (a) $ (2,777) $ 7,382) $ (6,671) $ (4,543) $ (6,689) ======== ======== ========= ======== ======== Per share data (d): Extraordinary gain on extinguishment of debt - - - $ 34.32 - ======== ======== ========= ======== ======== Cumulative effect of change in accounting principle - - - $ 5.91 - ======== ======== ========= ======== ======== Basic and diluted net loss per share under U.S. GAAP $ (3.55) $ (9.42) $ (8.82) $ (24.77) $ (36.71) ======== ======== ========= ======== ======== Weighted average shares outstanding (basic and diluted) 782,932 782,932 782,932 183,369 182,222 ======== ======== ========= ======== ======== Reconciliation to Canadian GAAP: Net loss under U.S. GAAP (2,842) (7,363) (6,909) (4,549) (6,764) Amortisation of foreign exchange gain (a) 53 38 162 28 50 Cumulative effect of change in accounting principle applied retroactively 3,196 1,859 2,861 1,521 1,083 -------- -------- --------- -------- -------- Net loss under Canadian GAAP 407 (5,466) (3,886) (3,000) (5,631) ======== ======== ========= ======== ======== Net loss per share under Canadian GAAP $ (0.52) $ (6.98) $ (4.96) $ (16.36) $ (30.90) ======== ======== ========= ======== ========
23 NOTES TO THE FINANCIAL STATEMENTS (Continued) 22. Generally Accepted Accounting Principles in the United States and Canada ------------------------------------------------------------------------ (Continued) ----------- The effect of differences in accounting under U.S. GAAP and Canadian GAAP on the balance sheets, statement of changes in shareholders' equity and statements of cash flow are as follows: Balance Sheet
(Unaudited) September 30, 1999 June 30, 1999 ------------------ ------------- Canadian U.S. Canadian U.S. As presented GAPP GAAP As presented GAAP GAAP ------------ ---- ---- ------------ ---- ---- Fixed assets 21,874 22,768 22,768 23,093 23,873 23,873 Development 13,806 19,805 16,944 expenditure (b) 12,942 19,081 15,885 Accumulated comprehensive income - - 384 - - 319 Accumulated deficit (69,308) (57,732) (65,525) (66,531) (58,139) (62,683) Total shareholders' equity 8,984 16,348 13,152 11,761 18,790 15,929
June 30, 1998 ------------- Canadian U.S. -------- ---- As presented GAAP GAAP ------------ ---- ---- Fixed assets 27,692 28,243 28,243 Development expenditure (b) 18,648 22,702 21,181 Accumulated comprehensive income - - 81 Accumulated deficit (59,860) (54,253) (55,774) Total shareholders' equity 18,432 24,121 22,600
Under U.S. GAAP, accruals and other payables would be separately disclosed as follows:
(Unaudited) September 30, June 30, June 30, 1999 1999 1998 ---- ---- ---- Accrued payroll, taxes and bonus 305 594 494 Accrued redundancy costs 50 302 356 Accrued royalties 312 266 222 Accrued electricity 163 393 116 Accrued mining department costs 94 152 - Other accrued liabilities 1,656 1,391 1,199 ----- ----- ----- Total accruals and other payables 2,580 3,098 2,387 ===== ===== =====
24 NOTES TO THE FINANCIAL STATEMENTS (Continued) 21. Generally Accepted Accounting Principles in the United States and Canada ------------------------------------------------------------------------ (Continued) ----------- Statement of Changes in Shareholders' Equity Under U.S. GAAP
Accumulated Other Total Class A Class B Stated Comprehensive Shareholder Shareholders' Shares Shares Capital Deficit Income Advances Equity ------ ------ ------- ------- -------------- ---------- --------- Balance at June 30, 1997 164,000 18,222 $18,222 $(51,225) $ 75 $ 24,671 $ (8,257) Comprehensive Income: Net income (loss) 1998 (4,549) (4,549) Translation adjustments 6 6 Comprehensive Income: (4,543) Shares issued 540,639 60,071 60,071 60,071 Shareholder advances - - - - - (24,671) (24,671) -------- -------- ------- -------- ------ -------- -------- Balance at June 30, 1998 704,639 78,293 $78,293 $(55,774) $ 81 $ - $ 22,600 Comprehensive Income: Net income (loss) 1999 (6,909) (6,909) Translation adjustments 238 238 Comprehensive Income: (6,671) Shares issued Shareholder advances - - - - - - - -------- -------- ------- -------- ------ -------- -------- Balance at June 30, 1999 704,639 78,293 $78,293 $(62,683) $ 319 $ - $ 15,929 Comprehensive Income: Net income (loss) 1999 (2,842) (2,842) Translation adjustments 65 65 Comprehensive Income: (2,777) Shares issued Shareholder advances - - - - - - - -------- -------- ------- -------- ------ -------- -------- Balance at Sept. 30, 1999 704,639 78,293 $78,293 $(65,525) $ 384 $ - $13,152
