REG - Galantas Gold Corp - Half-year Report
26/08/2022 07:00
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RNS Number : 2966X Galantas Gold Corporation 26 August 2022
GALANTAS REPORTS FINANCIAL RESULTS FOR THE QUARTER AND SIX MONTHS ENDED JUNE
30, 2022
August 26, 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 and Six Months ended June 30, 2022.
Financial Highlights
Highlights of the second quarter 2022 results, which are expressed in Canadian
Dollars, are summarized below:
All figures denominated in Canadian Dollars (CDN$)
Quarter Ended Six Months Ended
June 30 June 30
2022 2021 2022 2021
Revenue $ 0 $ 0 $ 0 $ 0
Cost and expenses of operations $ (66,995) $ (61,333) $ (113,634) $ (107,481)
Loss before the undernoted $ (66,995) $ (61,333) $ (113,634) $ (107,481)
Depreciation $ (148,336) $ (87,088) $ (278,867) $ (159,153)
General administrative expenses $(1,412,941) $ (2,719,055) $ 2,584,111) $ (3,224,152)
Foreign exchange gain / (loss) $ 48,104 $ 21,092) $ (19,368) $ (37,745)
Net Loss for the period $ 1,580,168) $ (2,888,568) $ (2,995,980) $ (3,528,531)
Working Capital (Deficit) / Surplus $(3,687,844) $ 4,505,905 $ (3,687,844) $ 4,505,905
Cash (loss) / profit from operating activities before changes in non-cash $(1,738,055) $ 144,806 $ (1,738,055) $ 144,806
working capital
Cash at June 30, 2022 $ 903,435 $ 6,142,477 $ 903,435 $ 6,142,477
Sales revenue for the quarter ended June 30, 2022 amounted to $Nil compared to
revenue of $Nil for the quarter ended June 30, 2021. Shipments of concentrate
commenced during the third quarter of 2019. Concentrate sales provisional
revenues totalled US$Nil for the second quarter of 2022 compared to US$218,000
for the second 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 June 30, 2022 amounted to $1,580,568 (2021:
$2,888,568) and the cash outflow from operating activities before changes in
non-cash working capital for the quarter ended June 30, 2022 amounted to
$1,738,055 (2021: $144,806). The main difference in the reduction in net loss
is due to a reduction in the value attributed to stock based compensation and
a reduction in financing activities from 2021.
The Company had a cash balance of $903,455 at June 30, 2022 compared to
$6,142,477 at June 30, 2021. The working capital deficit at June 30, 2022
amounted to $3,687,844 compared to a working capital surplus of $4,505,905 at
June 30, 2021.
Exploration
On August 4, 2022, the Company announced results for three holes from its
ongoing 4,000-metre drilling program at the Omagh Project, including a hole
that intersected 31.8 grams per tonne gold and 39.2 grams per tonne silver
over 4.4 metres.
Mine Development
Safety is a high priority and the company continued to invest in
safety-related training and infrastructure. The zero lost time accident rate
since the start of underground operations continues. Environmental monitoring
demonstrates a high level of regulatory compliance.
Ongoing development of the underground decline will facilitate deeper drilling
and more precise targeting of dilation zones to the south at Kearney, planned
later this year. Drilling is also planned from the 1084 level, with the aim of
identifying and delineating new dilation zones to the north at Kearney.
The secondary egress has been commissioned and blasting of the first stope has
commenced. The Company is reviewing its mine plan and production guidance for
the next 16 months including the timing to advance development to the higher
grade Joshua Vein to provide multiple mine headings as well as underground
drill platforms to extend the mineralization to depth and test new targets.
The Company is experiencing cost pressures in fuel and energy costs as well as
input costs including labor and supplies. The long term impact of
macroeconomic cost pressures are difficult to accurately assess at the moment
and result from supply chain issues arising from the COVID pandemic and energy
cost increases resulting from the war in Ukraine.
The detailed results and Management Discussion and Analysis (MD&A) are
available on www.sedar.com (http://www.sedar.com) and www.galantas.com
(http://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/2966X_1-2022-8-25.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2966X_1-2022-8-25.pdf)
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 (COO), 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.
