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GSS News Golden Star Reports Financial Results for the Fourth Quarter and 2006 Year

DENVER--(BUSINESS WIRE)--Golden Star Resources Ltd. (AMEX:GSS)(TSX:GSC) today announced its audited results for the full year and fourth quarter 2006. (All currency is expressed in U.S. dollars, unless otherwise noted).

2006 RESULTS

• Net income of $64.7 million, or $0.31 per share
• Increase in revenues of 35% to $128.7 million
• Record gold sales of 201,406 ounces from the Bogoso/Prestea and Wassa mines in Ghana
• Average realized gold price of $607 per ounce
• Average cash operating cost⁽¹⁾ of $442 per ounce
• Sales of certain non-core assets for a total pre-tax capital gain of $81.1 million
• Cash flow from operations of $27.7 million before committing approximately $22.3 million to increases in ore stockpiles

FOURTH QUARTER RESULTS

• Net income of $30.7 million, or $0.15 per share
• Revenues of $33.2 million
• Gold sales of 53,406 ounces at a cash operating cost⁽¹⁾ of $393 per ounce

2007 OUTLOOK

• Expected 2007 production of 390,000 ounces at average cash operating costs⁽¹⁾ of $389 per ounce
• Hwini-Butre and Benso feasibility study release and decision to mine expected in May
• Prestea underground, West Reef, feasibility study expected by end-2007

(1) See note on non-GAAP financial measures at the end of this press release.

OVERVIEW

We had net income of $64.7 million or $0.31 per share on revenues of $128.7 million for 2006 versus a net loss of $(13.5) million or $(0.09) per share on revenues of $95.5 million for 2005. Mine operations contributed $7.6 million to 2006 pre-tax income versus a deficit of $(6.7) million in 2005. The major factor contributing to the $78.2 million improvement in earnings was the sale of certain of our non-core assets including all of our shareholdings in Moto Goldmines Limited (“Moto”) and the majority of our shareholdings in EURO Ressources S.A. (“EURO”).

Improved gold prices were the major driver for the improved operating margins in 2006. Consolidated gold revenue increased by $32.9 million despite gold sales in 2006 being only marginally increased relative to gold sales in 2005. Gold prices averaged $607 per ounce in 2006 compared to $446 per ounce in 2005.

Looking forward, we forecast total gold sales in 2007 of 390,000 ounces at an average cash operating cost of $389 an ounce, benefiting from a partial year contribution from the Bogoso Sulfide Expansion Project.

BOGOSO/PRESTEA

Bogoso/Prestea generated an $8.4 million operating margin for 2006 on sales of 103,792 ounces of gold, up from a $2.5 million operating margin on gold sales of 131,898 ounces in 2005. The major factor contributing to 2006’s improved results included a 37% increase in realized gold prices, which was offset by lower production, as a result of lower ore grades from the Plant-North pit and lower processing plant through-put due to harder than anticipated ores from the deeper levels in the Plant-North pit.

Cash operating costs at Bogoso/Prestea decreased from $46.3 million in 2005 to $44.7 million in 2006 primarily due to reduced stripping rates as the Plant-North pit neared the end of its life. While the actual spending was lower in 2006, lower gold production led to an increase in costs per ounce resulting in a cash operating cost of $412 per ounce compared to $338 per ounce in 2005.

Bogoso/Prestea generated a positive operating margin of $4.8 million in the fourth quarter of 2006 versus an operating margin loss of $(3.9) million in the fourth quarter of 2005.

Our financial numbers for 2006 incorporate a review of our ore stockpile inventory valuation at Bogoso/Prestea for the first three quarters. The impact on the first three quarters of 2006 is as follows:

WASSA

Wassa operated for twelve months in 2006 versus nine months in 2005 and therefore operating results are not readily comparable.

Wassa generated a negative operating margin of $(0.8) million for 2006, which was improved relative to the higher negative operating margin of $(9.2) million for the nine months of operation in 2005. Results at Wassa were improved in the remaining three quarters of 2006 with a positive operating margin in each of those quarters.

In the fourth quarter of 2006, Wassa generated an operating margin of $0.5 versus a negative operating margin of $(3.0) million in the fourth quarter of 2005.

Operationally, Wassa is performing well and costs per tonne are at or around target levels. However, the mined grade has under-performed relative to the average reserve grade, which has resulted in lower gold production and higher cash operating costs per ounce. At year-end, Wassa’s Mineral Reserves were re-stated based on a new resource model which better reflects the ore grades encountered during 2005 and 2006.

