TIDMGAL
RNS Number : 4586S
Galantas Gold Corporation
09 July 2020
GALANTAS GOLD CORPORATION
TSXV & AIM : Symbol GAL
GALANTAS REPORTS RESULTS FOR THE QUARTERED MARCH 31, 2020
July 09, 2020: Galantas Gold Corporation (the "Company" or
"Galantas") is pleased to announce its financial results for the
Quarter ended March 31, 2020.
Financial Highlights
Highlights of the first quarter 2020 results, which are
expressed in Canadian Dollars, are summarized below:
Quarter Ended March 31
All in CDN$ 2020 2019
Revenue $ 0 $ 0
Cost and expenses of Operations $ (35,836) $ (70,026)
Loss before the items below $ (35,836) $ (70,026)
Amortization $ (88,727) $ (87,405)
General administrative expenses $ (656,768) $ (602,429)
Unrealized gain on fair value of derivative financial liability $ 0 $ 0
Foreign exchange gain (loss) $ 101,016 $ ( 19,657)
Net (Loss) for the Quarter $ (680,315) $ (779,517)
Working Capital (Deficit) $ (7,299,380) $ (2,702,004)
Cash (loss) generated from operations before changes in non-cash
working capital $ (348,899) $ (391,037)
Cash at March 31, 2020 $ 936,560 $ 3,767,187
Revenue for the Quarters ended March 31, 2020 and 2019 amounted
to $Nil for both periods. Shipments of concentrate had commenced
during the second quarter of 2019. Concentrate sales provisional
revenues totaled approximately US$ 186,000 for the first quarter of
2020. However, until the mine commences commercial production, the
net proceeds from concentrate sales are being offset against
Development assets.
The Net Loss for the quarter ended March 31, 2020 amounted to $
680,315 (2019: $ 779,517) and the cash outflow from operating
activities before changes in non-cash working capital items for the
quarter ended March 31, 2020
amounted to $ 348,899 (2019: $ 391,037).
The Company had cash balances of $ 936,560 at March 31, 2020
compared to $ 3,767,187 at March 31, 2019. The working capital
deficit at March 31, 2020 amounted to $ 7,299,380 compared to a
working capital deficit of $ 2,702,004 at March 31, 2019.
Subsequent to March 31, 2020 Galantas reported a proposed
private placement of common shares and amendments to the terms of
its loan facility with Ocean Partners UK Ltd both of which are
subject to TSXV and regulatory approval. The private placement is
expected to include funds raised in both UK and Canadian currency
and is for a maximum of 2,833,132 shares, at an issue price of $
0.225 (UKGBP 0.1328) per share for maximum gross proceeds of $
637,454 (UKGBP 376,240). Provisional indications have been received
for the maximum amount. The placement will be brokered and insiders
of the Company are expected to participate in the placement.
Galantas has also agreed on terms, subject to final documentation,
of an increase of USD$ 200,000 on the outstanding loan with Ocean
Partners UK Ltd. The interest rate applicable on the outstanding
loan will be increased from USD 12 month LIBOR + 8.75% to USD 12
month LIBOR + 9.9% and the maturity date will be extended from 30
December 2020 to 31 December 2021. As consideration for amending
the terms of the loan, Ocean will receive, upon closing of the
agreements, 1,700,000 bonus warrants of Galantas subject to the
rules of TSXV Policy 5.1 - Loans, Loan Bonuses, Finder's Fees and
Commissions. Each bonus warrant will be exercisable for one common
share of Galantas at an exercise price of $0.33 per bonus share,
being 110% of the TSXV closing price the day before the
announcement. The net proceeds to be raised by the private
placement and the additional Ocean Partners loan are intended to be
used to support mine operations and provide general working capital
for the Company.
Production/Mine Development
Underground development of the decline tunnel at the Omagh gold
mine, located at the base of the existing open pit, commenced in
early 2017 and the mine commenced limited production of gold
concentrate during the third quarter of 2018. Underground
development of the decline tunnel continued to be progressed during
2018 and 2019 from feed produced in the development of the Kearney
vein . The plant had continued limited production of a gold &
silver concentrate using a non-toxic, froth-flotation process, ran
on a batch basis from a stockpile of underground vein material plus
additional feed produced from on-vein development operations until
the temporary suspension of blasting at the mine during the fourth
quarter of 2019 (see Press release dated October 29, 2019).
Blasting operations were being limited since all blasting must be
supervised by the Police Service of Northern Ireland (PSNI) and
were not sufficient for the desired level of operations. The
Company had been working with the PSNI to increase blasting
availability to normal levels for an underground mine. While
progress has been made and substantive investment incurred in
accordance with recommendations the Company was still awaiting
final approvals from the authorities to be able to implement its
increased blasting protocols prior to the suspension. The
arrangements, at that time were not sufficient to allow for the
expansion of mine operations as envisaged by the Company's existing
mine plan and until changes were agreed, the present inefficiencies
caused by those arrangements form an increasing financial burden,
which has proved a significant drain on the financial resources of
the Company. Accordingly, to reduce costs the numbers employed at
the operation were reduced from 46 to 21. Some mine operations
continued at the Omagh gold mine, on a single shift. Subsequent to
March 31, 2020 Galantas reported that confirmation has been
received from PSNI, in regard to their satisfaction of certain
secure storage and handling protocols required for an increase in
blasting to a commercial level subject to financial matters being
agreed. The Company now understands that these financial matters
have now been mutually agreed. Ore production is suspended until
finance is available to expand the underground operation.
During 2019 underground development of the decline tunnel had
continued to be progressed with further crosscuts allowing access
to lower levels of vein development which forms the development
necessary to demarcate production panels. Prior to the suspension
of blasting, the access drive on the fourth (1060) level has
intersected the Kearney vein ahead of schedule and the intersection
showed strongly developed mineralization. The north and south faces
of the vein were channel sampled. The average of the two channels
was 8.35 g/t gold over an average true width of 2.65 metres (Press
release July 22, 2019). The Company also reported that drivage from
the 1072 access had been taken northwards, in-vein, for
approximately 40 metres. Mineralisation beyond the first 20 metres
is currently excluded from the geological model, due to paucity of
data. The mineralization was shown to be persistent and has been
followed in an in-vein development. Two channel samples, taken
across the face as the drivage was developed at 24.1m and 27.6m
into the third level (1072) north development, showed a grade of
6.2g/t gold and 16.3 g/t gold respectively, each with a true width
of 3 metres (Press release July 22, 2019). The vein will continue
to be followed northwards on the third (1072) level and elevates
potential for additional mineralisation to be added to the resource
model if discovered on the adjacent first (1096), second (1084) and
fourth (1060) levels. At the time the suspension of blasting was
reported, underground drivages had been developed to expose the
main Kearney vein on four levels with a fifth level at the point of
intersection. The mine is serviced by a decline tunnel of 1 in 6
gradient, of dimensions approximately 4.5m by 4.5m.
