TIDMGAL
RNS Number : 2456X
Galantas Gold Corporation
27 August 2020
GALANTAS GOLD CORPORATION
TSXV & AIM: Symbol GAL
GALANTAS REPORTS RESULTS FOR THE THREE AND SIX MONTHSED JUNE 30,
2020
August 27, 2020: Galantas Gold Corporation (the 'Company') is
pleased to announce its financial results for the Three and Six
Months ended June 30, 2020.
Financial Highlights
Highlights of the 2020 second quarter and first six month's
results, which are expressed in Canadian Dollars, are summarized
below:
All figures denominated in Canadian Dollars (CDN$)
Second Quarter Ended Six Months Ended
June 30 June 30
2020 2019 2020 2019
Revenue $ 0 $ 0 $ 0 $ 0
Cost of Sales $ (31,239) $ (85,482) $ (67,075) $ (155,508)
(Loss)/income before the undernoted $ (31,239) $ (85,482) $ (67,075) $ (155,508)
Depreciation $ (84,391) $ (99,085) $ (173,118) $ (186,490)
General administrative expenses $ (650,727) $ (646,381) $ (1,307,495) $ (1,248,810)
Foreign exchange (gain)/loss $ (25,784) $ (60,915) $ 75,232 $ (80,572)
Net Loss for the period $ ( 792,141) $ (891,863) $ (1,472,456) $ (1,671,380)
Working Capital Deficit $ (7,700,406) $ (4,753,840) $ (7,700,406) $(4,753,840)
Cash loss from operating activities before changes in
non-cash working capital $ (294,582) $ (673,444) $ (643,481) $ (1,064.481)
Cash at June 30, 2020 $ 199,953 $ 1,314,113 $ 199,953 $ 1,314,113
The Net Loss for the three months ended June 30, 2020 amounted
to $ 792,141 (2019: $ 891,863) and the cash loss from operating
activities before changes in non-cash working capital for the
second quarter of 2020 amounted to $ 294,582 (2019 Q2: $ 673,444).
The Net Loss for the six months ended June 30, 2020 amounted to $
1,472,656 (2019: $ 1,671,380) and the cash loss from operating
activities before changes in non-cash working capital for the first
six months of 2020 amounted to $ 643,481 (2019: $ 1,064,481).
The Company had cash balances of $ 199,953 at June 30, 2020
compared to $ 1,314,113 at June 30, 2019. The working capital
deficit at June 30, 2020 amounted to $ 7,700,406 compared to a
working capital deficit of $ 4,753,840 at June 30, 2019.
Property, plant and equipment expenditures for six months ended
June 30, 2020 amounted to $ 345,669. Expenditures were mainly in
connection with Development Assets expenditure at the Omagh
mine.
Shipments of concentrate had commenced during the second quarter
of 2019. However, until the mine commences commercial production,
the net proceeds from concentrate sales are being offset against
Development Assets. Concentrate sales provisional revenues totaled
approximately $ Nil and US$ 186,000 for the three and six months
ended June 30, 2020 respectively compared to $ Nil and $460,000 for
the three and six months ended June 30, 2019, respectively.
Concentrate inventories, on June 30, 2020, which were shipped in
the third quarter, amounted to $ 488,128 (subject to final
assessment) compared with $ 70,328 on December 31, 2019.
During the second quarter Galantas reported a proposed brokered
private placement of common shares, which was completed in July
2020, and amendments to the terms of its loan facility with Ocean
Partners UK Ltd. The private placement, which was fully subscribed,
included funds raised in both UK and Canadian currency and was for
a total of 2,833,132 shares, at an issue price of $ 0.225 (UKGBP
0.1328) per share for gross proceeds of $ 637,454 (UKGBP 376,240).
The placement has received the approval of the TSX Venture Exchange
and insiders of the Company participated in the placement. Galantas
reported June 26, 2020 that it had agreed terms, subject to final
documentation, for an increase of US$ 200,000 on the outstanding
loan with Ocean Partners UK Ltd. As consideration for amending the
terms of the loan, Ocean will receive, upon closing of the
agreements, 1,700,000 bonus warrants of Galantas which is subject
to TSXV approval. 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. Subsequent to June 30, 2020 and following the receipt
of TSXV approval the documentation on the loan and issuance of the
warrants has been completed. Drawdown of the loan increase will
take place when required.
