<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-12673
PROSPECTUS SUPPLEMENT DATED APRIL 24, 1997
(TO PROSPECTUS DATED NOVEMBER 8, 1996)
(LOGO)
3,025,000 SHARES
GOLDEN STAR RESOURCES LTD.
COMMON SHARES
All of the common shares without par value (the "Common Shares") offered
hereby are being sold by Golden Star Resources Ltd. ("Golden Star" or the
"Company"). The offering consists of 3,025,000 Common Shares at a price of $7.50
per Common Shares. The net proceeds to the Company of the offering will be
approximately $22.4 million, after deducting expenses of the offering, estimated
at $300,000, which will be paid by the Company out of its general funds.
The outstanding Common Shares of the Company are traded on the American
Stock Exchange under the symbol "GSR" and on the Toronto Stock Exchange under
the symbol "GSC." The Common Shares offered hereby have been approved for
listing on the American Stock Exchange. On April 23, 1997, the last reported
sale price of the Common Shares on the American Stock Exchange was $7.88 and the
last reported sale price of the Common Shares on the Toronto Stock Exchange was
Cdn. $10.59.
SEE "RISK FACTORS" COMMENCING ON PAGE S-3 OF THE PROSPECTUS SUPPLEMENT AND
PAGE 8 OF THE PROSPECTUS FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMMON SHARES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
THE PUBLIC COMMISSIONS THE COMPANY(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Per Common Share....................... $7.50 (1) $7.50
- ------------------------------------------------------------------------------------------------------------------
Total.................................. $22,687,500 (1) $22,687,500
==================================================================================================================
</TABLE>
(1) Not applicable.
(2) Before deducting expenses of the offering, estimated at $300,000, which will
be paid by the Company out of its general funds.
It is expected that certificates for the Common Shares offered hereby will
be made available for delivery on or about April 25, 1997 in New York, New York.
<PAGE> 2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus Supplement and the Prospectus
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance, or achievements
of the Company to be materially different from any future results, performance,
or achievements express or implied by such forward-looking statements. Such
factors include, among others, gold and diamond exploration and development
costs and results, fluctuation of gold prices, foreign operations and foreign
government regulation, including title and land tenure to foreign mining
properties, joint venture relationships, competition, uninsured risks, recovery
of reserves, capitalization and commercial viability and requirements for
obtaining permits and licenses. See "Risk Factors" and "Recent Developments"
herein and "Risk Factors" and "Business and Properties" in the Prospectus.
Readers are cautioned not to put undue reliance on forward-looking statements.
The Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.
FINANCIAL INFORMATION
All amounts in this Prospectus Supplement and the Prospectus or
incorporated by reference herein or therein are expressed in United States
dollars, unless otherwise indicated. References to (i) "Cdn" are to Canadian
dollars, (ii) "FF" are to French francs and (iii) "R" are to Brazilian reals.
GOLD PRICES AND EXCHANGE RATES
The high and low closing trading price of gold, as provided by the New York
Commodities Exchange ("COMEX"), for the year ended December 31, 1996 were
$414.70 and $368.00, respectively and for the quarter ended March 31, 1997 were
$365.70 and $341.30, respectively. The closing trading price per ounce of gold
quoted by the COMEX on April 23, 1997 was $341.50.
On April 23, 1997, the inverse of the noon buying rate in New York City for
cable transfers as certified for customs purposes by the Federal Reserve Bank of
New York was Cdn. $1.00 = U.S. $0.7173.
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<PAGE> 3
RISK FACTORS
Prospective purchasers of the Common Shares should carefully read this
Prospectus Supplement, the Prospectus delivered herewith, and the documents
incorporated by reference herein and therein. An investment in the Common Shares
involves certain risks. In determining whether to purchase Common Shares,
prospective investors should consider carefully the following risk factors and
the other information contained in this Prospectus Supplement, as well as the
other risk factors and information set forth in the Prospectus delivered
herewith as such risk factors or other information may be modified or superseded
herein.
RISKS ASSOCIATED WITH DIAMOND EXPLORATION
The exploration and development of diamond deposits involve exposure to
significant financial risks over a significant period of time. Very few
properties which are explored are ultimately developed into producing diamond
mines. Major expenses over a period of several years may be required to
establish reserves by sampling and drilling and to construct mining and
processing facilities at a site. It is impossible to ensure that the current
exploration programs of the Company, or any programs undertaken in the future
will result in a profitable commercial diamond mining operation. See "Recent
Developments -- Exploration Properties -- Dachine, French Guiana" herein and
"Business and Properties -- Properties -- Exploration Properties -- Dachine,
French Guiana" in the Prospectus.
Whether a diamond deposit will be commercially viable depends on a number
of factors, some of which are the particular attributes of the deposit, such as
its size, the size, quantity and quality of the diamonds, proximity to
infrastructure, financing costs and governmental regulations, including
regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of diamonds and environmental protection. The effect of
these factors cannot be accurately predicted, but the combination of these
factors may result in the Company not receiving an adequate return on invested
capital.
RISKS ASSOCIATED WITH THE FLUCTUATION OF GOLD PRICES
To the extent that the Company has any revenues from operations, such
revenues are expected to be in large part derived from the mining and sale of
gold. Gold prices fluctuate widely and are affected by numerous factors beyond
the Company's control, including international economic and political trends,
inflation expectations, interest rates, central bank sales and purchases, global
or regional consumptive patterns (such as the development of gold coin
programs), speculative activities and increased production due to new mine
developments and improved mining and production methods. The effect of these and
other factors on the price of gold cannot be accurately predicted.
The current demand for, and supply of, gold affect gold prices but not
necessarily in the same manner as current demand and supply affect the prices of
other commodities. The potential supply of gold consists of new mine production
plus existing stocks of bullion and fabricated gold held by governments,
financial institutions, industrial organizations and individuals. Since mine
production in any single year constitutes a very small portion of the total
potential supply of gold, normal variations in current production do not
necessarily have a significant effect on the supply of gold or on its price. If
gold prices should decline below the Company's cash costs of production at
existing operations, or estimated cash costs of production at any of its
exploration and development properties, and remain at such levels for any
sustained period, the Company could determine that it is not economically
feasible to continue commercial production at any or all of its mines or to
pursue further exploration or development activities on such properties.
Moreover, on a given date, the prices used in estimating the Company's ore
reserves are based on the price of gold on such date. If the Company were to
determine that its reserves and future cash flows should be calculated at
significantly lower gold prices than those used on the measurement date, there
would be a material reduction in the amount of its gold reserves. Current gold
prices are below the prices used in the calculation of reserves at the Company's
Omai, Gross Rosebel and Yaou properties. Should material reserve reductions
occur, material write-downs of the Company's investment in mining properties may
be required. See "Gold Prices and Exchange Rates" herein and "Gold Prices" and
"Exchange Rates" in the Prospectus.
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RISK OF COMPANY BEING CLASSIFIED AS A PASSIVE FOREIGN INVESTMENT COMPANY
Under the United States Internal Revenue Code of 1986, as amended (the
"Code"), the Company may be classified as a passive foreign investment company
(a "PFIC"). United States shareholders of a PFIC are subject to certain adverse
tax consequences, as discussed below. These consequences can be mitigated, under
certain circumstances, if the United States shareholder makes a timely election
to treat the Company as a "qualified electing fund" (a "QEF"). The Company has
been advised by Coopers & Lybrand L.L.P. that it should not be treated as a PFIC
with respect to shares purchased by United States shareholders during the years
1993 through 1996, although it could potentially be a PFIC with respect to
shares acquired by United States shareholders prior to 1993. The Company also
intends to engage Coopers & Lybrand L.L.P., or such other advisor, in the future
to analyze whether it is a PFIC in 1997 and subsequent years and will continue
to notify shareholders of the results of such future analyses. There can be no
assurance as to whether or not Coopers & Lybrand L.L.P., or such other advisor,
will conclude that the Company is a PFIC for any such period. Moreover, even if
Coopers & Lybrand L.L.P., or such other advisor, concludes that the Company is
not a PFIC, its conclusion is not binding on the United States Internal Revenue
Service. Accordingly, it is possible that the PFIC rules will apply with respect
to Common Shares purchased in the offering. ALL PROSPECTIVE PURCHASERS OF COMMON
SHARES IN THE UNITED STATES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS ABOUT
THE ADVISABILITY OF MAKING A QEF ELECTION WITH RESPECT TO THE COMPANY. ALL
PROSPECTIVE PURCHASERS OF COMMON SHARES IN THE UNITED STATES ALSO ARE URGED TO
CONSULT THEIR OWN TAX ADVISERS ABOUT THE POSSIBILITY OF CREDITING CANADIAN TAXES
PAID AGAINST UNITED STATES TAXES PAYABLE. See "Certain United States Federal
Income Tax Considerations" herein and "Market for the Registrant's Common Equity
and Related Stockholder Matters -- Certain United States Federal Income Tax
Considerations" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, incorporated by reference in the Prospectus.
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THE COMPANY
Golden Star is an international gold and diamond exploration company with a
diverse portfolio of active exploration and development projects and an
operating mine in ten countries on two continents. The Company's core focus is
on the acquisition, discovery and development of gold and diamond projects.
RECENT DEVELOPMENTS
Certain statements in "Recent Developments" constitute "forward-looking
statements" under the Reform Act. Actual results and the timing of certain
events could differ materially from those projected in the forward-looking
statements due to a number of factors, including those set forth under "Risk
Factors" and elsewhere in this Prospectus Supplement and the Prospectus. See
"Special Note Regarding Forward-Looking Statements" in this Prospectus
Supplement and in the Prospectus. The information contained in this Prospectus
Supplement is qualified in its entirety by the more detailed information,
descriptions and consolidated financial statements and notes thereto appearing
or incorporated by reference herein or in the Prospectus.
PRODUCING PROPERTIES
Omai Mine, Guyana
The Omai Mine, in which the Company has a 30% indirect equity interest,
achieved record production in 1996 with 254,950 ounces produced for the year and
92,834 ounces produced in the fourth quarter. Mill throughput for the fourth
quarter of 20,448 tonnes per day exceeded design capacity of 18,000 tonnes per
day. Production at the Omai Mine was suspended between August 19, 1995 and
February 4, 1996 due to a tailings dam failure. See "Business and
Properties -- Properties -- Producing Properties -- Omai Mine, Guyana" in the
Prospectus. As a result, gold production and cash costs of production were
adversely impacted during the first and second quarters of 1996. Cash costs of
production decreased from $294 per ounce in the first quarter to $238 per ounce
in the fourth quarter as operating conditions at the Omai mine improved and the
mill expansion reached full capacity. Production at the Omai Mine for 1995 and
by quarter for 1996 is shown below:
<TABLE>
<CAPTION>
1995 1996 1997
--------- ---------------------------------------------------------- ---------
FIRST SECOND THIRD FOURTH TOTAL FIRST
TOTAL(1) QUARTER(1) QUARTER QUARTER QUARTER 1996(1) QUARTER
--------- ---------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ore milled (tonne)...................... 3,041,211 725,203 1,160,413 1,679,890 1,881,248 5,446,754 1,802,359
Rate (tonne/day)........................ 13,165 12,950 12,752 18,260 20,448 16,455 20,026
Gold grade (g/tonne).................... 1.9 1.6 1.8 1.6 1.7 1.7 1.6
Recovery (%)............................ 91 85 89 92 93 91 95
Gold production (oz).................... 175,080 27,204 57,987 76,925 92,834 254,950 90,454
Cash costs of production(2) ($/oz)...... 224 294 281 233 238 252 236
</TABLE>
- ---------------
(1) There was no production at the Omai mine from August 19, 1995 to February 4,
1996 due to the Omai tailings dam failure.
(2) Cash costs of production include mining and milling costs, power generation
and general service charges.
Gold production from Omai in 1997 is expected to benefit from a full year
of operation of the mill expansion. Gold production in the first quarter of 1997
totaled 90,454 ounces, with cash costs of production of $236 per ounce. The
Company expects to receive $1.0 million through the redemption of Class I
preferred shares of Omai Gold Mines Limited ("OGML"), with respect to the first
quarter financial results of OGML. Mill throughput for 1997 is planned at 20,000
tonnes per day with gold production for the year projected to reach 340,000
ounces.
Total proven and probable reserves at December 31, 1996 remained
essentially constant at 66.6 million tonnes grading 1.5 g Au/tonne representing
3.21 million contained ounces as compared to 1995 year end reserves of 3.26
million contained ounces. Reserves are calculated using a gold price of $425 per
ounce with a
S-5
<PAGE> 6
cutoff grade of 0.35 g Au/tonne for soft rock reserves and 0.70 g Au/tonne for
hard rock reserves. Recovery rates range between 85% and 90%, depending on
grade.
On January 16, 1997, the Company and Cambior Inc. ("Cambior"), a co-owner
with the Company of OGML, announced that OGML was awarded prospecting licenses
to the Quartz Hill and Omai River concessions which are adjacent to and surround
the Omai Mine permit area. A budget of $1.0 million to be funded by OGML has
been allocated in 1997, to conduct data compilation, line cutting,
reconnaissance mapping and geophysical and geochemical surveys on the properties
as well as on the Omai concession.
DEVELOPMENT PROPERTIES
Gross Rosebel, Suriname
On September 26, 1996, the Company and Cambior, the Company's joint venture
partner in the Gross Rosebel project, announced a new mining reserve that
resulted in an overall improvement in reserve grade as well as a slightly lower
stripping ratio and expanded the proven and probable mining reserve base by
approximately 25%, to over 30 million tonnes grading 1.5 g Au/tonne, or
approximately 1.4 million ounces of gold in situ. A feasibility study is
expected to be submitted to the Government of Suriname by May 7, 1997. There can
be no assurance that the feasibility study will illustrate economics that would
justify a decision to develop a mine at Gross Rosebel at current gold prices or
that the feasibility study will fully satisfy the terms of the mineral agreement
between the Company and the Government of Suriname.
During the second half of 1996, an additional 23,668 meters of core
drilling in 227 holes and 5,038 meters of trenching was completed at the Gross
Rosebel project. This work included continued infill and step-out drilling to
expand the Pay Caro, Koolhoven and Royal Hill gold deposits. Core drilling and
trenching also was completed on the Bigi Asanjangmoni, J and Mama Kreek zones to
bring additional mineralization into the reserve category. Drilling at Gross
Rosebel continued during the first quarter of 1997. The revised mining reserve,
expected to be finalized by Cambior during the second quarter of 1997, should
reflect this additional information. Condemnation drilling was conducted on both
the proposed mill and tailings dam sites.
The current 1997 exploration program for the Gross Rosebel project provides
for completion of an additional 16,000 to 18,000 meters of continued infill and
step-out core drilling on known deposits and mineralized zones designed to add
to the proven and probable mining reserve as well as to complete condemnation
drilling at the proposed mill site.
The Company and Cambior, which, subject to government approval, has
acquired 50% of the Company's interest in the Gross Rosebel project, currently
are negotiating with the Government of Suriname and representatives of the Niew
Koffie camp village about the relocation of the village outside of the Gross
Rosebel property. There can be no assurance that these negotiations will not
delay, should the feasibility study be positive, any future mine development at
Gross Rosebel.
EXPLORATION PROPERTIES
Yaou, French Guiana
On January 20, 1997, the Company announced the results from the most recent
phase of core drilling at the Yaou project involving 30 core holes totaling
approximately 4,390 meters. Within the Yaou Central area, additional infill
drilling was completed on three separate deposits, the A zone, B zone and C-L
zone, which together host over 90% of the probable mining reserves defined to
date. Drilling in the A zone intercepted mineralization in each of nine holes,
exhibiting a weighted average grade of approximately 3.6 g Au/tonne with an
average intercept length of approximately 18 meters. In the B zone, three of
four holes intercepted mineralization exhibiting a weighted average grade of
approximately 4.0 g Au/tonne over an average intercept width of approximately 15
meters. Drilling in the C-L zone intercepted mineralization in each of eight
holes exhibiting a weighted average grade of approximately 2.2 g Au/tonne over
an average intercept length of approximately seven meters. At the lower grade
Chaina zone, approximately seven kilometers southwest of Yaou Central, six of
nine drill holes intercepted mineralization exhibiting a weighted average grade
of approximately 1.5 g Au/tonne over an average intercept length of
approximately 12 meters.
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<PAGE> 7
The current 1997 exploration program for the Yaou project provides for an
additional 10,000 meters of core drilling, including step-out and infill
drilling seeking to further expand the known deposits laterally and at depth.
Outside the Yaou Central and Chaina zones, drilling also is planned for the I, J
and K zones, approximately 1.5 kilometers northeast of Yaou Central, to
investigate further mineralized bodies that have been identified by previous
drilling. Continued regional exploration to define additional mineralization
which could be mined by open pit on the remainder of the 15,000 hectare Yaou
project is planned on three zones of interest, Yaou Nord, Tomantoni and Bois
Blanc. The Bois Blanc zone, approximately 10 kilometers north of Yaou Central,
will be the initial focus of this work. To date, less than 15% of the Yaou
project has been evaluated.
Dorlin, French Guiana
The work program at the Dorlin project for 1997 calls for continued soil
and auger sampling, trenching and 8,000 meters of core drilling. The objectives
of the program are to develop mineralized zones on the South-Inini area and
carry out the investigation in the North-Inini area, which hosts three intrusive
related targets known as Jadfar, Sept Kilo and D'Artagnan.
Andorinhas, Brazil
On January 29, 1997, Golden Star announced results from the first phase of
core drilling involving 18 holes, totaling approximately 2,700 meters in the
Mamao area of the Andorinhas project. The objectives of the first phase of
drilling included testing for potential strike extensions of the known
mineralization in the Melechete and Matinha zones in the Mamao area as well as
the potential for additional, similar deposits in the vicinity. This drilling
demonstrated that gold mineralization within the Mamao area of the Andorinhas
project is associated with quartz-carbonate-pyrite veins within east-west
striking parallel ductile shear zones. Based upon the first phase of the
drilling, the Company believes that there may be at least three such shear zones
within the Mamao area, providing possible evidence for the existence of multiple
mineralized horizons within the 14 kilometer regional Mamao-Babacu shear zone at
the Andorinhas project.
At the Matinha zone located west of the known Melechete deposit,
mineralization was intersected in 8 of 10 holes drilled on approximately 50
meter centers to the northwest of the existing Melechete pit. The most
significant five holes drilled in the Matinha zone exhibited an uncut, weighted
average grade of approximately 9.7 g Au/tonne over an average intercept length
of 2.1 meters. This drilling in the Melechete/Matinha area suggested that the
Melechete and Matinha zones may be part of one continuously mineralized zone
with a strike length of at least 300 meters and variable thickness. The first
phase of drilling more than doubled the strike length of mineralization in the
Melechete/Matinha area and remains open to the northwest and down plunge to the
northeast. Results from one hole also indicate additional potential to extend
mineralization along strike to the east.
At the Cantina zone, located to the east of Melechete, lower grade, shear
hosted mineralization was intercepted in 2 of 6 holes drilled on 50 meter
centers to the northeast of the Melechete zone. These two holes exhibited grades
of 0.5 to 2.0 g Au/tonne over one to two meter lengths, though all six holes
intercepted shear zones. It is not yet certain how this shear-related
mineralization can be correlated with that discovered in the Melechete/Matinha
area to the west. Two core holes were also drilled to test for mineralization
near the Maria Bonita pit, located approximately 400 meters south-southeast of
the Melechete/Matinha area. These holes also intercepted low grade gold
mineralization grading 0.5 to 2.0 g Au/tonne within quartz-carbonate-pyrite
veins within a shear zone over an average width of approximately 2 meters.
On April 17, 1997, Golden Star announced the results from the second phase
of core drilling in the Melechete/Matinha zone, totaling approximately 4,060
meters in 14 holes with significant mineralization encountered in 11 of the 14
holes. Six of nine step-out holes, drilled to extend the down-dip limits of the
Melechete/Marinha zone, intercepted significant mineralization exhibiting a
weighted average grade of approximately 11.3 g Au/tonne over an average
thickness of approximately 4.3 meters. To date, 16 of 22 holes drilled in the
Melechete/Matinha zone have intercepted significant mineralization, exhibiting a
weighted average grade of approximately 10.3 g Au/tonne over an average
thickness of approximately 3.5 meters. Core
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<PAGE> 8
drilling indicates that the Melechete/Matinha zone may be a mineralized tabular
body trending north north-east and dipping at approximately 40 degrees to the
north north-west. Drilling to date has defined the Melechete/Matinha mineralized
horizon over a strike length of approximately 200 to 300 meters and a down-dip
extent of 450 meters from the surface, to a vertical depth of approximately 300
meters. The Melechete/Matinha zone remains open down-dip and, in part, along
strike.
The second phase of core drilling also encountered three additional zones
of mineralization, the Mandioca zone above the Melechete zone and the Arame and
Maria Bonita zones below the Melechete zone. Results obtained to date indicate
that the Arame zone may be similar in thickness to the Melechete zone while the
Mandioca and Maria Bonita zones appear to be thinner. All four mineralized
zones, or horizons, represent a set of shear zones within which multiple
mineralizing events have resulted in gold bearing sulfides and native gold
associated with a complex set of deformed quartz veins and massive silica
replacement.
Core drilling is continuing on the Melechete/Matinha zone with the near
term objective of extending the mineralized horizon to the interpreted boundary
of a dyke-like, intrusive granitic body, which is believed to be younger than
the shear hosted gold mineralization. Three drill holes are planned to test
where the four shear horizons meet the granitic dyke, believed to be
approximately 600 to 1,000 meters down-dip from the surface. These drill holes
and 11 others in the Melechete/Matinha zone are planned for during the next
phase of drilling. A systematic deep augering program, a geologic mapping effort
and sampling of other old surface workings is in progress to assist in
developing additional drill targets in the Mamao/Babacu areas.
