<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
FORM 10-Q
--------------
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period ended March 31, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to ________.
Commission file number 0-21708
GOLDEN STAR RESOURCES LTD.
(Registrant's telephone number, including area code)
Canada 98-0101955
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Norwest Center
1660 Lincoln Street
Suite 3000
Denver, Colorado 80264
(Address of Principal Executive Office) (Zip Code)
(303) 830-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
Yes X No
---------- ________
Number of Common Shares outstanding as of May 10, 1998: 30,249,466
<PAGE>
GOLDEN STAR RESOURCES LTD.
INDEX
<TABLE>
<CAPTION>
<S> <C>
Part I Financial Information
Item 1. Financial Statements................................................. 1
Item 2. Management's Discussion and Analysis of Financial Condition,
Results of Operations and Recent Developments........................11
Part II Other Information
Item 1. Legal Proceedings...................................................14
Item 6. Exhibits and Reports on Form 8-K....................................14
Signatures.............................................................................15
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this report 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.
ii
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of United States Dollars except share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
As of March 31, As of December 31,
1998 1997
--------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 12,983 $ 17,399
Accounts receivable 3,059 2,238
Inventories 356 356
Other assets 445 159
-------- --------
Total Current Assets 16,843 20,152
RESTRICTED CASH 250 250
DEFERRED EXPLORATION 67,022 65,160
INVESTMENT IN OMAI GOLD MINES LIMITED 1,660 2,126
FIXED ASSETS 1,163 1,280
OTHER ASSETS 117 154
-------- --------
Total Assets $ 87,055 $ 89,122
======== ========
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 1,638 $ 2,825
Accrued wages and payroll taxes 783 900
-------- --------
Total Current Liabilities 2,421 3,725
OTHER LIABILITIES 63 115
-------- --------
Total Liabilities 2,484 3,840
-------- --------
MINORITY INTEREST 5,516 5,725
-------- --------
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
SHARE CAPITAL 158,121 158,001
(Common shares, without par value, unlimited shares
authorized. Shares issued and outstanding: March
31, 1998 - 29,847,892; December 31, 1997 - 29,797,432)
Stock option loans (4,012) (4,012)
DEFICIT (75,054) (74,432)
-------- --------
Total Shareholders' Equity 79,055 79,557
-------- --------
Total Liabilities and Shareholders' Equity $ 87,055 $ 89,122
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
1
<PAGE>
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of United States Dollars except share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
------------------ ------------------
<S> <C> <C>
REVENUE
Precious metals sales $ - $ 401
Interest and other 261 187
------- -------
261 588
------- -------
COSTS AND EXPENSES
Cost of goods sold - 866
Depreciation 59 312
General and administrative 1,529 2,080
Exploration expense 158 140
Interest expense 11 23
Foreign exchange loss (gain) (104) 91
------- -------
1,653 3,512
------- -------
PROFIT (LOSS) BEFORE THE UNDERNOTED (1,392) (2,924)
Omai preferred share redemptions surplus 561 554
------- -------
Net profit (loss) before minority interest (831) (2,370)
Minority interest loss 209 540
------- -------
NET PROFIT (LOSS) $ (622) $(1,830)
======= =======
NET PROFIT (LOSS) PER SHARE $ (0.02) $(0.07)
BASIC AND DILUTED
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING
(MILLIONS OF SHARES) 29.8 26.5
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
2
<PAGE>
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of United States Dollars except share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net profit (loss) $ (622) $(1,830)
Reconciliation of net income to net cash used in operations:
Depreciation 59 312
Premium on Omai Preferred Share Redemptions (561) (554)
Minority interest loss (209) (540)
Changes in non-cash operating working capital (2,413) (914)
------- -------
Net Cash Used in Operating Activities (3,746) (3,526)
======= =======
INVESTING ACTIVITIES:
Expenditures on mineral properties, net of joint venture
recoveries (1,862) (6,587)
Depreciation charged to projects 66 -
Equipment purchases (8) (74)
Omai Preferred Share Redemption 1,027 1,014
Other assets and investments 37 -
------- -------
Net Cash Used in Investing Activities (740) (5,647)
------- -------
FINANCING ACTIVITIES:
Restricted cash - 65
Offering costs of subsidiary - (14)
Increase in minority interest - -
Issuance of share capital and warrants, net - 5,429
Issuance of share capital under options 120 50
Other (50) (90)
------- -------
Net Cash Provided by Financing Activities 70 5,440
------- -------
Increase (decrease) in cash (4,416) (3,733)
Cash and short-term investments, beginning of period 17,399 15,663
------- -------
Cash and short-term investments, end of period $12,983 $11,930
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE>
NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS
- -----------------------------------------------
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
These financial statements and the accompanying notes should be read in
conjunction with the financial statements and related notes included in the
annual report on Form 10-K for Golden Star Resources Ltd. (the "Company") for
the fiscal year ended December 31, 1997, on file with the Securities and
Exchange Commission and with the Ontario Securities Commission (hereinafter
referred to as "the Company's 1997 10-K"). All amounts are in United States
dollars unless otherwise stated.
The unaudited financial statements as of March 31, 1998, and for the three
months ended March 31, 1998 and 1997, reflect all adjustments, consisting solely
of normal recurring items, which are necessary for a fair presentation of
financial position, results of operations, and cash flows on a basis consistent
with that of the prior audited consolidated financial statements.
(1) INVENTORIES
-----------
March 31, 1998 December 31, 1996
-------------- -----------------
Gold Inventory $ 51 $ 53
Materials and Supplies 305 303
---- ----
$356 $356
==== ====
(2) FIXED ASSETS
------------
March 31, 1998 December 31, 1996
-------------- -----------------
Machinery & Equipment $ 3,246 $ 3,239
------- -------
3,246 3,239
Accumulated Depreciation (2,083) (1,959)
------- -------
$ 1,163 $ 1,280
======= =======
4
<PAGE>
NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS
- -----------------------------------------------
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
(3) DEFERRED EXPLORATION
--------------------
<TABLE>
<CAPTION>
Deferred Deferred
Exploration Capitalized Capitalized Joint Exploration
Expenditures as Exploration Acquisition Venture Property Expenditures as
at Dec. 31, 1997 Expenditures Expenditures Recoveries Abandonments at March 31, 1998
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
GUYANA
Eagle Mountain $ 1,136 $ 41 $ - $ - $ - $ 1,177
Quartz Hill 1,347 - - - - 1,347
Mazaruni / Upper Mazaruni Diamond
(4) - - - - (4)
Five Stars Gold 3,684 213 - - - 3,897
Five Stars Diamond 2,360 166 - - - 2,526
BHP Gold Projects 333 - - (62) - 271
Guyana Diamond Permits 109 - - - - 109
Other 101 83 - - - 184
---------------------------------------------------------------------------------------------
Sub-total 9,066 503 - (62) - 9,507
---------------------------------------------------------------------------------------------
SURINAME
Benzdorp / Lawa 3,344 - - - - 3,344
Gross Rosebel 13,892 188 - (94) - 13,986
Headley's Right of Exploration 311 - - - - 311
Thunder Mountain 453 - - - - 453
Saramacca 1,862 292 - (202) - 1,952
Sara Kreek 581 3 - - - 584
Tempati Reconnaissance 344 10 - (15) - 339
Tapanahony Reconnaissance 251 1 - (22) - 230
Kleine Saramacca 107 - - - - 107
Lawa Antino 2,096 (2) - - - 2,094
Ulemari Reconnaissance 291 1 - (57) - 235
Other (17) 17 - - - -
---------------------------------------------------------------------------------------------
Sub-total 23,515 510 - (390) - 23,635
---------------------------------------------------------------------------------------------
FRENCH GUIANA
(GUYANOR RESSOURCES S.A.)
Dorlin 1,330 422 - (210) - 1,542
St-Elie 1,973 206 - (206) - 1,973
Dieu-Merci 382 74 - (74) - 382
Yaou 7,130 63 - (32) - 7,161
Paul Isnard / Eau Blanche 3,629 214 - (211) - 3,632
SOTRAPMAG 1,987 - - - - 1,987
Dachine 1,234 47 - - - 1,281
Other 81 20 - - - 101
---------------------------------------------------------------------------------------------
Sub-total 17,746 1,046 - (733) - 18,059
---------------------------------------------------------------------------------------------
AFRICA (PAN AFRICAN RESOURCES
CORPORATION)
Ivory Coast / Comoe 2,092 197 - - - 2,289
Kenya / Ndori 1,677 57 - - - 1,734
Burkina Faso 8 (8) - - - -
---------------------------------------------------------------------------------------------
Sub-total 3,777 246 - - - 4,023
---------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS
- -----------------------------------------------
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
<TABLE>
<CAPTION>
Deferred Deferred
Exploration Capitalized Capitalized Joint Exploration
Expenditures as Exploration Acquisition Venture Property Expenditures as
at Dec. 31, 1997 Expenditures Expenditures Recoveries Abandonments at March 31, 1998
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
LATIN AMERICA (SOUTHERN STAR
RESOURCES LTD.)