Production/Mine Development
Certain underground work continued in the first half of 2020.
However, ore production remains suspended until finance is
available to expand the underground operation (see press release
dated May 12, 2020). The processing plant continued to operate on a
limited basis with feedstock for the plant being from low grade
stock.
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, run
on a batch basis from a stockpile of underground vein material plus
additional feed produced from on-vein development operations.
Blasting operations had been 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 during 2019 to increase
blasting availability to normal levels for an underground mine.
While progress had 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 at the end of the third quarter of
2019. The arrangements, current 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
inefficiencies caused by those arrangements formed an increasing
financial burden, which had proved a significant drain on the
financial resources of the Company which resulted in the temporary
suspension of blasting at the mine during the fourth quarter of
2019 (see press release dated October 29, 2019) resulting in the
numbers employed at the operation were reduced from 46 to 21.
During the second quarter of 2020 Galantas reported that
confirmation has been received from PSNI, regarding 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 . However,
ore production remains suspended until finance is available to
expand the underground operation.
A probe drilling campaign was carried out following the
suspension of operations 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. During the second
quarter, 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 .
Following the suspension of blasting operations at the mine, the
processing plant continued to operate on a limited basis. 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. Concentrate
production during the three and six months ended June 30, 2020
totaled 44 tonnes and 92 tonnes of concentrate provisionally
assessed as grading 86.4 and 98 grams per tonne (g/t) respectively.
Shipments of concentrate under the off-take arrangements had
earlier commenced during the second quarter of 2019. For the three
and six months ended June 30, 2020 provisional revenues from
concentrate sales totaled US$ 186,000. Concentrate inventories on
hand at the end of June were shipped during the third quarter.
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.
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/2456X_1-2020-8-26.pdf
Qualified Person
The financial components of this disclosure has been reviewed by
Leo O'Shaughnessy (Chief Financial Officer) and the production/mine
development components by Roland Phelps (President & CEO),
qualified persons under the meaning of NI. 43-101. 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 anticipated
production and development projections, 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.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Enquiries
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, 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 and Six Months Ended June 30, 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
June 30, December 31,
2020 2019
------------------------------------------------------- ----------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 199,953 $ 1,913,420
Accounts receivable and prepaid expenses (note 4) 382,906 416,699
Inventories (note 5) 488,128 70,328
------------------------------------------------------- ----------- ------------
Total current assets 1,070,987 2,400,447
Non-current assets
Property, plant and equipment (note 6) 20,916,589 21,159,716
Long-term deposit (note 8) 504,960 515,220
Exploration and evaluation assets (note 7) 705,668 661,726
------------------------------------------------------- ----------- ------------
Total non-current assets 22,127,217 22,336,662
------------------------------------------------------- ----------- ------------
Total assets $ 23,198,204 $ 24,737,109
------------------------------------------------------- ----------- ------------
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (note 9) $ 1,678,671 $ 2,131,715
Current portion of financing facilities (note 10) 444,035 242,280
Due to related parties (note 15) 4,968,568 4,719,058
Convertible debenture (note 11) 1,680,119 1,400,594
------------------------------------------------------- ----------- ------------
Total current liabilities 8,771,393 8,493,647
Non-current liabilities
Non-current portion of financing facilities (note 10) 1,393,877 1,440,185
Decommissioning liability (note 8) 574,062 580,303
------------------------------------------------------- ----------- ------------
Total non-current liabilities 1,967,939 2,020,488
------------------------------------------------------- ----------- ------------
Total liabilities 10,739,332 10,514,135
------------------------------------------------------- ----------- ------------
Equity
Share capital (note 12(a)(b)) 50,123,910 50,123,910
Reserves 9,124,766 9,416,412
Deficit (46,789,804) (45,317,348)
------------------------------------------------------- ----------- ------------