Based on its own exploration work, Companhia Vale do Rio Doce ("CVRD"), the
optionor of the Andorinhas project, applied for a permit for the exploitation
and development of a mine on the property. The Company has been advised that
there is no provision under Brazilian law for continued exploration on a
property once an application for an exploitation permit has been filed with the
government. Although the Company has been advised that it is common practice in
Brazil to continue exploration activities following the application for an
exploitation permit and that the Brazilian government has tolerated such
activities in the past, there can be no assurance as to the status of any
exploration work done at the Andorinhas project during the period following
CVRD's submission of the application for the exploitation permit or that CVRD's
request for an exploitation permit for the Andorinhas project will be granted.
Paul-Isnard, French Guiana
The alluvial operations being conducted through Societe de Travaux Publics
et de Mines Auriferes en Guyane ("SOTRAPMAG"), a wholly-owned subsidiary of
Guyanor Ressources S.A. ("Guyanor"), which is 68% owned by Golden Star,
experienced continuing operating losses since its acquisition in 1994. Outside
consultants engaged in 1996 to review the operations and make recommendations on
how to make the operations profitable concluded that without a significant
capital investment to increase production, changes in certain work practices and
a reduction in fuel taxes, the operation could not achieve profitability. As a
result of these conclusions, Guyanor began implementation of a program to
discontinue the alluvial operations conducted by SOTRAPMAG and lay off all of
SOTRAPMAG's employees. This procedure is subject to negotiations with the
representatives of the workers and French authorities. The French government was
formally notified of the closure plans in January 1997. In March 1997, the
deadline for French government opposition to the closure plan expired, with no
such opposition expressed by the government. Management currently anticipates to
complete substantially the closure of SOTRAPMAG's alleuvial operations and local
rehabilitation in the second quarter of 1997.
Exploration efforts conducted in 1996 have identified several target areas
which hold potential to establish near surface mining reserves. Guyanor has
budgeted approximately $1.0 million in 1997 for prospecting activities aimed at
quantifying a near-surface mineralized inventory at the Paul-Isnard project
area. This program is in addition to the hard rock exploration planned for 1997.
Guyanor incurred a fourth quarter charge to 1996 earnings of $3.2 million
resulting from the write-down of certain fixed assets, inventories, capitalized
exploration costs related to the alluvial mining operations, accrual of land
rehabilitation and mine closure costs, and accrual of the severance and other
costs associated with the discontinuation of alluvial production. The Company's
share of these losses at December 31, 1996
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<PAGE> 9
was $2.2 million, after minority interest. Certain fixed assets, equipment and
inventories owned by SOTRAPMAG which may be utilized in the ongoing exploration
at the Paul-Isnard project area were not subject to the write-down. The final
amount of severance and other costs associated with the discontinuation of
alluvial production are contingent upon negotiations with the representatives of
the workers and the French government. Guyanor also expects to incur aggregate
operating losses of approximately $0.5 million during the first quarter of 1997.
St-Elie and Dieu-Merci, French Guiana
The Dieu-Merci project covers a total area of 15,500 hectares and consists
of three concessions and one exploration permit. The Dieu-Merci project is
located immediately adjacent to the eastern and southeastern portions of the
St-Elie project in north central French Guiana. As of March 31, 1997, a total of
$0.9 million, including capitalized acquisition costs of $0.8 million, had been
spent at Dieu-Merci since the Company's involvement with the project, of which
$0.5 was funded by ASARCO. The Company and ASARCO have budgeted $2.7 million for
exploration on the St-Elie and Dieu-Merci projects during the first half of
1997, all of which is expected to be funded by ASARCO.
The Dieu-Merci project is subject to the ASARCO joint venture regarding the
St-Elie property. See "Business and Properties -- Properties -- Exploration
Properties -- St-Elie, French Guiana" in the Prospectus.
On February 24, 1997, the Company announced results from trenching at the
Chemin de Fer target in the southeast section of the St-Elie property, as well
as results from prior exploration activities on the Dieu-Merci property.
Previous exploration work on the Dieu-Merci project included a soil
geochemical survey conducted by the Bureau de Recherches Geologiques et Minieres
on a 100 X 100 meter grid, totaling approximately 900 samples over an area of 4
X 2 kilometers, approximately two kilometers southeast of the St-Elie
concession. This survey identified four different 400 to 600 meter anomalous
areas with values greater than 0.9 g Au/tonne, Kerouani, Virgile, Cesar and
Devis Sud. Work conducted by the previous owner include augering (190 holes),
trenching and drilling 18 shallow core holes. At Kerouani, five trenches
excavated across the zone over a strike length of approximately 350 meters
exhibited an average mineralized interval of approximately 18 meters with a
weighted average gold grade of 10.7 g Au/tonne. At Virgile, five trenches over a
strike length of approximately 450 meters exhibited an average mineralized
interval of approximately 10 meters with a weighted average gold grade of 7.6 g
Au/tonne. At Cesar, five trenches, excavated over a strike length of
approximately 500 meters exhibited an average mineralized interval of
approximately 18 meters with a weighted average gold grade of 6.0 g Au/tonne.
On March 26, 1997, the Company announced gold assay results from 18 shallow
core holes previously drilled at Kerouani and Virgile to vertical depths up to
35 meters to test for the continuation at depth of mineralization identified by
trenching. At Kerouani, 9 holes yielded an average mineralized interval of 5.7
meters with a weighted average grade of 3.5 g Au/tonne over a strike length of
approximately 300 meters. At Virgile, 9 holes yielded an average mineralized
interval of 6.1 meters with a weighted average grade of 2.5 g Au/tonne over a
strike length of approximately 250 meters. Gold mineralization at both targets
appears to be related to a series of gently dipping quartz veins and altered
volcanic rocks surrounding the quartz veins. Sulfides, principally pyrite, also
are coincident with gold mineralization at both targets. Mineralization is open
at depth and along strike at both Kerouani and Virgile.
Guyanor is in the process of completing and receiving gold assay results
from a 20 hole core drilling program, totaling approximately 3,000 meters at the
Kerouani and Virgile targets. These core drilling programs are intended to test
the continuity of gold mineralization at depth below the trenches and shallow
core holes previously completed. Additional planned work includes trenching over
the St-Auguste-Madeleine area and additional core drilling at the Michel, Chemin
de Fer, Sable-Jonquemont, Pactole-Couriege and St-Auguste-Madeleine areas to
complete a minimum budgeted drilling campaign of 15,000 meters during 1997.
S-9
<PAGE> 10
Dachine, French Guiana
In December 1996, heavy mineral concentrate produced from an initial 186
tonne bulk sample collected from ten pits at sites over the strike length of the
diamondiferous body at Dachine, was shipped for diamond recovery analysis to the
mineral laboratories of BHP Minerals International ("BHP"), the Company's
partner at the Dachine project. Processing of the heavy mineral concentrate
sample was undertaken to recover only macrodiamonds larger than 1.25 mm in their
longest dimension. On February 24, 1997, the Company and Guyanor announced that
processing of the bulk sample recovered an insignificant number of stones larger
than 1.25 mm. Upon review of the final results, BHP decided to withdraw from the
Heads of Agreement with Guyanor. Guyanor intends to continue diamond exploration
in the Dachine area and may seek new partners. There can be no assurance that
Guyanor will be successful in finding a new partner or that funds required for
the exploration of the Dachine project can be obtained by Guyanor.
Guyanor is presently in the process of developing a program for additional
exploration at Dachine. The object of the program will be to characterize better
the geology and commercial potential of the Dachine diamondiferous ultramafic
body. During 1996, Guyanor spent $1.2 million for exploration at the Dachine
property, $1.1 million of which was reimbursed by BHP under the above-mentioned
agreement.
OTHER PROPERTIES
Antino, Suriname
The Antino project covers 37,000 hectares and is located approximately 250
kilometers south-southeast of the capital city of Paramaribo, Suriname. Antino
represents the northernmost portion of the larger 194,000 hectare South Benzdorp
Right of Reconnaissance where Golden Star has spent approximately $3.3 million
since the Company's initial involvement in 1993. The Antino project is covered
by the Antino Right of Exploration, granted to a local Surinamese company. Under
an agreement with the local Surinamese company, Golden Star has the right to
earn a 100% interest in the Antino Right of Exploration.
Geologically, the area is underlain by Proterozoic metasedimentary and
metavolcanic greenstone rocks which have been intruded by dioritic and tonolitic
rocks. Two target areas have been defined, the Upper Antino target, which covers
an area approximately 1.5 by 1.2 kilometers, and the Lower Antino target, which
covers an area approximately 2 by 1 kilometers located approximately 1.3
kilometers east of the Upper Antino target.
At Upper Antino, close spaced deep auguring (up to depths of 30 meters),
totaling 8,105 meters, has indicated the presence of near surface mineralization
which appears to be related to underlying shear zones. On October 14, 1996,
Golden Star announced the results of 51 close spaced deep auger holes, which
exhibited near surface, saprolite mineralization with a weighted average grade
of approximately 8.1 g Au/tonne over a strike length of approximately one
kilometer, widths of up to approximately 65 meters and depths ranging from
approximately 5 to 30 meters. A core drilling program was initiated to establish
the continuity of higher grade shear zone hosted mineralization at depth in hard
rock below the saprolite mineralization defined by this deep auguring.
On January 8, 1997, the Company announced the results from the first phase
of the core drilling program on the Antino project. The drilling program
involving 20 holes drilled on 50 meter centers, verified the existence of a
mineralized shear zone over a strike length of approximately 350 meters to a
vertical depth of approximately 100 meters. Based upon the first phase of
drilling, mineralization within the shear zone exhibits a weighted average grade
of approximately 12.8 g Au/tonne over an average true thickness of approximately
4 meters.
The current 1997 exploration program for the Antino project provides for
the completion of an additional 6,000 to 8,000 meters of core drilling. The next
phase of drilling has been designed to test for continuity of mineralization
within the main shear in the Central Zone of Upper Antino to a vertical depth of
approximately 400 meters over the 350 meter strike length of the zone.
Concurrently, a program of ground geophysics and additional deep auguring is
scheduled to be conducted to allow for improved structural interpretation and
planning of additional core drilling of the potential offset extensions of the
main Central zone shear both to the
S-10
<PAGE> 11
north and south. Deep auguring is planned to continue on Northwest and Northeast
zones of the Upper Antino target as well as the principal anomalous zones of the
Lower Antino target. Additional core drilling is also planned at Lower Antino.
Ndori, Kenya
In December 18, 1996, the Company and its approximately 58% owned
subsidiary Pan African Resources Corporation ("PARC") were granted the immediate
right to explore and an option by San Martin Mining and Investment Company ("San
Martin") to acquire a 75% or greater interest in a mining lease or leases issued
with respect to the 130,000 hectare Ndori project in southwestern Kenya
bordering Lake Victoria. To date, PARC has made payments to San Martin totaling
$600,000 and must make minimum expenditures of $600,000 in each of the next two
years in order to maintain its interests in the property. In addition, PARC must
relinquish 50% of the original 130,000 hectare Ndori project area by December
1998 and a further 25% of the original project area by December 1999.
The geology of the Ndori property is an extension of the Tanzanian gold
fields to the south and beneath Lake Victoria, with the property lying within a
well differentiated suite of Archaen volcanics. During the peak of Kenyan gold
production in the 1930's, the Ndori area was a significant center of gold mining
activity.
Past mining activity by others in the Ndori project area primarily
exploited numerous small quartz reefs. PARC's exploration program will
investigate the potential of the Ndori property to host bulk mining deposits
capable of supporting large scale, modern mining operations.
Dul Mountain, Ethiopia
In March 1997, after reviewing the results of the exploration conducted on
the Dul Mountain project, the management of PARC concluded that a large portion
of the Dul Mountain property did not meet PARC's expectations. As a result of
the disappointing results of the exploration program at Dul Mountain, the
Company decided to write-down as at December 31, 1996 capitalized expenditures
totaling $4.0 million. The Company's share of this charge was $2.3 million after
minority interest.
Dioulafoundou, Mali
On March 7, 1997, PARC granted African Selection Mining Corporation ("ASM")
a three-year option to acquire 50% of the issued and outstanding shares of PARC
Dioulafoundou Ltd. and PARC Fougala S.A., which hold PARC's interests in the
Dioulafoundou project area. In order to maintain its rights under the option,
ASM must incur exploration expenditures on the property of at least $4.5 million
prior to October 31, 1999 with $450,000 during the period commencing March 1,
1997 and ending September 30, 1997 ("Phase I"), $1.5 million during the period
commencing October 1, 1997 and ending September 30, 1998, and $2.5 million
during the period commencing October 1, 1998 and ending October 31, 1999. Should
ASM fail to make the required $450,000 in expenditures for Phase I within the
prescribed deadline, it will be required to pay the amount of the shortfall to
PARC in cash, subject to certain contingencies in order to maintain its rights
under the option.
The work program for 1997 to be conducted by ASM is anticipated to involve
induced polarization geophysical surveys to assist in better defining potential
gold bearing structures. Additional geochemistry, including termite mound
sampling, will be completed. Based upon results of this work, it is anticipated
that ASM will conduct a core and reverse circulation drilling program to
continue the evaluation of the property during 1997.
S-11
<PAGE> 12
USE OF PROCEEDS
The proceeds of this offering will be approximately $22.7 million before
deducting expenses of the offering, estimated at $300,000, which will be paid by
the Company out of its general funds. The net proceeds will be used to fund
exploration and development of gold and diamond projects in South America and
Africa and for working capital and general corporate purposes, including
potential property acquisition and development opportunities.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1996, and as adjusted to give effect to the sale of the 3,025,000
Common Shares offered hereby and the receipt by the Company of estimated
proceeds of $22.7 million before deducting expenses of the offering, estimated
at $300,000, which will be paid by the Company out of its general funds.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
ACTUAL AS ADJUSTED
-------- --------------
($ IN THOUSANDS)
<S> <C> <C>
Shareholders' equity:
Common Shares (without par value,
unlimited shares authorized; issued
and outstanding as of December 31,
1996 25,941,103 actual, 28,966,103
as adjusted)....................... $129,954 $152,642
Stock Option Loans.................... (4,012) (4,012)
Deficit............................... (47,848) (47,848)
Total capitalization.......... $ 78,094 $100,782
</TABLE>
S-12
<PAGE> 13
PRICE RANGE OF COMMON SHARES
The Common Shares are traded on the American Stock Exchange under the
symbol "GSR" and on the Toronto Stock Exchange under the symbol "GSC." The
following table sets forth, for the indicated periods, the high and low sales
prices of the Common Shares for the American Stock Exchange and The Toronto
Stock Exchange.
<TABLE>
<CAPTION>
AMERICAN TORONTO
STOCK EXCHANGE STOCK EXCHANGE
------------------ ------------------
HIGH LOW HIGH LOW
------ ------ ------ ------
(U. S. $) (CDN. $)
<S> <C> <C> <C> <C>
1994
First Quarter......................... $16.50 $14.13 $22.00 $19.00
Second Quarter........................ 15.13 10.25 20.88 14.25
Third Quarter......................... 13.75 8.38 18.25 11.50
Fourth Quarter........................ 13.50 7.75 18.13 10.50
1995
First Quarter......................... $ 8.50 $ 6.58 $11.75 $ 9.25
Second Quarter........................ 8.75 6.63 12.00 9.25
Third Quarter......................... 7.00 4.88 9.88 6.75
Fourth Quarter........................ 6.00 4.50 8.00 6.25
1996
First Quarter......................... $16.25 $ 5.19 $22.00 $ 7.25
Second Quarter........................ 19.13 12.88 26.00 17.25
Third Quarter......................... 19.75 11.75 27.10 16.75
Fourth Quarter........................ 21.00 12.75 28.25 18.00
1997
First Quarter......................... $16.00 $10.50 $22.25 $14.45
April 1-23............................ 10.63 7.75 14.80 10.50
</TABLE>
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its Common Shares
since its inception and does not expect to do so in the near future. In
determining whether to pay dividends in the future, the Company's Board of
Directors will consider then current business results, cash requirements and the
financial condition of the Company.
S-13
<PAGE> 14
DETAILS OF THE OFFERING
THE OFFERING
The offering consists of 3,025,000 million Common Shares at a price of
$7.50 per Common Share.
The outstanding Common Shares of the Company are traded on the American
Stock Exchange under the symbol "GSR" and on the Toronto Stock Exchange under
the symbol "GSC." The Common Shares offered hereby have been approved for
listing on the American Stock Exchange.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Shares is The R-M Trust
Company at its principal offices in Vancouver, Toronto and Montreal. ChaseMellon
Shareholder Services, L.L.C., at its principal office in New York, acts as
co-registrar and co-transfer agent for the Common Shares in the United States.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary sets forth certain material United States federal
income tax matters that may be relevant with respect to the acquisition,
ownership and disposition of Common Shares. This summary addresses only the
United States federal income tax considerations of holders that are citizens or
residents of the United States, partnerships or corporations created in or under
the laws of the United States or any political subdivision thereof or therein,
or estates or trusts the income of which is subject to United States federal
income taxation regardless of its source that will hold the Common Shares as
capital assets. This summary does not address tax considerations applicable to
holders that may be subject to special tax rules, such as banks, insurance
companies, dealers in securities or currencies, tax-exempt entities, persons
that will hold Common Shares as a position in a "straddle" or as part of a
"hedging" or "conversion" transaction for tax purposes, persons that have a
functional currency other than the U.S. dollar or holders of 10% or more (by
voting power) of Common Shares. This summary is based upon the tax laws and
regulations of the United States as in effect as of the date hereof, as well as
judicial and administrative interpretations thereof available on or before such
date. All of the foregoing are subject to change, which change could apply
retroactively and could affect the tax consequences described below.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT
TO THE UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
ACQUIRING, OWNING OR DISPOSING OF COMMON SHARES.
COMMON SHARES -- INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996 is hereby incorporated by reference, including the discussion of certain
material United States federal income tax consequences of acquiring, owning or
disposing of Common Shares contained therein.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material Canadian federal
income tax consequences applicable to a holder of Common Shares who is a
resident of the United States and who is not, and is not deemed to be, a
resident of Canada who holds such Common Shares as capital property and who does
not use or hold such Common Shares in carrying on a business in Canada (a
"Non-Resident Holder").
This summary is based on the current provisions of the Income Tax Act
(Canada) and regulations thereunder (the "ITA") and all specific proposals to
amend the ITA publicly announced prior to the date hereof by the Minister of
Finance (Canada) and the current administrative practices of Revenue Canada,
Customs, Excise and Taxation ("Revenue Canada"). It has been assumed that all
specific proposals to amend the ITA will be enacted in substantially their
present form and that no other relevant amendments to the ITA will come into
force. However, no assurance can be given to this effect. Except for the
foregoing, this summary
S-14
<PAGE> 15
does not take into account or anticipate any changes in law, whether by
legislative, administrative or judicial decision or action, nor does it take
into account provincial, territorial or foreign income tax legislation or
considerations which may differ from those described herein. See "Certain United
States Federal Income Tax Considerations" herein.
This summary is not exhaustive of all possible Canadian federal income tax
consequences to all Non-Resident Holders and in particular will not be
applicable where the Non-Resident Holder is a non-resident insurer carrying on
an insurance business in Canada in respect of which the Common Shares are held
or used in Canada. Nor should these comments be interpreted as legal or tax
advice to any particular Non-Resident Holder, each of whom should consult its
own tax advisors with respect to their particular circumstances.
DIVIDENDS
Dividends (including deemed dividends) paid or credited on the Common
Shares to a Non-Resident Holder will be subject to withholding tax in Canada.
The Canada-United States Income Tax Convention, 1980, as amended (the "Treaty")
provides that the normal 25% rate of withholding tax on the gross amount of such
dividends is reduced to 15% if paid to a resident of the United States. The
Treaty provides for a further reduction of the withholding tax rate to 5% if the
beneficial owner of such dividends is a company (any entity which is treated as
a body corporate for tax purposes) which is a resident of the United States and
which owns at least 10% of the voting stock of the Company.
CAPITAL GAINS
A Non-Resident Holder will not be subject to tax under the ITA in respect
of a capital gain realized upon the disposition or deemed disposition (such as
would arise on the death of an individual Non-Resident Holder) of a Common Share
unless such property is "taxable Canadian property" to the Non-Resident Holder.
A Common Share will be taxable Canadian property to a Non-Resident Holder if, at
any time during the five year period ending at the time of disposition of such
property, the Non-Resident Holder, persons with whom the Non-Resident Holder did
not deal at arm's length, or the Non-Resident Holder together with all such
persons owned 25% or more of the issued shares of any class of the capital stock
of the Company.
However, under the Treaty, a Non-Resident Holder to whom a Common Share
represents taxable Canadian property will not be liable to tax in Canada in
respect of a capital gain realized on the disposition of such Common Share
unless:
- -- the value thereof is derived principally from real property situated in
Canada (including mineral properties in Canada and rights in relation
thereto), or
- -- the Non-Resident Holder was a resident of Canada for 120 months during any
period of 20 consecutive years preceding the disposition of such Common
Share and was a resident of Canada at any time during the 10 years
immediately preceding such disposition and owned such Common Share (or
property for which the Common Share was substituted) at the time the
Non-Resident Holder ceased to be a resident of Canada (proposed amendments
to the ITA will apply to persons who cease to be a resident of Canada after
October 1, 1996 and will deem all shares owned by such persons to have been
disposed of at fair market value at that time).
PLAN OF DISTRIBUTION
The Company agreed to issue and sell an aggregate of 3,025,000 Common
Shares to more than 30 purchasers, pursuant to the terms of subscription
agreements between each such purchaser and the Company, on April 25, 1997 or
such other date as the parties to such agreements may agree, at a price of $7.50
per Common Share.
The Common Shares are not being offered through underwriters. The Company
will not pay any underwriting discounts or commissions in connection with the
offering of the Common Shares.
S-15
<PAGE> 16
GOLDEN STAR RESOURCES LTD.