Brazil / Andorinhas 8,490 476 200 - - 9,166
Brazil / Abacaxis 2,096 23 - - - 2,119
Brazil / Other 189 151 - - - 340
Bolivia / Other 173 - - - - 173
--------------------------------------------------------------------------------------------
Sub-total 10,948 650 200 - - 11,798
--------------------------------------------------------------------------------------------
OTHER 108 (108) - - - -
--------------------------------------------------------------------------------------------
TOTAL $65,160 2,847 200 (1,185) - 67,022
============================================================================================
</TABLE>
The recoverability of amounts shown for deferred exploration is dependent upon
the sale or discovery of economically recoverable reserves, the ability of the
Company to obtain necessary financing to complete the development, and upon
future profitable production or proceeds from the disposition thereof. The
amounts deferred represent costs to be charged to operations in the future and
do not necessarily reflect the present or future values of the properties.
Guyanor and ASARCO have not yet been able to agree on a work program and budget
for the first six months of 1998. Guyanor was informed by ASARCO in February
1998 of its intention to defer exploration spending at the St-Elie/Dieu-Merci
and Paul-Isnard / Eau-Blanche projects for the first half of 1998. The
agreements between Guyanor and ASARCO contains specific provisions on what would
happen in the event of a deadlock on a work program and budget. Guyanor is
currently discussing with ASARCO how to resolve the current deadlock, including
a possible withdrawal of ASARCO from the projects. These discussions will not
create any impairment to these properties.
It has recently come to the Company's attention that the extension of its
mineral rights to the Eagle Mountain project may not have conformed in all
material respects with the terms of the mining act. The Company is investigating
this matter with the assistance of local counsel and has no reason to believe
that any non-conformance can not be cured. However, no assurance can be given in
that respect. As of March 31, 1998, the Company has incurred $1.2 million of
costs on the Eagle Mountain project.
(4) INVESTMENT IN OMAI GOLD MINES LIMITED
-------------------------------------
Details regarding the Company's investment in the common and preferred share
equity of Omai Gold Mines Ltd. and its share of equity losses not recorded for
the year ended December 31, 1997 and the quarter ended March 31, 1998 are as
follows:
<TABLE>
<CAPTION>
Common Shares Preferred Shares
------------- ----------------
<S> <C> <C>
December 31, 1997 $ - $ 2,126
Less: Preferred Share Redemption - (1,027)
Add: Premium on Preferred Share Redemption - 561
------------- ----------------
March 31, 1998 $ - $ 1,660
============= ================
</TABLE>
The Company's share of Accumulated Losses at:
December 31, 1997 $(1,507)
=======
March 31, 1998 $ (392)
=======
6
<PAGE>
NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS
- -----------------------------------------------
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
5) CHANGES TO SHARE CAPITAL
------------------------
During the three months ended March 31, 1998, 50,460 shares were issued for
options previously granted under the Company's Employees' Stock Option Plan.
(6) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES
------------------------------------------------------------------------
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada which differ in certain
respects from those principles that the Company would have followed had its
financial statements been prepared in accordance with generally accepted
accounting principles in the United States. Differences which materially affect
these consolidated financial statements are:
(a) For United States GAAP ("U.S. GAAP"), exploration and general and
administrative costs related to projects are charged to expense as
incurred. As such, the majority of costs charged to Exploration Expense
and Abandonment of Mineral Properties under Canadian GAAP would have been
charged to earnings in prior periods under U.S. GAAP. Property acquisition
costs are capitalized for both Canadian and U.S. GAAP.
(b) For periods prior to May 15, 1992 (the "Amalgamation"), the Company's
reporting currency was the Canadian dollar. Subsequent to the Company's
Amalgamation and moving of corporate headquarters to the United States, the
reporting currency was changed to the U.S. dollar. As such, for the
financial statements for periods prior to May 15, 1992, the Company's
financial statements were translated into U.S. dollars using a translation
of convenience. U.S. GAAP requires translation in accordance with the
current rate method.
(c) Under U.S. GAAP, the investment in Omai Gold Mines Limited would have been
written off in prior years and, therefore, the entire Omai Preferred Share
Redemption would have been included in income. Under Canadian GAAP, a
portion of the Omai Preferred Share Redemption is included in income with
the remainder reducing the carrying value of the Company's preferred stock
investment.
(d) U.S. GAAP requires that compensation expense be recorded for the excess of
the quoted market price over the option price granted to employees and
directors under stock option plans since the Company has adopted the
disclosure provisions of APB 25 "Accounting for Stock Issued to Employees".
Under Canadian GAAP, no compensation expense is recorded for such awards.
(e) Canadian GAAP allows classification of investments which are capable of
reasonably prompt liquidation as current assets. As such, all of the
Company's investments are included under the caption "short-term
investments" on the balance sheet under current assets. U.S. GAAP requires
classification as current or long term assets based upon the anticipated
maturity date of such instruments. Under U.S. GAAP, cash (and cash
equivalents) includes bank deposits, money market instruments, and
commercial paper with original maturities of three months or less.
Canadian GAAP permits the inclusion of temporary investments with
maturities greater than 90 days in cash.
7
<PAGE>
NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS
- -----------------------------------------------
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
(f) The Company eliminated its accumulated deficit through the amalgamation
(defined as a quasi-reorganization under U.S. GAAP) effective May 15, 1992.
Under U.S. GAAP, the cumulative deficit was greater than the deficit under
Canadian GAAP due to the write-off of certain deferred exploration costs
described in (a) above.
(g) Under U.S. GAAP, available-for-sale securities are recorded at fair value
and unrealized gains and losses are recorded as a separate component of
shareholders' equity. Fair value is determined by quoted market prices.
The Company has available-for-sale securities as of March 31, 1998.
(h) Under U.S. GAAP, accrued severance and social charges of $1.1 million
resulting from suspension of alluvial mining operations at SOTRAPMAG would
not have been recorded as of December 31, 1996 as the requirements for
accrual under U.S. GAAP were not satisfied. Under U.S. GAAP, such accruals
were recorded in the first quarter of 1997.
Had the Company followed U.S. GAAP, certain items on the statements of
operations and balance sheets would have been reported as follows:
<TABLE>
<CAPTION>
For the three months ended
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Net profit (loss) under Canadian GAAP $ (622) $(1,830)
Net effect of the deferred exploration expenditures on
loss for the period (a) (1,662) (6,444)
Effect of recording compensation expense under stock
option plans (d) - (21)
Record loss for severance accruals (h) - (1,115)
Effect of Omai preferred share redemption (c) 466 460
-------- -------
Loss under U.S. GAAP before minority interest (1,818) (8,950)
Adjustment to minority interest 185 817
-------- -------
Loss under U.S. GAAP $ (1,633) $(8,133)
======== =======
Loss per share under U.S. GAAP $(0.05) $(0.31)
======== =======
</TABLE>
8
<PAGE>
NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS
- -----------------------------------------------
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
The effect of the differences in accounting under Canadian GAAP and U.S. GAAP on
the balance sheets and statements of cash flows are as follows:
BALANCE SHEET
<TABLE>
<CAPTION>
As of March 31, 1998 As of December 31, 1997
--------------------------------------- -----------------------------------
Canadian GAAP U.S. GAAP Canadian GAAP U.S. GAAP
------------------ ------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Cash (e) $ 12,983 $ 5,553 $ 12,458 $ 12,458
Short term investments (e) - 1,999 4,941 1,999
Other current assets 3,860 3,860 2,753 2,753
Restricted cash 250 250 250 250
Deferred exploration (a) 67,022 20,439 65,160 20,239
Investment in Omai Gold Mines Limited (c) 1,660 - 2,126 -
Long-term investments (e) - 5,431 - 2,942
Other assets 1,280 1,280 1,434 1,435
-------- --------- -------- ---------
Total Assets $ 87,055 $ 38,812 $ 89,122 $ 42,076
======== ========= ======== =========
Liabilities 2,484 2,484 3,840 3,840
Minority interest (a) 5,516 6,682 5,725 7,076
Share capital, net of stock option loans (f) 154,109 151,319 153,989 151,200
Cumulative translation adjustments (b) - 1,595 - 1,595
Deficit (a)(c)(d) (75,054) (123,268) (74,432) (121,635)
-------- --------- -------- ---------
Total Liabilities and Shareholders' Equity
$ 87,055 $ 38,812 $ 89,122 $ 42,076
======== ========= ======== =========
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NET CASH PROVIDED BY (USED IN):
Operating Activities Investing Activities Financing Activities
-------------------- -------------------- --------------------
Canadian U.S. Canadian U.S. Canadian U.S.
GAAP GAAP GAAP GAAP GAAP GAAP
--------- -------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
For the three months ended
March 31, 1998 $(3,746) $(4,342) $ (740) $(2,681) $ 70 $ 119
For the three months ended
March 31, 1997 $(3,526) $(8,979) $(5,647) $ 2,283 $5,440 $5,463
</TABLE>
The statements of cash flows reflect the impact of the previously discussed
adjustments (a) (c) (d) (f). There were no significant non-cash transactions
impacting the statement of cash flows for the quarters ended March 31, 1998 and
1997.