Statements of Cash Flow Under U.S. GAAP
Net Cash Provided by (Used in): Operating Activities Investing Activities Financing Activities -------------------- -------------------- -------------------- For the three month period ended As presented U.S. GAAP As presented U.S. GAAP As presented U.S. GAAP --------------------------------- ------------ --------- ------------ --------- ------------ --------- Sept. 30, 1999 (Unaudited) (2,407) (2,250) (1,535) (1,556) - - For the Years ended ------------------- June 30, 1999 8,363 5,957 (9,253) (8,419) (2,710) (2,710) June 30, 1998 8,882 7,524 (4,310) (5,668) (3,933) (3,933)
Cash paid for interest for the three months ended September 30, 1999 and the years ended June 30, 1999, 1998 and 1997 was nil, $2,203,000, $1,773,000 and $1,327,000 respectively. U.S. GAAP does not permit the presentation of non-cash items in investing or financing activities in the statements of cash flows. Under the Company's current reporting, no such transactions were included in the statements of cash flows. The Company did, however, convert $60,070,000 in shareholder advances plus accrued interest to Class A shares as described in Note 12. 25 NOTES TO THE FINANCIAL STATEMENTS (Continued) US GAAP Tax Considerations U.S. GAAP changes the Company's method of accounting for income taxes to an asset and liability approach. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Use of the assets and liability method has no effect on the U.S. GAAP financial statements as the Company as concluded that a full valuation allowance must be applied to the deferred tax assets resulting from the Company's net operating loss carryforwards. For the Three months ended September 30, 1999 and for the years ended June 30, 1999, 1998 and 1997, the Company has recorded no current tax expense under U.S. GAAP due to the cumulative net losses incurred by the Company. Under U.S. GAAP, the Company would not record any deferred tax expense based on the same rationale. Summarized below are the components of deferred taxes:
(Unaudited) As of As of As of September 30, June 30, June 30, 1999 1999 1998 ---- ---- ---- Temporary differences relating to net liabilities: Accrued environmental liabilities $ 4,850 $ 4,645 $ 4,237 Tax loss and credit carryforwards 13,259 7,095 10,347 ------ -------- -------- Gross deferred tax asset 18,109 11,740 14,584 Valuation allowance (18,109) (11,740) (14,584) ------- -------- -------- Net deferred tax assets $ - $ - $ - ======= ======== ========
The statutory tax rate in Ghana is 35%, while the Company's effective rate is nil. Impact of Recently issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction add, if it is, the type of hedge transaction. At this time the Company has no derivative instruments that are subject to the requirement of this statement. (b) Pro-forma financial information INTRODUCTION The following unaudited pro forma consolidated statements of operations illustrate Golden Star Resources Ltd.'s ("Golden Star" or the "Company") acquisition of Bogoso Gold Limited ("BGL"). The pro forma income statements were prepared as if the acquisition occurred January 1, 1998. The pro forma consolidated financial information is presented for illustrative purposes only and does not purport to represent what the Company's financial position or results of operations would have been had 26 the acquisition of BGL in fact occurred on the date indicated or at the beginning of the period indicated or to project the Company's financial position or results of operations for any future date or period. The pro forma acquisition is based on management's best estimates and upon available information which the Company believes is reasonable under the circumstances. There has been no Pro Forma Consolidated Balance Sheet provided due to the fact that the acquisition was consummated on September 30, 1999. Please refer to the Company's Quarterly Report on Form 10-Q filed for the third quarter of 1999. The following unaudited pro forma consolidated financial information should be read in conjunction with (i) the audited consolidated financial