UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended~~September 30, 2016~~March 31, 2017

¨TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from _________ to __________________

000-21777
(Commission File Number)

GOLDEN QUEEN MINING CO. LTD.

(Exact name of registrant as specified in its charter)

British Columbia, Canada		Not Applicable
(State or other jurisdiction of incorporation)		(IRS Employer Identification) No.)

2300 – 1066 West Hastings Street

Vancouver, British Columbia

V6E 3X2 Canada

(Address of principal executive offices)

Issuer’s telephone number, including area code:(778) 373-1557

Former name, former address and former fiscal year, if changed since last report:N/A

Check whether the registrant (1) filed all reports required to be filed by sections 13 or 15(d) of the Securities and 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. Yesx No¨

Check whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx No¨

Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer¨Accelerated filer¨x Non-accelerated filerx¨Smaller reporting company¨

Check whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes¨ Nox

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:As of ~~November 9, 2016~~May 10, 2017 the registrant’s outstanding common stock consisted of ~~111,048,683~~111,148,683 shares.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Golden Queen Mining Co. Ltd.

Condensed Consolidated Interim Financial Statements

~~September 30, 2016~~March 31, 2017

(US ~~Dollars -~~dollars – Unaudited)

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GOLDEN QUEEN MINING CO. LTD.

Condensed Consolidated Interim Balance Sheets

(amounts expressed in thousands of US dollars - Unaudited)

	September 30, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Assets
Current assets:
Cash	$	31,155,419		$	37,587,311		$	9,451		$	13,301
Receivables		41,828			23,962			67			34
Inventory (Note 2)		9,694,911			1,935,599
Inventories (Note 5)								11,814			10,941
Prepaid expenses and other current assets		260,756			432,353			632			577
Total current assets		41,152,914			39,979,225			21,964			24,853
Property, plant, equipment and mineral interests (Note 3)		134,727,606			128,562,572
Reclamation financial assurance deposit (Note 5)		-			902,382
Property, plant, equipment and mineral interests (Note 6)								138,074			134,550
Advance minimun royalties								304			303
Total Assets	$	175,880,520		$	169,444,179		$	160,342		$	159,706
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities (Note 7(i))	$	4,321,950		$	3,258,692
Interest payable (Note 7(ii))		1,050,023			969,645
Notes payable (Note 7(ii))		40,883,064			36,053,012
Current portion of loan payable (Note 13)		5,175,113			4,942,716
Derivative liability – Related party warrants (Note 7(iii))		4,870,193			2,498,269
Derivative liability – Warrants (Note 9)		2,165,550			-
Derivative liability– Hedging instruments (Note 8)		115,395			-
Accounts payable and accrued liabilities							$	5,037		$	4,264
Interest payable (Note 9 (iii))								626			296
Current portion of note payable (Note 9 (ii))								2,500			-
Current portion of loan payable (Note 16)								6,137			5,656
Derivative liability – Related party warrants (Note 10)								5,885			5,458
Derivative liability – Warrants (Note 10)								1,026			972
Total current liabilities		58,581,288			47,722,334			21,211			16,646
Asset retirement obligations (Note 5)		1,268,541			978,453
Loan payable (Note 13)		9,756,674			13,430,107
Note payable (Note 9 (ii))								24,429			26,347
Loan payable (Note 16)								10,089			9,494
Asset retirement obligation (Note 8)								1,483			1,366
Deferred tax liability		12,922,000			12,922,000			12,922			12,922
Total liabilities		82,528,503			75,052,894			70,134			66,775
Temporary Equity
Redeemable portion of non-controlling interest (Note 7(v))		26,739,394			27,123,741
Redeemable portion of non-controlling interest (Note 9 (iv))								26,064			26,220
Shareholders’ Equity
Common shares, no par value, unlimited shares authorized (2015 - unlimited); 111,048,683 (2015 – 99,928,683) shares issued and outstanding (Note 4)		71,066,995			62,860,443
Common shares, no par value, unlimited shares authorized (2016 - unlimited); 111,148,683 (2016 – 111,048,683) shares issued and outstanding (Note 7)								71,126			71,067
Additional paid-in capital		43,638,907			43,627,511			43,686			43,652
Deficit accumulated		(88,202,370	)		(79,906,021	)		(89,761	)		(87,335	)
Total shareholders’ equity attributable to GQM Ltd.		26,503,532			26,581,933			25,051			27,384
Non-controlling interest (Note 7(v))		40,109,091			40,685,611
Non-controlling interest (Note 9 (iv))								39,093			39,327
Total Shareholders’ Equity		66,612,623			67,267,544			64,144			66,711
Total Liabilities, Temporary Equity and Shareholders’ Equity	$	175,880,520		$	169,444,179		$	160,342		$	159,706

Ability to Continue as a Going Concern (Note 2)

Commitments and Contingencies (Note 12)

Subsequent Events (Note 17)

~~Ability to Continue as a Going Concern (Note 1)~~

~~Commitments and Contingencies (Note 6)~~

~~Subsequent Events (Note 15)~~

~~Approved by the Directors:~~

Approved by the Directors:

“Thomas M. Clay”		“Bryan A. Coates”
Thomas M. Clay, Director		Bryan A. Coates, Director

See Accompanying Notes to ~~the~~ Condensed Consolidated Interim Financial Statements

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GOLDEN QUEEN MINING CO. LTD.

Condensed Consolidated Interim Statements of ~~Income (Loss)~~Loss and Comprehensive ~~Income (Loss)~~Loss

(amounts expressed in thousands of US dollars, except shares amounts - Unaudited)

Three
Months
Ended
September 30, Three
Months
Ended
September 30, Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015 2016 2015
Revenues $ 13,450,545 $ - $ 16,914,638 $ -
Costs and expenses
Direct mining costs (9,110,596 ) - (12,673,605 ) -
Depreciation and depletion (2,231,897 ) - (4,081,828 ) -
Accretion (Note 5) (22,530 ) - (45,059 ) -
General and administrative expenses (Notes 7(i)) (657,305 ) (672,738 ) (3,166,970 ) (3,403,485 )
Gain (loss) on derivative instruments (Notes 7(iii), 8 and 9) 3,944,411 (598,770 ) (1,951,581 ) 1,868,329
Total costs and expenses (8,077,917 ) (1,271,508 ) (21,919,043 ) (1,535,156 )
Other income (expenses)
Interest expense (Notes 7(ii) and 7(iv)) (1,814,561 ) (981,390 ) (4,369,026 ) (2,999,254 )
Interest income 33,313 49,805 116,215 168,330
Loss on extinguishment of debt - - - (151,539 )
Closing fee (Note 7(ii)) - - - (1,500,000 )
Total other (expenses) (1,781,248 ) (931,585 ) (4,252,811 ) (4,482,463 )
Net and comprehensive income (loss) for the period 3,591,380 (2,203,093 ) (9,257,216 ) (6,017,619 )
Add: Net and comprehensive (gain) loss attributable to the non-controlling interest for the period (Note 7(v)) (853,173 ) 278,926 960,867 1,278,001
Net and comprehensive income (loss) attributable to Golden Queen Mining Co Ltd. for the period $ 2,738,207 $ (1,924,167 ) $ (8,296,349 ) $ (4,739,618 )
Earnings (Loss) per share – basic (Note 12) $ 0.03 $ (0.02 ) $ (0.08 ) $ (0.05 )
Earnings (Loss) per share – diluted (Note 12) $ 0.03 $ (0.02 ) $ (0.08 ) $ (0.05 )

Weighted average number of common shares outstanding -basic 108,026,944 99,928,683 102,657,767 99,881,430
Weighted average number of common shares outstanding - diluted 108,402,626 99,928,683 102,657,767 99,881,430

	Three Months Ended March 31,			Three Months Ended March 31,
	2017			2016
Revenues
Metal Sales	$	14,804		$	-

Cost of Sales
Direct mining costs		(11,561	)		-
Depreciation and depletion (Note 6)		(2,756	)		-
Income from mine operations		487			-

General and administrative expenses (Note 14)		(1,416	)		(1,527	)
Operating loss		(929	)		(1,527	)

Other (expenses) income
Loss on derivative instruments (Note 10)		(481	)		(7,031	)
Interest expense (Note 9 (iii))		(1,047	)		(762	)
Interest income		25			40
Other expenses		(384	)		-
Total other expenses		(1,887	)		(7,753	)
Net and comprehensive loss for the period	$	(2,816	)	$	(9,280	)
Less: Net and comprehensive loss attributable to the non-controlling interest for the period (Note 9 (iv))		390			355
Net and comprehensive loss attributable to Golden Queen Mining Co Ltd. for the period	$	(2,426	)	$	(8,925	)
Loss per share – basic (Note 15)	$	(0.02	)	$	(0.09	)
Loss per share – diluted (Note 15)	$	(0.02	)	$	(0.09	)

Weighted average number of common shares outstanding -basic		111,080,008			99,928,683
Weighted average number of common shares outstanding - diluted		111,080,008			99,928,683

See Accompanying Notes to ~~the~~ Condensed Consolidated Interim Financial Statements

3 | Page

GOLDEN QUEEN MINING CO. LTD.

Condensed Consolidated Interim Statements of Shareholders’ Equity, Non-controlling Interest and Redeemable Portion of Non-controlling Interest

(amounts expressed in thousands of US dollars, -except shares amounts- Unaudited)

Common
shares Amount Additional
Paid-in
Capital
(Restated -
Note 16) Deficit
Accumulated Total Shareholders’
Equity attributable
to GQM Ltd
(Restated - Note
16) Non-
controlling
Interest Total
Shareholders’
Equity
(Restated -
Note 16) Redeemable
Portion of
Non-
controlling
Interest
Balance, December 31, 2014 (Restated - Note 16) 99,778,683 $ 62,709,015 $ 43,468,510 $ (74,444,816 ) $ 31,732,709 $ 34,250,468 $ 65,983,177 $ 22,833,645
Issuance of common shares as part of management agreement (Note 6) 150,000 151,428 - - 151,428 - 151,428 -
Stock-based compensation - - - - - 7,500,000 7,500,000 5,000,000
Capital contribution from non-controlling interest (Note 7(v)) - - 159,001 - 159,001 159,001 -
Net loss for the year - - - (5,461,205 ) (5,461,205 ) (1,064,857 ) (6,526,062 ) (709,904 )
Balance, December 31, 2015 99,928,683 $ 62,860,443 $ 43,627,511 $ (79,906,021 ) $ 26,581,933 $ 40,685,611 $ 67,267,544 $ 27,123,741
Issuance of common shares, private placement net of share issuance cost (Note 4) 11,120,000 8,206,552 - - 8,206,552 - 8,206,552 -
Stock-based compensation - - 11,396 - 11,396 11,396 -
Net loss for the period - - - (8,296,349 ) (8,296,349 ) (576,520 ) (8,872,869 ) (384,347 )
Balance, September 30, 2016 111,048,683 $ 71,066,995 $ 43,638,907 $ (88,202,370 ) $ 26,503,532 $ 40,109,091 $ 66,612,623 $ 26,739,394

	Common shares		Amount		Additional Paid-in Capital		Deficit Accumulated			Total Shareholders’ Equity attributable to GQM Ltd			Non- controlling Interest			Total Shareholders’ Equity			Redeemable Portion of Non- controlling Interest
Balance, December 31, 2015		99,928,683	$	62,860	$	43,628	$	(79,906	)	$	26,582		$	40,686		$	67,268		$	27,124
Stock-based compensation		-		-		4		-			4			-			4			-
Net loss for the period		-		-		-		(8,926	)		(8,926	)		(213	)		(9,139	)		(142	)
Balance, March 31, 2016		99,928,683	$	62,860	$	43,632	$	(88,832	)	$	17,660		$	40,473		$	58,133		$	26,982

Balance, December 31, 2016		111,048,683	$	71,067	$	43,652	$	(87,335	)	$	27,384		$	39,327		$	66,711		$	26,220
Issuance of common shares (Note 7)		100,000		59		-		-			59			-			59			-
Stock-based compensation		-		-		34		-			34			-			34			-
Net loss for the period		-		-		-		(2,426	)		(2,426	)		(234	)		(2,660	)		(156	)
Balance, March 31, 2017		111,148,683	$	71,126	$	43,686	$	(89,761	)	$	25,050		$	39,093		$	64,144		$	26,064

See Accompanying Notes to ~~the~~ Condensed Consolidated Interim Financial Statements

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GOLDEN QUEEN MINING CO. LTD.

Condensed Consolidated Interim Statements of Cash Flows

(amounts expressed in thousands of US dollars - Unaudited)

Nine months ended Nine months ended
September 30, 2016 September 30, 2015
Operating Activities
Net loss for the period $ (9,257,216 ) $ (6,017,619 )
Adjustment to reconcile net loss to cash used in operating activities:
Depreciation and depletion 4,081,828 21,997
Amortization of debt discount and interest accrual 4,071,537 2,863,396
Accretion expense 45,059 -
Change in fair value of derivative liabilities (Note 9) 1,951,581 (1,868,329 )
Stock based compensation 11,396 155,203
Foreign exchange gain (273,470 ) (839,849 )
Loss on extinguishment of debt - 151,539
Non-cash consulting expense (Note 7(i)) - 151,428
Closing fee related to long-term debt - 1,500,000
Changes in assets and liabilities:
Receivables (17,866 ) 24,105
Prepaid expenses & other current assets 171,597 (108,180 )
Inventory (7,325,771 ) (182,865 )
Accounts payable & accrued liabilities 3,454,289 285,272
Interest payable (18,043 ) (951,445 )
Cash used in operating activities (3,105,079 ) (4,815,347 )

Investment activities:
Additions to property, plant, equipment and mineral interests (11,400,873 ) (59,812,875 )
Release (purchase) of reclamation financial assurance deposit 902,382 (349,053 )
Cash used in investing activities (10,498,491 ) (60,161,928 )

Financing activities:
Issuance of common shares and warrants, net of share issue costs (Note 4) 10,907,840 -
Repayments of loans payable (3,736,162 ) (2,500,000 )
Investment in Golden Queen Mining Company LLC by non-controlling interest - 12,500,000
Borrowing under long-term debt - 25,000,000
Repayment of convertible debentures - (7,675,000 )
Financing fees related to short-term debt - (1,500,000 )
Financing fees related to short-term debt capitalized to the loan - (250,000 )
Cash provided by financing activities 7,171,678 25,575,000
Net change in cash and cash equivalents (6,431,892 ) (39,402,275 )
Cash and cash equivalents, beginning balance 37,587,311 91,407,644
Cash and cash equivalents, ending balance $ 31,155,419 $ 52,005,369

	Three Months Ended March 31,			Three Months Ended March 31,
	2017			2016
Operating Activities
Net loss for the period	$	(2,816	)	$	(9,280	)
Adjustment to reconcile net loss to cash used in operating activities:
Depreciation and depletion		2,756			7
Amortization of debt discount and interest accrual		286			762
Accretion expense		30			-
Change in fair value of derivative liabilities (Note 10)		481			7,031
Stock based compensation		34			4
Unrealized foreign exchange		(5	)		-
Non-cash finder fees		59			-
Changes in non-cash working capital items:
Receivables		(33	)		(2	)
Prepaid expenses & other current assets		(55	)		(7	)
Inventory		(873	)		(1,622	)
Accounts payable & accrued liabilities		2,301			51
Interest payable		626			(144	)
Cash generated from (used in) operating activities		2,791			(3,200	)
Investment activities:
Additions to property, plant, equipment and mineral interests		(5,236	)		(7,401	)
Release (purchase) of reclamation financial assurance deposit		-			902
Cash used in investing activities		(5,236	)		(6,499	)
Financing activities:
Repayments of loan payable (Komatsu)		(1,405	)		(1,230	)
Cash used in financing activities		(1,405	)		(1,230	)
Net change in cash and cash equivalents		(3,850	)		(10,929	)
Cash and cash equivalents, beginning balance		13,301			37,586
Cash and cash equivalents, ending balance	$	9,451		$	26,657

Supplementary Disclosures of Cash Flow Information (Note ~~10)~~11)

See Accompanying Notes to ~~the~~ Condensed Consolidated Interim Financial Statements

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GOLDEN QUEEN MINING CO. LTD.

Notes to Condensed Consolidated Interim Financial Statements

For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~

(amounts expressed in thousands of US dollars - Unaudited)

Nature of Business

~~Nature of Business~~Golden Queen Mining Co. Ltd. (“Golden Queen”, “GQM Ltd.” or the “Company”) is engaged in the ~~development and~~ operation of the Soledad Mountain Project (“the Project”), located in the Mojave Mining District, Kern County, California. ~~The construction phase of the Project was completed in February 2016 and the Company commenced production in April 2016.~~

The Company originally used its wholly owned subsidiary, Golden Queen Mining Company, Inc. (“GQM Inc.”), to explore and develop the Project. On September 10, 2014, GQM Inc. was converted to a limited liability company, Golden Queen Mining Company, LLC (“GQM LLC”). The Company entered into a Joint Venture (the “JV”) agreement with Gauss LLC (“Gauss”) through its newly formed, wholly owned subsidiary, Golden Queen Mining Holdings, Inc. (“GQM Holdings”). The JV was completed on September 15, 2014. Upon completion of the JV, both the Company, through GQM Holdings, and Gauss each owned, and continue to own, 50% of GQM LLC. In February 2015, the Company incorporated Golden Queen Mining Canada Ltd. (“GQM Canada”), a wholly-owned British Columbia subsidiary, to hold the Company’s interest in GQM Holdings.

Ability to Continue as a Going Concern

~~Basis~~

The unaudited condensed consolidated interim financial statements of ~~Preparation~~Golden Queen Mining Co. Ltd. have been prepared using accounting principles generally accepted in the United States (US GAAP) applicable to a going concern.

The Company generated $14.8 million in revenues from operations during the three months ended March 31, 2017. The Company had an accumulated deficit of $89.8 million and a working capital surplus of $0.8 million at March 31, 2017.

Golden Queen Mining Co Ltd. expects to have sufficient cash on hand to meet its corporate general and administrative expenditures for the next twelve months from the date of the approval of these condensed consolidated interim financial statements. However, the Company is required to pay $5.4 million and $3.1 million in accrued interest and debt principal repayment on January 1, 2018 and April 1, 2018, respectively. The Company will need to receive cash distributions from GQM LLC to service its debt and such distributions are contingent on GQM LLC’s ability to generate positive cash flows. This situation raises substantial doubt about the Company’s ability to continue as a going concern.

The Company anticipates receiving sufficient distributions from GQM LLC during this fiscal year to service its debt in 2018, however such distributions are dependent on a number of factors, including the gold price and the ability of the mine to perform according to the mine plan in 2017 and 2018. Because of the uncertainty relating to the above factors, there can be no assurance that sufficient distributions will be generated and paid by GQM LLC to the Company in order for it to meet its obligations when they fall due. If the distributions are not sufficient, the Company will need to either raise equity or negotiate with its debt lender a delay in principal and interest repayments.

The Company’s access to the net assets of GQM LLC is determined by the Board of Managers of GQM LLC. The Board of Managers is not controlled by the Company and therefore there is no guarantee that any access to the net assets of GQM LLC would be provided to the Company in order to continue as a going concern. The Board of Managers of GQM LLC determine when and if distributions from GQM LLC are made to the holders of its membership units at their sole discretion.

The unaudited condensed consolidated interim financial statements do not reflect adjustments to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used, that would be necessary if the company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

~~These~~

Basis of Presentation

The unaudited condensed consolidated interim financial statements have been prepared in accordance with ~~accounting principles generally accepted in the United States of America (“U.S. GAAP”).~~US GAAP. The accounting policies followed in preparing these condensed consolidated interim financial statements are those used by the Company as set out in the audited consolidated financial statements for the year ended December 31, ~~2015, with~~2016.

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GOLDEN QUEEN MINING CO. LTD.

Notes to Condensed Consolidated Interim Financial Statements

For the ~~exception~~Three Months Ended March 31, 2017 and 2016

(amounts expressed in thousands of ~~Accounting Standards Update (“ASU”) 2015-02. This update was adopted January 1, 2016 as described below under the recent accounting standards.~~US dollars - Unaudited)

Basis of Presentation (continued)

Certain information and note disclosures normally included for annual consolidated financial statements prepared in accordance with ~~U.S.~~US GAAP have been omitted. These condensed consolidated interim financial statements should be read together with the audited consolidated financial statements of the Company for the year ended December 31, ~~2015.~~2016.

In the opinion of management, all adjustments considered necessary (including reclassifications and normal recurring adjustments) to present fairly the financial position, results of operations and cash flows at ~~September 30, 2016~~March 31, 2017 and for all periods presented, have been included in these financial statements. The interim results are not necessarily indicative of results for the full year ending December 31, ~~2016,~~2017, or future operating periods. For further information, see the Company’s annual consolidated financial statements, including the accounting policies and notes thereto.

~~Judgements and Estimates~~The preparation of financial statements in conformity with GAAP requires management to make judgements, estimates, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and judgements have been made by Management in several areas including the accounting for the joint venture transaction and determination of temporary and permanent non-controlling interest, the recoverability of mineral properties expenditures, royalty obligations, inventory valuations, ore on heap leach pads, ore reserves, mine plan, useful lives of assets, asset retirement obligations, convertible debentures, and derivative liability - warrants. A key judgement for 2016 related to when the Soledad Mountain mine enters the production phase. Generally, under US GAAP a mine would be considered to be in the production phase once it has demonstrated that it is producing saleable quantities of product. The Company concluded that the Soledad Mountain mine began producing saleable material in the second quarter of 2016.

~~Principles of Consolidation~~The Company consolidates all entities in which it can vote a majority of the outstanding voting stock. In addition, it consolidates entities which meet the definition of a variable interest entity for which it is the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. We consider special allocations of cash flows and preferences, if any, to determine amounts allocable to non-controlling interests. All intercompany transactions and balances are eliminated in consolidation.

These unaudited condensed consolidated interim financial statements include the accounts of Golden Queen, a limited liability Canadian corporation (Province of British ~~Columbia corporation,~~Columbia), its wholly-owned ~~subsidiaries, GQM Canada,~~subsidiary, GQM Holdings, a US (State of California) corporation, and GQM LLC, a limited liability company in which Golden Queen has a 50% interest, through GQM Canada’s ownership of GQM Holdings. GQM LLC meets the definition of a Variable Interest Entity (“VIE”). Golden Queen has determined it is the member of the related party group that is most closely associated with GQM LLC and, as a result, is the primary beneficiary who consolidates GQM LLC.

74.

Summary of Accounting Policies and Estimates and Judgements

~~GOLDEN QUEEN MINING CO. LTD.~~

~~Notes~~EstimatesThe preparation of financial statements in conformity with US GAAP requires management to ~~Condensed Consolidated Interim Financial Statements~~

~~For~~make estimates and assumptions that affect the ~~Nine Months Ended September 30, 2016~~reported amounts of assets and ~~2015~~

~~(US dollars - Unaudited)~~liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and judgements have been made by Management in several areas including the accounting for the joint venture transaction and determination of the temporary and permanent non-controlling interest, the recoverability of mineral properties interests, royalty obligations, inventory valuation, asset retirement obligations, and derivative liability – warrants. Actual results could differ from those estimates.

~~Revenues~~Revenue is recognized when title to gold and silver passes to the buyer and when collectability is reasonably assured. Title passes to the buyer based on terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets, for example, the London Bullion Market for both gold and silver, in an identical form to the product sold.

~~Recent~~Recently Adopted Accounting ~~Standards~~Pronouncements

(i)

~~Effective August 2014, FASB~~In July 2015, ASU No. 2015-11 was issued ~~ASU 2014-15, Presentation~~related to the inventory, simplifying the subsequent measurement of ~~Financial Statements - Going Concern (Subtopic 205-40 - Disclosure~~inventories by replacing the lower of ~~Uncertainties about an Entity’s Ability to Continue as~~cost or market test with a ~~Going Concern.~~lower of cost and net realizable value test. The update ~~essentially requires management of all entities, for annual and~~is effective in fiscal years, including interim periods ~~to evaluate whether there are conditions~~beginning after December 15, 2016. The Company records inventory at the lower of cost or ~~events, considered in~~net realizable value and the ~~aggregate, that raise substantial doubt about~~adoption of this guidance effective January 1, 2017 had no impact on the ~~entity’s ability to continue as a going concern within one year after the date the~~consolidated financial ~~statements are issued.~~statements.

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following:

~~Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans).~~

~~Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations.~~

~~Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.~~

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is~~substantial doubt about the entity’s ability to continue as a going concernwithin one year after the date that the financial statements are issued (or available to be issued).~~

~~This update will come into effect for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is assessing the impact of this standard.~~

(ii)

In ~~February 2015, the FASB issued ASU 2015-02,~~~~Consolidation (Topic 810) - Amendments to the Consolidation Analysis which~~ focuses on the consolidation evaluation for reporting organizations (public and private companies and not-for-profit organizations) that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the standards and improves current GAAP by:

Placing more emphasis on risk of loss when determining a controlling financial interest. A reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement, when certain criteria are met.

~~Reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (VIE).~~

~~Changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs.~~

The ASU became effective for periods beginning after December 15, 2015, for public companies. Early adoption was permitted, including adoption in an interim period. The Company adopted the ASU effective January 1, 2016. The Company assessed and concluded there was no impact on the Company with the adoption of the new standard.

~~GOLDEN QUEEN MINING CO. LTD.~~

~~Notes to Condensed Consolidated Interim Financial Statements~~

~~For the Nine Months Ended September 30, 2016 and 2015~~

~~(US dollars - Unaudited)~~

~~Recent Accounting~~~~Standards -Continued~~

~~(iii)~~

In January 2016, FASB issued ASU 2016-01, Financial Instruments – Recognition and measurement of financial assets and financial liabilities (Subtopic 825-10) which updates several aspects of recognition, measurement, presentation and disclosure of financial instruments. The amendments that are relevant to the Company are as follows:

Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

~~Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.~~

Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.