A probe drilling campaign was subsequently carried out using the
retained personnel and equipment. The results of this campaign,
combined with detailed mapping of the exposed mineralisation
underground suggests zones of higher width of mineralisation within
the vein, linking adjacent levels. This supports an implication
that such zonal mineralisation may continue at depth, with enhanced
exploration potential for targeting gold resources particularly to
the north and within the Company's license area. Probe drilling
does not provide samples suitable for use in mineral resource
estimates but can provide strong indications where mineralisation
is concentrated and is of significantly less cost than core
drilling. Subsequently in May 2020, the Company reported that it
had filed a short technical report in respect of the probe drilling
campaign. The report is available on www.sedar.com and
www.galantas.com .
Milling operations had progressed during 2019 and moved to a
two-shift basis in the third quarter. The processing plant, which
was used formerly for open-pit operations, has had the benefit of a
recent upgrade. Following the suspension of blasting operations at
the mine, the processing plant continued to operate on a limited
basis in the near term and is being fed from stock. In March 2020
and following UK government guidelines regarding Covid-19,
processing operations temporarily ceased until later in May when
the Company announced that concentrate processing has recommenced.
The company carried out maintenance to the processing plant during
the milling suspension, to minimise future maintenance
interruptions. The restart follows a review of Northern Ireland /
UK government health advice regarding Covid-19, a risk assessment
and the introduction of appropriate modifications to working
practices. Feedstock for the processing plant is from low grade
stock until suitable arrangements are in place to recommence
development underground. The number of employees that had been
furloughed during the first quarter under a NI/UK government scheme
has been recently reduced from seven to three. Shipments of
concentrate under the off-take arrangements had commenced during
the second quarter of 2019. For the first quarter of 2020
provisional revenues from concentrate sales totalled US$186,000.
Until the mine reaches the commencement of commercial production,
the net proceeds from concentrate sales will be offset against
Development assets.
The Company is seeking strategic alternatives including
reviewing its licenses and operations; and considering the
possibility of engaging in a sale, joint venture, partnership or
other options with third parties and alternative financing
structures. The Company is actively engaged in that process.
Safety is a high priority and the company continued to invest in
safety-related training and infra-structure. The zero lost time
accident rate since the start of underground operations, continues.
Environmental monitoring demonstrates a high level of regulatory
compliance.
The detailed results and Management Discussion and Analysis
(MD&A) are available on www.sedar.com and www.galantas.com and
the highlights in this release should be read in conjunction with
the detailed results and MD&A. The MD&A provides an
analysis of comparisons with previous periods, trends affecting the
business and risk factors.
http://www.rns-pdf.londonstockexchange.com/rns/4586S_1-2020-7-8.pdf
Qualified Person
The financial components of this disclosure has been reviewed by
Leo O' Shaughnessy (Chief Financial Officer) and the production
component by Roland Phelps (President & CEO), qualified persons
under the meaning of NI. 43-101 and AIM requirements. The
information is based upon local production and financial data
prepared under their supervision.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press
release contains forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995
and applicable Canadian securities laws, including revenues and
cost estimates, for the Omagh Gold project. Forward-looking
statements are based on estimates and assumptions made by Galantas
in light of its experience and perception of historical trends,
current conditions and expected future developments, as well as
other factors that Galantas believes are appropriate in the
circumstances. Many factors could cause Galantas' actual results,
the performance or achievements to differ materially from those
expressed or implied by the forward looking statements or strategy,
including: gold price volatility; discrepancies between actual and
estimated production, actual and estimated metallurgical recoveries
and throughputs; mining operational risk, geological uncertainties;
regulatory restrictions, including environmental regulatory
restrictions and liability; risks of sovereign involvement;
speculative nature of gold exploration; dilution; competition; loss
of or availability of key employees; additional funding
requirements; uncertainties regarding planning and other permitting
issues; and defective title to mineral claims or property. These
factors and others that could affect Galantas's forward-looking
statements are discussed in greater detail in the section entitled
"Risk Factors" in Galantas' Management Discussion & Analysis of
the financial statements of Galantas and elsewhere in documents
filed from time to time with the Canadian provincial securities
regulators and other regulatory authorities. These factors should
be considered carefully, and persons reviewing this press release
should not place undue reliance on forward-looking statements.
Galantas has no intention and undertakes no obligation to update or
revise any forward-looking statements in this press release, except
as required by law.
Galantas Gold Corporation
Roland Phelps C.Eng - President & CEO
Email: info@galantas.com
Website: www.galantas.com
Telephone: +44 (0) 2882 241100
Grant Thornton UK LLP (Nomad)
Philip Secrett, Richard Tonthat, Harrison Clarke
Telephone: +44(0)20 7383 5100
Whitman Howard Ltd (Broker & Corporate Adviser)
Ranald McGregor-Smith, Nick Lovering
Telephone: +44(0)20 7659 1234
GALANTAS GOLD CORPORATION
Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended March 31, 2020
NOTICE TO READER
The accompanying unaudited condensed interim consolidated
financial statements of Galantas Gold Corporation (the "Company")
have been prepared by and are the responsibility of management. The
unaudited condensed interim consolidated financial statements have
not been reviewed by the Company's auditors.
Galantas Gold Corporation
Condensed Interim Consolidated Statements of Financial
Position
(Expressed in Canadian Dollars)
(Unaudited)
As at As at
March 31, December 31,
2020 2019
------------------------------------------------------- ----------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 936,560 $ 1,913,420
Accounts receivable and prepaid expenses (note 4) 339,993 416,699
Inventories (note 5) 78,778 70,328
------------------------------------------------------- ----------- ------------
Total current assets 1,355,331 2,400,447
Non-current assets
Property, plant and equipment (note 6) 21,921,780 21,159,716
Long-term deposit (note 8) 528,120 515,220
Exploration and evaluation assets (note 7) 719,719 661,726
------------------------------------------------------- ----------- ------------
Total non-current assets 23,169,619 22,336,662
------------------------------------------------------- ----------- ------------
Total assets $ 24,524,950 $ 24,737,109
------------------------------------------------------- ----------- ------------
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (note 9) $ 1,723,322 $ 2,131,715
Current portion of financing facilities (note 10) 393,659 242,280
Due to related parties (note 15) 5,003,728 4,719,058
Convertible debenture (note 11) 1,534,002 1,400,594
------------------------------------------------------- ----------- ------------
Total current liabilities 8,654,711 8,493,647
Non-current liabilities
Non-current portion of financing facilities (note 10) 1,363,547 1,440,185
Decommissioning liability (note 8) 597,612 580,303
------------------------------------------------------- ----------- ------------
Total non-current liabilities 1,961,159 2,020,488
------------------------------------------------------- ----------- ------------
Total liabilities 10,615,870 10,514,135
------------------------------------------------------- ----------- ------------
Equity
Share capital (note 12(a)(b)) 50,123,910 50,123,910
Reserves 9,782,833 9,416,412
Deficit (45,997,663) (45,317,348)
------------------------------------------------------- ----------- ------------
Total equity 13,909,080 14,222,974
------------------------------------------------------- ----------- ------------
Total equity and liabilities $ 24,524,950 $ 24,737,109
------------------------------------------------------- ----------- ------------
The notes to the unaudited condensed interim consolidated
financial statements are an integral part of these statements.
