PFIC

Summary of Information on a Passive Foreign Investment Company or PFIC

Golden Queen Mining Co. Ltd. is classified as a passive foreign investment company, or PFIC, which will subject our U.S. investors to adverse tax rules.

Based upon our analysis of our assets as at December 31, 2012 and income for the year 2012, we were a PFIC for U.S. federal income tax purposes during 2012. We have substantial passive assets in the form of cash and cash equivalents, and can provide no assurance that we will not continue to remain a PFIC in 2013 and beyond. The determination of whether or not we continue to be a PFIC would principally be based upon:

  • The composition of our assets, the amount of which will depend, in part, on our total net assets and the market value of our Treasury portfolio, which is subject to change; and
  • The proportion of our revenue that is passive income.

We have limited control over these variables. To the extent we do have control over these variables, we may take steps to reduce the material and adverse effect that our PFIC classification may have on our share price. Further, we may consider additional capital markets or corporate financing transactions in the future. Should we proceed with such offerings, we cannot, at this stage, comment with certainty on timing, amounts or particular uses of net proceeds. Depending upon the usage of such net proceeds, we could continue to remain a PFIC. Since we are a PFIC, U.S. investors are urged to consult their tax advisors regarding the application of the PFIC rules to their particular circumstances.

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