Wassa Underground to Get Bigger September 20, 2017

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1 Nana Sangmuah, MBA Varun Arora, Associate Bhargav Bandhala, Associate Golden Star Resources Ltd. : $0.83 Rating: Buy Target: $2.00 Estimates 2016A 2017E 2018E CFPS P/CFPS 13.7x 4.8x 2.8x EPS P/E NMF Equity Au Production (koz) Consolidated Au Sales (koz) Gold Price ($/oz) $1,226 $1,252 $1,300 Costs (US$/oz) Total Cash Costs ($/oz) $918 $843 $623 Sustaining Capex ($/oz) $102 $58 $135 G&A $116 $69 $60 Exploration Expense $9 $6 $5 All-In Sustaining Costs (AISC) $1,145 $977 $823 Market Data Price (11/02/16): $0.89 Potential Return (%): 125% 52-Week Range: $0.21-$1.46 Market Cap. ($MM): $334.8 Shr. O/S-Basic (MM): Shr. O/S-FD (MM): Management and Directors (%): 0.50% Enterprise Val. ($MM): C$419 Dividend ($): $0.00 Avg Daily Vol (3 Mo) ('000) TSX: 290 Avg Daily Vol (3 Mo) ('000) NYSE: 1,913 NAVPS: $1.27 Cash ($MM): $26 Debt ($MM): $94 Royal Gold Streaming Liability (US$ MM) -$171 Price/NAV: 0.53x Fiscal Year End 31-Dec Volume ('000s) $ ,000 12,000 $ ,000 $1.20 8,000 $1.10 6,000 $1.00 4,000 $.90 2,000 $.80 0 $.70 Sep-16 Jan-17 May-17 Sep-17 Source: FactSet TOP HOLDERS (Source: Bloomberg) SENTRY INVESTMENTS 8.5% FRANKLIN TEMPLETON 3.4% OPPENHEIMER FUNDS 3.0% EARTH RESOURCE INVESTMENTS 2.0% RBC GLOBAL ASSET MANAGEMENT 1.0% COMPANY DIRECTORS 0.4% Company Information Flagship Projects/Location: Wassa & Prestea/ Ghana Att. Global Gold Resource (MMoz): 9.43 AMC/oz Valuation (US$/oz) $40 Price (C$) Wassa Underground to Get Bigger September 20, 2017 GSC reported positive drill results from the B Shoot (North & South) at Wassa UG that demonstrated wide, high grade intercepts outside the current resource envelope. This underlines the potential to significantly boost the current Wassa UG resource of ~3.6MM oz as well as the production profile in the near-term from the North and over the long term from the South. We believe GSC offers low risk production growth that will see the companywide production boosted to >300k oz/year at a low AISC of <US$850/oz by 2018 and significant exploration upside from Wassa UG, Prestea UG and Mampon, all at a discounted valuation to peers. We maintain our BUY rating and target price of $2.00 per share. DRILL RESULTS SUMMARY: GSC provided assay results from 11 holes from B Shoot North and 1 hole from B Shoot South that intersected mineralization outside the current resource envelope. Wide high grade mineralization intersected in both north and south with significant holes including: B Shoot North: Hole BS17DD m at 18.9 g/t, including 2.0m at 91.8 g/t; Hole BS17DD m at 7.3 g/t, including 4.0m at 21.8 g/t. B Shoot South: Hole BS17DD385M 23.8 m at 6.1 g/t, including 2.0m at 20.1 g/t; Hole BS17DD385M 21.7m at 5.3 g/t, including 4.0m at 21.8 g/t. Many of the drill results showed grades above the Wassa UG reserve grade of 4.21 g/t. We expect to see additional drill results from Wassa UG and definition and extension drilling from Prestea UG. NEAR-TERM UPSIDE FROM B SHOOT NORTH: Drilling has extended B Shoot mineralization 50m to the north. We see potential for fast tracking this mineralization into the production profile as it is close to existing development. This should ultimately provide enough higher grade (>4 g/t) underground ore to further displace lower grade (1.6 g/t) open-pit ore that makes up 70% of the current mill feed. We estimate that a 10% replacement of OP ore with high grade UG ore would increase production by ~10% and result in ~5% savings on the cash operating costs. SIGNIFICANT UPSIDE IN LONG TERM FROM B SHOOT SOUTH: The B Shoot South step out drilling program comprises 7,000 metres in total and includes two mother holes with up to four directional daughter holes. The first directional mother hole intersected high grade mineralization 200m south of the inferred mineral resource envelope. We highlight that from the F Shoot to B Shoot, the current reserve/resource envelope extends ~1.2 km along strike and we believe the system remains open for potentially another ~6.0 km along south. Exploration success could significantly boost our currently modelled Wassa UG mine life of 6.5 years, unlocking significant value. We expect to see bigger step out holes towards south over the next few quarters. The Company has completed drilling another hole with results pending and a third hole is currently being drilled. RECOMMENDATION: The stock currently trades at 4.8x 2017E and 0.5x P/NAV, a discount to midcap producer peers trading at an average of 8.3x and 0.9x, respectively. We also note that DGC, IMG and AGI trade at an average of 10.5x 2017E P/CF, a significant premium to GSC despite a much less compelling production growth profile as compared to GSC. We believe continued strong operational performance should remove this steep discount and drive the rerating of the stock. We maintain our BUY rating and target price of $2.00 per share.