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
Panmure Gordon & Co (AIM Joint Broker & Corporate Adviser)
Hugh Rich, John Prior
Telephone: +44(0)20 7886 2500
SP Angel Corporate Finance LLP (AIM Joint 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 Six Months Ended June 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.
Galantas Gold Corporation
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
(Unaudited)
As at As at
June 30, December 31,
2022 2021
ASSETS
Current assets
Cash and cash equivalents $ 903,435 $ 1,069,751
Accounts receivable and prepaid expenses (note 4) 412,521 1,279,935
Inventories (note 5) 72,856 108,788
Total current assets 1,388,812 2,458,474
Non-current assets
Property, plant and equipment (note 6) 28,490,156 25,688,836
Long-term deposit (note 8) 470,040 513,960
Exploration and evaluation assets (note 7) 2,090,096 1,574,183
Total non-current assets 31,050,292 27,776,979
Total assets $ 32,439,104 $ 30,235,453
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (notes 9 and 17) $ 3,362,962 $ 3,013,999
Due to related parties (note 15) 1,377,697 124,317
Leases (note 11) 335,997 416,040
Total current liabilities 5,076,656 3,554,356
Non-current liabilities
Non-current portion of financing facilities (note 10) 4,108,000 4,247,488
Due to related parties (note 15) 2,750,067 2,444,376
Decommissioning liability (note 8) 544,259 600,525
Total non-current liabilities 7,402,326 7,292,389
Total liabilities 12,478,982 10,846,745
Equity
Share capital (note 12(a)(b)) 64,072,069 57,783,570
Reserves 12,714,264 15,435,369
Deficit (56,826,211 ) (53,830,231 )
Total equity 19,960,122 19,388,708
Total equity and liabilities $ 32,439,104 $ 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)
Events after the reporting period (note 18)
Condensed Interim Consolidated Statements of Loss
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Revenues
Sales of concentrate (note 14) $ - $ - $ - $ -
Cost and expenses of operations
Cost of sales 66,995 61,333 113,634 107,481
Depreciation (note 6) 148,336 87,088 278,867 159,153
215,331 148,421 392,501 266,634
Loss before general administrative and other expenses (215,331 ) (148,421 ) (392,501 ) (266,634 )
General administrative expenses
Management and administration wages (note 15) 148,105 81,951 265,745 226,034
Other operating expenses 113,170 39,835 191,958 72,415
Accounting and corporate 36,482 73,273 189,461 88,457
Legal and audit 66,088 31,464 129,728 80,637
Stock-based compensation (note 12(d)) 645,438 1,230,510 995,977 1,235,141
Shareholder communication and investor relations 134,734 116,888 270,521 176,741
Transfer agent 17,718 9,046 21,733 11,907
Director fees (note 15) 35,000 15,500 70,000 24,000
General office 14,888 7,770 36,075 11,339
Accretion expenses (notes 8, 10 and 15) 93,334 27,856 213,821 132,416
Loan interest and bank charges less deposit interest (notes 10 and 15) 107,984 80,780 199,092 160,883
Financing costs - 1,004,182 - 1,004,182
1,412,941 2,719,055 2,584,111 3,224,152
Other expenses
Foreign exchange (gain) loss (48,104 ) 21,092 19,368 37,745
(48,104 ) 21,092 19,368 37,745
Net loss for the period $ (1,580,168 ) $ (2,888,568 ) $ (2,995,980 ) $ (3,528,531 )
Basic and diluted net loss per share (note 13) $ (0.02 ) $ (0.05 ) $ (0.04 ) $ (0.07 )
Weighted average number of common shares 84,140,878 60,494,975 81,353,664 53,501,436
outstanding - basic and diluted
The notes to the unaudited condensed interim consolidated financial statements
are an integral part of these statements.
Condensed Interim Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Net loss for the period $ (1,580,168 ) $ (2,888,568 ) $ (2,995,980 ) $ (3,528,531 )
Other comprehensive loss
Items that will be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations (1,218,739 ) (198,369 ) (2,089,716 ) (295,294 )
Total comprehensive loss $ (2,798,907 ) $ (3,086,937 ) $ (5,085,696 ) $ (3,823,825 )
The notes to the unaudited condensed interim consolidated financial statements
are an integral part of these statements.