9
<PAGE>
NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS
- -----------------------------------------------
(UNAUDITED)
(All tabular amounts in thousands of United States Dollars)
(7) SUBSEQUENT EVENTS
-----------------
On April 22, 1998, the Company announced that it had acquired all of the
outstanding common shares of PARC not already held by the Company pursuant to a
share exchange under a plan of arrangement among PARC and its shareholders which
became effective on April 21, 1998. Under the plan of arrangement, each
shareholder of PARC, other than the Company, receives one common share of Golden
Star in exchange for each 50 common shares of PARC. The plan of arrangement was
approved by the shareholders of PARC at a special meeting of shareholders held
on April 7, 1998, and approved by a final order of the Supreme Court of the
Yukon Territory on April 31, 1998. As a result of the exchange, the Company
will issue up to 388,590 additional common shares to minority holders of PARC
common shares.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
--------------------------------------------------
CONDITION, RESULTS OF OPERATIONS AND RECENT DEVELOPMENTS
--------------------------------------------------------
The following discussion should be read in conjunction with the accompanying
consolidated financial statements and related notes. The financial statements
have been prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). For U.S. GAAP reconciliation see attached financial
statement Note 6.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE REFORM ACT
The following contains certain forward-looking statements within the meaning of
the Reform Act. Actual results, performance or achievements of the Company could
differ materially from those projected in the forward-looking statements due to
a number of factors, including those set forth under "Risk Factors" in the
Company's Annual Report on Form 10-K. 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.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to the Three Months Ended March 31,
- ------------------------------------------------------------------------------
1997
- ----
During the first quarter of 1998, the Company reported a net loss of $0.6
million or $0.02 per share as compared to a net loss of $1.8 million or $0.07
per share for the first quarter of 1997.
Total revenues during the first quarter of 1998, decreased to $0.3 million as
compared to $0.6 million during first quarter of 1997, due to the shutdown of
alluvial mining operations at SOTRAPMAG in April 1997. Interest and other
revenues increased from $0.2 million in the first quarter of 1997 as compared to
$0.3 million in the first quarter of 1998 due to the increase in the average
cash balance invested during the period. Cost of goods sold were nil for the
first quarter of 1998 as compared to $0.4 million for the first quarter of 1997
as the result of the discontinuation of production at SOGRAPMAG in April 1997,
with no revenue from gold sales in the first quarter of 1998 as compared to $0.6
million during the first quarter of 1997.
General and administrative expenditures totaled $1.5 million during the first
quarter of 1998 as compared to $2.1 million during the first quarter of 1997 due
to the Company's ongoing cost reduction efforts. Depreciation expense for the
quarter decreased $0.3 million as a result of the decrease in the depreciable
asset base due to the write-down of equipment at SOTRAPMAG.
Omai Gold Mines Limited ("OGML"), in which the Company maintains a 30% common
share equity interest, reported net income of $3.9 million for the first quarter
of 1998 compared to a net income of $4.2 million in the first quarter of 1997.
The Omai mine produced 80,620 ounces of gold in the first quarter of 1998, a
decrease of 10.9% (compared to 90,454 ounces of gold in the first quarter of
1997). During the first quarter of 1998, the Company recorded redemptions of
Class "I" preferred shares of OGML of $1.0 million as compared to $1.0 million
in the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company held cash and short term investments of $13.0
million ($11.9 million as of March 31, 1997 and $17.4 million as of December 31,
1997) and working capital of $14.4
11
<PAGE>
million ($12.5 million as of March 31, 1997). The increase in cash resulted from
the Company's public offering in May 1997 of $22.7 million offset primarily by
the exploration and administration expenditures during 1997 and the first
quarter of 1998.
Sources of funding during the first quarter of 1998 included the exercise of
50,460 common stock options of the Company for proceeds of $0.1 million and
joint venture arrangements which provided $1.2 million in cash recoveries of
exploration expenditures.
Accounts receivables and other current assets increased $1.1 million during the
quarter in the aggregate reflecting accounts receivable from OGML preferred
share redemptions of $1.0 million in the first quarter of 1998.
Golden Star continues to closely monitor exploration progress at each of its
prioritized projects to ensure work programs and capital are allocated to those
projects that offer the greatest potential to generate additional reserves and
resources. Comprehensive cost reduction efforts continue at all operating
divisions and at the corporate headquarters to conserve cash resources. Most of
the exploration and development spending for the Company and its subsidiaries
represent discretionary spending and can be adjusted to reflect, among other
things, results of exploration and development activities, the successful
acquisition of additional properties or projects, the price of gold and
Management's assessment of capital markets.
The Company anticipates that its current cash balances, together with proceeds
from the redemption of preferred shares of OGML, proceeds from the exercise of
options and warrants, financing provided by joint venture partners, the sale of
property interests or assets and the sale of common shares and/or debt
securities will be sufficient to fund anticipated operating and exploration
expenditures for 1998. Whether, and to what extent, such alternative financing
options are pursued by the Company or its subsidiaries in 1998 will depend on a
number of factors including, among others, results of exploration and
development activities, the successful acquisition of additional properties or
projects, the price of gold and Management's assessment of the capital markets.
Cash used in investing activities of $0.7 million for the three months ended
March 31, 1998 decreased as compared to $5.6 million for the three months ended
March 31, 1997, primarily due to a decrease in exploration spending of $4.7
million and reduction in fixed asset purchases of $0.2 million as compared to
the first quarter of 1997.
Cash provided by financing activities of $0.1 million for period decreased as
compared to $5.4 million for the corresponding period in 1997 due to the
Company's unit offering and the exercise of the Company's Cdn$11.0 warrants
which occurred in the first quarter of 1997. Share capital increased by $0.1
million for the three months ended March 31, 1998, reflecting the exercise of
50,460 options (noted above), compared with $5.5 million during the three months
ended March 31, 1997, reflecting the exercise of the Company's Cdn$11.0 warrants
in 1997.
Africa (Pan African Resources Corporation)
- ------------------------------------------
Total exploration and acquisition expenditures by PARC in Africa for the first
quarter of 1998 amounted to $0.3 million (compared to $0.9 million in the first
quarter of 1997), and primarily reflect expenditures on exploration activities
in the Ivory Coast and Kenya. General and administrative expenditures for the
first quarter of 1998 totaled $0.2 million (compared to $0.3 million in the
first quarter of 1997).
French Guiana (Guyanor Ressources S.A.)
- ---------------------------------------
Total exploration expenditures by Guyanor for the first quarter amounted to $1.0
million, offset by joint venture recoveries of $0.7 million (compared to
expenditures of $2.0 million and joint venture recoveries of $1.8 million in the
first quarter of 1997). Activities in French Guiana focused primarily on
further work at St-Elie, Paul-Isnard, Yaou and Dorlin. General and
administrative expenditures for Guyanor which were not reimbursed by joint
venture partners amounted to $0.5 million for the quarter ended March 31, 1998
(compared to $0.5 million in the first quarter of 1997).
Guyanor and ASARCO have not yet been able to agree on a work program and budget
for the first six months of 1998. Guyanor was informed by ASARCO in February
1998 of its intention to defer exploration spending at the St-Elie/Dieu-Merci
and Paul-Isnard/Eau-Blanche projects for the first half of 1998. The agreement
between Guyanor and ASARCO contains specific provisions on what would happen in
the event of a deadlock on a work program and budget. Guyanor is currently
discussing with ASARCO how to resolve the current deadlock, including a possible
withdrawal of ASARCO from the projects. These discussions will not create any
impairment to these properties.
12
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Guyana
- ------
Exploration and acquisition expenditures in the first quarter of 1998 in Guyana
amounted to $0.5 million (compared to $0.6 million during the first quarter of
1997). Activities in Guyana focused primarily on the Makapa Hills, and Five
Stars diamond project and Eagle Mountain gold projects.
It has recently come to the Company's attention that the extension of its
mineral rights to the Eagle Mountain project may not have conformed in all
material respects with the terms of the mining act. The Company is investigating
this matter with the assistance of local counsel and has no reason to believe
that any non-conformance can not be cured. However, no assurance can be given in
that respect. As of March 31, 1998, the Company has incurred $1.2 million of
costs on the Eagle Mountain project.
Suriname
- --------
Exploration expenditures in Suriname during the first quarter of 1998 focused
principally on the Saramacca gold project in joint venture with BHP Minerals
International. Total spending in Suriname in the period of $0.5 million was
offset by joint venture recoveries of $0.4 million (as compared to expenditures
of $3.8 million and recoveries of $1.1 million during the first quarter of
1997). The reduction is primarily a result of the placement of the Gross Rosebel
project on care and maintenance pending improved gold prices and resolution of
certain development issues.
Southern Star Resources Ltd.
- ----------------------------
Exploration expenditures for the first quarter of 1998 of $0.7 million as
compared to $2.0 million during the first quarter of 1997 by Southern Star
decreased due to decreased exploration activities. Expenditures related
primarily to the Andorinhas project in Brazil.
13
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
There are currently no pending legal proceedings to which the Company or any of
its subsidiaries is a party or to which any of its properties or those of any of
its subsidiaries is subject. The Company and its subsidiaries are, however,
engaged in routine litigation incidental to their business. No material legal
proceedings involving the company are pending, or, to the knowledge of the
Company, contemplated, by any governmental authority. The Company is not aware
of any material events of noncompliance with environmental laws and regulations.