Total equity 12,458,872 14,222,974
------------------------------------------------------- ----------- ------------
Total equity and liabilities $ 23,198,204 $ 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 Six Months Ended
June 30, June 30,
2020 2019 2020 2019
---------------------------------------------- ---------- ---------- ---------- ----------
Revenues
Jewellery sales (note 14) $ - $ - $ - $ -
Cost and expenses of operations
Cost of sales 31,239 85,482 67,075 155,508
Depreciation (note 6) 84,391 99,085 173,118 186,490
---------------------------------------------- ---------- ---------- ---------- ----------
115,630 184,567 240,193 341,998
---------------------------------------------- ---------- ---------- ---------- ----------
Loss before general administrative and other
expenses (115,630) (184,567) (240,193) (341,998)
---------------------------------------------- ---------- ---------- ---------- ----------
General administrative expenses
Management and administration wages (note 15) 143,114 255,618 284,336 447,306
Other operating expenses 57,360 37,054 151,420 82,280
Accounting and corporate 15,109 14,718 29,253 28,613
Legal and audit 28,834 25,872 70,952 41,446
Stock-based compensation (note 12(d)) 12,064 76,723 (4,224) 212,063
Shareholder communication and investor
relations 45,882 62,836 92,958 110,969
Transfer agent 26,738 5,752 54,474 7,653
Director fees (note 15) 8,500 11,250 14,750 17,500
General office 2,776 3,663 5,489 6,262
Accretion expenses (notes 8, 10 and 11) 164,797 61,983 310,918 119,029
Loan interest and bank charges less deposit
interest (notes 10, 11 and 15) 145,553 90,912 297,169 175,689
---------------------------------------------- ---------- ---------- ---------- ----------
650,727 646,381 1,307,495 1,248,810
Other expenses
Foreign exchange loss (gain) 25,784 60,915 (75,232) 80,572
---------------------------------------------- ---------- ---------- ---------- ----------
25,784 60,915 (75,232) 80,572
---------------------------------------------- ---------- ---------- ---------- ----------
Net loss for the period $ (792,141) $ (891,863) $(1,472,456) $(1,671,380)
---------------------------------------------- ---------- ---------- ---------- ----------
Basic and diluted net loss per share (note 13) $ (0.02) $ (0.03) $ (0.05) $ (0.06)
---------------------------------------------- ---------- ---------- ---------- ----------
Weighted average number of common shares
outstanding - basic and diluted (i) 32,321,472 29,968,531 32,321,472 29,968,531
---------------------------------------------- ---------- ---------- ---------- ----------
(i) Adjusted for 10:1 share consolidation effective April 17,
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 Six Months Ended
June 30, June 30,
2020 2019 2020 2019
-------------------------------------------- ---------- ---------- ---------- ------------
Net loss for the period $ (792,141) $ (891,863) $(1,472,456) $$ (1,671,380)
Other comprehensive (loss)
Items that will be reclassified subsequently
to
profit or loss
Exchange differences on translating foreign
operations (670,131) (590,394) (287,422) (595,376)
-------------------------------------------- ---------- ---------- ---------- ------------
Total comprehensive loss $(1,462,272) $(1,482,257) $(1,759,878) $$ (2,266,756)
-------------------------------------------- ---------- ---------- ---------- ------------
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)
Six Months Ended
June 30,
2020 2019
------------------------------------------------------------------- ---------- ----------
Operating activities
Net loss for the period $(1,472,456) $(1,671,380)
Adjustment for:
Depreciation (note 6) 173,118 186,490
Stock-based compensation (note 12(d)) (4,224) 212,063
Interest expense (notes 10, 11 and 15) 295,889 180,717
Foreign exchange loss (gain) 53,274 (91,400)
Accretion expenses (notes 8, 10 and 11) 310,918 119,029
Non-cash working capital items:
Accounts receivable and prepaid expenses 26,588 (743,079)
Inventories (427,718) 11,335
Accounts payable and other liabilities (422,474) 318,134
Due to related parties 168,784 79,013
------------------------------------------------------------------- ---------- ----------
Net cash and cash equivalents used in operating activities (1,298,301) (1,399,078)
------------------------------------------------------------------- ---------- ----------
Investing activities
Purchase of property, plant and equipment (345,669) (3,392,566)
Exploration and evaluation assets (57,119) -
------------------------------------------------------------------- ---------- ----------
Net cash and cash equivalents used in investing activities (402,788) (3,392,566)
------------------------------------------------------------------- ---------- ----------
Financing activities
Repayment of financing facilities (note 10) (8,353) (22,569)
------------------------------------------------------------------- ---------- ----------
Net cash and cash equivalents used in financing activities (8,353) (22,569)
------------------------------------------------------------------- ---------- ----------
Net change in cash and cash equivalents (1,709,442) (4,814,213)