Going concern (note 1)
Contingency (note 17)
Events after the reporting period (note 18)
Galantas Gold Corporation
Condensed Interim Consolidated Statements of Loss
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended
March 31,
2020 2019
----------------------------------------------------------------------------- ---------- ----------
Revenues
Jewellery sales (note 14) $ - $ -
Cost and expenses of operations 35,836
Cost of sales 70,026
Depreciation (note 6) 88,727 87,405
----------------------------------------------------------------------------- ---------- ----------
124,563 157,431
----------------------------------------------------------------------------- ---------- ----------
Loss before general administrative and other expenses (124,563) (157,431)
----------------------------------------------------------------------------- ---------- ----------
General administrative expenses
Management and administration wages (note 15) 141,222 191,688
Other operating expenses 94,060 45,226
Accounting and corporate 14,144 13,895
Legal and audit 42,118 15,574
Stock-based compensation (note 12(d)) (16,288) 135,340
Shareholder communication and investor relations 47,076 48,133
Transfer agent 27,736 1,901
Director fees (note 15) 6,250 6,250
General office 2,713 2,599
Accretion expenses (notes 8, 10 and 11) 146,121 57,046
Loan interest and bank charges less deposit interest (notes 10, 11 and 15) 151,616 84,777
----------------------------------------------------------------------------- ---------- ----------
656,768 602,429
Other expenses
Foreign exchange (gain) loss (101,016) 19,657
----------------------------------------------------------------------------- ---------- ----------
(101,016) 19,657
----------------------------------------------------------------------------- ---------- ----------
Net loss for the period $ (680,315) $ (779,517)
----------------------------------------------------------------------------- ---------- ----------
Basic and diluted net loss per share (note 13) $ (0.02) $ (0.03)
----------------------------------------------------------------------------- ---------- ----------
Weighted average number of common shares outstanding - basic and diluted (i) 32,321,472 29,968,531
----------------------------------------------------------------------------- ---------- ----------
(i) Adjusted for 10:1 share consolidation effective March 31,
2020 (note 13).
The notes to the unaudited condensed interim consolidated
financial statements are an integral part of these statements.
Galantas Gold Corporation
Condensed Interim Consolidated Statements of Comprehensive
Loss
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended
March 31,
2020 2019
--------------------------------------------------------------- -------- --------
Net loss for the period $(680,315) $(779,517)
Other comprehensive income (loss)
Items that will be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations 382,709 (4,982)
--------------------------------------------------------------- -------- --------
Total comprehensive loss $(297,606) $(784,499)
--------------------------------------------------------------- -------- --------
The notes to the unaudited condensed interim consolidated
financial statements are an integral part of these statements.
Galantas Gold Corporation
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended
March 31,
2020 2019
------------------------------------------------------------------- --------- ----------
Operating activities
Net loss for the period $ (680,315) (779,517)
Adjustment for:
Depreciation (note 6) 88,727 87,405
Stock-based compensation (note 12(d)) (16,288) 135,340
Interest expense (notes 10, 11 and 15) 151,275 90,164
Foreign exchange (gain) loss (38,419) 18,525
Accretion expenses (notes 8, 10 and 11) 146,121 57,046
Non-cash working capital items:
Accounts receivable and prepaid expenses 84,588 (974)
Inventories (6,526) -
Accounts payable and other liabilities (445,617) (146,655)
Due to related parties 92,409 74,356
------------------------------------------------------------------- --------- ----------
Net cash and cash equivalents used in operating activities (624,045) (464,310)
------------------------------------------------------------------- --------- ----------
Investing activities
Purchase of property, plant and equipment (325,769) (1,951,052)
Exploration and evaluation assets (41,424) -
------------------------------------------------------------------- --------- ----------
Net cash and cash equivalents used in investing activities (367,193) (1,951,052)
------------------------------------------------------------------- --------- ----------
Financing activities
Repayment of financing facilities (note 10) (8,353) (1,766)
------------------------------------------------------------------- --------- ----------
Net cash and cash equivalents used in financing activities (8,353) (1,766)
------------------------------------------------------------------- --------- ----------
Net change in cash and cash equivalents (999,591) (2,417,128)
Effect of exchange rate changes on cash held in foreign currencies 22,731 (4,239)
Cash and cash equivalents, beginning of period 1,913,420 6,188,554
------------------------------------------------------------------- --------- ----------
Cash and cash equivalents, end of period $ 936,560 $ 3,767,187
------------------------------------------------------------------- --------- ----------
Cash $ 936,560 $ 3,767,187
Cash equivalents - -
------------------------------------------------------------------- --------- ----------
Cash and cash equivalents $ 936,560 $ 3,767,187
------------------------------------------------------------------- --------- ----------
The notes to the unaudited condensed interim consolidated
financial statements are an integral part of these statements.
Galantas Gold Corporation
Condensed Interim Consolidated Statements of Changes in
Equity
(Expressed in Canadian Dollars)
(Unaudited)
Reserves
Equity
settled Foreign Equity
component
share-based currency of
Share Warrants payments translation convertible
capital reserve reserve reserve debenture Deficit Total
---------------------- ---------- -------- ----------- ----------- ----------- ----------- ----------
Balance, December 31,
2018 $48,628,055 $ 786,000 $ 7,264,147 $ 913,016 $ - $(41,752,739) $15,838,479
Stock-based
compensation
(note 12(d)) - - 135,340 - - - 135,340
Exchange
differences on
translating
foreign operations - - - (4,982) - - (4,982)
Net loss for the
period - - - - - (779,517) (779,517)
---------------------- ---------- -------- ----------- ----------- ----------- ----------- ----------
Balance, March 31,
2019 $48,628,055 $ 786,000 $ 7,399,487 $ 908,034 $ - $(42,532,256) $15,189,320
---------------------- ---------- -------- ----------- ----------- ----------- ----------- ----------
Balance, December 31,
2019 $50,123,910 $ 786,000 $ 7,585,580 $ 796,754 $ 248,078 $(45,317,348) $14,222,974
Stock-based
compensation (note
12(d)) - - (16,288) - - - (16,288)
Exchange
differences on
translating
foreign operations - - - 382,709 - - 382,709
Net loss for the
period - - - - - (680,315) (680,315)
---------------------- ---------- -------- ----------- ----------- ----------- ----------- ----------
Balance, March 31,
2020 $50,123,910 $ 786,000 $ 7,569,292 $ 1,179,463 $ 248,078 $(45,997,663) $13,909,080
---------------------- ---------- -------- ----------- ----------- ----------- ----------- ----------
The notes to the unaudited condensed interim consolidated
financial statements are an integral part of these statements.
Galantas Gold Corporation
Notes to Condensed Interim Consolidated Financial Statements
Three Months Ended March 31, 2020
(Expressed in Canadian Dollars)
(Unaudited)
-------------------------------------------------------------
1. Going Concern
These unaudited condensed interim consolidated financial
statements have been prepared on a going concern basis which
contemplates that Galantas Gold Corporation (the "Company") will be
able to realize assets and discharge liabilities in the normal
course of business. In assessing whether the going concern
assumption is appropriate, management takes into account all
available information about the future, which is at least, but is
not limited to, twelve months from the end of the reporting period.