COMMON SHARES
PREFERRED SHARES
CONVERTIBLE DEBT SECURITIES
WARRANTS
---------------------
Golden Star Resources Ltd. (the "Company" or "Golden Star") may offer from
time to time (i) common shares without par value (the "Common Shares"), (ii)
first preferred shares (the "Preferred Shares") in one or more series, (iii)
convertible debt securities (the "Convertible Debt Securities"), consisting of
debentures, notes and/or other evidences of indebtedness representing unsecured
obligations of the Company convertible into Common Shares and (iv) warrants (the
"Warrants") to purchase Common Shares, Preferred Shares or Convertible Debt
Securities. The foregoing securities are collectively referred to as the
"Securities." Any Securities may be offered with other Securities or separately.
Securities may be sold for U.S. dollars, foreign currency or currency units,
including the European Currency Unit; amounts payable with respect to any
Convertible Debt Securities may likewise be payable in U.S. dollars, foreign
currency or currency units, including the European Currency Unit, in each case,
as the Company specifically designates. The amounts payable by the Company in
respect of Convertible Debt Securities may be calculated by reference to the
value, rate or price of one or more specified commodities, currencies or indices
as set forth in an accompanying Prospectus Supplement. The Securities will be
offered at an aggregate initial offering price not to exceed U.S. $75,000,000 or
the equivalent (based on the applicable exchange rate at the time of sale) if
Convertible Debt Securities of the Company are issued in principal amounts
denominated in one or more foreign currencies or currency units as shall be
designated by the Company.
SEE "RISK FACTORS" COMMENCING ON PAGE 8 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE SECURITIES.
This Prospectus will be supplemented by one or more accompanying Prospectus
Supplements, which will set forth with regard to the particular Securities in
respect of which this Prospectus is being delivered (i) in the case of Common
Shares, the number of Common Shares and the terms of the offering thereof, (ii)
in the case of Preferred Shares, the designation, aggregate principal amount and
stated value and liquidation preference per share, initial public offering
price, dividend rate (or method of calculation), dates on which dividends shall
be payable, any redemption or sinking fund provisions, any conversion or
exchange rights, whether the Company has elected to offer the Preferred Shares
as depositary shares, any listing of such Preferred Shares on a securities
exchange, and any other terms in connection with the offering and sale of such
Preferred Shares, (iii) in the case of Convertible Debt Securities, title,
aggregate principal amount, currency of denomination, maturity, interest rate,
if any (which may be fixed or variable), or method of calculation thereof, time
of payment of any interest, any terms for redemption at the option of the
Company or the holder, any terms for sinking fund payments, any index or other
method used to determine the amounts payable, the ranking of such Convertible
Debt Securities (whether senior, senior subordinated or subordinated), any
conversion rights, at the option of the Company or the holder, any listing on a
securities exchange, the initial public offering price and any other terms in
connection with the offering and sale of such Convertible Debt Securities, and
(iv) in the case of Warrants, the number and terms thereof, the number of shares
of Common Shares or Preferred Shares or amount of Convertible Debt Securities
issuable upon their exercise, the exercise price, the periods during which the
Warrants are exercisable, any listing of such Warrants on a securities exchange
and any other terms in connection with the offering, sale and exercise of such
Warrants. The Prospectus Supplement will also contain information, as
applicable, about certain United States and Canadian Federal income tax
considerations relating to the Securities in respect of which this Prospectus is
being delivered.
The Company's Common Shares are traded on the American Stock Exchange under
the symbol "GSR" and The Toronto Stock Exchange under the symbol "GSC." Each
Prospectus Supplement will indicate if the Securities offered thereby will be
listed on any securities exchange.
The Company may sell Securities to or through one or more underwriters, and
may also sell Securities directly to other purchasers or through agents. See
"Plan of Distribution." Each Prospectus Supplement will set forth the names of
any underwriters, dealers or agents involved in the sale of the Securities in
respect of which this Prospectus is being delivered, the principal amount, if
any, to be purchased by any such Underwriters, and any applicable fee,
commission or discount arrangements with them.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is November 8, 1996.
<PAGE> 17
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR IN THE PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER, AGENT OR
DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL CREATE, UNDER ANY CIRCUMSTANCES, AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT, OR IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DO THEY CONSTITUTE AN
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION IN WHICH SUCH OFFER OR SALE IS UNLAWFUL OR NOT
AUTHORIZED OR IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files,
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street N.W., Washington, D.C. 20549; and at its
regional offices located at Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661-2511; and 13th Floor, 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, at
prescribed rates. The Company also is subject to the information and reporting
requirements of the securities regulatory authorities of certain provinces of
Canada and files similar reports, proxy statements and other information with
such authorities. Such reports, proxy statements and other information
concerning the Company also can be inspected and copied at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006 and the
offices of The Toronto Stock Exchange, 2 First Canadian Place, Toronto Ontario,
Canada M5X 1J2. The Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect of the Securities covered by this Prospectus. This
Prospectus, which forms part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and such
securities, reference is hereby made to such Registration Statement, including
the exhibits filed therewith. The Registration Statement and the exhibits
thereto can be obtained by mail from or inspected and copied at the public
reference facilities maintained by the Commission as provided in the prior
paragraph.
2
<PAGE> 18
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES
Golden Star Resources Ltd. is a corporation subsisting under the laws of
Canada and certain of its directors and officers, as well as certain of the
experts named herein, are neither citizens nor residents of the United States. A
substantial part of the assets of several of such persons and of the Company are
located outside the United States. As a result, it may be difficult for
investors to effect service of process within the United States upon such
persons or to enforce against them or the Company within the United States
judgment of courts of the United States predicated upon the civil liability
provisions of the federal securities laws of the United States. There is doubt
as to the enforceability against such persons and Golden Star Resources Ltd. in
Canada, in original actions or in actions to enforce judgments of United States
courts, of liabilities predicated solely upon the federal securities laws of the
United States.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1995, filed
with the Commission on March 29, 1996, as amended by Amendment to
Annual Report on Form 10-K/A, filed with the Commission on April 30,
1996.
(2) Current Reports on Form 8-K, filed with the Commission on January 10,
1996, February 7, 1996, March 4, 1996, April 2, 1996 and May 8, 1996.
(3) Quarterly Reports on Form 10-Q, filed with the Commission on May 15,
1996 and August 14, 1996.
(4) 1996 Proxy Statement and Information Circular for the 1996 Annual
Meeting of Shareholders, filed with the Commission on May 16, 1996.
(5) The description of the Common Shares contained in the Company's
Articles (incorporated by reference to Exhibit 1.1 to the Company's
Registration Statement on Form 20-F, filed on May 10, 1993).
(6) The Company's Shareholder Rights Plan included in the Company's Current
Report on Form 8-K, filed with the Commission on May 8, 1996.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the Offering
of the Securities offered hereby shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the oral or written request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits, unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to the Secretary,
Golden Star Resources Ltd., One Norwest Center, 1700 Lincoln Street, Suite 1950,
Denver, Colorado 80203, (303) 830-9000.
References in this Prospectus to the term "Golden Star" or to the term
"Company" refer to Golden Star Resources Ltd. and its consolidated subsidiaries,
including, without limitation, Guyanor Resources S.A. ("Guyanor") and Pan
African Resources Corporation ("PARC"), unless the context otherwise requires.
Certain terms and measurements used herein are defined in "Glossary of Terms"
included in this Prospectus.
3
<PAGE> 19
The information in this Prospectus is qualified in its entirety by the more
detailed information and consolidated financial statements and notes thereto
appearing in this Prospectus or incorporated by reference herein.
CANADIAN PROSPECTUSES
The Company is filing with certain Canadian securities regulatory
authorities a shelf prospectus relating to the potential offering in Canada of
up to 5,000,000 common shares (including the Common Shares offered hereunder)
and a shelf prospectus relating to the potential offering in Canada of
convertible debt securities at an aggregate initial offering price of up to U.S.
$75,000,000 (including the Convertible Debt Securities offered hereunder).
Canadian securities laws do not permit the use of an unallocated (as between
common shares and debt securities) shelf prospectus.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus and any Prospectus Supplement
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance, or achievements
of the Company to be materially different from any future results, performance,
or achievements express or implied by such forward-looking statements. Such
factors include, among others, gold and diamond exploration and development
costs and results, fluctuation of gold prices, foreign operations and foreign
government regulation, competition, uninsured risks, recovery of reserves,
capitalization and commercial viability and requirements for obtaining permits
and licenses. See "Risk Factors" and "Business and Properties."
REPORTING CURRENCY AND FINANCIAL INFORMATION
For the periods prior to May 15, 1992, the Company's reporting currency was
the Canadian dollar. In addition, the Company historically has raised most of
its equity capital in Canadian dollars. The Company's current reporting currency
is the United States dollar.
All amounts in this Prospectus and any Prospectus Supplement or
incorporated herein by reference are expressed in United States dollars, unless
otherwise indicated. References to (i) "Cdn" are to Canadian dollars, (ii) "FF"
are to French francs and (iii) "R" are to Brazilian reals.
Financial information is presented in accordance with generally accepted
accounting principles in Canada ("Canadian GAAP"). Differences between generally
accepted accounting principles in the United States ("U.S. GAAP") and Canadian
GAAP as applicable to the Company, are explained in Note 14 to the Company's
Consolidated Financial Statements incorporated by reference herein.
4
<PAGE> 20
GOLD PRICES
The following table sets forth for the last ten years the high and low
selling prices of gold, as provided by the New York Commodities Exchange
("COMEX"):
<TABLE>
<CAPTION>
YEAR HIGH LOW
---- ------- -------
<S> <C> <C>
1986............................................. $441.10 $327.00
1987............................................. $497.10 $392.10
1988............................................. $487.00 $394.00
1989............................................. $418.90 $358.10
1990............................................. $422.40 $346.80
1991............................................. $403.20 $344.30
1992............................................. $359.30 $329.70
1993............................................. $407.00 $326.30
1994............................................. $398.00 $370.60
1995............................................. $395.40 $371.20
</TABLE>
The closing trading price per ounce of gold quoted by COMEX on November 4,
1996 was $379.60.
EXCHANGE RATES
The following table sets forth certain exchange rates based on the noon
buying rate in New York City for cable transfers as certified for customs
purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate"). Such
rates are set forth as United States dollars per Cdn. $1.00 and are the inverse
of rates quoted by the Federal Reserve Bank of New York for Canadian dollars per
U.S. $1.00.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
-------------- -----------------------------------------
1996 1995 1995 1994 1993 1992 1991
----- ----- ----- ----- ----- ----- -----
(U.S. $ PER CDN. $1.00)
<S> <C> <C> <C> <C> <C> <C> <C>
High for period........... .7391 .7396 .7527 .7632 .8046 .8757 .8926
Low for period............ .7235 .7023 .7023 .7103 .7439 .7761 .8587
End of period............. .7322 .7279 .7323 .7128 .7544 .7865 .8652
Average for period (1).... .7310 .7224 .7305 .7300 .7729 .8235 .8726
</TABLE>
- ---------------
(1) The average of the exchange rates on the last day of each month in the
applicable period.
On November 4, 1996, the inverse of the Noon Buying Rate was Cdn. $1.00 =
U.S. $0.7485.
5
<PAGE> 21
THE COMPANY
Golden Star is an international gold and diamond exploration company with a
diverse portfolio of active exploration and development projects and operating
mines in approximately ten countries on two continents. The Company's core focus
is on the acquisition, discovery and development of gold and diamond projects.
Once it identifies such projects, Golden Star's business strategy is, if
appropriate, to enter into partnership arrangements with major mining companies
to develop and operate mines. The Company currently has properties in various
stages of development in Guyana, French Guiana (through its approximately 69%
owned publicly traded subsidiary, Guyanor), Suriname, Brazil and Bolivia in
South America and Eritrea, Ethiopia, Gabon, Ivory Coast and Mali in Africa
(through its approximately 60% owned publicly traded subsidiary, PARC).
Golden Star is a substantial mining exploration organization, with over 50
professional geologists on staff and over 600 individuals in the field. The
Company's estimated exploration spending for 1996, including funding provided by
its partners, is approximately $35.4 million. The Company's efforts are
concentrated in a geologic domain known as greenstone belts, which are ancient
volcanic-sedimentary rock assemblages. Greenstone belts are known to be
favorable geologic environments for gold mineralization and account for a
significant proportion of the world's historic gold production. The Company
began its exploration activities in 1985 in the tropical, Proterozoic greenstone
belts of the Guiana Shield and more recently extended its activities to the
geologically related greenstone belts of the Brazilian Shield and the West
African Shield and finally to the greenstone belts of eastern Africa.
Golden Star was one of the first North American gold companies to become
actively involved in the search for gold and diamonds in Guyana, French Guiana
and Suriname in South America and Eritrea, Ethiopia and Ivory Coast in Africa.
As a result, the Company has built a significant portfolio of prospective
exploration acreage on a cost effective basis. In recognition of the Company's
exploration expertise and in competition with some of the world's major mining
companies, Golden Star was one of the first foreign companies to be awarded
exploration rights in Ethiopia and Eritrea and was the first foreign company
awarded the right to earn a 50% interest in a gold project owned by the
Brazilian state mining company, Companhia Vale do Rio Doce ("CVRD").
Exploration requires a different set of skills from those required for mine
operation. Therefore, Golden Star's business strategy is to focus exclusively on
its core skills of gold and diamond exploration and property acquisition, with
the ultimate goal of holding significant ownership interests in large scale gold
and diamond mines. The Company believes that it can achieve the greatest
increase in shareholder value from the discovery and development, rather than
from the exploitation, of mineral resources. By entering into partnership
arrangements with major mining companies that have the technical skills and
financial resources to develop and operate major mines, the Company also seeks
to profit from the exploitation of the mineral resources that it discovers. To
date, the Company has funded its activities through the issuance of equity
securities and partner contributions and expects that these will be its primary
means of funding for the next several years. However, the Company's long-term
objective is to fund additional exploration and the development of new projects
with the cash flow from its mining interests.
Golden Star's initial exploration success in 1986 resulted in the
development of the Omai Gold Mine in Guyana, which commenced commercial
production in January 1993. The Omai Mine, in which the Company holds a 30%
equity interest, is one of South America's largest operating gold mines, with
proven and probable reserves of approximately 3.3 million ounces as of December
31, 1995, after production of over 630,000 ounces. The Omai's Mine's anticipated
1997 production is in excess of 300,000 ounces. In early 1997, the Company
expects to complete a final feasibility study on its second major project, Gross
Rosebel, located in Suriname. The Company currently estimates total proven and
probable reserves at Gross Rosebel to be approximately 1.1 million ounces and a
substantial drilling program is underway to attempt to delineate additional
reserves. In September 1996, Guyanor and Golden Star announced probable reserves
at the Yaou project in French Guiana of approximately 10.3 million tonnes
grading 2.7 g Au/t, representing approximately 876,000 ounces of gold in situ,
which is part of total mineralization of approximately 13 million tonnes grading
2.5 g Au/t. Cambior Inc. ("Cambior") is a partner in each of these three
projects.
6
<PAGE> 22
Golden Star's partnership arrangements at Omai and Gross Rosebel are
illustrative of the Company's partnership strategy. Golden Star's partners
currently include ASARCO Incorporated ("ASARCO"), Broken Hill Proprietary Co.
Ltd. ("BHP"), Cambior, CVRD and LaSource Developpement S.A. ("LaSource"). Under
a typical partnership arrangement with a major mining company, Golden Star's
partner funds a portion of the exploration to earn an interest in a given
project, prepares a feasibility study and manages the tasks and risks involved
in engineering, building and operating any mine which warrants development.
Certain of the Company's agreements also require its partner to use its best
efforts to provide debt financing for construction capital. This strategy
enables Golden Star to transfer a portion of the financial risks associated with
exploration and development to its partner, provides a means to meet the
majority of the financing requirements for project development and allows the
project to be built and managed by a company experienced in mine development and
operation. The Company's capital and its human resources then can be focused on
obtaining and advancing exploration on new properties, thereby diversifying the
Company's interests among a wide range of properties at different stages of
exploration and development.
Golden Star believes it is poised to rapidly advance a number of projects
by the end of 1997. The Company's objectives during this period include (i) the
completion of a final feasibility study at Gross Rosebel in Suriname and, if
positive, the commencement of mine construction, (ii) the commencement of
intensive exploration at Andorinhas in Brazil, (iii) the continuation of
drilling on the Yaou, Dorlin, St-Elie and Paul-Isnard gold projects in French
Guiana, at Dioulafoundou in Mali and at Dul Mountain in Ethiopia and (iv) the
continuation of bulk sampling at the Dachine diamond project in French Guiana.
The head office of the Company is located at One Norwest Center, 1700
Lincoln Street, Suite 1950, Denver, Colorado 80203; its telephone number is
(303) 830-9000. The Company's registered and records office is located at 19th
Floor, 885 West Georgia Street, Vancouver, British Columbia V6C 3H4; its
telephone number is (604) 891-3688.
7
<PAGE> 23
RISK FACTORS
Prospective purchasers of Securities should carefully read this Prospectus,
any Prospectus Supplement delivered herewith, and the documents incorporated by
reference herein and therein. Ownership of Securities involves certain risks. In
determining whether to purchase Securities, prospective investors should
consider carefully the following risk factors and the other information
contained in this Prospectus, as well as the other risk factors and information
set forth in any Prospectus Supplement delivered herewith.
RISKS OF EXPLORATION AND DEVELOPMENT
Mineral exploration and development involves a high degree of risk and few
properties which are explored ultimately are developed into commercially
producing mines. The long-term success of the Company's operations will be
substantially and directly related to the cost and success of its exploration
programs. The risks associated with the exploration for new mineralization
include the identification of potential gold mineralization based on surficial
analysis, the attraction and retention of experienced geologists and drilling
personnel, the quality and availability of third party assaying, sampling
errors, geological, geophysical, geochemical and other technical analyses and
other factors. Substantial early stage expenditures are required to outline
mineralized prospects and establish ore reserves through, among other things,
drilling and the preparation of feasibility studies and mine plans, and to
develop and construct the mining and processing facilities at any site chosen
for mining. Although substantial benefits may be derived from the discovery of a
major mineralized deposit, no assurance can be given that (i) minerals will be
discovered in sufficient quantities and/or grades to constitute reserves or
justify commercial operations, (ii) the Company will be successful in partnering
with companies to develop and operate those properties that are commercially
attractive on acceptable or attractive terms or (iii) the funds required for
development can be obtained by the Company or any of its partners on a timely or
commercially reasonable basis. Further, even if reserves are delineated, it may
require a number of years and significant expenditures until production is
possible, during which time the economic feasibility of a property may change.
Additionally, the Company will be reliant on its partners in each project for
technical expertise in the development and operation phases of the project, and,
in certain instances, for financing, until cash flow is generated from the
property for the Company's account. Finally, to the extent the Company's mineral
reserves are produced and sold, the Company must continually acquire new mineral
prospects and explore for and develop new mineral reserves to replace such
reserves.
UNCERTAINTY OF RESERVE AND OTHER MINERALIZATION ESTIMATES
There are numerous uncertainties inherent in estimating proven and probable
reserves and other mineralization, including many factors beyond the control of
the Company. The estimation of reserves and other mineralization is a subjective
process and the accuracy of any such estimate is a function of the quality of
available data and of engineering and geological interpretation and judgment.
Results of drilling, metallurgical testing and production and the evaluation of
mine plans subsequent to the date of any estimate may justify revision of such
estimates. No assurance can be given that the volume and grade of reserves
recovered and rates of production will not be less than anticipated. Assumptions
about prices are subject to great uncertainty and gold prices have fluctuated
widely in the past. Declines in the market price of gold or other precious
metals also may render reserves or other mineralization containing relatively
lower grades of mineralization or requiring more extensive processing uneconomic
to exploit. If the price realized by the Company for its gold bullion were to
decline substantially below the price at which ore reserves were calculated for
a sustained period of time, the Company potentially could experience reductions
in reserves and asset write-downs. Under such circumstances, the Company may
discontinue the development of a project or mining at one or more of its
properties. Further, changes in operating and capital costs and other factors,
including but not limited to short-term operating factors such as the need for
sequential development of ore bodies and the processing of new or different ore
grades, may materially and adversely affect reserves.
FLUCTUATION OF PRICES
To the extent that the Company has any revenues from operations, such
revenues are expected to be in large part derived from the mining and sale of
gold. The price of gold can fluctuate, and in the past has
8
<PAGE> 24
fluctuated, widely and is affected by numerous factors beyond the Company's
control, including international economic and political trends, inflation
expectations, interest rates, central bank sales and purchases, global or
regional consumptive patterns (such as the development of gold coin programs),
speculative activities and increased production due to new mine developments and
improved mining and production methods. The effect of these factors on the price
of gold cannot be accurately predicted.
The current demand for, and supply of, gold affect gold prices but not
necessarily in the same manner as current demand and supply affect the prices of
other commodities. The potential supply of gold consists of new mine production
plus existing stocks of bullion and fabricated gold held by governments,
financial institutions, industrial organizations and individuals. Since mine
production in any single year constitutes a very small portion of the total
potential supply of gold, normal variations in current production do not
necessarily have a significant effect on the supply of gold or on its price. If
gold prices should decline below the Company's cash costs of production and
remain at such levels for any sustained period, the Company could determine that
it is not economically feasible to continue commercial production at any or all
of its mines.
Moreover, on a given date, the prices used in estimating the Company's ore
reserves are based on the price of gold on such date. If the Company were to
determine that its reserves and future cash flows should be calculated at
significantly lower gold prices than those used on the measurement date, there
would likely be a material reduction in the amount of its gold reserves. Should
such reductions occur, material write-downs of the Company's investment in
mining properties may be required. See "Gold Prices."
CAPITALIZATION AND COMMERCIAL VIABILITY
The Company has limited financial resources. To date, and for the
reasonably foreseeable future, its exploration and development activities have
not generated and are not expected to generate substantial revenues, which has
caused, and is expected to continue for the reasonably foreseeable future to
cause, the Company to incur losses. In addition, the Company historically has
incurred significant expenditures in connection with its exploration activities
and contemplates doing so for the foreseeable future. There can be no assurance
that additional funding will be available to the Company for further exploration
or development of its properties or to fulfill its obligations under any
applicable agreements with its partners or the nations in which the Company is
operating. Although the Company has been successful in the past in obtaining
financing through the sale of equity securities and through partnership
arrangements involving several of the Company's properties, there can be no
assurance that the Company will be able to obtain adequate financing in the
future or that the terms of such financing will be favorable, or that such
partnership arrangements will continue to be available for the Company's
properties on acceptable terms. Failure to obtain such additional financing
could result in delay or indefinite postponement of further exploration and
development of the Company's properties with the possible loss of the Company's
interest in such properties.