~~The ASU will be effective for periods beginning after December 15, 2017, for public companies. The Company is assessing the impact of this standard.~~

~~(iv)~~

In March 2016, ~~FASB~~ASU No. 2016-09 was issued ~~ASU 2016-09, Compensation – Stock Compensation (Subtopic 718) which updates several aspects of~~related to stock-based compensation. The new guidance simplifies the accounting for ~~share-based~~stock-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This update is effective for the Company’s fiscal year and interim periods beginning after December 15, 2016. The adoption of this guidance as of January 1, 2017 had no impact on the consolidated financial statements.

7 | Page

~~The ASU will be effective for periods beginning after December 15, 2016, for public companies. The Company is assessing~~

GOLDEN QUEEN MINING CO. LTD.

Notes to Condensed Consolidated Interim Financial Statements

For the ~~impact~~Three Months Ended March 31, 2017 and 2016

(amounts expressed in thousands of ~~this standard.~~US dollars - Unaudited)

~~(v)~~4.

Summary of Accounting Policies and Estimates and Judgements (continued)

New Accounting Policies

(iii)

In May 2014, ASU 2014-09 was issued related to revenue from contracts with customers. The ASU was further amended in August 2015, March 2016, April 2016, and May 2016 by ASU 2015-14, 2016-08, 2016-10 and ~~2016-12.~~2016- 12. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition.

In August 2015, the effective date was deferred to reporting periods, including interim periods, beginning after December 31, 2017, and will be applied retrospectively. Early adoption is not permitted. ~~The Company is~~

We are currently ~~evaluating this guidance~~assessing the impact of implementation of ASU No. 201-09, however, management does not believe it will change the point of revenue recognition or amounts of revenue recognized compared to how we recognize revenue under our current policies. Our revenues involve a relatively limited number of types of contracts and customers. In addition, our revenue contracts do not involve multiple types of performance obligations. Revenues from doré are recognized, and the transaction price is known, at the time the metals sold are delivered to the customer. We will finalize our assessment of the impact ~~it will have~~of ASU No. 201-09 on our revenue recognition during 2017 and assess the ~~consolidated financial statements and disclosures.~~additional disclosure requirements under the guidance.

~~(vi)~~(iv)

In February 2016, FASB issued ASC 842 that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than 12 months. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement.

The ASU will be effective for annual and interim periods beginning January 1, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company is assessing the impact of this standard.

(v)

In August 2016, ASC guidance was issued to amend the classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance is effective for the Company’s fiscal year and interim periods beginning December 1, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating this guidance and the impact on its consolidated financial statements.

Inventories

Inventories consist primarily of production from the Company’s operation, in varying stages of the production process and supplies and spare parts, all of which are presented at the lower of cost or net realizable value. Inventories of the Company are comprised of:

March 31, 2017 December 31, 2016
Stockpile inventory $ 407 $ 318
In-process inventory 9,389 9,491
Dore inventory 408 76
Supplies and spare parts 1,610 1,056
$ 11,814 $ 10,941
9 8 | Page

GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~
(amounts expressed in thousands of US dollars - Unaudited)

1. ~~Ability to Continue as a Going Concern~~
The Company entered the production phase and began generating revenues from operations during the quarter ended June 30, 2016. The Company had an accumulated deficit of $88,202,370 and a working capital deficit of $17,428,374 at September 30, 2016. Cash used in operations for the nine months ended September 30, 2016 was $3,105,079.
Golden Queen, on a non-consolidated basis, currently does not have sufficient funds to repay the $37,500,000 loan  (Note 7(ii)), plus the accrued interest, at the issuance date of the condensed consolidated interim financial statements. However, in order to secure the necessary funds to meet this upcoming obligation and mitigate the going concern issue, management is evaluating its options, including debt and equity, and to re-finance the June 2015 Loan which matures on December 8, 2016. The Company raised gross proceeds of $12.2 million (C$16.1  million) in July 2016 primarily to be used to repay a portion of the loan.
While Golden Queen has been successful at certain of these efforts in the past, there can be no assurance that future efforts will be successful. This raises substantial doubt about this entity’s ability to continue as a going concern. At the Project level, GQM LLC has sufficient funds to meet its contractual obligations for the next twelve months.
The Company’s access to the net assets of GQM LLC is determined by the Board of Managers of GQM LLC. The Board of Managers is not controlled by the Company and therefore there is no guarantee that any access to the net assets of GQM LLC would be provided to the Company in order to continue as a going concern. The Board of Managers of GQM LLC determine when and if distributions from GQM LLC are made to the holders of its membership units at their sole discretion.
These condensed consolidated interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
2. ~~Inventory~~
September 30, 2016 December 31, 2015
Stockpile inventory $ 1,926,535 $ 1,259,669
Dore inventory 46,250 -
Supplies and spare parts 1,259,144 592,690
$ 3,231,929 $ 1,852,359
Ore on heap leach pad:
Current $ 6,462,982 $ 83,240
Total $ 9,694,911 $ 1,935,599
3.6. Property, Plant, Equipment and Mineral Interests

September 30, 2016 December 31, 2015

Land $ 3,892,583 $ 109,600
Mineral property interest and claims 2,064,026 4,458,744
Mine development 42,295,924 86,038,407
Mine equipment 55,970,460 25,425,661
Buildings 17,521,721 5,691,335
Computer equipment and software 429,403 218,822
Vehicles 2,107,558 978,573
Leasehold improvements - 51,030
Infrastructure (Water/power) 11,051,509 -
Asset retirement costs 871,908 626,878
Construction in progress 1,139,056 -
Capitalized interest 5,770,001 5,174,846
Less:
Accumulated depreciation and depletion (8,386,543 ) (211,324 )
$ 134,727,606 $ 128,562,572
Property, plant and equipment and mineral interest, are depreciated and depleted using either the units-of-production or straight-line method over the shorter of the estimated useful life of the asset or the expected life of mine. Assets under construction in progress are recorded at cost and re-allocated to its corresponding classification when they become available for use.

10
Land Mineral
property
interest and
claims Mine
development Machinery
and
equipment Buildings and
infrastructure Construction
in progress Interest
capitalized Total
Cost
At December 31, 2015 $ 110 $ 4,459 $ 84,798 $ 28,085 $ 8,565 $ - $ - $ 126,017
Additions 3,777 9,391 542 5,674 19,384
Transfers 6 (6 ) (42,765 ) 32,117 10,648 - - -
Disposals - - - - - - - -
At December 31, 2016 $ 3,893 $ 4,453 $ 42,033 $ 60,202 $ 28,604 $ 542 $ 5,674 $ 145,401
Additions 17 18 3,588 3,820 - 7,443
Transfers (39 ) (36 ) (75 )
Disposals - - - (1,344 ) - - - (1,344 )
At March 31, 2017 $ 3,910 $ 4,471 $ 41,994 $ 62,446 $ 28,568 $ 4,362 $ 5,674 $ 151,425

Accumulated depreciation and depletion
At December 31, 2015 $ - $ - $ 654 $ 1,462 $ 350 $ - $ - $ 2,466
Additions - 72 317 5,666 2,330 - - 8,385
Disposals - - - - - - - -
At December 31, 2016 $ - $ 72 $ 971 $ 7,128 $ 2,680 $ - $ - $ 10,851
Additions - 61 558 1,437 591 - 109 2,756
Disposals - - - (256 ) - - - (256 )
At March 31, 2017 $ - $ 133 $ 1,529 $ 8,309 $ 3,271 $ - $ 109 $ 13,351

Carrying values
At December 31, 2016 $ 3,893 $ 4,381 $ 41,062 $ 53,074 $ 25,924 $ 542 $ 5,674 $ 134,550
At March 31, 2017 $ 3,910 $ 4,338 $ 40,465 $ 54,137 $ 25,297 $ 4,362 $ 5,565 $ 138,074

~~GOLDEN QUEEN MINING CO. LTD.~~
~~Notes to Condensed Consolidated Interim Financial Statements~~
~~For~~During the ~~Nine Months Ended September 30, 2016 and 2015~~
~~(US dollars - Unaudited)~~three months ended March 31, 2017, the Company acquired three (3) (2016 –one (1)) pieces of mining equipment from Komatsu through financing agreements. Also, during the same period the Company disposed of two (2) pieces of mining equipment (2016 – $Nil). See Note 16 for further details.

3. ~~Property, Plant, Equipment and Mineral Interests - Continued~~
As at September 30, 2016, the Company had capitalized depreciation of $3,559,886 (December 31, 2015 - $2,255,056  ) relating to assets used in the development of the mine. As the Company entered production on April 1, 2016, the Company began amortising assets put into production on this date and also discontinued capitalizing depreciation.
The Company capitalized a portion of the interest expense related to the convertible debenture and notes payable in accordance with its accounting policy. As the Company entered the production phase during the three months ended June 30, 2016, interest was no longer being capitalized.
4.7. Share Capital
The Company’s common shares outstanding are no par value, voting shares with no preferences or rights attached to them.

Common shares – 2017
On January 17, 2017, the Company issued 100,000 shares for a total of $0.06 million as finder fees which were recognized in general and administrative expenses in connection with the declaration of commercial production in December 2016.
Common shares – 2016

In July 2016, the Company completed a financing for gross proceeds of ~~$12,193,298~~$12.1 million (C$~~16,124,000)~~16.1 million) consisting of 11,120,000 units at a price of $1.10 (C$1.45) per unit. Each unit consisted of one common share of the Company and one-half of one common share purchase warrant. Each whole warrant entitles the holder to acquire one additional common share of the Company at a price of C$2.00 per common share until July 25, 2019. The aggregate fair value of the common share purchase warrants at the time of issuance was ~~$2,377,315 (C$3,144,180),~~$2.3 million, which was recorded as a derivative liability and the Company allocated the remaining proceeds of ~~$9,815,983 (C$12,979,820)~~$9.8 million to the common shares. (See Note 10).

9 | Page
~~In connection with~~
GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the ~~financing, the~~Three Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of US dollars - Unaudited)
7. Share Capital (continued)
The Company also issued 757,700 common share purchase warrants to brokers with the same terms as the common share purchase warrants issued with the financing units. The aggregate fair value of the common share purchase warrants issued to the brokers at the time of issuance was ~~$323,973 (C$428,479)~~$0.3 million which was recorded as a derivative ~~liability.~~liability (See Note 10).
~~The fair value of the warrants was determined using the Black-Scholes option pricing model with the following assumptions:~~
~~2016~~
~~Expected life years~~ ~~3.00~~
~~Interest rate~~ ~~0.58%~~
~~Volatility~~ ~~87.29%~~
~~Dividend yield~~ ~~Nil~~

In addition, the Company incurred cash share issue costs totalling ~~$1,285,458 (C$985,303),~~$1.2 million, which consisted of legal fees, commission and other direct financing costs.
In connection with the guidance of ASC 815-40-15, as the options and warrants are exercisable in a currency other than the functional currency of the Company they do not meet the “fixed-for-fixed” criteria of the guidance. As a result, the Company was required to separately account for the common share purchase warrants issued in connection with the financing noted above as a derivative instrument liability. (See note 9 – Derivative liability)
~~Common shares – 2015~~
In March 2015, the Company issued 150,000 common shares to the former President of the Company for achieving two of the three milestones outlined in his management agreement (See Note 6 – Commitments and Contingencies). The common shares had a total fair value of $155,428 (Note 7(i)). The fair value was based on the market price on the date of issuance.
11
~~GOLDEN QUEEN MINING CO. LTD.~~
~~Notes to Condensed Consolidated Interim Financial Statements~~
~~For the Nine Months Ended September 30, 2016 and 2015~~
~~(US dollars - Unaudited)~~
4. ~~Share Capital – Continued~~

Stock options
The Company’s current stock option plan (the “Plan”) was adopted by the Company in 2013 and approved by shareholders of the Company in 2013. The Plan provides a fixed number of 7,200,000 common shares of the Company that may be issued pursuant to the grant of stock options. The exercise price of stock options granted under the Plan shall be determined by the Company’s Board of Directors (the “Board”), but shall not be less than the volume-weighted, average trading price of the Company’s shares on the TSX for the five (5) trading days immediately prior to the date of the grant. The expiry date of a stock option shall be the date so fixed by the Board subject to a maximum term of five (5) years. The Plan provides that the expiry date of the vested portion of a stock option will be the earlier of the date so fixed by the Board at the time the stock option is awarded and the early termination date (the “Early Termination Date”).
The Early Termination Date will be the date the vested portion of a stock option expires following the option holder ceasing to be a director, employee or consultant, as determined by the Board at the time of grant, or in the absence thereof at any time prior to the time the option holder ceases to be a director, employee or consultant, in accordance with and subject to the provisions of the Plan. All options granted under the 2013 Plan will be subject to such vesting requirements as may be prescribed by the TSX, if applicable, or as may be imposed by the Board. A total of 1,955,002 (December 31, 2016 – 1,555,000) common shares were issuable pursuant to such stock options as at March 31, 2017.

The Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options granted. In accordance with the accounting standard for employees, the compensation expense is amortized on a straight-line basis over the requisite service period, which approximates the vesting period. Compensation expense for stock options granted to non-employees is amortized over the contract services period or, if none exists, from the date of grant until the options vest. Compensation associated with unvested options granted to non-employees is re-measured on each balance sheet date using the Black-Scholes option pricing model.

The following is a summary of stock option activity during the ~~nine months~~period ended ~~September 30, 2016~~March 31, 2017 and 2016:
Shares Weighted Average
Exercise Price per
Share
Options outstanding, December 31, 2015 1,070,000 $ 0.94
Options granted 485,000 $ 0.66
Options outstanding, December 31, 2016 1,555,000 $ 0.85
Options granted 400,002 $ 0.65
Options outstanding, March 31, 2017 1,955,002 $ 0.81
On March 20, 2017, the ~~year ended December 31, 2015:~~Company granted 400,002 options to the Company’s Chief Financial Officer. The options are exercisable at a price of $0.65 for a period of five years from the date of grant and 133,334 options vest on March 20, 2018, 133,334 options vest on March 20, 2019 and 133,334 on March 20, 2020.

NoThe fair value of stock options ~~expired during~~granted as above is calculated using the ~~three or nine months ended September 30, 2016.~~following weighted average assumptions:
2017 2016
Expected life (years) 4.97 4.92
Interest rate 1.18 % 1.00 %
Volatility 77.29 % 81.27 %
Dividend yield 0.00 % 0.00 %
10 | Page
GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of US dollars - Unaudited)
7. Share Capital (continued)
Stock options (continued)

During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, the Company recognized ~~$3,799 and $11,396 (three and nine months ended September 30, 2015~~$0.03 million (March 31, 2016 - ~~$155,203)~~$0.02 million) in stock-based compensation relating to employee stock options that were issued and/or had vesting terms.

~~As at September 30, 2016, the aggregate intrinsic value of the outstanding exercisable options was $171,000 (December 31, 2015 - $Nil).~~
Shares Weighted Average
Exercise Price per
Share
Options outstanding and exercisable, December 31, 2014 750,000 $ 1.29
Options granted 570,000 $ 0.58
Options forfeited (250,000 ) $ 1.18
Options outstanding, December 31, 2015 1,070,000 $ 0.94
Options exercisable, December 31, 2015 976,667 $ 0.97

Options outstanding, September 30, 2016 1,070,000 $ 0.94
Options exercisable, September 30, 2016 1,023,334 $ 0.96
The following table summarizes information about stock options outstanding and exercisable at ~~September 30, 2016:~~March 31, 2017:

Expiry
Date Number
Outstanding Number
Exercisable Remaining
Contractual Life
(Years) Exercise
Price Number
Outstanding Number
Exercisable Remaining
Contractual Life
(years) Exercise
Price
June 3, 2018 50,000 50,000 1.67 $ 1.16 50,000 50,000 1.18 $ 1.16
September 3, 2018 150,000 150,000 1.93 $ 1.59 150,000 150,000 1.43 $ 1.59
September 18, 2018 300,000 300,000 1.97 $ 1.26 300,000 300,000 1.47 $ 1.26
September 8, 2020 570,000 523,334 3.94 $ 0.58 570,000 523,334 3.44 $ 0.58
Balance, September 30, 2016 1,070,000 1,023,334 3.00
November 30, 2021 485,000 0 4.67 $ 0.66
March 20, 2022 400,002 0 4.97 $ 0.65
Balance, March 31, 2017 1,955,002 1,023,334 3.55
As at March 31, 2017, the aggregate intrinsic value of the outstanding exercisable options was $0.1 million (December, 31, 2016 - $0.4 million).
Warrants
The following is a summary of common share purchase warrants activity:
March 31, 2017 December 31, 2016
Balance, beginning of the period 24,317,700 10,000,000
Issued - financing units - 5,560,000
Issued - financing brokers⁽¹⁾ - 757,700
Issued - debt restructuring⁽¹⁾ - 8,000,000
Balance, end of the period 24,317,700 24,317,700
⁽¹⁾ Non-tradable share purchase warrants.
The following table summarizes information about share purchase warrants outstanding and exercisable at March 31, 2017:
Expiry Date Number
Outstanding Remaining
Contractual Life
(years) Exercise
Price
June 8, 2020 10,000,000 3.19 $ 0.95
July 25, 2019 5,560,000 2.32 C$ 2.00
July 25, 2019 757,700 2.32 C$ 2.00
November 18, 2021 8,000,000 4.65 $ 0.85
8. Asset Retirement Obligations and Financial Reclamation Assurance
Asset Retirement Obligation
The total asset retirement obligation as of March 31, 2017, was $1.5 million (December 31, 2016 - $1.4 million).
The Company estimated its asset retirement obligations based on its requirements to reclaim and remediate its property based on its activities to date. As at March 31, 2017, the Company estimates the primary cash outflow related to these reclamation activities will commence in 2028. Reclamation provisions are measured at the expected value of future cash flows discounted to their present value using a discount rate based on a credit adjusted risk-free interest rate of 8.7% and an inflation rate of 2.45%.

12 11 | Page


GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~
(amounts expressed in thousands of US dollars - Unaudited)

4.8. ~~Share Capital – Continued~~Asset Retirement Obligation and Financial Reclamation Assurance (continued)
~~Warrants~~Asset Retirement Obligation (continued)
During the nine months ended September 30, 2016, the Company issued 6,317,700 (nine months ended September 30, 2015 – 10,000,000) share purchase warrants in connection with a financing. See Note 7(v) and 9, for accounting treatment. The following is a summary of ~~common share purchase warrants activity:~~asset retirement obligations:
March 31, 2017 December 31, 2016
Balance, beginning of the period $ 1,366 $ 978
Accretion 30 90
Changes in cash flow estimates 87 298
Balance, end of the period $ 1,483 $ 1,366

September 30,2016 December 31,2015
Balance, beginning of period 10,000,000 -
Issued 6,317,700 10,000,000
Balance, end of period 16,317,700 10,000,000
*Included in the warrants issued are 757,700 non-tradable share purchase warrants issued to brokers.
~~The following table summarizes information about share purchase warrants outstanding and exercisable at September 30, 2016:~~
Expiry
Date Number
Outstanding Remaining
Contractual Life
(Years) Exercise
Price
June 8, 2020 10,000,000 3.69 $ 0.95
July 25, 2019 6,317,700 2.82 C$ 2.00
5. ~~Asset Retirement Obligations and~~Reclamation Financial ~~Reclamation Assurance~~
~~Financial Reclamation~~ Assurance

The Company is required to provide the Bureau of Land Management, the State Office of Mine Reclamation and Kern County, California with a revised reclamation cost estimate annually. The financial assurance is adjusted once the cost estimate is approved. The Company’s provision for reclamation of the property is estimated each year by an independent consulting engineer. This estimate, once approved by state and county authorities, forms the basis for ~~the~~a cash deposit of reclamation financial assurance. The reclamation assurance provided as at ~~September 30, 2016~~March 31, 2017 was ~~$1,464,592~~$1.5 million (December 31, ~~2015~~2016 - ~~$624,142)~~$1.5 million).

The Company is also required to provide financial assurance with the Lahontan Regional Water Quality Control Board (the “Regional Board”) for closure and reclamation costs related to the lined impoundments, which are defined as the Stage 1 heap leach pad, the overflow pond, and the solution collection channel. The reclamation financial assurance estimate for as of ~~September 30, 2016~~March 31, 2017, is ~~$1,210,889~~$1.9 million (December 31, ~~2015~~2016 - ~~$Nil)~~$1.2 million).

In addition to the above, the Company is required to obtain and maintain financial assurance for initiating and completing corrective action and remediation of a reasonably foreseeable release from the Project’s waste management units as required by the Regional Board. The reclamation financial assurance estimate for as of ~~September 30, 2016~~March 31, 2017, is ~~$278,240~~$0.3 million (December 31, ~~2015~~2016 - ~~$278,240)~~$0.3 million).

~~The~~During 2016, the Company entered into $3.0 million in surety bond agreements in order to release its reclamation ~~deposits and post a portion of the financial assurance due in 2016.~~deposits. The Company pays a yearly ~~premium.~~premium of $0.1 million. Golden Queen Mining Co. Ltd. has provided a corporate ~~guarantee~~guaranty on the surety ~~bonds.~~bonds (see Note 12).
9. Related Party Transactions
Except as noted elsewhere in these condensed consolidated interim financial statements, related party transactions are disclosed as follows:
(i) Management Agreement
During the three months ended March 31, 2017, the Company paid a total of $0.03 million (Three months ended March 31, 2016 - $0.03) to the three (3) independent directors of the Company. Additionally, the Company paid $0.02 million for consulting services to one of its directors.

13 12 | Page


GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~
(amounts expressed in thousands of US dollars - Unaudited)

5. ~~Asset Retirement Obligations and Financial Reclamation Assurance - Continued~~
~~Asset Retirement Obligation~~
~~The total asset retirement obligation as of September 30, 2016 is $1,268,541 (December 31, 2015 - $978,453).~~
The Company estimated its asset retirement obligations based on its understanding of the requirements to reclaim and clean-up its property based on its activities to date. During the three and nine months ended September 30, 2016, there was an increase of $96,696 and $290,088 (Three and nine months ended September 30, 2015 - $Nil and $278,240) to the asset retirement obligations. Of these totals, $74,167 and $245,029 was capitalized to property, plant, equipment and mineral interests as the asset portion of the asset retirement obligation for the three and nine months ended September 30, 2016 (Three and nine months ended September 30, 2015 - $Nil and $71,892). The remaining amount of $22,529 and $45,059, for the three and nine months ended September 30, 2016, was expensed to operations as accretion expense (Three and nine months ended September 30, 2015 - $Nil and $Nil). The Company estimates that the cash outflows related to these reclamation activities will be incurred primarily in 2028.   Reclamation provisions are measured at the expected value of future cash flows discounted to their present value using a credit adjusted risk-free interest rate and adjusted for inflation. The Company used a credit adjusted risk-free rate of 9.20% (December 31, 2015 – 9.20%) and an inflation rate of 2.27% (December 31, 2015 – 2.27%).
~~The following is a summary of asset retirement obligations:~~
September 30, 2016 December 31, 2015
Balance, beginning of the period $ 978,453 $ 624,142
Accretion 45,059 -
Changes in cash flow estimates 245,029 354,311
Balance, end of the period $ 1,268,541 $ 978,453
6. ~~Commitments and Contingencies~~
~~Property rent payments and Production Royalties~~
The Company has acquired a number of mineral properties outright. It has acquired exclusive rights to explore, develop and mine other portions of the Project under various mining lease agreements with landowners.
The Company is required to make property rent payments related to its mining lease agreements with landholders, in the form of advance minimum royalties. The total property rent payments for the three and nine months ended September 30, 2016 were $Nil and $18,206 (three months ended September 30, 2015 – $8,539 and nine months ended September 30, 3015 - $68,706), and the Company expects to pay approximately $30,000 in property rent payments in 2016.
Production royalty payments commenced during the first quarter of 2016. The Company has paid $345,184 and $406,147 in production royalties during the three and nine months ended September 30, 2016, respectively.
~~There are multiple third party landholders and the royalty amount due to each landholder over the life of the Project varies with each property.~~
~~Finder’s fee~~
The Company has agreed to issue 100,000 common shares as a finder’s fee in connection with certain property acquisitions upon commencement of commercial production, as defined in the agreement, at the Project. As of September 30, 2016, commercial production had not commenced and accordingly no shares have been issued.
~~Compliance with Environmental Regulations~~
The Company’s exploration and development activities are subject to laws and regulations controlling not only the exploration and mining of mineral properties, but also the effect of such activities on the environment. Compliance with such laws and regulations may necessitate additional capital outlays or affect the economics of a project, and cause changes or delays in the Company’s activities.
14
~~GOLDEN QUEEN MINING CO. LTD.~~
~~Notes to Condensed Consolidated Interim Financial Statements~~
~~For the Nine Months Ended September 30, 2016 and 2015~~
~~(US dollars - Unaudited)~~
6. ~~Commitments and Contingencies - continued~~
~~Compliance with Environmental Regulations - continued~~
The Company may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. The Company believes that any adverse outcome of existing claims, individually or in the aggregate, would not have a material effect on its financial position, results of operations or cash flows.
~~See Note 13 for further details on the mining equipment loans.~~
7.9. Related Party Transactions (continued)
~~Except as noted elsewhere in these consolidated financial statements, related party transactions are disclosed as follows:~~
~~(i)~~ ~~Consulting Fees~~
For the three and nine months ended September 30, 2015, the Company paid $Nil and $201,312 to Mr. H. Lutz Klingmann for services as President of the Company. Included in these consulting fees was $155,428 related to 150,000 bonus shares (Refer to Note 4 – Share Capital). There were no consulting fees paid during the three and nine months ended September 30, 2016.
During the three and nine months ended September 30, 2016, the Company paid a total of $27,447 and $83,685 (Three and nine months ended September 30, 2015 - $44,732 and $81,584) to the three independent directors of the Company. During the three and nine months ended September 30, 2016, Thomas M. Clay did not receive director fees.

