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Golden Star Resources Q3 Gold Sales Decreases

Golden Star Resources Ltd. (TSX:GSC)(NYSE Amex:GSS)(GSE:GSR) has reported its third quarter financial and operational results for 2010.

SUMMARY

  • Operating cash flow of $35.4 million or $0.137 per share for the third quarter of 2010; year-to-date operating cash flow of $94.9 million or $0.368 per share;
  • Third quarter gold sales were 84,638 ounces and year-to-date gold sales were 277,988 ounces for 2010 while gold sales were 107,433 ounces for the third quarter and nine month production of 303,416 ounces for 2009;
  • Realized gold price of $1,225 per ounce for the third quarter of 2010 versus a realized gold price of $967 for the third quarter of 2009;
  • Quarter-end cash balance of $184.0 million compared to $154.1 million at December 31, 2009;
  • Net loss of $1.8 million or $0.007 per share for the third quarter of 2010 compared to net loss of $2.3 million or $0.010 per share for the third quarter of 2009;
  • Year-to-date net earnings of $9.7 million or $0.038 per share versus a net loss of $3.1 million or $0.013 per share loss for the first nine months of 2009;
  • Cash operating costs of $825 per ounce for the quarter and $686 per ounce year-to-date compared to $586 per ounce for the third quarter and $572 per ounce for the first nine months of 2009.

Tom Mair, President and CEO, stated, "Our operating cash flow remained strong in the third quarter as gold prices reached new record highs. Our production performance was impacted by lower recoveries at Bogoso/Prestea, lower grades milled and record high rainfall in our operating areas which affected ore deliveries. Our strong financial position allowed us to make substantial investments in our future. We drilled a further 30,000 meters around our properties in the quarter. We made progress on restarting the Bogoso oxide mill by advancing the tailings reprocessing project, preparing to restart mining at Pampe pit and progressing the Prestea Underground scoping study."

During the third quarter of 2010, revenues from Bogoso totaled $54.0 million, up $2.8 million from third quarter 2009 revenues of $51.2 million, a 5% improvement. The total ore processed at Bogoso was 749,536 tonnes during the third quarter of 2010, down 6% from the third quarter of 2009 while the grade of ore processed was essentially unchanged at 2.94 g/t. Recovery rates for the refractory ore that was processed decreased from 69.4% to 61.3% quarter-over-quarter. The driving factor contributing to the lower recovery rate is the change of ore feed from fresh ore in the third quarter of 2009 to transitional ore feed in the third quarter of 2010. This situation is anticipated to improve going forward as we mine deeper into the Chujah pit where fresh ore will be encountered resulting in higher flotation recovery rates. The lower metallurgical recovery and significantly higher than average rainfall contributed to the higher cash operating costs for the quarter.

For the year-to-date, Bogoso sold 142,952 ounces of gold, up 3% over the first nine months of 2009. Cash operating costs were $734 per ounce during the first nine months of 2010, up marginally (3%) over the same period in 2009, attributed to increased costs of reagents, labor, fuel and electricity.

Gold sales at Wassa were 40,359 ounces for the third quarter of 2010, versus 54,364 ounces for the third quarter of 2009. This reduction in gold sales is ascribed to the lower grades of ore at Hwini-Butre and Benso. In addition, heavy rainfall during the quarter impeded delivery of HBB ore to the plant causing us to make up the shortfall with lower grade Wassa ore. The lower grade production was the main driver of commensurately higher per ounce cash operating costs.

Gold sales in the first nine months of 2010 were 135,036 ounces of gold which was below the gold sales for the same period of 2009. This was due to scheduled and unscheduled plant maintenance, lower grade ore processed and unusually heavy seasonal rains leading to lower plant throughput.

CASH, CASH FLOW AND LIQUIDITY

Our cash and cash equivalents totaled $184.0 million at September 30, 2010. Cash flow from operations totaled $94.9 million for the first nine months was 42% higher than the $66.7 million in cash flow generated in the first nine months of 2009.

We expect to use approximately $85 million for capital projects in 2010. This total includes $19 million in mine property development and $43 million in new equipment and facilities upgrades. We also increased our 2010 exploration budget to $23 million, of which $5 million is related to exploration at the Buesichem South discovery.

We expect that operational cash flow, our cash and cash equivalents on hand, and our existing credit lines will be sufficient to fund our capital and operational needs over the next 12 months.

DEVELOPMENT PROJECTS

Bogoso Tailings Reprocessing Project

Earlier this year we completed a scoping study to assess the viability of reprocessing the 2.4 million tonnes of mineralized material in one of the Bogoso oxide tailings storage facilities. The Board of Directors has approved the $8 million capital cost of the project which is expected to produce 40,000 to 50,000 ounces of gold per year from the Bogoso oxide mill. Cash operating costs will be relatively low as the tailings do not require mining, crushing or grinding. This project is expected to come on-line in 2011, subject to permitting.

Pampe

We completed drilling at Pampe pit and are preparing to commence a layback of the pit wall in the fourth quarter of this year.

EXPLORATION

Tom Mair, President and CEO, stated, "This year, one of our goals is increasing our resource and mine lives at each mine through drilling and we are encouraged and excited by the results thus far. Six rigs are currently busy drilling at many targets in and around our current operations with the emphasis on expanding and firming up our mineral resources."