If the Company proceeds to production on a particular property, commercial
viability will be affected by certain factors that are beyond the Company's
control, including the specific attributes of the deposit (such as mineral grade
and stripping ratio), the fluctuation in metal prices, the costs of constructing
and operating a mine in a specific environment, processing and refining
facilities, the availability of economic sources of energy, adequacy of water
supply, adequate access, government regulations including regulations relating
to prices, royalties, duties, taxes, restrictions on production, quotas on
exportation of minerals, as well as the costs of protection of the environment
and agricultural lands. The occurrence of any such factors may materially and
adversely affect the Company's business, financial condition, results of
operations and cash flow.
MARKETABILITY OF DIAMONDS
The marketability of diamonds which may result from projects advanced by
the Company will be affected by numerous factors beyond the control of the
Company. These factors include market fluctuations, government regulations,
including regulations relating to prices, taxes, royalties, land tenure, land
use, importing and exporting of diamonds and environmental protection. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in the Company not receiving an adequate return on
invested capital. The price for diamonds is, among other things, based on the
size, cut,
9
<PAGE> 25
color and quality of individual diamonds sold and, to a lesser extent, the
market supply and demand for diamonds in general.
RISKS OF FOREIGN OPERATIONS
In certain countries in which the Company has mineral rights (whether held
directly or indirectly), there are certain laws, regulations and statutory
provisions which, as currently written, could have a material negative impact on
the ability of the Company to develop a commercial mine in such countries. The
range and diversity of such laws and regulations are such that the Company could
not adequately summarize them in this document. Through, among other things, the
negotiation of mineral agreements with the governments of these countries,
management of the Company intends to seek variances or otherwise to be exempted
from the provisions of these laws, regulations and/or statutory provisions.
There can be no assurance, however, that the Company will be successful in
obtaining such mineral agreements, that any such variances or exemptions can be
obtained on commercially acceptable terms or that such agreements will be
enforceable in accordance with their terms.
Further, many of the mineral rights and interests of the Company are
subject to government approvals, licenses and permits. Such approvals, licenses
and permits are, as a practical matter, subject to the discretion of the
applicable governments or governmental officials. No assurance can be given that
the Company will be successful in obtaining any or all of such approvals,
licenses and permits, will obtain them in a timely fashion or will be able to
maintain them in full force and effect without modification or revocation.
The Company's assets and operations are subject to various political,
economic and other uncertainties, including, among other things, the risks of
war or civil unrest, expropriation, nationalization, renegotiation or
nullification of existing concessions, licenses, permits, approvals and
contracts, taxation policies, foreign exchange and repatriation restrictions,
changing political conditions, international monetary fluctuations, currency
controls and foreign governmental regulations that favor or require the awarding
of drilling contracts to local contractors or require foreign contractors to
employ citizens of, or purchase supplies from, a particular jurisdiction. In
addition, in the event of a dispute arising from foreign operations, the Company
may be subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdiction of courts in the
United States or Canada. The Company also may be hindered or prevented from
enforcing its rights with respect to a governmental instrumentality because of
the doctrine of sovereign immunity. The Company has suspended its operations in
Sierra Leone due to the unstable political situation there and has invoked the
force majeure provisions of the contracts pertaining to its Sierra Leone
operations. Currently, it is not possible for the Company to accurately predict
such developments or changes of law or policy and which, if any, of such
developments or changes may have a material adverse impact on the Company's
operations.
REQUIREMENT FOR PERMITS AND LICENSES
The operations of the Company require licenses and permits from various
governmental authorities. Except as otherwise described in "Business and
Properties" herein or in documents incorporated by reference in this Prospectus,
management believes that the Company presently holds substantially all necessary
licenses and permits to carry on the activities which it currently is conducting
or expects to conduct in the near term under applicable laws and regulations in
respect of its properties, and also believes the Company is presently complying
in all material respects with the terms of such laws, regulations, licenses and
permits, although the Company is in breach of certain provisions of such laws,
regulations, licenses and permits from time to time. Such licenses and permits
are subject to modification or revocation as discussed above in "Risks of
Foreign Operations," as well as changes in regulations and in various operating
circumstances. While the Company does not believe that any such breaches will
have a material adverse effect on its operations, there can be no assurance that
the Company will be able to obtain or maintain in force all necessary licenses
and permits that may be required for it to conduct further exploration or
commence construction or operation of mining facilities at properties under
exploration or to maintain continued operations at economically justifiable
costs.
10
<PAGE> 26
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the services of certain key officers and
employees, including its Chief Executive Officer, its Chief Financial Officer,
its General Counsel and certain of its geologists. Competition in the mining
exploration industry for qualified individuals is intense, and the loss of any
of these key officers or employees if not replaced could have a material adverse
effect on the Company's business and its operations. The Company has entered
into agreements with certain of its officers which provide for payments upon
termination without cause or, in certain cases, upon a change in control of the
Company.
OPERATIONAL HAZARDS AND RESPONSIBILITIES
The business of gold mining is generally subject to a number of risks and
hazards, including environmental hazards, the discharge of pollutants or
hazardous chemicals, industrial accidents, labor disputes, encountering unusual
or unexpected geological or operating conditions, slope failures, cave-ins,
failure of pit walls or dams and fire, changes in the regulatory environment and
natural phenomena such as inclement weather conditions, floods and earthquakes,
as well as other hazards. Such occurrences could result in damage to, or
destruction of, mineral properties or production facilities, personal injury or
death, environmental damage, delays in mining, monetary losses and possible
legal liability. The Company or its subsidiaries or partnership arrangements to
which they are parties also may incur liability as a result of pollution and
other casualties. The Company may not be able to insure fully or at all against
such risks, due to political or other reasons, or the Company may decide not to
insure against such risks as a result of high premiums or for other reasons.
Such occurrences, against which it cannot insure, or may elect not to insure,
may delay production, increase production costs or result in liability. Paying
compensation for obligations resulting from such liability may entail
significant costs for the Company and may have an adverse effect on the
Company's financial position. Furthermore, insurance against certain risks
(including certain liabilities for environmental pollution or other hazards as
result of exploration and production) is not generally available to the Company
or to other companies within the industry.
MINING AND PROCESSING
The Company's business operations are subject to risks and hazards inherent
in the mining industry, including but not limited to unanticipated grade and
other geological problems, water conditions, surface or underground conditions,
metallurgical and other processing problems and mechanical equipment performance
problems, the unavailability of materials and equipment, accidents, labor force
and force majeure factors, unanticipated transportation costs and weather
conditions, and prices and production levels of by-products, any of which can
materially and adversely affect, among other things, the development of
properties, production quantities and rates, costs and expenditures and
production commencement dates. In addition, the Company relies upon its partners
to manage the development and operating stages of the projects in which it has
an interest and, therefore, has less control over such matters than would be the
case if the Company were the operator.
In the case of the Company's exploration properties, there generally is no
operating history upon which to base estimates of future operating costs and
capital requirements. The economic feasibility of any individual project is
based upon, among other things, the interpretation of geological data obtained
from drill holes and other sampling techniques, feasibility studies, which
derive estimates of cash operating costs based upon anticipated tonnage and
grades of ore to be mined and processed, the configuration of the ore body,
expected recovery rates of metals from the ore, comparable facility and
equipment costs, anticipated climatic conditions, estimates of labor
productivity and other factors. Such exploration properties also are subject to
the successful completion of final feasibility studies, issuance of necessary
permits and receipt of adequate financing. Accordingly, uncertainties related to
operations are magnified in the case of exploration properties.
As a result of the foregoing risks, expenditures on any and all projects,
actual production quantities and rates and cash operating costs, among other
things, may be materially and adversely affected and may differ materially from
anticipated expenditures, production quantities and rates, and costs, just as
estimated production dates may be delayed materially, in each case, especially
to the extent exploration properties are
11
<PAGE> 27
involved. Any such events can materially and adversely affect the Company's
business, financial condition, results of operations and cash flows.
COMPETITION
The Company competes with major mining companies and other natural resource
companies in the acquisition, exploration, financing and development of new
properties and projects. Many of these companies are more experienced, larger,
and better capitalized than the Company. The Company's competitive position will
depend upon its ability to successfully and economically explore, acquire and
develop new and existing mineral resource properties or projects. Factors which
allow producers to remain competitive in the market over the long term are the
quality and size of the ore body, cost of production and operation generally,
and proximity to market. The Company also competes with other mining companies
for skilled geologists, geophysicists and other technical personnel, which may
result in higher turnover and greater labor costs for the Company.
CURRENCY
The Company historically has raised most of its equity capital in Canadian
dollars, primarily maintains its accounts in U.S. dollars and converts such U.S.
dollars into various local currencies on an as needed basis in order to conduct
local operations. The Company currently maintains all or the majority of its
working capital in U.S. dollars or U.S. dollar denominated securities and
converts funds to foreign currencies as payment obligations come due.
Accordingly, the Company is subject to fluctuations in the rates of currency
exchange between the U.S. dollar and these currencies, and such fluctuations may
materially affect the Company's financial position and results of operations.
The Company currently has future obligations which are payable in French francs
and Brazilian reals and receivables payable in French francs. The Company
currently does not actively take steps to hedge against such risks.
GOVERNMENTAL REGULATIONS
Management believes that compliance with existing regulations in the
jurisdictions in which the Company operates which are applicable to the
discharge of materials into the environment, or otherwise relating to
environmental protection, will not have a material adverse effect on the
Company's exploration activities, earnings, expenditures or competitive
position. However, there can be no assurance that this will always be the case.
New or expanded regulations, if adopted, could affect the exploration or
development of the Company's mining projects or otherwise have a material
adverse effect on the operations of the Company.
USE OF PROCEEDS
Unless a Prospectus Supplement indicates otherwise, the net proceeds to be
received by the Company from the issue and sale from time to time of the
Securities will be added to the general funds of the Company to be used to
finance the Company's operations and for other general corporate purposes.
Pending such application, such net proceeds may be invested in short-term
investment grade marketable securities. Each Prospectus Supplement will contain
specific information concerning the use of proceeds from the sale of Securities
to which it relates.
12
<PAGE> 28
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges(1) for the Company and its
subsidiaries was as follows for the six months ended June 30, 1995 and 1996, the
years ended December 31, 1995, 1994 and 1993, the periods from May 16, 1992 to
December 31, 1992 and July 1, 1991 to May 15, 1992 and the year ended June 30,
1991:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31, PERIOD FROM PERIOD FROM
- --------------- ------------------------ MAY 16, 1992 TO JULY 1, 1991 YEAR ENDED
1996 1995 1995 1994 1993 DECEMBER 31, 1992 TO MAY 15, 1992 JUNE 30, 1991
- ------ ------ ------ ------ ------ ----------------- --------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
N/M N/M N/M N/M N/M N/M N/M N/M
</TABLE>
- ---------------
(1) The Company's projects are in the exploration or development stages. As a
result, the Company has reported net losses for each of the periods
presented, except for the six months ended June 30, 1996 for which it
reported a gain due to the issuance of common shares by PARC. The Company
has not had any material fixed charge obligations for each of the periods
presented. Therefore, the ratio of earnings to fixed charges for the Company
is not meaningful ("N/M") under both U.S. GAAP and Canadian GAAP.
13
<PAGE> 29
BUSINESS AND PROPERTIES
Certain statements in "Business and Properties" constitute "forward-looking
statements" under the Reform Act. Actual results and the timing of certain
events could differ materially from those projected in the forward-looking
statements due to a number of factors, including those set forth under "Risk
Factors" and elsewhere in this Prospectus. See "Special Note Regarding
Forward-Looking Statements" in this Prospectus. The information contained in
this Prospectus is qualified in its entirety by the more detailed information,
descriptions and consolidated financial statements and notes thereto appearing
or incorporated by reference in this Prospectus.
GENERAL
Golden Star is an international gold and diamond exploration company with a
diverse portfolio of active exploration and development projects and operating
mines in ten countries on two continents. The Company's core focus is on the
acquisition, discovery and development of gold and diamond projects. Once it
identifies such projects, Golden Star's business strategy is, if appropriate, to
enter into partnership arrangements with major mining companies to develop and
operate mines. The Company currently has properties in various stages of
development in Guyana, French Guiana (through its approximately 69% owned
publicly traded subsidiary, Guyanor), Suriname, Brazil and Bolivia in South
America and Eritrea, Ethiopia, Gabon, Ivory Coast and Mali in Africa (through
its approximately 60% owned publicly traded subsidiary, PARC).
Golden Star is a substantial mining exploration organization, with over 50
professional geologists on staff and over 600 individuals in the field. The
Company's estimated exploration spending for 1996, including funding provided by
its partners, is approximately $35.4 million. The Company's efforts are
concentrated in a geologic domain known as greenstone belts, which are ancient
volcanic-sedimentary rock assemblages. Greenstone belts are known to be
favorable geologic environments for gold mineralization and account for a
significant proportion of the world's historic gold production. The Company
began its exploration activities in 1985 in the tropical, Proterozoic greenstone
belts of the Guiana Shield and more recently extended its activities to the
geologically related greenstone belts of the Brazilian Shield and the West
African Shield and finally to the greenstone belts of eastern Africa.
Golden Star's initial exploration success in 1986 resulted in the
development of the Omai Gold Mine in Guyana, which commenced commercial
production in January 1993. The Omai Mine, in which the Company holds a 30%
equity interest, is one of South America's largest operating gold mines, with
proven and probable reserves of approximately 3.3 million ounces as of December
31, 1995, after production of over 630,000 ounces. The Omai Mine's anticipated
1997 production is in excess of 300,000 ounces. In early 1997, the Company
expects to complete a final feasibility study on its second major project, Gross
Rosebel, located in Suriname. The Company currently estimates total proven and
provable reserves at Gross Rosebel to be approximately 1.1 million ounces and a
substantial drilling program is underway to delineate additional reserves. In
September 1996, Guyanor and Golden Star announced probable reserves at the Yaou
project in French Guiana of approximately 10.3 million tonnes grading 2.7 g
Au/t, representing approximately 876,000 ounces of gold in situ, which is part
of total mineralization of approximately 13 million tonnes grading 2.5 g Au/t.
Cambior is a partner in each of these three projects.
Golden Star believes it is poised to rapidly advance a number of projects
by the end of 1997. The Company's objectives during this period include (i) the
completion of a final feasibility study at Gross Rosebel in Suriname and, if
positive, the commencement of mine construction, (ii) the commencement of
intensive exploration in Andorinhas in Brazil, (iii) the continuation of
drilling on the Yaou, Dorlin, St-Elie and Paul Isnard gold projects in French
Guiana, at Dioulafoundou in Mali and at Dul Mountain in Ethiopia, and (iv) the
continuation of bulk sampling at the Dachine diamond project in French Guiana.
Golden Star also has created two publicly traded subsidiaries. Guyanor is
approximately 69% owned by Golden Star and is incorporated under the laws of
France. Guyanor was established in order to comply with French Guiana law
requiring a mining company to be a French company. Guyanor's Class B common
shares are listed on The Toronto Stock Exchange under the symbol "GRL.B" and
were listed on the Nouveau Marche in France on October 30, 1996. PARC is
approximately 60% owned by Golden Star and was created
14
<PAGE> 30
in recognition of the unique risk profile of establishing exploration projects
across Africa. PARC's common shares are quoted on the Canadian Dealing Network
under the symbol "PARC."
BUSINESS STRATEGY
Golden Star's business strategy is to focus on its core skills of gold and
diamond exploration and property acquisition with the ultimate goal of holding
significant interests in large scale gold and diamond mines. Golden Star's
business strategy is comprised of the following elements:
- Focus on exploration. Golden Star believes that the greatest increase in
shareholder value in the gold and diamond mining sector comes from the
discovery of mineral deposits. The Company intends to continue to
concentrate its exploration efforts in its areas of expertise, gold and
diamond exploration in the tropical greenstone belts of the Guiana
Shield, the Brazilian Shield, the West African Shield and the greenstone
belts of eastern Africa.
- Concentrate on current portfolio of properties. Golden Star intends to
focus its efforts on advancing the most promising projects within its
current portfolio of properties to the feasibility stage. The Company
continues to pursue new opportunities and may make selective additional
acquisitions of promising properties.
- Partner with major mining companies. Golden Star intends to continue to
leverage its exploration capital by entering into partnership
arrangements with major mining companies that have the technical skills
and financial resources to develop and operate large modern mining
operations. This strategy enables the Company to transfer a portion of
the financial risks associated with exploration and development to its
partners and to utilize a greater portion of its funds to explore and
develop additional projects.
- Maintain a strong local presence in the countries where Golden Star
operates. Golden Star intends to continue its practice of locating
offices, the majority of its employees and certain of its executives in
the countries where Golden Star has exploration, development and mining
interests. Many of the Company's employees are from the countries in
which Golden Star operates. The Company believes that its local presence
and hiring practices support its exploration efforts by enabling the
Company to establish and maintain relationships with local government
officials and business leaders. In addition, Golden Star believes that
its decentralized local management structure permits it to make better
informed exploration and management decisions.
15
<PAGE> 31
[MAP OF CERTAIN SOUTH AMERICAN PROJECT
LOCATIONS OF GOLDEN STAR RESOURCES LTD. AND
GUYANOR RESSOURCES S.A.]
16
<PAGE> 32
[MAP OF CERTAIN AFRICAN PROJECT LOCATIONS OF
PAN AFRICAN RESOURCES CORPORATION]
17
<PAGE> 33
The following table is a guide to Golden Star's current portfolio of
mineral properties. The nature of the exploration business is such that this
information changes continually as new properties are identified and acquired,
and existing ones mature for development, are sold or are released.
<TABLE>
<CAPTION>
1996 ESTIMATED
PROPERTY AREA EXPENDITURES
COUNTRY (PERCENT OWNED)(1) (HECTARES) STATUS(2) ($ MILLIONS)(3)
------- ----------------------- ---------- --------- ---------------
<S> <C> <C> <C> <C>
SOUTH AMERICA
Guyana(4)............... Omai (30%) 5,200 Producing mine N/A
Other (100%) 108,000 Exploration -- early $ 5.2
and intermediate
stages
Suriname(4)............. Gross Rosebel (40%-50%) 17,000 Prefeasibility study $ 7.5
completed; final
feasibility study
in process
Other (75-100%) 380,273 Exploration -- early $ 3.2
stage
French Guiana(5)........ Yaou (50%) 15,000 Prefeasibility study $ 1.5
in process
Dorlin (50%) 15,000 Exploration -- $ 1.5
advanced stage
St-Elie (50%) 9,900 Exploration -- $ 1.6
advanced stage
Paul-Isnard (37.5%) 25,100 Exploration -- $ 1.4
advanced stage
Dachine (31.5-49%) 2,500 Exploration -- $ 1.1
intermediate stage
Other 2,500 Exploration -- early $ 0.3
and intermediate
stages
Brazil(4)............... Andorinhas (50%) 25,000 Exploration -- $ 3.3
advanced stage
Other 30,000 Exploration -- early $ 1.3
stage
Other South Bolivia 14,600 Exploration -- early $ 1.1
America(4)............ stage
AFRICA
Ethiopia(6)............. Dul Mountain (100%) 180,100 Exploration -- $ 1.8
advanced stage
Mali(6)................. Dioulafoundou (85%) 3,400 Exploration -- $ 0.8
advanced stage
Other 22,000 Exploration -- early $ 0.0
stage
Other Africa(6)......... Other(7) 790,000 Exploration -- early $ 3.8
and intermediate
stages
=====
TOTAL $35.4
</TABLE>
- ---------------
(1) Percentages identified are the percentages Golden Star would own assuming
either the Company or each of its partners achieves the maximum percentage
ownership permissible under the applicable partnership arrangement.
Percentages currently owned by Golden Star may be higher or lower. See
"-- Properties" and the Company's Annual Report on Form 10-K and other
documents incorporated by reference herein for a discussion of such
potential changes and for additional information on the Company's properties
and the ownership interests.
(2) See "Glossary of Terms."
(3) Estimated aggregate expenditures by the Company and its partners.
(4) Properties in this country are owned by Golden Star Resources Ltd. or a
wholly owned subsidiary of Golden Star Resources Ltd.
(5) Properties in this country are owned by Guyanor, which is approximately 69%
owned by Golden Star Resources Ltd.
(6) Properties in these countries are owned by Golden Star or by PARC, which is
approximately 60% owned by Golden Star Resources Ltd. Certain properties
have been transferred from Golden Star Resources Ltd. to PARC, subject to
the approval of the applicable government.
(7) Includes properties located in Eritrea (30,000 hectares), Gabon (363,000
hectares), Ivory Coast (375,000 hectares) and Mali (22,000 hectares).
18
<PAGE> 34
PROPERTIES
The following is a description of the Company's significant gold and
diamond interests. For more information about these properties and the Company's
other mineral property interests, including with respect to the ownership
interests and funding obligations of third parties, see the Company's 1995
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the first and
second quarters of 1996 incorporated by reference herein.
PRODUCING PROPERTIES
Omai Mine, Guyana
The Company owns a 30% common share equity interest in Omai Gold Mines Ltd.
("OGML"), a company incorporated under the laws of Guyana which owns and
operates the Omai Mine. The mine is located on a 5,200 hectare mining license on
the Essequibo River approximately 160 kilometers southwest of Georgetown,
Guyana. The mine is operated as an equity joint venture between the Government
of Guyana, the Company and Cambior, the operator.
Cambior and the Government of Guyana own 65% and 5% of the common shares of
OGML, respectively. The Company and Cambior each has granted the Government of
Guyana options to acquire from them up to an additional 13.5% of the common
shares of OGML at capital market values, beginning in 2003.