2 Milestones 1. Commencement of stoping at Prestea Underground Q3/17 2. Commercial production at Prestea Underground Q4/17 3. Exploration drill results from Wassa and Prestea UG Ongoing Figure 1: Wassa UG B Shoot North & South Drilling Program Source: Company Reports 2 of 6 September 20, 2017

3 Figure 2: Wassa B Shoot Exploration Upside Along South Source: Company Reports Figure 3: GSC Producer Comps Source: Company Reports September 20, of 6

4 Target Price Calculator: We value GSC using a blended corporate NAV (50% weight) and CFPS multiple (50% weight) approach. For our corporate NAV analysis we apply a 1.0x multiple to our project NAV (Wassa & Prestea) estimate. We also account for corporate adjustments. Using the CFPS multiple approach we apply a multiple of 6.0x to GSC s 2018E CFPS. Key Risk to Target Price: Please refer to the risks disclosed in the initiating report dated 06/01/ of 6 September 20, 2017

5 September 20, of 6

6 Clarus Securities Equity Research Disclosures The analyst has visited the Company s mining operations in Ghana. No payment or reimbursement was received from the issuer for the associated travel costs. Within the last 24 months, Clarus Securities Inc. has received compensation for investment banking services with respect to the securities of this Company. Within the last 24 months, Clarus Securities Inc. has managed or co-managed a public offering of securities of this company. General Disclosure The information and opinions in this report were prepared by Clarus Securities Inc. ( Clarus Securities ). Clarus Securities is a whollyowned subsidiary of Clarus Securities Holdings Ltd. and is an affiliate of such. The reader should assume that Clarus Securities or its affiliate may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. 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Equity Research Ratings Buy: Attractively valued and expected to appreciate significantly from the current price over the next months. Speculative Buy: Expected to appreciate significantly from the current price over the next months. Financial and/or operational risk is high in the analyst s view. Accumulate: Attractively valued, but given the current market price, is expected to appreciate moderately over the next months. Hold: Fairly valued and expected to trade in line with the current price over the next months. Sell: Overvalued and expected to decline from the current price over the next months. Under review: Pending additional review and/or information. No rating presently assigned. Tender: Company subject to an acquisition bid: accept offer. A summary of our research ratings distribution can be found on our website. 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For additional disclosures, please visit our website Clarus Securities Inc of 6 September 20, 2017