The exact nature of environmental control problems, if any, which the Company
may encounter in the future cannot be predicted, primarily because of the
changing character of environmental regulations that may be enacted with foreign
jurisdictions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
10 Arrangement Agreement dated February 19, 1998
27 Financial Data Schedule
(b) The Company did not file a Form 8-K during the period covered by this
report.
14
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN STAR RESOURCES LTD.
By: /s/David A. Fennell
---------------------
David A. Fennell
President and Chief Executive Officer
By: /s/ Gordon J. Bell
--------------------
Gordon J. Bell
Vice President and Chief Financial Officer
May 15, 1997
15
<PAGE>
ARRANGEMENT AGREEMENT dated as of February 19, 1998:
BETWEEN:
PAN AFRICAN RESOURCES CORPORATION ("PARC"), a corporation
existing under the laws of the Yukon Territory;
AND:
GOLDEN STAR RESOURCES LTD. ("Golden Star"), a corporation
existing under the laws of Canada;
WHEREAS PARC and Golden Star intend to propose to the shareholders of PARC
an arrangement on the terms and conditions set out herein pursuant to and in
accordance with the provisions of section 195 of the Act (as defined below); and
WHEREAS the Arrangement involves the exchange of each of the issued and
outstanding PARC Common Shares (as defined below), other than those held by
Golden Star or by shareholders who exercise rights of dissent, for Golden Star
Common Shares (as defined below);
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the
premises and the respective covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the following
meanings, respectively:
"ACT" means the Business Corporations Act (Yukon Territory), as amended;
"ARRANGEMENT" means the arrangement under the provisions of section 195 of
the Act involving PARC and the shareholders of PARC, on the terms and
conditions set out in this Agreement and the Plan of Arrangement or any
amendment or variation thereof pursuant to section 5.1 of this Agreement;
"BUSINESS DAY" means a day other than a Saturday or Sunday, on which
Canadian banks are open for retail business in Vancouver, British Columbia;
"CIRCULAR" means the Management Information Circular of PARC to be mailed
to holders of PARC Common Shares in connection with the Special Meeting;
"COURT" means the Supreme Court of the Yukon Territory;
"DEPOSITARY" means CIBC Mellon Trust Company, at its principal office in
Toronto, Ontario;
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"EFFECTIVE DATE" means the date of the filing of a copy of the Final Order
with the Registrar appointed under the Act pursuant to subsection 195(10)
of the Act;
"FINAL ORDER" means the order of the Court approving the Arrangement;
"INTERIM ORDER" has the meaning ascribed thereto in section 3.3;
"GOLDEN STAR" means Golden Star Resources Ltd., a corporation existing
under the Canada Business Corporations Act, as amended;
"GOLDEN STAR COMMON SHARES" means the Common Shares of Golden Star;
"GOLDEN STAR FINANCIAL STATEMENTS" means the Golden Star 1996 Financial
Statements and the Golden Star Interim Financial Statements;
"GOLDEN STAR FORM 10-K" means the Form 10-K of Golden Star for the fiscal
year ended December 31, 1996;
"GOLDEN STAR INTERIM FINANCIAL STATEMENTS" means the unaudited financial
statements of Golden Star as at and for the three-month period ended March
31, 1997, the six-month period ended June 30, 1997 and the nine-month
period ended September 30, 1997, all as reproduced in the first, second and
third quarter interim reports to shareholders of Golden Star;
"GOLDEN STAR 1996 FINANCIAL STATEMENTS" means the financial statements of
Golden Star as at and for the year ended December 31, 1996 and the notes
thereto and the auditors' report thereon, all as reproduced in the Golden
Star Form 10-K;
"OSA" means the Securities Act (Ontario) and the regulations and rules made
thereunder, as they exist on the date hereof and as they may be amended and
in force up to and including the Effective Date;
"PARC" means Pan African Resources Corporation, a corporation existing
under the Act;
"PARC FINANCIAL STATEMENTS" means the PARC 1996 Financial Statements and
the PARC Interim Financial Statements;
"PARC COMMON SHARES" means the Common Shares of PARC;
"PARC AIF" means the annual information form of PARC for the fiscal year
ended December 31, 1996;
"PARC ESOP" means the Stock Option Plan of PARC dated February 6, 1996;
"PARC INTERIM FINANCIAL STATEMENTS" means the unaudited financial
statements of PARC as at and for the three-month period ended March 31,
1997, the six-month period ended June 30, 1997 and the nine-month period
ended September 30, 1997, all as reproduced in the first, second and third
quarter interim reports to shareholders of PARC;
"PARC 1996 FINANCIAL STATEMENTS" means the financial statements of PARC as
at and for the
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year ended December 31, 1996 and the notes thereto and the auditors' report
thereon, all as reproduced as an appendix to the PARC AIF;
"PLAN OF ARRANGEMENT" means the plan of arrangement set out as Exhibit I
hereto and any amendment or variation thereto made in accordance therewith;
"SPECIAL MEETING" means the special meeting of PARC shareholders to be held
to consider and, if thought fit, approve the Arrangement.
1.2 CURRENCY
All sums of money which are referred to in this Agreement are expressed in
United States dollars unless otherwise specified.
1.3 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into articles, sections and other portions
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "herein" and "hereunder" and similar expressions refer to
this Agreement and the exhibit hereto and not to any particular article, section
or other portion hereof and include any agreement or instrument supplementary or
ancillary hereto. For greater certainty, the Plan of Arrangement forms part of
this Agreement.
1.4 NUMBER, ETC.
Unless the context requires the contrary, words importing the singular
number only shall include the plural and vice versa; words importing the use of
any gender shall include all genders; and words importing persons shall include
individuals, firms, partnerships, corporations and other entities.
1.5 ENTIRE AGREEMENT
This Agreement, together with the agreements and other documents herein or
therein referred to, constitute the entire agreement between the parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, between
the parties with respect to the subject matter hereof.
1.6 SCHEDULE
The following schedule is attached to and forms part of this Agreement:
Exhibit I - Plan of Arrangement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
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<PAGE>
2.1 REPRESENTATIONS AND WARRANTIES OF PARC
PARC represents and warrants to and in favour of Golden Star as follows and
acknowledges that Golden Star is relying upon such representations and
warranties in connection with the matters contemplated by this Agreement:
(a) each of PARC and its subsidiaries is duly organized and validly
existing and has the corporate capacity and power to own or lease its
property and assets and to carry on its business as now conducted by
it, and PARC has the corporate capacity and power to enter into this
Agreement and, subject to obtaining the requisite approvals
contemplated hereby, to perform its obligations hereunder and under
the Plan of Arrangement;
(b) as at February 19, 1998, the authorized and issued share capital of
PARC consisted of:
(i) an unlimited number of preferred shares, issuable in series,
none of which was outstanding; and
(ii) an unlimited number of PARC Common Shares, of which 53,805,828
were issued and outstanding, all such issued PARC Common Shares
being fully paid and non-assessable shares in the capital of
PARC and such shares having the attributes described in the PARC
Financial Statements;
(c) no person holds any securities convertible into or exchangeable for
any unissued PARC Common Shares or any other unissued shares of PARC
or has any agreement, warrant or option or any right capable of
becoming an agreement, warrant or option for the purchase of any
unissued shares of PARC, except for holders of options to acquire a
total of 2,338,000 PARC Common Shares granted pursuant to the PARC
ESOP;
(d) the execution and delivery of this Agreement by PARC and the
completion of the transactions contemplated by this Agreement and the
Plan of Arrangement:
(i) do not and will not as of the Effective Date result in the
breach of, or violate any term or provision of, the articles or
by-laws of PARC;
(ii) do not and will not as of the Effective Date conflict with,
result in the breach of, constitute a default under, or
accelerate or permit the acceleration of the performance
required by any agreement, instrument, licence, permit or
authority to which PARC, or any subsidiary of PARC, is a party
or by which it is bound which is material to PARC and its
subsidiaries considered as a whole or result in the creation of
any lien, charge or encumbrance upon any of the material assets
of PARC or any subsidiary of PARC under any such agreement or
instrument, or give to others any material interest or right,
including rights of purchase,
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<PAGE>
termination, cancellation or acceleration, under any such
agreement, instrument, licence, permit or authority, which would
have a material adverse effect on PARC and its subsidiaries
considered as a whole; and
(iii) do not and will not, as of the Effective Date, violate any
provision of law or administrative regulation or any judicial or
administrative award, judgment or decree applicable to, and
known to, PARC or any subsidiary of PARC, the breach of which
would have a material adverse effect on PARC and its
subsidiaries considered as a whole;
(e) the execution and delivery of this Agreement and the completion of the
transactions contemplated herein have been duly authorized by the
Board of Directors of PARC, and this Agreement constitutes a valid and
binding obligation of PARC enforceable against it in accordance with
its terms, subject to obtaining the requisite approvals contemplated
hereby and subject to the customary qualifications relating to
equitable remedies and laws relating to bankruptcy, insolvency and
creditors' rights;
(f) there are no actions, suits, proceedings or investigations commenced
or, to the knowledge of PARC, contemplated or threatened, against or
affecting PARC or any subsidiary of PARC at law or in equity
including, without limitation, actions, suits, proceedings or
investigations with respect to the Arrangement (other than those
proceedings commenced by PARC and relating to the Interim Order and
the Final Order) before or by any governmental department, commission,
board, bureau, court, agency, arbitrator or instrumentality, domestic
or foreign, of any kind nor, to the knowledge of PARC, are there any
existing facts or conditions which may reasonably be expected to be a
proper basis for any actions, suits, proceedings or investigations,
other than in connection with the exercise of rights of dissent as
referred to in section 3.1 of the Plan of Arrangement, which in any
case would prevent or hinder the consummation of the transactions
contemplated by this Agreement or which can reasonably be expected to