(ii) ~~Notes~~Note Payable
On January 1, 2014, the Company entered into an agreement to secure a $10,000,000 loan (the “January 2014 Loan”). The January 2014 Loan was provided by members of the Clay family, who are shareholders of the Company, including $7,500,000 provided by an investment vehicle managed by Thomas M. Clay, a Director and insider of the Company. The January 2014 Loan had a twelve-month term and an annual interest rate of 5%, payable on the maturity date.
The January 2014 Loan was repaid on a date that is less than 183 days before the maturity date. As a result, the Company paid the Lenders an additional charge in the amount that is equivalent to 5% of the principal amount, plus interest on the principal amount at the rate of 5% per annum accrued to the date the January 2014 Loan was repaid. The Company repaid $7,500,000 loan plus the $375,000 accrued interest and $375,000 additional charge on December 31, 2014.
~~The remaining balance of the loan, $2,500,000, the accrued interest of $125,000 and the additional charge of $125,000, were paid on January 5, 2015.~~

On December 31, 2014, the Company ~~also~~ entered into a ~~new~~ loan (the “December 2014 Loan”) with the ~~same parties~~Clay family for ~~an amount of $12,500,000. The December 2014 Loan was~~$12.5 million, due ~~on demand~~ on July 1, 2015 and bore an annual interest rate of 10% ~~payable at the end of each quarter.~~. The loan was guaranteed by GQM Holdings, and secured by a pledge of the Company's interests in GQM Canada, GQM Canada’s interest in GQM Holdings and GQM Holdings' 50% interest in GQM LLC.

The Company also incurred a financing fee to secure the loan in the amount of ~~$1,000,000,~~$1.0 million, of which, ~~$750,000~~$0.8 million was paid on December 31, 2014 and the remaining ~~$250,000~~$0.3 million was paid on January 5, 2015. ~~The Company agreed to pay the legal fees incurred by the lenders relating to this instrument which amounted to $90,916. The total legal fees paid for the transaction were $118,695.~~
15
~~GOLDEN QUEEN MINING CO. LTD.~~
~~Notes to Condensed Consolidated Interim Financial Statements~~
~~For the Nine Months Ended September 30, 2016 and 2015~~
~~(US dollars - Unaudited)~~
7. ~~Related Party Transactions – Continued~~
~~(ii)~~ ~~Notes Payable - Continued~~

On June 8, 2015, the Company amended the December 2014 Loan to extend the maturity to December 8, 2016 and increased the principal amount from ~~$12,500,000~~$12.5 million to ~~$37,500,000~~$37.5 million (the “June 2015 Loan”). The Company also issued to the lenders 10,000,000 common share purchase warrants exercisable for a period of five years expiring June 8, 2020. The common share purchase warrants have an exercise price of $0.95. All other terms remained the same as the December 2014 Loan. The Company also incurred a financing ~~fee~~fees to secure the loan in the amount of ~~$1,500,000, all of which was paid on June 8, 2015.~~$1.5 million. The Company agreed to pay the legal fees incurred by the lenders relating to this debt instrument which amounted to ~~$46,408.~~$0.04 million. The total legal fees were expensed as the transaction met the definition of a debt extinguishment. ~~The terms of the registration rights remains unchanged as does the Company’s assessment of the likelihood of the registration rights being exercised.~~
September 30, 2016 December 31, 2015
Balance, beginning of the period $ 36,053,012 $ 13,881,305
Accretion of discount on the June 2015 Loan 1,853,023 1,374,228
Interest payable transferred to principal balance of the June 2015 loan 2,977,029 1,181,507
Fair value at inception, notes payable - 33,497,277
Repayment of loans - (2,500,000 )
Accretion of financing and legal fees - 967,156
Extinguishment of the December 2014 Loan - (12,500,000 )
Loss on extinguishment of debt - 151,539
Balance, end of the period $ 40,883,064 $ 36,053,012

~~Interest payable relating to~~On November 18, 2016, the Company repaid $12.2 million of the June 2015 Loan asand accrued interest with cash on hand and the net proceeds of $10.1 million from an equity financing. The Company restructured the remaining debt with a new loan with a principal amount of $31.0 million (the “November 2016 Loan”). The new loan has a thirty-month term and an annual interest rate of 8%, payable on a quarterly basis commencing during the first quarter of 2017. Quarterly principal payments of $2.5 million commence during the first quarter of 2018, with a payment of the remaining balance at ~~September 30,~~the maturity date. The first four quarterly interest payments under the November 2016 ~~was $1,050,023 (December 31, 2015 - $969,645). Subsequent~~Loan can be added to ~~September 30, 2016,~~ the ~~$1,050,023 interest payable~~loan principal balance rather than paid in cash, at the Company’s option. The Company exercised this option on January 1, 2017.
In connection with the new loan the Company issued 8,000,000 common share purchase warrants exercisable for a period of five years expiring November 21, 2021. The common share purchase warrants have an exercise price of $0.85. The Company also incurred a financing fee to secure the loan in the amount of $0.9 million, all of which was paid ~~in cash. Please refer to Note 15 for complete details.~~on November 18, 2016.
The table below summarizes the activity on the November 2016 Loan:
March 31, 2017 December 31, 2016
Balance, beginning of the period $ 26,347 $ 36,053
Interest payable transferred to principal balance 296 2,977
Accretion of discount on loans 286 1,996
Capitalized financing fee and legal fees - (930 )
Reduction of debt upon issuance of warrants - (3,090 )
Repayment of loans and interest - (10,659 )
Balance, end of the period $ 26,929 $ 26,347

Current portion $ 2,500 $ -
Non-current portion $ 24,429 $ 26,347
(iii) ~~Share Purchase Warrants~~Amortization of Discounts and Interest Expense
The following table summarizes the amortization of discounts and interest on loan:
13 | Page
GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of US dollars - Unaudited)
9. Related Party Transactions (continued)
(iii) Amortization of Discounts and Interest Expense (continued)
Three Months
Ended March 31, Three Months
Ended March 31,
2017 2016
Accretion of the Nov 2016 Loan discount $ 286 $ -
Interest expense related to the Nov 2016 Loan 626 -
Interest expense related to Komatsu financial loans⁽¹⁾ 135 167
Accretion of the June 2015 Loan discount - 606
Interest expense related to the June 2015 Loan - 994
Accretion of discount and interest on loan $ 1,047 $ 1,767
The Company’s loans were contracted to fund significant development costs.
Three Months
Ended March 31, Three Months
Ended March 31,
2017 2016
Accretion of discounts and interest on loan⁽¹⁾ $ 1,047 $ 1,767
Less: Interest costs capitalized⁽²⁾ - (1,005 )
Interest expense $ 1,047 $ 762
(1) Komatsu is not a related party and has only been included in the above table to reconcile the total interest expense incurred for the period to the amounts capitalized and expensed.
(2) Interest capitalization ended on March 31, 2016 because the mine went into production on April 1, 2016.
(iv) Joint Venture Transaction
On September 15, 2014, the Company closed the Joint Venture Transaction with Gauss resulting in both parties owning a 50% interest in the Project. Pursuant to the Joint Venture Transaction, Golden Queen converted its wholly-owned subsidiary GQM Inc., the entity developing the Project, into a California limited liability company named GQM LLC. On closing of the transaction, Gauss acquired 50% of GQM LLC by investing $110 million cash in exchange for newly issued membership units of GQM LLC. GQM Holdings, a newly incorporated subsidiary of the Company, holds the other 50% of GQM LLC.
Gauss is a funding vehicle owned by entities controlled by Leucadia National Corporation (NYSE: LUK) (“Leucadia”) and certain members of the Clay family, a shareholder group which collectively owned approximately 27% of the issued and outstanding shares of Golden Queen (the “Clay Group”) at the time of the transaction. Gauss is owned 70.51% by Gauss Holdings LLC (“Gauss Holdings”, Leucadia’s investment entity) and 29.49% by Auvergne LLC (“Auvergne”, the Clay Group’s investment entity). Pursuant to the transaction, Leucadia was paid a transaction fee of $2.0 million and $0.3 million was paid to Auvergne through GQM LLC in 2014. The Company expensed these transaction costs.
14 | Page
GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of US dollars - Unaudited)
9. Related Party Transactions (continued)
(iv) Joint Venture Transaction (continued)
Variable Interest Entity
In accordance with ASC 810-10-30, the Company has determined that GQM LLC meets the definition of a VIE and that the Company is part of a related party group that, in its entirety, would meet the definition of a primary beneficiary.   Although no individual variable interest holder individually meets the definition of a primary beneficiary in the absence of the related party group, Golden Queen has determined it is considered the member of the related party group most closely associated with GQM LLC. As a result, the Company has condensed consolidated interim 100% of the accounts of GQM LLC in these condensed consolidated interim financial statements, while presenting a non-controlling interest portion representing the 50% interest of Gauss in GQM LLC on its balance sheet. A portion of the non-controlling interest has been presented as temporary equity on the Company’s balance sheet representing the initial value of the non-controlling interest that could potentially be redeemable by Gauss in the future.
The Company has presented Gauss’ ownership in GQM LLC as a non-controlling interest amount on the balance sheet within the equity section. However, there are terms in the agreement that provides for the exit from the investment in GQM LLC for an initial member whose interest in GQM LLC becomes less than 20%.
If a member becomes less than a 20% interest holder, its remaining unit interest will (ultimately) be terminated through one of three (3) events at the non-diluted member’s option:
a. Through conversion to a net smelter royalty (“NSR”);
b. Through a buy-out (at fair value) by the non-diluted member; or
c. Through a sale process by which the diluted member’s interest is sold
The net assets of GQM LLC as of March 31, 2017, and December 31, 2016 are as follows:
March 31, 2017 December 31, 2016
Assets, GQM LLC $ 152,976 $ 151,802
Liabilities, GQM LLC (22,663 ) (20,710 )
Net assets, GQM LLC $ 130,313 $ 131,092
Included in the assets above, is $9.4 million (December 31, 2016 - $11.1 million) in cash held as at March 31, 2017. The cash in GQM LLC is directed specifically to fund capital expenditures required to continue with production and settle GQM LLC’s obligations. The liabilities of GQM LLC do not have recourse to the general credit of Golden Queen except for two (2) mining drill loans and $3.0 million in surety bond agreements.
Non-Controlling Interest
The carrying value of the non-controlling interest is adjusted for net income and loss, distributions and contributions pursuant to ASC 810-10 based on the same percentage allocation used to calculate the initial book value of temporary equity.
15 | Page
GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of US dollars - Unaudited)
9. Related Party Transactions (continued)
(iv) Joint Venture Transaction (continued)
Three Months
Ended March 31, Three Months
Ended March 31,
2017 2016
Net and comprehensive loss in GQM LLC $ (779 ) $ (709 )
Non-controlling interest percentage 50 % 50 %
Net and comprehensive loss attributable to non-controlling interest $ (390 ) $ (355 )
Net and comprehensive loss attributable to permanent non-controlling interest $ (234 ) $ (213 )
Net and comprehensive loss attributable to temporary non-controlling interest $ (156 ) $ (142 )
Permanent Non-
Controlling Interest Temporary Non-
Controlling Interest
Carrying value of non-controlling interest, December 31, 2016 $ 39,327 $ 26,220
Net and comprehensive loss for the period (234 ) (156 )
Carrying value of non-controlling interest, March 31, 2017 $ 39,093 $ 26,064
Dilution of Interest in Subsidiary
As a result of the Joint Venture Transaction, the Company’s interest in GQM LLC was diluted from 100% to 50% and ordinarily, the Company would recognize gain on dilution with the book value of the investment in GQM LLC increasing as well. However, since the transaction was with a related party and the Company retained control, the excess has not been recognized in net income but rather has been recorded in equity as an increase to APIC based on guidance provided in ASC 810-10-55-4D and -4E.
The deferred tax liability resulted from the increase in the book value over tax value of the investment in GQM LLC.
Capital Contribution Agreement
Pursuant to the Joint Venture Transaction, GQM Holdings made a single capital contribution to GQM LLC of $12.5 million on June 15, 2015. Gauss funded an amount equal to GQM Holdings’ capital contribution to GQM LLC. Both partners maintain their 50% ownership of the Project.
16 | Page
GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of US dollars - Unaudited)
10. Derivative Liabilities
Share Purchase Warrants – Clay loans (Related Party)

On June 8, 2015, the Company issued 10,000,000 share purchase warrants to the Clay family in connection with the June 2015 Loan. The share purchase warrants are exercisable until June 8, 2020 at an exercise price of $0.95. Included in the June 2015 Loan agreement was an anti-dilution provision. If the Company were to complete a financing at a share price lower than the exercise price of the share purchase warrants, the exercise price of the share purchase warrants would be adjusted to match the price at which the financing was completed.
On November 18, 2016, the Company issued 8,000,000 share purchase warrants to the Clay family in connection with the November 2016 Loan. The share purchase warrants are exercisable until November 18, 2021 at an exercise price of $0.85. Included in the November 2016 Loan agreement was an anti-dilution provision. If the Company were to complete a financing at a share price lower than the exercise price of the share purchase warrants, the exercise price of the share purchase warrants would be adjusted to match the price at which the financing was completed.

The share purchase warrants meet the definition of a derivative liability instrument as the exercise price is not a fixed price as described above. Therefore, the settlement feature does not meet the “fixed-for-fixed” criteria outlined in ASC 815-40-15.

The fair value of the derivative ~~liability~~liabilities related to the share purchase warrants as at ~~September 30, 2016~~March 31, 2017 is ~~$4,870,193~~$5.9 million (December 31, ~~2015~~2016 - ~~$2,498,269)~~$5.5 million). The derivative ~~liability was~~liabilities were calculated using ~~an option~~the binomial and the Black-Scholes pricing valuation ~~model~~models with the following assumptions:

16
Warrants  related to June 2015 Loan March 31, 2017 December 31, 2016
Risk-free interest rate 0.87 % 0.84 %
Expected life of derivative liability 3.19 years 3.44 years
Expected volatility 73.66 % 78.79 %
Dividend rate 0.00 % 0.00 %

~~GOLDEN QUEEN MINING CO. LTD.~~
~~Notes to Condensed Consolidated Interim Financial Statements~~
~~For the Nine Months Ended September 30, 2016 and 2015~~
~~(US dollars - Unaudited)~~
7. ~~Related Party Transactions – Continued~~
~~(iii)~~ ~~Share Purchase Warrants - Continued~~
2016      2015
Risk-free interest rate 0.51% - 0.68% 0.73% - 1.02%
Expected life of derivative liability 3.69 - 4.19 years 4.44 - 5 years
Expected volatility 79.45% - 83.3% 72.29% - 76.11%
Dividend rate 0.00% 0.00%
Warrants  related to November 2016 Loan March 31, 2017 December 31, 2016
Risk-free interest rate 1.12 % 1.11 %
Expected life of derivative liability 4.65 years 4.89 years
Expected volatility 88.21 % 77.21 %
Dividend rate 0.00 % 0.00 %

The ~~estimated fair value of~~change in the derivative share purchase warrants is as follows:

September 30, 2016 December 31, 2015
Balance, beginning of the period $ 2,498,269 $ -
Fair value at inception - 4,002,723
Change in fair value 2,371,924 (1,504,454 )
Balance, end of the period $ 4,870,193 $ 2,498,269
~~(iv)~~ ~~Amortization~~~~of Discounts and Interest Expense~~
March 31, 2017 December 31, 2016
Balance, beginning of the period $ 5,458 $ 2,498
Fair value at inception - 3,090
Change in fair value 427 (130 )
Balance, end of the period $ 5,885 $ 5,458

~~The following table summarizes the amortization of discounts and interest on loans and convertible debentures:~~Share Purchase Warrants – July 2016 financing

Three Months
Ended
September 30, Three Months
Ended
September 30, Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015 2016 2015
Accretion of the June 2015 Loan discount $ 620,971 $ 600,797 $ 1,853,024 $ 743,866
Interest expense related to the June 2015 Loan 1,050,023 937,500 3,057,406 1,166,667
*Interest expense related to Komatsu financial loans 143,567 91,301 463,818 135,859
Interest expense related to the convertible debentures - 14,321 - 94,907
Amortization of the convertible debentures - 262,203 - 1,852,754
Interest expense related to the december 2014 Loan - - - 547,945
Accretion of the december 2014 loan financing fees - - - 967,155
Accretion of discount and interest on loan and convertible debentures $ 1,814,561 $ 1,906,122 $ 5,374,249 $ 5,509,153
The Company’s loans were contracted to fund significant development costs. The Company capitalizes a portion of the interest expense as it related to funds borrowed to complete development activities at the Project site.
Three Months
Ended
September 30, Three Months
Ended
September 30, Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015 2016 2015
Accretion of discounts and interest on loan, advance and convertible debenture* $ 1,814,561 $ 1,906,122 $ 5,374,249 $ 5,509,153
Less: Interest costs capitalized** - (924,732 ) (1,005,223 ) (2,509,899 )
Interest expense $ 1,814,561 $ 981,390 $ 4,369,026 $ 2,999,254
*Komatsu is not a related party and has only been included in the above table to reconcile the total interest expense incurred for the period to the amounts capitalized and expensed.
**Interest capitalization ended on March 31, 2016 as the mine went into production on April 1, 2016.
17
~~GOLDEN QUEEN MINING CO. LTD.~~
~~Notes to Condensed Consolidated Interim Financial Statements~~
~~For the Nine Months Ended September 30, 2016 and 2015~~
~~(US dollars - Unaudited)~~
7. ~~Related Party Transactions – Continued~~
~~(v)~~ ~~Joint Venture Transaction~~
~~Variable Interest Entity~~
In accordance with ASC 810-10-30, the Company has determined that GQM LLC meets the definition of a VIE and that the Company is part of a related party group that, in its entirety, would meet the definition of a primary beneficiary.   Although no individual variable interest holder individually meets the definition of a primary beneficiary in the absence of the related party group, Golden Queen has determined it is considered the member of the related party group most closely associated with GQM LLC. As a result, the Company has consolidated 100% of the accounts of GQM LLC in these consolidated financial statements, while presenting a non-controlling interest portion representing the 50% interest of Gauss in GQM LLC on its balance sheet. A portion of the non-controlling interest has been presented as temporary equity on the Company’s balance sheet representing the initial value of the non-controlling interest that could potentially be redeemable by Gauss in the future.
~~The net assets of GQM LLC as of September 30, 2016 and December 31, 2015 are as follows:~~
September 30, 2016 December 31, 2015
Assets, GQM LLC $ 154,296,007 $ 158,209,916
Liabilities, GQM LLC (20,599,036 ) (22,591,211 )
Net assets, GQM LLC $ 133,696,971 $ 135,618,705
Included in the assets above, is $15,414,250  (December 31, 2015 - $31,531,853) in   cash held as at September 30, 2016. The cash in GQM LLC is directed specifically to fund working capital until the Project reaches positive cash flows. The liabilities of GQM LLC do not have recourse to the general credit of the primary beneficiary except in two situations. Please refer to notes 5 and 13 for details on the exceptions.
~~Non-Controlling Interest~~
The carrying value of the non-controlling interest is adjusted for net income and loss, distributions and contributions pursuant to ASC 810-10 based on the same percentage allocation used to calculate the initial book value of temporary equity.
Three Months
Ended
September 30, Three Months
Ended
September 30, Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015 2016 2015
Net and comprehensive income (loss) in GQM LLC $ 1,706,349 $ (557,852 ) $ (1,921,733 ) $ (2,556,001 )
Non-controlling interest percentage 50 % 50 % 50 % 50 %
Net and comprehensive income (loss) attributable to non-controlling interest $ 853,173 $ (278,926 ) $ (960,867 ) $ (1,278,001 )
Net and comprehensive income (loss) attributable to permanent non-controlling interest $ 511,904 $ (167,355 ) $ (576,520 ) $ (766,801 )
Net and comprehensive income (loss) attributable to temporary non-controlling interest $ 341,269 $ (111,571 ) $ (384,347 ) $ (511,200 )
Permanent Non-
Controlling Interest Temporary Non-
Controlling Interest
Carrying value of non-controlling interest, December 31, 2015 $ 40,685,611 $ 27,123,741
Net and comprehensive loss for the period (576,520 ) (384,347 )
Carrying value of non-controlling interest, September 30, 2016 $ 40,109,091 $ 26,739,394
18
~~GOLDEN QUEEN MINING CO. LTD.~~
~~Notes to Condensed Consolidated Interim Financial Statements~~
~~For the Nine Months Ended September 30, 2016 and 2015~~
~~(US dollars - Unaudited)~~
8. ~~Derivatives used as Hedging Instruments~~
During the nine months ended September 30, 2016, the Company entered into a series of “zero-cost put/ call” collar contracts for gold with settlements scheduled between September 30, 2016 and December 30, 2016 with an average floor price of $1,100 per ounce and an average ceiling price of $1,320 per ounce. These derivative instruments were not designated as hedges by the Company and are recorded at their fair value at the end of each reporting period with changes in fair value recorded in the statement of loss and comprehensive loss.
For the three and nine months ended September 30, 2016, the Company recorded an unrealized gain of $206,239 and a loss of $115,395 (Three and nine months ended September 30, 2015 - $Nil and $Nil) in the statement of income (loss) and comprehensive income (loss) on these contracts.
~~The following is a summary, by maturity dates, of the Company’s gold collar contracts outstanding as at September 30, 2016:~~
2016
Gold zero cost collars:
Floor amount (ounces) 3,000
Average floor price $ 1,100
Ceiling amount (ounces) 3,000
Average ceiling price $ 1,320
~~The unrealized fair value of these contracts at September 30, 2016 was a liability of $115,395 (December 31, 2015 - $Nil).~~
9. ~~Derivative Liability~~
On July 25, 2016, the Company issued a total of 6,317,700 share purchase warrants in connection with the July 2016 financing with an exercise price of C$2.00. In accordance with the guidance in ASC 815-40-15, the share purchase warrants met the criteria of a derivative instrument liability because they were exercisable in a currency other than the functional currency of the Company and thus did not meet the “fixed-for-fixed” criteria of that guidance. As a result, the Company was required to separately account for the share purchase warrants as derivative instrument liabilities recorded at fair value and marked-to-market each period with the changes in the fair value each period charged or credited to income.

17 | Page
GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of US dollars - Unaudited)
10. Derivative Liabilities (continued)
Share Purchase Warrants – July 2016 financing (continued)
As at ~~September 30, 2016,~~March 31, 2017, the Company had re-measured the share purchase warrants and determined the fair value of the derivative liability to be ~~$2,165,550~~$1.0 million (December 31, 2016 - $1.0 million) using the Black-Scholes option pricing model with the following assumptions:
March 31, 2017 December 31, 2016
Risk-free interest rate 0.87 % 0.84 %
Expected life of derivative liability in years 2.32 years 2.56 years
Expected volatility 77.18 % 79.40 %
Dividend rate 0.00 % 0.00 %

The change in the derivative share purchase warrants is as follows:
March 31, 2017 December 31, 2016
Fair value of warrants issued $ 972 $ 2,701
Change in fair value of warrants 54 (1,729 )
Balance, end of the period $ 1,026 $ 972
11. ~~September 30, 2016~~Supplementary Disclosures of Cash Flow Information
Three Months Ended
March 31, Three Months Ended
March 31,
2017 2016
Cash paid during the period for:
Interest on loan payable $ 135 $ 144
Non-cash financing and investing activities:
Asset retirement costs charged to mineral property interests $ 87 $ 97
Mining equipment acquired through issuance of debt $ 2,481 $ 295
Mineral property expenditures included in accounts payable $ 1,524 $ 2,311
Interest cost capitalized to mineral property interests $ - $ 839
Inventory expenditures included in accounts payable $ - $ 867
Non-cash finder fess $ 59 $ -
Non-cash amortization of discount and interest expense $ 286 $ 606
Interest payable converted to principal balance $ 296 $ 975
~~Risk-free interest rate~~12. ~~0.51~~ %
~~Expected life of derivative liability in years~~ ~~2.82~~
~~Expected volatility~~ ~~84.29~~ %
~~Dividend rate~~ ~~0.00~~ %Commitments and Contingencies

~~As of September 30, 2016, the changes of derivative liability for share purchase warrants are as follows:~~Royalties

The Company has acquired a number of mineral properties outright. It has acquired exclusive rights to explore, develop and mine other portions of the Project under various mining lease agreements with landowners. Royalty amount due to each landholder over the life of the Project varies with each property.
September 30, 2016
Fair value at inception $ -
Fair value of warrants granted 2,701,288
Change in fair value of warrants (535,738 )
Balance, end of the period $ 2,165,550
Compliance with Environmental Regulations
The Company’s exploration and development activities are subject to laws and regulations controlling not only the exploration and mining of mineral properties, but also the effect of such activities on the environment. Compliance with such laws and regulations may necessitate additional capital outlays or affect the economics of a project, and cause changes or delays in the Company’s activities.