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
Six Months Ended
June 30,
2022 2021
Operating activities
Net loss for the period $ (2,995,980 ) $ (3,528,531 )
Adjustment for:
Depreciation (note 6) 278,867 159,153
Stock-based compensation (note 12(d)) 995,977 1,235,141
Accrued interest (notes 10 and 15) 375,855 158,239
Foreign exchange (gain) loss (573,713 ) 344,243
Accretion expenses (notes 8, 10 and 15) 180,939 132,416
Financing costs - 1,004,182
Non-cash working capital items:
Accounts receivable and prepaid expenses 811,072 (168,600 )
Inventories 34,717 (64,831 )
Accounts payable and other liabilities 621,711 124,053
Due to related parties (16,255 ) (67,781 )
Net cash and cash equivalents used in by operating activities (286,810 ) (672,316 )
Investing activities
Net purchase of property, plant and equipment (4,891,767 ) (1,194,831 )
Exploration and evaluation assets (650,437 ) (87,456 )
Lease payments (note 11) (339,470 ) -
Net cash and cash equivalents used in investing activities (5,881,674 ) (1,282,287 )
Financing activities
Proceeds of private placements (note 12(b)(i)) - 7,998,980
Share issue costs - (783,262 )
Proceeds from exercise of warrants 4,610,133 330,000
Advances from related parties 1,465,792 -
Repayment of financing facilities - (23,802 )
Net cash and cash equivalents provided by financing activities 6,075,925 7,521,916
Net change in cash and cash equivalents (92,559 ) 5,567,313
Effect of exchange rate changes on cash held in foreign currencies (73,757 ) (36,930 )
Cash and cash equivalents, beginning of period 1,069,751 612,094
Cash and cash equivalents, end of period $ 903,435 $ 6,142,477
Cash $ 903,435 $ 6,142,477
Cash equivalents - -
Cash and cash equivalents $ 903,435 $ 6,142,477
The notes to the unaudited condensed interim consolidated financial statements
are an integral part of these statements.
Condensed Interim Consolidated Statements of Changes in Equity
(Expressed in Canadian Dollars)
(Unaudited)
Reserves
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 7,998,980 - - - - 7,998,980
(note 12(b)(i))
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)) (792,045 ) 8,783 - - - (783,262 )
Warrant extension (note 15(a)(iii)) - 251,000 - - - 251,000
Stock-based compensation (note 12(d)) - - 1,235,141 - - 1,235,141
Exercise of warrants 677,647 (347,647 ) - - - 330,000
Exchange differences on translating foreign - - - (295,294 ) - (295,294 )
operations
Net loss for the period - - - - (3,528,531 ) (3,528,531 )
Balance, June 30, 2021 $ 57,559,598 $ 4,180,714 $ 9,616,523 $ 717,445 $ (52,074,331 ) $ 19,999,949
Balance, December 31, 2021 $ 57,783,570 $ 4,130,200 $ 10,417,260 $ 887,909 $ (53,830,231 ) $ 19,388,708
Warrants issued (note 15(a)(iii)) - 51,000 - - - 51,000
Stock-based compensation (note 12(d)) - - 995,977 - - 995,977
Exercise of warrants 6,288,499 (1,678,366 ) - - - 4,610,133
Exchange differences on translating foreign - - - (2,089,716 ) - (2,089,716 )
operations
Net loss for the period - - - - (2,995,980 ) (2,995,980 )
Balance, June 30, 2022 $ 64,072,069 $ 2,502,834 $ 11,413,237 $ (1,201,807 ) $ (56,826,211 ) $ 19,960,122
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 six months
ended June 30, 2022, the Company raised gross proceeds of $4.6M through 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 June 30, 2022, the Company had a deficit of $56,826,211 (December 31,
2021 - $53,830,231). Comprehensive loss for the six months ended June 30, 2022
was $5,085,696 (six months ended June 30, 2021 - $3,823,825). 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 August 25,
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
June 30, December 31,
2022 2021
Sales tax receivable - Canada $ 12,588 $ 4,471
Valued added tax receivable - Northern Ireland 240,526 239,774
Accounts receivable 50,529 594,071
Prepaid expenses 108,878 281,207
Other debtors - 160,412