Management is aware, in making its assessment, of uncertainties
related to events or conditions that may cast doubt on the
Company's ability to continue as a going concern. The Company's
future viability depends on the consolidated results of the
Company's wholly-owned subsidiary Cavanacaw Corporation
("Cavanacaw"). Cavanacaw has a 100% shareholding in both Flintridge
Resources Limited ("Flintridge") who are engaged in the
acquisition, exploration and development of gold properties, mainly
in Omagh, Northern Ireland and Omagh Minerals Limited ("Omagh") who
are engaged in the exploration of gold properties, mainly in the
Republic of Ireland. The Omagh mine has an open pit mine, which was
in production until 2013 when production was suspended and is
reported as property, plant and equipment and as an underground
mine which having established technical feasibility and commercial
viability in December 2018 has resulted in associated exploration
and evaluation assets being reclassified as an intangible
development asset and reported as property, plant and
equipment.
The going concern assumption is dependent upon forecast cash
flows being met, negotiations for the extension of the short-term
loans being finalized, further financing currently being negotiated
being completed and blasting arrangement with the Police Service of
Northern Ireland ("PSNI") being resolved. The directors assumptions
in relation to future levels of production, gold prices and mine
operating costs are crucial to forecast cash flows being achieved.
Should production be significantly delayed, revenues fall short of
expectations or operating costs and capital costs increase
significantly, there may be insufficient cash flows to sustain day
to day operations without seeking further finance.
Negotiations with current finance providers to extend short-term
loans are progressing satisfactory. The Company is also in advanced
negotiations with potential new investors to meet the financial
requirements of the Company for the foreseeable future. Based on
the five-year period financial projections prepared, the directors
believe it's appropriate to prepare the unaudited condensed interim
consolidated financial statements on the going concern basis.
On April 17, 2020, the Company completed a share consolidation
of its share capital on the basis of ten existing common shares for
one new common share consolidation. All common shares, per common
share amounts, stock options and warrants in these unaudited
condensed interim consolidated financial statements have been
retroactively restated to reflect the share consolidation.
As at March 31, 2020, the Company had a deficit of $45,997,663
(December 31, 2019 - $45,317,348). Comprehensive loss for the three
months ended March 31, 2020 was $297,606 (three months ended March
31, 2019 - $784,499). These losses raise material uncertainties
which may cast significant doubt as to whether the Company will be
able to continue as a going concern. Management is confident that
it will continue as a going concern. However, this is subject to a
number of factors including market conditions.
These unaudited condensed interim consolidated financial
statements do not reflect adjustments to the carrying values of
assets and liabilities, the reported expenses and financial
position classifications used that would be necessary if the going
concern assumption was not appropriate. These adjustments could be
material.
2. Incorporation and Nature of Operations
The Company was formed on September 20, 1996 under the name
Montemor Resources Inc. on the amalgamation of 1169479 Ontario Inc.
and Consolidated Deer Creek Resources Limited. The name was changed
to European Gold Resources Inc. by articles of amendment dated July
25, 1997. On May 5, 2004, the Company changed its name from
European Gold Resources Inc. to Galantas Gold Corporation. The
Company was incorporated to explore for and develop mineral
resource properties, principally in Europe. In 1997, it purchased
all of the shares of Omagh which owns a mineral property in
Northern Ireland, including a delineated gold deposit. Omagh
obtained full planning and environmental consents necessary to
bring its property into production.
The Company entered into an agreement on April 17, 2000,
approved by shareholders on June 26, 2000, whereby Cavanacaw, a
private Ontario corporation, acquired Omagh. Cavanacaw has
established an open pit mine to extract the Company's gold deposit
near Omagh, Northern Ireland. Cavanacaw also has developed a
premium jewellery business founded on the gold produced under the
name Galántas Irish Gold Limited ("Galántas"). As at July 1, 2007,
the Company's Omagh mine began production and in 2013 production
was suspended. On April 1, 2014, Galántas amalgamated its jewelry
business with Omagh.
On April 8, 2014, Cavanacaw acquired Flintridge. Following a
strategic review of its business by the Company during 2014 certain
assets owned by Omagh were acquired by Flintridge.
The Company's operations include the consolidated results of
Cavanacaw, and its wholly-owned subsidiaries Omagh, Galántas and
Flintridge.
The Company's common shares are listed on the TSX Venture
Exchange ("TSXV") and London Stock Exchange AIM under the symbol
GAL. The primary office is located at The Canadian Venture
Building, 82 Richmond Street East, Toronto, Ontario, Canada, M5C
1P1.
3. Basis of Preparation
Statement of compliance
The Company applies International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB") and interpretations issued by the International Financial
Reporting Interpretations Committee ("IFRIC"). These unaudited
condensed interim consolidated financial statements have been
prepared in accordance with International Accounting Standard 34 -
Interim Financial Reporting. Accordingly, they do not include all
of the information required for full annual financial
statements.
The policies applied in these unaudited condensed interim
consolidated financial statements are based on IFRS issued and
outstanding as of July 7, 2020 the date the Board of Directors
approved the statements. The same accounting policies and methods
of computation are followed in these unaudited condensed interim
consolidated financial statements as compared with the most recent
annual consolidated financial statements as at and for the year
ended December 31, 2019, except as noted below. Any subsequent
changes to IFRS that are given effect in the Company's annual
consolidated financial statements for the year ending December 31,
2020 could result in restatement of these unaudited condensed
interim consolidated financial statements.
New accounting standards adopted
IFRS 3, Business Combinations ("IFRS 3")
Amendments to IFRS 3, issued in October 2018, provide
clarification on the definition of a business. The amendments
permit a simplified assessment to determine whether a transaction
should be accounted for as a business combination or as an asset
acquisition.
The amendments are effective for transactions for which the
acquisition date is on or after the beginning of the first annual
reporting period beginning on or after January 1, 2020. The
adoption of the amendments had no impact on the Company's unaudited
condensed interim consolidated financial statements.
IAS 1, Presentation of Financial Statements ("IAS 1")
Amendments to IAS 1, issued in October 2018, provide
clarification on the definition of material and how it should be
applied. The amendments also align the definition of material
across IFRS and other publications.
The amendments are effective for annual periods beginning on or
after January 1, 2020 and are required to be applied prospectively.
The adoption of the amendments had no impact on the Company's
unaudited condensed interim consolidated financial statements.
IAS 8, Accounting Policies, Changes in Accounting Estimates and
Errors ("IAS 8")
Amendments to IAS 8, issued in October 2018, provide
clarification on the definition of material and how it should be
applied. The amendments also align the definition of material
across IFRS and other publications.
The amendments are effective for annual periods beginning on or
after January 1, 2020 and are required to be applied prospectively.
The adoption of the amendments had no impact on the Company's
unaudited condensed interim consolidated financial statements.