have a material adverse effect on PARC and its subsidiaries considered
as a whole;
(g) the information set forth in the PARC AIF in respect of PARC and its
subsidiaries and their respective properties and assets is true,
correct and complete in all material respects as at May 19, 1997 and
as at that date did not contain any untrue statement of any material
fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading in
light of the circumstances in which they were made, and since December
31, 1996, PARC has filed publicly all interim reports, proxy circulars
and material change reports that it is required to file pursuant to
the OSA and all such filings were true and correct in all material
respects as at the date of filing and there has been no "material
change", as defined in the OSA, in the business, operations or capital
of PARC that has not been generally publicly disclosed;
(h) the PARC Financial Statements present fairly, in all material
respects, the consolidated financial position of PARC and the results
of its operations and its cash flows as of the respective dates
thereof and for the periods therein in conformity with accounting
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<PAGE>
principles generally accepted in Canada as in effect on the applicable
dates of such financial statements and applied on a consistent basis,
except as noted therein and except that the PARC Interim Financial
Statements are not accompanied by complete notes and may be subject to
normal adjustments that would be made in the course of an audit and
that would not be material;
(i) each of PARC and its material subsidiaries has conducted and is
conducting its business in compliance in all material respects with
all applicable laws, rules and regulations of each jurisdiction in
which any material portion of its business is carried on and is duly
licensed, registered or qualified in all jurisdictions in which it
owns, leases or operates any material portion of its property or
carries on any material portion of its business to enable its business
and assets to be owned, leased and operated, except to the extent that
the failure to so comply or to be so licensed, registered or qualified
would not have a material adverse effect on PARC and its subsidiaries
taken as a whole, and such licences, registrations or qualifications
which are material are valid and existing and in good standing;
(j) each of PARC and its material subsidiaries has filed all tax returns
required to be filed by it prior to the date hereof in all applicable
jurisdictions and has paid and remitted all taxes, customs duties, tax
instalments, levies, assessments, reassessments, penalties, interest
and fines due and payable or remittable by it other than those that
taken individually or in the aggregate, are not material in amount
with respect to PARC and its subsidiaries considered as a whole. All
such tax returns properly reflect, and do not in any material respect
understate, the income, taxable income or the liability for taxes of
PARC and its material subsidiaries considered as a whole in the
relevant period and the liability of PARC and its material
subsidiaries for the collection and payment of the Goods and Services
Tax under the Excise Tax Act (Canada), and tax levied under any
applicable goods and services, sales or use taxation statute of a
province, any applicable customs duties and federal sales and excise
taxes. Without limiting the generality of the foregoing, PARC and its
material subsidiaries are in compliance with all registration, timely
reporting and remittance obligations in respect of all such taxes.
Neither PARC nor any of its material subsidiaries has incurred any
material undisclosed liability for taxes in excess of the amounts
reserved therefor in such corporation's books and records for the
fiscal period ended December 31, 1996. Neither PARC nor any of its
material subsidiaries will incur any material liability for taxes for
the period commencing January 1, 1997 to the Effective Date which has
not been disclosed to Golden Star. No material undisclosed adverse
tax consequences will arise to PARC or to any material subsidiary as a
result of the acquisition of all outstanding PARC Common Shares and
its material subsidiaries upon the completion of the transactions
contemplated by the Plan of Arrangement;
(k) except for fees which may become payable in connection with the
solicitation of proxies for the Special Meeting, there are no claims
for brokerage commissions, finders fees or similar compensation in
connection with the Arrangement based on any arrangement or agreement
binding upon PARC and PARC shall hold Golden Star harmless against any
liability, loss or expense (including, without limitation, attorney's
fees and out-of-pocket expenses) arising out of or in connection with
any such claim; and
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<PAGE>
(l) the information relating to PARC and its subsidiaries and their
respective businesses, properties and assets to be set forth in the
Circular will comply with all relevant statutes and regulations and
will be true and correct in all material respects as at the date of
the Circular and as at the date of the Circular will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances in
which they were made.
2.2 REPRESENTATIONS AND WARRANTIES OF GOLDEN STAR
Golden Star represents and warrants, to and in favour of PARC as follows
and acknowledges that PARC is relying upon such representations and warranties
in connection with the matters contemplated by this Agreement:
(a) each of Golden Star and its subsidiaries (other than PARC) is duly
organized and validly existing and has the corporate capacity and
power to own or lease its property and assets, including, without
limitation, PARC Common Shares, and to carry on its business as now
conducted by it;
(b) it has the corporate capacity and power to enter into this Agreement
and to perform its obligations hereunder and will have obtained, as of
the Effective Date, all necessary authorizations and consents to
fulfil its obligations hereunder and under the Plan of Arrangement;
(c) as at February 19, 1998, the authorized and issued share capital of
Golden Star consisted of:
(i) an unlimited number of first preferred shares, issuable in
series, none of which were outstanding; and
(ii) an unlimited number of Golden Star Common Shares, of which
29,805,592 were issued and outstanding, all such issued shares
being fully paid and non-assessable shares in the capital of
Golden Star and such shares having the attributes described in
Golden Star Financial Statements;
(d) the execution and delivery of this Agreement by Golden Star and the
completion of the transactions contemplated by this Agreement and the
Plan of Arrangement:
(i) do not and will not as of the Effective Date result in the
breach of, or violate any term or provision of, its articles or
by-laws;
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<PAGE>
(ii do not and will not as of the Effective Date conflict with,
result in the breach of, constitute a default under, or
accelerate or permit the acceleration of the performance
required by any agreement, instrument, licence, permit or
authority to which Golden Star is a party or by which it is
bound which is material to Golden Star or any of its
subsidiaries or result in the creation of any lien, charge or
encumbrance under any such agreement or instrument upon any of
the material assets of Golden Star or any of its subsidiaries
under any such agreement or instrument, or give to others any
material interest or right, including rights of purchase,
termination, cancellation or acceleration under any such
agreement, instrument, licence, permit or authority, which would
have a material adverse effect on Golden Star on a consolidated
basis provided, however, that nothing herein shall be construed
as a representation or warranty of Golden Star regarding PARC
and its subsidiaries; and
(iii) do not and will not as of the Effective Date violate any
provision of law or administrative regulation or any judicial or
administrative award, judgment or decree applicable to, and
known (after due enquiry) to Golden Star, the breach of which
would have a material adverse effect on Golden Star or Golden
Star's interest in PARC;
(e) the execution and delivery of this Agreement and the completion of the
transactions contemplated herein have been duly approved by all
necessary corporate action on Golden Star's part, and this Agreement
constitutes Golden Star's valid and binding obligation, enforceable
against Golden Star in accordance with its terms, subject to the
customary qualifications relating to equitable remedies and laws
relating to bankruptcy, insolvency and creditors' rights;
(f) there are no actions, suits, proceedings or investigations commenced
or, to the knowledge of Golden Star (after due inquiry), contemplated
or threatened, against or affecting Golden Star and its subsidiaries
at law or in equity before or by any governmental department,
commission, board, bureau, court, agency, arbitrator or
instrumentality, domestic or foreign, of any kind nor, to the
knowledge of Golden Star (after due inquiry) are there any existing
facts or conditions which may reasonably be expected to be a proper
basis for any actions, suits, proceedings or investigations which in
any case would prevent or hinder the consummation of the transactions
contemplated by this Agreement and the Plan of Arrangement; provided,
however, that nothing herein shall be construed as a representation or
warranty of Golden Star regarding PARC and its subsidiaries;
(g) the information set forth in the Golden Star Form 10-K in respect of
Golden Star and its subsidiaries and their respective properties and
assets is true, correct and complete in all material respects as at
March 31, 1997 and as at that date did not contain any untrue
statement of any material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances in
which they were made, and since December 31, 1996, Golden Star has
filed publicly all interim reports, proxy circulars and material
change reports that it is required to file pursuant to the OSA and all
such filings were true and correct in all
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<PAGE>
material respects as at the date of filing and there has been no
"material change", as defined in the OSA, in the business, operations
or capital of Golden Star or its subsidiaries taken as a whole, that
has not been generally publicly disclosed; provided, however, that
nothing herein shall be construed as a representation or warranty of
Golden Star regarding PARC and its subsidiaries;
(h) the Golden Star Financial Statements present fairly, in all material
respects, the consolidated financial position of Golden Star and the
results of its operations and its cash flows as of the respective
dates thereof and for the periods therein in conformity with
accounting principles generally accepted in Canada as in effect on the
applicable dates of such financial statements and applied on a
consistent basis, except as noted therein and except that the Golden
Star Interim Financial Statements are not accompanied by complete
notes and may be subject to normal adjustments that would be made in
the course of an audit and that would not be material; provided,
however, that nothing herein shall be construed as a representation or
warranty of Golden Star regarding PARC and its subsidiaries;
