REG - Galantas Gold Corp - 3rd Quarter Results
30/11/2022 07:00
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RNS Number : 0041I Galantas Gold Corporation 30 November 2022
GALANTAS REPORTS FINANCIAL RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2022
November 30, 2022: Galantas Gold Corporation (TSX-V & AIM: GAL; OTCQX:
GALKF) ("Galantas" or the "Company") is pleased to announce its unaudited
financial results for the quarter ended September 30, 2022.
Financial Highlights
Highlights of the third quarter 2022 results are summarized below. All figures
are in Canadian dollars unless otherwise stated.
All figures denominated in Canadian Dollars (CDN$)
Quarter Ended Nine Months Ended
September 30 September 30
2022 2021 2022 2021
Revenue $ 0 $ 0 $ 0 $ 0
Cost and expenses of operations $ (86,442) $ (74,462) $ (200,076) $ (181,943)
Loss before the undernoted $ (86,442) $ (74,462) $ (200,076) $ (181,943)
Depreciation $ (196,178) $ (89,151) $ (475,045) $ (248,304)
General administrative expenses $ (1,179,927) $ (914,174) $(3,764,038) $ (4,138,326)
Foreign exchange (loss) $ (93,277) $ (95,489) $ (112,645) $ (133,234)
Net Loss for the period $ (1,555,824) $ (1,173,276) $(4,551,804) $ (4,701,807)
Working Capital (Deficit) / Surplus $ (714,865) $ 2,454,581 $ (714,865) $ 2,454,581
Cash (loss) from operating activities before changes in non-cash working $ (324,827) $ (419,009) $ (3,003,660) $ (1,116,243)
capital
Cash at September 30, 2022 $ 3,567,196 $ 3,881,674 $ 3,567,196 $ 3,881,674
Sales revenue for the quarter ended September 30, 2022 amounted to $Nil
compared to revenue of $Nil for the quarter ended September 30, 2021.
Shipments of concentrate commenced during the third quarter of 2019.
Concentrate sales provisional revenues totalled US$183,000 for the third
quarter of 2022 compared to US$329,000 for the third quarter of 2021. 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 September 30, 2022 amounted to $ 1,555,824
(2021: $1,173,276) and the cash loss from operating activities before changes
in non-cash working capital for the quarter ended September 30, 2022 amounted
to $(3,003,660 (2021: ($1,116,243)). The difference in the net loss for Q3
2022 versus Q3 2021 is mainly due to changes in the amount of accretion
expenses and loan interest costs between the quarters. The difference in the
cash loss for the nine months ending September 30 2022 and the prior period
results from adjustments for foreign exchange and prior year financing costs.
The Company had a cash balance of $3,567,196 at September 30, 2022 compared to
$3,881,674 at September 30, 2021. The working capital deficit at September 30,
2022 amounted to $714,865 compared to a working capital surplus of $2,454,581
at September 30, 2021.
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Qualified Person
The financial components of this disclosure has been reviewed by Alan Buckley
(Chief Financial Officer) and the production and permitting components by
Brendan Morris (Chief Operating Officer), 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 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.
Information communicated within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014 which is part of UK law by virtue of the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
Enquiries
Galantas Gold Corporation
Mario Stifano: Chief Executive Officer
Email: info@galantas.com
Website: www.galantas.com
Telephone: +44(0)28 8224 1100
Grant Thornton UK LLP (AIM Nomad)
Philip Secrett, Harrison Clarke, George Grainger, Samuel
Littler
Telephone: +44(0)20 7383 5100
SP Angel Corporate Finance LLP (AIM Broker)
David Hignell, Charlie Bouverat (Corporate Finance)
Grant Barker (Sales & Broking)
Telephone: +44(0)20 3470 0470
GALANTAS GOLD CORPORATION
Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited)
Three and Nine Months Ended September 30, 2022
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.
As at As at
September 30, December 31,
2022 2021
ASSETS
Current assets
Cash and cash equivalents $ 3,567,196 $ 1,069,751
Accounts receivable and prepaid expenses (note 4) 1,845,390 1,279,935
Inventories (note 5) 32,763 108,788
Total current assets 5,445,349 2,458,474
Non-current assets
Property, plant and equipment (note 6) 29,657,790 25,688,836
Long-term deposit (note 8) 452,940 513,960
Exploration and evaluation assets (note 7) 2,281,115 1,574,183
Total non-current assets 32,391,845 27,776,979
Total assets $ 37,837,194 $ 30,235,453
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (notes 9 and 17) $ 3,672,456 $ 3,013,999
Due to related parties (note 15) 2,487,758 124,317
Leases (note 11) - 416,040
Total current liabilities 6,160,214 3,554,356
Non-current liabilities
Non-current portion of financing facilities (note 10) 4,120,767 4,247,488
Due to related parties (note 15) 2,695,201 2,444,376
Decommissioning liability (note 8) 536,379 600,525
Total non-current liabilities 7,352,347 7,292,389
Total liabilities 13,512,561 10,846,745
Equity
Share capital (note 12(a)(b)) 68,649,647 57,783,570
Reserves 14,057,021 15,435,369
Deficit (58,382,035 ) (53,830,231 )
Total equity 24,324,633 19,388,708
Total equity and liabilities $ 37,837,194 $ 30,235,453
The notes to the unaudited condensed interim consolidated financial statements
are an integral part of these statements.