4. Accounts Receivable and Prepaid Expenses
As at As at
March 31, December 31,
2020 2019
----------------------------------------------- --------- ------------
Sales tax receivable - Canada $ 6,241 $ 2,682
Valued added tax receivable - Northern Ireland 47,055 93,864
Accounts receivable 245,136 250,533
Prepaid expenses 41,561 69,620
----------------------------------------------- --------- ------------
$ 339,993 $ 416,699
----------------------------------------------- --------- ------------
Prepaid expenses includes advances for consumables and for
construction of the passing bays in the Omagh mine.
The following is an aged analysis of receivables:
As at As at
March 31, December 31,
2020 2019
-------------------------- --------- ------------
Less than 3 months $ 79,752 $ 235,934
3 to 12 months 216,147 108,674
More than 12 months 2,533 2,471
-------------------------- --------- ------------
Total accounts receivable $ 298,432 $ 347,079
-------------------------- --------- ------------
5. Inventories
As at As at
March 31, December 31,
2020 2019
------------------------ --------- ------------
Concentrate inventories $ 78,778 $ 70,328
------------------------ --------- ------------
6. Property, Plant and Equipment
Freehold Plant
land and and Motor Office Development
Cost buildings machinery vehicles equipment assets Total
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
December 31,
2018 $2,406,174 $ 6,188,611 $ 166,362 $ 154,396 $ 14,696,413 $23,611,956
Additions - 1,807,493 30,771 37,092 4,542,274 6,417,630
Disposals - (1,036,502) (33,968) - - (1,070,470)
Foreign
exchange
adjustment (36,564) (93,527) (2,528) (2,346) (221,783) (356,748)
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
December 31,
2019 2,369,610 6,866,075 160,637 189,142 19,016,904 28,602,368
Additions - 2,817 - - 322,952 325,769
Foreign
exchange
adjustment 59,329 171,067 4,020 4,736 473,601 712,753
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
March 31,
2020 $2,428,939 $ 7,039,959 $ 164,657 $ 193,878 $ 19,813,457 $29,640,890
------------- --------- ---------- -------- --------- ----------- ----------
Freehold Plant
land and and Motor Office Development
Accumulated
depreciation buildings machinery vehicles equipment assets Total
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
December 31,
2018 $1,975,045 $ 4,936,580 $ 111,910 $ 100,920 $ - $ 7,124,455
Depreciation 9,742 414,756 19,351 13,285 - 457,134
Disposals - (45,590) (14,497) - - (60,087)
Foreign
exchange
adjustment (29,880) (46,177) (1,439) (1,354) - (78,850)
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
December 31,
2019 1,954,907 5,259,569 115,325 112,851 - 7,442,652
Depreciation 1,976 80,578 3,310 2,863 - 88,727
Foreign
exchange
adjustment 48,992 132,876 2,968 2,895 - 187,731
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
March 31,
2020 $2,005,875 $ 5,473,023 $ 121,603 $ 118,609 $ - $ 7,719,110
------------- --------- ---------- -------- --------- ----------- ----------
Freehold Plant
land and and Motor Office Development
Carrying
value buildings machinery vehicles equipment assets Total
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
December 31,
2019 $ 414,703 $ 1,606,506 $ 45,312 $ 76,291 $ 19,016,904 $21,159,716
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
March 31,
2020 $ 423,064 $ 1,566,936 $ 43,054 $ 75,269 $ 19,813,457 $21,921,780
------------- --------- ---------- -------- --------- ----------- ----------
7. Exploration and Evaluation Assets
Exploration and evaluation assets are expenditures for the
underground mining operations in Omagh. The Company had announced
in December 2016 that it would commence the first phase of
underground development and re-start concentrate shipments at its
Omagh mine. Underground development of a decline tunnel, located at
the base of the existing open pit, commenced in the first quarter
2017. During 2018 the mine commenced limited production of gold
concentrate from feed produced in the development of the Kearney
vein and in the fourth quarter Galantas reported that delivery of
the first consignment of concentrate derived from underground
feedstock at the mine had been made. Underground development of the
decline tunnel continued to be progressed during 2019 with further
crosscuts allowing access to lower levels of vein development which
forms the development necessary to demarcate production panels. By
the end of the third quarter of 2019 some two kilometres of
underground drivages had been developed, with exposure of the main
Kearney vein on four levels with a fifth level is near the point of
intersection. The mine is serviced by a decline tunnel of 1 in 6
gradients, of dimensions approximately 4.5m by 4.5m. However,
during the fourth quarter Galantas announced a temporary suspension
of blasting operations at its Omagh gold mine. Blasting operations
had been limited, since all blasting must be supervised by the
PSNI. Presently the blasting arrangements are not sufficient for
the desired level of operations and are not sufficient to allow for
the expansion of mine operations as envisaged by the Company's
existing mine plan. Until changes are agreed, the present
inefficiencies caused by these blasting arrangements form an
increasing financial burden, which has proved a significant drain
on the financial resources of the Company. Accordingly, in order to
reduce costs, while some mine operations will continue at the Omagh
gold mine, consultation with the workforce has
resulted in the numbers employed at the operation being reduced
from 46 to 21. Some mine operations continued at the Omagh gold
mine, on a single shift. Subsequent to March 31, 2020, Galantas
reported that confirmation had been received from PSNI, in regard
to their satisfaction of certain secure storage and handling
protocols required for an increase in blasting to a commercial
level subject to financial matters being agreed. The Company
understands that these financial matters have now been mutually
agreed. Ore production is suspended until finance is available to
expand the underground operation.
Exploration
and
evaluation
Cost assets
---------------------------- -----------
Balance, December 31, 2018 $ 760,023
Additions 70,836
Impairment (157,583)
Foreign exchange adjustment (11,550)
---------------------------- -----------
Balance, December 31, 2019 661,726
Additions 41,424
Foreign exchange adjustment 16,568
---------------------------- -----------
Balance, March 31, 2020 $ 719,718
---------------------------- -----------
Carrying value
Balance, December 31, 2019 $ 661,726
---------------------------- -----------
Balance, March 31, 2020 $ 719,718
---------------------------- -----------
8. Decommissioning Liability
The Company's decommissioning liability is a result of mining
activities at the Omagh mine in Northern Ireland. The Company
estimated its decommissioning liability at March 31, 2020 based on
a risk-free discount rate of 1% (December 31, 2019 - 1%) and an
inflation rate of 1.50% (December 31, 2019 - 1.50%). The expected
undiscounted future obligations allowing for inflation are GBP
330,000 and based on management's best estimate the decommissioning
is expected to occur over the next 5 to 10 years. On March 31,
2020, the estimated fair value of the liability is $597,612
(December 31, 2019 - $580,303). Changes in the provision during the
three months ended March 31, 2020 are as follows:
As at As at
March 31, December 31,
2020 2019
----------------------------------------------- --------- ------------
Decommissioning liability, beginning of period $ 580,303 $ 578,242
Accretion 2,713 10,702
Foreign exchange 14,596 (8,641)
----------------------------------------------- --------- ------------
Decommissioning liability, end of period $ 597,612 $ 580,303
----------------------------------------------- --------- ------------
As required by the Crown in Northern Ireland, the Company is
required to provide a bond for reclamation related to the Omagh
mine in the amount of GBP 300,000 (December 31, 2019 - GBP
300,000), of which GBP 300,000 was funded as of March 31, 2020 (GBP
300,000 was funded as of December 31, 2019) and reported as
long-term deposit of $528,120 (December 31, 2019 - $515,220).