$ 412,521 $ 1,279,935
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,
2022 2021
Less than 3 months $ 253,114 $ 884,550
3 to 12 months 42,617 105,526
More than 12 months 7,912 8,652
Total accounts receivable $ 303,643 $ 998,728
5. Inventories
As at As at
June 30, December 31,
2022 2021
Concentrate inventories $ 72,856 $ 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 - 969,503 15,037 9,233 4,704,518 - 5,698,291
Disposals - - - - - (535,784 ) (535,784 )
Foreign exchange adjustment (201,998 ) (690,057 ) (17,024 ) (18,514 ) (1,856,288 ) (20,489 ) (2,804,370 )
Balance, June 30, 2022 $ 2,161,816 $ 8,388,434 $ 197,230 $ 207,372 $ 25,409,904 $ - $ 36,364,756
Freehold Plant
land and and Motor Office Development Assets under
Accumulated depreciation buildings machinery vehicles equipment assets construction Total
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 2,368 262,644 7,863 5,992 - - 278,867
Foreign exchange adjustment (167,977 ) (528,952 ) (13,035 ) (12,086 ) - - (722,050 )
Balance, June 30, 2022 $ 1,798,700 $ 5,801,390 $ 142,716 $ 131,794 $ - $ - $ 7,874,600
Freehold Plant
land and and Motor Office Development Assets under
Carrying value buildings machinery vehicles equipment assets construction Total
Balance, December 31, 2021 $ 399,505 $ 2,041,290 $ 51,329 $ 78,765 $ 22,561,674 $ 556,273 $ 25,688,836
Balance, June 30, 2022 $ 363,116 $ 2,587,044 $ 54,514 $ 75,578 $ 25,409,904 $ - $ 28,490,156
(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 six
months ended June 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 650,437
Foreign exchange adjustment (134,524 )
Balance, June 30, 2022 $ 2,090,096
Carrying value
Balance, December 31, 2021 $ 1,574,183
Balance, June 30, 2022 $ 2,090,096
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, 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 June 30, 2022, the estimated
fair value of the liability is $544,259 (December 31, 2021 - $600,525).
Changes in the provision during the six months ended June 30, 2022 are as
follows:
As at As at
June 30, December 31,
2022 2021
Decommissioning liability, beginning of period $ 600,525 $ 598,275
Accretion 5,211 10,892
Foreign exchange (61,477 ) (8,642 )
Decommissioning liability, end of period $ 544,259 $ 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 June 30, 2022 (GBP 300,000 was funded as of December 31, 2021) and
reported as long-term deposit of $470,040 (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
June 30, December 31,
2022 2021
Accounts payable $ 2,168,056 $ 1,463,316
Accrued liabilities 1,194,906 1,550,683
Total accounts payable and other liabilities $ 3,362,962 $ 3,013,999
The following is an aged analysis of the accounts payable and other
liabilities:
As at As at
June 30, December 31,
2022 2021
Less than 3 months $ 2,518,766 $ 2,246,440
3 to 12 months 227,225 98,415
12 to 24 months 5,001 -
More than 24 months 603,747 669,144
Total accounts payable and other liabilities $ 3,362,962 $ 3,013,999
10. Financing Facilities
Amounts payable on the Company's financial facilities are as follow:
As at As at
June 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 129,678 151,290
Interest 194,973 164,197
Foreign exchange adjustment (464,135 ) 23,962
4,108,004 4,247,488
Financing facilities - non-current portion $ 4,108,004 $ 4,247,488
(i) During the six months ended June 30, 2021, the maturity date of the
G&F Phelps loan was extended to December 31, 2023. Interest may be
deferred and added to the balance outstanding until March 31, 2022, at which
point interest will be 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 18,133
Lease payments (339,470 )
Foreign exchange (29,446 )
Balance, June 30, 2022 $ 335,997
(i) During the year ended 2021, the Company entered into lease agreements in
respect to rent of equipments which will expire between February 2022 to July
2022.