19 18 | Page

GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~
(amounts expressed in thousands of US dollars - Unaudited)

~~10.~~12. ~~Supplementary Disclosures of Cash Flow Information~~Commitments and Contingencies (continued)

Corporate Guaranties
Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015
Cash paid during period for:
Interest $ 468,276 $ 1,070,664
Non-cash financing and investing activities:
Common shares issued as part of a management agreement $ - $ 155,428
Change in cash flow estimates related to asset retirement obligations charged to mineral property interests $ 245,030 $ -
Mobile equipment acquired through issuance of debt $ 295,126 $ 12,088,470
Property, plant, equipment and mineral interest expenditures included in accounts payable $ 318,327 $ 4,117,646
Non-cash interest cost capitalized to mineral property interests $ 838,888 $ 2,509,899
Non-cash amortization of discount and interest expense $ 1,853,023 $ 2,863,396
Interest payable converted to principal balance on notes payable $ 2,977,028 $ -
The Company has provided corporate guaranties for two (2) of GQM LLC’s mining drill loans. The Company has also provided corporate a guaranty for GQM LLC’s surety bonds.

~~11.~~13. Financial Instruments
Fair Value Measurements

All financial assets and financial liabilities are recorded at fair value on initial recognition. Transaction costs are expensed when they are incurred, unless they are directly attributable to the acquisition of qualifying assets, in which case they are added to the costs of those assets until such time as the assets are substantially ready for their intended use or sale.
Fair Value Measurements (continued)
The three levels of the fair value hierarchy are as follows:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
~~Level 3~~Level3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

September 30, 2016
Total Level 1 Level 2 Level 3
Liabilities:
Share purchase warrants – Related Party (Note 7(iii)) $ 4,870,193 $ - $ 4,870,193 $ -
Share purchase warrants – (Note 9) 2,165,550 - 2,165,550 -
Derivatives – Hedging instruments (Note 8) 115,395 - 115,395 -
$ 7,151,138 $ - $ 7,151,138 $ -
March 31, 2017
Total Level 1 Level 2 Level 3
Liabilities:
Share purchase warrants – Related Party (Note 10) $ 5,885 $ - $ 5,885 $ -
Share purchase warrants – (Note 10) 1,026 - 1,026 -
$ 6,911 $ - $ 6,911 $ -

December 31, 2015
Total Level 1 Level 2 Level 3
Liabilities:
Share purchase warrants – Related Party (Note 7(iii)) $ 2,498,269 $ - $ 2,498,269 $ -
20
~~GOLDEN QUEEN MINING CO. LTD.~~
~~Notes to Condensed Consolidated Interim Financial Statements~~
~~For the Nine Months Ended September 30, 2016 and 2015~~
~~(US dollars - Unaudited)~~
~~11.~~ ~~Financial Instruments - Continued~~
December 31, 2016
Total Level 1 Level 2 Level 3
Liabilities:
Share purchase warrants – Related Party (Note 10) $ 5,458 $ - $ 5,458 $ -
Share purchase warrants – (Note 10) 972 - 972 -
$ 6,430 $ - $ 6,430 $ -

Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value measurement of the financial instruments above use observable inputs in option price models such as the binomial and the Black-Scholes valuation models.

~~12.~~ ~~Earning (Loss) Per Share~~
Three Months
Ended
September 30, Three Months
Ended
September 30, Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015 2016 2015
Numerator:
Net income (loss) attributable to the shareholders of the Company– numerator for basic and diluted EPS $ 2,738,207 $ (1,924,167 ) $ (8,296,349 ) $ (4,739,618 )
Denominator:
Weighted average number of common shares outstanding -basic 108,026,944 99,928,683 102,657,767 99,881,430
Weighted average number of common shares outstanding - diluted¹ 108,402,626 99,928,683 102,657,767 99,881,430

Earnings (Loss) per share – basic $ 0.03 $ (0.02 ) $ (0.08 ) $ (0.05 )
Earnings (Loss) per share – diluted $ 0.03 $ (0.02 ) $ (0.08 ) $ (0.05 )
1. Diluted weighted average number of shares for the three months ended September 30, 2016, excludes 500,000 options and 16,317,700 warrants because out of money, for the nine months ended September 30,2016, 1,070,000 anti-dilutive options and 16,317,700 warrants were excluded, (three and nine months ended September 30, 2015 –1,070,000 ant-dilutive options and 10,000,000 warrants.).
~~13.~~ ~~Loan Payable~~
During the nine months ended September 30, 2016, the Company acquired one piece of mobile mining equipment from Komatsu through a financing agreements. As at September 30, 2016 and December 31, 2015, the finance agreement balances are as follows:
September 30, 2016     December 31, 2015
Balance, beginning of period $ 18,372,823 $ 913,132
Additions 352,438 23,155,510
Down payments, taxes and principal repayments (3,793,474 ) (5,695,819 )
Balance, end of period $ 14,931,786 $ 18,372,823
~~The terms of the financing agreements are as follows:~~
September 30, 2016 December 31, 2015
Total acquisition costs $ 24,614,468 $ 24,262,031
Interest rates 0.00% - 4.40 % 0.00% - 4.40 %
Average remaining life (Years) 2.98 3.46
Monthly payments $ 4,669 - $33,906 $ 4,669 - $33,906
Short-term portion $ 5,175,113 $ 4,942,716
Long-term portion $ 9,756,674 $ 13,430,107
21 19 | Page

GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~
(amounts expressed in thousands of US dollars - Unaudited)

13. ~~Loan Payable - Continued~~Financial Instruments (continued)
Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Company by failing to discharge its obligations. To mitigate exposure to credit risk on financial assets the Company has established policies to ensure liquidity of funds and ensure counterparties demonstrate minimum acceptable credit worthiness.
The Company maintains its US Dollar and Canadian Dollar cash in bank accounts with major financial institutions with high credit standings. Cash deposits held in the United States are insured by the FDIC for up to $0.3 million and Canadian Dollar cash deposits held in Canada are insured by the Canada Deposit Insurance Corporation (“CDIC”) for up to C$0.1 million.
Certain United States and Canadian bank accounts held by the Company exceed these federally insured limits or are uninsured as they relate to US Dollar deposits held in Canadian financial institutions. As of March 31, 2017, the Company’s cash balances held in United States and Canadian financial institutions include $9.5 million, which are not fully insured by the FDIC or CDIC. The Company has not experienced any losses on such accounts and management believes that using major financial institutions with high credit ratings mitigates the credit risk in cash.
Interest Rate Risk
The Company holds 93% of its cash in bank deposit accounts with a single major financial institution. The interest rates received on these balances may fluctuate with changes in economic conditions. Based on the average cash balances during the three months ended March 31, 2017 a 1% decrease in interest rates would have reduced the interest income for 2017 to a immaterial amount.
Foreign Currency Exchange Risk
Certain purchases of corporate overhead expenditures are denominated in Canadian Dollar. As a result, currency exchange fluctuations may impact the costs of our operations. Specifically, the appreciation of the Canadian Dollar against the US Dollar may result in an increase in the Canadian operating expenses in US dollar terms. As of March 31, 2017, the Company maintained the majority of its cash balance in US Dollar. The Company currently does not engage in any currency hedging activities.
Commodity Price Risk
The Company’s primary business activity is the development of the open pit, gold and silver, heap leach project on the Project. Decreases in the price of either of these metals from current levels has the potential to negatively impact the future viability of the Project.
14. General and Administrative Expenses
General and administrative expenses are incurred to support the administration of the business that are not directly related to production. Significant components of general and administrative expenses are comprised of the following:
Three Months
Ended March 31, Three Months
Ended March 31,
2017 2016
Audit, legal and professional fees $ 288 $ 774
Salaries and benefits and director fees 560 342
Regulatory fees and licenses 53 22
Insurance 133 124
Corporate administration 382 265
$ 1,416 $ 1,527
20 | Page
GOLDEN QUEEN MINING CO. LTD.
Notes to Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of US dollars - Unaudited)
15. Loss Per Share
Three Months
Ended March 31, Three Months
Ended March 31,
2017 2016
Numerator:
Net loss attributable to the shareholders of the Company - numerator for basic and diluted LPS $ (2,426 ) $ (8,925 )
Denominator:
Weighted average number of common shares outstanding - basic and diluted 111,080,008 99,893,341

Loss per share – basic and diluted $ (0.02 ) $ (0.09 )
Weighted average number of shares for the three months ended March 31, 2017 excludes 1,955,002 options (March 31, 2016 -1,070,000) and 24,317,700 warrants (March 31, 2016 – 10,000,000) that were antidilutive.
16. Loan Payable
During the three months ended March 31, 2017, the Company sold two (2) (December 31, 2016 –Nil) pieces of equipment with a net book value of $1.0 million in consideration for settlement of two (2) loans by $0.6 million plus $0.1 million in cash. The Company also booked $0.3 million as a loss in disposition of fixed assets.
During the three months ended March 31, 2017, the Company entered into three (3) new loan agreements for a total of $3.8 million for the acquisition of three (3) (December 31, 2016 –two (2)) pieces of mining equipment from Komatsu.
As at March 31, 2017 and December 31, 2016, the finance agreement balances are as follows:
March 31, 2017 December 31, 2016
Balance, beginning of the period $ 15,150 $ 18,373
Additions 3,737 2,047
Down payments and taxes (700 ) (264 )
Settlements (556 ) -
Principal repayments (1,405 ) (5,006 )
Balance, end of the period $ 16,226 $ 15,150

Current portion $ 6,137 $ 5,656
Non-current portion $ 10,089 $ 9,494

For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, the Company made total down payments of ~~$Nil and $57,313 (Three and nine months ended September 30, 2015~~$0.7 million (2016 - ~~$1,606,452 and $2,525,921)~~$0.3 million). The down payments consist of the sales tax on the assets and a 10% payment of the pre-tax purchase price. All of the loan agreements are for a term of four (4) years, except ~~one~~two (2) which isare for three (3) years, and are secured by the underlying asset except for ~~the~~two (2) mining drill ~~loan~~loans for which GQM Ltd. has provided a corporate guarantee. Interest rates range from 0.00% to 4.50% with monthly payments in the range of $0.005 to $0.03 million.

The following table outlines the principal payments to be made for each of the remaining years:

Year Principal Payments
2016 $ 1,294,271
Years Principal Payments
2017 5,198,262 6,137
2018 5,323,624 6,142
2019 3,115,631 3,118
2020 - 829
Total $ 14,931,788 $ 16,226
~~14.~~ ~~Comparative Figures~~21 | Page
~~Certain comparative figures have been reclassified~~GOLDEN QUEEN MINING CO. LTD.
Notes to ~~conform to~~Condensed Consolidated Interim Financial Statements
For the financial statement presentation adopted for the current year. The reclassifications had no impact on the net loss, comprehensive loss, deficit accumulated or the cash flows as previously reported. Also see Note 16 for restatementThree Months Ended March 31, 2017 and 2016
(amounts expressed in thousands of ~~certain 2015 balances.~~US dollars - Unaudited)

~~15.~~17. Subsequent Events

On ~~October~~April 1st, ~~2016,~~2017, the Company ~~made an~~was to make a quarterly interest payment ~~of $1,050,023 in~~on the November 2016 loan. In accordance with the terms of the ~~June 2015 loan agreement.~~
~~Subsequent to September 30,~~November 2016 ~~GQM LLC acquired a blasthole drill valued at $1.1 million. A down payment of $0.2 million was made with the remaining amount being financed over 36 months at a rate of 4.40%. The~~ loan agreement, ~~has been guaranteed by Golden Queen.~~
~~16.~~ ~~Prior Periods Financial Restatements~~
~~During~~ the ~~preparation~~Company chose to exercise its right to add the interest owed on April 1st, 2017 to the principal balance. The principal balance of the deferred tax calculations for the year ended December 31, 2015, the Company found an accounting error in the calculation of the deferred income taxes for the year ended December 31, 2014. The accounting error related to the recognition of a deferred tax liability resulting from the dilution gain recorded in additional paid-in capital from the JV transaction (Note 7(v)). The impact of the error on the financial statements as at September 30, 2015 is presented below. Thereloan was ~~no impact on the Company’s Consolidated Statements of Loss and Comprehensive Loss or the Consolidated Statement of Cash Flows.~~increased by $0.6 million.
~~Impact as at September 30, 2015:~~
September, 2015
As Previously
Reported As Restated

Liabilities:
Deferred tax liability $ - $ 12,922,000
Total liabilities $ 57,891,299 $ 70,813,299
Shareholders’ Equity:
Additional paid-in capital $ 56,545,713 $ 43,623,713
Total shareholders’ equity attributable to GQM Ltd. $ 40,221,722 $ 27,299,722
Total shareholders’ equity $ 81,205,389 $ 68,283,389

22 | Page

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operation
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing under Item 1 of this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under the heading “Risk Factors and Uncertainties” in our Annual Report on Form 10-K filed with the SEC on March 30, 2016, and elsewhere in this Quarterly Report on Form 10-Q.
~~Cautionary Note Regarding Forward-Looking Statements~~
Certain statements made in this Quarterly Report on Form 10-Q may constitute “forward-looking statements”. These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Except for historical information, the matters set forth herein, which are forward-looking statements, involve certain risks and uncertainties that could cause actual results to differ. Potential risks and uncertainties include, but are not limited to, unexpected changes in business and economic conditions;  significant increases or decreases in gold prices; changes in interest and currency exchange rates;  unanticipated grade changes; changes in recovery rates of gold and silver; metallurgy, processing, access, availability of materials, equipment, supplies and water; determination of reserves; results of current and future drilling activities; joint venture relationships; economic volatility, either globally or in the U.S.; local and community impacts and issues; accidents and labor disputes; environmental costs and risks; and ability to refinance debt at reasonable rates or at all. Forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of these terms or other comparable terminology, or which by their nature refer to future events. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements are made based on management’s beliefs, estimates, and opinions on the date the statements are made, and we undertake no obligation to update such forward-looking statements if these beliefs, estimates, and opinions should change, except as required by law.

The following discussion of the operating results and financial condition of Golden Queen Mining Co. Ltd. (“Golden Queen”, “Company”, “we”, “our” or “us”) is as at ~~November 9, 2016~~May 10, 2017 and should be read in conjunction with the unaudited condensed consolidated interim financial statements of the Company for the quarter ended ~~September 30, 2016~~March 31, 2017 and the notes thereto.

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is prepared in accordance with ~~U.S.~~US generally accepted accounting principles and all amounts herein are in ~~U.S.~~thousands of US dollars unless otherwise noted.
Cautionary Note Regarding Forward-looking Statements
This Form 10-Q contains certain forward-looking statements, which relate to the intent, belief and current expectations of the Company’s management, as well as assumptions and parameters used in the feasibility study referenced in this report. These forward-looking statements are based upon numerous assumptions that involve risks and uncertainties and other factors that may cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include among other things the receipt and compliance with the terms of required approvals and permits, results of operations and commodity prices. In addition, projected mining results, including quantity of ore, grade, production rates, and recovery rates, are subject to numerous risks normally associated with mining activity of the nature described in this report and in the feasibility study, and as a result actual results may differ substantially from projected results. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date the statements were made.
Cautionary Note to US Investors
We advise US investors that the mineral reserve estimates disclosed in this report have been prepared in accordance with Canadian regulations and may not qualify as “reserves” under the SEC Industry Guide 7. Accordingly, information concerning mineral resources and reserves set forth herein may not be comparable with information presented by companies using only US standards in their public disclosure.
Mr. Peter A. Herrera, CPG is a qualified person for the purposes of NI 43-101 and has reviewed and approved the technical information in this Form 10-Q.

The Soledad Mountain Project

Overview

The Company is an emerging gold and silver producer utilizing an open pit, heap leach operation on its Soledad Mountain property, located just outside the town of Mojave in Kern County in southern California. The Soledad Mountain Project (the “Project”) utilizes conventional open pit mining methods and the cyanide heap leach and Merrill-Crowe processes to recover gold and silver from crushed, agglomerated ore.

The Project is held by Golden Queen Mining Company, ~~closed~~LLC (“GQM LLC”), a ~~joint venture transaction (the “Joint Venture Transaction”)~~California limited liability corporation. The Company holds a 50% interest in GQM LLC, with Gauss LLC (“Gauss”) ~~pursuant to which it sold~~holding the remaining 50% ~~of its ownership in the Project for an investment of $110 million in September 2014.~~. Gauss is a funding vehicle owned by entities controlled by Leucadia National Corporation (NYSE: LUK) (“Leucadia”) and certain members of the Clay family ~~a shareholder group which, at the time of the Joint Venture Transaction, collectively owned approximately 27% of the issued and outstanding shares of Golden Queen~~ (the “Clay Group”). Gauss is owned 70.51% by Gauss Holdings LLC ~~(“Gauss Holdings”, Leucadia’s~~(Leucadia’s investment entity) and 29.49% by Auvergne LLC (“~~Auvergne”,~~Auvergne,” the Clay Group’s investment entity).
23
~~Golden Queen Mining Co., Inc. (“~~GQM ~~Inc.”),~~LLC is created as a ~~California corporation~~joint venture pursuant to the terms of an amended and ~~the wholly-owned subsidiary of the Company, was converted into a~~restated limited liability company ~~Golden Queen Mining Company, LLC (“GQM LLC”) on~~agreement dated September ~~10,~~15, 2014 ~~in preparation for the formation of the Joint Venture. Golden Queen Mining Holdings (“GQ Holdings”~~(the “Joint Venture”)~~, the Company’s wholly-owned subsidiary, now owns a 50% interest in GQM LLC and Gauss holds the remaining 50%~~.

Please refer to the Company’s Form 10-K dated March ~~30, 2016~~15, 2017 for information on the Project and the Joint ~~Venture Transaction.~~
The Company commenced commissioning of the facilities in the last quarter of 2015. The first gold and silver doré was poured, as part of the testing and commissioning process, on March 1, 2016. Testing and commissioning continued in March 2016 and production commenced on April 1, 2016.
~~Commissioning of the Facilities~~
Commissioning of the crushing-screening plant commenced in the fourth quarter of 2015 as scheduled. Leaching of the agglomerated ore was initiated in early February and the commissioning of the Merrill-Crowe facility was completed mid-February. A significant milestone was achieved when the inaugural gold and silver doré bar was poured on March 1, 2016.
The crushing and screening plant continued to be ramped up during the third quarter and 24-hour, 7-day per week operations commenced in June. Irrigation rates of ore on the heap were at the upper level of anticipated flow. The Company anticipates achieving an average throughput of 10,000-11,000 tons per day by the end of 2016.
~~In accordance with US GAAP, the Company started recognizing revenues and expenses related to the sale of metals in the second quarter of 2016.~~
~~Please refer to the~~~~Operating performance~~~~section below for further details.~~Venture.

~~Feasibility Study~~Highlights

~~The Company filed~~Operating costs for first quarter were $16.08 per ton processed. Mining has steadily increased and total tons moved now averages over 50K tons per day. This was accomplished with the addition of two (2) new haul trucks and will be further enhanced with the addition of a ~~technical report pursuant~~front shovel in August. Processing is working to ~~National Instrument 43-101 – Standards~~reduce down-time and increase throughput by improving the efficiency of ~~Disclosure for Mineral Projects (“NI 43-101”) titled “Soledad Mountain Technical Report~~the feeders below the coarse ore stockpile and ~~Updated Feasibility Study” with an effective date~~maximizing the efficiency of ~~February 25, 2015 (the “Technical Report”) on~~ the ~~System for Electronic Document Analysis and Retrieval (“SEDAR”) on February 27, 2015 and~~cone liners of the ~~Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) on March 2, 2015.~~Secondary Crusher. Process maintenance costs are still higher than anticipated due to higher wear.

Please refer to the Company’s news release dated February 10, 2015 and Form 10-K dated March 30, 2016 for further details on the Technical Report and updated feasibility study. The Technical Report and updated feasibility study are also available on the Company’s website or on SEDAR.
~~The Center for Biodiversity Petition to List the Mohave Shoulderband Snail as an Endangered Species~~
On January 31, 2014, the Center for Biological Diversity (“CBD”) filed an emergency petition (the “Petition”) with the United States Fish and Wildlife Service (“USFWS”) asking the USFWS to list the Mohave Shoulderband snail as a threatened or endangered species. Citing a report published more than 80 years ago, the Petition claims that the snail exists in only three places and that most of the snail habitat occurs on Soledad Mountain, where the Company is developing the Project.
The Company worked with its environmental and legal advisors to prepare a detailed response to the petition, which was filed with the USFWS on March 31, 2014. The Company’s response is available on the Company’s website at www.goldenqueen.com.
On April 22, 2014, the Company learned that the USFWS had determined that there is no emergency to justify listing the Mohave Shoulderband snail as threatened or endangered under the Endangered Species Act of 1973, as amended. The USFWS reviewed the petition filed by the CBD and concluded that there was no imminent threat to the snail that would cause them to believe an emergency listing was required.
242

~~Even though an emergency listing was not warranted,~~A total of 4.1mm tons of ore and waste were mined during the ~~USFWS~~first quarter, including 852k tons of ore. Mining continued in the North-West pit and the Main Pit Phase 1. Mining operations are increasing in the East Pit and stripping continues in that area. The first ore is ~~required by~~expected in the ~~Endangered Species Act to continue processing~~fourth quarter of 2017 with over 70% of the ~~listing petition.~~ ore for the plant in the first quarter of 2018 will be supplied from the East Pit.
A ~~public comment period~~total of 791k tons were processed and stacked on the ~~petition commenced on April 10, 2015 for a period~~Leach Pad in the first quarter of ~~60 days. On September 9, 2015,~~2017 at an average grade of 0.0186 ounces per ton. The average grade of ore stacked in the ~~USFWS~~fourth quarter of 2016 was 0.0146 ounces per ton.
The porosity and the ~~CBD entered into~~permeability of the ore on the heap-leach pad continue to be very good. Side-slope leaching on the pad continues to be a ~~Stipulated Settlement Agreement that established a 12 Month Finding date of April 11, 2016.~~priority and solution percolation from the second lift through the first lift has been without problems.

~~In November 2015,~~GQMC produced a total of 11,406 ounces of gold and 64,581 ounces of silver and sold 11,160 ounces of gold and 62,095 ounces of silver the ~~Company,~~first quarter. Aggregate sales commenced this quarter.
Construction of the ~~USFWS, and~~second phase of the ~~CBD entered into a Memorandum of Understanding under which~~Leach Pad started in the ~~USFWS and the CBD agreed~~first quarter. The project is expected to defer the 12 Month Finding date to June 30, 2017, and the Company agreed not to disturb until June 30, 2017 certain points on Soledad Mountain where snails or snail shells had been identified. The Company, the USFWS, and the CBD have jointly selected a third party environmental consultant that will conduct a survey to better understand the snail’s range and distribution on Soledad Mountain before the USFWS prepares its 12 Month Finding. Surveying is anticipated to take place between the fall of 2016 and the springbe completed in July of 2017.

The ~~ongoing review by~~cash balance as at the ~~USFWS does not affect the Project’s regulatory approvals or interfere with the Project’s operation. The November 2015 Memorandum~~end of Understanding caused no material adjustments to the Project’s mine plan. The Company believes that conservation of any snail habitat areas can be accomplished without material adjustments to the Project’s mine plan and is preparing a conservation plan accordingly. If the USFWS ultimately finds that the snail is ‘endangered’ or ‘threatened’ and no agreed conservation plan is established, material adjustments to the Project’s mine plan may be required.March was $9.4 mm. Currently there are 199 employees.

~~Other Legal Matters~~
3

~~National Labor Relations Board~~
The Company filed a charge with the National Labor Relations Board (the “NLRB”) against the Building and Construction Trades Council of Kern, Inyo, and Mono Counties (the “Union”) on May 23, 2014. The charge was in response to the action taken by the Union related to a 1997 project labor agreement (PLA) that the Company believes is not applicable to the Project and unenforceable under federal labor law.
The NLRB issued a Complaint against the Union and the matter was heard by an NLRB Administrative Law Judge resulting in a December 2015finding by the judge that the PLA violates Section 8(e) of the National Labor Relations Act and is therefore unenforceable. The Union has appealed that decision to the NLRB in Washington, D.C., and the North America’s Building Trades Unions have filed an amicus curiae brief in support. The Company has filed its Responses to both briefs.
Results of Operations
The following are the results of operations for the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, and the corresponding ~~periods~~period ended ~~September 30, 2015.~~March 31, 2016.
31-Mar-17 31-Mar-16 Variance
Mining⁽¹⁾
Ore mined k ton 852 291 193 %
Ore mined k tonnes 773 264 193 %
Waste mined k ton 3,230 956 238 %
Waste mined k tonnes 2,930 841 248 %
Total mined k ton 4,082 1,218 235 %
Total mined k tonnes 3,703 1,105 235 %
Strip ratio waste:ore 3.8 3.3 15 %
Processing⁽¹⁾
Ore processed k ton 791 362 119 %
Ore processed k tonnes 718 328 119 %
Average ore processed gold grade ozpt 0.019 0.008 133 %
Average ore processed gold grade gpt 0.640 0.274 133 %
Average ore processed silver grade ozpt 0.232 0.292 -20 %
Average ore process silver grade gpt 7.969 10.011 -20 %
Gold loaded on pad contained oz 14,718 2,982 394 %
Silver loaded on pad contained oz 184,115 82,792 122 %
Average ore processing throughput ton per day 8,821 3,973 122 %
Average ore processing throughput tonne per day 8,002 3,604 122 %
Gold produced oz 11,406 447 2452 %
Silver produced oz 64,581 4,002 1514 %
Financial⁽¹⁾
Revenue $ 14,804 - 100 %
Income from mine operations $ 487 - 100 %
General and administrative expenses $ (1,416 ) (1,527 ) -7 %
Total other income (expenses) $ (1,887 ) (7,753 ) -76 %
Net and comprehensive (loss) income for the year $ (2,816 ) (9,280 ) -70 %
Net and comprehensive (loss) income attributable to Golden Queen Mining Co Ltd. $ (2,426 ) (8,925 ) -73 %
Average realized gold price⁽²⁾ $/oz 1,228 - 100 %
Average realized silver price⁽²⁾ $/oz 17.59 - 100 %
Total cash costs - net of by product credits⁽²⁾ $/oz 1,013 - 100 %
All-in sustaining costs - net of by product credits⁽²⁾ $/oz 1,724 - 100 %
⁽¹⁾ For accounting purposes, the transition to the production phase commenced on April 1, 2016. As such, comparative figures for certain measures or data are not available or are not meaningful.
⁽²⁾ Total cash costs, all-in sustaining costs, and average realized gold and silver prices are financial performance measures with no standard meaning under General Accounting Accepted Principles in the US (“USGAAP”). Refer to “Non-GAAP Financial Performance Measures” for further information. As transition to the production phase commenced April 1, 2016, year-to-date amounts for these measures only include data starting April 1, 2016.
Operating Results

The ~~Company~~first quarter of 2017 ore production was 6% under budget while gold production was 3% under budget. A total of 852K tons of ore were mined in the first quarter with a strip ratio of 3.8 waste to ore. This compares to 291K tons of ore at a strip ratio of 3.3 in the first quarter of 2016 when the mine had ~~$13,450,545~~not yet achieved commercial production. The year over year comparison is biased by the fact that the mine was still in development stage in the first quarter of 2016. The higher production and ~~$16,914,638 revenues from operations during~~strip ratio are a result of increased mining activity and the ~~three and nine months ended September 30, 2016.~~requirement to pre-strip the East pit.