Effect of exchange rate changes on cash held in foreign currencies (4,025) (60,228)
Cash and cash equivalents, beginning of period 1,913,420 6,188,554
Cash and cash equivalents, end of period $ 199,953 $ 1,314,113
------------------------------------------------------------------- ---------- ----------
Cash $ 199,953 $ 1,314,113
Cash equivalents - -
------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents $ 199,953 $ 1,314,113
------------------------------------------------------------------- ---------- ----------
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 Equity
share- Foreign component
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)) - - 212,063 - - - 212,063
Exchange
differences
on
translating
foreign
operations - - - (595,376) - - (595,376)
Net loss for
the period - - - - - (1,671,380) (1,671,380)
-------------- ---------- -------- --------- ----------- ----------- ----------- ----------
Balance, June
30, 2019 $48,628,055 $ 786,000 $7,476,210 $ 317,640 $ - $(43,424,119) $13,783,786
-------------- ---------- -------- --------- ----------- ----------- ----------- ----------
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)) - - (4,224) - - - (4,224)
Expiry of
warrants - (786,000) 786,000 - - - -
Exchange
differences
on
translating
foreign
operations - - - (287,422) - - (287,422)
Net loss for
the period - - - - - (1,472,456) (1,472,456)
-------------- ---------- -------- --------- ----------- ----------- ----------- ----------
Balance, June
30, 2020 $50,123,910 $ - $8,367,356 $ 509,332 $ 248,078 $(46,789,804) $12,458,872
-------------- ---------- -------- --------- ----------- ----------- ----------- ----------
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 and Six Months Ended June 30, 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 June 30, 2020, the Company had a deficit of $46,789,804
(December 31, 2019 - $45,317,348). Comprehensive loss for the six
months ended June 30, 2020 was $1,759,878 (six months ended June
30, 2019 - $2,266,756). 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.
In March 2020, the World Health Organization declared
coronavirus (COVID-19) a global pandemic. This contagious disease
outbreak, which has continued to spread, has adversely affected
workforces, economies, and financial markets globally, leading to
an economic downturn. It is not possible for the Company to predict
the duration or magnitude of the adverse results of the outbreak
and its effects on the Company's business or ability to raise
funds.
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 August 25, 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
June 30, December 31,
2020 2019
----------------------------------------------- -------- ------------
Sales tax receivable - Canada $ 3,414 $ $2,682
Valued added tax receivable - Northern Ireland 112,089 93,864
Accounts receivable 234,386 250,533
Prepaid expenses 33,017 69,620
----------------------------------------------- -------- ------------
$ 382,906 $ 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
June 30, December 31,
2020 2019
-------------------------- -------- ------------
Less than 3 months $ 115,504 $ 235,934
3 to 12 months 231,963 108,674
More than 12 months 2,422 2,471
-------------------------- -------- ------------
Total accounts receivable $ 349,889 $ 347,079
-------------------------- -------- ------------
5. Inventories
As at As at
June 30, December 31,
2020 2019
------------------------ -------- ------------
Concentrate inventories $ 488,128 $ 70,328
------------------------ -------- ------------
6. Property, Plant and Equipment
Freehold Plant
land and and Motor Office Development
Cost buildings machinery vehicles equipment assets (i) 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 - 2,693 - - 342,976 345,669
Foreign
exchange
adjustment (47,188) (136,055) (3,201) (3,767) (376,681) (566,892)
------------- --------- ---------- -------- --------- ----------- ----------
Balance, June
30, 2020 $2,322,422 $ 6,732,713 $ 157,436 $ 185,375 $ 18,983,199 $28,381,145
------------- --------- ---------- -------- --------- ----------- ----------
Freehold Plant
land and and Motor Office Development
Accumulated
depreciation buildings machinery vehicles equipment assets (i) 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 3,854 157,228 6,416 5,620 - 173,118
Foreign
exchange
adjustment (39,014) (107,403) (2,431) (2,366) - (151,214)
------------- --------- ---------- -------- --------- ----------- ----------
Balance, June
30, 2020 $1,919,747 $ 5,309,394 $ 119,310 $ 116,105 $ - $ 7,464,556
------------- --------- ---------- -------- --------- ----------- ----------
Freehold Plant
land and and Motor Office Development
Carrying
value buildings machinery vehicles equipment assets (i) Total
------------- --------- ---------- -------- --------- ----------- ----------
Balance,
December 31,
2019 $ 414,703 $ 1,606,506 $ 45,312 $ 76,291 $ 19,016,904 $21,159,716
------------- --------- ---------- -------- --------- ----------- ----------
Balance, June
30, 2020 $ 402,675 $ 1,423,319 $ 38,126 $ 69,270 $ 18,983,199 $20,916,589
------------- --------- ---------- -------- --------- ----------- ----------
(i) Development 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.