(i) each of Golden Star and its material subsidiaries has conducted and is
conducting its business in compliance in all material respects with
all applicable laws, rules and regulations of each jurisdiction in
which any material portion of its business is carried on and is duly
licensed, registered or qualified in all jurisdictions in which it
owns, leases or operates any material portion of its property or
carries on any material portion of its business to enable its business
and assets to be owned, leased and operated, except to the extent that
the failure to so comply or to be so licensed, registered or qualified
would not have a material adverse effect on Golden Star and its
subsidiaries taken as a whole, and such licences, registrations or
qualifications which are material are valid and existing and in good
standing; provided, however, that nothing herein shall be construed as
a representation or warranty of Golden Star regarding PARC and its
subsidiaries;
(j) each of Golden Star and its material subsidiaries has filed all tax
returns required to be filed by it prior to the date hereof in all
applicable jurisdictions and has paid and remitted all taxes, customs
duties, tax instalments, levies, assessments, reassessments,
penalties, interest and fines due and payable or remittable by it
other than those that taken individually or in the aggregate, are not
material in amount with respect to Golden Star and its subsidiaries
considered as a whole. All such tax returns properly reflect, and do
not in any material respect understate, the income, taxable income or
the liability for taxes of Golden Star and its material subsidiaries
considered as a whole in the relevant period and the liability of
Golden Star and its material subsidiaries for the collection and
payment of the Goods and Services Tax under the Excise Tax Act
(Canada), and tax levied under any applicable goods and services,
sales or use taxation statute of a province, any applicable customs
duties and federal sales and excise taxes. Without limiting the
generality of the foregoing, Golden Star and its material subsidiaries
are in compliance with all registration, timely reporting and
remittance obligations in respect of all such taxes. Neither Golden
Star nor any of its material subsidiaries has incurred any material
undisclosed liability for taxes in excess of the amounts reserved
therefor in such corporation's books and records for the fiscal period
ended December 31, 1996. Neither Golden Star nor any of its material
subsidiaries will incur any material liability for taxes for the
period commencing January 1, 1997 to the Effective Date which has not
been disclosed to Golden Star. No
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material undisclosed adverse tax consequences will arise to Golden
Star or to any material subsidiary as a result of the acquisition of
all outstanding Golden Star Common Shares and its material
subsidiaries upon the completion of the transactions contemplated by
the Plan of Arrangement; provided, however, that nothing herein shall
be construed as a representation or warranty of Golden Star regarding
PARC and its subsidiaries;
(k) Golden Star is the registered and beneficial owners of the PARC Common
Shares described in the Circular under the heading "Information
Concerning PARC - Principal Holder of PARC Common Shares"
(collectively, the "Golden Star Shares"), and has and will have, at
all times from the date hereof until and including the Effective Date
valid and marketable title to the Golden Star Shares;
(l) there are no claims for brokerage commissions, finders fees or similar
compensation in connection with the Arrangement based on any
arrangement or agreement binding upon Golden Star and Golden Star
shall hold PARC harmless against any liability, loss or expense
(including, without limitation, attorney's fees and out-of-pocket
expenses) arising out of or in connection with any such claim; and
(m) the information relating to Golden Star and its subsidiaries and
Golden Star's interest in PARC to be set forth in the Circular will be
true, correct and complete in all material respects as at the date of
the Circular, and as at the date of the Circular such information will
not contain any untrue statement of any material fact or omit to state
any material fact required to be stated therein or necessary in order
to make the statements therein not misleading in the light of the
circumstances in which they were made and, except as will be otherwise
disclosed in the Circular, Golden Star will have no knowledge of any
material change or material fact concerning Golden Star or its
securities that will not have been generally disclosed; Golden Star
will indemnify and hold PARC harmless for any damage or loss arising
in connection with any third party claims against PARC pursuant to the
Circular; provided, however, that nothing herein shall be construed as
a representation or warranty of Golden Star regarding PARC and its
subsidiaries.
ARTICLE 3
COVENANTS
3.1 COVENANTS OF PARC
PARC hereby covenants and agrees as follows:
(a) until the Effective Date, each of PARC and its subsidiaries will carry
on its business in the ordinary course and without Golden Star's prior
consent, which consent will not be unreasonably withheld or delayed,
will not enter into any transaction or incur any obligation or
liability out of the ordinary course of its business, except as
otherwise contemplated by this Agreement;
B-10
<PAGE>
(b) until the Effective Date, without Golden Star's prior consent, which
consent will not be unreasonably withheld or delayed, PARC will not,
and will not permit any of its subsidiaries to, merge into or with, or
amalgamate or consolidate with, or enter into any other arrangement or
corporate reorganization with, any other person or perform any act or
enter into any transaction or negotiation which interferes or is
inconsistent with the completion of the transactions contemplated
hereby and, without limiting the generality of the foregoing, PARC
will not, and will not permit any of its subsidiaries to:
(i) make any distribution by way of dividend, return of capital or
otherwise to or for the benefit of its shareholders;
(ii) issue any of its shares or other securities convertible into or
exchangeable for its shares or enter into any commitment or
agreement therefor except pursuant to the PARC ESOP; or
(iii) increase or decrease its paid-up capital;
provided, however, that this subsection 3.1(b) shall not apply to
either the transactions between PARC and its subsidiaries or between
PARC and Golden Star in the ordinary course, nor shall it restrict
PARC from honouring the existing outstanding options of participants
under the PARC ESOP;
(c) PARC shall, in a timely and expeditious manner, file the Circular in
all jurisdictions where the same is required and mail the circular to
its shareholders in accordance with applicable law;
(d) PARC shall do all such other acts and things as may be necessary or
required in order to give effect to the Arrangement and, without
limiting the generality of the foregoing, PARC shall apply for and use
its reasonable best efforts to obtain:
(i) the approvals of holders of the PARC Common Shares required for
the implementation of the Arrangement;
(ii) the Interim Order and the Final Order as provided in section
3.3; and
(iii) such other consents, orders or approvals as counsel may advise
are necessary or desirable for the implementation of the
Arrangement, including those referred to in subsections 4.1(a),
4.1(b) and 4.1(c);
(e) from the date hereof until the Effective Date, PARC shall promptly
notify Golden Star of the occurrence of any material adverse change in
the business of PARC and its
B-11
<PAGE>
subsidiaries taken as a whole; and
(f) from the date hereof until the Effective Date, PARC will not solicit,
initiate or encourage enquiries, submissions, proposals or offers from
any other person relating to, and will not participate in any
negotiations regarding or furnish to any other person any information
with respect to, or otherwise cooperate in any other way with or
assist or participate in, or facilitate or encourage any effort or
attempt with respect to the direct or indirect acquisition or
disposition of all or any of the shares of PARC or the merger,
amalgamation, sale of any substantial part of PARC's assets, or any
take-over bid, reorganization, recapitalization, liquidation or
winding-up of or any other business combination or similar transaction
involving PARC; provided, however, that nothing herein shall be
construed as preventing any party hereto from fulfilling its fiduciary
obligations as a director or officer of PARC, including participating
in discussions or negotiations respecting a proposal which is
reasonably likely to be or become, or from responding to, a bona fide
offer or proposal for which adequate financial arrangements have been
made, which the board of directors of PARC determines in good faith
(after consultation with its financial advisors, and after receiving a
written opinion of outside counsel to the effect that the board of
directors is required to do so in order to discharge properly its
fiduciary duties) would, if consummated in accordance with its terms,
result in a transaction more favourable to the shareholders of PARC
than would the Arrangement.
3.2 COVENANTS OF GOLDEN STAR
Golden Star hereby covenants and agrees as follows:
(a) until the Effective Date, Golden Star will not enter into any
transaction or perform any act which might interfere with or be
inconsistent with the completion of the transactions contemplated
hereby;
(b) Golden Star will perform the obligations required to be performed by
it under the Plan of Arrangement;
(c) Golden Star shall do all such other acts and things as may be
necessary or required in order to give effect to the Arrangement and,
without limiting the generality of the foregoing, Golden shall
cooperate in applying for and obtaining the following:
(i) the Interim Order and the Final Order as provided in section
3.3; and
(ii) such other consents, orders or approvals as counsel may advise
are necessary or desirable for the implementation of the
Arrangement, including those referred to in subsection 4.1(c);
and
B-12
<PAGE>
(d) from the date hereof until the Effective Date, Golden Star shall
promptly notify PARC of the occurrence of any material adverse change
in the business of Golden Star and its subsidiaries (other than PARC)
taken as a whole.
3.3 INTERIM AND FINAL ORDERS
PARC shall as soon as practicable apply to the Court, pursuant to section
195 of the Act, for an interim order providing for, among other things, the
calling and holding of the Special Meeting on or about April 7, 1998 for the
purpose of considering and, if deemed advisable, approving the Arrangement (an
"Interim Order"). PARC covenants and agrees that if it obtains an Interim Order
and the approval of the Arrangement as set forth in the Interim Order is
obtained at the Special Meeting, thereafter it will take the necessary steps to
submit the Arrangement to the Court and apply for the Final Order in such
fashion as the Court may direct and, as soon as practicable thereafter, and
subject to compliance with any other conditions provided for in Article 4, it
will file, pursuant to section 195 of the Act, a copy of the Final Order to give
effect to the Arrangement. The foregoing covenants of PARC are subject to the
provisions of Article 5.