Going concern (note 1)
Incorporation and nature of operations (note 2)
Contingency (note 17)
Event after the reporting period (note 18)
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenues
Sales of concentrate (note 14) $ - $ - $ - $ -
Cost and expenses of operations
Cost of sales 86,442 74,462 200,076 181,943
Depreciation (note 6) 196,178 89,151 475,045 248,304
282,620 163,613 675,121 430,247
Loss before general administrative and other expenses (282,620 ) (163,613 ) (675,121 ) (430,247 )
General administrative expenses
Management and administration wages (note 15) 220,289 112,997 486,034 339,031
Other operating expenses 66,676 65,327 258,634 137,742
Accounting and corporate 33,705 48,891 223,166 137,348
Legal and audit 70,190 32,487 199,918 113,124
Stock-based compensation (note 12(d)) 236,623 404,064 1,232,600 1,639,205
Shareholder communication and investor relations 128,889 133,522 399,410 310,263
Transfer agent 17,394 3,084 39,127 14,991
Director fees (note 15) 35,000 19,500 105,000 43,500
General office 13,468 8,648 49,543 19,987
Accretion expenses (notes 8, 10 and 15) 138,144 2,742 351,965 135,158
Loan interest and bank charges less deposit interest (notes 10 and 15) 219,549 82,912 418,641 243,795
Financing costs - - - 1,004,182
1,179,927 914,174 3,764,038 4,138,326
Other expenses
Foreign exchange loss 93,277 102,648 112,645 140,393
Gain on disposal of property, plant and equipment - (7,159 ) - (7,159 )
93,277 95,489 112,645 133,234
Net loss for the period $ (1,555,824 ) $ (1,173,276 ) $ (4,551,804 ) $ (4,701,807 )
Basic and diluted net loss per share (note 13) $ (0.02 ) $ (0.02 ) $ (0.05 ) $ (0.08 )
Weighted average number of common shares outstanding - basic and diluted 92,115,467 74,488,086 84,788,729 60,565,996
The notes to the unaudited condensed interim consolidated financial statements
are an integral part of these statements.
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net loss for the period $ (1,555,824 ) $ (1,173,276 ) $ (4,551,804 ) $ (4,701,807 )
Other comprehensive loss
Items that will be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations (1,101,693 ) 30,489 (3,191,409 ) (264,805 )
Total comprehensive loss $ (2,657,517 ) $ (1,142,787 ) $ (7,743,213 ) $ (4,966,612 )
The notes to the unaudited condensed interim consolidated financial statements
are an integral part of these statements.
Nine Months Ended
September 30,
2022 2021
Operating activities
Net loss for the period $ (4,551,804 ) $ (4,701,807 )
Adjustment for:
Depreciation (note 6) 475,045 248,304
Stock-based compensation (note 12(d)) 1,232,600 1,639,205
Accrued interest (notes 10 and 15) 704,919 158,404
Foreign exchange (gain) loss (1,139,442 ) 407,470
Accretion expenses (notes 8, 10 and 15) 275,022 135,158
Financing costs - 1,004,182
Gain on disposal of property, plant and equipment - (7,159 )
Non-cash working capital items:
Accounts receivable and prepaid expenses 346,959 (415,954 )
Inventories 71,611 (3,129 )
Accounts payable and other liabilities 1,068,811 137,074
Due to related parties 246,714 75,638
Net cash and cash equivalents used in by operating activities (1,269,565 ) (1,322,614 )
Investing activities
Net purchase of property, plant and equipment (7,065,758 ) (2,696,746 )
Proceeds from sale of property, plant and equipment - 8,561
Exploration and evaluation assets (893,830 ) (402,702 )
Lease payments (note 11) (668,534 ) -
Net cash and cash equivalents used in investing activities (8,628,122 ) (3,090,887 )
Financing activities
Proceeds of private placements (note 12(b)(i)) 5,900,003 7,998,980
Share issue costs (601,932 ) (775,137 )
Proceeds from exercise of warrants 5,074,467 495,333
Advances from related parties 2,044,133 -
Repayment of financing facilities - (23,802 )
Net cash and cash equivalents provided by financing activities 12,416,671 7,695,374
Net change in cash and cash equivalents 2,518,984 3,281,873
Effect of exchange rate changes on cash held in foreign currencies (21,539 ) (12,293 )
Cash and cash equivalents, beginning of period 1,069,751 612,094
Cash and cash equivalents, end of period $ 3,567,196 $ 3,881,674
Cash $ 3,567,196 $ 3,881,674
Cash equivalents - -
Cash and cash equivalents $ 3,567,196 $ 3,881,674
The notes to the unaudited condensed interim consolidated financial statements
are an integral part of these statements.