During the six months ended June 30, 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. The processing plant continues to operate on
a limited basis with feedstock for the plant being from low grade
stock.
7. Exploration and Evaluation Assets
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 57,119
Foreign exchange adjustment (13,177)
---------------------------- -----------
Balance, June 30, 2020 $ 705,668
---------------------------- -----------
Carrying value
---------------------------- -----------
Balance, December 31, 2019 $ 661,726
---------------------------- -----------
Balance, June 30, 2020 $ 705,668
---------------------------- -----------
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 June 30, 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 June 30, 2020,
the estimated fair value of the liability is $574,062 (December 31,
2019 - $580,303). Changes in the provision during the six months
ended June 30, 2020 are as follows:
As at As at
June 30, December 31,
2020 2019
----------------------------------------------- -------- ------------
Decommissioning liability, beginning of period $ 580,303 $ 578,242
Accretion 5,429 10,702
Foreign exchange (11,670) (8,641)
----------------------------------------------- -------- ------------
Decommissioning liability, end of period $ 574,062 $ 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 June 30, 2020 (GBP
300,000 was funded as of December 31, 2019) and reported as
long-term deposit of $504,960 (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
June 30, December 31,
2020 2019
--------------------------------------------- --------- ------------
Accounts payable $ 845,899 $ 1,084,574
Accrued liabilities 832,772 1,047,141
--------------------------------------------- --------- ------------
Total accounts payable and other liabilities $1,678,671 $ 2,131,715
--------------------------------------------- --------- ------------
The following is an aged analysis of the accounts payable and
other liabilities:
As at As at
June 30, December 31,
2020 2019
--------------------------------------------- --------- ------------
Less than 3 months $ 772,640 $ 1,232,089
3 to 12 months 236,567 221,328
12 to 24 months 11,971 357,073
More than 24 months 657,493 321,225
--------------------------------------------- --------- ------------
Total accounts payable and other liabilities $1,678,671 $ 2,131,715
--------------------------------------------- --------- ------------
10. Financing Facilities
Amounts payable on the Company's long-term debts are as
follow:
As at As at
June 30, December 31,
2020 2019
-------------------------------------------------- --------- ------------
Financing facilities, beginning of period (i)(ii) $1,440,185 $ 1,081,190
Less current portion (444,035) (242,280)
Repayment of financing facilities (8,353) (56,854)
Accretion (ii) 155,447 248,238
Interest (ii) 115,990 279,151
Foreign exchange adjustment 134,643 130,740
-------------------------------------------------- --------- ------------
Financing facilities - long term portion $1,393,877 $ 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 and six months ended June 30, 2020, the Company
recorded accretion expense of $80,705 and $155,447, respectively 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 and six months ended June 30, 2020, the Company
recorded interest expense of $57,995 and $115,990, respectively 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(i).