ARTICLE 4
CONDITIONS
4.1 MUTUAL CONDITIONS PRECEDENT
The respective obligations of each of the parties hereto to complete the
transactions contemplated by this Agreement and of PARC to file a copy of the
Final Order to give effect to the Arrangement shall be subject to the
satisfaction, on or before the Effective Date, of the following conditions:
(a) the Arrangement, with or without amendment, shall have been approved
at the Special Meeting in accordance with the Interim Order and the
Arrangement shall have otherwise been approved by the requisite
majorities of shareholders entitled or required to vote thereon as
determined by the Court;
(b) the Interim Order and Final Order shall have been obtained in form and
substance satisfactory to each party hereto, acting reasonably;
(c) all other consents, orders and approvals, including regulatory and
judicial approvals and orders, required or necessary or desirable for
the completion of the transactions provided for in this Agreement and
the Plan of Arrangement shall have been obtained or received from the
persons, authorities or bodies having jurisdiction in the
circumstances, including, without limitation, pursuant to the OSA;
(d there shall not be in force any order or decree restraining or
enjoining the consummation of the transactions contemplated by this
Agreement and the Arrangement;
B-13
<PAGE>
(e) none of the consents, orders or approvals contemplated herein shall
contain terms or conditions or require undertakings or security deemed
unsatisfactory or unacceptable by any of the parties hereto, each
acting reasonably;
(f) no material adverse change in the business of PARC and its
subsidiaries, taken as a whole, shall have occurred after the date of
this Agreement and prior to the Effective Date;
(g) no material adverse change in the business of Golden Star and its
subsidiaries, taken as a whole, shall have occurred after the date of
this Agreement and prior to the Effective Date;
(h) any amendment to the Arrangement shall have been agreed to by each of
the parties hereto, each acting reasonably; and
(i) this Agreement shall not have been terminated under Article 5.
The condition set forth in subsection 4.1(f) may be waived in whole or in
part by any party hereto without prejudice to such party's right to rely on any
other condition.
4.2 CONDITIONS TO OBLIGATIONS OF EACH PARTY
The obligation of each party to complete the transactions contemplated by
this Agreement is further subject to the condition, which may be waived by such
party without prejudice to its right to rely on any other condition in favour of
such party, that the covenants of each other party hereto to be performed on or
before the Effective Date pursuant to the terms of this Agreement shall have
been duly performed by each of them and that, except as affected by the
transactions contemplated by this Agreement, the representations and warranties
of each other party hereto shall be true and correct in all material respects as
at the Effective Date, with the same effect as if such representations and
warranties had been made at, and as of, such time, and each party shall have
delivered to the other parties hereto a certificate, dated the Effective Date,
of a senior officer of PARC and Golden Star confirming the same.
4.3 MERGER OF CONDITIONS
The conditions set out in sections 4.1 and 4.2 shall be conclusively deemed
to have been satisfied, waived or released on the filing by PARC of a copy of
the Final Order under the Act. The representations and warranties set out in
sections 2.1 and 2.2 and in any certificate provided pursuant to section 4.2
shall survive the execution of this Agreement for the period ending on the
Effective Date and shall expire and be terminated and extinguished on the
Effective Date; provided, however, that the indemnities in subsections 2.1(k)
and 2.2(l) shall survive the Effective Date for a period of 12 months.
ARTICLE 5
AMENDMENT AND TERMINATION
B-14
<PAGE>
5.1 AMENDMENT
This Agreement may, at any time and from time to time before and after the
holding of the Special Meeting but not later than the Effective Date, be amended
by written agreement of the parties hereto without, subject to applicable law,
further notice to or authorization on the part of the holders of PARC Common
Shares, without limiting the generality of the foregoing, any such amendment
may:
(a) change the time for performance of any of the obligations or acts of
the parties hereto;
(b) waive any inaccuracies or modify any representation contained herein
or any document to be delivered pursuant hereto; or
(c) waive compliance with or modify any of the covenants herein contained
or waive or modify performance of any of the obligations of the
parties hereto;
provided that, notwithstanding the foregoing, the terms of section 2.1 of the
Plan of Arrangement and subsection 4.1(a) shall not be amended after the holding
of the Special Meeting without the approval of the holders of PARC Common Shares
given in the same manner as required for the approval of the Arrangement or as
may be ordered by the Court. This Agreement and the Exhibit hereto may be
amended in accordance with the Final Order, but in the event that the terms of
the Final Order require any such amendment, the rights of the parties hereto
under sections 4.1, 4.2 and 5.2 shall remain unaffected.
5.2 TERMINATION
This Agreement may, at any time before or after the holding of the Special
Meeting but no later than the Effective Date, be terminated:
(a) by agreement of PARC and Golden Star (without further action on the
part of their respective securityholders);
(b) by Golden Star in the event that holders of more than 2,000,000 PARC
Common Shares who do not vote in favour of the resolution approving
the Arrangement at the Special Meeting file written objections to such
resolution in accordance with the Interim Order and section 193(5) of
the Act; or
(c) by any of PARC or Golden Star if the Effective Date has not occurred
on or before June 30, 1998.
ARTICLE 6
GENERAL
B-15
<PAGE>
6.1 EXPENSES OF THE ARRANGEMENT
Golden Star shall be responsible for all of the reasonable costs and
expenses of each of the parties hereto relating to the Arrangement, whether or
not this Agreement is terminated or the Arrangement becomes effective,
including, without limitation, financial advisory, accounting and legal fees and
reasonable out-of-pocket expenses and all costs incurred in the preparation and
printing of this Agreement and the Circular; provided, however, that if the
Arrangement does not become effective as a result of a breach by PARC of any of
its obligations under this Agreement, then PARC shall be responsible for all
such costs and expenses and shall forthwith upon submission by Golden Star of
documentation evidencing same, reimburse Golden Star for all reasonable expenses
(including, without limitation, fees and disbursements of legal counsel,
accountants and travel expenses) in connection with the Arrangement.
6.2 NOTICES
All notices which may or are required to be given pursuant to any provision
of this Agreement shall be given or made in writing and delivered in person or
by telecopy and shall be addressed to:
in the case of PARC:
Pan African Resources Corporation
c/o Preston, Willis & Lackowicz
Barristers and Solicitors
2093 Second Avenue
Whitehorse, Yukon Territory
Y1A 1B5
Attention: President and Chief Executive
-----------------------------------------
Telecopier No.: (867) 688-5251
with a copy to:
Preston, Willis & Lackowicz
Barristers and Solicitors
2093 Second Avenue
Whitehorse, Yukon Territory
Y1A 1B5
Attention: Mr. Paul Lackowicz
-----------------------------
Telecopier No.: (867) 668-5251
with a copy to:
Bennett Jones Verchere
Barristers and Solicitors
B-16
<PAGE>
1 First Canadian Place
Suite 3400
Toronto, Ontario
M5X 1A4
Attention: Mr. Michael N. Melanson
-----------------------------------
Telecopier No.: (416) 863-1716
in the case of Golden Star:
Golden Star Resources Ltd.
1660 Lincoln Street
Suite 3000
Denver, Colorado
80264
U.S.A.
Attention: Secretary
---------------------
Telecopier No.: (303) 830-9092
with a copy to:
McCarthy TJtrault
Barristers and Solicitors
1170 Peel Street
Montreal, Quebec
H3B 4S8
Attention: Mr. Daniel BJnay
----------------------------
Telecopier No.: (514) 397-4235
or such other address or telecopier number of which a party may, from time to
time, advise the other parties hereto by notice in writing given in accordance
with the foregoing. Any such notice or other communication shall be deemed to
have been given and received on the day on which it is was delivered or
transmitted (or, if such day is not a Business Day, on the next following
Business Day).
6.3 ASSIGNMENT
No party may assign its rights or obligations under this Agreement or the
Arrangement without the prior written consent the other party hereto.
6.4 BINDING EFFECT
This Agreement shall be binding upon and shall enure to the benefit of the
parties hereto and their respective successors and permitted assigns.
B-17
<PAGE>
6.5 WAIVER
Any waiver or release of any of the provisions of this Agreement, to be
effective, must be in writing executed by the party granting the same. Waivers
may only be granted upon compliance with the terms governing amendments set
forth in section 5.1, with such modifications as the circumstances require.
6.6 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the Yukon Territory and the laws of Canada applicable therein and shall
be treated in all respects as a Yukon contract.
6.7 COUNTERPARTS
This Agreement may be executed in one or more counterparts each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first hereinbefore written.
PAN AFRICAN RESOURCES CORPORATION
By: /s/ Winston M. King
-------------------------------------
Winston M. King
Title: Director
-------------------------------------
By: /s/ Vijay Kirpalani
-------------------------------------
Vijay Kirpalani
Title: Director
-------------------------------------
By: /s/ Sir Shridath Ramphal
-------------------------------------
Sir Shridath Ramphal
Title: Director
-------------------------------------
GOLDEN STAR RESOURCES LTD.