Equity settled Foreign
share-based currency
Share Warrants payments translation
capital reserve reserve reserve Deficit Total
Balance, December 31, 2020 $ 52,933,594 $ 340,000 $ 8,381,382 $ 1,012,739 $ (48,545,800 ) $ 14,121,915
Shares issued in private placement (note 12(b)(i)) 7,998,980 - - - - 7,998,980
Warrants issued (note 12(b)(i)) (3,258,578 ) 3,258,578 - - - -
Warrants issued (note 10(i)) - 670,000 - - - 670,000
Share issue costs (note 12(b)(i)) (783,920 ) 8,783 - - - (775,137 )
Warrant extension (note 15(a)(iii)) - 251,000 - - - 251,000
Stock-based compensation (note 12(d)) - - 1,639,205 - - 1,639,205
Exercise of warrants 893,494 (398,161 ) - - - 495,333
Exchange differences on translating foreign operations - - - (264,805 ) - (264,805 )
Net loss for the period - - - - (4,701,807 ) (4,701,807 )
Balance, September 30, 2021 $ 57,783,570 $ 4,130,200 $ 10,020,587 $ 747,934 $ (53,247,607 ) $ 19,434,684
Balance, December 31, 2021 $ 57,783,570 $ 4,130,200 $ 10,417,260 $ 887,909 $ (53,830,231 ) $ 19,388,708
Shares issued in private placement (note 12(b)(ii)) 5,900,003 - - - - 5,900,003
Shares issued for services arrangement (note 12(b)(ii)) 1,000,000 - - - - 1,000,000
Warrants issued (note 12(b)(ii)) (2,320,000 ) 2,320,000 - - - -
Warrants issued (note 15(a)(iii)) - 74,000 - - - 74,000
Share issue costs (note 12(b)(ii)) (813,932 ) 212,000 - - - (601,932 )
Stock-based compensation (note 12(d)) - - 1,232,600 - - 1,232,600
Exercise of warrants 7,100,006 (2,025,539 ) - - - 5,074,467
Exchange differences on translating foreign operations - - - (3,191,409 ) - (3,191,409 )
Net loss for the period - - - - (4,551,804 ) (4,551,804 )
Balance, September 30, 2022 $ 68,649,647 $ 4,710,661 $ 11,649,860 $ (2,303,500 ) $ (58,382,035 ) $ 24,324,633
The notes to the unaudited condensed interim consolidated financial statements
are an integral part of these statements.
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
and further financing currently being negotiated. The management's assumptions
in relation to future levels of production, gold prices and mine operating and
capital 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 have
progressed positively and the maturity dates for both the G&F Phelps Ltd.
("G&F Phelps") and Ocean Partners UK Ltd. ("Ocean Partners") loans have
now been extended to December 31, 2023 (see notes 10 and 15). During the year
ended December 31, 2021, the Company raised gross proceeds of $8M through the
issuance of shares to new and current investors to meet the financial
requirements of the Company for the foreseeable future. During the nine months
ended September 30, 2022, the Company raised gross proceeds of $11M through
the issuance of shares to investors and the exercise of warrants. Based on the
financial projections prepared, the directors believe it's appropriate to
prepare the unaudited condensed interim consolidated financial statements on
the going concern basis.
As at September 30, 2022, the Company had a deficit of $58,382,035 (December
31, 2021 - $53,830,231). Comprehensive loss for the nine months ended
September 30, 2022 was $7,743,213 (nine months ended September 30, 2021 -
$4,966,612). These conditions raise material uncertainties which may cast
significant doubt as to whether the Company will be able to continue as a
going concern. However, 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.
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.
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. On September 1, 2021, the
Company's common shares started trading under the symbol GALKF on the OTCQX in
the United States. 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 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 November
29, 2022 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, 2021. Any subsequent changes to IFRS that are given effect in the
Company's annual consolidated financial statements for the year ending
December 31, 2022 could result in restatement of these unaudited condensed
interim consolidated financial statements.