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 and six months ended June 30, 2020, the Company
recorded accretion expense of $60,817 and $129,483, respectively
(year ended December 31, 2019 - $12,425) and interest expense of
$85,300 and $150,042, respectively (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 129,483
Accretion expense 150,042
--------------------------------------- ---------
Balance, June 30, 2020 $1,680,119
--------------------------------------- ---------
12. Share Capital and Reserves
a) Authorized share capital
At June 30, 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 June 30, 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 June 30, 2019 29,968,531 $48,628,055
---------------------------------------------- ---------- ----------
Balance, December 31, 2019 and June 30, 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 June 30, 2019 1,500,000 $ 1.58
---------------------------------------------- ---------- --------
Balance, December 31, 2019 1,500,000 $ 1.58
Expired (1,500,000) 1.58
---------------------------------------------- ---------- --------
Balance, June 30, 2020 - $ -
---------------------------------------------- ---------- --------
There are no warrants outstanding as at June 30, 2020.
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)(ii) 540,000 0.90
Expired (13,333) 0.90
---------------------------- --------- --------
Balance, June 30, 2019 1,411,667 $ 0.90
---------------------------- --------- --------
Balance, December 31, 2019 1,395,000 $ 0.92
Expired (285,000) 1.05
Cancelled (i)(ii)(iii) (515,000) 1.01
---------------------------- --------- --------
Balance, June 30, 2020 595,000 $ 1.15
---------------------------- --------- --------
(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 and six months ended June 30, 2020,
included in stock-based compensation is $4,818 and $21,813,
respectively (three and six months ended June 30, 2019 - $27,934
and $125,974, respectively) related to the vested portion of these
options. During the three and six months ended June 30, 2020, nil
and 150,000 stock options, respectively were cancelled and
therefore, $nil and $21,813, respectively 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) On June 27, 2019, 220,000 stock options were granted to
directors and employees of the Company to purchase common shares at
a price of $0.90 per share until June 27, 2024. The options will
vest as to one third on June 27, 2019 and one third on each of the
following two anniversaries. The fair value attributed to these
options was $128,040 and was expensed in the unaudited condensed
interim consolidated statements of loss and credited to equity
settled share-based payments reserve. During the three and six
months ended June 30, 2020, included in stock-based compensation is
$7,042 and $25,180, respectively (three and six months ended June
30, 2019 - $43,206) related to the vested portion of these options.
During the three and six months ended June 30, 2020, nil and
150,000 stock options, respectively were cancelled and therefore,
$nil and $33,246, respectively 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 - 128%; risk-free interest rate -
1.37% and an expected life of 5 years.
(iii) The portion of the estimated fair value of options granted
in the prior years and vested during the three and six months ended
June 30, 2020, amounted to $204 and $4,334, respectively (three and
six months ended June 30, 2019 - $37,300). In addition, during the
three and six months ended June 30, 2020, nil and 215,000 options
granted in the prior years were cancelled and therefore, $nil and
$2,451, respectively of stock-based compensation was reversed
related to the unvested portion of the options cancelled.
The following table reflects the actual stock options issued and
outstanding as of June 30, 2020:
Weighted average Number of
remaining Number of options Number of
Exercise contractual options vested options
Expiry date price ($) life (years) outstanding (exercisable) unvested
------------------ --------- ---------------- ----------- ------------- ---------
March 25, 2022 1.35 1.73 320,000 320,000 -
April 19, 2023 1.10 2.80 25,000 25,000 -
February 13, 2024 0.90 3.62 150,000 100,000 50,000
June 27, 2024 0.90 3.99 100,000 66,667 33,333
------------------- --------- ---------------- ----------- ------------- ---------
1.15 2.64 595,000 511,667 83,333
------------------ --------- ---------------- ----------- ------------- ---------
13. Net Loss per Common Share
The calculation of basic and diluted loss per share for the
three and six months ended June 30, 2020 was based on the loss
attributable to common shareholders of $792,141 and $1,472,456,
respectively (three and six months ended June 30, 2019 - $891,863
and $1,671,380, respectively) and the weighted average number of
common shares outstanding of 32,321,472 (three and six months ended
June 30, 2019 - 29,968,531) for basic and diluted loss per share.
Diluted loss did not include the effect of nil warrants (three and
six months ended June 30, 2019 - 1,500,000) and 595,000 options
(three and six months ended June 30, 2019 - 1,411,667) for the
three and six months ended June 30, 2020, as they are
anti-dilutive. The calculation of basic and diluted loss per share
is adjusted for 10:1 share consolidation effective April 17,
2020.