statements of the Company and its subsidiaries for the year ended December 31, 1998, which are contained in the Company's 1998 Annual Report on Form 10-K; (ii) the unaudited financial statements of the Company and its subsidiaries for the nine months ended September 30, 1999, which are contained in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999; (iii) the audited financial statements of BGL for the three years ended June 30, 1999, 1998 and 1997, which are included elsewhere in this Form 8-K/A; and (iv) the unaudited financial statements of BGL for the three months ended September 30, 1999 and 1998, which are included elsewhere in this Form 8-K/A. 27 GOLDEN STAR RESOURCES LTD. Unaudited Pro Forma Consolidated Statements of Operations For the Year Ended December 31, 1998 (stated in thousands of United States Dollars except share amounts)
Golden Star Historical BGL Historical Pro Forma Golden Star December 31, 1998 December 31, 1998 Adjustments Pro Forma ----------------- ----------------- ----------- --------- REVENUES Gold Sales $ - $ 35,432 $ - $ 35,432 Interest and Other 635 227 - 862 -------- -------- ------- -------- $ 635 $ 35,659 $ - $36,294 COSTS AND EXPENSES Costs of Goods Sold - 23,130 - 23,130 Royalties - 1,062 - 1,062 Depreciation 230 13,258 (a) (9,156) 4,332 Amortization - 1,325 (a) (1,325) - General and Administrative 7,712 9,535 - 17,247 Exploration expense 443 - - 443 Write-offs and Abandonment of Mineral Properties 16,600 - - 16,600 Interest Expense 36 4,936 (b) (4,936) 348 (c) 312 Other Income - (6,419) 6,293 (126) Foreign Exchange Loss (Gain) 26 236 (b) (236) 26 -------- -------- ------- -------- 25,047 47,063 (9,048) 63,062 LOSS BEFORE THE UNDERNOTED (24,412) (11,404) 9,048 (26,768) Omai Preferred Share Redemptions Surplus 950 - - 950 -------- -------- ------- -------- Net Loss Before Minority Interest (23,462) (11,404) 9,048 (25,818) Minority Interest 1,214 - (d) (1,612) (398) -------- ------- ------- --------- Net Loss $(22,248) $(11,404) $ 7,436 $(26,216) ======== ======== ======= ======== Basic and Fully Diluted Net Loss Per Share $ (0.74) $ - $ (0.71) ======== ======== Weighted Average Shares Outstanding (in millions of shares) 30.2 - 6.9 37.1
28 GOLDEN STAR RESOURCES LTD. Unaudited Pro Forma Consolidated Statements of Operations For the Nine Months Ended September 30, 1999 (stated in thousands of United States Dollars except share amounts)
Golden Star Historical BGL Historical September 30, September 30, Pro Forma Golden Star 1999 1999 Adjustments Pro Forma ---- ---- ----------- --------- REVENUES Gold Sales $ - $26,954 $ - $ 26,954 Interest and Other 287 723 - 1,010 -------- ------- ------- -------- $ 287 $27,677 $ - $ 27,964 COSTS AND EXPENSES Costs of Goods Sold - 18,146 - 18,146 Royalties - 813 - 813 Depreciation 115 7,264 (a) (3,989) 3,390 Amortization - 964 (a) (964) - General and Administrative 2,358 1,480 - 3,838 Exploration Expense 129 - - 129 Write-offs and Abandonment of Mineral Properties 23,745 - - 23,745 Interest Expense 49 1,739 (b) (1,739) 283 234 - Other Income - (318) - (318) Foreign Exchange Loss (Gain) (18) (648) (b) 648 (18) -------- ------- ------- -------- 26,378 29,440 (5,810) 50,008 LOSS BEFORE THE UNDERNOTED (26,091) (1,763) 5,810 (22,044) Omai Preferred Share Redemptions Surplus 379 - - 379 --------- ------- ------- -------- Net Loss Before Minority Interest (25,712) (1,763) 5,810 (21,665) Minority Interest Loss 1,056 - (d) (986) 70 -------- ------- ------- -------- Net Loss $(24,656) $(1,763) $ 4,824 $(21,595) ======== ======= ======= ======== Basic and Fully Diluted Net Loss Per Share $ (0.79) $ (0.59) ======== ========= Weighted Average Shares Outstanding (in millions of shares) 31.4 - 31.4