The Company incurred general and administrative expenses of $657,305 and $3,166,970 during the three and nine months ended September 30, 2016 as compared to $672,738 and $3,403,485 for the same periods in 2015. Costs were lower by $15,433 and $236,515 for the three and nine months ended September 30, 2016 when compared with the same periods in 2015. The reasons for the variance in costs are highlighted below.
~~The following significant general and administrative expenses were incurred during the nine months ended September 30, 2016:~~
· $551,856 (2015 - $700,912) for legal expenses. Legal costs were lower during the nine months ended September 30, 2016 as compared to the same period in 2015 due to the legal fees related to the financing activities and the snail and union issues in 2015 (see~~Other Legal Matters~~ ~~section above).~~
· $544,503 (2015 - $372,976) for audit, tax and accounting fees. Audit and accounting costs were higher during the nine months ended September 30, 2016 as compared to the same period in 2015 mainly due to the increased complexity of the audit work as the Soledad Mountain entered production and the additional costs relating to the calculations of the deferred tax liability.
254

· $355,756 (2015 - $217,515) for insurance expenses. The insurance expense increase is related to the general increase in corporate and site activities. Enhanced insurance coverage is required because construction of the processing facilities is complete and the Project has transitioned into the production phase.
Mining continued in the Northwest Pit and the Main Pit, Phase-1 during the first quarter. The road to the East pit was completed late in 2016 and the stripping of the East Pit is currently underway.
· $Nil (2015 - $201,312) for consulting expenses. The 2015 consulting fees were payments for the services provided by the Company’s former CEO. The current CEO salary is now included under corporate salary.
· $Nil (2015 - $108,545) for feasibility study expenses. The 2015 feasibility study expenses were related to the preparation of the Company’s revised feasibility study, which was completed in February 2015.

The ~~following significant general~~grade reconciliation with the Block-Model for both the North West Pit and ~~administrative expenses were incurred~~Main Pit is on-going. Generally, the mine produces more gold per bench than predicted by our model at a lower grade. The higher grade mined in the first quarter of this year versus the first quarter in 2016 is the result of our target grade program; our operators are more successful in grouping the ore on the benches into minable chunks that average a higher grade.
The in-fill drilling program of the East Pit was completed late in 2016 and the information is being incorporated into the Block Model. No additional drilling is currently being contemplated in 2017.
Processing and Production
The crushing-screening plant daily average in the first quarter of 2017 was 8,890 tons per operating day. In April, the daily average was 10,168 tons per operating day. The company experienced a mechanical problem with a gear-box on the overland conveyor during the first quarter that affected the throughput. Operating efficiency has been improving and the issues associated with high wear are being addressed. The performance of the HPGR system has exceeded expectations.
As at the end of April 2017, a total of 3,773K tons are loaded on the heap-leach pad. Agglomerate quality was very good in the first quarter of 2017 and the porosity and permeability of the heap-leach pad is extremely high. The apparent recovery project to date is approximately 66%.
A total of 34,480 ounces of gold and 276,970 ounces of silver has been produced as at April 30, 2017.
Financial Results
The Company had revenues from operations during the three months ended ~~September 30, 2016:~~March 31, 2017 in the amount of $14.8 million from the sales of 11,406 ounces of gold and 64,581 ounces of silver. The Company did not have revenues during the three months ended March 31, 2016 as production commenced on April 1, 2016.

· $115,980 (2015 - $81,613) for insurance expenses. The insurance expense increase is related to the general increase in corporate and site activities. Enhanced insurance coverage is required because construction of the processing facilities is complete and the Project has transitioned into the production phase.
The cost applicable to sales incurred during the period ended March 31, 2017 was $11.6 million, excluding depreciation and depletion. The Company did not have any cost applicable to sales for the three months ended March 31, 2016 as production started on April 1, 2016. Costs of sales include mining, processing, maintenance and site support costs. Also included in the costs of sales are refining, transportation costs, royalties and personal property taxes.

· $19,507 (2015 - $85,590) for legal expenses. Legal costs were significantly lower during the three months ended September 30, 2016 as compared to the same period in 2015 due to the legal fees related to the financing activities and the snail and union issues in 2015. (see~~Other Legal Matters~~ ~~section above).~~
The Company ~~experienced~~recorded an attributable net ~~foreign exchange gains~~and comprehensive loss of ~~$273,470 and $271,365~~$2.4 million ($0.02 loss per basic share) during the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017 as compared ~~with gains~~to an attributable net and comprehensive loss of ~~$319,600~~$8.9 million ($0.09 loss per basic share) during the three months ended March 31, 2016. Loss from operations during the period ended March 31, 2017 was mainly related to $14.8 million in revenues net of $11.6 million in cost of sales, a $2.8 million expense in depletion and ~~$786,688~~depreciation, $1.4 million in general and administrative expenses and $1.0 million in interest expense.
General and administrative expenses decreased by $0.1 million to $1.4 million during the three months ended March 31, 2017, when compared to $1.5 million for the same period in ~~2015. The net foreign exchange gain is made up~~2016 as a result of an increase in corporate salaries by ~~realized and unrealized gains and losses~~$0.2 million, an increase in corporate expenses by $0.1 million related to the ~~Company’s Canadian expenditures,~~addition of administrative personnel in Mojave as the ~~Canadian balances~~Project started production, and increase on regulatory fees and licences by $0.1 million. This was offset by, a decrease in legal expenses of ~~cash, accounts payable and,~~$0.5 million as there were no significant legal matters as compared to the same period in ~~2015, the convertible debentures. During the third quarter of 2015 the net foreign exchange gain was mainly the~~2016 when legal costs were incurred as a result of settlement of the ~~unrealized gain~~Complaint on Alleged Short-swing Trading Profits the ~~convertible debentures, which were denominated~~Company had in Canadian dollars while the Company’s functional currency is the US dollar. The exchange rate, stated in US dollar per one Canadian dollar, moved from $0.72 as of December 31, 2015 to $0.76 on September 30, 2016.

For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, the Company incurred a total interest expense of ~~$1,814,561 and $4,369,026 respectively~~$1.0 million (three months ended ~~September 30, 2015~~March 31, 2016 - ~~$981,390, nine months ended September 30, 2015 – $2,999,254)~~$1.8 million) related to its various loans. The ~~increase is~~decrease was mainly due to the ~~amortization of the discount of~~fact the June 2015 Loan ~~(as defined~~was replaced by a new loan in ~~the~~~~Transactions~~November 2016 with ~~Related Parties~~ ~~section below)~~a lower principal and ~~the fact that the Company no longer capitalizes~~ a ~~portion~~reduction of 1% on the interest ~~payable.~~rate. Please refer to ~~the~~~~Transaction with Related Parties~~ ~~section for a complete breakdown~~Note 9(ii) and 9(iii) of the unaudited condensed consolidated interim financial statements. Also, during the period ended March 31, 2017 there were no interest ~~expenses.~~capitalized to mineral properties, compared to $1.0 million in the same period of 2016.
5

During the ~~third~~first quarter of ~~2016~~2017 the amount of the Company’s derivative liability includes the warrants issued in conjunction with the November 2016 Clay Loan, the June 2015 Loan and the ~~fair value of hedging instruments and the warrants issued in conjunction with the~~ July 2016 ~~financing.~~Financing. During the ~~third~~first quarter of ~~2015~~2017, the ~~Company’s derivative liability included the convertible debentures and the warrants issued in conjunction with the June 2015 Loan. The~~ Company recorded ~~a decrease~~an increase in the derivative liability ~~including foreign exchange~~ of ~~$3,944,411 mostly~~$0.5 million due to a slight increase in the Company’s share price, compared to $7.0 million as a result of ~~a decrease~~165% increase in the Company’s share price during the three months ended September 30, 2016 as compared to an increase of $598,770 for the same quarter in 2015. For the nine months ended September 30, 2016, the Company recorded an increase in the derivative liability including foreign exchange of $1,951,581 as a result of a significant increase in the Company’s share price during the nine months ended September 30, 2016 as compared to a decrease of $1,868,329 for the same period in 2015.March 31, 2016. Refer to ~~Notes 7(iii), 8 and 9~~Note 10 of the unaudited condensed consolidated interim financial statements for a detailed analysis of the changes in fair value of the derivative liability.

Interest income of $33,313 (2015 - $49,805) was lower during the three months ended September 30, 2016 as compared with the same period in 2015 due to a decrease in the cash balances. For the nine months ended September 30, 2016, the interest income was $116,215 (2015 - $168,330) as compared with the same period in 2015 also due to a decrease in the cash balances. Interest rates remained low during the second quarter and are projected to remain low for the remainder of 2016.
26
The Company recorded ~~net income and comprehensive income of $2,738,207* and~~ a net loss and comprehensive loss of $8,296,349*$2.8 million (or ~~$0.03 and $(0.08) income and (loss)~~$0.02 loss per basic share) during the three ~~and nine~~ months ended ~~September 30, 2016 respectively~~March 31, 2017 as compared to a net ~~loss~~ and comprehensive loss of ~~$1,924,167* and $4,739,168* respectively~~$8.9 million (or ~~$0.02 and $0.05~~$0.09 loss per basic share) during the same ~~periods~~period of ~~2015.~~2016. The difference between the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~ is mainly due to the significant increase in the derivative liability related to the Company’s warrants ~~and increase~~ in ~~interest expense. The Company also recorded revenue of $13,450,545 and $16,914,638 during the three and nine months ended September 2016 respectively.~~2016.

* Attributable to the Company.
Summary of Quarterly Results (in thousands of US dollars, except per share)

Results for the eight most recent quarters are set out in the table ~~below~~below:
Results for the quarter ended on:
31-Mar-17 31-Dec-16 30-Sep-16 30-Jun-16
Revenue $ 14,804 $ 10,278 $ 13,451 $ 3,464
Net and comprehensive (loss) income $ (2,816 ) $ (434 ) $ 3,590 $ (3,568 )
Net and comprehensive (loss) income attributable to Golden Queen Mining Co Ltd. $ (2,426 ) $ 868 2,738 (2,109 )
Basic net income (loss) per share $ (0.02 ) $ 0.01 $ 0.03 $ (0.02 )
Diluted net income (loss) per share $ (0.02 ) $ 0.01 $ 0.03 $ (0.02 )
Results for the quarter ended on:
31-Mar-16 31-Dec-15 30-Sep-15 30-Jun-15
Revenue $ Nil $ Nil $ Nil $ Nil
Net and comprehensive (loss) (9,280 ) $ (1,217 ) $ (2,203 ) $ (2,092 )
Net and comprehensive loss attributable to Golden Queen Mining Co Ltd. $ (8,926 ) (722 ) (1,924 ) (1,379 )
Basic net (loss) per share $ (0.09 ) $ (0.01 ) $ (0.02 ) $ (0.01 )
Diluted net (loss) per share $ (0.09 ) $ (0.01 ) $ (0.02 ) $ (0.01 )
During the first quarter of 2017, net and ~~can be found~~comprehensive loss was $2.8 million compared to net and comprehensive income of $0.4 million in the ~~respective interim reports:~~
Results for the quarter ended on: Sept. 30, June 30, March 31, Dec. 31,
2016 2016 2016 2015
Item $ $ $ $
Revenue 13,450,545 3,464,093 Nil Nil
Net income (loss) for the quarter * 2,738,207 (2,108,781 ) (8,925,777 ) (721,587 )
Basic net income (loss) per share 0.03 (0.02 ) (0.09 ) (0.01 )
Diluted net income (loss) per share 0.03 (0.02 ) (0.09 ) (0.01 )
Sept. 30, June 30, March 31, Dec. 31,
2015 2015 2015 2014
Item $ $ $ $
Revenue Nil Nil Nil Nil
Net income (loss) for the quarter * (1,924,167 ) (1,379,265 ) (1,436,187 ) 1,543,120
Basic net income (loss) per share (0.02 ) (0.01 ) (0.01 ) 0.02
Diluted net income (loss) per share (0.02 ) (0.01 ) (0.01 ) 0.00
* Net income (loss) forquarter ended December 31, 2016. The main reason is due to fluctuations in the ~~period attributable~~Company’s derivative liabilities from warrants of 114% from gains of $3.8 million in the fourth quarter of 2016 to a loss of $0.5 million in the first quarter of 2017. As the stock price rises, the derivative liabilities increase resulting in the Company recognizing losses. Alternatively, when the stock price decreases, the Company recognizes gains.

~~Although~~For fiscal 2016, although the Company generated revenues starting in the second ~~and third~~ quarter ~~respectively,~~of 2016, for the quarters illustrated in the above table, the main reasons for the significant fluctuations in net (loss) income ~~(loss)~~ between periods are the fluctuations in the Company’s derivative liabilities ~~from warrants,~~and interest expense and the costs related to the Joint Venture Transaction.  The Company’s derivative liabilities are a function of the Company’s stock price as compared to the instruments’ strike price and the exchange rate between the Canadian dollar and the US dollar. As the stock price rises, the derivative liabilities increase resulting in the Company recognizing losses. When the stock price decreases, the Company recognizes gains.   expense.

For fiscal 2015, the Company experienced a loss related to its derivative liabilities in the amount of ~~$101,749 (2014 – Loss of $5,747,376)~~$0.1 million in the first quarter whereas it recorded a gain of ~~$2,568,849 (2014 – Gain of $1,634,681)~~$2.6 million during the second quarter. The second quarter gain was however off-set by higher interest expense and a one-time financing fee of ~~$1,500,000~~$1.5 million paid in connection with the June 2015 Loan. In the third quarter of 2015, the Company experienced a loss of ~~$598,770 (2014 – Gain of $2,861,314)~~$0.6 million related to the derivative liabilities. Adding to the losses for the three months ended September 30, 2015 ~~were~~was the interest expense and amortization of the discount on the June 2015 Loan and the convertible debenture and the interest expense related to the Komatsu loans. In the fourth quarter of 2015, the Company experienced a gain of ~~$1,465,895 (2014 – Gain of $2,255,598)~~$1.5 million related to the derivative liabilities. This gain was partially off-set by interest expense and amortization of the discount on the June 2015 Loan and the interest expense related to the ~~Komatsu~~equipment finance loans.

276

In general, the results of operations can vary from quarter to quarter depending upon the nature, timing and cost of activities undertaken during the quarter, whether or not the Company incurs gains or losses on foreign exchange or grants stock options, and the movements in its derivative liability.

Please refer to theResults of Operationssection above for the results of operations for the three ~~and nine~~ months ended on ~~September 30, 2016.~~March 31, 2017.

Reclamation Financial Assurance and Asset Retirement Obligation

Reclamation Financial Assurance

The Company is required to provide the Bureau of Land Management, the State Office of Mine Reclamation and Kern County, California with a revised reclamation cost estimate annually. The financial assurance is adjusted once the cost estimate is approved. The Company’s provision for reclamation of the property is estimated each year by an independent consulting engineer. This estimate, once approved by state and county authorities, forms the basis for ~~the~~a surety bond for reclamation financial assurance. The reclamation assurance provided as at ~~September 30, 2016~~March 31, 2017 was ~~$1,460,592~~$1.5 million (December 31, ~~2015~~2016 - ~~$624,142)~~$1.5 million).

The Company is also required to provide financial assurance with the Lahontan Regional Water Quality Control Board (the “Regional Board”) for closure and reclamation costs related to the lined impoundments, which are defined as the Stage 1 heap leach pad, the overflow pond, and the solution collection channel. The reclamation financial assurance estimate for as of ~~September 30, 2016~~March 31, 2017, is ~~$1,210,889~~$1.9 million (December 31, ~~2015~~2016 - ~~$Nil)~~$1.2 million).

In addition to the above, the Company is required to obtain and maintain financial assurance for initiating and completing corrective action and remediation of a reasonably foreseeable release from the Project’s waste management units as required by the Regional Board. The reclamation financial assurance estimate for as of ~~September 30, 2016~~March 31, 2017, is ~~$278,240~~$0.3 million (December 31, ~~2015~~2016 - ~~$278,240)~~$0.3 million).

The Company entered into $3.0 million in surety bond agreements in order to release its reclamation ~~deposits and post a portion of the financial assurance due in 2016.~~deposits. The Company pays a yearly ~~premium.~~premium of $0.1 million. Golden Queen Mining Co. Ltd. has provided a corporate ~~guarantee~~guaranty on the surety ~~bonds.~~bonds (see Note 12 of the of the unaudited condensed consolidated interim financial statements).

Asset Retirement Obligation

The total asset retirement obligation as of ~~September 30, 2016 is $1,268,541~~March 31, 2017, was $1.5 million (December 31, ~~2015~~2016 - ~~$978,453)~~$1.4 million).

The Company estimated its asset retirement obligations based on its ~~understanding of the~~ requirements to reclaim and ~~clean-up~~remediate its property based on its activities to date. ~~During~~As at March 31, 2017, the three and nine months ended September 30, 2016, there was an increase of $96,696 and $290,088 (Three and nine months ended September 30, 2015 - $Nil and $278,240) to the asset retirement obligations. Of these totals, $74,167 and $245,030 was capitalized to property, plant, equipment and mineral interests as the asset portion of the asset retirement obligation for the three and nine months ended September 30, 2016 (Three and nine months ended September 30, 2015 - $Nil and $71,892). The remaining amount of $22,529 and $45,058, for the three and nine months ended September 30, 2016, was expensed to operations as accretion expense (Three and nine months ended September 30, 2015 - $Nil and $Nil).
~~The~~ Company estimates ~~that~~ the primary cash ~~outflows~~outflow related to these reclamation activities will ~~be incurred primarily~~commence in 2028. Reclamation provisions are measured at the expected value of future cash flows discounted to their present value using a discount rate based on a credit adjusted risk-free interest rate ~~and adjusted for inflation. The Company used a credit adjusted risk-free rate~~ of ~~9.20% (December 31, 2015 – 9.20%)~~8.7% and an inflation rate of ~~2.27% (December 31, 2015 – 2.27%)~~2.5%.
Property Rent Payments ~~and Production Royalties~~

The Company has acquired a number of mineral properties outright. It has acquired exclusive rights to explore, develop and mine other portions of the Project under various mining lease agreements with landowners.

The Company is required to make property rent payments related to its mining lease agreements with landholders, in the form of advance minimum royalties. The total property rent payments for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 were $0.3 million (March 31, 2016 ~~were $Nil and $18,206 (three months ended September 30, 2015 – $8,539 and nine months ended September 30, 3015~~ - ~~$68,706), and the Company expects to pay approximately $30,000 in property rent payments in 2016.~~
28
Production royalty payments commenced during the first quarter of 2016. The Company has paid $345,184 and $406,147 in production royalties during the three and nine months ended September 30, 2016, respectively.$0.002 million).

There are multiple third party landholders and the royalty amount due to each landholder over the life of the Project varies with each property.
~~Contractual Obligations~~

~~GQM LLC’s contractual obligations as of September 30, 2016 are shown in the table below:~~
Payments Due by Period
Contractual Obligations Total Less than 1
year 1-3 years 3-5 years More than 5
years
Debt obligations (mostly mobile mining equipment financing) $ 14,931,787 $ 5,175,113 $ 9,514,785 $ 241,889 $ -
Asset retirement obligations (Undiscounted) $ 2,949,625 - - - $ 2,949,625
Total $ 17,881,412 $ 5,175,113 $ 9,514,785 $ 241,889 $ 2,949,625
~~GQM LTD’s contractual obligations as of September 30, 2016 are shown in the table below:~~
Payments Due by Period
Contractual Obligations Total Less than 1
year 1-3 years 3-5 years More than 5
years
Interest payable - June 2015 Clay loan (July 1, 2016 payment) $ 1,050,023 $ 1,050,023 - - -
2015 June Clay Loan (Face value) $ 41,658,535 $ 41,658,535 - - -
Total $ 42,708,558 $ 42,708,558 - - -
Off-balance Sheet Arrangements

The Company has no off-balance sheet arrangements.
7

Stock Option Plan

The Company’s current stock option plan (the “Plan”) was adopted by the Company in 2013 and approved by shareholders of the Company in 2013. The Company also adopted a house keeping amendment to the plan on April 27, 2015 to clarify the procedure for fixing the early termination date of stock options. The Plan provides a fixed number of 7,200,000 common shares of the Company that may be issued pursuant to the grant of stock options. The exercise price of stock options granted under the Plan shall be determined by the Company’s board of directors (the “Board”), but shall not be less than the volume-weighted, average trading price of the Company’s shares on the Toronto Stock Exchange (the “TSX”) for the five trading days immediately prior to the date of the grant. The expiry date of a stock option shall be the date so fixed by the Board subject to a maximum term of five years. The Plan provides that the expiry date of the vested portion of a stock option will be the earlier of the date so fixed by the Board at the time the stock option is awarded and the early termination date (the “Early Termination Date”). The Early Termination Date will be the date the vested portion of a stock option expires following the option holder ceasing to be a director, employee or consultant, as determined by the Board at the time of grant, or in the absence thereof at any time prior to the time the option holder ceases to be a director, employee or consultant, in accordance with and subject to the provisions of the Plan. All options granted under the 2013 Plan will be subject to such vesting requirements as may be prescribed by the TSX, if applicable, or as may be imposed by the Board.

On March 20, 2017, the Company granted 400,002 options to the Company’s Chief Financial Officer. The options are exercisable at a price of $0.65 for a period of five years from the date of grant and 133,334 options vest on March 20, 2018, 133,334 options vest on March 20, 2019 and 133,334 on March 20, 2020.
On November 30, 2016, the Company granted the aggregate amount of 485,000 options to Company’s directors, officers and employees. The options are exercisable at a price of $0.66 for a period of five years from the date of grant and 161,667 options vest on November 30, 2017, 161,667 options vest on November 30, 2018 and 161,668 on November 30, 2019.
A total of ~~1,070,000~~1,955,002 (1,023,334 exercisable) (December 31, ~~2015~~2016 – ~~1,070,000 (976,667~~1,555,000 (1,023,334 exercisable); ~~September 30, 2015 – 1,270,000 (1,176,666 exercisable))~~ common shares were issuable pursuant to such stock options as at ~~September 30, 2016.~~March 31, 2017.
29

Transactions with Related Parties
Except as noted elsewhere in this Form 10-Q, related party transactions are disclosed as follows:

(i) ~~Consulting Fees~~Management Agreement
For the three and nine months ended September 30, 2015, the Company paid $Nil and $201,312 to Mr. H. Lutz Klingmann for services as President of the Company. Included in these consulting fees was $151,428 related to 150,000 bonus shares (Refer to Note 4 – Share Capital of the unaudited condensed consolidated interim financial statements). There were no consulting fees paid during the three and nine months ended September 30, 2016.

During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, the Company paid a total of ~~$27,447 and $83,685~~$0.03 million (Three ~~and nine~~ months ended ~~September 30, 2015~~March 31, 2016 - ~~$44,732 and $81,584)~~$0.03 million) to the three independent directors of the Company. ~~During~~Additionally, the ~~three and nine months ended September 30, 2016, Thomas M. Clay did not receive~~Company paid $0.02 million for consulting services to Behre Dolbear, a company whereby a director ~~fees.~~serves in the capacity of principal.
(ii) ~~Notes~~Note Payable
On January 1, 2014, the Company entered into an agreement to secure a $10,000,000 loan (the “January 2014 Loan”). The January 2014 Loan was provided by members of the Clay family, who are shareholders of the Company, including $7,500,000 provided by an investment vehicle managed by Thomas M. Clay, a Director and insider of the Company. The January 2014 Loan had a twelve-month term and an annual interest rate of 5%, payable on the maturity date.
The January 2014 Loan was repaid on a date that is less than 183 days before the maturity date. As a result, the Company paid the Lenders an additional charge in the amount that is equivalent to 5% of the principal amount, plus interest on the principal amount at the rate of 5% per annum accrued to the date the January 2014 Loan was repaid. The Company repaid $7,500,000 loan plus the $375,000 accrued interest and $375,000 additional charge on December 31, 2014.
~~The remaining balance of the loan, $2,500,000, the accrued interest of $125,000 and the additional charge of $125,000, were paid on January 5, 2015.~~

On December 31, 2014, the Company ~~also~~ entered into a ~~new~~ loan (the “December 2014 Loan”) with the ~~same parties~~Clay Group for ~~an amount of $12,500,000. The December 2014 Loan was~~$12.5 million, due ~~on demand~~ on July 1, 2015 and bore an annual interest rate of 10% ~~payable at the end of each quarter.~~. The ~~loan~~December 2014 Loan was guaranteed by GQM Holdings, and secured by a pledge of the Company's interests in GQM Canada, GQM Canada’s interest in GQM Holdings and GQM Holdings' 50% interest in GQM LLC.