14. Revenues
Shipments of concentrate under the off-take arrangements
commenced during the second quarter of 2019. Concentrate sales
provisional revenues during the three and six months ended June 30,
2020 totaled approximately US$nil and US$186,000, respectively
(three and six months ended June 30, 2019 - US$460,000). 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 Six Months Ended
June 30, June 30,
Note 2020 2019 2020 2019
-------------------------------- ----- --------- -------- -------- -------
Interest on related party loans (i) $ 79,872 $ 90,553 $ 166,405 $180,717
-------------------------------- ----- --------- -------- -------- -------
(i) G&F Phelps, a company controlled by a director of the
Company, had amalgamated loans to the Company of $3,071,442 (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
June 30, 2020, the amount of interest accrued is $1,145,347 (GBP
680,458) (December 31, 2019 - $1,002,388 - GBP 583,666). Refer to
note 18(i).
(ii) See note 11.
(b) Remuneration of officer and directors of the Company was as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
-------------------------- --------- -------- -------- -------
Salaries and benefits (1) $ 117,228 $ 116,176 $ 231,727 $227,875
Stock-based compensation 6,412 17,616 15,726 57,383
-------------------------- --------- -------- -------- -------
$ 123,640 $ 133,792 $ 247,453 $285,258
-------------------------- --------- -------- -------- -------
(1) Salaries and benefits include director fees. As at June 30,
2020, due to directors for fees amounted to $133,250 (December 31,
2019 - $118,500) and due to officers, mainly for salaries and
benefits accrued amounted to $618,529 (GBP 367,472) (December 31,
2019 - $464,320 - GBP 270,362), and is included with due to related
parties.
(c) As of June 30, 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. Refer
to note 18(ii).
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:
June 30, 2020 United Kingdom Canada Total
------------------- -------------- --------- ----------
Current assets $ 942,713 $ 128,274 $ 1,070,987
Non-current assets 22,068,556 58,661 22,127,217
------------------- -------------- --------- ----------
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 $512,181 (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 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 July 9, 2020, the Company amended the terms of its loan
facility (refer to note 10(ii)) of an increase in the outstanding
loan facility. The amount of the loan facility increased by
US$200,000 to a total of US$1.8 million. The interest rate
applicable on the loan facility increased from US$ 12 month LIBOR +
8.75% to US$ 12 month LIBOR + 9.9% and the maturity date was
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 received on August 14, 2020, 1,700,000 bonus warrants of
Galantas ("Bonus Warrants"). 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. The Bonus Warrants will expire on
December 31, 2021 (the "Expiry Date") 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 Date to a date that is
30 days from the date on which the Company announces the
accelerated Expiry Date by press release.
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.
(ii) On July 17, 2020, the Company completed a private placement
for 2,833,132 common shares at an issue price of $0.225
(UKGBP0.1328) per share for gross proceeds of $637,454 (GBP
376,240). The net proceeds to be raised by the private placement
are intended to be used to support mine operations and provide
general working capital of the Company.
The private placement included a subscription by LF Miton UK
Smaller Companies Fund, which has subscribed for 527,108 common
shares in the private placement and is managed by Premier Fund
Managers Ltd ("Premier Miton"). Post-closing, this fund holds
3,222,330 shares, equivalent to 9.17% of the Company's common
shares. The total number of shares controlled by Premier Miton post
completion of the private Placement is 4,884,243, representing
13.89% of the Company's enlarged issued and outstanding common
shares.
The private placement also included a subscription from
Melquart, for 1,506,024 common shares, which gives rise to an
enlarged holding of 9,262,595 common shares post completion of the
private placement, or 26.35% of the Company's enlarged issued and
outstanding common shares.
A four month hold period will apply to the common shares of the
private placement. The hold period will expire on November 18,
2020. The shares issued pursuant to the private placement will rank
pari passu with the existing common shares in issue of the
Company.
Commission payable to brokers in Canada and the United Kingdom
in relation to the private placement totals $33,673 (GBP
19,874).
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END
IR PPUGGRUPUGAQ
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August 27, 2020 02:00 ET (06:00 GMT)
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