4. Accounts Receivable and Prepaid Expenses
As at As at
September 30, December 31,
2022 2021
Sales tax receivable - Canada $ 22,824 $ 4,471
Valued added tax receivable - Northern Ireland 256,917 239,774
Accounts receivable 181,975 594,071
Prepaid expenses 1,383,674 281,207
Other debtors - 160,412
$ 1,845,390 $ 1,279,935
Prepaid expenses includes advances for consumables and for construction of the
passing bays in the Omagh mine. Prepaid expenses includes also $1,000,000
pursuant to services agreement as disclosed in note 12(b)(ii).
The following is an aged analysis of receivables:
As at As at
September 30, December 31,
2022 2021
Less than 3 months $ 402,551 $ 884,550
3 to 12 months 51,540 105,526
More than 12 months 7,625 8,652
Total accounts receivable $ 461,716 $ 998,728
5. Inventories
As at As at
September 30, December 31,
2022 2021
Concentrate inventories $ 32,763 $ 108,788
6. Property, Plant and Equipment
Freehold Plant
land and and Motor Office Development Assets under
Cost buildings machinery (i) vehicles equipment assets (ii) construction Total
Balance, December 31, 2020 $ 2,398,171 $ 6,951,208 $ 162,571 $ 191,422 $ 19,345,676 $ - $ 29,049,048
Additions - 1,263,168 38,975 27,973 4,898,703 556,273 6,785,092
Disposals - (6,289 ) - - - - (6,289 )
Cash receipts from concentrate sales - - - - (1,412,329 ) - (1,412,329 )
Foreign exchange adjustment (34,357 ) (99,099 ) (2,329 ) (2,742 ) (270,376 ) - (408,903 )
Balance, December 31, 2021 2,363,814 8,108,988 199,217 216,653 22,561,674 556,273 34,006,619
Additions - 942,979 24,454 8,897 7,434,667 - 8,410,997
Disposals - - - - - (523,478 ) (523,478 )
Cash receipts from concentrate sales - - - - (551,021 ) - (551,021 )
Foreign exchange adjustment (280,644 ) (958,727 ) (23,652 ) (25,722 ) (2,584,864 ) (32,795 ) (3,906,404 )
Balance, September 30, 2022 $ 2,083,170 $ 8,093,240 $ 200,019 $ 199,828 $ 26,860,456 $ - $ 37,436,713
Accumulated depreciation
Balance, December 31, 2020 $ 1,986,461 $ 5,648,586 $ 130,107 $ 125,791 $ - $ - $ 7,890,945
Depreciation 6,347 507,731 19,776 13,992 - - 547,846
Disposals - (4,801 ) - - - - (4,801 )
Foreign exchange adjustment (28,499 ) (83,818 ) (1,995 ) (1,895 ) - - (116,207 )
Balance, December 31, 2021 1,964,309 6,067,698 147,888 137,888 - - 8,317,783
Depreciation 3,384 439,277 22,977 9,407 - - 475,045
Foreign exchange adjustment (233,428 ) (744,490 ) (19,018 ) (16,969 ) - - (1,013,905 )
Balance, September 30, 2022 $ 1,734,265 $ 5,762,485 $ 151,847 $ 130,326 $ - $ - $ 7,778,923
Carrying value
Balance, December 31, 2021 $ 399,505 $ 2,041,290 $ 51,329 $ 78,765 $ 22,561,674 $ 556,273 $ 25,688,836
Balance, September 30, 2022 $ 348,905 $ 2,330,755 $ 48,172 $ 69,502 $ 26,860,456 $ - $ 29,657,790
(i) Right-of-use assets of $680,520 is included in additions of the plant and
machinery for the year ended December 31, 2021. Right-of-use assets of
$270,740 is included in additions of the plant and machinery for the nine
months ended September 30, 2022.
(ii) Development assets are expenditures for the underground mining operations
in Omagh.
7. Exploration and Evaluation Assets
Exploration
and
evaluation
Cost assets
Balance, December 31, 2020 $ 750,741
Additions 834,193
Foreign exchange adjustment (10,751 )
Balance, December 31, 2021 1,574,183
Additions 893,830
Foreign exchange adjustment (186,898 )
Balance, September 30, 2022 $ 2,281,115
Carrying value
Balance, December 31, 2021 $ 1,574,183
Balance, September 30, 2022 $ 2,281,115
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 September 30, 2022 based on a risk-free discount rate of 1%
(December 31, 2021 - 1%) and an inflation rate of 1.50% (December 31, 2021 -
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 September 30, 2022, the
estimated fair value of the liability is $536,379 (December 31, 2021 -
$600,525). Changes in the provision during the nine months ended September 30,
2022 are as follows:
As at As at
September 30, December 31,
2022 2021
Decommissioning liability, beginning of period $ 600,525 $ 598,275
Accretion 7,635 10,892
Foreign exchange (71,781 ) (8,642 )
Decommissioning liability, end of period $ 536,379 $ 600,525
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, 2021 - GBP 300,000), of which GBP 300,000 was funded
as of September 30, 2022 (GBP 300,000 was funded as of December 31, 2021) and
reported as long-term deposit of $452,940 (December 31, 2021 - $513,960).