The Company also incurred a financing fee to secure the loan in the amount of ~~$1,000,000,~~$1.0 million, of which, ~~$750,000~~$0.8 million was paid on December 31, 2014 and the remaining ~~$250,000~~$0.3 million was paid on January 5, 2015.~~The Company agreed to pay the legal fees incurred by the lenders relating to this instrument which amounted to $90,916. The total legal fees paid for the transaction were $118,695.~~

On June 8, 2015, the Company amended the December 2014 Loan to extend the maturity to December 8, 2016 and increased the principal amount from ~~$12,500,000~~$12.5 million to ~~$37,500,000~~$37.5 million (the “June 2015 Loan”). The Company also issued to the lenders 10,000,000 common share purchase warrants exercisable for a period of five years expiring June 8, 2020. The common share purchase warrants have an exercise price of $0.95. All other terms remained the same as the December 2014 Loan. The Company also incurred a financing ~~fee~~fees to secure the loan in the amount of ~~$1,500,000, all of which was paid on June 8, 2015.~~$1.5 million. The Company agreed to pay the legal fees incurred by the lenders relating to this debt instrument which ~~amounted to $46,408.~~totaled the amount of $0.04 million. The total legal fees were expensed as the transaction met the definition of a debt extinguishment. ~~The terms of the registration rights remains unchanged as does the Company’s assessment of the likelihood of the registration rights being exercised.~~

308

September 30, 2016 December 31, 2015
Balance, beginning of the period $ 36,053,012 $ 13,881,305
Accretion of discount on the June 2015 Loan 1,853,023 1,374,228
Interest payable transferred to principal balance of the June 2015 loan 2,977,029 1,181,507
Fair value at inception, notes payable - 33,497,277
Repayment of loans - (2,500,000 )
Accretion of financing and legal fees - 967,156
Extinguishment of the December 2014 Loan - (12,500,000 )
Loss on extinguishment of debt - 151,539
Balance, end of the period $ 40,883,064 $ 36,053,012
~~Interest payable relating to~~On November 18, 2016, the Company repaid $12.2 million of the June 2015 Loan asand accrued interest with cash on hand and the net proceeds of $10.1 million from an equity financing. The Company restructured the remaining debt with a new loan with a principal amount of $31.0 million (the “November 2016 Clay Loan”). The new loan has a thirty-month term and an annual interest rate of 8%, payable on a quarterly basis commencing during the first quarter of 2017. Quarterly principal payments of $2.5 million commence during the first quarter of 2018, with a payment of the remaining balance at ~~September 30,~~the maturity date. The first four quarterly interest payments under the November 2016 ~~was $1,050,023 (December 31, 2015 - $969,645). Subsequent~~Clay Loan can be added to ~~September 30,~~the loan principal balance rather than paid in cash, at the Company’s option. The Company exercised this option on January 1, 2017 and transferred $0.3 million interest to the principal.
In connection with the November 2016 Clay Loan the ~~$1,050,023 interest payable~~Company issued 8,000,000 common share purchase warrants exercisable for a period of five years expiring November 21, 2021. The common share purchase warrants have an exercise price of $0.85. The Company also incurred a financing fee to secure the loan in the amount of $0.9 million, all of which was paid ~~in cash. Please refer to Note 15 of~~on November 18, 2016.
The table below summarizes the ~~unaudited condensed consolidated interim financial statements for complete details.~~activity on the note payable:
March 31, 2017 December 31, 2016
Balance, beginning of the period $ 26,347 $ 36,053
Interest payable transferred to principal balance 296 2,977
Accretion of discount on loans 286 1,996
Capitalized financing fee and legal fees - (930 )
Reduction of debt upon issuance of warrants - (3,090 )
Repayment of loans and interest - (10,659 )
Balance, end of the period $ 26,929 $ 26,347

Current portion $ 2,500 $ -
Non-current portion $ 24,429 $ 26,347
Share Purchase Warrants – Clay loans
~~(iii)~~ ~~Share Purchase Warrants~~

On June 8, 2015, the Company issued 10,000,000 share purchase warrants to the Clay family in connection with the June 2015 Loan. The share purchase warrants are exercisable until June 8, 2020 at an exercise price of $0.95. Included in the June 2015 Loan agreement was an anti-dilution provision. If the Company were to complete a financing at a share price lower than the exercise price of the share purchase warrants, the exercise price of the share purchase warrants would be adjusted to match the price at which the financing was completed.

On November 18, 2016, the Company issued 8,000,000 share purchase warrants to the Clay family in connection with the November 2016 Clay Loan. The share purchase warrants are exercisable until November 18, 2021 at an exercise price of $0.85. Included in the November 2016 Clay Loan agreement was an anti-dilution provision. If the Company were to complete a financing at a share price lower than the exercise price of the share purchase warrants, the exercise price of the share purchase warrants would be adjusted to match the price at which the financing was completed.
The share purchase warrants meet the definition of a derivative liability instrument as the exercise price is not a fixed price as described above. Therefore, the settlement feature does not meet the “fixed-for-fixed” criteria outlined in ASC 815-40-15.

9
The fair value of the derivative ~~liability~~liabilities related to the share purchase warrants as at ~~September 30, 2016~~March 31, 2017 is ~~$4,870,193~~$5.9 million (December 31, ~~2015~~2016 - ~~$2,498,269)~~$5.5 million). The derivative ~~liability was~~liabilities were calculated using ~~an option~~the binomial and the Black-Scholes pricing valuation ~~model~~models with the following assumptions:

2016 2015
Risk-free interest rate 0.51% - 0.68 % 0.73% - 1.02 %
Expected life of derivative liability 3.69 - 4.19 years 4.44 - 5 years
Expected volatility 79.45% - 83.3 % 72.29% - 76.11 %
Dividend rate 0.00 % 0.00 %
Warrants  related to June 2015 Loan March 31, 2017 December 31, 2016
Risk-free interest rate 0.87 % 0.84 %
Expected life of derivative liability 3.19 years 3.44 years
Expected volatility 73.66 % 78.79 %
Dividend rate 0.00 % 0.00 %

Warrants  related to November 2016 Loan March 31, 2017 December 31, 2016
Risk-free interest rate 1.12 % 1.11 %
Expected life of derivative liability 4.65 years 4.89 years
Expected volatility 88.21 % 77.21 %
Dividend rate 0.00 % 0.00 %

The ~~estimated fair value of~~change in the derivative share purchase warrants is as follows:

September 30, 2016 December 31, 2015
Balance, beginning of the period $ 2,498,269 $ -
Fair value at inception - 4,002,723
Change in fair value 2,371,924 (1,504,454 )
Balance, end of the period $ 4,870,193 $ 2,498,269
March 31, 2017 December 31, 2016
Balance, beginning of the period $ 5,458 $ 2,498
Fair value at inception - 3,090
Change in fair value 427 (130 )
Balance, end of the period $ 5,885 $ 5,458

31
~~(iv)~~(iii) Amortization of Discounts and Interest Expense

The following table summarizes the amortization of discounts and interest on ~~loans and convertible debentures:~~loan:

Three Months
Ended
September 30, Three Months
Ended
September 30, Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015 2016 2015
Accretion of the June 2015 Loan discount $ 620,971 $ 600,797 $ 1,853,024 $ 743,866
Interest expense related to the June 2015 Loan 1,050,023 937,500 3,057,406 1,166,667
*Interest expense related to Komatsu financial loans 143,567 91,301 463,818 135,859
Interest expense related to the convertible debentures - 14,321 - 94,907
Amortization of the convertible debentures - 262,203 - 1,852,754
Interest expense related to the december 2014 Loan - - - 547,945
Accretion of the december 2014 loan financing fees - - - 967,155
Accretion of discount and interest on loan and convertible debentures $ 1,814,561 $ 1,906,122 $ 5,374,249 $ 5,509,153
Three Months Three Months
Ended March 31, Ended March 31,
2017 2016
Accretion of the Nov 2016 Loan discount $ 286 $ -
Interest expense related to the Nov 2016 Loan 626 -
Interest expense related to Komatsu financial loans⁽¹⁾ 135 167
Accretion of the June 2015 Loan discount - 606
Interest expense related to the June 2015 Loan - 994
Accretion of discount and interest on loan $ 1,047 $ 1,767

The Company’s loans were contracted to fund significant development costs. The Company capitalizes a portion of the interest expense as it related to funds borrowed to complete development activities at the Project site.

Three Months
Ended
September 30, Three Months
Ended
September 30, Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015 2016 2015
Accretion of discounts and interest on loan, advance and convertible debenture* $ 1,814,561 $ 1,906,122 $ 5,374,249 $ 5,509,153
Less: Interest costs capitalized** - (924,732 ) (1,005,223 ) (2,509,899 )
Interest expense $ 1,814,561 $ 981,390 $ 4,369,026 $ 2,999,254
Three Months Three Months
Ended March 31, Ended March 31,
2017 2016
Accretion of discounts and interest on loan⁽¹⁾ $ 1,047 $ 1,767
Less: Interest costs capitalized⁽²⁾ - (1,005 )
Interest expense $ 1,047 $ 762

*(1) Komatsu is not a related party and has only been included in the above table to reconcile the total interest expense incurred for the period to the amounts capitalized and expensed.
**(2) Interest capitalization ended on March 31, 2016 asbecause the mine went into production on April 1, 2016.

10
~~(v)~~(iv) Joint Venture Transaction

On September 15, 2014, the Company closed the Joint Venture Transaction with Gauss resulting in both parties owning a 50% interest in the Project. Pursuant to the Joint Venture Transaction, Golden Queen converted its wholly-owned subsidiary GQM Inc., the entity developing the Project, into a California limited liability company named GQM LLC. On closing of the Joint Venture Transaction, Gauss acquired 50% of GQM LLC by investing $110 million cash in exchange for newly issued membership units of GQM LLC. GQM Holdings, a newly incorporated subsidiary of the Company, holds the other 50% of GQM LLC.
Gauss is a funding vehicle owned by entities controlled by Leucadia and the Clay Group. Gauss is owned 70.51% by Gauss Holdings and 29.49% by Auvergne, the Clay Group’s investment entity. Pursuant to the transaction, Leucadia was paid a transaction fee of $2.0 million and $0.3 million was paid to Auvergne through GQM LLC in 2014. The Company has adopted an accounting policy of expensing these transaction costs.
Variable Interest Entity
In accordance with ASC 810-10-30, the Company has determined that GQM LLC meets the definition of a VIE and that the Company is part of a related party group that, in its entirety, would meet the definition of a primary beneficiary.   Although no individual variable interest holder individually meets the definition of a primary beneficiary in the absence of the related party group, Golden Queen has determined it is considered the member of the related party group most closely associated with GQM LLC. As a result, the Company has condensed consolidated interim 100% of the accounts of GQM LLC in these condensed consolidated interim financial statements, while presenting a non-controlling interest portion representing the 50% interest of Gauss in GQM LLC on its balance sheet. A portion of the non-controlling interest has been presented as temporary equity on the Company’s balance sheet representing the initial value of the non-controlling interest that could potentially be redeemable by Gauss in the future.

The Company has presented Gauss’ ownership in GQM LLC as a non-controlling interest amount on the balance sheet within the equity section. However, there are terms in the agreement that provides for the exit from the investment in GQM LLC for an initial member whose interest in GQM LLC becomes less than 20%.
If a member becomes less than a 20% interest holder, its remaining unit interest will (ultimately) be terminated through one of three events at the non-diluted member’s option:
32a. Through conversion to a net smelter royalty (“NSR”);
b. Through a buy-out (at fair value) by the non-diluted member; or
c. Through a sale process by which the diluted member’s interest is sold

The net assets of GQM LLC as of ~~September 30, 2016~~March 31, 2017, and December 31, ~~2015~~2016 are as follows:

March 31, 2017 December 31, 2016
Assets, GQM LLC $ 152,976 $ 151,802
Liabilities, GQM LLC (22,663 ) (20,710 )
Net assets, GQM LLC $ 130,313 $ 131,092
September 30, 2016 December 31, 2015
Assets, GQM LLC $ 154,296,007 $ 158,209,916
Liabilities, GQM LLC (20,599,036 ) (22,591,211 )
Net assets, GQM LLC $ 133,696,971 $ 135,618,705

Included in the assets above is ~~$15,414,250~~$9.4 million (December 31, ~~2015~~2016 - ~~$31,530,900)~~$11.1 million) in cash held as at ~~September 30, 2016.~~March 31, 2017. The cash in GQM LLC is directed specifically to fund ~~working~~ capital ~~until the Project reaches positive cash flows.~~expenditures required to continue with production and settle GQM LLC’s obligations. The liabilities of GQM LLC do not have recourse to the general credit of the primary beneficiary except for two (2) mining drill loans and $3.0 million in ~~two situations. Please refer to notes 5 and 13 of the unaudited condensed consolidated interim financial statements for details on the exceptions.~~surety bond agreements.
Non-Controlling Interest
The carrying value of the non-controlling interest is adjusted for net income and loss, distributions and contributions pursuant to ASC 810-10 based on the same percentage allocation used to calculate the initial book value of temporary equity.

Three Months
Ended
September 30, Three Months
Ended
September 30, Nine Months
Ended
September 30, Nine Months
Ended
September 30,
2016 2015 2016 2015
Net and comprehensive income (loss) in GQM LLC $ 1,706,349 $ (557,852 ) $ (1,921,733 ) $ (2,556,001 )
Non-controlling interest percentage 50 % 50 % 50 % 50 %
Net and comprehensive income (loss) attributable to non-controlling interest $ 853,173 $ (278,926 ) $ (960,867 ) $ (1,278,001 )
Net and comprehensive income (loss) attributable to permanent non-controlling interest $ 511,904 $ (167,355 ) $ (576,520 ) $ (766,801 )
Net and comprehensive income (loss) attributable to temporary non-controlling interest $ 341,269 $ (111,571 ) $ (384,347 ) $ (511,200 )
Permanent Non-
Controlling Interest Temporary Non-
Controlling Interest
Carrying value of non-controlling interest, December 31, 2015 $ 40,685,611 $ 27,123,741
Net and comprehensive loss for the period (576,520 ) (384,347 )
Carrying value of non-controlling interest, September 30, 2016 $ 40,109,091 $ 26,739,394
~~Operating performance~~
Metal revenues*
Q3 2016 Q2 2016
Gold Sold (oz) 8,715 2,362
Silver Sold (oz) 97,430 26,500
Average realized gold price $ 1,329 $ 1,276
Average London PM fix gold price $ 1,335 $ 1,259
Average realized silver price $ 19.22 $ 17.02
Average London PM fix silver price $ 19.61 $ 16.78
Metal Revenues $ 13,450,545 $ 3,464,093
* Figures are shown on a 100% basis
The Company recorded revenue for the first time during the second quarter of 2016. For the third quarter GQM LLC sold 8,715 gold ounces at an average realized gold price of $1,329 per ounce and 97,430 silver ounces at an average realized silver price of $19.22 per ounce.
3311

Three Months
Ended March 31, Three Months
Ended March 31,
2017 2016
Net and comprehensive loss in GQM LLC $ (779 ) $ (709 )
Non-controlling interest percentage 50 % 50 %
Net and comprehensive loss attributable to non-controlling interest $ (390 ) $ (355 )
Net and comprehensive loss attributable to permanent non-controlling interest $ (234 ) $ (213 )
Net and comprehensive loss attributable to temporary non-controlling interest $ (156 ) $ (142 )
Permanent Non-
Controlling Interest Temporary Non-
Controlling Interest
Carrying value of non-controlling interest, December 31, 2016 $ 39,327 $ 26,220
Net and comprehensive loss for the period (234 ) (156 )
Carrying value of non-controlling interest, March 31, 2017 $ 39,093 $ 26,064
~~Operating Metrics~~
Management Agreement

Q3 2016 Q2 2016
Ore mined (ton) 808,000 660,000
Waste mined (ton) 1,773,000 1,193,000
Total mined (ton) 2,581,000 1,853,000
Strip ratio (waste: ore) 2.2 1.8
Ore Processed (tons) 763,157 646,211
Average ore processed Gold grade (oz/ton) 0.016 0.013
Average ore processed Silver grade (oz/ton) 0.362 0.404
Gold loaded on pad (contained oz) 11,928 8,636
Silver loaded on pad (contained oz) 276,043 261,021
Average ore processing throughput (tons per scheduled operating ) 8,479 8,852
Gold produced (oz) 7,975 2,830
Silver produced (oz) 87,849 33,335
GQM LLC is managed by a board of managers comprising an equal number of representatives of each of Gauss and GQM Holdings. The officers of GQM LLC are Robert C. Walish Jr. as Chief Executive Officer and Guy Le Bel Chief Financial Officer of GQM LLC. Bryan A. Coates was appointed to the GQM LLC Board of Managers as a nominee of the Company. As long as a member of the Clay family holds greater that 25% of the Company, the Clay Group is entitled to appoint one (1) of the Company’s representatives to the GQM LLC board of managers.
~~Mining~~Fair Value of Financial Instruments
All financial assets and financial liabilities are recorded at fair value on initial recognition. Transaction costs are expensed when they are incurred, unless they are directly attributable to the acquisition of qualifying assets, in which case they are added to the costs of those assets until such time as the assets are substantially ready for their intended use or sale.
Fair Value Measurements
The three levels of the fair value hierarchy are as follows:

808K tons of ore were mined during the third quarter with a strip ratio of 2.2:1 waste to ore. A total of 1,759K tons of ore has now been mined since January 2016 with a strip ratio of 2.2:1 waste to ore. The lower stripping ratio, compared to the mine plan is due to more ore encountered on most benches mined during the third quarter in the Northwest Pit and in the Main Pit, Phase-1. This has resulted in more ore and less waste available for mining. Seven-day per week operations started in the Mining function in June.
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

~~Northwest Pit: Mining of the Northwest Pit commenced in 2015 and will continue into late 2017.~~
Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
~~Main Pit: Mining of the Main Pit, Phase 1, commenced in early January of this year. Mining of the Main pit, Phase-1, will continue throughout 2017.~~
Reconciliation of the three most recently mined benches in the Northwest Pit showed 35% more ore and 42% more Au than expected at 4% higher grade than predicted by the mine plan (based on the block model). In the Main Pit, Phase 1, the five most recently mined benches showed 14% more ore and 8% more Au at 5% lower grade. The foregoing ore quantities and grades are based on the results of mining activity to date, and may not necessarily be indicative of future results.
East Pit: The development of the East Pit access road is completed. Bench mining started in the East Pit in June for waste and overburden. An in-fill drilling program of the East Pit, for optimization of resources and mine planning, was completed in September. The results of the program are not available at this time but the presence of the geologic structures was confirmed. The access road from the Primary Crusher to the East Pit was completed in the third quarter and ore mining is expected begin in 2017 with substantial ore delivery in the 4^th ~~quarter of 2017.~~
~~Processing and Production~~
The Company has made steady progress with the production rate of the crushing-screening plant and the pad-loading systems. HPGR performance continues to exceed expectations. The hourly throughput of the plant, when operating, was above the design rate by 2% in the third quarter. Run-time was below expectations but continues to improve. It was hampered by higher than expected wear on some components. Total pad-loading production was 763K tons in the third quarter or 18% higher than the second quarter. The daily average throughput for placing ore on the pad was 8,479 tons per scheduled operating day for the quarter. Seven-day per week operations started in the Process function in June.
At the end of September, 1,770,922 tons, loaded during 2016, were under leach on the heap-leach pad. In the third quarter, agglomerate quality and the porosity and permeability of the heap-leach pad continued to be good.
The average grade of ore processed during Q3 2016 was 0.016 oz/t Au and 0.362 oz/t Ag. A total of 11,928 gold ounces and 276,043 silver ounces were placed on the heap leach pad during the third quarter.
~~Au production commenced in April 2016. GQM LLC produced 7,975 gold ounces and 87,849 silver ounces during third quarter of 2016.~~

3412

March 31, 2017
Total Level 1 Level 2 Level 3
Liabilities:
Share purchase warrants – Related Party (Note 10) $ 5,885 $ - $ 5,885 $ -
Share purchase warrants – (Note 10) 1,026 - 1,026 -
$ 6,911 $ - $ 6,911 $ -
~~Cost of sales~~
December 31, 2016
Total Level 1 Level 2 Level 3
Liabilities:
Share purchase warrants – Related Party (Note 10) $ 5,458 $ - $ 5,458 $ -
Share purchase warrants – (Note 10) 972 - 972 -
$ 6,430 $ - $ 6,430 $ -

Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The ~~Project is still~~fair value measurement of the financial instruments above uses observable inputs in ~~the ramp-up phase and it is anticipated that operating costs will decrease~~option price models such as the ~~average throughput increases.~~binomial and the Black-Scholes valuation models.
~~Mining costs averaged $1.53 per ton mined during the third quarter of 2016. Mining unit costs were somewhat higher than anticipated due~~Please refer also to the ~~lower than anticipated tonnage moved during the quarter. However, total mining costs were 26% lower than expected. Equipment availability remained high.~~
~~Processing costs averaged $5.48 per ton processed during the third quarter~~note on fair value of ~~2016. Processing unit costs were higher than anticipated due to the lower than anticipated tonnage loaded on the pad. Higher total costs were also due to greater than anticipated wear in some parts~~derivative liability underResults of ~~the process plant. This excessive wear due to the ore abrasiveness is being addressed by a retro-fit program in the plant including crusher liner improvements.~~
Site support, maintenance and site G&A averaged $2.47 per ton processed during the third quarter of 2016. Site support and Administrative unit costs were higher than expected due to the lower than anticipated pad-loading production and alsoOperations above for ~~dust control initiatives and unanticipated insurance and legal costs. Maintenance costs were higher in the processing plant due to higher wear and start-up.~~
Total site operating costs averaged $13.13 per ton processed during the third quarter of 2016. Cash costs per ounces of gold sold were $854/oz net of silver by-product. The Project is still in the ramp-up phase, and cash costs are expected to decrease as gold production increases. Please refer to~~Non-GAAP Financial Performance Measuressection below for further details.~~more information.

Select Non-Consolidated Figures
The Company has 50% interest in GQM LLC, which meets the definition of a Variable Interest Entity (“VIE”). The Company consolidates entities which meet the definition of a VIE for which it is the primary beneficiary. The Company, has determined it is the member of the related party group that is most closely associated with GQM LLC and, as a result, is the primary beneficiary who consolidates GQM LLC.

The following table shows figures attributable to the Company only as of ~~September 30, 2016~~March 31, 2017:

GQM LLC
100% GQM LLC
50% Attributable
to LTD
LTD on a Non-
Consolidated
Basis *

LTD
Attributable
GQM LLC
100% GQM LLC
50% Attributable
to LTD LTD on a Non-
Consolidated
Basis * LTD
Attributable
(1) (2) (1) + (2) (1) (2) (1) + (2)
Cash $ 15,414,250 $ 7,707,125 $ 15,741,169 $ 23,448,294 $ 7,688 $ 3,844 $ 1,763 $ 5,607
Short Term Debt $ 5,175,113 $ 2,587,556 $ 41,933,087 $ 44,520,643 $ 6,137 $ 3,069 $ 2,500 $ 5,569
Long Term Debt $ 9,756,674 $ 4,878,337 $ 0 $ 4,878,337 $ 10,089 $ 5,045 $ 24,429 $ 29,474
Working Capital / (Deficit) $ 15,764,581 $ 7,882,290 $ (33,192,955 ) $ (25,310,664 ) $ 9,074 $ 4,537 $ (8,321 ) $ (3,784 )
* Includes GQM Holdings
3513

GQM LLC
100% GQM LLC
50% Attributable
to LTD LTD on a Non-
Consolidated
Basis * LTD
Attributable
(1) (2) (1) + (2)
Revenue $ 14,804 $ 7,402 $ 0 $ 7,402
Cost of sales including depreciation and depletion $ (14,210 ) $ (7,105 ) $ (109 ) $ (7,214 )
Accretion expense $ (31 ) $ (16 ) $ 0 $ (16 )
G&A Expenses $ (875 ) $ (438 ) $ (511 ) $ (949 )
Share based payments $ 0 $ 0 $ (34 ) $ (34 )
Foreign exchange gain (loss) $ 0 $ 0 $ 7 $ 7
(Increase) / Decrease in fair value of derivative liability $ 0 $ 0 $ (481 ) $ (481 )
Interest Expense $ (136 ) $ (68 ) $ (912 ) $ (979 )
Interest Income $ 21 $ 11 $ 4 $ 14
Others $ (352 ) $ (176 ) $ 0 $ (176 )
Net Loss $ (779 ) $ (390 ) $ (2,036 ) $ (2,426 )
~~Figures shown for the three months ended September 30, 2016~~
* Includes GQM Holdings
GQM LLC
100% GQM LLC
50% Attributable
to LTD
LTD on a Non-
Consolidated
Basis *

LTD
Attributable

(1) (2) (1) + (2)
Revenue $ 13,450,545 $ 6,725,273 $ 0 $ 6,725,273
Cost of sales including depreciation and depletion $ (11,144,024 ) $ (5,572,012 ) $ (198,467 ) $ (5,770,479 )
Accretion expense $ (22,530 ) $ (11,265 ) $ 0 $ (11,265 )
G&A Expenses $ (656,455 ) $ (328,228 ) $ (270,521 ) $ (598,748 )
Share based payments $ 0 $ 0 $ (3,799 ) $ (3,799 )
Foreign exchange gain (loss) $ 0 $ 0 $ 273,470 $ 273,470
(Increase) / Decrease in fair value of derivative liability $ 206,239 $ 103,120 $ 3,738,172 $ 3,841,292
Interest Expense $ (143,566 ) $ (71,783 ) $ (2,345,120 ) $ (2,416,903 )
Interest Income $ 16,139 $ 8,070 $ 691,299 $ 699,368
Net Loss (Income) $ 1,706,349 $ 853,173 $ 1,885,035 $ 2,738,208

Liquidity and Capital Resources

The Company has generated ~~$16,914,638~~$42.0 million in revenues from operations since inception and as at ~~September 30, 2016~~March 31, 2017 had an accumulated deficit of ~~$88,202,370~~$89.8 million and a working capital ~~deficit~~surplus of ~~$17,428,374.~~ $0.8 million.
Cash ~~used in~~generated from operations for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017 was ~~$3,105,079.~~$2.8 million.