9. Accounts Payable and Other Liabilities
Accounts payable and other liabilities of the Company are
principally comprised of amounts outstanding for purchases relating
to exploration costs on exploration and evaluation assets, general
operating activities and professional fees activities.
As at As at
March 31, December 31,
2020 2019
--------------------------------------------- --------- ------------
Accounts payable $ 641,248 $ 1,084,574
Accrued liabilities 1,082,074 1,047,141
--------------------------------------------- --------- ------------
Total accounts payable and other liabilities $1,723,322 $ 2,131,715
--------------------------------------------- --------- ------------
The following is an aged analysis of the accounts payable and
other liabilities:
As at As at
March 31, December 31,
2020 2019
--------------------------------------------- --------- ------------
Less than 3 months $ 823,075 $ 1,232,089
3 to 12 months 210,243 221,328
12 to 24 months 360,732 357,073
More than 24 months 329,272 321,225
--------------------------------------------- --------- ------------
Total accounts payable and other liabilities $1,723,322 $ 2,131,715
--------------------------------------------- --------- ------------
10. Financing Facilities
Amounts payable on the Company's long-term debts are as
follow:
As at As at
March 31, December 31,
2020 2019
-------------------------------------------------- --------- ------------
Financing facilities, beginning of period (i)(ii) $1,440,185 $ 1,081,190
Less current portion (393,659) (242,280)
Repayment of financing facilities (8,353) (56,854)
Accretion (ii) 74,742 248,238
Interest (ii) 57,995 279,151
Foreign exchange adjustment 192,637 130,740
-------------------------------------------------- --------- ------------
Financing facilities - long term portion $1,363,547 $ 1,440,185
-------------------------------------------------- --------- ------------
(i) In June 2015, the Company obtained financing in the amount
of GBP 19,900 for the purchase of a vehicle. The financing is for
three years at interest of 6.79% per annum with monthly principal
and interest payments of GBP 377 together with a final payment in
August 2019 of GBP 9,540. The financing was secured on the
vehicle.
(ii) In April 2018, the Company signed a concentrate pre-payment
agreement and loan facility for US$1.6 million with a United
Kingdom based company (the "Lender"), with a maturity date of
December 31, 2020. The interest is set at US$ 12 month LIBOR +
8.75% and payable monthly. No interest shall be charged for 6
months and repayments shall commence against deliveries in 2019.
There was a US$25,000 arrangement fee.
In respect of the loan facility, a fixed and floating security,
subordinated to an existing security to G&F Phelps Ltd.
("G&F Phelps"), is being put in place over Flintridge assets.
G&F Phelps has a first charge on Flintridge assets in respect
of its loan facility and the Lender required an intercreditor
agreement between G&F Phelps and the Lender.
As consideration for the loan facility, the United Kingdom based
company received 1,500,000 bonus warrants of the Company. Each
bonus warrant is exercisable into one common share of the Company
and is subject to an initial four months plus one day hold period
from the date of issuance of the bonus warrants. The bonus warrants
have a maximum life of two years (the "Expiry Time"). On April 19,
2018, the 1,500,000 bonus warrants were granted. In the event that
the weighted average closing price per common share of the Company
is more than $2.00 per share for more than five consecutive trading
days, the Company shall be entitled to accelerate the Expiry Time
to a date that is 30 days from the date on which the Company
announces the accelerated Expiry Time by press release.
The fair value of the 1,500,000 bonus warrants was estimated at
$786,000 using the Black-Scholes option pricing model with the
following assumptions: expected dividend yield - 0%, expected
volatility - 113.55%, risk-free interest rate - 1.91% and an
expected average life of 2 years.
During the three months ended March 31, 2020, the Company
recorded accretion expense of $74,742 in the unaudited condensed
interim consolidated statements of loss in regards with this loan
facility (year ended December 31, 2019 - $248,238).
During the three months ended March 31, 2020, the Company
recorded interest expense of $57,995 in the unaudited condensed
interim consolidated statements of loss in regards with this loan
facility (year ended December 31, 2019 - $279,151).
Refer to note 18(iii).
11. Convertible Debenture
On December 17, 2019, the Company closed a $1,731,190 (GBP
1,000,000) convertible debenture consisting of 3,000 units. The
convertible debenture is unsecured, is for a term of one year
commencing on the date that it is issued, carries a coupon of 15%
per annum and is convertible into common shares of the Company. The
conversion price is fixed at $0.15, being a 25% discount to the
closing price of the common shares of the Company on the issue
date.
The convertible debenture has been fully subscribed by Melquart
Limited ("Melquart"), an insider and control person of the Company
(as defined by the TSXV). Melquart held 7,756,572 common shares
equivalent to 24% of the Company at December 31, 2019. Melquart are
under no obligation to convert the convertible debenture and should
Melquart choose not to convert, the Company will need to raise
further funds to repay the convertible debenture within 12
months.
A four month hold period will apply to common shares converted
through the convertible debenture. The hold period will expire on
April 18, 2020. The share issued pursuant to the convertible
debenture will rank pari passu with the existing common shares
issued by the Company.
Commission payable to Whitman Howard Ltd. for acting as the
broker in relation to the convertible debenture offering total
$86,308 (GBP 50,000).
The debentures consist of the liability component and equity
component. The fair value of the liability was recorded at
$1,467,110, discounted at an effective interest rate of 18%. The
residual value of the debentures is allocated to the conversion
feature. The value of the conversion feature was $264,080. The
Company incurred transaction costs of $104,903 which was allocated
pro-rata on the value of the conversion feature and the liability
component.
During the three months ended March 31, 2020, the Company
recorded accretion expense of $68,666 (year ended December 31, 2019
- $12,425) and interest expense of $64,742 (year ended December 31,
2019 - $9,960) as loan interest and bank charges less deposit
interest in the unaudited condensed interim consolidated statement
of loss.
Balance, December 31, 2018 $ -
Principal amount 1,731,190
Equity allocation - conversion feature (264,080)
Transaction costs (104,903)
Transaction costs allocated to equity 16,002
Interest expense 9,960
Accretion expense 12,425
--------------------------------------- ---------
Balance, December 31, 2019 1,400,594
Interest expense 64,742
Accretion expense 68,666
--------------------------------------- ---------
Balance, March 31, 2020 $1,534,002
--------------------------------------- ---------
12. Share Capital and Reserves
a) Authorized share capital
At March 31, 2020, the authorized share capital consisted of an
unlimited number of common and preference shares issuable in
Series.
On April 17, 2020, the Company completed a share consolidation
of its share capital on the basis of ten then existing common
shares for one new common share consolidation. All common shares,
per common share amounts, stock options and warrants in these
unaudited condensed interim consolidated financial statements have
been retroactively restated to reflect the share consolidation.