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
September 30, December 31,
2022 2021
Accounts payable $ 2,244,092 $ 1,463,316
Accrued liabilities 1,428,364 1,550,683
Total accounts payable and other liabilities $ 3,672,456 $ 3,013,999
The following is an aged analysis of the accounts payable and other
liabilities:
As at As at
September 30, December 31,
2022 2021
Less than 3 months $ 2,866,801 $ 2,246,440
3 to 12 months 214,894 98,415
More than 24 months (See also Note 17) 590,761 669,144
Total accounts payable and other liabilities $ 3,672,456 $ 3,013,999
10. Financing Facilities
Amounts payable on the Company's financial facilities are as follow:
As at As at
September 30, December 31,
2022 2021
Ocean Partners
Financing facilities, beginning of period $ - $ 2,186,272
Repayment of financing facilities - (23,802 )
Accretion - 126,949
Interest - 86,820
Foreign exchange adjustment - 200,898
Financing facility reallocated to due to related parties - (2,577,137 )
- -
G&F Phelps
Financing facility, beginning of period 4,247,488 -
Financing facility reallocated from due to related parties - 4,578,039
Less bonus warrants issued (i) - (670,000 )
Accretion 194,517 151,290
Interest 309,588 164,197
Foreign exchange adjustment (630,826 ) 23,962
4,120,767 4,247,488
Financing facilities - non-current portion $ 4,120,767 $ 4,247,488
(i) During the nine months ended September 30, 2021, the maturity date of the
G&F Phelps loan was extended to December 31, 2023. Interest was deferred
and added to the balance outstanding until March 31, 2022, after which point
interest has been paid monthly. In consideration for extending the G&F
loan and deferring interest, G&F Phelps received 1,700,000 warrants
exercisable into one common share at an exercise price of $0.33, with said
warrants expiring on December 31, 2023.
The fair value of the 1,700,000 warrants was estimated at $670,000 using the
following Black-Scholes option pricing model with the following assumptions:
expected dividend yield - 0%, expected volatility - 123.98% to 144.48%,
risk-free interest rate - 0.32% and an expected average life of 2.63 years.
11. Leases
Balance, December 31, 2020 $ -
Addition (i) 680,520
Interest expense 36,706
Lease payments (297,450 )
Foreign exchange (3,736 )
Balance, December 31, 2021 416,040
Addition (ii) 270,740
Interest expense 18,422
Lease payments (668,534 )
Foreign exchange (36,668 )
Balance, September 30, 2022 $ -
(i) During the year ended 2021, the Company entered into lease agreements in
respect to rent of equipments which expired between February 2022 to July
2022.
(ii) During the nine months ended September 30, 2022, the Company entered into
lease agreements in respect to rent of equipments, all of which expired in
July 2022 with the exception of a Scissors lift which will continue for a
further 12 months.
12. Share Capital and Reserves
a) Authorized share capital
At September 30, 2022, the authorized share capital consisted of an unlimited
number of common and preference shares issuable in Series.
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 September 30, 2022, the issued share capital amounted to $68,649,647. The
continuity of issued share capital for the periods presented is as follows:
Number of
common
shares Amount
Balance, December 31, 2020 46,565,537 $ 52,933,594
Shares issued in private placement (i) 26,663,264 7,998,980
Warrants issued (i) - (3,258,578 )
Share issue costs (i) 41,667 (783,920 )
Exercise of warrants 1,413,333 893,494
Balance, September 30, 2021 74,683,801 $ 57,783,570
Balance, December 31, 2021 74,683,801 $ 57,783,570
Shares issued in private placement (ii) 13,111,119 5,900,003
Shares issued for services arrangement (ii) 2,222,222 1,000,000
Warrants issued (ii) - (2,320,000 )
Share issue costs - (813,932 )
Exercise of warrants 12,969,667 7,100,006
Balance, September 30, 2022 102,986,809 $ 68,649,647
(i) On May 14, 2021, Galantas completed a private placement of 26,663,264
units at a price of $0.30 per unit for aggregate gross proceeds of $7,998,980.
Each unit comprises one common share and one common share purchase warrant.
Each warrant will be exercisable into one additional common share at an
exercise price of $0.40 for 24 months from the closing date of the private
placement. There is a four-month and one day hold period on the trading of
securities issued in connection with this private placement.