As at September 30, 2016, Golden Queen, on a non-consolidated basis, currently does not have sufficient funds to repay the $37,500,000 loan plus the accrued interest. However, in order to secure the necessary funds to meet this upcoming obligation and mitigate the going concern issue, management is actively exploring several options including debt financing and equity issuance.
~~In July~~On November 18, 2016, the Company ~~completed an equity financing~~repaid $12.2 million of the June 2015 Loan and ~~raised gross proceeds of C$16.1 million. The~~accrued interest with cash on hand and the net proceeds of ~~C$15.0~~$10.1 million ~~will~~from an equity financing. The Company restructured the remaining debt with the November 2016 Clay Loan with a principal amount of $31.0 million. The November 2016 Clay Loan has a 30-month term and an annual interest rate of 8%, payable on a quarterly basis commencing first quarter of 2017, a repayment of $2.5 million on a quarterly basis commencing first quarter of 2018 and repayment of balance at maturity date. The first four quarterly interest payments on the November 2016 Clay Loan can be ~~used~~added to ~~repay a portion~~the loan principal balance rather than paid in cash, at the Company’s option. The Company exercised this option on January 1, 2017 and transferred $0.3 million interest to the principal.
Golden Queen Mining Co Ltd. expects to have sufficient cash on hand to meet its corporate general and administrative expenditures for the next twelve months from the date of the ~~loan on December 8, 2016.~~
~~While Golden Queen has been successful at certain~~approval of these ~~efforts~~condensed consolidated interim financial statements. However, the Company is required to pay $5.4 million in ~~the past, there can be no assurance that future efforts~~accrued interest and debt principal repayment on April 1, 2018. The Company will ~~be successful.~~need to receive cash distributions from GQM LLC to service its debt and such distributions are contingent on GQM LLC’s ability to generate positive cash flows. This situation raises substantial doubt about ~~this entity’s~~the Company’s ability to continue as a going concern.

~~At the Project level,~~The Company anticipates receiving sufficient distributions from GQM LLC ~~has~~during this fiscal year to service its debt in 2018, however such distributions are dependent on a number of factors, including the gold price and the ability of the mine to perform according to the mine plan for 2017. Because of the uncertainty relating to the above factors, there can be no assurance that sufficient ~~funds~~distributions will be generated and paid by GQM LLC to the Company in order for it to meet its ~~contractual~~ obligations ~~for~~when they fall due. If the ~~next 12 months.~~distributions are not sufficient, the Company will need to either raise equity or negotiate with its debt lender a delay in principal and interest repayments.
14

The Company’s access to the net assets of GQM LLC is determined by the Board of Managers of GQM LLC. The Board of Managers is not controlled by the Company and therefore there is no guarantee that any access to the net assets of GQM LLC would be provided to the Company in order to continue as a going concern. The Board of Managers of GQM LLC determine when and if distributions from GQM LLC are made to the holders of its membership units at their sole discretion.

~~These~~The unaudited condensed consolidated interim financial statements do not ~~include any~~reflect adjustments to the ~~recoverability~~carrying values of the assets and ~~classification of recorded asset amounts~~liabilities, the reported revenues and ~~classification of liabilities~~expenses, and the balance sheet classifications used, that ~~might~~would be necessary ~~should~~if the ~~Company be~~company were unable to ~~continue~~realize its assets and settle its liabilities as a going ~~concern.~~concern in the normal course of operations. Such adjustments could be material.
36
The Company’s 50%-owned subsidiary, GQM LLC, which holds the Company’s interest in the Soledad Mountain project, held $15,414,250 in cash as of September 30, 2016 as compared to $45,643,060 on September 30, 2015. It is expected that the current cash on hand will fund remaining working capital needs until in the end of the year 2016 when the Project is expected to reach positive cash flow.
Cash ~~used in~~generated from (used in) Operating Activities:

Cash ~~used to fund~~generated by operating activities, including general and administrative expenses such as legal fees, accounting, taxation and auditing fees, corporate expenses, office expenses and corporate salary was ~~$3,105,079 (nine months~~$2.8 million (used in the three-month period ended ~~September 30, 2015~~March 31, 2016 - ~~$4,815,347)~~$3.2 million) for the ~~nine months~~three months’ period ended ~~September 30, 2016.~~March 31, 2017. The ~~decrease~~increase in cash ~~used~~utilized in operating activities is ~~mostly~~primarily due to the increase in revenues since the Company started production in the second quarter of ~~2016. Additionally, during this quarter the Company invested $6,116,952 building-up ore on leach pad inventory ($182,865 third quarter 2015).~~2016, improvements in working capital and operating cost.

Cash used in Investing Activities:
Cash used in investing activities totaled ~~$10,498,491~~$5.2 million during the ~~nine~~three months ended ~~September 30, 2016 (nine~~March 31, 2017 (three months ended ~~September 30, 2015~~March 31, 2016 - ~~$60,161,928)~~$6.6 million). ~~The decrease is due to~~Construction of the ~~decreased level~~second stage of ~~construction activity on site as~~ the ~~Project construction was finalized.~~leach pad started during the first quarter 2017.

Cash from Financing Activities:

Cash ~~provided by~~used in financing activities totaled ~~$7,171,678~~$1.4 million during the ~~nine~~three months ended ~~September 30, 2016 (nine~~March 31, 2017 (three months ended ~~September 30, 2015~~March 31, 2016 – cash ~~provided by~~used of $1.2 million). See below a description of the main financing activities ~~$25,575,000) and relates to~~used by the ~~July equity financing and repayments of loans payable at~~Company during the project level. The January 1, April 1, and July 1, 2016 interest payments due on the June 2015 Loan of $2,977,028 have been added to the principal balance. The cash provided by financing activities for the ninethree months ended ~~September 30, 2015 was the result of the June 2015 Loan and our JV partner’s Top-Up contribution.~~March 31, 2017:

· The Company acquired three (3) (three-month period ended March 31, 2016 –one (1)) pieces of mining equipment from Komatsu through financing agreements totaling $2.4 million, (three-month period ended March 31, 2016- $0.3 million) net of down payments.
· The Company made principal payments of $1.0 million (three-month period ended March 2016 - $1.2 million) related to the loans payable on the mining equipment and machinery.
· The January 1, 2017 interest payment due on the June 2015 Loan of $0.3 million has been added to the principal balance.
Working Capital:

LTD on a Non-
Consolidated
Basis * LTD on a
Consolidated
Basis ** LTD on a Non-
Consolidated
Basis * LTD on a
Consolidated
Basis **

Current Assets $ 15,864,191 $ 41,152,913 $ 1,881 $ 21,964
Current Liabilities $ (49,057,145 ) $ (58,581,288 ) $ (10,202 ) $ (21,212 )
Working Capital / (Deficit) $ (33,192,955 ) $ (17,428,375 ) $ (8,321 ) $ 752
* Includes GQM Holdings
** Includes GQM Holdings and GQM LLC
* Includes GQM Holdings
** Includes GQM Holdings and GQM LLC
Golden Queen Mining Co. Ltd. and Golden Queen Holdings Inc.

As at ~~September 30, 2016, the Company, on a consolidated basis,~~March 31, 2017, Golden Queen Mining Co. Ltd. and Golden Queen Holdings Inc. had current assets of ~~$41,152,913~~$1.9 million (December 31, ~~2015~~2016 - ~~$39,979,225)~~$2.3 million) and current liabilities of ~~$58,581,288~~$10.2 million (December 31, ~~2015~~2016 - ~~$47,722,334)~~$6.9 million) or working capital deficit of ~~$17,428,374~~$8.3 million (December 31, ~~2015~~2016 – working capital deficit of ~~$7,743,109)~~$4.6 million). The ~~increase~~decrease in current assets from December 31, 2015 is ~~mostly~~ the result of ~~construction~~general corporate expenditures such as corporate salary expenses, legal fees, audit fees, financing fees and ~~working capital expenditures on site.~~interest expenses. The increase in current liabilities is ~~mainly due to~~ the ~~increase~~result of the principal payment of the November 2016 Clay Loan now being included in ~~the derivative liability.~~our current liabilities.

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~~GQM LLC will use its cash on hand for working capital related expenditures until in the end of the year 2016 when the Project is expected to be generating positive cash flows.~~

~~The Company~~Golden Queen Mining Co. Ltd will use its cash for general corporate expenditures such as accounting fees, legal fees ~~interest expense~~ and corporate salary expenses. Interest expenses on the November 2016 Clay Loan due during 2017 can be added to the loan principal balance rather than paid in cash at the Company’s option.

~~Please refer also to~~~~Outlook~~~~below.~~GQM LLC

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As at March 31, 2017, GQM LLC had current assets of $20.2 million (December 31, 2016 - $22.7 million) and current liabilities of $11.0 million (December 31, 2016 - $9.9 million) or working capital surplus of $9.2 million (December 31, 2016 – $12.8 million).

The decrease in current assets from December 31, 2016 is the result of cash spent on project-related expenditures and working capital. The increase in current liabilities is the result of an increase of accounts payable and an increase of the short-term portion of the mobile equipment loans.
GQM LLC will use its cash on hand for sustaining capital expenditures and for working capital needs.
Outstanding Share Data

The number of shares issued and outstanding and the fully diluted share position are set out in the table below:

Item No. of Shares
Shares issued and outstanding on December 31, 2015 99,928,683
Shares issued pursuant to the exercise of stock options Nil
Shares Issued in Connection with July 2016 Financing 11,120,000
Shares issued and outstanding on September 30, 2016 111,048,683 Exercise Price Expiry Date
Shares to be issued on exercise of directors and employees stock options 1,070,000 $0.58 to $1.59 From 06/03/18 to 09/08/20
Shares to be issued on exercise of warrants 10,000,000 $ 0.95 6/8/2020
Shares to be issued as a finder’s fee (due upon commercial production) 100,000 Not Applicable Not Applicable
Shares to be issued on exercise of warrants in conjunction with July 2016 financing 5,560,000 C$ 2.00 7/25/2019
Shares to be issued on exercise of warrants in conjunction with July 2016 financing  broker warrants (non-tradable) 757,700 C$ 2.00 7/25/2019
Fully diluted September 30, 2016 128,536,383
The company has an unlimited authorized share capital
Item No. of Shares
Shares issued and outstanding on December 31, 2016 111,048,683
Shares issued as the result of a purchase agreement 100,000
Shares issued pursuant to the exercise of stock options Nil
Shares issued and outstanding on March 31, 2017 111,148,683 Exercise Price Expiry Date
Shares to be issued on exercise of directors and employees stock options 1,808,335 $0.58 to $1.59 From 06/03/18 to 03/16/22
Shares to be issued on exercise of warrants 24,317,700 $0.95 06/08/20
Fully diluted March 31, 2017 137,274,718
The company has an unlimited authorized share capital
~~Outlook~~
The Company is evaluating its options, including debt financing and equity issuance, to refinance the June 2015 Loan which matures on December 8, 2016. The Company has raised gross proceeds of C$16.1 million in July to repay a portion of the loan.
The ability of the Company to operate a mine on the property is subject to numerous risks, certain of which are disclosed in the Company’s latest Form 10-K filing with the SEC, dated March 30, 2016. Readers should evaluate the Company’s prospects in light of these and other risk factors.

Subsequent Events

On ~~October 1st, 2016,~~April 1, 2017, the Company ~~made an~~was to make a quarterly interest payment ~~of $1,050,023 in~~on the November 2016 Clay Loan. In accordance with the terms of the ~~June 2015~~November 2016 Clay Loan ~~agreement.~~agreement, the Company chose to exercise its right to add the interest owed on April 1, 2017 to the principal balance. The principal balance of the loan was increased by $0.6 million.
Non-GAAP Financial Performance Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles. These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

Total Cash Costs

Total cash costs are common financial performance measures in the gold mining industry but with no standard meaning under US GAAP. Management believes that, in addition to conventional measures prepared in accordance with US GAAP, certain investors use this information to evaluate our performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with US GAAP. The measure, along with sales, is considered to be a key indicator of a Company’s ability to generate earnings and cash flow from its mining operations.

3816

Total cash cost figures are calculated in accordance with a standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold Institute ceased operations in 2002, but the standard is the accepted standard of reporting cash cost of production in North America. Adoption of the standard is voluntary and the cost measures presented may not be comparable to other similarly titled measures of other companies. Other companies may calculate these measures differently. Total cash costs are derived from amounts included in the statement of operations and include direct mining costs and site general and administrative costs. The direct mining costs shown on the table below include mine site operating costs such as mining, processing, smelting, refining, third party transportation costs, advanced minimum royalties and production costs less silver metals revenues. Management has determined that silver metals revenues when compared with gold metals revenues, are immaterial and therefore are considered a by-product of the production of gold.
The table below shows a reconciliation of total cash costs per gold ounce and cash costs per gold ounce on a by-product ~~basis:~~basis (expressed in thousands of US dollars except ounce and per ounce amounts).

Three Months Ended
September 30, 2016 Three Months Ended
June 30, 2016 Three Months Ended
Direct mining costs (US GAAP) $ 9,110,596 $ 3,563,009
March 31, 2017 December 31, 2016
Total Cash Costs
Mining $ 5,624 $ 4,933
Processing 4,379 4,243
Indirect mining cost 656,455 620,923 1,880 1,901
Inventory changes and others (322 ) (2,181 )
Costo of sales 11,561 8,896
Site general and administrative 838 754
Cash costs before by product credits $ 9,767,051 $ 4,183,932 12,399 9,650
Divided by gold sold (oz) 8,715 2,362 11,160 7,760
Cash costs per ounce of gold sold ($/oz) $ 1,121 $ 1,771 1,111 1,244
Less: By-product silver credits per ounce ($/oz) (267 ) (191 ) (98 ) (148 )
Total cash cost per ounce of gold sold on a by-product basis ($/oz) $ 854 $ 1,580 $ 1,013 $ 1,095
The transition to the production phase commenced on April 1, 2016. As such, comparative figures for certain measures or data are not available or are not meaningful.
All-in Sustaining Costs

In September 2013, the World Gold Council, a non-regulatory association of the world’s leading gold mining companies established to promote the use of gold to industry, consumers and investors, provided guidance for the calculation of the measure “All-in sustaining costs”, which has no standard meaning under US GAAP. These standards became effective January 1, 2014. Management believes that the all-in sustaining costs measure provides additional insight into the costs of producing gold by capturing all of the expenditures required for the discovery, development and sustaining of gold production and allows the Company to assess its ability to support capital expenditures to sustain future production from the generation of operating cash flows. Management believes that, in addition to conventional measures prepared in accordance with US GAAP, certain investors use this information to evaluate our performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with US GAAP.

Golden Queen defines all-in sustaining costs as the sum of direct mining costs (as defined under total cash costs), site and corporate general and administrative costs, share based payments, reclamation liability accretion and capital expenditures that are sustaining in nature. Adoption of the standard is voluntary and the cost measures presented may not be comparable to other similarly titled measures of other companies. Other companies may calculate these measures differently.

17
The table below shows a reconciliation of all-in sustaining costs per ounce to the unaudited condensed interim consolidated financial ~~statements:~~statements (expressed in thousands of US dollars except ounce and per ounce amounts).

Three Months Ended
September 30, 2016 Three Months Ended
June 30, 2016 Three Months Ended
Direct mining costs (US GAAP) $ 9,110,596 $ 3,563,009
March 31, 2017 December 31, 2016
All-in sustaining costs
Mining $ 5,624 $ 4,933
Processing 4,379 4,243
Indirect mining cost 656,455 620,923 1,880 1,901
Cash costs before by product credits 9,767,051 4,183,932
Less: By-product silver credits (2,323,313 ) (450,925 )
Total cash cost $ 7,443,739 3,733,007
Site G&A 838 754
Inventory changes (322 ) (2,181 )
Silver by-product (1,092 ) (1,150 )
Total cash cost after by-product 11,307 8,500
Corporate general and administrative expenses 270,521 - 578 311
Share based payments 3,799 - 34 17
Accretion expense 22,530 22,529 31 23
Sustaining capital 915,434 330,479 7,288 2,648
All-in sustaining costs $ 8,656,023 $ 4,086,015 19,237 11,499
Divided by gold sold (oz) 8,715 2,362 11,160 7,760
All-in sustaining costs per gold ounce on a by-product basis $ 993 $ 1,730 $ 1,724 $ 1,482

~~General and administrative expenses in Income Statement include a foreign exchange gain of $273,470 for the three months ended September 30, 2016.~~
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Summary of Significant Accounting Policies and Estimates

Revenue is recognized when title to gold and silver passes to the buyer and when collectability is reasonably assured. Title passes to the buyer based on terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets, for example, the London Bullion Market for both gold and silver, in an identical form to the product sold.
~~Besides of the revenue recognition policy mentioned above, full~~Full disclosure of the Company’s significant accounting policies and estimates in accordance with generally accepted accounting principles in the United Stated can be found in notes of its audited consolidated financial statements as at December 31, ~~2015.~~2016.

~~Recent~~Recently Adopted Accounting ~~Standards~~Pronouncements

(i) ~~Effective August 2014, FASB~~In July 2015, ASU No. 2015-11 was issued ~~Accounting Standards update (“ASU”) 2014-15, Presentation~~related to the inventory, simplifying the subsequent measurement of ~~Financial Statements – Going Concern (Subtopic 205-40 –Disclosure~~inventories by replacing the lower of ~~Uncertainties about an Entity’s Ability to Continue as~~cost or market test with a ~~Going Concern.~~lower of cost and net realizable value test. The update ~~essentially requires management of all entities, for annual and~~is effective in fiscal years, including interim periods ~~to evaluate whether there are conditions~~beginning after December 15, 2016. The Company records inventory at the lower of cost or ~~events, considered in~~net realizable value and the ~~aggregate, that raise substantial doubt about~~adoption of this guidance effective January 1, 2017 had no impact on the ~~entity’s ability to continue as a going concern within one year after the date the~~consolidated financial ~~statements are issued.~~statements.
If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following:
1. ~~Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans).~~
2. ~~Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations.~~
3. ~~Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.~~
If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is~~substantial doubt about the entity’s ability to continue as a going concernwithin one year after the date that the financial statements are issued (or available to be issued).~~
~~This update will come into effect for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is assessing the impact of this standard.~~
(ii) In ~~February, 2015, the FASB issued ASU 2015-02,~~~~Consolidation (Topic 810) – Amendments to the Consolidation Analysis~~which focuses on the consolidation evaluation for reporting organizations (public and private companies and not-for-profit organizations) that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the standards and improves current GAAP by:
· Placing more emphasis on risk of loss when determining a controlling financial interest. A reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement, when certain criteria are met.
· ~~Reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (VIE).~~
· ~~Changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs.~~
The ASU will be effective for periods beginning after December 15, 2015, for public companies. The Company have adopted the ASU effective January 1, 2016 and it had no impact on the Company’s results or financial position.
~~(iii)~~ In January 2016, FASB issued ASU 2016-01, Financial Instruments – Recognition and measurement of financial assets and financial liabilities (Subtopic 825-10) which updates several aspects of recognition, measurement, presentation and disclosure of financial instruments. The amendments that are relevant to the Company are as follows:
1. Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
40
2. ~~Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.~~
3. Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
~~The ASU will be effective for periods beginning after December 15, 2017, for public companies. The Company is assessing the impact of this standard.~~
~~(iv)~~ In March 2016, ~~FASB~~ASU No. 2016-09 was issued ~~ASU 2016-09, Compensation – Stock Compensation (Subtopic 718) which updates several aspects of~~related to stock-based compensation. The new guidance simplifies the accounting for ~~share-based~~stock-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This update is effective for the Company’s fiscal year and interim periods beginning after December 15, 2016. The adoption of this guidance as of January 1, 2017 had no impact on the consolidated financial statements.
~~The ASU will be effective for periods beginning after December 15, 2016, for public companies. The Company is assessing the impact of this standard.~~New Accounting Policies

~~(v)~~(iii) In May 2014, ASU 2014-09 was issued related to revenue from contracts with customers. The ASU was further amended in August 2015, March 2016, April 2016, and May 2016 by ASU 2015-14, 2016-08, 2016-10 and ~~2016-12.~~2016- 12. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition.

In August 2015, the effective date was deferred to reporting periods, including interim periods, beginning after December 31, 2017, and will be applied retrospectively. Early adoption is not permitted. The Company is currently evaluating this guidance and the impact it will have on the consolidated financial statements and disclosures.
In August 2015, the effective date was deferred to reporting periods, including interim periods, beginning after December 31, 2017, and will be applied retrospectively. Early adoption is not permitted.

~~(vi)~~ We are currently assessing the impact of implementation of ASU No. 201-09, however, management does not believe it will change the point of revenue recognition or amounts of revenue recognized compared to how we recognize revenue under our current policies. Our revenues involve a relatively limited number of types of contracts and customers. In addition, our revenue contracts do not involve multiple types of performance obligations. Revenues from doré are recognized, and the transaction price is known, at the time the metals sold are delivered to the customer. We will finalize our assessment of the impact of ASU No. 201-09 on our revenue recognition during 2017 and assess the additional disclosure requirements under the guidance.
18
(iv) In February 2016, FASB issued ASC 842 that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than 12 months. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement.

The ASU will be effective for annual and interim periods beginning January 1, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company is assessing the impact of this standard.
The ASU will be effective for annual and interim periods beginning January 1, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company is assessing the impact of this standard.
(v) In August 2016, ASC guidance was issued to amend the classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance is effective for the Company’s fiscal year and interim periods beginning December 1, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating this guidance and the impact on its consolidated financial statements.

~~Qualified Person~~The Center for Biodiversity Petition to List the Mohave Shoulderband Snail as an Endangered Species
As a result of a petition filed by the Center for Biological Diversity (“CBD”), the Company, the United States Fish and ~~Caution With Respect~~Wildlife Service (“USFWS”), and CBD entered into a memorandum of understanding (the “Memorandum of Understanding”) pursuant to ~~Forward-looking Statements~~which a review of the habitat of the Mohave Shoulderband snail will be surveyed. For the purposes of evaluating the petition, the survey is expected to be completed by June 30, 2017.
The Memorandum of Understanding caused no material adjustments to the Project’s mine plan. The Company believes that conservation of the snail can be accomplished without material adjustments to the Project’s mine plan, but if the USFWS ultimately finds that the snail is ‘endangered’ or ‘threatened’ and no agreed conservation plan is established, material adjustments to the Project’s mine plan may be required.
Other Legal Matters

~~Mr. Timothy Mazanek, PE, and Mr. Peter Herrera, PG are all qualified persons for the purpose of NI 43-101 and have reviewed and approved the technical information in this Form 10Q.~~National Labor Relations Board

~~This Form 10-Q contains certain forward-looking statements, which relate to~~The Building and Construction Trades Council of Kern, Inyo, and Mono Countries (the “Union”) is in the ~~intent, belief and current expectations~~process of appealing the decision of the Company’s management, as well as assumptions and parameters used in the Soledad Mountain Project Technical Report and Updated Feasibility Study, February 25, 2015. These forward-looking statements are based upon numerous assumptionsNational Labor Relations Board that involve risks and uncertainties and other factors that may cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include among other things the receipt and compliance with the terms of required approvals and permits, the costs of and availability of sufficient capital to fund the projects to be undertakenaction taken by the ~~Company and commodity prices. In addition, projected mining results, including quantity of ore, grade, production rates, and recovery rates, are subject~~Union related to ~~numerous risks normally associated with mining activity~~a 1997 project labor agreement violates Section 8(e) of the ~~nature described in this report~~National Labor Relations Act and in the feasibility study, and as a result actual results may differ substantially from projected results. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date the statements were made.is therefore unenforceable.

Additional Information

Further information on Golden Queen Mining Co. Ltd. is available on the SEDAR web site atwww.sedar.com and on the Company’s web site atwww.goldenqueen.com.
41

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Company by failing to discharge its obligations. To mitigate exposure to credit risk on financial assets the Company has established policies to ensure liquidity of funds and ensure counterparties demonstrate minimum acceptable credit worthiness.

The Company maintains its US Dollar and Canadian Dollar cash in bank accounts with major financial institutions with high credit standings. Cash deposits held in the United States are insured by the FDIC for up to $250,000 and Canadian Dollar cash deposits held in Canada are insured by the Canada Deposit Insurance Corporation (“CDIC”) for up to C$100,000.

Certain United States and Canadian bank accounts held by the Company exceed these federally insured limits or are uninsured as they relate to US Dollar deposits held in Canadian financial institutions. As of ~~September 30, 2016 and December~~March 31, ~~2015,~~2017, the Company’s cash balances held in United States and Canadian financial institutions include ~~$31,155,419 and $37,587,311 respectively,~~$9.5 million, which are not fully insured by the FDIC or CDIC. The Company has not experienced any losses on such accounts and management believes that using major financial institutions with high credit ratings mitigates the credit risk in cash.