29 Purchase Price Allocation The purchase price for the Acquisition was an initial payment by us of US$6.5 million, of which US$5,056,000 was for our account and US$1,444,000 was for the account of Anvil. The Purchase Agreement also calls for a payment to the sellers based upon the average price spot price of gold in the two years subsequent to closing (the "Calculation Period"). The payment will be calculated on a pro-rata basis if the average afternoon gold price fixing by the London Bullion Market Association over the Calculation Period (the "Average Gold Price") is between US$255 and US$310 per ounce and will be capped at US$10.0 million. If we acquire additional mineable ore reserves that can be processed at the Bogoso facility equivalent to at least 50,000 ounces of gold output, we will make a minimum payment of US$2.0 million one and half years after the closing of the Bogoso Purchase transaction. This payment will be applied towards the US$10.0 million cap mentioned above. The Company will record these payments at their fair value at the date they are determinable. These amounts will be amortized over the remaining life of the mine. Under an agreement with Anvil, our Company will provide all of the funds for the initial US$6.5 million purchase price and all other acquisition costs collectively (the "Acquisition Costs"). We will provide a loan to Anvil (the "Note Receivable") to fund Anvil's share of the Acquisition Costs. The Note Receivable will bear an annual interest rate of 15% compounded monthly. All cash distributions from the Bogoso Property will be paid to us until we have received all of the Acquisition Costs plus interest thereon. Assets and liabilities assumed have been recorded at estimated fair market value. In addition, US$6,000,000 of cash acquired has been reflected as restricted cash to pay for the assumed mine site rehabilitation and economic and social development for the mine area community at the eventual closure of the Bogoso Property. The Company will also be required to pay the sellers an additional US$5,000,000 on the first anniversary of commencement of sulfide production at BGL. Due to the uncertain nature of this contingent consideration, no liability has been recorded as part of the purchase price allocation. This payment, if made, will be amortized over the remaining life of the mine. 30 The following allocation of the purchase price reflects the estimated fair market values of all the assets and all the liabilities acquired in the transaction completed on September 30, 1999. This allocation represents the entire transaction, related costs and acquired assets and liabilities.
Cost of Acquisition US$'000 Purchase Price $ 6,500 Transaction Costs 1,948 Cost of Acquisition $ 8,448 ======== Allocation of Purchase Price Cash $ 6,923 Accounts receivable 1,453 Inventories 8,383 Other current assets 122 Mining properties 3,774 Accounts Payable (4,362) Long-Term Liabilities (7,000) Minority Interest (845) -------- Total Purchase Price Allocated $ 8,448 ========
The accompanying Pro Forma Consolidated Statements of Operations assume that the proposed acquisition of BGL had occurred on January 1, 1998. The acquisition adjustments are as follows: a. To record the elimination of depreciation and amortization expense on mining assets acquired as of January 1, 1998. b. To record the elimination of interest expense and foreign exchange gains/losses and forgiveness of debt included as other income related to the debt of BGL. c. To record the estimated interest expense related to debt incurred of US$4,155,000 at 7.5% as part of the funding for the acquisition of BGL. d. To record the 30% minority interest share in the earnings of BGL. The Acquisition Agreement noted that the Company and Anvil would provide for the following: US$6 million related to environmental rehabilitation, US$3 million related to severance costs, and US$1 million related to social and economic programs. Prior to the consummation of the acquisition, BGL paid the severance of US$3.0 million. Thus, as at September 30, 1999, the liabilities that were assumed by the Company, and thus included in the purchase price allocation were US$6.0 million for environmental rehabilitation and US$1.0 million for social and economic programs. 