Bogoso/Prestea

Buesichem South (6 kilometers from Bogoso Plant)

Two multi-purpose drill rigs continue infill drilling at the Buesichem South deposit. The initial resource, constrained within a $1,100 per ounce gold price optimized pit shell, was estimated at 1.6 million tonnes grading 2.64 grams per tonne (g/t) gold of Measured and Indicated Mineral Resource and 5.3 million tonnes grading 2.92 g/t of Inferred Mineral Resource as reported in our press release of July 22, 2010.

Drilling at Buesichem South has delineated a continuous mineralized body with a strike length of 500 meters. The gold bearing zone is lenticular in shape with widths increasing from a few meters at surface up to 20 to 25 meters at approximately 75 meters depth. To date, 160 holes have been completed totaling 34,350 meters. Drill fences are spaced every 25 meters and holes on these fences spaced between 25 to 60 meters. Highlights include hole BUVTDD098 which reported 24 meters grading 4.3 g/t, hole BUVTDD108 which reported 17.4 meters grading 4.9 g/t and hole BUVTTDD037 which yielded 25.3 meters grading 3.3 g/t. The mineralization is open at depth. For the remainder of this year we will continue to test the extent of the orebody with 11,000 meters of additional planned drilling.

Buesichem East (6 kilometers from Bogoso Plant)

At Buesichem East, drilling continues with one drill testing an eastern splay of the Ashanti Trend. This drilling program has successfully delineated a non-refractory ore target that is approximately 500 meters in strike length. Significant intersections include drill hole BUERB086 that resulted in an intersection from 5 meters depth of 19 meters grading 1.86 g/t gold and terminated in gold mineralization, and BUERB055 from 10 meters depth that gave a true width of 12 meters grading 0.85 g/t. Thus far, 43 drill holes have been completed totaling 1,200 meters of drilling.

Bogoso North (5 kilometers from Bogoso Plant)

Drilling was conducted at the northern portion of the Bogoso mining lease to test the VTEM geophysical ground conductors which are often associated with gold mineralization. The majority of the drill holes were successful in intersecting the conductive fault zone. This year, a total of 15 diamond drill holes were drilled for 3,800 meters. One significant hole, BNVTDD007 reported a true width of 5.3 meters grading 11.41 g/t gold. Two parallel zones of high grade mineralization situated beneath the Bogoso North oxide pit were identified with a strike length of approximately 1,200 meters. Golden Star is in the process of finalizing drill contracts and expects to initiate the delineation drill program for this target in the near-term with the drilling continuing into 2011.

Wassa/HBB

Wassa

To date in 2010, 92 drill holes totaling 11,080 meters have been completed at Wassa. The drilling has been successful in confirming the limits of high-grade ore shoots that characterize the Wassa deposits. Assay results from these programs are currently being used to produce an updated geological interpretation and gold grade block model. We also drill tested an induced polarity (IP) geophysical target connecting two previously known mineralized occurrences. Gold mineralization associated with pyrite and silicification was intersected and the most significant holes included hole 242DD022 yielding 9.9 meters grading 10.94 g/t, hole SEDD017 yielding 35.8 meters grading 2.43 g/t, and hole BSRC048 which yielded 8.3 meters grading 9.92 g/t. Drilling is continuing at this zone testing along strike.

Benso (50 kilometers from Wassa Plant)

To date, 112 holes totaling 11,600 meters have been completed at Benso. Drilling at the Subriso West deeps target resumed during the third quarter of 2010. Two drill rigs are currently running step-out and infill drilling on this high-grade target. Infill drilling will test the continuity of the higher grades between the existing drill intercepts where hole spacing currently exceeds 50 meters. The step-out program will test the down plunge extent of the shoot with 50 meter increments along strike.

Gold mineralization at Subriso West is associated with a northwest plunging, high-grade ore shoot located within a steeply dipping west-southwest dipping shear zone. This ore shoot has already been delineated over a down-plunge extent of approximately 350 meters from the bottom of the current Subriso West pit design. The gold mineralization is associated with free gold, pyrite and silicification hosted either in ductile shears or in brittle vein systems depending on the host rocks. The high-grade mineralization in this zone ranges from 5 g/t to 20 g/t gold and this would potentially be amenable to underground mining.

Mitch Wasel, Vice President Exploration, commented, "We believe that this new zone at Subriso West has a high drilling success rate due to our excellent understanding of the structural controls of the gold mineralization of this deposit. The hosting mafic to intermediate volcanic units which have been intruded by porphryries of the same composition and subsequently deformed by this shear zone are a good recipe for hosting high-grade underground gold deposits. These gold systems often have a large down-plunge extent and it is this plunging zone where we are focusing our current drilling efforts."

Hwini-Butre (80 kilometers from Wassa Plant)

During 2010, drilling has focused on extending the Adoikrom and Father Brown orebodies at depth and along strike. By the end of the third quarter of 2010, approximately 15,000 meters had been drilled at the Hwini-Butre deposits resulting in widths and grades that indicate the potential for underground mining. The Adoikrom and Father Brown orebodies represent more targets with underground potential that remain to be fully tested.

QA-QC

The technical contents of this press release have been reviewed and verified by S. Mitchel Wasel, BSc Geology, a Qualified Person pursuant to Canada's National Instrument 43-101. Mr. Wasel is Vice President Exploration for Golden Star and an active member of the Australasian Institute of Mining and Metallurgy.

The Mineral Resource estimates have been estimated by our technical personnel in accordance with definitions and guidelines set out in the Definition Standards for Mineral Resources and Mineral Reserves published by the Canadian Institute of Mining, Metallurgy, and Petroleum and as required by Canada's National Instrument 43-101.

Source: Golden Star Resources Ltd.

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