19
Interest Rate Risk

The interest rates received on these balances may fluctuate with changes in economic conditions. Based on the average cash balances during the three months ending ~~September 30, 2016,~~March 31, 2017, a 1% decrease in interest rates would have reduced the interest income to a trivial amount.

Foreign Currency Exchange Risk

Certain purchases of labour ~~costs~~ are denominated in Canadian dollars. As a result, currency exchange fluctuations may impact the costs of our operations. Specifically, the appreciation of the Canadian dollar against the ~~U.S.~~US dollar may result in an increase in the Canadian operating expenses in ~~U.S.~~US dollar terms. As of ~~September 30, 2016,~~March 31, 2017, the Company maintained the majority of its cash balance in ~~U.S.~~US dollars.
Commodity Price Risk

The Company’s primary business activity is the development of the open pit, gold and silver, heap leach project on the Property. Decreases in the price of either of these metals from current levels ~~has~~have the potential to negatively impact the future viability of the Project. ~~The Company holds a small portfolio of derivative contracts in the form of gold zero-cost collars in order to hedge against the gold spot price volatility risk.~~ A 10% change in the gold spot price would have a trivial impact on the change in the fair value of the derivative contracts held by the Company. The Company may enter into hedging contracts from time to time to protect the cash flows from commodity price volatility.
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Item 4. Controls and Procedures.

~~Evaluation of~~ Disclosure ~~Controls~~controls and ~~Procedures~~procedures

The ~~term “disclosure~~Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and ~~procedures”~~procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the ~~Exchange Act. These rules refer to~~end of the period covered by this report.
The Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and ~~other~~ procedures ~~of a company that are designed~~were effective to ensure that ~~the~~ information required to be disclosed by ~~a company~~the Company in ~~the~~ reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the ~~required~~ time ~~periods. Disclosure controls~~periods specified in the applicable Securities and ~~procedures include, without limitation, controls~~Exchange Commission rules and ~~procedures designed to ensure that information required to be disclosed in our Exchange Act reports is~~forms and (ii) accumulated and communicated to the Company’s management, including ~~our~~the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. ~~It is management’s responsibility to establish and maintain adequate disclosure controls and procedures.~~

~~Our~~Management’s report on internal control over financial reporting
The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, and ~~our~~effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external ~~Sarbanes-Oxley consultants carried out an evaluation~~purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
20
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Furthermore, an assessment that internal control over financial reporting was effective for any completed period does not mean that internal control over financial reporting will be assessed as effective for any future period as processes and procedures may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate, among other reasons. In connection with the assessment of effectiveness of ~~our disclosure controls and procedures~~the Company's internal control over financial reporting as of ~~September 30,~~December 31, 2016, a material weakness was identified relating to the accuracy and ~~concluded that our disclosure~~valuation of inventory and the aggregation of deficiencies in the areas of journal entry review, user access and segregation of duties. The Company is in the process of implementing a remediation plan to address the deficiency previously noted in the areas of personnel and controls including the engagement of an external consultant to assist in the documentation and ~~procedures were operating effectively.~~review of its internal controls.

Changes in Internal Control

Since the Company started production during the second quarter of 2016 new processes and internal controls over such areas as revenue recognition, cost accounting and inventory valuation have been implemented. There were no ~~other~~ changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) during the quarter ended ~~September 30, 2016~~March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting.~~  reporting, other than the Company is in the process of implementing a remediation plan to address the deficiency previously noted in the areas of personnel and controls including the engagement of an external consultant to assist in the documentation and review of its internal controls.
Fraud Analysis

The Company is committed to preventing fraud and corruption and is developing an anti-fraud culture. To achieve this goal, the Company has committed to the following:

1. Developing and maintaining effective controls to prevent fraud;
2. Ensuring that if fraud occurs a vigorous and prompt investigation takes place;
3. Taking appropriate disciplinary and legal actions;
4. Reviewing systems and procedures to prevent similar frauds;
5. Investigating whether there has been a failure in supervision and take appropriate disciplinary action if supervisory failures occurred; and
6. Recording and reporting all discovered cases fraud.

The following policies have been developed to support the Company’s goals:
· Insider Trading Policy ~~& Addendum~~
· Managing Confidential Information Policy
· Whistleblower Policy
· Anti-corruption Policy
· ~~Code of Business Conduct~~
· ~~Code of Ethics~~
· ~~Environmental Safety & Health~~

All policies can be viewed in full on the Company’s website atwww.goldenqueen.com

For the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2017 and year ended December 31, ~~2015,~~2016, there were no reported instances of fraud.

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Part II – Other Information

Item 1. Legal Proceedings

See “The Center for Biodiversity Petition to List the Mojave Shoulderband Snail as an Endangered Species” and “Other Legal Matters” contained in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q.

Item 1A. Risk Factors

There are no material changes from the risk factors previously disclosed in our Form 10-K for the fiscal period ended December 31, ~~2015,~~2016, as filed with the SEC on March ~~30, 2016.~~15, 2017.
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Item 4. Mine Safety Disclosures

GQM LLC is the operator of the Project, which is located in Mojave in Kern County, California. The mine safety disclosures required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K are included in Exhibit 95.1 of this Quarterly Report. There was one lost-time accident at GQM LLC during the ~~third~~first quarter of ~~2016.~~2017.

Item 6. Exhibits

Exhibit
No. Description of Exhibit Manner of Filing
3.1 Notice of Articles Incorporated by reference to Exhibit 3.1 to the Form 10-K of the Company, filed with the SEC on March 30, 2016
3.2 Articles Incorporated by reference to Exhibit 3.2 to the Form 8-K of the Company, filed with the SEC on September 2, 2010
4.1 Warrant Indenture dated July 25, 2016 Incorporated by reference to Exhibit 4.1 to the Form 8-K of the Company, filed with the SEC on July 25, 2016
4.2 Form of Warrant Certificate Incorporated by reference to Exhibit 4.1 to the Form 8-K of the Company, filed with the SEC on July 28, 2016
10.1 Employment Agreement dated March 16, 2017 with Guy Le Bel Incorporated by reference to Exhibit 10.1 to the Form 8-K of the Company, filed with the SEC on March 20, 2017
31.1 Certification of the Principal Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the ~~U.S.~~US Securities Exchange Act of 1934 Filed herewith
31.2 Certification of the Principal Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the ~~U.S.~~US Securities Exchange Act of 1934 Filed herewith
32.1 Section 1350 Certification of the Principal Executive Officer Filed herewith
32.2 Section 1350 Certification of the Principal Financial Officer Filed herewith
95.1 Mine Safety Disclosure Filed herewith
101 Financial Statements from the Quarterly Report on Form 10-Q of the Company for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2017, formatted in XBRL Filed herewith

4422

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~November 9, 2016~~May 10, 2017

GOLDEN QUEEN MINING CO. LTD.
(Registrant)

By: /s/ Thomas M. Clay
Thomas M. Clay
Principal Executive Officer
By: /s/ ~~Andrée St-Germain~~Guy Le Bel
~~Andrée St-Germain~~Guy Le Bel

Principal Financial Officer

4523

	Three Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,			Nine Months Ended September 30,
	2016			2015			2016			2015
Revenues	$	13,450,545		$	-		$	16,914,638		$	-
Costs and expenses
Direct mining costs		(9,110,596	)		-			(12,673,605	)		-
Depreciation and depletion		(2,231,897	)		-			(4,081,828	)		-
Accretion (Note 5)		(22,530	)		-			(45,059	)		-
General and administrative expenses (Notes 7(i))		(657,305	)		(672,738	)		(3,166,970	)		(3,403,485	)
Gain (loss) on derivative instruments (Notes 7(iii), 8 and 9)		3,944,411			(598,770	)		(1,951,581	)		1,868,329
Total costs and expenses		(8,077,917	)		(1,271,508	)		(21,919,043	)		(1,535,156	)
Other income (expenses)
Interest expense (Notes 7(ii) and 7(iv))		(1,814,561	)		(981,390	)		(4,369,026	)		(2,999,254	)
Interest income		33,313			49,805			116,215			168,330
Loss on extinguishment of debt		-			-			-			(151,539	)
Closing fee (Note 7(ii))		-			-			-			(1,500,000	)
Total other (expenses)		(1,781,248	)		(931,585	)		(4,252,811	)		(4,482,463	)
Net and comprehensive income (loss) for the period		3,591,380			(2,203,093	)		(9,257,216	)		(6,017,619	)
Add: Net and comprehensive (gain) loss attributable to the non-controlling interest for the period (Note 7(v))		(853,173	)		278,926			960,867			1,278,001
Net and comprehensive income (loss) attributable to Golden Queen Mining Co Ltd. for the period	$	2,738,207		$	(1,924,167	)	$	(8,296,349	)	$	(4,739,618	)
Earnings (Loss) per share – basic (Note 12)	$	0.03		$	(0.02	)	$	(0.08	)	$	(0.05	)
Earnings (Loss) per share – diluted (Note 12)	$	0.03		$	(0.02	)	$	(0.08	)	$	(0.05	)

Weighted average number of common shares outstanding -basic		108,026,944			99,928,683			102,657,767			99,881,430
Weighted average number of common shares outstanding - diluted		108,402,626			99,928,683			102,657,767			99,881,430

	Common shares		Amount		Additional Paid-in Capital (Restated - Note 16)		Deficit Accumulated			Total Shareholders’ Equity attributable to GQM Ltd (Restated - Note 16)			Non- controlling Interest			Total Shareholders’ Equity (Restated - Note 16)			Redeemable Portion of Non- controlling Interest
Balance, December 31, 2014 (Restated - Note 16)		99,778,683	$	62,709,015	$	43,468,510	$	(74,444,816	)	$	31,732,709		$	34,250,468		$	65,983,177		$	22,833,645
Issuance of common shares as part of management agreement (Note 6)		150,000		151,428		-		-			151,428			-			151,428			-
Stock-based compensation		-		-		-		-			-			7,500,000			7,500,000			5,000,000
Capital contribution from non-controlling interest (Note 7(v))		-		-		159,001		-			159,001						159,001			-
Net loss for the year		-		-		-		(5,461,205	)		(5,461,205	)		(1,064,857	)		(6,526,062	)		(709,904	)
Balance, December 31, 2015		99,928,683	$	62,860,443	$	43,627,511	$	(79,906,021	)	$	26,581,933		$	40,685,611		$	67,267,544		$	27,123,741
Issuance of common shares, private placement net of share issuance cost (Note 4)		11,120,000		8,206,552		-		-			8,206,552			-			8,206,552			-
Stock-based compensation		-		-		11,396		-			11,396						11,396			-
Net loss for the period		-		-		-		(8,296,349	)		(8,296,349	)		(576,520	)		(8,872,869	)		(384,347	)
Balance, September 30, 2016		111,048,683	$	71,066,995	$	43,638,907	$	(88,202,370	)	$	26,503,532		$	40,109,091		$	66,612,623		$	26,739,394

	Nine months ended			Nine months ended
	September 30, 2016			September 30, 2015
Operating Activities
Net loss for the period	$	(9,257,216	)	$	(6,017,619	)
Adjustment to reconcile net loss to cash used in operating activities:
Depreciation and depletion		4,081,828			21,997
Amortization of debt discount and interest accrual		4,071,537			2,863,396
Accretion expense		45,059			-
Change in fair value of derivative liabilities (Note 9)		1,951,581			(1,868,329	)
Stock based compensation		11,396			155,203
Foreign exchange gain		(273,470	)		(839,849	)
Loss on extinguishment of debt		-			151,539
Non-cash consulting expense (Note 7(i))		-			151,428
Closing fee related to long-term debt		-			1,500,000
Changes in assets and liabilities:
Receivables		(17,866	)		24,105
Prepaid expenses & other current assets		171,597			(108,180	)
Inventory		(7,325,771	)		(182,865	)
Accounts payable & accrued liabilities		3,454,289			285,272
Interest payable		(18,043	)		(951,445	)
Cash used in operating activities		(3,105,079	)		(4,815,347	)

Investment activities:
Additions to property, plant, equipment and mineral interests		(11,400,873	)		(59,812,875	)
Release (purchase) of reclamation financial assurance deposit		902,382			(349,053	)
Cash used in investing activities		(10,498,491	)		(60,161,928	)

Financing activities:
Issuance of common shares and warrants, net of share issue costs (Note 4)		10,907,840			-
Repayments of loans payable		(3,736,162	)		(2,500,000	)
Investment in Golden Queen Mining Company LLC by non-controlling interest		-			12,500,000
Borrowing under long-term debt		-			25,000,000
Repayment of convertible debentures		-			(7,675,000	)
Financing fees related to short-term debt		-			(1,500,000	)
Financing fees related to short-term debt capitalized to the loan		-			(250,000	)
Cash provided by financing activities		7,171,678			25,575,000
Net change in cash and cash equivalents		(6,431,892	)		(39,402,275	)
Cash and cash equivalents, beginning balance		37,587,311			91,407,644
Cash and cash equivalents, ending balance	$	31,155,419		$	52,005,369

	March 31, 2017		December 31, 2016
Stockpile inventory	$	407	$	318
In-process inventory		9,389		9,491
Dore inventory		408		76
Supplies and spare parts		1,610		1,056
	$	11,814	$	10,941

	September 30, 2016			December 31, 2015

Land	$	3,892,583		$	109,600
Mineral property interest and claims		2,064,026			4,458,744
Mine development		42,295,924			86,038,407
Mine equipment		55,970,460			25,425,661
Buildings		17,521,721			5,691,335
Computer equipment and software		429,403			218,822
Vehicles		2,107,558			978,573
Leasehold improvements		-			51,030
Infrastructure (Water/power)		11,051,509			-
Asset retirement costs		871,908			626,878
Construction in progress		1,139,056			-
Capitalized interest		5,770,001			5,174,846
Less:
Accumulated depreciation and depletion		(8,386,543	)		(211,324	)
	$	134,727,606		$	128,562,572

	Land		Mineral property interest and claims			Mine development			Machinery and equipment			Buildings and infrastructure			Construction in progress		Interest capitalized		Total
Cost
At December 31, 2015	$	110	$	4,459		$	84,798		$	28,085		$	8,565		$	-	$	-	$	126,017
Additions		3,777											9,391			542		5,674		19,384
Transfers		6		(6	)		(42,765	)		32,117			10,648			-		-		-
Disposals		-		-			-			-			-			-		-		-
At December 31, 2016	$	3,893	$	4,453		$	42,033		$	60,202		$	28,604		$	542	$	5,674	$	145,401
Additions		17		18						3,588						3,820		-		7,443
Transfers							(39	)					(36	)						(75	)
Disposals		-		-			-			(1,344	)		-			-		-		(1,344	)
At March 31, 2017	$	3,910	$	4,471		$	41,994		$	62,446		$	28,568		$	4,362	$	5,674	$	151,425

Accumulated depreciation and depletion
At December 31, 2015	$	-	$	-		$	654		$	1,462		$	350		$	-	$	-	$	2,466
Additions		-		72			317			5,666			2,330			-		-		8,385
Disposals		-		-			-			-			-			-		-		-
At December 31, 2016	$	-	$	72		$	971		$	7,128		$	2,680		$	-	$	-	$	10,851
Additions		-		61			558			1,437			591			-		109		2,756
Disposals		-		-			-			(256	)		-			-		-		(256	)
At March 31, 2017	$	-	$	133		$	1,529		$	8,309		$	3,271		$	-	$	109	$	13,351

Carrying values
At December 31, 2016	$	3,893	$	4,381		$	41,062		$	53,074		$	25,924		$	542	$	5,674	$	134,550
At March 31, 2017	$	3,910	$	4,338		$	40,465		$	54,137		$	25,297		$	4,362	$	5,565	$	138,074

		~~2016~~
~~Expected life years~~		~~3.00~~
~~Interest rate~~		~~0.58%~~
~~Volatility~~		~~87.29%~~
~~Dividend yield~~		~~Nil~~

	Shares		Weighted Average Exercise Price per Share
Options outstanding, December 31, 2015		1,070,000	$	0.94
Options granted		485,000	$	0.66
Options outstanding, December 31, 2016		1,555,000	$	0.85
Options granted		400,002	$	0.65
Options outstanding, March 31, 2017		1,955,002	$	0.81

	2017			2016
Expected life (years)		4.97			4.92
Interest rate		1.18	%		1.00	%
Volatility		77.29	%		81.27	%
Dividend yield		0.00	%		0.00	%

	Shares			Weighted Average Exercise Price per Share
Options outstanding and exercisable, December 31, 2014		750,000		$	1.29
Options granted		570,000		$	0.58
Options forfeited		(250,000	)	$	1.18
Options outstanding, December 31, 2015		1,070,000		$	0.94
Options exercisable, December 31, 2015		976,667		$	0.97

Options outstanding, September 30, 2016		1,070,000		$	0.94
Options exercisable, September 30, 2016		1,023,334		$	0.96

Expiry Date	Number Outstanding		Number Exercisable		Remaining Contractual Life (Years)	Exercise Price		Number Outstanding		Number Exercisable		Remaining Contractual Life (years)	Exercise Price
June 3, 2018		50,000		50,000	1.67	$	1.16		50,000		50,000	1.18	$	1.16
September 3, 2018		150,000		150,000	1.93	$	1.59		150,000		150,000	1.43	$	1.59
September 18, 2018		300,000		300,000	1.97	$	1.26		300,000		300,000	1.47	$	1.26
September 8, 2020		570,000		523,334	3.94	$	0.58		570,000		523,334	3.44	$	0.58
Balance, September 30, 2016		1,070,000		1,023,334	3.00
November 30, 2021									485,000		0	4.67	$	0.66
March 20, 2022									400,002		0	4.97	$	0.65
Balance, March 31, 2017									1,955,002		1,023,334	3.55

	March 31, 2017		December 31, 2016
Balance, beginning of the period		24,317,700		10,000,000
Issued - financing units		-		5,560,000
Issued - financing brokers⁽¹⁾		-		757,700
Issued - debt restructuring⁽¹⁾		-		8,000,000
Balance, end of the period		24,317,700		24,317,700

Expiry Date	Number Outstanding		Remaining Contractual Life (years)		Exercise Price
June 8, 2020		10,000,000		3.19	$	0.95
July 25, 2019		5,560,000		2.32	C$	2.00
July 25, 2019		757,700		2.32	C$	2.00
November 18, 2021		8,000,000		4.65	$	0.85

	September 30,2016		December 31,2015
Balance, beginning of period		10,000,000		-
Issued		6,317,700		10,000,000
Balance, end of period		16,317,700		10,000,000

	March 31, 2017			December 31, 2016
Assets, GQM LLC	$	152,976		$	151,802
Liabilities, GQM LLC		(22,663	)		(20,710	)
Net assets, GQM LLC	$	130,313		$	131,092

	Permanent Non- Controlling Interest			Temporary Non- Controlling Interest
Carrying value of non-controlling interest, December 31, 2016	$	39,327		$	26,220
Net and comprehensive loss for the period		(234	)		(156	)
Carrying value of non-controlling interest, March 31, 2017	$	39,093		$	26,064

Warrants related to June 2015 Loan	March 31, 2017			December 31, 2016
Risk-free interest rate		0.87	%		0.84	%
Expected life of derivative liability		3.19 years			3.44 years
Expected volatility		73.66	%		78.79	%
Dividend rate		0.00	%		0.00	%

Warrants related to November 2016 Loan	March 31, 2017			December 31, 2016
Risk-free interest rate		1.12	%		1.11	%
Expected life of derivative liability		4.65 years			4.89 years
Expected volatility		88.21	%		77.21	%
Dividend rate		0.00	%		0.00	%

	Three Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,		Nine Months Ended September 30,
	2016		2015		2016		2015
Accretion of the June 2015 Loan discount	$	620,971	$	600,797	$	1,853,024	$	743,866
Interest expense related to the June 2015 Loan		1,050,023		937,500		3,057,406		1,166,667
*Interest expense related to Komatsu financial loans		143,567		91,301		463,818		135,859
Interest expense related to the convertible debentures		-		14,321		-		94,907
Amortization of the convertible debentures		-		262,203		-		1,852,754
Interest expense related to the december 2014 Loan		-		-		-		547,945
Accretion of the december 2014 loan financing fees		-		-		-		967,155
Accretion of discount and interest on loan and convertible debentures	$	1,814,561	$	1,906,122	$	5,374,249	$	5,509,153

	2016
Gold zero cost collars:
Floor amount (ounces)		3,000
Average floor price	$	1,100
Ceiling amount (ounces)		3,000
Average ceiling price	$	1,320

	March 31, 2017		December 31, 2016
Fair value of warrants issued	$	972	$	2,701
Change in fair value of warrants		54		(1,729	)
Balance, end of the period	$	1,026	$	972

	Three Months Ended March 31,		Three Months Ended March 31,
	2017		2016
Cash paid during the period for:
Interest on loan payable	$	135	$	144
Non-cash financing and investing activities:
Asset retirement costs charged to mineral property interests	$	87	$	97
Mining equipment acquired through issuance of debt	$	2,481	$	295
Mineral property expenditures included in accounts payable	$	1,524	$	2,311
Interest cost capitalized to mineral property interests	$	-	$	839
Inventory expenditures included in accounts payable	$	-	$	867
Non-cash finder fess	$	59	$	-
Non-cash amortization of discount and interest expense	$	286	$	606
Interest payable converted to principal balance	$	296	$	975


~~Risk-free interest rate~~*12.*	~~0.51~~	%
~~Expected life of derivative liability in years~~	~~2.82~~
~~Expected volatility~~	~~84.29~~	%
~~Dividend rate~~	~~0.00~~	%*Commitments and Contingencies*

	September 30, 2016
Fair value at inception	$	-
Fair value of warrants granted		2,701,288
Change in fair value of warrants		(535,738	)
Balance, end of the period	$	2,165,550

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

~~Level 3~~Level3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

	September 30, 2016			December 31, 2015
Total acquisition costs	$	24,614,468		$	24,262,031
Interest rates		0.00% - 4.40	%		0.00% - 4.40	%
Average remaining life (Years)		2.98			3.46
Monthly payments	$	4,669 - $33,906		$	4,669 - $33,906
Short-term portion	$	5,175,113		$	4,942,716
Long-term portion	$	9,756,674		$	13,430,107

Year	Principal Payments
2016	$	1,294,271
Years			Principal Payments
2017		5,198,262		6,137
2018		5,323,624		6,142
2019		3,115,631		3,118
2020		-		829
Total	$	14,931,788	$	16,226

	September, 2015
	As Previously Reported		As Restated

Liabilities:
Deferred tax liability	$	-	$	12,922,000
Total liabilities	$	57,891,299	$	70,813,299
Shareholders’ Equity:
Additional paid-in capital	$	56,545,713	$	43,623,713
Total shareholders’ equity attributable to GQM Ltd.	$	40,221,722	$	27,299,722
Total shareholders’ equity	$	81,205,389	$	68,283,389

		31-Mar-17			31-Mar-16			Variance
Mining⁽¹⁾
Ore mined	k ton		852			291			193	%
Ore mined	k tonnes		773			264			193	%
Waste mined	k ton		3,230			956			238	%
Waste mined	k tonnes		2,930			841			248	%
Total mined	k ton		4,082			1,218			235	%
Total mined	k tonnes		3,703			1,105			235	%
Strip ratio	waste:ore		3.8			3.3			15	%
Processing⁽¹⁾
Ore processed	k ton		791			362			119	%
Ore processed	k tonnes		718			328			119	%
Average ore processed gold grade	ozpt		0.019			0.008			133	%
Average ore processed gold grade	gpt		0.640			0.274			133	%
Average ore processed silver grade	ozpt		0.232			0.292			-20	%
Average ore process silver grade	gpt		7.969			10.011			-20	%
Gold loaded on pad	contained oz		14,718			2,982			394	%
Silver loaded on pad	contained oz		184,115			82,792			122	%
Average ore processing throughput	ton per day		8,821			3,973			122	%
Average ore processing throughput	tonne per day		8,002			3,604			122	%
Gold produced	oz		11,406			447			2452	%
Silver produced	oz		64,581			4,002			1514	%
Financial⁽¹⁾
Revenue	$		14,804			-			100	%
Income from mine operations	$		487			-			100	%
General and administrative expenses	$		(1,416	)		(1,527	)		-7	%
Total other income (expenses)	$		(1,887	)		(7,753	)		-76	%
Net and comprehensive (loss) income for the year	$		(2,816	)		(9,280	)		-70	%
Net and comprehensive (loss) income attributable to Golden Queen Mining Co Ltd.	$		(2,426	)		(8,925	)		-73	%
Average realized gold price⁽²⁾	$/oz		1,228			-			100	%
Average realized silver price⁽²⁾	$/oz		17.59			-			100	%
Total cash costs - net of by product credits⁽²⁾	$/oz		1,013			-			100	%
All-in sustaining costs - net of by product credits⁽²⁾	$/oz		1,724			-			100	%

	Results for the quarter ended on:
	31-Mar-17			31-Dec-16			30-Sep-16		30-Jun-16
Revenue	$	14,804		$	10,278		$	13,451	$	3,464
Net and comprehensive (loss) income	$	(2,816	)	$	(434	)	$	3,590	$	(3,568	)
Net and comprehensive (loss) income attributable to Golden Queen Mining Co Ltd.	$	(2,426	)	$	868			2,738		(2,109	)
Basic net income (loss) per share	$	(0.02	)	$	0.01		$	0.03	$	(0.02	)
Diluted net income (loss) per share	$	(0.02	)	$	0.01		$	0.03	$	(0.02	)