The fair value of the 26,663,264 warrants was estimated at $3,258,578 using
the Black-Scholes option pricing model with the following assumptions:
expected dividend yield - 0%, expected volatility - 155.08%, risk-free
interest rate - 0.32% and an expected average life of 2 years.
Ocean Partners acquired 1,666,667 units of the private placement, for
consideration of $500,000 and the Company paid a finder's fee of 41,667 units
to Ocean Partners resulting in the issuance of 1,708,334 common shares or 2.3%
of the Company's issued and outstanding common shares on a non-diluted basis.
The 41,667 units paid as a finder's fee were valued at $20,417. The fair value
of the 41,667 warrants was estimated at $8,783 using the Black-Scholes option
pricing model with the following assumptions: expected dividend yield - 0%,
expected volatility - 155.08%, risk-free interest rate - 0.32% and an expected
average life of 2 years.
Roland Phelps, the Company's retired President and Chief Executive Officer,
acquired 166,667 units for consideration of $50,000, increasing his holding to
5,100,484 common shares or 6.9% of the Company's issued and outstanding common
shares on a non-diluted basis.
In respect of an under-writing by Ocean Partners, the Company paid a
commitment fee of $112,500 in cash.
(ii) On August 30, 2022, Galantas completed a private placement of 13,111,119
units at a price of $0.45 per unit for aggregate gross proceeds of $5,900,003.
In addition, 2,222,222 units were sold to a third-party service provider on
the same term as the offering. The gross proceeds being $1,000,000 was offset
against certain fees to be paid to the third-party service provider by the
Company pursuant to a service agreement between the third-party service
provider and the Company dated August 30, 2022, for the underground
development at the Omagh Gold Project.
Each unit comprises one common share and one-half common share purchase
warrant. Each warrant will be exercisable into one additional common share at
an exercise price of $0.55 until February 28, 2025.
The fair value of the 7,666,669 warrants was estimated at $2,320,000 using the
Black-Scholes option pricing model with the following assumptions: expected
dividend yield - 0%, expected volatility - 128.35%, risk-free interest rate -
3.64% and an expected average life of 2.5 years.
The Company paid the agents a cash commission equal to $355,320 and issue
820,000 non-transferable broker warrants of the Company. Each broker warrant
is exercisable to acquire one common share at an exercise price of $0.45 until
August 30, 2024. The fair value of the 820,000 warrants was estimated at
$212,000 using the Black-Scholes option pricing model with the following
assumptions: expected dividend yield - 0%, expected volatility - 109.13%,
risk-free interest rate - 3.63% and an expected average life of 2 years.
The securities issued under the offering are subject to a four-month hold
period under applicable Canadian securities laws which will expire on December
31, 2022.
Melquart Limited ("Melquart") acquired 2,666,667 units for consideration of
$1,200,000. Following the offering, Melquart holds 28,140,195 common shares,
representing approximately 27.36% of the issued and outstanding common shares
on a non-diluted basis. Ocean Partners acquired 461,112 units of the private
placement, for consideration of $207,500. Mario Stifano, a director of the
Company, acquired 55,556 units for consideration of $25,000.
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, 2020 1,700,000 $ 0.33
Issued (notes 10(i) and 12(b)(i)) 28,404,931 0.40
Expired (1,413,333 ) 0.35
Balance, September 30, 2021 28,691,598 $ 0.39
Balance, December 31, 2021 28,691,598 $ 0.39
Issued (notes 12(b)(ii) and 15(a)(iii)) 8,861,669 0.54
Exercised (12,969,667 ) 0.36
Balance, September 30, 2022 24,583,600 $ 0.45
The following table reflects the actual warrants issued and outstanding as of
September 30, 2022:
Grant date Exercise
Number fair value price
Expiry date of warrants ($) ($)
February 3, 2023 250,000 51,000 0.50
May 14, 2023 (notes 15(a)(iii)(1)) 14,941,931 1,829,779 0.40
July 25, 2023 125,000 23,000 0.48
December 31, 2023 780,000 274,882 0.33
August 30, 2024 820,000 212,000 0.45
February 28, 2025 7,666,669 2,320,000 0.55
24,583,600 4,710,661 0.45
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, 2020 570,000 $ 1.16
Granted (i)(ii)(iii) 4,360,000 0.85
Balance, September 30, 2021 4,930,000 $ 0.88
Balance, December 31, 2021 4,885,000 $ 0.88
Granted (iv) 1,742,500 0.60
Expired (255,000 ) 1.35
Cancelled (220,000 ) 0.94
Balance, September 30, 2022 6,152,500 $ 0.78
(i) On May 19, 2021, the Company granted 3,915,000 stock options to directors,
employees and consultants of the Company to purchase common shares at $0.86
per share until May 19, 2026. The options will vest as to one third
immediately and one third on each of May 19, 2022 and May 19, 2023. The fair
value attributed to these options was $2,907,000 and was expensed in the
unaudited condensed interim consolidated statements of loss and credited to
equity settled share-based payments reserve.