Golden Star currently receives cash flow from the Omai Mine at the rate of
10% of the after tax cash flow from the Omai Mine through the redemption of
Class I preferred shares in OGML. The Company received $1.2 million in 1995
through the redemption of Class I preferred shares and, as of June 30, 1996,
held approximately $8.4 million of Class I preferred shares. The Company does
not expect to receive dividends from its common share holdings in OGML until
debt owed by OGML and guaranteed by Cambior is repaid and Class II and III
preferred shares held by Cambior are redeemed. As of June 30, 1996, OGML had
$184.2 million in debt outstanding and a total of $53.1 million in Class II and
III preferred shares outstanding.
The Omai Mine was brought into commercial production in January 1993 and
currently is the Company's only significant producing property. Gold production
for 1993, 1994, 1995 and the first six months of 1996 totaled 206,537 ounces,
250,642 ounces, 175,080 ounces and 85,191 ounces, respectively. Gold production
in 1995 was significantly lower than the originally expected amount of 250,000
ounces due primarily to the August 1995 tailings dam failure and resulting lack
of production for the remainder of 1995. Quarterly gold production at the Omai
Mine for 1995 and the first six months of 1996 was as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- -----------------------------------------------------------
FIRST SECOND FIRST SECOND THIRD FOURTH TOTAL
QUARTER(1) QUARTER QUARTER QUARTER QUARTER(1) QUARTER(1) 1995(1)
---------- --------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ore milled (mt)..................... 725,203 1,160,413 1,169,535 1,216,002 655,674 -- 3,041,211
Rate (mt/day)....................... 13,185 12,752 12,995 13,363 7,127 -- 13,165
Grade (g Au/mt)..................... 1.6 1.8 1.9 2.0 1.9 -- 1.9
Recovery (%)........................ 85 89 90 91 91 -- 91
Gold production (oz)................ 27,204 57,987 64,435 70,005 40,640 -- 175,080
Cash cost of production(2)($/oz).... $ 294 $ 281 $ 234 $ 220 $ 215 -- $ 224
</TABLE>
- ---------------
(1) There was no production at the Omai Mine from August 19, 1995 to February 4,
1996 due to the Omai dam failure.
(2) Cash cost of production includes mining and milling costs, power generation
and general services charges.
Ore reserves at the Omai Mine are derived from four sources: the Fennell
pit, the Wenot Lake pit, the alluvial deposits and from above-ground stockpiles.
In 1995, ore was processed from each of these sources. The average mined waste
to ore ratio for 1995 was 1.98. At December 31, 1995, the stockpiles held
10,094,000 tonnes grading 0.9 g Au/mt. Cash costs of production at the Omai Mine
for 1994 and 1995 amounted to $244 per ounce and $224 per ounce, respectively.
The surface infrastructure at the Omai Mine includes a milling facility
equipped with crushing, semi-autogenous grinding, a gravity recovery circuit,
carbon-in-pulp cyanide leaching and electro-winning, together
19
<PAGE> 35
with camp facilities, administrative offices, a warehouse, a maintenance shop
and a laboratory. Electric power currently is supplied by 15 diesel generators
having a total installed capacity of 47 megawatts. The mine site also includes a
tailings pond allowing the natural degradation of the cyanide and decanting and
recirculation of the water used in milling with discharge of treated process
waters into the Omai River.
The 1996 production target for the Omai Mine is 255,000 ounces. The mill
currently is processing stockpiled ore and lower grade soft rock ore from the
Wenot pit. Mining of hard rock ore resumed in the Fennell pit upon completion of
dewatering during the second quarter. The Omai Mine expanded its rated mill
capacity from 12,000 to 18,000 tonnes per day through incremental additions in
grinding and power generating capacity which were completed in July 1996. As a
result of the $54 million expansion program, annual production rates at the Omai
Mine in excess of 300,000 ounces are expected, beginning in 1997.
The Omai Mine has registered an increase in reserves every year since
operations began, exclusive of the gold that has been mined. Total reserves have
grown from 2.3 million ounces at year end 1992 to 3.3 million ounces at year end
1995, after production of over 630,000 ounces. The increase in minable gold
reserves for 1995 was the greatest year on year increase to date, representing a
24% increase over year end 1994, exclusive of production during 1996.
Importantly, the overall grade of the reserves at both the Fennell and Wenot pit
registered improvements. Drilling is continuing in 1996 in the East Wenot pit
section on a geochemical anomaly more than 1.2 kilometers long, with the
intention of further increasing reserves during 1996. The reserves(1) at
year-end 1995 and 1994 were estimated as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------------------------- ---------------------------------------
PROVEN AND PROVEN AND
PROBABLE PROBABLE
RESERVES GRADE CONTAINED GOLD RESERVES GRADE CONTAINED GOLD
(MT) (G AU/MT) (OZ) (MT) (G AU/MT) (OZ)
---------- --------- -------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Fennell Pit.............. 43,450,000 1.6 2,217,800 39,977,000 1.5 1,937,000
Wenot Lake Pit........... 14,127,000 1.6 708,100 6,905,000 1.4 309,300
Alluvials................ 1,237,000 0.9 38,100 3,946,000 1.1 138,600
Stockpiles............... 10,094,000 0.9 296,600 7,805,000 1.0 240,900
---------- --- --------- ---------- --- ---------
TOTAL.................... 68,908,000 1.5 3,260,600 58,633,000 1.4 2,625,800
========== === ========= ========== === =========
</TABLE>
- ---------------
(1) Reserves are calculated using a gold price of $425 per ounce with a cutoff
grade of 0.35 g Au/t for soft rock reserves and 0.70 g Au/t for hard rock
reserves. Recovery rates range between 85% and 90%, depending on grade.
On August 19, 1995, a failure occurred in the main section of the tailings
dam at the Omai Mine. The failure resulted in the discharge of
effluent-contaminated water into the Omai River, which in turn flowed into the
Essequibo River. The discharge began on August 19, 1995 and continued until the
leakage was controlled by Omai personnel on August 24, 1995. To minimize
environmental damage, a portion of the discharged water was diverted into the
Fennell Pit, the main source of ore at the Omai Mine. Production at the Omai
Mine was suspended from August 19, 1995 until February 4, 1996.
In October 1995, the Government of Guyana appointed a Commission of Inquiry
to examine various matters arising from the dam failure. Its report stated that
the Commission of Inquiry could see no justifiable reason for OGML not being
permitted to resume production at the Omai Mine. The Commission of Inquiry also
made a number of recommendations in its report relating to, among other things,
the construction of the new tailings pond, the treatment of water before its
release into receiving waters, the reclamation and closure of the former
tailings pond and the implementation of other environmental safeguards.
Operations at the Omai Mine resumed on February 4, 1996.
Other Producing Properties
The Company currently has alluvial mining operations at the Paul-Isnard
project in French Guiana. See "-- Development Properties -- Paul-Isnard."
20
<PAGE> 36
DEVELOPMENT PROPERTIES
Gross Rosebel, Suriname
The Gross Rosebel project covers 17,000 hectares and is located 80
kilometers south of the capital city of Paramaribo, Suriname. As of December 31,
1995, a total of $12.9 million, including capitalized acquisition costs, had
been spent at Gross Rosebel since the Company's involvement with the project, of
which $6.6 million was funded by Cambior. The Company anticipates that $7.5
million will be spent on the Gross Rosebel project in 1996, with Cambior
expected to fund $5.0 million of this amount.
Golden Star and Cambior each owns 50% of the Gross Rosebel project. Cambior
is obligated to use its best efforts to arrange debt financing for 65% of mine
construction and related costs, with Golden Star and Cambior each contributing
50% of the remainder of such costs. In addition, Grassalco, a mining company
owned and operated by the government of Suriname, has the right to purchase up
to a 20% minority interest from Golden Star and Cambior (on a pro rata basis) in
the production company that will operate the mine, in which case Grassalco will
be obligated to fund its pro rata portion of mine construction and related
costs.
Gross Rosebel is composed of two contiguous areas known as the Northern and
Southern blocks. Geologically, the area is underlain by Proterozoic
metasedimentary and metavolcanic greenstone rocks which have been intruded by a
large tonalitic stock near the southern boundary of the project.
As part of a prefeasibility study completed in April 1996, Cambior
calculated proven and probable gold reserves of approximately 24 million tonnes
grading 1.4 g Au/t, representing 1.1 million ounces in situ. These reserves lie
in the South block, containing the Royal Hill, Mayo and Rosebel deposits, and
the North block, containing the Pay Caro and Koolhoven deposits.
The 1996 exploration work is focused on drilling to better define and
expand the reserve and mineralization base within the five areas where reserves
have been established, as well as to identify potential new zones. During the
first six months of 1996, an additional 16,585 meters of drilling in 113 holes
and 13,312 linear meters of trenching has been completed on the North block of
the project. Mineralization was extended along strike on the Pay Caro and East
Pay Caro zones by approximately 450 meters, allowing existing open pit plans to
be widened and deepened. Results from this core drilling exhibited average
widths of mineralization of 8.1 meters with a weighted average grade of 2.4 g
Au/t at Pay Caro and average widths of 9.6 meters with a weighted average grade
of 2.2 g Au/t at the East Pay Caro zone. Wide spaced, step out drilling along
the Koolhoven and Bigi Asanjangmoni trends has been successful, although
additional closer spaced drilling will be required to bring this mineralization
into the reserve category. Metallurgical test work conducted during the
prefeasibility study has indicated recoveries in excess of 90% using
conventional gravity and cyanide leaching recovery methods.
An additional 18,691 meters of drilling within the North block and the
South block of the Gross Rosebel project are budgeted for the remainder of 1996
with the objective of significantly increasing open pittable reserves for the
final feasibility study. The Company expects the final feasibility study at
Gross Rosebel to illustrate economics that would justify a development decision
at current gold prices, given the nature of the bulk of the ore body, simple
metallurgy and good infrastructure for mine development, including nearby port
facilities and road access.
EXPLORATION PROPERTIES
Yaou, French Guiana
The Yaou project, owned through Guyanor, covers a total area of 15,000
hectares and is located approximately 210 kilometers southwest of Cayenne,
French Guiana. Yaou is the most advanced of Guyanor's exploration projects and a
significant amount of exploration work has been conducted on the property. As of
December 31, 1995, a total of $10.3 million, including capitalized acquisition
costs, had been spent at Yaou since the Company's involvement with the project,
of which $3.3 million was funded by Cambior. The Company anticipates that $1.5
million will be spent on the Yaou project in 1996, all of which is expected to
be funded by Cambior.
21
<PAGE> 37
The Yaou project is underlain by a typical greenstone sequence of the
Paramaca Formation. Within these rocks are two distinct units that host gold
mineralization generally associated with pyrite and quartz-carbonate veins and
veinlets.
During the first six months of 1996, an evaluation was completed using all
exploration data gathered at Yaou by both Guyanor and the previous owners, the
French Bureau de Recherches Geologiques et Minieres ("BRGM") and BHP, with the
purpose of developing a new geologic model of the known mineralized area. On
September 11, 1996, Guyanor and Golden Star announced the results of this work.
A reserve estimation was completed on the Yaou Central and Chaina zones based on
results from 130 drill holes for a total of 24,416 meters, approximately 40,000
meters of augering and approximately 10 kilometers of trenching. The estimation
calculated a probable reserve of approximately 10.3 million tonnes grading 2.7 g
Au/t, representing approximately 876,000 ounces of gold in situ. The probable
reserve is part of total mineralization of approximately 13 million tonnes
grading 2.5 g Au/t.
The exploration program for the remainder of 1996 is focused on
establishing proven mining reserves based upon the above mentioned probable
reserves and mineralized inventory, as well as establishing new zones of
mineralization. Some 4,300 meters of drilling is scheduled to be completed
during the remainder of 1996 on both Yaou Central and Chaina for infill drilling
and testing lateral and depth extensions as well on additional targets to the
northeast of Yaou Central (Zones I, J and K) to identify new mineralization
minable by open pit. Guyanor also plans to conduct additional exploration over
the project area, with an initial focus on the Bois Blanc target approximately
10 kilometers to the north of Yaou Central. In addition to the Bois Blanc
target, there are two other known zones of gold mineralization which warrant
follow-up work, Yaou Nord and Tomantoni. To date, less than 15% of the Yaou
project area has been evaluated.
The Yaou and Dorlin gold projects are being advanced under an agreement
with Cambior, pursuant to which Cambior must fund in the aggregate $11.0 million
on the two properties by June 30, 1998 in order to earn a 50% interest in each
project. Cambior also is obligated to use its best efforts to arrange debt
financing for 65% of mine financing costs, with Guyanor and Cambior each
contributing 50% of the remainder of such costs. Guyanor is to manage the
exploration of the properties and Cambior is to prepare a feasibility study on
the properties and to manage the development and operation of future mining
operations.
Dorlin, French Guiana
The Dorlin project, owned through Guyanor, covers a total area of 15,000
hectares and is located approximately 180 kilometers southwest of Cayenne,
French Guiana. As of December 31, 1995, a total of $1.6 million, including
capitalized acquisition costs, had been spent at Dorlin since the Company's
involvement with the project, of which $1.0 million was funded by Cambior. The
Company anticipates that $1.5 million will be spent on the Dorlin project in
1996, all of which is expected to be funded by Cambior.
The Dorlin project is underlain by a volcano-sedimentary sequence of the
Paramaca Formation and is intruded by younger granitic intrusive rocks.
In August 1996, Guyanor announced the results of approximately 2,000 meters
of drilling in 31 holes as well as the recompilation and integration of results
from 19 holes totaling 4,323 meters drilled by the BRGM and BHP in 1986.
Guyanor's drilling focused on the Sud Nivre zone on a prominent ridge known as
Montagne Nivre while the BRGM-BHP drilling focused on the West Nivre zone to the
north of Sud Nivre and on the west flank of Montagne Nivre. Guyanor established
two zones of mineralization approximately 40 to 50 meters wide over a strike
length of approximately 750 meters. Mineralization was encountered in
approximately 74% of the core holes drilled by Guyanor, exhibiting average
widths of 9.8 meters at a weighted average grade of 1.9 g Au/t. Drilling
conducted by the BRGM and BHP on the West Nivre zone and across the northern
extension of the zones drilled by Guyanor encountered mineralization in
approximately 79% of the core holes drilled, exhibiting average widths of 9.9
meters at a weighted average grade of 1.9 g Au/t. Current and past drilling
results have indicated mineralization over a strike length of approximately 1.5
kilometers on the far southern end of a major hydrothermal breccia system which
has been identified continuously over five kilometers and discontinuously over
an additional 4 kilometers.
22
<PAGE> 38
During the second half of 1996, Guyanor plans to mobilize a second, larger
drill rig to test the Sud Nivre zone at greater depth, test the extension of the
system to the north and conduct infill drilling on the zones drilled by the BRGM
and BHP.
Andorinhas, Brazil
The Andorinhas project covers approximately 25,000 hectares and is located
in the state of Para in the eastern Amazon area, approximately 670 kilometers
south-southwest of the city of Belem, Brazil. Andorinhas is the single largest
item in Golden Star's 1996 exploration budget, with planned expenditures of $3.3
million.
In December 1995, CVRD, the largest individual producer of gold in Latin
America, awarded the Company the right to associate with CVRD for the possible
future development and exploitation of the Andorinhas gold property in Brazil.
The Andorinhas tender represented CVRD's first effort to secure outside partners
to assist in the development of CVRD's gold resource potential in Brazil. Under
the agreement with CVRD and subject to final approval of the Brazilian
government, the Company must match CVRD's previous exploration expenditures of
approximately $5.5 million, as well as pay 50% of any additional costs required
to complete a positive feasibility study, in order to earn a 50% interest in the
Andorinhas project. The Andorinhas project is comprised of three exploration
concessions, each of which has expired. It has been represented to the Company
that the title holders in each case (CVRD or its subsidiary) have timely applied
for renewals or successor mineral rights with respect to each of the
concessions, which applications currently are pending. The Company believes that
the title holders will obtain the renewals or successor rights as applicable;
however, no assurance can be given that such rights will in fact be granted.
Andorinhas is an advanced stage exploration project. Gold mineralization
was discovered at Andorinhas in the late 1970s by Rio Doce Geologia e Mineracao
S.A., CVRD's exploration subsidiary. The geologic setting and mineralization of
discoveries in the area share the same characteristics of many of the notable
underground mines in the Abitibi mineral province in Canada, such as the
Campbell Red Lake mine, with high grade gold-quartz vein mineralization
occurring in multiple zones. Surface work and approximately 15,000 meters of
drilling by CVRD in the late 1970s identified three primary zones of interest,
Mamao and Babacu along a 14 kilometer shear zone trending northeast-southwest
through the southern leg of the property and Lagoa Seca on a parallel 8
kilometer shear zone to the north. The results averaged 2.7 meters at 17.1 g
Au/t from 11 holes at the Mamao prospect, 19.8 meters at 4.7 g Au/t from 9 holes
at the Lagoa Seca prospect and 2 meters at 8.1 g Au/t from 6 holes at Babacu.
In the early 1980s, the Andorinhas area experienced a significant influx of
garimpeiros (illegal miners) who mined multiple surface zones of enriched
mineralization along the shear zones. Garimpeiro mining ceased in the mid 1980s
as the price of gold fell and pits from the surface mining of gold bearing
material began to encounter the water table. One of the few garimpeiros who
remained developed an underground decline 240 meters down plunge to exploit the
primary structure on the Mamao zone. Sampling by the Company consisted of a
carefully cut series of 675 samples in 78 channels systematically distributed
throughout the 27 levels of the existing underground workings. The sampling
evaluated a mineralized zone whose minimum dimensions, as defined by the mined
out workings, extend from surface down plunge for 270 meters, with a width of up
to 150 meters, and a thickness of 2.5 to 7.0 meters. Encouraging results have
been received from the sampling with an uncut weighted average grade of all
samples of 20.0 g Au/t. The cut weighted average grade (cut at the 98th
percentile of 125.0 g Au/t) is 13.7 g Au/t. Mineralization remains open on
strike and at depth in the Mamao zone.
In October 1996, the Company and CVRD announced the commencement of core
drilling at the Andorinhas project. The first phase of the core drilling program
involves two drills and is scheduled to consist of 18 holes totaling
approximately 3,000 meters. Drilling will be distributed to test for the
existence of additional ore shoots in the vicinity of the Mamao zone where
garimpeiro workings and/or outcrop of the mineralized structures are evident.
The Company is the manager of an aggressive 30-month program at Andorinhas
to expand the known mineralized zones and delineate new ones. The objective of
the 30-month program is to delineate a high grade gold mineralization of at
least one million ounces as rapidly as possible, while evaluating the potential
for
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similar targets over the extent of major shears zones which have not been
explored. CVRD has the right to act as the operator of any mine that may result
from the exploration efforts. Detailed underground and surface geologic mapping
and geochemical sampling have been completed on the principal prospects, while
surface sampling and mapping continues over the remainder of the property to
identify new targets. An airborne aeromagnetic, EM and radiometric survey on 100
meter line spacing is in progress over the entire property.
St-Elie, French Guiana
The St-Elie project, owned through Guyanor, covers a rectangular area of
9,900 hectares located in north central French Guiana, 110 kilometers west of
Cayenne, French Guiana. As of December 31, 1995, a total of $3.2 million,
including capitalized acquisition costs, had been spent at St-Elie since the
Company's involvement with the project, of which $1.2 million was funded by
ASARCO. The Company anticipates that $1.6 million will be spent on the St-Elie
project in 1996, all of which is expected to be funded by ASARCO.
ASARCO has a 50% equity interest in the St-Elie project, subject to its
spending $10 million for development of the property, including the completion
of a feasibility study, by February 2000. ASARCO, at Guyanor's request, is
obligated to use its best efforts to obtain financing on a project finance basis
for 80% of project development costs, with Guyanor and ASARCO each contributing
50% of the remainder of such costs. ASARCO may decide at any time to terminate
its obligations under the agreements with Guyanor and stop funding the St-Elie
project, which will result in the forfeiture of its interest in St-Elie. Guyanor
will be the operator of the exploration effort at St-Elie prior to the
completion of the final feasibility study, at which time ASARCO has the right to
assume the position of operator.
The first gold discoveries in the St-Elie region were made in 1873, and
between 1878 and 1923 more than 600,000 ounces of gold reportedly were mined
from alluvial and eluvial deposits, using mainly hydraulic methods. From 1956 to
1993, mining activities on the project were intermittent and consisted only of
local, small scale alluvial operations.
To the Company's knowledge, gold extracted to date from the St-Elie, Michel
and Devis sectors of the project was from both alluvials and weathered bedrock.
Other sources of gold which have been identified include recent and ancient
alluvial deposits, re-worked lateritic deposits, eluvial and surficial deposits
and mining residues. However, on the basis of present knowledge of the areas,
bedrock sources appear to be the most promising and the most recommended for
exploration.
Extensive exploration work began at St-Elie in late October 1995.
Geological, geochemical and geophysical work completed in 1995 identified nine
primary drill targets on the property. During the first half of 1996, 34 holes
were drilled, totalling 4,982 meters, on the Devis and Michel zones of the
property. In May 1996, Guyanor completed 23 holes for 3,202 meters in the Devis
zone. Mineralization was encountered in approximately 57% of the core holes
drilled, illustrating a mineralized zone approximately 550 meters in length by
200 meters wide and exhibiting average intersection widths of 8.5 meters at a
weighted average grade of 2.6 g Au/t. In July 1996, Guyanor completed an initial
11 hole, 1,780 meter drilling campaign in the Michel zone over an area of
mineralization approximately 1.2 kilometers in length by 200 meters wide. At the
Michel zone, mineralization was encountered in approximately 82% of the core
holes drilled, with average intersection widths of 4.3 meters at a weighted
average grade of 3.9 g Au/t. For the remainder of 1996, Guyanor expects to focus
work at St-Elie on continued surface mapping, preparation of 80-90 drill sites
for 1997 drilling and improvements to road access.