(ii) During the six months ended June 30, 2022, the Company entered into lease
agreements in respect to rent of equipments, all of which will expire 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 June 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 June 30, 2022, the issued share capital amounted to $64,072,069. 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 (792,045 )
Exercise of warrants 1,000,000 677,647
Balance, June 30, 2021 74,270,468 $ 57,559,598
Balance, December 31, 2021 74,683,801 $ 57,783,570
Exercise of warrants 11,686,333 6,288,499
Balance, June 30, 2022 86,370,134 $ 64,072,069
(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.
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), 12(b)(i) and 15(a)(iii)) 28,404,931 0.40
Expired (1,000,000 ) 0.33
Balance, June 30, 2021 29,104,931 $ 0.39
Balance, December 31, 2021 28,691,598 $ 0.39
Issued (notes 15(a)(iii)) 250,000 0.50
Exercised (11,686,333 ) 0.39
Balance, June 30, 2022 17,255,265 $ 0.40
The following table reflects the actual warrants issued and outstanding as of
June 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)) 15,525,265 1,901,069 0.40
December 31, 2023 1,480,000 550,765 0.33
17,255,265 2,502,834 0.40
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) 4,340,000 0.85
Balance, June 30, 2021 4,910,000 $ 0.88
Weighted
average
Number of exercise
options price
Balance, December 31, 2021 4,885,000 $ 0.88
Granted (iii) 1,742,500 0.60
Expired (255,000 ) 1.35
Cancelled (205,000 ) 0.96
Balance, June 30, 2022 6,167,500 $ 0.85
(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. During the three and six months
ended June 30, 2022, included in stock-based compensation is $241,587 and
$557,975, respectively related to the vested portion of these options.
(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. During the three and six months ended
June 30, 2022, included in stock-based compensation is $30,973 and $63,768,
respectively related to the vested portion of these options.
(iii) 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. During the three and six
months ended June 30, 2022, included in stock-based compensation is $371,507
related to the vested portion of these options.
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, 2022, amounted to
$1,371 and $22,727, respectively (three and six months ended June 30, 2021 -
$1,230,510 and $1,235,141, respectively).
The following table reflects the actual stock options issued and outstanding
as of June 30, 2022:
Weighted average Number of
remaining Number of options Number of
Exercise contractual options vested options
Expiry date price ($) life (years) outstanding (exercisable) unvested
April 19, 2023 1.10 0.80 25,000 25,000 -
February 13, 2024 0.90 1.62 85,000 85,000 -
June 27, 2024 0.90 1.99 100,000 100,000 -
May 19, 2026 0.86 3.89 3,770,000 2,513,333 1,256,667
June 21, 2026 0.73 3.98 425,000 283,333 141,667
August 27, 2026 0.86 4.16 20,000 6,667 13,333
May 3, 2023 0.60 4.84 1,742,500 580,833 1,161,667
0.78 4.09 6,167,500 3,594,166 2,573,334
13. Net Loss per Common Share
The calculation of basic and diluted loss per share for the three and six
months ended June 30, 2022 was based on the loss attributable to common
shareholders of $1,580,168 and $2,995,980, respectively (three and six months
ended June 30, 2021 - $2,888,568 and $3,528,531, respectively) and the
weighted average number of common shares outstanding of 84,140,878 and
81,353,664, respectively (three and six months ended June 30, 2021 -
60,494,975 and 53,501,436, respectively) for basic and diluted loss per share.
Diluted loss did not include the effect of 17,255,265 warrants (three and six
months ended June 30, 2021 - 29,104,931) and 6,167,500 options (three and six
months ended June 30, 2021 - 4,910,000) for the three and six months ended
June 30, 2022, as they are anti-dilutive.
14. Revenues
Shipments of concentrate under the off-take arrangements commenced during the
second quarter of 2019. Concentrate sales provisional revenues during the
three and six months ended June 30, 2022 totaled approximately US$nil and
US$219,000, respectively (three and six months ended June 30, 2021 -
US$218,000 and US$785,000, 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 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 Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Interest on related party loans (i) $ 88,054 $ 39,660 $ 162,749 $ 118,536
(i) Refer to note 10(i).