BOGOSO SULFIDE EXPANSION PROJECT

Construction of the Bogoso Sulfide Expansion Project continued throughout 2006 and we commenced commissioning some portions of the project toward the end of the year. The Project is designed to expand the existing Bogoso processing capacity by adding a sulfide processing plant with a nominal capacity of 3.5 million tonnes per year of refractory sulfide ore. The sulfide processing plant will utilize the BIOX^® bio-oxidation process. Approximately 82% of the Mineral Reserves at Bogoso/Prestea are refractory sulfide ore, which cannot be economically processed in the existing oxide plant.

We are currently in the final stages of construction and commissioning of the sulfide processing plant. Overall, progress is substantially in line with our estimates set forth in our press releases of January and February of this year. Of note:

• Crushing and grinding of sulfide ore commenced on February 22;
• BIOX^® Module 1 started flowing to the washing circuit on February 28;
• Washed, bacterially oxidized ore started flowing from the washing circuit to the Carbon in Leach (CIL) circuit on March 4;
• The first gold from the new plant is expected to be poured on or around March 20;
• BIOX^® Module 2 is expected to be filled in late March; and
• The new reagents and elution circuit are expected to be commissioned in March and until then we will continue to utilize the existing reagents and elution circuit.

As of December 31, 2006, we had spent approximately $151.7 million on the Project compared with an original estimate of $150 million and we anticipate further expenditures of approximately $15 million before commercial production commences. The higher costs are largely related to the approximate three month delay in finalizing the Project which has led to higher pre-stripping costs being incurred, and to some extension of time costs. Costs to December 31, 2006 included $118.8 million for plant construction, $10.5 million for mining equipment, and $22.4 million for pre-stripping and stockpile and other inventories. The costs exclude capitalized interest of $6.2 million and approximately $7.2 million of costs incurred prior to the completion of the feasibility study and decision to proceed with the development.

GHANA POWER

Power supply in Ghana continues to be a significant risk, and therefore, in addition to our $10 million investment in the joint power project with Newmont Mining Corporation, Gold Fields Limited and AngloGold Ashanti Limited, which is expected to be operational by mid-year, we are considering options to increase our mine-based back-up power.

The joint power project is expected to satisfy about 50% of our power requirements, while our existing back-up diesel generating equipment are capable of satisfying about 30% of our requirements. This leaves 20% or approximately 10 megawatts that we will need to draw from the national grid unless, and until, we increase back-up power.

DEVELOPMENT PROJECTS

During 2006, we progressed the feasibility study for Hwini-Butre and Benso deposits, south of our Wassa mine, and expect to complete this study in the next month and to present it to our Board of Directors for a mining decision in May 2007. Subject to this approval and any permitting requirements, we expect to be mining and hauling high grade ore from Hwini-Butre and Benso to Wassa for processing, by mid-2008. The high grade ore is expected to displace low grade ore that would otherwise have been fed to the Wassa processing plant. The net impact would be a significant increase in gold production from Wassa and an improvement in mine life and cash operating costs per ounce.

At Bogoso/Prestea we progressed the assessment of the Pampe and Prestea South projects as satellite sources of feed for the Bogoso oxide processing plant. Mining at Pampe is expected to commence in the first quarter of 2007 and mining at Prestea South is expected to commence in the second half of 2007. The action by the Ghana Government to remove illegal miners from our mining concessions in Ghana in November was a pivotal step in the assessment and development of Prestea South.

Exploration of the Prestea Underground in 2006 focused on the West Reef, and as a result sufficient drilling was done to provide sufficient confidence in the mineral resource for a feasibility study to be commenced. We expect that the feasibility study would be completed by end-2007.

EXPLORATION PROJECTS

Exploration expenditures for 2006 totaled $15.3 million, compared to $17.1 million in 2005.

Exploration around our mines focused on converting mineral resources to mineral reserves, and defining further mineral resources, with special concentration on upgrading mineral reserves at our Hwini-Butre and Benso properties. Exploration activities included:

• Drilling of the Father Brown, Adiokrom, Subriso East, Subriso West, and the Benso G & I Zones at the Benso property. Studies to determine the best development options for these deposits are currently in progress;
• Drilling beneath the Plant-North pit and Prestea South
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