Paul-Isnard, French Guiana
The Paul-Isnard project area, which includes both the Paul-Isnard and
Eau-Blanche projects, is owned through Guyanor. The Paul-Isnard project area is
located in the western part of French Guiana, approximately 250 kilometers west
of Cayenne, and covers 25,000 hectares. Guyanor's interest in the Paul-Isnard
project area is held by its subsidiary, Societe de Travaux Publics et de Mines
Auriferes en Guyane ("SOTRAPMAG"), a societe a responsibilite limitee
incorporated under the laws of France and based in French Guiana. As of December
31, 1995, a total of $5.5 million, including capitalized acquisition costs of
$4.0 for both the alluvial mining project and the hard rock mineral projects,
had been spent at the Paul-Isnard project
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area, of which $1.4 million was funded by ASARCO. The Company anticipates that
$0.7 million will be spent on the Paul-Isnard project area in 1996, all of which
is expected to be funded by ASARCO and LaSource.
Guyanor has entered into a joint venture agreement to give LaSource a 25%
participating interest in the exploration and exploitation of primary gold
deposits on the Paul-Isnard and Eau-Blanche projects. Pursuant to the same joint
venture agreement, ASARCO has two separate options to acquire a 50% interest in
Guyanor's remaining interest in the primary deposits on each of the Paul-Isnard
and Eau-Blanche projects. In order to acquire its interests in one of these
projects, ASARCO is obligated, by June 2001, to complete a feasibility study on
the project and to spend at least $10 million on such project, or to combine the
Paul-Isnard and Eau-Blanche projects into a single joint venture and spend a
combined $20 million. ASARCO also is obligated to use its best efforts to obtain
financing on a project finance basis for 80% of project development costs, with
Guyanor and ASARCO each contributing 37.5% and LaSource contributing 25% of the
remainder of such costs. Guyanor will act as project manager for the exploration
phase at the Paul-Isnard project area, while ASARCO, once vested, has the right
to act as the manager of any resulting feasibility study and exploitation.
There are two prominent mountain chains bordering the Paul-Isnard project
area which form the edges of a basin in which alluvial gold deposits have
accumulated. The Company believes that this alluvial gold originated from
gold-bearing rocks from Decou-Decou and Lucifer mountains and was transported
downward by high-energy streams, concentrating the gold in the gravel beds of
streams in the Paul-Isnard project area. The alluvial gold deposits of the
Paul-Isnard project area have been known for almost a century and gold panning
was reported on a number of creeks which traverse the property. Mechanized
alluvial mining started in about 1910, with recorded production of over three
tons of gold.
The Company, through SOTRAPMAG, currently has three plants of various
configurations operating on the Paul-Isnard property, one of which is a fixed
plant located at Barthelemy and two of which are mobile plants currently located
at Petit Lezard and Reine Creek. In late 1995, the Company began an aggressive
alluvial exploration program to identify target areas and commenced prospecting
activities to quantify the potential for alluvial mining reserves. The program
is scheduled to be completed in 1996. Ore reserves are not stated for the
current alluvial operations at the Paul-Isnard project area as the data for
reserve estimation are not currently considered adequate to support the
calculation of ore reserves.
SOTRAPMAG's alluvial operations have experienced operating losses in 1996
as a result of a labor strike, the redeployment of certain equipment for
construction of a new plant and heavy rainfall. Guyanor has retained outside
consultants to analyze SOTRAPMAG's operations and make recommendations on how to
render the operation profitable. There can be no assurance, however, that it
will be possible to return SOTRAPMAG's operations to profitability or that
management will not decide to close the alluvial operations.
To the Company's knowledge, little systematic exploration has been
conducted at the Paul-Isnard project area in search of primary gold. Management
believes that there are at least two virtually unexplored occurrences which may
constitute possible sources of alluvial gold on the property. An airborne
radiometric and magnetometric geophysical survey over the property was carried
out recently by Guyanor as part of a survey of all of Guyanor's French Guiana
properties.
Surface sampling from approximately 900 outcrop channel samples has
indicated a zone in excess of two kilometers in length with widths varying
between 100 and 400 meters and average gold grades of 1.5 to 2.0 g Au/t, and as
high as 13 g Au/t. In June 1996, Guyanor initiated drilling on the Paul-Isnard
project area and has completed 18 holes totaling approximately 3,300 meters on
the Montagne d'Or zone on the north flank of Decou-Decou Mountain, part of an
initial 6,000 meter drilling program. The objective of the drilling campaign is
to test the depth continuity of mineralization identified through surface
sampling. In October 1996, the Company, Guyanor and LaSource announced results
from the initial phase of core drilling at Montagne d'Or. Mineralization
encountered within the felsic volcanic unit at depth over the 1.1 kilometer
strike length drilled appeared to be consistent with a massive sulfide (VMS)
type of mineralization which the Company currently believes is similar to
deposits currently being mined along the Cadillac Break in Quebec. Polymetallic
assays on semi-massive to massive sulfide mineralization intersected in one hole
between 82.6 and 99.6 meters
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yielded weighted average metal grades of 3.7 g Au/t, 17.0 g/t silver,
approximately 0.3% copper and trace zinc values. The Company plans to continue
to compile and interpret the data from the first 18 holes prior to planning the
completion of the 6,000 meter campaign, the success of which will determine
further drilling programs.
Dachine, French Guiana
The Dachine project, owned through Guyanor, covers a 2,500 hectare area in
southwest French Guiana approximately 200 kilometers southwest of Cayenne that
was previously known as the Inini diamond occurrence. As of December 31, 1995, a
total of $0.8 million, including capitalized acquisition costs, has been spent
at Dachine since the Company's involvement with the project, of which $0.4
million was funded by BHP. The Company anticipates that $1.1 million will be
spent on the Dachine project in 1996, all of which is expected to be funded by
BHP.
In December 1995, Guyanor entered into an agreement with BHP pursuant to
which BHP would earn a 51% interest in the Dachine project by spending $3.5
million by May 31, 1998. Depending upon options available to both companies,
Guyanor's ultimate interest in the property could vary between 31.5% and 49%.
BHP may elect to terminate the agreement and stop funding the Dachine project at
any time.
On March 1, 1996, the Company and Guyanor reported the discovery within the
Dachine permit area of a metamorphosed ultramafic structure that can be traced
over a minimum dimension of approximately 3.5 kilometers in length and 0.5
kilometers in width. Final results from the initial exploration program,
announced on May 22, 1996, exhibited significant diamond counts from
microdiamond analysis on auger and core drill holes that intersected the main
body with a total of 8,970 stones recovered from approximately 1,164 kilograms
of core and auger samples. Additionally, a total of 976 stones were recovered
from microdiamond analysis on approximately 387 kilograms of outcrop and soil
samples collected during the initial exploration program.
These results led to the decision to proceed with an initial small bulk
sample at Dachine during second half of 1996. This program calls for the
collection of 200 to 250 tonnes of material from several near surface pits along
the length of the Dachine body. This material will be processed at the Dachine
site to produce a heavy mineral concentrate which will be shipped to North
America for macrodiamond analysis. Results of this initial bulk sample will
serve as the basis for future exploration programs at Dachine. To secure its
land position, Guyanor has applied for a 33,700 hectare "A" Permit around the
existing Dachine "B" Permit area.
Dul Mountain, Ethiopia
The Company believes it was the first foreign company to be awarded
exploration licenses in Ethiopia. Golden Star has acquired an interest in 90
exclusive exploration licenses to explore for gold at the Dul Mountain project
located in western Ethiopia, approximately 500 kilometers west-northwest of
Addis Ababa, Ethiopia. As of December 31, 1995, a total of $2.6 million,
including capitalized acquisition costs, had been spent at Dul Mountain since
the Company's involvement with the project. The Company anticipates that $1.8
million will be spent on the Dul Mountain project in 1996. The Company has
transferred its interest in the Dul Mountain project to PARC, subject to
governmental approval.
The area covered by the Dul Mountain project lies within the western
Ethiopian Shield which is part of the north-south trending
Pan-African-Mozambique Precambrian belt that extends along the east coast of
Africa. There are records of small-scale alluvial gold production on the Dul
Mountain property for most of this century, with unrecorded production by local
miners continuing today. Previous exploration has identified three gold
prospects on the property: Ashashire, Azale-Akendeyu and Dul Mountain. The
Company has ceased activity on the latter prospect.
Trenching at the Ashashire prospect over an anomaly 1.6 kilometers in
length and 200 meters in width provided encouragement with mineralized sections
of 4.1 g Au/t over 24.6 meters and 3.3 g Au/t over 14.8 meters. Ashashire and a
second target, Belaute, are both prospects in the western half of the Dul
Mountain project area which warrant follow-up work, although difficult terrain
makes mobilization costly.
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In late 1995, the reconnaissance work over the eastern half of the Dul
Mountain project area resulted in the discovery of the previously unknown Menghi
area on the northern portion of the most eastern of three greenstone belts on
the project. The main zone of interest on the 4 by 5 kilometer Menghi prospect
is a north striking quartz ridge approximately 600 meters long. During the first
half of 1996, PARC moved its primary camp at Dul Mountain to a location near the
Menghi prospect and conducted soil geochemical and ground geophysical surveys as
well as trenching. Trenching completed to date over a strike length of
approximately 400 meters along the mineralized zone identified average widths of
mineralization within the trenches of 27 meters with a weighted average grade of
2.9 g Au/t.
In July 1996, an initial seven hole, 1,100 meter core drilling campaign was
initiated in the south of the zone identified by trenching to test the depth
continuity of mineralization along strike to the north. Poor drilling conditions
early in the program and heavy rains slowed the drilling as well as additional
trenching to the south testing for possible extensions of the system. PARC plans
to compile and interpret the results from the initial drilling campaign and
additional trenching data prior to recommencing drilling at the Menghi prospect.
PARC has not complied with certain of the terms of its license agreement
with the Ethiopian government in which PARC agreed to a specified work program
and a certain level of expenditures at the Dul Mountain project. PARC and the
government have agreed to a revised work program and lower required expenditures
for the Dul Mountain project and PARC intends to use its best efforts to resolve
any additional outstanding issues with respect to the license agreement.
Although the Company currently has no reason to believe that its licenses for
the Dul Mountain project will be revoked, there can be no assurance that the
Ethiopian government will not revoke the licenses as a result of noncompliance
with certain of the original terms of the license agreement, as discussed above.
Dioulafoundou, Mali
The Company's exploration activity in Mali to date has concentrated on the
Dioulafoundou project near the Mali-Senegal border in the Kenieba district,
approximately 400 kilometers west of the capital of Bamako. The project consists
of four authorizations aggregating 2,800 hectares. As of December 31, 1995, a
total of $1.9 million, including capitalized acquisition costs, had been spent
at Dioulafoundou since the Company's involvement with the project. The Company
anticipates that $0.8 million will be spent on the Dioulafoundou project in
1996.
The Company, through PARC, has an 85% interest on one authorization,
subject to divestment, while the other three authorizations have been acquired,
subject to divestment, from Mali parties who retain the right to a 5%
participating interest and a royalty of 0.3% from any mine development.
The region in which the Dioulafoundou project lies is part of the West
African Shield. The project area lies within the exposed early Proterozoic
Kenieba inlier that straddles the Mali-Senegal border and is composed primarily
of thick Birimian volcanic and sedimentary formations that trend generally
north-south and northeast-southwest. Local miners have long produced unknown
quantities of gold from alluvial deposits in the Kenieba district.
The main objective of PARC's work completed to date at the Dioulafoundou
project has been to establish the presence of economically attractive gold
mineralization within the prospect area. During 1995, PARC completed an initial
1,137 meter core drilling campaign, encountering significant mineralization in
six of eight holes. Mineralized intersections from the initial core drilling
campaign in 1995 averaged 11 to 15 meters at 2.5 to 3.0 g Au/t.
During the first half of 1996, PARC completed a mechanical augering program
for geochemical analysis consisting of 355 holes totaling 4,548 meters over the
whole of the Dioulafoundou project. A 65 hole, 4,200 meter reverse circulation
("RC") drilling program was completed in July, 1996. This RC program confirmed
the north-south striking mineralization identified by previous core drilling
with near surface mineralized intersections with an average width of 2.9 meters
and a weighted average grade of 2.4 g Au/t. Gold mineralization also was
encountered on the Bah permit which comprises the south and southeast border
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of the Diaoulafoundou project. These mineralized zones are characterized as near
surface, narrow zones with gold grades ranging from 1.3 to 3.2 g Au/t. An early
and intense rainy season caused postponement of RC drilling near the extensive
Kerekou artisanal working on the Magassa permit.
PARC intends to continue evaluating the entire Diaoulafoundou project. PARC
expects to resume core drilling during the fourth quarter of 1996 to test
extension of the mineralized zone on the AFC permit, core drilling the more
significant mineralized zones on the Bah permit and, as previously planned, test
targets near the Kerekou workings on the Magassa permit.
PARC's exploration activities at the Diaoulafoundou project are partly
conducted under an exploitation authorization issued by the government of Mali
which requires the authorization holder to conduct exploitation activities
within the authorization area. Although PARC intends to commence exploitation
activities within the perimeter of the authorization if warranted, there can be
no assurance that it will do so or that, even if such activities are commenced,
PARC's exploitation authorization for the Diaoulafoundou project will not be
revoked because of its failure to comply with the requirement to conduct
exploitation activities. The Company currently has no reason to believe that its
exploitation authorization for the Diaoulafoundou project will be revoked.
OTHER PROPERTIES
Golden Star and its subsidiaries also hold a significant portfolio of other
early and intermediate stage gold and diamond projects in Guyana, French Guiana,
Suriname, Brazil and Bolivia in South America and Eritrea, Ethiopia, Gabon,
Ivory Coast and Mali in Africa that are in various stages of development.
Excluding the properties specifically mentioned above, the Company anticipates
spending $14.9 million on these other projects in 1996, of which $1.9 million is
anticipated to be funded by various partners and through the recovery of
performance bonds.
In October 1996, Golden Star commenced a 26 hole, 2,600 meter core drilling
program on the Antino project covering an area of approximately 3,700 hectares
located within the South Benzdorp area in southeastern Suriname on the French
Guiana border. Golden Star has the right to earn a 100% interest in the Right of
Exploration granted to a local Surinamese company with respect to the Antino
project. The objective of the core drilling program at Antino is to test the
depth potential of high grade root zones identified through deep augering on the
Upper Antino central and middle zones. To date, less than half of the anomalous
ground, principally the northwest and northeast zones, on the Upper Antino
target has been covered by deep augering. Mechanized deep augering is planned on
these zones in addition to the core drilling now underway on the central and
middle zones.
In addition to the exploration projects described above, Golden Star
initiated core drilling on the Fish Creek project in northwest Guyana during the
fourth quarter of 1996. PARC intends to commence and complete initial core
drilling campaigns at the Adi Rassi and Torat prospects in Eritrea throughout
the remainder of the year.
In 1994, the Company established a diamond exploration group based in
Georgetown, Guyana to evaluate the potential for primary diamond sources on
exploration reconnaissance areas in Guyana, as well as to identify other high
priority diamond exploration prospects across the Guiana Shield. This work has
led to the identification of multiple diamond exploration projects in Guyana,
Suriname and French Guiana. In 1996, the Company made the decision to proceed
with the next level of evaluation on these targets, as well as on new potential
targets which have been identified on permits held by PARC in Ivory Coast. The
Company intends to continue its diamond exploration efforts by committing up to
$2.5 million of its 1997 annual exploration budget to the advancement of
existing and any future diamond exploration projects.
The Company acquires and disposes of mineral exploration properties in the
ordinary course of its business and intends to make selective additional
acquisitions of promising properties in South America, Africa and other parts of
the world.
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RECENT DEVELOPMENTS
On October 31, 1996, PARC announced that the expiration date of its Series
A warrants issued on February 5, 1996 had been extended to January 31, 1997.
On November 5, 1996, Guyanor completed an offering in France and certain
other countries of 1.0 million of its Class B common shares for net proceeds of
FF 45.5 million or U.S. $8.92 million in conjunction with the listing of its
Class B common shares on the Nouveau Marche in France on October 30, 1996. The
Class B common shares sold in the offering were not offered for sale in Canada
or in the United States. As a result of the offering, the Company's interest in
Guyanor decreased from approximately 70% to approximately 69%.
DESCRIPTION OF SHARE CAPITAL
The Company's Articles currently authorize the issuance of an unlimited
number of Common Shares and an unlimited number of Preferred Shares, issuable in
series. As of June 30, 1996, 25,716,303 Common Shares and no Preferred Shares
were outstanding.
COMMON SHARES
The holders of Commons Shares are entitled to receive dividends as, when
and if declared by the Board of Directors of the Company out of funds legally
available therefor, provided that if any Preferred Shares are at the time
outstanding, the payment of dividends on Common Shares or other distributions
(including purchases of Common Shares) will be subject to any preferential
rights attaching to any other class or series of shares of the Company.
The holders of Common Shares are entitled to one vote for each share on all
matters voted on by shareholders, including elections of directors. The holders
of Common Shares do not have any conversion, redemption or preemptive rights. In
the event of the dissolution, liquidation or winding up of the Company, holders
of Common Shares are entitled to share ratably in any assets remaining after the
satisfaction in full of the prior rights of creditors, including holders of the
Company's indebtedness, and the aggregate liquidation preference of any other
class or series of shares then outstanding.
On June 11, 1996, the shareholders of the Company confirmed the adoption of
a Shareholder Rights Plan (the "Rights Plan"). Pursuant to the Rights Plan, the
Company issued one right (a "Right") for each Common Share outstanding on April
24, 1996 and will issue one Right for each Common Share issued in the future.
The terms of the Rights Plan are set forth in the Rights Agreement (the "Rights
Agreement") dated as of April 24, 1996 between the Company and The R-M Trust
Company as Rights Agent. For additional information on the Rights Plan and the
Rights Agreement, see the Company's Current Report on Form 8-K filed with the
Commission on May 8, 1996, incorporated by reference herein.
Any material United States or Canadian federal income tax consequences with
respect to any offered Common Shares will be described in the Prospectus
Supplement relating to the offering and sale of such Common Shares.
All outstanding Common Shares are, and the Common Shares offered hereby
will be, issued as fully paid and non-assessable.
The registrar and transfer agent for the Common Shares is The R-M Trust
Company. ChaseMellon Shareholder Services, L.L.C. acts as co-registrar and
co-transfer agent for the Common Shares in the United States.
PREFERRED SHARES
The following is a description of certain general terms and provisions of
the Preferred Shares. The particular terms of any series of Preferred Shares
will be described in the applicable Prospectus Supplement.
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<PAGE> 45
If so indicated in a Prospectus Supplement, the terms of any such series may
differ from the terms set forth below.
The summary of the terms of the Company's Preferred Shares contained in
this Prospectus does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Articles relating to each
series of Preferred Shares, which will be filed as an exhibit to or incorporated
by reference in this Prospectus at or prior to the time of issuance of any such
series of the Preferred Shares.
The Board of Directors of the Company is authorized to approve the issuance
of one or more series of Preferred Shares without further authorization of the
shareholders of the Company and to fix the number of shares, the designations,
rights, privileges, restrictions and conditions of any such series.
The applicable Prospectus Supplement will set forth the number of shares,
particular designation, relative rights and preferences and the limitations of
any series of Preferred Shares in respect of which this Prospectus is delivered.
The particular terms of any such series will include the following:
(i) The maximum number of shares to constitute the series and the
designation thereof;
(ii) The annual dividend rate, if any, on shares of the series,
whether such rate is fixed or variable or both, the date or dates from
which dividends will begin to accrue or accumulate, whether dividends will
be cumulative and whether such dividends shall be paid in cash, Common
Shares or otherwise;
(iii) Whether the shares of the series will be redeemable and, if so,
the price at and the terms and conditions on which the shares of the series
may be redeemed, including the time during which shares of the series may
be redeemed and any accumulated dividends thereon that the holders of
shares of the series shall be entitled to receive upon the redemption
thereof;
(iv) The liquidation preference, if any, applicable to shares of the
series;
(v) Whether the shares of the series will be subject to operation of a
retirement or sinking fund and, if so, the extent and manner in which any
such fund shall be applied to the purchase or redemption of the shares of
the series for retirement or for other corporate purposes, and the terms
and provisions relating to the operation of such fund;
(vi) The terms and conditions, if any, on which the shares of the
series shall be convertible into, or exchangeable for, shares of any other
class or classes of capital stock of the Company or any series of any other
class or classes, or of any other series of the same class, including the
price or prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same;
(vii) The voting rights, if any, of the shares of the series;
(viii) The currency or units based on or relating to currencies in
which such series is denominated and/or in which payments will or may be
payable;
(ix) The methods by which amounts payable in respect of such series
may be calculated and any commodities, currencies or indices, or price,
rate or value, relevant to such calculation;
(x) Any listing of the shares of the series on a securities exchange;
and
(xi) Any other preferences and relative, participating, optional or
other rights or qualifications, limitations or restrictions thereof.
Any material United States or Canadian federal income tax consequences and
other special considerations with respect to any offered Preferred Shares will
be described in the Prospectus Supplement relating to the offering and sale of
such Preferred Shares.
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DESCRIPTION OF WARRANTS
The Company may issue Warrants to purchase Common Shares, Preferred Shares
or Convertible Debt Securities. Warrants may be issued, subject to regulatory
approvals, independently or together with any Common Shares, Preferred Shares or
Convertible Debt Securities, as the case may be and may be attached to or
separate from such Common Shares, Preferred Shares or Convertible Debt
Securities. Each series of Warrants will be issued under a separate warrant
agreement (each, a "Warrant Agreement") to be entered into between the Company
and a warrant agent (each, a "Warrant Agent"). The Warrant Agent will act solely
as an agent of the Company in connection with the Warrants of such series and
will not assume any obligation or relationship of agency or trust for or with
any holders or beneficial owners of Warrants. The following sets forth certain
general terms and provisions of the Warrants offered hereby. Further terms of
the Warrants and the applicable Warrant Agreement will be set forth in the
applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the following terms of
any Warrants in respect of which this Prospectus is being delivered: (1) the
title of such Warrants; (2) the securities (which may include Common Shares,
Preferred Shares or Convertible Debt Securities) for which such Warrants are
exercisable; (3) the price or prices at which such Warrants will be issued; (4)
the periods during which the Warrants are exercisable; (5) the number of Common
Shares, Preferred Shares or amount of Convertible Debt Securities for which each
Warrant is exercisable; (6) the exercise price for such Warrants, including any
changes to or adjustments in the exercise price; (7) the currency or currencies,
including composite currencies, in which the exercise price of such Warrants may
be payable; (8) if applicable, the designation and terms of the Preferred Shares
with which such Warrants are issued; (9) if applicable, the terms of the
Convertible Debt Securities with which such Warrants are issued; (10) the number
of Warrants issued with each Common Share or Preferred Share or the Convertible
Debt Securities; (11), if applicable, the date on and after which such Warrants
and the related Common Shares, Preferred Shares or Convertible Debt Securities
will be separately transferable; (12) any listing of the Warrants on a
securities exchange; (13) if applicable, a discussion of material United States
or Canadian federal income tax consequences and other special considerations
with respect to any Warrants; and (14) any other terms of such Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Warrants.