3. Reconciliation of Pro Forma Consolidated Statements of Operations to United States GAAP The Pro Forma Consolidated Financial Statements have been prepared using the financial statements of GSR which are in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") which differ in certain respects from those principles that the Company would have followed had its financial statements been prepared in accordance with generally accepted accounting 31 principles in the United States ("US GAAP"). Differences which materially affect these Pro Forma Consolidated Financial Statements are: a. For US GAAP, exploration and general and administrative costs related to projects are charged to expense as incurred. As such, the majority of costs charged to Exploration Expense and Abandonment of Mineral Properties under Canadian GAAP would have been charged to earnings in prior periods under US GAAP. Property acquisition costs are capitalized for both Canadian and US GAAP. For the Pro Forma Consolidated Statements of Operations the impact of this adjustment would be US$4.9 million for the year ended December 31, 1998 and US$13.8 million for the nine months ended September 30, 1999. b. Under US GAAP, the investment in Omai Gold Mines Limited would have been written off in prior years and, therefore, the entire Omai Preferred Share Redemption would have been included in income. Under Canadian GAAP, a portion of the Omai Preferred Share Redemption is included in income with the remainder reducing the carrying value of the Company's preferred stock investment. For the Pro Forma Consolidated Statements of Operations, the impact of this adjustment would be US$0.8 million for the year ended December 31, 1998 and US$0.3 million for the nine months ended September 30, 1999. The following table summarizes the effect of the above material adjustments on the Pro Forma Financial Statements:
Pro Forma Canadian Pro Forma US GAAP GAAP US $'000 US $'000 -------- -------- For the Year Ended December 31, 1998 ------------------------------------ Net (Loss)/Income $(26,216) $(20,237) For the Nine Months Ended September 30, 1999 -------------------------------------------- Net (Loss)/Income $(21,595) $(6,820)
Sub events Rider SUBSEQUENT EVENTS (Unaudited) On September 30, 1999, the Company was purchased by Bogoso Holdings, a wholly-owned subsidiary of Golden Star Resources Ltd. ("Golden Star"), and Anvil Mining NL ("Anvil"). Golden Star and Anvil acquired of 70% and 20%, respectively, of the common shares of BGL. The Government of Ghana retained its remaining 10% equity interest in BGL. The acquisition also included the assignment of US$34 million of existing indebtedness owed to the previous owners of BGL. The debt was assigned 78% to Bogoso Holdings and 22% to Anvil. CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-33237) dated October 2, 1998 of Golden Star Resources Ltd. of our report dated December 14, 1999, relating to the financial statement of Bogoso Gold Limited, which appears in the Current Report on Forma 8-K/A of Golden Star Resources Ltd. dated December 14, 1999. 32 /s/ PricewaterhouseCoopers Chartered Accountants Accra, Ghana December 14, 1999 Proforma Rider f. The transaction as detailed elsewhere in this Form 8-K, detailed the assignment of US$34 million of existing BGL indebtedness to the Company and Anvil. Due to the intricate structure of the acquisition, the debt was assigned to Bogoso Holdings, a wholly-owned subsidiary of the Company. Thus, through the consolidation process of BGL and Bogoso Holdings the assigned debt becomes intercompany debt and thus does not appear on the purchase price allocation of Company. Note: As previously disclosed in the Prospectus Supplement dated August 16, 1999, the Company detailed that as of March 31, 1999, BGL had approximately US$12.9 million in long-term debt beyond the debt owed to the previous owners. The Acquisition Agreement, referred to in the above document, noted that the Company and Anvil would acquire US$34 million in debt , owed to the owners, and also provide for the following: US$6 million related to environmental rehabilitation, US$3 million related to severance costs, and US$1 million related to social and economic programs. Prior to the consummation of the acquisition, BGL paid the severance of US$3 million. Thus, as at September 30, 1999, the liabilities that were assumed by the Company, and thus included in the purchase price allocation were US$6 million for environmental rehabilitation and US$1 million for social economic programs. 33 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 hereunto duly authorized. GOLDEN STAR RESOURCES LTD. By: /s/ Allan J. Marter ------------------------------------ Name: Allan J. Marter Title: Vice President and Chief Financial Officer Dated: December 14, 1999 34