The common shares do not have a par value. All issued shares are
fully paid.
No preference shares have been issued. The preference shares do
not have a par value.
b) Common shares issued
At March 31, 2020, the issued share capital amounted to
$50,123,910. The change in issued share capital for the periods
presented is as follows:
Number of
common
shares Amount
---------------------------------------------- ---------- ----------
Balance, December 31, 2018 and March 31, 2019 29,968,531 $48,628,055
----------------------------------------------- ---------- ----------
Balance, December 31, 2019 and March 31, 2020 32,321,472 $50,123,910
----------------------------------------------- ---------- ----------
c) Warrant reserve
The following table shows the continuity of warrants for the
periods presented:
Weighted
average
Number of exercise
warrants price
---------------------------------------------- --------- --------
Balance, December 31, 2018 and March 31, 2019 1,500,000 $ 1.58
----------------------------------------------- --------- --------
Balance, December 31, 2019 and March 31, 2020 1,500,000 $ 1.58
----------------------------------------------- --------- --------
The following table reflects the actual warrants issued and
outstanding as of March 31, 2020:
Grant date Exercise
Number fair value price
Expiry date of warrants ($) ($)
--------------- ----------- ---------- --------
April 19, 2020 1,500,000 786,000 1.575
---------------- ----------- ---------- --------
d) Stock options
The following table shows the continuity of stock options for
the periods presented:
Weighted
average
Number of exercise
options price
--------------------------- --------- --------
Balance, December 31, 2018 885,000 $ 1.20
Granted (i) 320,000 0.90
---------------------------- --------- --------
Balance, March 31, 2019 1,205,000 $ 1.10
---------------------------- --------- --------
Balance, December 31, 2019 1,395,000 $ 0.92
Cancelled (i)(ii) (515,000) 1.01
---------------------------- --------- --------
Balance, March 31, 2020 880,000 $ 1.12
---------------------------- --------- --------
(i) On February 13, 2019, 320,000 stock options were granted to
directors, officers, consultants and employees of the Company to
purchase common shares at a price of $0.90 per share until February
13, 2024. The options will vest as to one third on February 13,
2019 and one third on each of the following two anniversaries. The
fair value attributed to these options was $247,360 and was
expensed in the unaudited condensed interim consolidated statements
of loss and credited to equity settled share-based payments
reserve. During the three months ended March 31, 2020, included in
stock-based compensation is $18,954 (three months ended March 31,
2019 - $98,040) related to the vested portion of these options.
During the three months ended March 31, 2020, 150,000 stock options
were cancelled and therefore, $21,813 of stock-based compensation
was reversed related to the unvested portion of the options
cancelled.
The fair value of the options was estimated using the
Black-Scholes option pricing model with the following assumptions:
dividend yield - 0%; volatility - 129%; risk-free interest rate -
1.84% and an expected life of 5 years.
(ii) The portion of the estimated fair value of options granted
in the prior years and vested during the three months ended March
31, 2020, amounted to $22,268 (three months ended March 31, 2019 -
$37,300). In addition, during the three months ended March 31,
2020, 365,000 options granted in the prior years were cancelled and
therefore, $35,697 of stock-based compensation was reversed related
to the unvested portion of the options cancelled.
The following table reflects the actual stock options issued and
outstanding as of March 31, 2020:
Weighted average Number of
remaining Number of options Number of
Exercise contractual options vested options
Expiry date price ($) life (years) outstanding (exercisable) unvested
------------------ --------- ---------------- ----------- ------------- ---------
June 1, 2020 1.05 0.17 285,000 285,000 -
March 25, 2022 1.35 1.98 320,000 320,000 -
April 19, 2023 1.10 3.05 25,000 25,000 -
February 13, 2024 0.90 3.87 150,000 100,000 50,000
June 27, 2024 0.90 4.24 100,000 33,333 66,667
------------------- --------- ---------------- ----------- ------------- ---------
1.12 2.01 880,000 763,333 116,667
------------------ --------- ---------------- ----------- ------------- ---------
13. Net Loss per Common Share
The calculation of basic and diluted loss per share for the
three months ended March 31, 2020 was based on the loss
attributable to common shareholders of $680,315 (three months ended
March 31, 2019 - $779,517) and the weighted average number of
common shares outstanding of 32,321,472 (three months ended March
31, 2019 - 29,968,531) for basic and diluted loss per share.
Diluted loss did not include the effect of 1,500,000 warrants
(three months ended March 31, 2019 - 1,500,000) and 880,000 options
(three months ended March 31, 2019 - 1,205,000) for the three
months ended March 31, 2020, as they are anti-dilutive. The
calculation of basic and diluted loss per share is adjusted for
10:1 share consolidation effective March 31, 2020.
14. Revenues
Shipments of concentrate under the off-take arrangements
commenced during the second quarter of 2019. Concentrate sales
provisional revenues during the three months ended March 31, 2020
totaled approximately US$186,000 (three months ended March 31, 2019
- US$nil). However, until the mine reaches the commencement of
commercial production, the net proceeds from concentrate sales will
be offset against Development assets.
15. Related Party Disclosures
Related parties include the Board of Directors, close family
members, other key management individuals and enterprises that are
controlled by these individuals as well as certain persons
performing similar functions.
Related party transactions conducted in the normal course of
operations are measured at the fair value and approved by the Board
of Directors in strict adherence to conflict of interest laws and
regulations.
(a) The Company entered into the following transactions with
related parties:
Three Months Ended
March 31,
Note 2020 2019
-------------------------------- ----- --------- --------
Interest on related party loans (i) $ 86,533 $ 90,164
-------------------------------- ----- --------- --------
(a) The Company entered into the following transactions with
related parties (continued):
(i) G&F Phelps, a company controlled by a director of the
Company, had amalgamated loans to the Company of $3,212,315 (GBP
1,824,764) (December 31, 2019 - $3,133,850 - GBP 1,824,764)
included with due to related parties bearing interest at 2% above
UK base rates, repayable on demand and secured by a mortgage
debenture on all the Company's assets. In April 2018, the interest
increased to 6.75% + US$ 12 month LIBOR. Interest accrued on
related party loans is included with due to related parties. As at
March 31, 2020, the amount of interest accrued is $1,116,134 (GBP
634,023) (December 31, 2019 - $1,002,388 - GBP 583,666). Refer to
note 18(iii).
(ii) See note 11.
(b) Remuneration of officer and directors of the Company was as
follows:
Three Months Ended
March 31,
2020 2019
-------------------------- --------- --------
Salaries and benefits (1) $ 114,499 $ 111,699
Stock-based compensation 9,314 39,767
-------------------------- --------- --------
$ 123,813 $ 151,466
-------------------------- --------- --------
(1) Salaries and benefits include director fees. As at March 31,
2020, due to directors for fees amounted to $124,750 (December 31,
2019 - $118,500) and due to officers, mainly for salaries and
benefits accrued amounted to $550,529 (GBP 312,730) (December 31,
2019 - $464,320 - GBP 270,362), and is included with due to related
parties.