DESCRIPTION OF CONVERTIBLE DEBT SECURITIES
The Convertible Debt Securities may be issued from time to time in one or
more series under an indenture among the Company, as issuer, and the trustee
specified in the applicable Prospectus Supplement. The following statements with
respect to the Convertible Debt Securities are subject to the detailed
provisions of the indenture, the form of which is filed as an exhibit to the
Registration Statement. Parenthetical references below are to the indenture (or
the form of security contained therein if so specified) and, whenever any
particular provision of the indenture or any term used therein is referred to,
such provision or term is incorporated by reference as a part of the statement
in connection with which such reference is made, and the statement in connection
with which such reference is made is qualified in its entirety by such
reference.
The Convertible Debt Securities will constitute either indebtedness
designated as Senior Indebtedness ("Senior Debt Securities"), indebtedness
designated as Senior Subordinated Indebtedness ("Senior Subordinated Debt
Securities") or indebtedness designated as Subordinated Indebtedness
("Subordinated Debt Securities"). Senior Debt Securities, Senior Subordinated
Debt Securities and Subordinated Debt Securities will each be issued under a
separate indenture (individually an "Indenture" and collectively the
"Indentures") to be entered into prior to the issuance of such Convertible Debt
Securities. The Indentures will be substantially identical, except for
provisions relating to subordination. See "Subordination of Senior Subordinated
Debt Securities and Subordinated Debt Securities". There will be a separate
Trustee (individually a "Trustee" and collectively the "Trustees") under each
Indenture. Information regarding the Trustee under an Indenture will be included
in any Prospectus Supplement relating to the Convertible Debt Securities issued
thereunder.
The particular terms of each series of Convertible Debt Securities, as well
as any modification or addition to the general terms of the Convertible Debt
Securities as herein described, which may be applicable to a
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particular series of Convertible Debt Securities, are described in the
Prospectus Supplement relating to such series of Convertible Debt Securities and
will be set forth in a filing with the Commission. Accordingly, for a
description of the terms of a particular series of Convertible Debt Securities,
reference must be made to both the Prospectus Supplement relating to such series
and to the description of Convertible Debt Securities set forth in this
Prospectus.
GENERAL
The Convertible Debt Securities offered pursuant to this Prospectus will be
limited to $75,000,000 aggregate principal amount (or (i) its equivalent (based
on the applicable exchange rate at the time of sale), if Convertible Debt
Securities are issued with principal amounts denominated in one or more foreign
currencies, composite currencies or currency units as shall be designated by the
Company, or (ii) such greater amount, if Convertible Debt Securities are issued
at an original issue discount, as shall result in aggregate proceeds of
$75,000,000 to the Company). The Indenture provides that additional convertible
debt securities may be issued thereunder up to the aggregate principal amount,
which is not limited by the Indenture, authorized from time to time by the
Company's Board of Directors or any duly authorized committee thereof. So long
as a single Trustee is acting for the benefit of the holders of all the
Convertible Debt Securities offered hereby and any such additional convertible
debt securities issued under the Indenture, the Convertible Debt Securities and
any such additional convertible debt securities are herein collectively referred
to as the "Indenture Securities." The Indenture also provides that there may be
more than one Trustee under the Indenture, each with respect to one or more
different series of Indenture Securities. At any time when two or more Trustees
are acting, each with respect to only certain series, the term "Indenture
Securities" as used herein shall mean the one or more series with respect to
which each respective Trustee is acting and the powers and the trust obligations
of each such Trustee as described herein shall extend only to the one or more
series of Indenture Securities for which it is acting as trustee. The effect of
the provisions contemplating that there might be more than one Trustee acting
for different series of Indenture Securities is that, in that event, those
Indenture Securities (whether of one or more than one series) for which each
Trustee is acting would be treated as if issued under a separate Indenture.
The applicable Prospectus Supplement will set forth a description of the
particular series of Convertible Debt Securities being offered thereby,
including but not limited to: (1) the designation or title of such Convertible
Debt Securities; (2) the aggregate principal amount of such Convertible Debt
Securities; (3) the percentage of their principal amount at which such
Convertible Debt Securities will be offered; (4) the date or dates on which the
principal of such Convertible Debt Securities will be payable and on which such
Convertible Debt Securities will mature; (5) the rate or rates (which may be
fixed or variable) at which such Convertible Debt Securities shall bear
interest, or the method of determination of such rate or rates at which such
Convertible Debt Securities shall bear interest, if any; (6) the date or dates
from which interest will accrue or the method of determination of such date or
dates, and the date or dates on which any such interest shall be payable; (7)
the currencies or currency units in which such Convertible Debt Securities are
issued or payable; (8) the terms for redemption, extension or early repayment of
such Convertible Debt Securities, if any; (9) if other than denominations of
$1,000 and any integral multiple thereof, the denominations in which such
Convertible Debt Securities are authorized to be issued; (10) the terms and
conditions upon which conversion will be effected, including the conversion
price, the conversion period and other conversion provisions; (11) the
provisions for a sinking fund, if any; (12) whether such Convertible Debt
Securities are issuable as a Global Security or Securities; (13) any index or
formula to be used to determine the amount of payments of principal, premium, if
any, and interest on such Convertible Debt Securities, and any commodities,
currencies, currency units or indices, or value, rate or price, relevant to such
determination; (14) if the principal of, premium, if any, or interest on such
Convertible Debt Securities is to be payable, at the election of the Company or
a Holder thereof, in one or more currencies or currency units other than that or
those in which such Convertible Debt Securities are stated to be payable, the
currencies or currency units in which payment of the principal of, premium, if
any, and interest on such Convertible Debt Securities as to which election is
made shall be payable, and the periods within which and the terms and conditions
upon which such election is to be made; (15) if other than the principal amount
thereof, the portion of the principal amount of such Convertible Debt Securities
of the series which will be payable upon acceleration of the
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Maturity thereof; (16) whether such Convertible Debt Securities are subordinate
in right of payment to any Senior Indebtedness of the Company and, if so, the
terms and conditions of such subordination and the aggregate principal amount of
such Senior Indebtedness outstanding as of a recent date; (17) any covenants to
which the Company may be subject with respect to such Convertible Debt
Securities; (18) the applicability of the provisions described under
"Defeasance" below; (19) United States and Canadian Federal income tax
consequences, if any; (20) the provisions for the payment of additional amounts
with respect to any Canadian withholding taxes in certain cases; (21) any term
or provision relating to such Convertible Debt Securities which is not
inconsistent with the provisions of the Indenture; (22) the Trustee; and (23)
any other special terms pertaining to such Convertible Debt Securities. Unless
otherwise specified in the applicable Prospectus Supplement, the Convertible
Debt Securities will not be listed on any securities exchange.
One or more series of Convertible Debt Securities may be sold at a
substantial discount below their stated principal amount, bearing no interest or
interest at a rate which at the time of issuance is below market rates. Any
material United States or Canadian federal income tax consequences and other
special considerations with respect to any series of Convertible Debt Securities
will be described in the Prospectus Supplement relating to any such series of
Convertible Debt Securities.
If the purchase price of any series of Convertible Debt Securities is
denominated in a foreign currency or currencies or a foreign currency unit or
units or if the principal of, premium, if any, and interest on any series of
Convertible Debt Securities are payable in a foreign currency or currencies or a
foreign currency unit or units, the restrictions, elections, general tax
considerations, specific terms and other information with respect to such series
of Convertible Debt Securities will be set forth in the applicable Prospectus
Supplement.
Convertible Debt Securities may be issued from time to time with payment
terms which are calculated by reference to the value, rate or price of one or
more commodities, currencies, currency units or indices. Holders of such
Convertible Debt Securities may receive a principal amount (including premium,
if any) on any principal payment date, or a payment of interest on any interest
payment date, that is greater than or less than the amount of principal
(including premium, if any) or interest otherwise payable on such dates,
depending upon the value, rate or price on the applicable dates of the
applicable currency, currency unit, commodity or index. Information as to the
methods for determining the amount of principal, premium, if any, or interest
payable on any date, the currencies, currency units, commodities or indices to
which the amount payable on such date is linked and any additional tax
considerations will be set forth in the applicable Prospectus Supplement.
Except as may be set forth in the applicable Prospectus Supplement, Holders
of Convertible Debt Securities will not have the benefit of any specific
covenants or provisions in the applicable Indenture or such Convertible Debt
Securities in the event that the Company engages in or becomes the subject of a
highly leveraged transaction, other than the limitations on mergers,
consolidations and transfers of substantially all of the Company's properties
and assets as an entirety to any person as described below under "Consolidation,
Merger and Sale of Assets".
The Convertible Debt Securities will be general unsecured obligations of
the Company.
Except as otherwise provided in the applicable Prospectus Supplement,
principal, premium, if any, and interest, if any, will be payable at an office
or agency to be maintained by the Company in , except that at the
option of the Company interest may be paid by check mailed to the person
entitled thereto.
The Convertible Debt Securities will be issued only in fully registered
form without coupons and may be presented for the registration of transfer or
exchange at the corporate trust office of the Trustee. Not all Convertible Debt
Securities of any one series need be issued at the same time, and, unless
otherwise provided, a series may be reopened for issuances of additional
Convertible Debt Securities of such series.
SENIOR DEBT SECURITIES
The Senior Debt Securities will rank pari passu with all other unsecured
and unsubordinated debt of the Company and senior to the Senior Subordinated
Debt Securities and Subordinated Debt Securities.
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SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES AND SUBORDINATED DEBT
SECURITIES
The payment of the principal of, premium, if any, and interest on the
Senior Subordinated Debt Securities and the Subordinated Debt Securities will,
to the extent set forth in the respective Indentures and Indenture Supplements
governing such Senior Subordinated Debt Securities and Subordinated Debt
Securities, be subordinated in right of payment to the prior payment in full of
all Senior Indebtedness. Upon any payment or distribution of assets to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or
similar proceedings of the Company, the holders of all Senior Indebtedness will
be entitled to receive payment in full of all amounts due or to become due
thereon before the Holders of the Senior Subordinated Debt Securities or the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on such Senior Subordinated
Debt Securities or Subordinated Debt Securities, as the case may be. In the
event of the acceleration of the maturity of any Senior Subordinated Debt
Securities or Subordinated Debt Securities, the holders of all Senior
Indebtedness will be entitled to receive payment in full of all amounts due or
to become due thereon before the Holders of the Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be, will be entitled
to receive any payment upon the principal of, premium, if any, or interest on
such Senior Subordinated Debt Securities or Subordinated Debt Securities, as the
case may be. No payments on account of principal, premium, if any, or interest
in respect of the Senior Subordinated Debt Securities or Subordinated Debt
Securities may be made if there shall have occurred and be continuing in a
default in the payment of principal of (or premium, if any) or interest on any
Senior Indebtedness beyond any applicable grace period, or a default with
respect to any Senior Indebtedness permitting the holders thereof to accelerate
the maturity thereof, or if any judicial proceedings shall be pending with
respect to any such default. For purposes of the subordination provisions, the
payment, issuance or delivery of cash, property or securities (other than stock,
and certain subordinated securities, of the Company) upon conversion or exchange
or a Senior Subordinated Debt Security or Subordinated Debt Security will be
deemed to constitute payment on account of the principal of such Senior
Subordinated Debt Security or Subordinated Debt Security, as the case may be.
By reason of such provisions, in the event of insolvency, holders of Senior
Subordinated Debt Securities and Subordinated Debt Securities may recover less,
ratably, than holders of Senior Indebtedness with respect thereto.
The term "Senior Indebtedness", when used with respect to any series of
Senior Subordinated Debt Securities or Subordinated Debt Securities, is defined
to include all amounts due on and obligations in connection with any of the
following, whether outstanding at the date of execution of the Indenture or
thereafter incurred, assumed, guaranteed or otherwise created (including,
without limitation, interest accruing on or after a bankruptcy or other similar
event, whether or not an allowed claim therein):
(a) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Company for money borrowed or evidenced by bonds,
debentures, notes or similar instruments;
(b) reimbursement obligations and other liabilities (contingent or
otherwise) of the Company with respect to letters of credit or bankers'
acceptances issued for the account of the Company and interest rate
protection agreements and currency exchange or purchase agreements;
(c) obligations and liabilities (contingent or otherwise) of the Company
related to capitalized lease obligations;
(d) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Company related to agreements or arrangements
designed to protect the Company against fluctuations in commodity
prices, including without limitation, commodity futures contracts or
similar hedging instruments;
(e) indebtedness of others of the kinds described in the preceding clauses
(a) through (d) that the Company has assumed, guaranteed or otherwise
assured the payment of, directly or indirectly;
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(f) indebtedness of another Person of the type described in the preceding
clauses (a) through (e) secured by any mortgage, pledge, lien or other
encumbrance on property owned or held by the Company; and
(g) deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or
liability described in the preceding clauses (a) through (f) whether or
not there is any notice to or consent of the Holders of such series of
Senior Subordinated Debt Securities or Subordinated Debt Securities, as
the case may be;
except that, with respect to the Senior Subordinated Debt Securities, any
particular indebtedness, obligation, liability, guaranty, assumption, deferral,
renewal, extension or refunding shall not constitute "Senior Indebtedness" if it
is expressly stated in the governing terms, or in the assumption or guarantee,
thereof that the indebtedness involved is not senior in right of payment to the
Senior Subordinated Debt Securities or that such indebtedness is pari passu with
or junior to the Senior Subordinated Debt Securities and, with respect to
Subordinated Debt Securities, any particular indebtedness, obligation,
liability, guaranty, assumption, deferral, renewal, extension or refunding shall
not constitute "Senior Indebtedness" if it is expressly stated in the governing
terms, or in the assumption or guarantee, thereof that the indebtedness involved
is not senior in right of payment to the Subordinated Debt Securities or that
such indebtedness is pari passu with or junior to the Subordinated Debt
Securities.
In certain circumstances, such as the bankruptcy or insolvency of the
Company, Canadian or U.S. bankruptcy or insolvency legislation may be applicable
and the application of such legislation may lead to different results with
respect to, for example, payments to be made to Holders of Convertible Debt
Securities, or priorities between Holders of the Convertible Debt Securities and
holders of Senior Indebtedness, than those provided for in the applicable
Indenture.
If this Prospectus is being delivered in connection with a series of Senior
Subordinated Debt Securities or Subordinated Debt Securities, the accompanying
Prospectus Supplement or the information incorporated herein by reference will
set forth the approximate amount of Senior Indebtedness outstanding as of the
end of the Company's most recent fiscal quarter.
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the
Convertible Debt Securities will be issued only in fully registered form in
denominations of U.S. $1,000 or integral multiples thereof. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of principal,
premium, if any, and interest on the Convertible Debt Securities will be
payable, and the exchange, conversion and transfer of Convertible Debt
Securities will be registerable, at the office or agency of the Company
maintained for such purposes. No service charge will be made for any
registration of a transfer or exchange of the Convertible Debt Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
All monies paid by the Company to a Paying Agent for the payment of
principal of, premium, if any, or interest on any Convertible Debt Security
which remain unclaimed for two years after such principal, premium or interest
has become due and payable may be repaid to the Company and thereafter the
holder of such Convertible Debt Security may look only to the Company for
payment thereof.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
Convertible Debt Securities of any series: (a) failure to pay principal (or
premium, if any) on any Convertible Debt Security of that series at its
maturity, whether or not such failure is a result of the subordination
provisions of the Indenture with respect to such series; (b) failure to pay any
interest on any Convertible Debt Security of that series when due, continued for
30 days, whether or not such failure is a result of the subordination provisions
of the Indenture with respect to such series; (c) failure to make any sinking
fund payment, when due, in respect of any Convertible Debt Security of that
series; (d) failure to perform any other covenant of the Company in the
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applicable Indenture or any other covenant to which the Company may be subject
with respect to Convertible Debt Securities of that series (other than a
covenant solely for the benefit of a series of Convertible Debt Securities other
than that series), continued for 90 days after written notice as provided in the
applicable Indenture; (e) failure to pay when due on final maturity (after the
expiration of any applicable grace period), or upon acceleration, any
indebtedness for money borrowed by the Company in excess of U.S. $10 million;
(f) certain events of bankruptcy, insolvency or reorganization; and (g) any
other Event of Default provided with respect to Convertible Debt Securities of
that series.
If an Event of Default with respect to outstanding Convertible Debt
Securities of any series shall occur and be continuing, either the Trustee or
the Holders of at least 25% in principal amount of the outstanding Convertible
Debt Securities of that series, by notice as provided in the applicable
Indenture, may declare the principal amount (or, if the Convertible Debt
Securities of that series are original issue discount securities, such portion
of the principal amount as may be specified in the terms of that series) of all
Convertible Debt Securities of that series to be due and payable immediately,
except that upon the occurrence of an Event of Default specified in (f) above,
the principal amount (or in the case of original issue discount securities, such
portion) of all Convertible Debt Securities shall be immediately due and payable
without notice. However, at any time after a declaration of acceleration with
respect to Convertible Debt Securities of any series has been made, but before
judgment or decree based on such acceleration has been obtained, the Holders of
a majority in principal amount of the outstanding Convertible Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. For information as to waiver of defaults, see "Modification and
Waiver" below.
The Indentures will provide that, subject to the duty of the respective
Trustees thereunder during an Event of Default to act with the required standard
of care, each such Trustee will be under no obligation to exercise any of its
rights or powers under the respective Indentures at the request or direction of
any of the Holders, unless such Holders shall have offered to such Trustee
reasonable security or indemnity. Subject to certain provisions, including those
requiring security or indemnification of the applicable Trustee, the Holders of
a majority in principal amount of the outstanding Convertible Debt Securities of
any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to such Trustee, or to
exercise any trust or power conferred on such Trustee, with respect to the
Convertible Debt Securities of that series.
No Holder of a Convertible Debt Security of any series will have any right
to institute any proceeding with respect to the applicable Indenture or for any
remedy thereunder, unless such Holder shall have previously given to the
applicable Trustee written notice of a continuing Event of Default and unless
also the Holders of at least 25% in aggregate principal amount of the
outstanding Convertible Debt Securities of the same series shall have made
written requests, and offered reasonable indemnity, to such Trustee to institute
such proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the outstanding
Convertible Debt Securities of the same series a direction inconsistent with
such request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
Convertible Debt Security for enforcement of payment of the principal of and
interest on such Convertible Debt Security on or after the respective due dates
expressed in such Convertible Debt Security.
The Company will be required to furnish to the Trustees annually a
statement as to the performance by the Company of its obligations under the
respective Indentures and as to any default in such performance.
MODIFICATION AND WAIVER
Without the consent of any Holder of outstanding Convertible Debt
Securities, the Company and the Trustees may amend or supplement the Indentures
or the Convertible Debt Securities to cure any ambiguity, defect or
inconsistency, or to make any change that does not adversely affect the rights
of any Holder of Convertible Debt Securities. Other modifications and amendments
of the respective Indentures may be made by the Company and the applicable
Trustee with the consent of the Holders of not less than a majority in aggregate
principal amount of the outstanding Convertible Debt Securities of each series
affected thereby;
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provided, however, that no such modification or amendment may, without the
consent of the Holder of each outstanding Convertible Debt Security affected
thereby: (a) change the stated maturity of the principal of, or any installment
of principal of, or premium, if any, or interest on any Convertible Debt
Security; (b) reduce the principal amount of, the rate of interest on, or the
premium, if any, payable upon the redemption of, any Convertible Debt Security;
(c) reduce the amount of principal of an original issue discount security
payable upon acceleration of the maturity thereof; (d) change the place or
currency of payment of principal of, premium, if any, or interest on any
Convertible Debt Security; (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Convertible Debt Security
on or after the stated maturity or redemption date thereof; (f) modify the
conversion provisions in a manner adverse to the holders thereof; (g) modify the
subordination provisions applicable to Senior Subordinated Debt Securities or
Subordinated Debt Securities in a manner adverse to the Holders thereof; (h)
reduce the percentage in principal amount of outstanding Convertible Debt
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the applicable Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver of
certain defaults or (i) modify any of the provisions of certain sections as
specified in the Indenture including the provisions summarized in this
paragraph, except to increase any such percentage or to designate additional
provisions of the Indenture, which, with respect to such series, cannot be
modified or waived without the consent of the Holder of each outstanding
Convertible Debt Security affected thereby.