(ii) Refer to note 12(b)(i).
(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 matures on July 31, 2022 (the "Maturity Date").
· 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 will be paid to Ocean Partners if the
Company elects to extend the loan for a further six months from the Maturity
Date.
Proceeds from the loan will be used for further development of the Omagh mine
in Northern Ireland and working capital.
As at June 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 $4,029,998 (December 31, 2021 -
$2,444,376).
June 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 1,380,477 -
Less bonus warrants ((1)) (51,000 ) (251,000 )
Repayment (5,979 ) -
Accretion 48,580 57,338
Interest 162,749 27,506
Foreign exchange adjustment 50,795 33,395
Balance, end of period 4,029,998 2,444,376
Less current balance (1,279,932 ) -
Due to related parties - non-current balance $ 2,750,066 $ 2,444,376
((1)) During the six months ended June 30, 2022, 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 Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Salaries and benefits ((1)) $ 145,551 $ 50,380 $ 253,134 $ 167,986
Stock-based compensation 383,377 828,180 633,687 830,438
$ 528,928 $ 878,560 $ 886,821 $ 998,424
((1)) Salaries and benefits include director fees. As at June 30, 2022, due to
directors for fees amounted to $70,000 (December 31, 2021 - $102,917) and due
to officers, mainly for salaries and benefits accrued amounted to $27,766
(December 31, 2021 - $21,400), and is included with due to related parties.
(c) As at June 30, 2022, Ross Beaty owns 3,744,747 common shares of the
Company or approximately 4.3% of the outstanding common shares. Premier Miton
owns 4,848,243 common shares of the Company or approximately 5.6%. Melquart
owns, directly and indirectly, 24,473,528 common shares of the Company or
approximately 29.5% of the outstanding common shares of the Company. G&F
Phelps owns 5,354,484 common shares of the Company or approximately 6.2%. Eric
Sprott owns 8,833,333 common shares of the Company or approximately 10.2%.
Mike Gentile owns 6,100,000 common shares of the Company or approximately
7.1%. The remaining 37.1% 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:
June 30, 2022 United Kingdom Canada Total
Current assets $ 880,194 $ 508,618 $ 1,388,812
Non-current assets $ 30,921,720 $ 128,572 $ 31,050,292
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 $476,762 (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. Events After the Reporting Period
(i) On July 11, 2022, the Company announced the appointment of SP Angel
Corporate Finance LLP as its Joint Broker to support its position as an
AIM-quoted company.
(ii) 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 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
warrants are subject to a hold period under applicable securities laws and the
rules of the TSXV, expiring on July 25, 2023.
· 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.
(iii) On August 8, 2022, the Company announced that it entered into an
agreement with Canaccord Genuity Corp., on behalf of itself and and a
syndicate of agents including Cormark Securities Inc. and Research Capital
Corporation (together, the "Agents"), in connection with a proposed private
placement of up to 8,888,890 units of the Company at a price of $0.45 per unit
for aggregate gross proceeds of up to approximately $4 million. Each unit will
be comprised of one common share in the capital of the Company and one_half of
one common share purchase warrant of the Company. Each warrant will entitle
the holder thereof to purchase one common share in the capital of the Company
at a price of $0.55 per warrant share for a period of 30 months following the
closing of the offering.
(iv) On August 11, 2022, the Company announced that it entered into an
amending agreement with the Agents, to increase the size of the Company's
previously announced proposed private placement of up to 13,333,340 units of
the Company.
The Company also granted the Agents an option, exercisable, in whole or in
part, at any time up to 48 hours prior to closing of the offering, which will
allow the Agents to sell up to an additional 2,000,001 units at the offering
price.
The upsized offering is expected to close on or about August 30, 2022, or such
other date as the Company and the Agents may agree, and is subject to certain
closing conditions including, but not limited to, the receipt of all necessary
approvals, including the conditional acceptance of the TSXV.
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