(ii) On June 21, 2021, the Company granted 425,000 stock options to
consultants and officers of the Company to purchase common shares at $0.73 per
share until June 21, 2026. The options will vest as to one third immediately
and one third on each of June 21, 2022 and June 21, 2023. The fair value
attributed to these options was $266,000 and was expensed in the unaudited
condensed interim consolidated statements of loss and credited to equity
settled share-based payments reserve.
(iii) On August 27, 2021, the Company granted 20,000 stock options to an
employee of the Company to purchase common shares at $0.86 per share until
August 27, 2026. The options will vest as to one third immediately and one
third on each of August 27, 2022 and August 27, 2023. The fair value
attributed to these options was $11,000 and was expensed in the unaudited
condensed interim consolidated statements of loss and credited to equity
settled share-based payments reserve.
(iv) On May 3, 2022, the Company granted 1,742,500 stock options to directors,
officers, employees and consultants of the Company to purchase common shares
at $0.60 per share until May 3, 2027. The options will vest as to one third
immediately and one third on each of May 3, 2023 and May 3, 2024. The fair
value attributed to these options was $900,000 and was expensed in the
unaudited condensed interim consolidated statements of loss and credited to
equity settled share-based payments reserve.
The portion of the estimated fair value of options granted in the current and
prior years and vested during the three and nine months ended September 30,
2022, amounted to $236,623 and $1,232,600, respectively (three and nine months
ended September 30, 2021 - $404,064 and $1,639,205, respectively).
The following table reflects the actual stock options issued and outstanding
as of September 30, 2022:
Weighted average Number of
remaining Number of options Number of
Exercise contractual options vested options
Expiry date price ($) life (years) outstanding (exercisable) unvested
April 19, 2023 1.10 0.55 25,000 25,000 -
February 13, 2024 0.90 1.37 85,000 85,000 -
June 27, 2024 0.90 1.74 100,000 100,000 -
May 19, 2026 0.86 3.64 3,760,000 2,506,667 1,253,333
June 21, 2026 0.73 3.73 425,000 283,333 141,667
August 27, 2026 0.86 3.91 20,000 13,333 6,667
May 3, 2023 0.60 4.59 1,737,500 579,167 1,158,333
0.78 3.84 6,152,500 3,592,500 2,560,000
13. Net Loss per Common Share
The calculation of basic and diluted loss per share for the three and nine
months ended September 30, 2022 was based on the loss attributable to common
shareholders of $1,555,824 and $4,551,804, respectively (three and nine months
ended September 30, 2021 - $1,173,276 and $4,701,807, respectively) and the
weighted average number of common shares outstanding of 92,115,467 and
84,788,729, respectively (three and nine months ended September 30, 2021 -
74,488,086 and 60,565,996, respectively) for basic and diluted loss per share.
Diluted loss did not include the effect of 24,583,600 warrants (three and nine
months ended September 30, 2021 - 28,691,598) and 6,152,500 options (three and
nine months ended September 30, 2021 - 4,930,000) for the three and nine
months ended September 30, 2022, as they are anti-dilutive.
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 nine months ended September 30, 2022 totalled approximately
US$183,000 and US$402,000, respectively (three and nine months ended September
30, 2021 - US$329,000 and US$1,114,000, respectively). 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 pursuant to IFRS 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 exchange amount 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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Interest on related party loans (i) $ 214,159 $ 40,861 $ 376,908 $ 159,397
(i) Refer to note 10(i).
(ii) Refer to note 12(b)(i)(ii).
(iii) On February 3, 2022, the Company announced the closing of the loan
agreement for US$1.06 million with Ocean Partners. Ocean Partners and the
Company have a common director. Terms of the loan agreement are:
· The loan matured on July 31, 2022.
· The loan will bear interest at an annual rate of 10% compounded
monthly payable upon repayment of the loan.
· US$20,000 structuring fee has been paid to Ocean Partners.
· US$40,000 consulting fee will be paid to Ocean Partners, to be
invoiced separately by Ocean Partners.
· 250,000 warrants have been granted to Ocean Partners, which will
be exercisable for a period of 12 months at an exercise price of $0.50. The
bonus warrants are subject to a hold period under applicable securities laws
and the rules of the TSXV, expiring on June 4, 2022. The fair value of the
250,000 warrants was valued at $51,000 using the following Black-Scholes
option pricing model with the following assumptions: expected dividend yield -
0%, expected volatility - 107%, risk-free interest rate - 1.22% and an
expected average life of 1 year.