The Holders of at least a majority in principal amount of the outstanding
Convertible Debt Securities of any series may on behalf of the Holders of all
Convertible Debt Securities of that series waive, insofar as that series is
concerned, compliance by the Company with certain covenants of the applicable
Indenture. The Holders of not less than a majority in principal amount of the
outstanding Convertible Debt Securities of any series may, on behalf of the
Holders of all Convertible Debt Securities of that series, waive any past
default under the applicable Indenture with respect to that series, except a
default in the payment of the principal of, premium, if any, or interest on, any
Convertible Debt Security of that series or in respect of a provision which
under the applicable Indenture cannot be modified or amended without the consent
of the Holder of each outstanding Convertible Debt Security of that series
affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of any series of
outstanding Convertible Debt Securities, may consolidate with or merge into, or
transfer or lease its assets substantially as an entirety (treating the Company
and each of its Subsidiaries as a single consolidated entity) to, any
corporation, and any other corporation may consolidate with or merge into, or
transfer or lease its assets substantially as an entirety to, the Company,
provided that the corporation (if other than the Company) formed by such
consolidation or into which the Company is merged or which acquires or leases
the assets of the Company substantially as an entirety is organized and existing
under the laws of the United States of America or Canada or any political
subdivision of either, and assumes the Company's obligations under each series
of outstanding Convertible Debt Securities and the Indentures applicable thereto
and that the Trustee is satisfied that the transaction will not result in the
successor being required to make any deduction or withholding on account of
certain Canadian taxes from any payments in respect of the Securities, and that,
after giving effect to such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have occurred and be continuing, and the delivery of an officer's
certificate and an opinion of counsel with respect to compliance with the
foregoing requirements.
DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to the
Convertible Debt Securities of a series, the Company at its option will be
released from its obligations to comply with certain covenants specified in the
applicable Prospectus Supplement with respect to the Convertible Debt Securities
of such series, and the occurrence of an event described in clause (d) under
"Events of Default" above with respect to any defeased covenants, and clauses
(e) and (g) under "Events of Default" above shall no longer be an Event of
Default, if the Company irrevocably deposits with the applicable Trustee, in
trust, money, government
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obligations of the government issuing the currency in which the Convertible Debt
Securities of the relevant series are denominated, or a combination thereof that
through the payment of interest thereon and principal thereof in accordance with
the terms will provide money in an amount sufficient to pay all the principal of
and premium, if any, and interest on the Securities of such series on the dates
such payments are due (up to the stated maturity date, or the redemption date,
as the case may be) in accordance with the terms of such Convertible Debt
Securities. Such a trust may only be established if, among other things, (a) no
Event of Default described under "Events of Default" above or event that, after
notice or lapse of time, or both, would become an Event of Default under the
applicable Indenture, shall have occurred and be continuing on the date of such
deposit, or, with regard to an Event of Default described under clause (f) under
"Events of Default" above or an event that, after notice or lapse of time, or
both, would become an Event of Default described under such clause (f), shall
have occurred and be continuing at any time during the period ending on the
123rd day following such date of deposit, (b) the Company shall have delivered
an opinion of counsel to the effect that the Holders of the Convertible Debt
Securities will not recognize gain or loss for United States Federal income tax
purposes as a result of such deposit or defeasance and will be subject to United
States Federal income tax in the same manner as if such defeasance had not
occurred, and (c) such covenant defeasance will not result in the trust being in
violation of the Investment Company Act of 1940. In the event the Company omits
to comply with its remaining obligations under the applicable Indenture after a
defeasance of such Indenture with respect to the Convertible Debt Securities of
any series as described above and the Convertible Debt Securities of such series
are declared due and payable because of the occurrence of any undefeased Event
of Default, the amount of money and government obligations on deposit with the
applicable Trustee may be insufficient to pay amounts due on the Convertible
Debt Securities of such series at the time of the acceleration resulting from
such Event of Default. However, the Company will remain liable in respect to
such payments.
Notwithstanding the description set forth under "Subordination of Senior
Subordinated Debt Securities and Subordinated Debt Securities" above, in the
event that the Company deposits money or government obligations in compliance
with the Indenture that governs any Senior Subordinated Debt Securities or
Subordinated Debt Securities, as the case may be, in order to defease all or
certain of its obligations with respect to the applicable series of Convertible
Debt Securities, the money or government obligations so deposited will not be
subject to the subordination provisions of the applicable Indenture and the
indebtedness evidenced by such series of Convertible Debt Securities will not be
subordinated in right of payment to the holders of applicable Senior
Indebtedness to the extent of the money or government obligations so deposited.
GOVERNING LAW
The Indentures and the Convertible Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York.
REGARDING THE TRUSTEES
The Indenture contains certain limitations on the right of each Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. Each Trustee will be
permitted to engage in certain other transactions with the Company; however, if
it acquires any conflicting interest and there is a default under the
Convertible Debt Securities issued under the applicable Indenture, it must
eliminate such conflict or resign.
BOOK-ENTRY SYSTEM
The Convertible Debt Securities of a Series may be issued in the form of
one or more global certificates representing the Convertible Debt Securities
(the "Global Securities") that will be deposited with a depository (the
"Depository") or with a nominee for the Depository identified in the applicable
Prospectus supplement and will be registered in the name of the Depository or a
nominee thereof. In such a case one or more Global Securities will be issued in
a denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Convertible Debt Securities of the series to be
represented by such
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Global Security or Securities. Unless and until it is exchanged in whole or in
part for Convertible Debt Securities in definitive certificated form, a Global
Security may be transferred, in whole but not in part, only to another nominee
of the Depository for such series, or to a successor Depository for such series
selected or approved by the Company, or to a nominee of such successor
Depository.
The specific depository arrangement with respect to any series of
Convertible Debt Securities to be represented by a Global Security will be
described in the applicable Prospectus Supplement. The Company expects that the
following provisions will apply to depository arrangements.
Upon the issuance of any Global Security, and the deposit of such Global
Security with or on behalf of the Depository for such Global Security, the
Depository will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Convertible Debt Securities represented by
such Global Security to the accounts of institutions ("participants") that have
accounts with the Depository or its nominee. The accounts to be credited will be
designated by the underwriters or agents engaging in the distribution of such
Convertible Debt Securities or by the Company, if such Convertible Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in a Global Security will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests by
participants in such Global Security will be shown on, and the transfer of such
beneficial interests will be effected only through, records maintained by the
Depository for such Global Security or by its nominee. Ownership of beneficial
interests in such Global Security by persons that hold through participants will
be shown on, and the transfer of such beneficial interests within such
participants will be effected only through, records maintained by such
participants. The laws of some jurisdictions may require that certain purchasers
of securities take physical delivery of such securities in certificated form.
The foregoing limitations and such laws may impair the ability to own, pledge or
transfer beneficial interests in such Global Securities.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Convertible
Debt Securities represented by such Global Security for all purposes under the
Indenture. Unless otherwise specified in the applicable Prospectus Supplement
and except as specified below, owners of beneficial interests in such Global
Security will not be entitled to have Convertible Debt Securities of the series
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Convertible Debt Securities of
such series in certificated form and will not be considered the holders thereof
for any purposes under the Indenture. Accordingly, each person owning a
beneficial interest in such Global Security must rely on the procedures of the
Depository and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a holder under the Indenture. The Company understands that, under existing
industry practices, if the Company requests any action of holders or an owner of
a beneficial interest in such Global Security desires to give any notice or take
any action a holder is entitled to give or take under the Indenture, the
Depository would authorize the participants to give such notice or take such
action, and participants would authorize beneficial owners owning through such
participants to give such notice or take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Unless otherwise specified in the applicable Prospectus Supplement,
payments with respect to principal, premium, if any, and interest, if any, on
Convertible Debt Securities represented by a Global Security registered in the
name of a Depository or its nominee will be made to such Depository or its
nominee, as the case may be, as the registered owner of such Global Security.
The Company expects that the Depository for any Convertible Debt Securities
represented by a Global Security, upon receipt of any payment of principal,
premium or interest in respect of such Global Security, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of such Depository. The Company also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street names," and will be the
responsibility of such participants. None of the Company, the Trustee or any
agent of the
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Company or the Trustee shall have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of a Global Security, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
If the Depository for any Convertible Debt Securities represented by a
Global Security is at any time unwilling or unable to continue as Depository or
ceases to be registered or in good standing under the Securities Exchange Act of
1934, as amended, and a successor Depository is not appointed by the Company
within 90 days after the Company receives notice or becomes aware of such
condition, the Company will issue such Convertible Debt Securities in definitive
certificated form in exchange for such Global Security. In addition, the Company
may at any time and in its sole discretion determine not to have any of the
Convertible Debt Securities of a series represented by one or more Global
Securities and, in such event, will issue Convertible Debt Securities of such
series in definitive certificated form in exchange for all of the Global
Security or Securities representing such Convertible Debt Securities.
PLAN OF DISTRIBUTION
The Company may offer and sell the Securities to or through underwriters or
dealers, and also may offer and sell Securities directly to other purchasers or
through agents.
Each Prospectus Supplement will set forth the terms of the offering of the
particular series of Securities to which the Prospectus Supplement relates,
including the name or names of any underwriters, dealers or agents, the purchase
price or prices of the Securities, the proceeds to the Company from the sale of
such series of Securities, the use of such proceeds, any initial public offering
price or purchase price of such series of Securities, any underwriting discount
or commission, any discounts, concessions or commissions allowed or reallowed or
paid by any underwriters to other dealers, any commissions paid to any agents
and the securities exchanges, if any, on which such Securities will be listed.
Any initial public offering price or purchase price and any discounts,
concessions or commissions allowed or reallowed or paid by any underwriter to
other dealers may be changed from time to time.
Sales of Common Shares or Preferred Shares offered pursuant to any
Prospectus Supplement may be effected from time to time in one or more
transactions on the American Stock Exchange or, in appropriate circumstances,
The Toronto Stock Exchange, or in negotiated transactions or any combination of
such methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, or at other negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities for whom
they may act as agents in the form of discounts, concessions or commissions,
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Company and any profit on the resale of Securities by
them may be deemed to be underwriting discounts and commissions under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the applicable
Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under Canadian and United States securities legislation.
The Company may grant underwriters who participate in the distribution of
Securities an option to purchase additional Securities to cover over-allotments,
if any.
The place and date of delivery for the Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement.
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Unless otherwise indicated in the applicable Prospectus Supplement, the
Securities in respect of which this Prospectus is being delivered (other than
Common Shares) will be a new issue of securities, will not have an established
trading market when issued and will not be listed on any securities exchange.
Any underwriters or agents to or through whom such Securities are sold by the
Company for public offering and sale may make a market in such Securities, but
such underwriters or agents will not be obligated to do so and may discontinue
any market making at any time without notice. No assurance can be given as to
the liquidity of the trading market for any such Securities.
Certain of the underwriters and their affiliates may from time to time
perform various commercial banking and investment banking services for the
Company, for which customary compensation is received.
EXPERTS
The consolidated financial statements of the Company, included in its
Annual Report on Form 10-K for the year ended December 31, 1995, have been
audited by Coopers & Lybrand, independent chartered accountants, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are, and audited financial statements to be
included in subsequently filed documents will be, incorporated herein by
reference in reliance upon the reports of Coopers & Lybrand pertaining to such
financial statements (to the extent covered by consents filed with the
Securities and Exchange Commission) given upon the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the validity of the Securities will be
passed upon for the Company by Paul, Weiss, Rifkind, Wharton & Garrison, New
York, New York, and by Koffman Birnie & Kalef, Vancouver, British Columbia.
Certain legal matters will be passed upon for the underwriters, if any, by
Davis, Graham & Stubbs LLP, Denver, Colorado, and by Stikeman, Elliott, Toronto,
Ontario, or by the counsel named in the applicable Prospectus Supplement.
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GLOSSARY OF TERMS
GLOSSARY
The definitions of proven and probable reserves (ore) set forth below are
substantially the same as those used in Canada by certain provincial securities
regulatory authorities and are set forth in National Policy No. 2-A (of Canada).
These definitions are substantially the same as those applied in the United
States by the Commission and those accepted by the United States Bureau of Mines
and the United States Geological Survey.
PROVEN RESERVES that material for which tonnage is computed from
dimensions revealed in outcrops or trenches or
underground workings or drill holes and for which the
grade is computed from the results of adequate sampling,
and for which the sites for inspection, sampling and
measurement are so spaced and the geological character
so well defined that the size, shape and mineral content
are established and for which the computed tonnage and
grade are judged to be accurate within limits which
shall be stated and for which it shall be stated whether
the tonnage and grade of proven ore or measured ore are
"in situ" or extractable, with dilution factors shown,
and reasons for the use of these dilution factors
clearly explained
PROBABLE RESERVES that material for which tonnage and grade are computed
partly from specific measurements, samples or production
data, and partly from projection for a reasonable
distance on geological evidence, and for which the sites
available for inspection, measurement and sampling are
too widely or otherwise inappropriately spaced to
outline the material completely or to establish its
grade throughout.
The following definitions of the stages of the exploration and development
process are used by Golden Star. There can be no assurance that the terminology
used by Golden Star is consistent with the terminology used by other companies
in the mining industry or by industry analysts.
EARLY STAGE an early stage exploration project typically involves
one or more targets within an area which have been
determined to merit further follow-up work based on a
combination of geological, geochemical and geophysical
analysis. The objective of an early stage project
typically is to better define targets that have the
potential to be advanced to the next stage of
exploration and level of financial commitment.
INTERMEDIATE STAGE an intermediate stage exploration project typically
involves establishing near surface mineralization
through such techniques as deep augering and trenching.
Depending on spacing, drilling (both reverse circulation
("RC") and core) may be an intermediate stage
exploration tool. The objective of the intermediate
exploration stage is to advance a project by identifying
a well defined zone of mineralization that suggests the
potential of mineralization continuing to depth.
ADVANCED STAGE an advanced exploration stage project typically involves
testing targets at depth and generating the information
necessary to develop a three dimensional geologic model
of the mineralized zone, which may be used to
demonstrate mineralized materials and/or reserves. This
typically is accomplished by both core and RC drilling,
although reserves also can be established through
trenching.
PREFEASIBILITY STAGE a prefeasibility stage project typically involves a
target for which sufficient geologic information exists
about the mineralized zone to determine the
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reserves. During the prefeasibility stage, drilling
often is done to infill the information set on the
mineralized zone in order to increase the certainty of
calculated reserves. Wider spaced step-out drilling also
is conducted to extend upon known mineralized zones or
to test for additional zones. The objective of the
prefeasibility stage is to prove sufficient reserves to
allow for a rate of production over a sufficient period
of time to justify the investment of capital to extract
the reserves, based on various economic and financial
assumptions.
FEASIBILITY STAGE during the feasibility stage, exploration continues in
order to better define known reserves of a project while
attempting to further expand them. During this stage,
management of the project often is transferred to the
operating partner which develops the necessary
engineering and costing for mining, processing, power
and infrastructure, as well as the designs for the plant
and equipment required to construct and operate a modern
mining operation.
MINE mining is the process of transforming a valuable mineral
reserve or deposit into benefits for its owners (debt,
equity and employees), governments and communities.
Exploration continues during the mining process and, in
many cases, reserves are expanded during the early years
of mine operations as the exploration potential of the
deposit is realized.
- --------------------------------------------------------------------------------
ALLUVIUM, ALLUVIALS a general term for clay, silt, sand, gravel or other
material deposited by a body of water usually during recent geological time
ANOMALY a deviation from uniformity or regularity in geophysical quantities
ASSAY to analyze the proportions of metals in an ore
BRECCIA a coarse-grained rock composed of large angular pieces of broken rock
CARBONATE a mineral compound characterized by a fundamental structure of carbon
and oxygen
DEGRADATION the wearing down or away, and the general lowering or reduction of
the Earth's surface by the natural processes of weathering and erosion
DIAMOND DRILLING a variety of rotary drilling in which diamond bits are used as
the rock-cutting tool to produce a recoverable core of rock for observation and
assay
DIP the angle that a structural surface, a bedding or fault plane, makes with
the horizontal, measured perpendicular to the strike of the structure
ELUVIAL an incoherent ore deposit resulting from decomposition or disintegration
of rock in place
FAULT a surface or zone of rock fracture along which there has been displacement
FORMATION the basic rock-stratigraphic unit in the local classification of rocks
GEOCHEMISTRY the study of the distribution and amounts of the chemical elements
in minerals, ores, rocks, solids, water, and the atmosphere
GEOPHYSICS the study of the Earth as a planet with three areas of study:
solid-earth, atmosphere and hydrosphere, and magnetosphere
GREENSTONE ancient volcanic-sedimentary rock assemblages
HORIZON a plane of stratification assumed to have been once horizontal and
continuous
HYDROTHERMAL the products of the actions of heated water, such as a mineral
deposit precipitated from a hot solution
INTRUSION the process of replacement of magma (naturally occurring mobile rock
material generated within the Earth) in pre-existing rock
MAFIC an igneous rock composed mostly of one or more ferromagnesian,
dark-colored minerals in its mode; also, said of those minerals
MASSIVE said of a mineral deposit, especially sulfides, characterized by a great
concentration of ore in one place, as opposed to a disseminated or veinlike
deposit
METALLURGY the science and art of separating metals from their ores by
mechanical and chemical processes
METAMORPHOSED the mineralogical and structural adjustment of solid rocks to
physical and chemical conditions which have been imposed at depth below the
surface zones of weathering and cementation
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METASEDIMENT a sediment or sedimentary rock which shows evidence of having been
subjected to metamorphism
METAVOLCANIC a volcanic rock which shows evidence of having been subjected to
metamorphism
MINERAL a naturally formed chemical element of compound having a definite
chemical composition and, usually, a characteristic crystal form
MINERALIZATION a natural occurrence in rocks or soil of one or more
metalliferous minerals
OUTCROP that part of a geologic formation or structure that appears at the
surface of the earth; also, bedrock that is covered only by surficial deposits
such as alluvium
OVERBURDEN barren rock material overlying a mineral deposit
PAN CONCENTRATE a small proportion, generally of heavy minerals, typically of a
weathered rock or stream sediment, obtained by manual use of a "gold pan."
PLUNGE the inclination of a fold axis or other geological structure, measured by
its departure from the horizontal
PRECAMBRIAN all rocks formed before Cambrian time, or more than 600 million
years ago
PROTEROZOIC the more recent division of the Precambrian
PYRITE a common, pale-bronze or brass-yellow, isometric iron sulfide mineral
QUARTZ crystalline silica; silicon dioxide
RADIOMETRIC SURVEY survey using a radiation-measuring instrument, usually to
detect specific elements in the ground
REVERSE CIRCULATION DRILLING a drilling method used in geological appraisals
whereby the drilling fluid passes inside the drill stem to a down-the-hole
precision bit and returns to the surface outside the drill stem carrying chips
of rock
SAPROLITE a soft, earthy, clay-rich and thoroughly decomposed rock formed in
place by chemical weathering of igneous, sedimentary or metamorphic rocks which
retains the original structure of the unweathered rock
SHEAR a strain resulting from stresses that cause or tend to cause contiguous
parts of a body of rock to slide relatively to each other in a direction
parallel to their plane of contact
SHEAR ZONE a tabular zone of rock that has been crushed and brecciated by many
parallel fractures due to shear strain
SHIELD a large area of exposed basement rocks in a craton commonly with a very
gently convex surface, surrounded by sediment-covered platforms
STOCK an igneous intrusion that is less than 100 square kilometers in surface
exposure
STRIKE the direction or trend that a structural surface, e.g. a bedding or fault
plane, takes as it intersects the horizontal
SURFICIAL situated, formed or occurring on the Earth's surface
ULTRAMAFIC an igneous rock composed chiefly of mafic minerals
VEIN a thin, sheetlike igneous intrusion into a crevice
WEATHERING the destructive process constituting that part of erosion whereby
earthy and rocky materials on exposure to atmospheric agents at or near the
Earth's surface are changed in character with little or no transport of the
loosened or altered material
CONVERSION FACTORS AND ABBREVIATIONS
For ease of reference, the following conversion factors are provided:
<TABLE>
<S> <C>
1 acre = 0.4047 hectare
1 foot = 0.3048 meter
1 gram per tonne = 0.0292 ounce per ton
1 ton (2000 pounds) = 0.9072 tonne
1 metric tonne = 1,000 kg or 2,204.6 pounds
1 kilogram = 2.2 pounds or 32.151 oz
1 mile = 1.6093 kilometers
1 troy ounce = 31.1035 grams
1 square mile = 2.59 square kilometers
1 square kilometer = 100 hectares
1 kilometer = 0.6214 miles
1 meter = 1.0936 yards or 3.2808 feet
1 hectare = 2.4710 acres
</TABLE>
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The following abbreviations of measurements are used herein:
<TABLE>
<S> <C>
Au = gold
ct = carats
ct/m(2) = carats per square meter
gm = grams
g/t = grams per tonne
ha = hectares
km = kilometers
km(2) = square kilometers
kg = kilogram
m = meter
m(2) = square meter
m(3) = cubic meter
mg = milligrams
mg/m(3) = milligrams per cubic
meter
mt = metric tonne
oz = troy ounces
oz/t = troy ounces per ton
t = ton (2,000 pounds)
ppb = parts per billion
</TABLE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER OR DEALER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL CREATE, UNDER ANY CIRCUMSTANCES, AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND
PROSPECTUS, OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE COMMON SHARES
OFFERED HEREBY, NOR DO THEY CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL OR NOT AUTHORIZED
OR IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Special Note Regarding Forward-Looking
Statement................................ S-2
Financial Information...................... S-2
Gold Prices and Exchange Rates............. S-2
Risk Factors............................... S-3
The Company................................ S-5
Recent Developments........................ S-5
Use of Proceeds............................ S-12
Capitalization............................. S-12
Price Range of Common Shares............... S-13
Dividend Policy............................ S-13
Details of the Offering.................... S-14
Certain United States Federal Income Tax
Considerations........................... S-14
Certain Canadian Federal Income Tax
Considerations........................... S-14
Plan of Distribution....................... S-15
PROSPECTUS
Available Information...................... 2
Enforcement of Certain Civil Liabilities... 3
Incorporation of Certain Documents by
Reference................................ 3
The Company................................ 6
Risk Factors............................... 8
Use of Proceeds............................ 12
Ratios of Earnings to Fixed Charges........ 13
Business and Properties.................... 14
Description of Share Capital............... 29
Description of Warrants.................... 31
Description of Convertible Debt
Securities............................... 31
Plan of Distribution....................... 40
Experts.................................... 41
Legal Matters.............................. 41
</TABLE>
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3,025,000 COMMON SHARES
LOGO
GOLDEN STAR RESOURCES LTD.
COMMON SHARES
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PROSPECTUS SUPPLEMENT
APRIL 24, 1997
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