By: /s/ David A. Fennell
-------------------------------------
David A. Fennell
Title: President and Chief Executive Officer
-------------------------------------
B-18
<PAGE>
By: /s/ Gordon J. Bell
-------------------------------------
Gordon J. Bell
Title: Vice President and Chief Financial
Officer
-------------------------------------
B-19
<PAGE>
EXHIBIT I
TO THE ARRANGEMENT AGREEMENT
BETWEEN
PAN AFRICAN RESOURCES CORPORATION
AND
GOLDEN STAR RESOURCES LTD.
PLAN OF ARRANGEMENT UNDER SECTION 195
OF THE BUSINESS CORPORATIONS ACT (YUKON TERRITORY)
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Plan of Arrangement unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
following meanings, respectively:
"ACT" means the Business Corporations Act (Yukon Territory), as amended;
"ARRANGEMENT" means the arrangement under the provisions of section 195 of
the Act relating to PARC which is provided for in this Plan of
Arrangement;
"ARRANGEMENT AGREEMENT" means the agreement made as of February 19, 1998,
between PARC and Golden Star to which this Plan of Arrangement is attached
as Exhibit I;
"CIRCULAR" means the Management Information Circular of PARC to be mailed
to holders of PARC Common Shares in connection with the Special Meeting;
"COURT" means the Supreme Court of the Yukon Territory;
"DEPOSITARY" means CIBC Mellon Trust Company, at its principal office in
Toronto, Ontario;
"EFFECTIVE DATE" means the date of the filing of a copy of the Final Order
with the Registrar appointed under the Act pursuant to subsection 195(10)
of the Act;
"FINAL ORDER" means the order of the Court approving the Arrangement;
"GOLDEN STAR" means Golden Star Resources Ltd., a corporation existing
under the Canada Business Corporations Act, as amended;
"GOLDEN STAR COMMON SHARES" means the Common Shares of Golden Star;
"INTERIM ORDER" means the order of the Court providing, among other things,
for the calling and holding of the Special Meeting;
"LETTER OF TRANSMITTAL" means the letter of transmittal which accompanies
the Circular;
B-20
<PAGE>
"OSA" means the Securities Act (Ontario) and the regulations and the rules
made thereunder, as they exist on the date hereof and as they may be
amended and proclaimed in force up to the Effective Date;
"PARC" means Pan African Resources Corporation , a corporation existing
under the Act;
"PARC COMMON SHARES" means the Common Shares of PARC;
"PARC ESOP" means the Stock Option Plan of PARC dated February 6, 1996;
"PARC SHAREHOLDERS" means the holders of PARC Common Shares;
"PLAN OF ARRANGEMENT" means this plan of arrangement and any amendment or
variation thereto made in accordance herewith;
"SPECIAL MEETING" means the special meeting of PARC Shareholders to be held
to consider and, if thought fit, approve the Arrangement;
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Plan of Arrangement into articles, sections and
other portions and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this Plan of
Arrangement. The terms "this Plan of Arrangement", "hereof", "herein" and
"hereunder" and similar expressions refer to this Plan of Arrangement and not to
any particular article, section or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto.
1.3 NUMBER, GENDER, CURRENCY
Unless the context requires the contrary, words importing the singular
number only shall include the plural and vice versa; words importing the use of
any gender shall include all genders; and words importing persons shall include
firms and corporations. All references to "C$" are to Canadian dollars.
ARTICLE 2
THE ARRANGEMENT
2.1 EXCHANGE OF PARC COMMON SHARES AND OTHER STEPS
At 12:01 a.m. on the Effective Date, the following shall occur and
shall be deemed to have occurred in the following order without any further act
or formality:
(a) each person holding PARC Common Shares, other than Golden Star and
holders of PARC Common Shares exercising rights of dissent pursuant to
section 3.1 of this Plan of Arrangement, shall be deemed to have
exchanged each issued and outstanding PARC Common Share held by such
person for, and Golden Star shall issue to each such person, 0.02
Golden Star Common Shares in exchange for each PARC Common Shares
held;
B-21
<PAGE>
(b) holders of PARC Common Shares exercising rights of dissent pursuant to
section 3.1 of the Plan of Arrangement shall be deemed to have
transferred their PARC Common Shares to PARC for cancellation or to
have exchanged their PARC Common Shares for Golden Star Common Shares
in accordance with the provisions of section 3.1; and
(c) upon the exchange referred to in subsection 2.1(a), each holder of
PARC Common Shares, who is deemed to have exchanged PARC Common Shares
pursuant to subsection 2.1(a), shall cease to be such a holder of PARC
Common Shares, shall have its name removed from the registers of PARC
Common Shares, and shall become a holder of the number of fully paid
and non-assessable Golden Star Common Shares to which such person is
entitled as a result of the exchange referred to in subsection 2.1(a)
and such holder's name shall be added to Golden Star's securities
register accordingly.
2.2 WITHHOLDING
Any and all property or amounts required to be delivered, deposited or
paid under this Plan of Arrangement (including, for greater certainty, the
delivery of Golden Star Common Shares in exchange for PARC Common Shares) shall
be delivered, deposited or paid after deduction of any amount required by
applicable laws to be deducted or withheld on account of tax, and the deduction
of such amount and remittance to the applicable tax authorities shall, to the
extent thereof, satisfy such requirement to deliver, deposit or pay hereunder.
ARTICLE 3
RIGHTS OF DISSENT
3.1 RIGHTS OF DISSENT
Holders of PARC Common Shares may exercise rights of dissent pursuant
to and in the manner set forth in section 193 of the Act, the Interim Order and
this section 3.1 in connection with the Arrangement and holders who duly
exercise such rights of dissent and who:
(a) are ultimately entitled to receive payment for their PARC Common
Shares under section 193 of the Act shall be deemed to have
transferred their PARC Common Shares to PARC for cancellation on the
Effective Date and shall receive the payment for each PARC Common
Shares held by such holder; or
(b) are ultimately not entitled to receive payment, for any reason, for
their PARC Common Shares under section 193 of the Act shall be deemed
to have exchanged their PARC Common Shares for Golden Star Common
Shares on the Effective Date and shall receive 0.02 Golden Star Common
Shares for each PARC Common Share held by such holder.
B-22
<PAGE>
In no case shall PARC be required to recognize such holders as holders
of PARC Common Shares on or after the Effective Date, and the names of such
holders shall be deleted from the registers of holders of PARC Common Shares, on
the Effective Date.
ARTICLE 4
CERTIFICATES AND GOLDEN STAR COMMON SHARES
4.1 ENTITLEMENT TO AND DELIVERY OF CERTIFICATES AND GOLDEN STAR COMMON
SHARES ETC.
(a) On and after the Effective Date, certificates formerly representing
PARC Common Shares shall represent only the right to receive the
Golden Star Common Shares for such PARC Common Shares, upon the holder
depositing with the Depositary the certificates for such PARC Common
Shares duly endorsed for transfer and accompanied by such other
documents and instruments as would have been required to effect the
transfer of the securities formerly represented by such certificates
under the Act and the by-laws of PARC and as the Depositary may
reasonably require; provided, however, that certificates formerly
representing PARC Common Shares held by holders of PARC Common Shares
who duly exercise rights of dissent pursuant to section 3.1 and who
are ultimately entitled to receive payment for their PARC Common
Shares, shall represent only the right to receive payment for such
PARC Common Shares;
(b) On the Effective Date, Golden Star shall cause to be issued to the
Depositary for the benefit of holders of PARC Common Shares in respect
of, a share certificate or certificates representing the aggregate
number of Golden Star Common Shares to which such holders are entitled
in accordance with the terms of this Plan of Arrangement.
4.2 NO FRACTIONAL GOLDEN STAR COMMON SHARES
No certificates or scrip representing fractional Golden Star Common
Shares will be issued or delivered on the Arrangement. In lieu of any such
fractional Golden Star Common Share, each fractional interest in a Golden Star
Common Share will entitle the holder thereof to receive from Golden Star an
amount in cash (rounded to the nearest whole cent), without interest, on a basis
equivalent to the closing price of the Golden Star Common Shares on The Toronto
Stock Exchange at the Effective Date, and for purposes of determining the amount
of such payment, the PARC Common Shares owned by such holder will be aggregated.
B-23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND CONSOLIDATED STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,983
<SECURITIES> 0
<RECEIVABLES> 3,059
<ALLOWANCES> 0
<INVENTORY> 356
<CURRENT-ASSETS> 16,843
<PP&E> 3,246
<DEPRECIATION> (2,083)
<TOTAL-ASSETS> 87,055
<CURRENT-LIABILITIES> 2,421
<BONDS> 0
0
0
<COMMON> 158,121
<OTHER-SE> (4,012)
<TOTAL-LIABILITY-AND-EQUITY> 87,055
<SALES> 0
<TOTAL-REVENUES> 261
<CGS> 0
<TOTAL-COSTS> 1,653
<OTHER-EXPENSES> (554)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> (622)
<INCOME-TAX> 0
<INCOME-CONTINUING> (622)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 622
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