· US$40,000 extension fee was paid to Ocean Partners if the Company
elects to extend the loan for a further six months from the maturity date. The
Company exercised its option to extend the US$1.06 million loan for a further
six months, to January 31, 2023 by paying the US$40,000 extension fee to Ocean
Partners.
Proceeds from the loan will be used for further development of the Omagh mine
in Northern Ireland and working capital.
(a) The Company entered into the following transactions with related parties
(continued):
(iii) (continued) On August 3, 2022, the Company announced the closing of the
loan agreement for US$530,000 with Ocean Partners. Terms of the loan agreement
are:
· The loan matures on January 31, 2023.
· The loan will bear interest at an annual rate of 12% compounded monthly
and repayable in full on the maturity date.
· US$10,000 commitment fee has been paid to Ocean Partners.
· 125,000 bonus warrants have been granted to Ocean Partners, which will be
exercisable for a period of 12 months at an exercise price of $0.48. The bonus
warrants are subject to a hold period under applicable securities laws and the
rules of the TSXV, expiring on July 25, 2023. The fair value of the 125,000
warrants was valued at $23,000 using the following Black-Scholes option
pricing model with the following assumptions: expected dividend yield - 0%,
expected volatility - 95.09%, risk-free interest rate - 3.12% and an expected
average life of 1 year.
· US$20,000 extension fee will be paid to Ocean Partners if the Company
elects to extend the loan for a further six months from the maturity date.
As at September 30, 2022, financial liabilities due to the lender and recorded
as due to related parties on the unaudited condensed interim consolidated
statement of financial position is $4,984,795 (December 31, 2021 -
$2,444,376).
September 30, December 31,
2022 2021
Balance, beginning of period $ 2,444,376 $ -
Financing facility reallocated to due to related parties - 2,577,137
Loan received 2,044,133 -
Less bonus warrants ((1)) (74,000 ) (251,000 )
Repayment (245,785 ) -
Accretion 149,813 57,338
Interest 376,908 27,506
Foreign exchange adjustment 289,350 33,395
Balance, end of period 4,984,795 2,444,376
Less current balance (2,289,594 ) -
Due to related parties - non-current balance $ 2,695,201 $ 2,444,376
((1)) During the year ended December 31, 2021, the 1,700,000 bonus warrants
issued have been extended. The Company recorded the incremental difference of
$251,000 as financing costs based on the fair value of these warrants
immediately prior to and after the modification. The fair value of the
1,700,000 bonus warrants was valued immediately prior to the subsequent
extension using the following Black-Scholes option pricing model with the
following assumptions: expected dividend yield - 0%, expected volatility -
123.98% to 144.48%, risk-free interest rate - 0.32% and an expected average
life of 0.63 to 2.63 years.
(b) Remuneration of officer and directors of the Company was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Salaries and benefits ((1)) $ 193,705 $ 93,305 $ 446,839 $ 261,291
Stock-based compensation 148,268 267,570 781,955 1,098,008
$ 341,973 $ 360,875 $ 1,228,794 $ 1,359,299
((1) )Salaries and benefits include director fees. As at September 30, 2022,
due to directors for fees amounted to $35,000 (December 31, 2021 - $102,917)
and due to officers, mainly for salaries and benefits accrued amounted to
$163,164 (December 31, 2021 - $21,400), and is included with due to related
parties.
(c) As at September 30, 2022, Ross Beaty owns 3,744,747 common shares of the
Company or approximately 3.6% of the outstanding common shares. Premier Miton
owns 4,848,243 common shares of the Company or approximately 4.7%. Melquart
owns, directly and indirectly, 24,140,195 common shares of the Company or
approximately 27.3% of the outstanding common shares of the Company. G&F
Phelps owns 5,353,818 common shares of the Company or approximately 5.2%. Eric
Sprott owns 10,166,667 common shares of the Company or approximately 9.9%.
Mike Gentile owns 6,217,222 common shares of the Company or approximately
6.0%. The remaining 43.3% 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.
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:
September 30, 2022 United Kingdom Canada Total
Current assets $ 841,557 $ 4,603,792 $ 5,445,349
Non-current assets $ 32,243,020 $ 148,566 $ 32,391,586
Revenues $ - $ - $ -
December 31, 2021 United Kingdom Canada Total
Current assets $ 1,379,742 $ 1,078,732 $ 2,458,474
Non-current assets $ 27,714,667 $ 62,312 $ 27,776,979
Revenues $ - $ - $ -
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 $459,417 (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 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. Event After the Reporting Period
On November 18, 2022, the Company was fined GBP 120,000 relating to a legacy
event that happened in July 2018 under previous management. The company has
six months to pay this fine. New systems and procedures have since been put in
place to avoid a reoccurrence and have been reviewed by both the HSE and Mines
Inspector.
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