(c) As of March 31, 2020, Ross Beaty owns 3,744,749 common
shares of the Company or approximately 11.59% of the outstanding
common shares. Roland Phelps, Chief Executive Officer and director,
owns, directly and indirectly, 4,933,817 common shares of the
Company or approximately 15.26% of the outstanding common shares of
the Company. Miton Assets Management Limited owns 4,357,135 common
shares of the Company or approximately 13.48%. Melquart owns,
directly and indirectly, 7,756,572 common shares of the Company or
approximately 24.00% of the outstanding common shares of the
Company. The remaining 35.67% of the shares are widely held, which
includes various small holdings which are owned by directors of the
Company. These holdings can change at anytime at the discretion of
the owner.
The Company is not aware of any arrangements that may at a
subsequent date result in a change in control of the Company.
- 18 -
16. Segment Disclosure
The Company has determined that it has one reportable segment.
The Company's operations are substantially all related to its
investment in Cavanacaw and its subsidiaries, Omagh and Flintridge.
Substantially all of the Company's revenues, costs and assets of
the business that support these operations are derived or located
in Northern Ireland. Segmented information on a geographic basis is
as follows:
March 31, 2020 United Kingdom Canada Total
------------------- -------------- --------- ----------
Current assets $ 499,460 $ 855,871 $ 1,355,331
Non-current assets 23,112,822 56,797 23,169,619
------------------- -------------- --------- ----------
Revenues $ - $ - $ -
------------------- -------------- --------- ----------
December 31, 2019 United Kingdom Canada Total
------------------- -------------- --------- ----------
Current assets $ 891,210 $1,509,237 $ 2,400,447
Non-current assets 22,286,304 50,358 22,336,662
------------------- -------------- --------- ----------
Revenues $ 5,788 $ - $ 5,788
------------------- -------------- --------- ----------
17. Contingency
During the year ended December 31, 2010, the Company's
subsidiary Omagh received a payment demand from Her Majesty's
Revenue and Customs ("HMRC") in the amount of $535,672 (GBP
304,290) in connection with an aggregate levy arising from the
removal of waste rock from the mine site during 2008 and early
2009. Omagh Minerals believed this claim to be without merit. An
appeal was lodged with the Tax Tribunals Service and the hearing
started at the beginning of March 2017 and following a number of
adjournments was completed in August 2018. During the year ended
December 31, 2019, the Tax Tribunals Service issued their judgement
dismissing the appeal by Omagh in respect of the assessments. A
provision has now been included in the unaudited condensed interim
consolidated financial statements in respect of the aggregates levy
plus interest and penalty.
There is a contingent liability in respect of potential
additional interest which may be applied in respect of the
aggregates levy dispute. Omagh Minerals Limited is unable to make a
reliable estimate of the amount of the potential additional
interest that may be applied by HMRC.
18. Events After the Reporting Period
(i) On April 19, 2020, 1,500,000 warrants with an exercise price
of $1.575 expired unexercised.
(ii) On June 1, 2020, 285,000 stock options with an exercise
price of $1.05 expired unexercised.
(iii) On June 26, 2020, the Company announced a proposed private
placement of common shares and amendments to the terms of its loan
facility (refer to note 10(ii)). The net proceeds to be raised by
the private placement are intended to be used to support mine
operations and provide general working capital for the Company.
The private placement is expected to include funds raised in
both UK and Canadian currency and is for a maximum of 2,636,355
shares, at an issue price of $0.225 (UKGBP0.1328) per share for
maximum gross proceeds of $593,180 (UKGBP350,000). Provisional
indications have been received for $457,469 (UKGBP270,000). A four
month plus one day hold period will apply to the shares and the
shares will rank pari passu with the existing shares in issue of
the Company. The private placement will be brokered and insiders of
the Company are expected to participate in the private
placement.
(iii) (continued) Galantas also agreed on terms, subject to
final documentation, of an increase in the outstanding loan
facility (refer to note 10(ii)). The amount of the loan facility
will increase by US$200,000 to a total of US$1.8 million. The
interest rate applicable on the loan facility will be increased
from US$ 12 month LIBOR + 8.75% to US$ 12 month LIBOR + 9.9% and
the maturity date will be extended from December 30, 2020 to
December 31, 2021. Interest may be rolled into the loan facility
until December 31, 2020, at the Company's option. The existing
second charge debenture over mine assets will remain in place.
Galantas entered into the loan facility through a concentrate
pre-payment agreement/loan agreement signed by its subsidiary
Flintridge and the Lender on April 11, 2018.
As consideration for amending the terms of the loan facility,
the Lender will receive, upon closing of the loan facility
agreements, 1,700,000 bonus warrants of Galantas ("Bonus Warrants")
subject to the rules of TSXV. Each Bonus Warrant will be
exercisable for one common share of Galantas (a "Bonus Share") at
an exercise price of $0.33 per Bonus Share, being 110% of the TSXV
closing price the day before this announcement. The Bonus Warrants
will expire on December 31, 2021 (the "Expiry Time") and the Bonus
Shares will be subject to an initial four month plus one day hold
period from the date of their issuance. In the event that the
weighted average closing price per common share of the Company is
more than $0.4125 per share for more than five consecutive trading
days, the Company shall be entitled to accelerate the Expiry Time
to a date that is 30 days from the date on which the Company
announces the accelerated Expiry Time by press release. The Bonus
Warrants are subject to TSXV and regulatory approval.
Following the completion of the private placement and the loan
facility, G&F Phelps will enter into an arrangement in respect
of its loans with the Company (the "G&F Phelps Loans") which
will provide that G&F Phelps will not call for repayment of the
G&F Phelps Loans (which are repayable on demand), until June
30, 2021 at the earliest, unless certain events occur including
inter alia a sale or insolvency of the Company, a material
liquidity event, change of control or breach of the terms of the
G&F Phelps Loans. G&F Phelps is a company owned by Roland
Phelps, Chief Executive Officer of Galantas.
(iv) On July 3, 2020, the Company announced that it increased
the proposed private placement to a maximum of 2,833,132 shares, at
an issue price of $0.225 (UKGBP0.1328) per share for maximum gross
proceeds of $637,454 (UKGBP376,240). Provisional indications have
been received for the maximum amount.
(v) The Company's operations could be significantly adversely
affected by the effects of a widespread global outbreak of a
contagious disease, including the recent outbreak of respiratory
illness caused by COVID-19. The Company cannot accurately predict
the impact COVID-19 will have on its operations and the ability of
others to meet their obligations with the Company, including
uncertainties relating to the ultimate geographic spread of the
virus, the severity of the disease, the duration of the outbreak,
and the length of travel and quarantine restrictions imposed by
governments of affected countries. In addition, a significant
outbreak of contagious diseases in the human population could
result in a widespread health crisis that could adversely affect
the economies and financial markets of many countries, resulting in
an economic downturn that could further affect the Company's
operations and ability to finance its operations.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRFZZGGNNRMGGZM
(END) Dow Jones Newswires
July 09, 2020 02:00 ET (06:00 GMT)
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